The Potential of Nuclear SMR in the Norwegian Energy Mix : Economic and financial analysis of SMRs in Norway

Abstract

The primary purpose of this thesis is to determine the feasibility of incorporating small modular reactors (SMR) into the Norwegian energy mix, considering Norway's role in a larger integrated power market with direct grid connections to several European countries. Three analyzes were conducted to evaluate this: Initially, we conducted a literature review to determine if there is room for nuclear energy in the Norwegian energy mix and to compare nuclear energy with other relevant sources on a variety of financial and socioeconomic metrics to determine its potential value relative to relevant alternatives. Finally, we conducted a profitability analysis to determine the potential value creation of an SMR project. This approach aims to provide a nuanced perspective on the potential of allowing nuclear energy production in Norway. The primary findings suggest that SMR technology has significant potential in the Norwegian energy mix. With the green transition, the market analysis predicts a substantial increase in energy demand through 2050. In addition, the energy prices observed over the past few years are likely to decrease by 2030. With the current energy policies, however, there is a substantial risk of deviations between demand and supply, thereby severely jeopardizing the power balance and causing volatile power prices. Potentially resolvable by the addition of a stable and to a large extent dispatchable energy source, such as SMR. The comparative analysis demonstrates that nuclear energy has acquired an undeservedly negative reputation, despite appearing to be one of, if not the most environmentally friendly and secure energy source available today. In addition to being highly cost-competitive with sources such as offshore wind and solar, especially when the need for energy storage and external costs is considered. Our analysis of profitability is based on several assumptions. Seeing as SMR is a new and untested technology, its validity is difficult to assess. Nevertheless, based on these assumptions, our findings indicate that SMR projects would require reasonable financing in order to create shareholder value due to their substantial initial investment. With the long and stable cash flow, however, our base case estimates indicate that a project could achieve a payback period of approximately 20 years, with an accumulated positive net cash flow of between 60 and 70 billion NOK. Which, with discounting effects included, results in a net present enterprise value of 2-3 billion NOK. In addition, a levelized cost of electricity of around 65 øre/Kwh is achieved, which is particularly competitive compared to offshore wind.