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16.11.2018 11:20
US Deparment of Energy Publishes a Report on Subsidies for Small Modular Nuclear Reactors

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State-imposed standards and financial incentives such as those used to spur widespread adoption of renewables technologies offer a promising model to address challenges to commercialize small modular reactors, says a report by the U.S. Department of Energy’s Office of Nuclear Energy, POWER reports.

But to make a meaningful impact, nearly $10 billion in incentives will be needed to deploy 6 GW of small modular reactor capacity by 2025, it acknowledges.

The report, “Examination of Federal Assistance in the Renewable Energy Market,” was prepared by Kutak Rock and Scully Capital under contract with the Department of Energy and made public on November 15. It notes that while uncertainty attached to the rapidly evolving market environment is shadowing long-term investment decisions at electric utilities in the U.S, current trends in the power sector present an opportunity for the technology development “as a flexible, carbon-free baseload generation resource which can be built on a smaller scale than traditional nuclear plants.” However, efforts to commercialize it have lagged owing to several challenges. These include development of a manufacturing ecosystem, licensing risks, developmental timelines, first-of-a-kind costs, and uncertainty in long-term energy markets.

Federal financial assistance such as tax and credit incentives could help curb reductions in the cost of power, while demand mandates would assure off-take at predictable prices, the report adds.

Citing data from a September 2017  economic study conducted by U.S.-based consortium SMR Start, the report says that allowing SMRs to receive production tax credits could reduce the cost of power by just under 1 cent per kWh. Credit incentives, such as loan guarantees could further slash the cost of power by another 0.3 cents. Additionally, state and local tax incentives, such as sales and use tax exemptions and property tax abatements, could further reduce costs by 0.5 cents. “Altogether, these would reduce the cost of power by 22%,” it concludes.

But to meaningfully impact commercial deployment, financial incentives would need to be applied to several reactors in combination with demand mandates “to assure off-take,” it suggests. “Construction of 6 GW of SMR capacity by 2035 would comprise about 5% of total capacity additions through that year. This would amount to 15 SMR projects with capacity of 400 MW each.” If the federal government backed 15 SMR projects with PTCs and DOE loan guarantees, total taxpayer-funded costs could amount to about $10 billion.

However, the report argues: “While this level of support is significant relative to the capacity deployed, the high capacity factors and long operating lives of SMRs support an attractive return on the government’s investment.” Government-backing of SMRs could even prove cheaper than its support for renewables, it adds. “Specifically, the $10 billion assistance estimate equates to approximately $0.0034/kWh.

By comparison, the investments in wind and solar equaled approximately $0.0108/kWh.” Federal expenditure for SMRs could be impactful even if on a smaller scale than the $51 billion that the government spent on solar and wind through mandates, tax incentives, loans and research grants from 2005 to 2015, the report says. It notes that 90% of the $51 billion came in the form of subsidies, which included investment and production tax credits. One reason that SMRs compare favorably to renewables is that they are “expected to realize capacity factors of 92.1% or above and have very long operating lives.”

Still, the report notes that significant questions remain about how much commercial deployment of SMRs will actually cost—and whether 6 GW of induced capacity would be enough to develop the industrial capabilities necessary to support the industry over the long-term.

TAGS: subsidies | nuclear | report | usa | department | of | energy 

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20.03.2022  Teodor Bobochikov, Managing Partner, V-Ridium
Energy Transformation – Trends and drivers
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