Risk analysis of nuclear power investments in Large versus Small-Medium sized reactors

Capital intensive investment projects, as nuclear power generation, have traditionally pursued the Economy of Scale. Multiple SMRs on the same site represent an alternative investment option, that exploits the concept of Economy of Multiples to offset or partially compensate the loss of Economy of Scale. The comparative financial performance has been analysed of alternative NPP investment projects at a single site level: a stand alone, large LWR is compared against multiple SMRs, with the same total power generation capacity. Given conservative assumptions, as far as input variables are considered as deterministic values, scenario simulations show that a LR holds a competitive edge on multiple SMRs, in terms of investment profitability. Nevertheless, LR’s project profitability has proven to be more volatile against changed scenario conditions such as construction period and cost overrun, reduced electricity output, etc. SMRs’ lower project profitability is counterbalanced by higher capability to deal with perturbations of the forecasted scenario conditions, with limited loss of value, as compared to LR. If Profitability Index is assumed as an indicator of the investment performance, useful information may be derived about business risk and profitability from its distribution. This work lead to the conclusion that SMRs may be considered as a valuable and flexible investment option, in a merchant plant environment, where a stochastic approach has to be assumed in data elaboration and where investment profitability is as relevant as investment risk.