6.1 Introduction and designers’ cost data for SMRs

6.1.1 Introduction and definition of Levelised Unit Electricity Cost (LUEC)

In order to assess the economics of different SMR projects and their deployment potential, this chapter provides the analysis and evaluation of the various economic factors affecting the competitiveness of SMRs.

The main figure of merit used in this chapter, as well as in the following Chapter 7, is the Levelised Unit Electricity Cost (LUEC). The LUEC formula and definitions are taken from reference [6.1] which mentions that:

the notion of levelised costs of electricity (LUEC[41]) is a handy tool for comparing the unit costs of different technologies over their economic life. It would correspond to the cost of an investor assuming the certainty of production costs and the stability of electricity prices. In other words, the discount rate used in LUEC calculations reflects the return on capital for an investor in the absence of specific market or technology risks.

All SMR deployment foreseen in the next decade would mainly take place in regulated electricity markets with loan guarantees and with more or less strictly regulated prices (see Figure 4.2), which justifies the selection of LUEC as a figure of merit for the competitiveness assessment of nearer-term SMRs.

The LUEC formula suggested in reference [6.1] reads:

where;

The amount of electricity produced in year “t”; Annual discount rate;

Investment cost in year “t”;

Operations and maintenance cost in year “t”; Fuel cost in year “t”;

Carbon cost in year “t”;

Decommissioning cost in year “t”.

The subscript “t” denotes the year in which the electricity production takes place or the expenses are made. The various assumptions used in deriving the formula (6.1) are discussed in detail in reference [6.1].

We summarise in Table 6.1 the structure of a nuclear generation cost, based on the data reported in reference [6.1]. It should be noted that those data refer mostly to NPPs of unit power higher than 1 000 MWe.

Table 6.1. Structure of nuclear electricity generation cost (for large reactors), based on [6.1]

Table 6.1 indicates that the total investment cost is a major constituent of LUEC for nuclear technology, with the O&M cost and the fuel cost making the next meaningful contributions. Carbon cost is zero since nuclear power plants emit no CO2 in operation. Finally, the contribution of the decommissioning cost (usually taken as about 15% of the overnight costs) to LUEC is always very small once discounted over 40-60 years, the typical operational lifetime of a nuclear plant.

As has been shown in the previous chapters, SMRs could be divided in to two major categories: “traditional” land-based nuclear power plants and barge-mounted plants (see Figure 6.1). Land-based reactors could be either factory-manufactured and assembled on-site, or fully built on-site. These realisations may have very different effects on the competitiveness of each particular project.

The objective of the following sections is to analyse and, where possible, to quantify the various factors affecting the competitiveness of SMRs (in terms of LUEC). An important concern while analysing the economics of SMRs, is the lack of data regarding their construction cost and the differences between SMR projects. In order to avoid those difficulties, we decided to adopt a scaling- law methodology [6.4] using the reliable data available for NPPs with large reactors (that have been deployed in recent years or are being deployed at the time of this report). The analyses performed are mostly based on comparative assessment of the impacts of the various factors on the economy of a NPP with SMR and that of a NPP with a large reactor.

After a brief summary of the designers’ LUEC values for SMRs in the following sub-section 6.1.2, we analyse in section 6.2 the factors affecting the investment cost, which are responsible for the major differences in the economies of SMRs and larger reactors.

The main factor negatively affecting the investment component of LUEC for all SMRs is the economy of scale. Depending on the power level of the plant, the specific (per kWe) capital costs of SMRs are expected to be tens to hundreds of percent higher than that for large reactors. While the economy of scale increases the specific capital costs and, therefore, the investment component of the LUEC for SMRs, other economic factors may tend to improve it. As an example:

• Construction duration. According to the vendors’ estimates the construction duration of SMRs is shorter than for large reactors.

• First-of-a-kind factors and economy of subsequent units on the site/multi-module plants. Building several reactors on the same site is usually cheaper than building a NPP with single units. This factor is the same for large reactors and SMRs. However, many SMRs are intended to be built in multiple modules and, thus, this factor can potentially play a larger role for SMRs than for large reactors.

• Economy of subsequent factory fabricated units. Different from large reactors, some SMRs could be manufactured and fully factory assembled, and then transported to the deployment site. This could potentially allow a decrease in the production cost (owing to the effects of production organisation and learning) and contribute positively to the competitiveness of SMRs.

• Design simplification. Some SMRs could offer a significant design simplification with respect to large reactors. If simplifications are possible, this would be a positive contribution to the competitiveness of SMRs.

To the extent possible, numerical estimates of each of the factors and their combined action are provided.