The 'inquiry into the prerequisites for nuclear energy in Australia' being run by Federal Parliament's Environment and Energy Committee has finished receiving submissions and is gradually making them publicly available.1
The inquiry is particularly interested in 'small modular reactors' (SMRs) and thus one point of interest is how enthusiasts spin the economic debate given that previous history with small reactors has shown them to be expensive2; the cost of the handful of SMRs under construction is exorbitant3; and both the private sector and governments around the world have been unwilling to invest the billions of dollars required to get high-risk SMR demonstration reactors built.4
To provide a reality-check before we get to the corporate spin, a submission to the inquiry by the Institute for Energy Economics and Financial Analysis notes that SMRs have been as successful as cold fusion – i.e., not at all.5 The submission states:
"The construction of nuclear power plants globally has proven to be an ongoing financial disaster for private industry and governments alike, with extraordinary cost and construction time blow-outs, while being a massive waste of public monies due to the ongoing reliance on government financial subsidies. ... Governments have repeatedly failed to comprehend that nuclear construction timelines and cost estimates put forward by many corporates (with vested interests) have proven disastrously flawed and wrong."
The Institute is equally sceptical about SMRs:5
"For all the hype in certain quarters, commercial deployment of small modular reactors (SMRs) have to-date been as successful as hypothesized cold fusion – that is, not at all. Even assuming massive ongoing taxpayer subsidies, SMR proponents do not expect to make a commercial deployment at scale any time soon, if at all, and more likely in a decade from now if historic delays to proposed timetables are acknowledged."
Thus the Institute adds its voice to the chorus of informed scepticism about SMRs6, such as the 2017 Lloyd's Register survey of 600 industry professionals and experts who predicted that SMRs have a "low likelihood of eventual take-up, and will have a minimal impact when they do arrive".7
Corporate spin #1: Minerals Council of Australia
The Minerals Council of Australia claims in its submission to the federal inquiry that SMRs could generate electricity for as little as $60 per megawatt-hour (MWh).8 That claim is based on a report by the Economic and Finance Working Group (EFWG) of the Canadian government-industry 'SMR Roadmap' initiative.9
The Canadian EFWG gives lots of possible SMR costs and the Minerals Council's use of its lowest figure is nothing if not selective. The figure cited by the Minerals Council assumes near-term deployment from a standing start (with no-one offering to risk billions of dollars to build demonstration reactors), plus extraordinary learning rates in an industry notorious for its negative learning rates.
Dr. Ziggy Switkowski ‒ the head of a government-commissioned nuclear review in 2006 ‒ noted in his evidence to the federal inquiry that "nuclear power has got more expensive, rather than less expensive".10 Yet the EFWG paper takes a made-up learning rate and subjects SMR cost estimates to eight 'cumulative doublings' based on the learning rate.
That's creative accounting and one can only wonder why the Minerals Council would present it as a credible estimate.
Here are the first-of-a-kind SMR cost estimates from the EFWG paper, all of them far higher than the figure cited by the Minerals Council:
300-megawatt (MW) on-grid SMR: C$162.67 (US$123) / MWh
125-MW off-grid heavy industry: C$178.01 (US$134) / MWh
20-MW off-grid remote mining: C$344.62 (US$260) / MWh
3-MW off-grid remote community: C$894.05 (US$674) / MWh
The government and industry members on the Canadian EFWG are in no doubt that SMRs won't be built without public subsidies:
"The federal and provincial governments should, in partnership with industry, investigate ways to best risk-share through policy mechanisms to reduce the cost of capital. This is especially true for the first units deployed, which would likely have a substantially higher cost of capital than a commercially mature SMR."
The EFWG paper used a range of estimates from the literature and vendors. It notes problems with its inputs, such as the fact that many of the vendor estimates have not been independently vetted, and "the wide variation in costs provided by expert analysts". Thus, the EFWG qualifies its findings by noting that "actual costs could be higher or lower depending on a number of eventualities".
Corporate spin #2: NuScale Power
US company NuScale Power has put in a submission to the federal nuclear inquiry, estimating a first-of-a-kind cost for its SMR design of US$4.35 billion / gigawatt (GW) and an nth-of-a-kind cost of US$3.6 billion / GW.11
NuScale doesn't provide a $/MWh estimate in its submission, but the company has previously said it is targeting a cost of US$65/MWh for its first SMR plant.12 That is 2.4 lower than the US$155/MWh estimate based on the NuScale design in a report by WSP / Parsons Brinckerhoff prepared for the South Australian Nuclear Fuel Cycle Royal Commission.13
NuScale's cost estimates should be regarded as promotional and will continue to drop ‒ unless and until the company actually builds an SMR. The estimated cost of power from NuScale's non-existent SMRs fell from US$98-$108/MWh in 201514 to US$65/MWh by mid-2018.12 The company announced with some fanfare in 2018 that it had worked out how to make its SMRs almost 20% cheaper ‒ by making them almost 20% bigger!
Lazard estimates costs of US$112-189/MWh for electricity from large nuclear plants.15 NuScale's claim that its electricity will be 2-3 times cheaper than that from large nuclear plants is implausible. And even if NuScale achieved costs of US$65/MWh, that would still be higher than Lazard's figures for wind power (US$29-56) and utility-scale solar (US$36-46).
Likewise, NuScale's construction cost estimate of US$4.35 billion / GW is implausible. The latest cost estimate for the two AP1000 reactors under construction in the US state of Georgia (the only reactors under construction in the US) is US$12.3-13.6 billion / GW.16 NuScale's target is just one-third of that cost ‒ despite the unavoidable diseconomies of scale and despite the fact that every independent assessment concludes that SMRs will be more expensive to build (per GW) than large reactors.
Further, the modular factory-line production techniques now being championed by NuScale were trialed with the AP1000 reactor project in South Carolina ‒ a project that was abandoned in 2017 after the expenditure of at least US$9 billion.
Corporate spin #3: Australian company SMR Nuclear Technology
In support of its claim that "it is likely that SMRs will be Australia's lowest-cost generation source", Australian company SMR Nuclear Technology Pty Ltd cites in its submission17 to the federal nuclear inquiry a 2017 report by the US Energy Innovation Reform Project (EIRP).18
According to SMR Nuclear Technology, the EIRP study "found that the average levelised cost of electricity (LCOE) from advanced reactors was US$60/MWh."
However the cost figures used in the EIRP report are nothing more than the optimistic estimates of companies hoping to get 'advanced' reactor designs off the ground. Therefore the EIRP authors heavily qualified the report's findings:18
"There is inherent and significant uncertainty in projecting NOAK [nth-of-a-kind] costs from a group of companies that have not yet built a single commercial-scale demonstration reactor, let alone a first commercial plant. Without a commercial-scale plant as a reference, it is difficult to reliably estimate the costs of building out the manufacturing capacity needed to achieve the NOAK costs being reported; many questions still remain unanswered ‒ what scale of investments will be needed to launch the supply chain; what type of capacity building will be needed for the supply chain, and so forth."
SMR Nuclear Technology's conclusions ‒ that "it is likely that SMRs will be Australia's lowest-cost generation source" and that low costs are "likely to make them a game-changer in Australia" ‒ have no more credibility than the company estimates used in the EIRP paper.
SMR Nuclear Technology's submission does not note that the EIRP inputs were merely company estimates and that the EIRP authors heavily qualified the report's findings.
The US$60/MWh figure cited by SMR Nuclear Technology is far lower than all independent estimates for SMRs:
- The 2015/16 South Australian Nuclear Fuel Cycle Royal Commission estimated costs of A$180-184/MWh for large light-water reactors, compared to A$225 for an SMR based on the NuScale design (and a slightly lower figure for the 'mPower' SMR design that was abandoned in 2017 by Bechtel and Babcock & Wilcox).13
- A December 2018 report by the Commonwealth Scientific and Industrial Research Organisation and the Australian Energy Market Operator found that electricity from SMRs would be more than twice as expensive as that from wind or solar power with some storage costs included (two hours of battery storage or six hours of pumped hydro storage).19
- A report by the consultancy firm Atkins for the UK Department for Business, Energy and Industrial Strategy found that electricity from the first SMR in the UK would be 30% more expensive than that from large reactors, because of diseconomies of scale and the costs of deploying first-of-a-kind technology.20 Its optimistic SMR cost estimate is US$107‒155 / MWh.
- The Canadian SMR Roadmap estimate of US$123 / MWh for a first-of-a-kind 300-MW on-grid SMR.9
- A 2015 report by the International Energy Agency and the OECD Nuclear Energy Agency predicted that electricity from SMRs will be 50−100% more expensive than that from large reactors, although it holds out some hope that large-volume factory production could reduce costs.21
- An article by four pro-nuclear researchers from Carnegie Mellon University's Department of Engineering and Public Policy, published in 2018 in the Proceedings of the National Academy of Science, concluded than an SMR industry would only be viable in the US if it received "several hundred billion dollars of direct and indirect subsidies" over the next several decades.22
SMR Nuclear Technology's assertion that "nuclear costs are coming down due to simpler and standardised design; factory-based manufacturing; modularisation; shorter construction time and enhanced financing techniques" is at odds with all available evidence23 and it is at odds with Dr. Ziggy Switkowski's observation in a public hearing of the federal inquiry that nuclear "costs per kilowatt hour appear to grow with each new generation of technology".10