Small Modular Reactors: A Technical and Economic Assessment

Definition and Typology of SMRs

Small Modular Reactors (SMRs) represent the promise of a new nuclear technology to supply zero-emissions, safe, and dispatchable power amid intensified efforts to reduce carbon emissions and ensure energy security. With small size and capacity (up to 300 MW per unit) and simplified design, modular and factory-made, SMRs are expected to supply new kinds of industrial consumers of electricity and/or heat – e.g., steel mills, aluminum smelters, chemical plants, off-grid mining, refining facilities, electrolyzers, and replacement of closing coal power plants. SMRs will offer zero-emissions baseload (yet partly flexible) power to an energy system with an increasing share of variable renewables. They would be geographically more distributed, with smaller footprints, and much less dependent on cooling water bodies than the large-scale nuclear power plants (NPPs). Significantly, they would cost notably less per MWh than new units of the latter sort.

Chapter 2 offers a detailed definition, typology, and characterization of SMRs, with a discussion of their value proposition (i.e., lower cost of financing due to the smaller size; less upfront capital necessary, thanks to modularization; shortened time between project development and commissioning). By way of typology, IAEA (2021) puts it succinctly: “The most mature SMR concepts being proposed by vendors are evolutionary variants of light water Generation II and Generation III/III+ reactors (LWR-PWR) operating worldwide, and these benefit from many decades of operating and regulatory experience. They represent approximately 50% of SMR designs under development. The other 50% of SMR designs correspond to Gen IV SMRs incorporating alternative coolants…, advanced fuel, and innovative system configurations.”

The Issue of SMR Costs

The current study mainly investigates the technical and economic features of SMR designs. The focus is the Romanian market, for which several SMR designs are described and assessed, alongside several other designs deemed particularly promising among dozens of contenders worldwide. Yet, the conclusions have a general salience. As IEA (2022b) pointed out, “The cost-competitiveness of SMRs relative to other types of low emissions dispatchable power and heat generation will be crucial to the widespread deployment of the technology.” However, most of the cost estimates presently available for SMRs are produced by vendors and project developers, so “they have yet to be tempered by much in the way of real-life experience and so should be treated with great caution.”

The LCOE (levelized cost of electricity) for SMR projects in some advanced economies, at the cost of capital rates of 6-9%, has been put at $45-110/MWh, while a range of $50-60/MWh is envisaged for nth-of-a-kind (NOAK) units. The figures should include the cost of building the SMR factories and certification, which are mainly uncertain.

An extensive discussion about LCOE as a tool to calculate the lifetime costs of power generation projects is offered in section 2.7.1. In power systems with significant penetration of variable renewable sources (VRE), the system integration costs of VRE become increasingly substantial, so more complex metrics are needed. System LCOE, introduced by Ueckerdt et al. (2013), is the sum of the generation costs (LCOE) and the system integration costs for the power plant’s lifetime. The system integration costs consist of the extra balancing, profile, and grid costs incurred because of variability. They depend on the characteristics of the power system. System flexibility, which will lower integration costs, will be significantly enhanced by added storage capacity, grid expansion, digitalization, demand-side management, and interconnections with regional markets. Such a transformation is in progress anyway, as the transition to clean energy primarily consists of a shift away from fossil fuels towards electricity use.

In a systematic review, Heptonstall and Grass (2020) conclude that VRE’s overall system integration costs can be relatively low. On the other hand, the system integration costs can be sensibly higher for quickly growing VRE shares in power systems of low flexibility and limited transmission and distribution grids. Therefore, to appreciate the economic soundness of SMR investments, system-level cost assessments are required, in which the expected benefits are weighted. The latter may well justify various forms of public support for SMR projects, such as facilitating the licensing process, public equity participation, and/or de-risking utilizing a long-term contract-for-difference (CfD) for the plant’s operational phase. Nonetheless, SMRs must deliver lower LCOEs than the large-scale NPPs, for which the ready-to-hand figure is the £92.50/MWh strike price agreed in 2012 (£125/MWh as of mid-2023) for Hinkley Point C in Great Britain for a 35-year CfD, inflation-indexed. SMRs must do better than that for LCOE.

The U.S. Energy Information Administration (EIA) uses, in combination with LCOE, a metric called LACE (levelized avoided cost of electricity), which captures a given power plant’s value to the power grid. “A generator’s avoided cost reflects the costs that would be incurred to provide the electricity displaced by a new generation project as an estimate of the revenue available to the plant.” EIA calculates LACE “based on the marginal value of energy and capacity that would result from adding a unit of a given technology to the grid as it exists or as we project it to exist at a specific future date.” (EIA 2022, 4). Although the actual investment decisions for any particular technology exceed the LCOE-LACE assessment, given other non-economic drivers and policy goals, the two metrics provide together a sound basis of comparison for the economics of various technologies.

SMRs in the Romanian Nuclear Landscape

Chapter 3 focuses on the Romanian nuclear sector: its status and specifics, long-term planning, and commitment to SMR technology. The chapter details the partnership between the Romanian Government, NuScale Power (U.S.), and state-controlled Nuclearelectrica for developing a NuScale SMR in Doicesti (Dambovita County) as soon as 2030. Then, ten SMR designs are presented which have various degrees of relevance for the Romanian nuclear market: NuScale VOYGR-6, GE-Hitachi BWRX-300, Holtec SMR-160, Terrapower Natrium, X-Energy’s Xe-100 HGTR, UNSC MMR, CANDU SMR, Last Energy PWR-20, Rolls Royce SMR – as well as the Romanian R&D project ALFRED. The assessment criteria and scoring have been borrowed and adjusted by CATF from the NEA’s Small Modular Reactor Dashboard (2023), with weighted scores assigned for each design to identify those deemed nearest to deployment.

The NuScale VOYGR-6 design came out on top among the LWR-PWR reactors due to its maturity in terms of design and licensing – indeed, the most advanced SMR design anywhere, considering its certification of design with NRC, robust governmental support, and planned construction of a demonstration FOAK unit in Utah (U.S.) by 2028, followed by a Romanian NPP by 2030. Of the Gen IV reactors, Terrapower Natrium scored highest due to its siting, finance, and supply chain maturity since a project is already under development in Wyoming (U.S.).

Chapter 4 explores the nuclear institutional and regulatory landscape in Romania, with CNCAN (National Commission for the Control of Nuclear Activities) being the central regulatory institution, seconded by ANDR (National Authority for Radioactive Waste) and ISCIR (State Inspection for the Control of Boilers, Pressure Vessels, and Lifting Installations). Section 4.2 presents the norms for managing radioactive waste and spent nuclear fuel that apply in Romania.

Arguments Against SMR Skepticism

Across this work, arguments are leveled against different blends of nuclear skepticism, which, typically, infer from the most unfavorable past cases of large-scale nuclear projects to blank judgments about the alleged incapacity of SMRs to be delivered within time and budget – see section 1.3. However, the very concept of SMR has crystallized as a response to the intrinsic challenges of the nuclear industry. As noted by Flyvbjerg and Gardner (2023), large-scale NPPs are “the products of a staggering number of bespoke parts and systems that must all work, and work together, for the plant as a whole to work,” which fundamentally turns them into one-of-a-kind products. By contrast, SMRs are predicated on standardization, modularization, and replicability in a factory setting. There is undoubtedly nothing preordained about their economic impracticality.

Nuclear skeptics frequently dismiss SMRs based on unfavorable LCOE comparisons with renewable energy sources. Although this is essential in today’s clean energy transition, we have argued that LCOE does not capture the entire value that a zero-emissions, dispatchable, baseload, yet partly flexible electricity source brings to the power system. Such value – especially in power systems of high renewable shares, limited or low flexibility resources, and limited grid capacity – may justify public support for SMRs.

Finally, on a more ideological line, SMRs are depicted as a socio-cultural phenomenon (“technofideism”) by which decision-making elites lend unwarranted credence to the promises of technology, impervious to evidence. However, there is no empirical evidence against the economic and safety case of SMRs. Their definitional features have repeatedly come out as solutions to improve the track record of the nuclear industry.

Policy Recommendations

The policy recommendations closing the study are grouped in three clusters:

(i) Improving the licensing process for SMRs

The Romanian nuclear program has been built around the heavy water CANDU technology based on natural uranium. CNCAN will have to create expertise and institutional capacity to deal with the new generation of LWR-PWR reactors and, as the case may be, also with the Gen IV SMRs.

International cooperation for the harmonization of licensing regimes should be pursued by the nuclear regulators – multilateral licensing coordination, bilateral collaborations, and joint safety evaluations, as urged by NEA (2021). At the EU level, a framework of joint pre-licensing reviews for the pro-nuclear member states would go a long way. The EU should consider creating guidelines of best practices for SMRs, as well as joint regulatory or pre-licensing reviews among the interested member states’ regulators on a single advanced reactor design.

The EU could consider establishing a license-by-testing system (sandbox). With this approach, an area would be designated for reactor designers to conduct full-scale testing under regulatory oversight.

Also, an international technical body focusing on SMRs should be established to assist the national regulators in know-how on license applications for SMR construction and operation and specialized training. The formation of an International Technical Support Organization (ITSO) could also help address the problem of constrained resources and accelerate SMR deployment by:

• Conducting and reviewing license applications for the construction and operation of SMRs;
• Assisting with inspections during the construction and operation of SMRs and
• Providing training services to national regulatory bodies to help with oversight functions which would supplement training and support provided by IAEA.

(ii) Improving governmental policy in the nuclear sector

A FOAK demonstration plant will be necessary for operational learning on the new technology and to pave the way for investments in further units.

Creating a CfD scheme for SMRs at the national level to support financial de-risking (at least for FOAK units), especially in jurisdictions with higher WACC rates, such as Romania.

Assessing the necessary workforce for SMR development in Romania. The government should identify the resources, training, and skills needed to develop SMRs in Romania. Using funds for a just transition, reskilling, and upskilling programs should be supported, as well as labor market adjustments in SMRs.

Support of R&D and nuclear manufacturing capabilities. The technology generation of SMRs will require a new momentum for R&D, with needed advances in reactor materials and fuel technologies (including reprocessing). The EU should support nuclear R&D hubs in the pro-nuclear member states to mobilize the existing expertise and to develop new capabilities required by modular and standardized manufacturing processes. Such hubs will be critical in attracting new specialists in nuclear higher education and R&D projects.

Romania should engage with the European Commission, and other member states at the EU level to create Centers of Excellence for Advanced Manufacturing on Nuclear Research. Coordinating the nuclear supply chain across member states would encourage inward investment, strengthen capabilities, contribute to technological innovation, and fulfill the clean energy goals.

The government can use state aid instruments to support manufacturers of nuclear components and equipment and service providers for the SMR industry. International partnerships among technology developers and manufacturers, on the one hand, and research and educational institutions, on the other hand, must be supported, alongside coordination to harmonize codes and standards.

The Romanian authorities should be more transparent about the nuclear planning process. The Romanian public knows little about the economics of the plans for the construction of Units 3 and 4 at Cernavoda and the financial model behind the NuScale SMR project in Doicesti.

Transparency can be improved by launching clean transition dialogues on SMRs to discuss their shared challenges and opportunities with a broad range of stakeholders. Such dialogues could promote best practices and solutions, bring new business and collaboration opportunities, help the government identify and reflect on possible gaps in implementation, and further build the SMR business model informed by industry needs.

Public engagement requires attention and involvement from government and companies alike. As pointed out by NEA (2021), with the new SMR designs and their limited or non-existent experience base, ti will be “challenging to demonstrate and approve their safety case based on more efficient passive safety measures, fewer and less severe failure modes and reduced off-site emergency planning zones (EPZs).”

Public engagement can benefit from international collaboration, with information exchanges on best practices and lessons learned. Public engagement with local communities should not be a merely perfunctory exercise but a patient and comprehensive involvement based on knowledge of the communities’s habits, traditions, needs, and concerns.

(iii) Reducing the costs of new nuclear power plants

A common assumption is that, once a FOAK plant is built, the costs for the next one will fall due to economies of scale and an anticipated learning curve, to the effect that a nth-of-a-kind (NOAK) NPP would cost sizably less than a FOAK. However, based on an extensive dataset of empirical cases, Eash-Gates et al. (2020) conclude that, on the contrary, “we see that costs rose rapidly. We estimate a rate of learning of -115% for the industry, implying that plant costs more than doubled with each doubling of cumulative U.S. capacity.” The main factors of cost escalation they have identified are indirect: declining on-site labor productivity, inefficient project management, and increasing stringency of nuclear safety regulations.

To mitigate cost escalation, Buongiorno et al. (2018) recommend serial manufacturing in standardized plants, incorporating passive safety measures in the reactor design, and focusing on proven project management. These, of course, are intrinsic features of SMRs. The SMR technology can deliver diminishing costs for the NOAK plants, although this should not be taken for granted.

A more specific and actionable recommendation aimed at cutting down SMR costs is the creation, at the EU level, of a Joint Platform for SMR Procurements, ideally under the coordination of the European Commission, to address the challenges of fragmented demand and limited economies of scale in the nuclear industry. The platform would coordinate technology acquisition by centralizing demand, consolidating requirements, and negotiating with the technology developers around a standard SMR design, of which multiple units would be built across the continent (based on the prior agreement by the participating member states). A unified order book among several or all pro-nuclear EU member states would support a scale of SMR demand needed to drive the industry into a mode of standardization and factory-based manufacturing. This would be a significant contribution to the cost reduction of SMR projects.

In conclusion, the present study offers a cautious technical-economic endorsement for developing the most viable SMR designs. They will bring an essential contribution to the intensifying efforts of reaching net-zero emissions by 2050 and ensuring energy security and affordability.

To download the report, please access:
https://www.enpg.ro/small-modular-reactors-a-technical-and-economic-assessment-policy-br/