Advanced nuclear technologies could form an integral part of the solution to reconcile the need for clean energy with energy security; this is the conclusion of a new report from Charles River Associates (CRA). The report breaks down the role of advanced nuclear technology to meet decarbonisation goals and notes that various regions and governments are including the technology in core policy objectives. The report also offers an overview of the trends and challenges that face the nuclear supply chain, spanning from extraction and processing to end-use applications and waste management.
CRA’s report, titled: ‘Advanced Nuclear Reactor Technologies: A Tailwind for Nuclear Energy Revival’ further says: “The renewed prominence of nuclear in the energy transition reflects the growing emphasis on energy security and decarbonization among policy makers. Alongside the repowering of existing nuclear plants, advanced nuclear technologies are now also under the spotlight as they hold the promise of shorter construction timelines, lower overhead costs, and cross-industry applications.”
Addressing investment challenges
The report highlights that given some of the biggest challenges to infrastructure investing are inflation and regulation, including permitting and licensing, taxation, and safety standards, investors require certainty.
Meera Kotak, Associate Principal at CRA and co-author of the report, points to the recent collapse of Nuscale’s Idaho National Laboratory scheme as an example of the challenges advanced reactors face when considering deployment: “The Nuscale news really does show how difficult it can be for developers to line up all the different components in the macro context of high inflation and high interest rates. If you are a developer that started back when the rates weren’t what they are today, you are going to be hit by them even if you’re grounded in the best technological positions.”
Kotak points to some relatively simple solutions though: “In the first instance, the industry needs government support to drive projects forward in the first of a kind development. The industry would also benefit from a coherent regulatory framework that crosses borders.”
Indeed, Kotak tells NEI that alongside sustained policy support, a better regulatory framework is needed for advanced reactors to deliver on their potential: “The technology can be mature, the customers can be ready and we are seeing a lot of market demand there, but having those government policy and regulatory markers to incentivise investment is still needed. The central mechanisms aren’t yet in the place that they need to be to enable the advent and progression of advanced reactors.”
Nonetheless, she does pick up on some positive signs of change: “There is an element of sharing on the fundamentals across borders. There have been some examples with the US and Canada in terms of exchanging learnings on the regulatory processes that they’re undertaking.”
However, Kotak notes that much of the regulatory structure was developed around large conventional reactors that has a knock-on impact on, for example, how insurance products for small reactors are set up and delivered. This in turn has an impact on how the private sector perceives advanced reactors as an attractive investment prospect. “The regulatory system needs to evolve as the products evolve; investors seem interested in the promise of advanced and small reactors relative to conventional, but it’s very much hinged on policy sentiment.” Kotak highlights the Inflation Reduction Act rolled out earlier this year in the US as an example of positive sentiment that could serve as a model for wider advanced reactor deployment: “The tax credits that we saw in the US with the IRA, has been very promising given the wave of new developments and progress that occurred as a result. Given the nascency of these new technologies, the role of government and the introduction of supportive policy has shown to be important in navigating the uncertainty that comes with innovation.
Kotak also identifies a number of other challenges that must be addressed if advanced reactors are to be deployed at scale. “Whilst there are nuances across the different technologies, considerations do need to be made with regards to the supply chain, and labour and skills capacity. Public sentiment towards nuclear is also part of the challenge and needs to be overcome, given the benefits, and passive safety features, that small and advanced reactors bring relative to conventional designs.”
Indeed, the report argues that under certain circumstances, the economic viability of advanced nuclear technologies is notable, offering some advantages relative to other energy sources, including renewable and storage portfolios. This distinction is particularly noticeable at high levels of renewable penetration when contributions to capacity from renewables starts to decline.
Kotak adds: “It’s exciting that there are so many different options on the table and each have distinct points that they’re working through, but equally opportunities to offset. Whilst there might be a supply chain obstacle for one design, it might also enable it to advance because of other factors that are impeding a different design get solved first.”
Advanced nuclear can also offer a more appealing proposition for off-takers or utility buyers, as demonstrated by the evaluation of the value-adjusted levelised cost of electricity (VALCOE), which considers the relative contribution of the technology to the electricity system in terms of energy, capacity and flexibility services.
The report notes that the case for additional advanced nuclear capacity is reinforced by the fact that long-term operation of nuclear power plants has the lowest levelised cost of electricity (LCOE) among all other technologies, including newly built solar and offshore wind. However, larger reactors often have extended construction timelines and conventional nuclear reactors (Generation I, II and III) typically feature high levels of fuel expenditure, with most of the construction activities occurring at the reactor site. As Kotak says: “Advanced reactors such as the molten salts, the micro reactors, they’re all being predicated on the fact that they’re trying to offset the challenges that the large reactors bring for example trying to offset those cost overruns that appear to be inherent with traditional designs. Each has a USP and each of them is trying to target or offset a problem that has been in the industry and that’s a positive.
A recently published report on behalf of EPRI and conducted by CRA titled, shows how across 1000 Monte Carlo simulations, a first of a kind (FOAK) small modular reactor (SMR) has an overall average capital cost that is 16% less than a conventional light water reactor (LWR), primarily driven by lower financing costs resulting from shorter construction durations. This could ultimately result in lower total project costs for smaller reactors compared to their larger counterparts when considering both overnight and financing expenses.
Additionally, when integrated with thermal storage, advanced nuclear technologies can provide enhanced flexibility in the delivery of ancillary services, further underscoring their intrinsic advantages compared to conventional alternatives.
Market developments
The report says that merits of advanced nuclear technologies present a strong case for potential investment opportunities. While external influences, such as government and industry, play a major role in de-risking investment, the role of the investor itself is critical in bridging the investment gap needed to enable the transition towards second-of-a-kind reactors and achieve commercial returns.
“There is an argument to say that it is not which design will win, but which one will be able to be deployed first. There’s a variety of market policy and regulatory factors, skills factors, supply chain and fuel factors that must be addressed, but at the end of the day, you need that customer demand and you need the funding to be able to get it not just to first of a kind, but to commercial return, which requires Nth of a kind deployment. This is where the returns that make it economic can be seen. The industry needs enough funding for it to get to not just one, but perhaps four, seven, reactors that enable Nth of a kind projections. At this point, the economic benefits align and compound the otherwise existing inherent benefits of small reactors, such as the ability to power remote locations and offset grid infrastructure problems, and the modular construction and factory build approach that is poised to offset costs,” she says.
The report highlights a number of examples of policies encouraging private sector engagement, noting for example, that Canada and the US have consistently supported nuclear as part of their energy mix. Both countries have extensive governmental backing for the advancement of nuclear technologies.
Canada’s introduction of a clean technology investment tax credit of 30% explicitly focuses on SMR technology. Canada also recognises nuclear energy as a ‘fundamental and necessary component’ of the low-carbon energy system.
In addition, the development of SMRs is supported at both the national and provincial levels. The federal government released its SMR Roadmap in 2018 and SMR Action plan in 2020, supporting the development, demonstration and deployment of SMRs for various uses domestically and internationally. Canada’s federal budget for 2023, announced in March, provided a 15% refundable investment tax credit for clean electricity, including nuclear. This credit is separate from the clean technology investment tax credit introduced in the 2022 federal budget, which provided a tax credit of up to 30% for non-emitting electricity generation technologies, including SMRs. On March 28, 2022, the provinces of Ontario, New Brunswick, Saskatchewan and Alberta released a plan outlining a path forward for SMRs as a deliverable under the provincial SMR memorandum of understanding (MoU). Ontario Power Generation (OPG), Bruce Power, New Brunswick Power and SaskPower have been working collectively to develop three streams of SMR project proposals. On September 21, 2023, the province of Alberta announced the allocation of US$5m in funding (C$7m) towards a multi-year research initiative aimed at assessing the techno-economic feasibility, as well as considerations for safety behind implementing SMRs within oil sands operations.
As Kotak says: “Such policy measures would give confidence to investors that this is a technology that we are going to support and it is not going to be dropped and lose your investment. Similar to what was done with wind and solar. It’s only at the price it is today because of that level of support to drive innovation and driving new supply chains. Private investment has come in now because of the amount of subsidies that went into it from the outset.”
The report also emphasises the growing role of the private sector, noting that in July 2023, OPG announced its collaboration with the provincial government to plan and license three additional SMRs, for a total of four SMRs at OPG’s Darlington New Nuclear Project.
Earlier in January, OPG, GEH, SNC-Lavalin and Aecon signed the first commercial contract for a grid-scale SMR in North America. The six-year partnership seeks to finalise the construction of a BWRX-300 SMR at the Darlington site by the end of 2028, with plans to commence power supply to the grid in 2029. This comes in the wake of the Canadian Infrastructure Bank commitment of US$713m (C$970), announced in October 2022, to finance the first phase of OPG’s Darlington New Nuclear Project. In 2021, OPG selected GEH’s BWRX-300 SMR for the project.
Kotak picks up on these developments: “It’s great to see different vendor-utility or customer partnerships that are driving for clusters or multiples of reactor units that still reach the required output.”
The report notes that Europe is also seeing both public and private sector engagement, highlighting that the market is divided in its views on the role of nuclear energy in the future energy mix. Some countries, including Germany, Italy and Lithuania, have phased out nuclear power; Austria, Denmark, Germany, Luxembourg and Portugal signed a joint declaration, opposing the inclusion of nuclear in the EU Green finance taxonomy. In contrast, France, the European leader in nuclear power, has brought together a ‘Nuclear Alliance’ consisting of 11 countries. This alliance will work towards strengthening cooperation in nuclear energy as an important component of Europe’s energy goals.
In a bid to cement its leadership in civilian nuclear energy, France, in 2022, announced its plans to build six new next-generation nuclear reactors by 2050, with a possibility of deploying an additional eight. This plan was catalysed by Parliament’s recent approval of the Government’s nuclear investment plan, allocating €52bn to the construction of new reactors. While the project work is yet to begin, EDF Energy plans to commission its first two facilities in 2035 and a third in 2040. France’s ambition to deploy its first SMR by 2030 contributes to the government vision for nuclear to account for more than 50% of the country’s electricity mix.
The report further notes that in Poland, energy-intensive companies such as Synthos and PKN Orlen, established a joint venture to deploy an SMR fleet, GEH’s BWRX-300. In addition, ENEA Group, one of the largest power companies in Poland, is collaborating with Last Energy to develop SMRs.
Other countries, including UK, Romania and the Czech Republic that have historically been dependent on coal to meet their energy needs, are increasingly turning to advanced nuclear technologies as a means of decarbonising their energy systems.
“We’re seeing the private sector engage in Eastern Europe, Poland, Romania, the Czech Republic, with high-wealth individuals exploring options with small and advanced reactors. Bill Gates’ TerraPower has shown what private investment can do to propel a new reactor design,” says Kotak.
Kotak also points to a broader economic benefit to those nations that do successfully deploy advanced reactor technology: “Once that first of a kind small reactor is identified and can be commercially developed, there could be significant export potential for a market.” She adds: “The timeliness, limitations and opportunities of all clean energy resources – nuclear, CCUS, hydrogen, geothermal – need to be considered.”
Advanced reactor outlook
The report says that the nuclear energy sector challenge is exacerbated by the imminent retirement of the current nuclear workforce. A multi-year, multi-unit build-up of nuclear reactors will require addressing the labour shortage at various stages, including education, recruitment for entry-level positions and the identification of highly skilled master tradespeople.
“From a vendor developer perspective, business models are set up with the intention to build more than one reactor, given the level of infrastructure, supply chain, manufacturing capabilities and people required. The repeatability is the USP. If the modular construction, factory build, and ability to just repeat orders isn’t taken up on, it could miss a key opportunity. The report notes that designs are planned for modules to be built at factories and then transported to the main reactor site, reducing the total construction time required. Microreactors take this concept a step further and are designed such that the entire reactor can be transported at once,” says Kotak.
Nonetheless, Kotak is optimistic, she says: “Advanced nuclear technology could play a pivotal role in the decarbonisation of our energy systems. I am positive because fundamentally, regardless of what design gets chosen, it has a role to play as a clean energy source, and to enable the pathway to net zero. I think, ultimately, we need to be reminded that all COP nations or signatories have all signed up to this to reduce emissions and to reach those net zero goals.” As Kotak concludes: “As the costs become more secure, the investment returns become more clear and that regulatory and policy structures are in place to give that confirmation of returns, I think we will see more private investment, as we’ve seen with other energy sources.”
