Financial Case Studies on Small- and Medium-Size Modular Reactors

Nowadays interest in small- to medium-size modular reactors (SMRs) is growing in several countries, including those economically and infrastructurally developed. Such reactors are also called "deliberately small reactors" since the reduced size is exploited from the design phase to reach valuable benefits in safety, operational flexibility, and economics. A rough evaluation based only on the economies of scale could label these reactors as economically unattractive, but that approach is incomplete and misleading. An economic model (INCAS - INtegrated model for the Competitiveness Assessment of SMRs) is currently being developed by Politecnico di Milano university within an international effort on SMR competitiveness fostered by the International Atomic Energy Agency, suitable to compare the economic performance of SMRs with respect to large reactors (LRs). INCAS performs an investment project simulation and assessment of SMR and LR deployment scenarios, providing monetary indicators (e.g., internal rate of return, levelized cost of electricity, total equity employed) and nonmonetary indicators (e.g., design robustness, required spinning reserve). This paper presents the general features and purpose of the INCAS model, detailing the input required, and points out the main differences with other simulation codes. INCAS is applied to evaluate the financial attractiveness of an investment in four SMRs with respect to a single LR with the same power generation capacity installed, in different deployment scenarios. Then, a sensitivity analysis highlights the degree of elasticity of the key output parameters for the investors, with respect to the most sensitive input parameters. Given the uncertainties of the main input parameters, INCAS results are affected by uncertainties as well. However, the financial output parameters provide a general understanding on the investment economics: INCAS shows that the economy of scale is not the only cost driver, because the economies of multiples may compensate for most of the gap in the economic performance of the SMRs. The uncertainties that affect the input data and the model do not allow declaration of a straightforward and neat economic performance superiority of SMRs versus LRs, or vice versa. Nevertheless, some trends have been highlighted. In particular, in "supported" market scenarios, where overnight construction costs have the highest incidence and the market conditions are less volatile, the most suitable strategy is to pursue the economies of scale. In contrast, SMRs behave better in "merchant" scenarios, where the cost of financing is higher and financial risk is sensitive. A "modular" investing strategy with a step-by-step power block deployment process allows lower financial exposure and less capital at risk and may mitigate the impact of scenario uncertainties on a project's profitability.