The energy costs associated with small modular reactors exceed those of diesel-based electricity. Policy-makers should focus on renewables.
A new type of theoretical nuclear power plant design called small modular reactors (SMRs) has been in the news of late. Earlier this year, at the 2020 Canadian Nuclear Association conference, Minister of Natural Resources Seamus O’Regan announced that the federal government will release an SMR Action Plan this fall. Ontario, New Brunswick and Saskatchewan have announced their backing and possibly some financial support for the development of these reactors.
Promoters suggest that remote communities and off-grid mining operations are promising markets for SMRs in Canada. These communities and mines pay a lot for electricity because they are reliant on diesel generators, and transporting and storing diesel to these locations can be very expensive. Thus, supporters hope, SMRs might be a way to lower electricity costs and carbon dioxide emissions.
We examined this proposition in detail in a recently published paper and concluded that this argument has two problems. First, the electricity that SMRs produce is far more expensive than diesel-based electricity. Second, even ignoring this problem, the total demand for electricity at these proposed markets is insufficient to justify investing in a factory to manufacture the SMRs.
SMRs have been proposed as a way to deal with many problems associated with large nuclear power plants, in particular the high costs of construction, running to tens of billions of dollars. SMR designs have much in common with large nuclear reactors, including, most basically, their reliance on nuclear fission reactions to produce electricity. But they also differ from large nuclear reactors in two ways. First, they have electricity outputs of less than 300 megawatts (MW) and sometimes as low as a few MW, considerably lower than the outputs of 700 to 1500 MW typical of large nuclear reactors. Second, SMR designs use modular means of manufacturing, so that they need only be assembled, rather than fully constructed, at the plant site. While large reactors that have been constructed in recent years have also adopted modular construction, SMR designers hope to rely more substantially on these techniques.
A standard metric used to evaluate the economics of different energy choices is called the levelized cost of energy (LCOE). We calculated that the LCOE for SMRs could be over ten times greater than the LCOE for diesel-based electricity. The cheapest options are hybrid generation systems, with wind or solar meeting a part of the electricity demand and diesel contributing the rest.
Why this high cost? The primary problem is that the small outputs from SMRs run counter to the logic of economies of scale. Larger reactors are more cost-efficient because they produce more electricity for each unit of material (such as concrete and steel) they use and for the number of operators they employ. SMR proponents argue that they can make up for this through the savings from mass manufacture at factories and the learning that comes with manufacturing many reactors. The problem is that building a factory requires a sizable market, sometimes referred to as an order book. Without a large number of orders, the investment needed to build the factory will not be justified.
We estimated the potential market for SMRs at remote mines and communities in Canada. We drew primarily upon two databases produced by Natural Resources Canada regarding mining areas and remote communities. As of 2018, there were 24 remote mining projects that could be candidates for SMR deployment within the next decade. Currently, these projects use diesel generators with a total installed capacity of 617 MW. For remote communities, we calculated a fossil fuel (primarily diesel) generation capacity of 506 MW. But many of these communities had demands that were too low for even the smallest-output SMR under review at the Canadian Nuclear Safety Commission.
Even if all these potential buyers want to adopt SMRs for electricity supply, without regard to the economic or noneconomic factors weighing against the construction of nuclear reactors, the combined demand would likely be much less than 1000 MW. The minimum demand required to justify the cost of producing SMRs would be three to seven times higher.
Furthermore, we concluded that the economics of SMRs don’t compete when compared with other alternatives. The cost of electricity from SMRs was found to be much higher than the cost of wind or solar, or even of the diesel supply currently used in the majority of these mines and communities.
Of course, our estimates for the LCOEs of different sources are dependent on various assumptions. We tried varying these assumptions within reasonable limits and found that the main result — that electricity from SMRs is far more expensive than the corresponding costs of generating electricity using diesel, wind, solar or some combination thereof — remains valid. All else being equal, the assumed capital cost of constructing a SMR would have to decline by over 95 percent to be competitive with a wind-diesel hybrid system. The limited experience with SMRs that are being built around the world suggests that construction costs will be higher, not lower, than advocates promise.
Meanwhile, renewables and storage technologies have seen substantial cost declines over the past decades. Recent estimates place wind, solar and hybrid systems at costs competitive with diesel power. Successful demonstrations suggest that renewable hybrid applications are becoming increasingly feasible for heavy industry, and the implementation of numerous numerous projects in northern communities suggests a high level of social acceptance. Many northern and, in particular, Indigenous communities have an interest in self-determined decision-making and maintaining a good relationship with the land. In June 2019, for example, the Anishinabek Chiefs-in-Assembly, representing 40 First Nations across Ontario, unanimously expressed opposition to SMRs. Grand Council Chief Glen Hare announced that the Anishinabek Nation is “vehemently opposed to any effort to situate SMRs within our territory.”
Instead of focusing on SMRs, policy-makers should bolster support for other renewable generation technologies as key mechanisms to reduce carbon emissions and align with community values.