Small modular reactors are advanced nuclear power systems designed to generate electricity using smaller reactor units than conventional nuclear plants. Their levelized cost of electricity helps estimate the average cost of generating power over a facility’s lifetime. This calculation considers construction expenses, financing, fuel, operations, maintenance, and electricity production. Understanding these factors helps explain how small modular reactors compare economically with other generation technologies. Their costs depend on reactor design, project size, regulatory requirements, financing conditions, construction timelines, and the number of units deployed.
Small modular reactors (SMRs) are designed to provide nuclear electricity through relatively compact reactor systems that may be manufactured partly in factories and assembled at project sites. Their economic performance is frequently evaluated using the levelized cost of electricity (LCOE), a measure that estimates the average cost of generating electricity over a power plant’s operating lifetime. LCOE supports comparisons between technologies, but its results depend on assumptions about costs, output, financing, and project duration.
The levelized cost of electricity represents the discounted lifetime costs of a power generation facility divided by its discounted electricity production. It is generally expressed in currency per megawatt-hour, such as dollars per MWh.
For small modular reactors, this calculation includes the expenses associated with developing, constructing, operating, maintaining, and eventually decommissioning a nuclear facility. Because SMRs are an emerging technology category, estimated costs can vary significantly between designs and projects.
Important factors influencing SMR LCOE include:
Initial construction costs: Reactor design, engineering, site preparation, equipment, and construction labor contribute to the upfront investment.
Financing expenses: Interest rates, the cost of capital, and the time required to complete construction can substantially affect lifetime electricity costs.
Capacity factor: This measures the proportion of potential electricity output actually generated over a period. Higher utilization can spread fixed costs across more electricity.
Operating and maintenance costs: Staffing, inspections, repairs, security, and regulatory compliance contribute to ongoing expenses.
Fuel cycle costs: Uranium fuel, fuel fabrication, transportation, and spent fuel management influence total project economics.
Plant lifetime: A longer operating period can distribute initial investment over additional electricity production, provided the facility remains safe and economically viable.
LCOE calculations typically discount future costs and electricity generation to account for the time value of money. Therefore, two projects with similar construction costs may have different estimated LCOEs because their financing terms, operating assumptions, and expected output differ.
The economic competitiveness of small modular reactors depends on whether their design and deployment strategies can offset the costs associated with nuclear power development. Factory manufacturing and standardized designs may create opportunities for efficiency, but these benefits depend on production volumes, supply chains, and successful project execution.
Key considerations include:
Modular manufacturing: Producing repeatable components in factories may improve quality control and reduce some on-site construction activities. However, savings depend on manufacturing capacity and design standardization.
Multiple-unit deployment: Installing several reactors at one site may allow shared infrastructure, staffing, security, and supporting facilities to reduce costs per unit.
Construction schedules: Shorter construction periods can reduce financing expenses and allow electricity generation to begin earlier. Delays can undermine these potential benefits.
Regulatory requirements: Licensing, safety assessments, environmental reviews, and quality assurance are essential considerations that affect development timelines and costs.
Project scale and learning: Repeated construction may improve manufacturing efficiency and workforce experience, although projected learning benefits are not guaranteed.
Comparison with alternative technologies: SMRs may be evaluated alongside large nuclear plants, natural gas generation, renewables, storage, and other resources. Fair comparisons require consistent assumptions about financing, system reliability, emissions, and project lifetimes.
An SMR’s LCOE should not be treated as a universal price. Early projects may face different costs from later deployments, and estimates can change as designs mature and supply chains develop. In addition, LCOE does not fully capture every aspect of electricity system value, including dispatchability, grid integration, reliability, or the cost of supporting infrastructure. These factors may require separate analysis when assessing the role of SMRs in an electricity system.