10.6.1 Deterministic scenarios

The economic analysis and comparison between SMRs and LRs, has given great emphasis to the capital costs that dominate nuclear generation costs, as a very capital­intensive technology. The cost comparison between LRs and multiple SMRs has been

110

105

100 95

Figure 10.14 Design saving factor ranges of different SMR fleets deployed in large sites (4500 MWe), compared to a very large reactor unit (Boarin and Ricotti, 2011b).

assessed based on very conservative assumptions that almost disregard savings by design at SMRs. Under this assumption and considering ideal or expected construction costs and schedule for LRs (i. e. no delays and no cost overruns), scenario analysis of alternative LR and multiple SMR projects confirms a comparable or higher economic performance of LRs, essentially due to the economy of scale on construction costs. On average, investment IRR and profitability index (PI) of LRs are 1-1.5% higher than SMRs (Boarin and Ricotti, 2009). This slight difference, applied on a relevant project investment value, translates into a significant project value increase. This holds in deterministic scenario conditions, with conservative assumptions on SMRs and ideal assumption for LRs, with no uncertainties affecting the scenario evolution (Boarin and Ricotti, 2011a).

Nonetheless, multiple SMRs have economic features that make them competitive with large NPPs under different perspectives than mere profitability. Multiple SMRs offer financial benefits that encompass intrinsic investment modularity. Investment modularity and scalability are intrinsic features of multiple SMRs that allow adaptation of the investment program to the electricity and financial market evolution. Current projected schedules of SMRs are in the range of four years for the first-of-a-kind (FOAK) and down to two years for a n-th-of-a-kind (NOAK), in some designs. This shorter construction time is due mainly to smaller size, simpler design, increased modularization, higher degree of factory fabrication and series fabrication of components.

The shorter construction schedule and the smaller output size make SMRs more readily adaptable to market conditions, both temporally and spatially. The shorter lead times and the plant capacity allow to split the investment in a closer proximity to the market evolution: if not needed, the construction of an additional SMR unit can be avoided whereas a monolithic LR investment may result in an unexpected overcapacity installed. Whereas market conditions are highly uncertain, the SMR modularity translates in adaptability; the investment flexibility in the plant deployment has an associated economic value, which is caught by real option analysis. It is demonstrated that this economic value is positive and accounts for the possibility of avoiding financial losses in market downturn and reaping early revenues in favourable market conditions. The chance to better cope with the probability of a change in the economic environment reduces the gap of competitiveness between LRs and SMRs (Locatelli et al., 2012).

A short construction schedule limits the financial cost escalation during the construction period. During construction, when no revenues allow the capital repayment, financial interests are compound over a growing invested capital base, increasing exponentially. This is the reason why, assuming the same total overnight construction cost as large units, multiple SMR projects pay lower IDC than LR projects (Carelli et al., 2007b; Boarin et al., 2012).

Shorter PBT of each SMR unit allows to get a cash in-flow from the sale of power generated by early units. Average outstanding capital exposure may be relieved by suitable staggered deployment of successive units, and cash flow from early units may be employed to finance the construction of later units on the site. This capability to self-generate the sources of financing is not available to a single large NPP project
and is a valuable option to limit up-front capital requirements: the relevant share of total capital investment cost may be provided by self-financing (Figures 10.15 and 10.16).

SMRs’ investment scalability is a key value driver: by staggering the investment effort over time, the average capital-at risk and IDCs are decreased. Cash out-flow profile during the construction phase is smoother for SMRs (Figure 10.17). These features make of SMRs an affordable investment option by investors with financial constraints, despite the conservative assumption of higher total capital investment cost.