SMRs could generate power at £40/MWh under RAB model

Small modular reactors (SMR) could generate nuclear power for less than £40/MWh if they were able to access the regulated asset base (RAB) funding model, according to the chief executive of the Rolls-Royce-led consortium that is developing the technology in the UK.

But at a hearing of the House of Lords Industry and Regulators Committee’s ongoing inquiry into Ofgem and the net-zero target on Tuesday (16 November), Tom Samson said the consortium is nevertheless prioritising the existing Contracts for Difference (CfD) mechanism as a source of support.

The government has just tabled legislation to implement the RAB model, which aims to bring down financing costs by allowing developers to start receiving revenues from billpayers while projects are still being built, for conventional large-scale nuclear power stations.

Commenting on its potential to be applied to SMRs, Samson said: “It provides access to low-cost capital and therefore further reduces cost of electricity. If we had RAB with a much lower cost of capital, it could be below £40/MWh.”

However, Samson said the consortium’s focus is still the CfD scheme, which he described as a more “bankable” financing mechanism than the RAB model, given the legislative uncertainties surrounding the latter: “The CfD is a bigger priority because we are not entirely sure of the timing for RAB and we don’t want to have to wait to deploy the technology.”

Under the CfD scheme, he said Rolls-Royce’s SMRs are expected to generate power for £68/MWh, which is significantly less than the strike price awarded to EDF’s Hinkley Point C plant in Somerset.

Samson, who oversaw Toshiba’s Moorside nuclear project in Cumbria before the Japanese multi-national pulled the plug, said their reliance on CfDs could be reduced by signing five-to-ten-year power purchase agreements (PPAs) to supply dedicated electricity to large energy users, such as data centres.

“Combining PPAs over five to ten years with CfDs further diminishes the burden on the government,” he added.

Samson also told the committee that there could be “20 if not 30” of the reactors, which are each designed to provide 470 MW of generation capacity, in the UK by 2050.

And he estimated that the consortium could deliver up to six SMR plants per annum from its factories where it plans to prefabricate 90% of each reactor before delivering them to sites.