Using Real Options to Value Two Key Merits of Small Modular Reactors

Small Modular Reactors (SMRs) are a better choice respect to large reactors, according to their inherent construction flexibility and their short construction time. In the energy sector, the Discounted Cash Flow (DCF) is usually used to evaluate an investment. However, “Real Options” method is a better choice respect to DCF approach underestimates the importance of flexibility during the investment decision. In this chapter, starting from real options approach, two fundamental characteristics for the choice of the construction of SMRs are defined: the time to market and the adding of a new plant on a typical portfolio. The computational model described in this chapter assesses the superior performance of SMRs in the UK.