With the arrival of the Tea Party in Washington, a huge rift may be opening up over the future of nuclear power.

On the one hand, the Tea Party and new Republicans are foursquare in favor of energy development. “Pass an All of the Above Energy Policy” was item No. 8 in the Contract from America. “This would include off-shore oil drilling, clean coal, nuclear, renewable, and everything else,” says Ryan Hecker, the Houston attorney who organized the document. “The important thing is to develop domestic resources.”

Yet virtually everyone in the nuclear industry says that it will be impossible to build any new reactors without loan guarantees from the federal government. “We had all the output from our new uranium-enrichment plant in Idaho sold in advance, and we still couldn’t get any investment money without a federal loan guarantee,” says Mike Rencheck, COO of Areva, the French nuclear giant. “That was only a $2 billion facility. You’re never going to be able to build an $8 billion reactor without federal help.”

Most environmental groups now bypass the traditional scare tactics and declare solemnly that they oppose nuclear only because it is too expensive. “It’s like trying to solve world hunger problems with caviar,” says Peter Bradford, a former nuclear-regulatory commissioner who’s now with the Union of Concerned Scientists.

And therein constitutes the dilemma for the Tea Party. They want new energy sources, but they also want to cut industry’s reliance on government. Is there any way around this dilemma?

Marvelously, there is. American ingenuity has once again come up with a potential solution. Over the past four years, half a dozen new companies, plus a few old-guard stalwarts such as Babcock & Wilcox, General Electric, and Westinghouse, have introduced designs for reactors approximately one-tenth the size of the conventional variety. Instead of being laboriously constructed on-site — a process that takes at least four years — these units can be mass produced in factories and shipped to their destinations via truck or rail, where they can be sited individually or combined like Lego blocks.

This is something unique to nuclear. You can’t build one-tenth of a coal or natural-gas plant — at least without sacrificing a great deal of thermodynamic efficiency. But nuclear is so flexible that individual units can be built to almost any size.

The full-size commercial reactors built by Areva and Westinghouse are 1,500 megawatts — enough to power a city the size of San Francisco. By contrast, Babcock & Wilcox’s 50-year history of building small submarine reactors for the U.S. Navy finally inspired it to introduce the 125-megawatt mPower reactor in 2010. And NuScale Energy of Corvallis, Ore., has developed a 45-megawatt reactor that could fit into a gazebo and power a town of 10,000. “It’s built mostly of off-the-shelf technologies,” says Paul Lorenzini, a nuclear engineer and former utility executive who founded the company in 2007. “You could power a major manufacturing plant with one unit, or combine twelve of them into something the size of a conventional power plant.”

The biggest advantage of modular reactors is that they can avoid the whole sturm und drang of a ten-year, $10 billion investment that may turn out to have been unnecessary. Most utilities simply can’t afford the risk — their entire net worth may be only $20–25 million. But adding bite-sized units will be like adding individual windmills — except the reactors won’t stand 45 stories tall to produce only 1 megawatt apiece.