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Effects of the U.S. inflation reduction act on SMR economics

Journal Article · · Frontiers in Nuclear Engineering
 [1];  [2];  [1];  [1]
  1. Idaho National Laboratory (INL), Idaho Falls, ID (United States)
  2. Argonne National Laboratory (ANL), Argonne, IL (United States)
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The U.S. Inflation Reduction Act (IRA) of 2022 provides a wide array of tax credits and other incentives for low-carbon energy. The technology-neutral clean generation production tax credit (PTC) (Section 45Y of the U.S. Internal Revenue Code) and the technology-neutral investment tax credit (ITC) (Section 48E) lower the net cost of new electricity generation projects with zero or negative greenhouse gas emission rates. We evaluate the impact of the IRA legislation—specifically the PTC and ITC—on the cost-competitiveness of small modular reactors (SMRs). We use the Argonne Low-carbon Energy Analysis Framework (A-LEAF) model to calculate the capacity factor of an SMR with a range of hypothetical variable operating and maintenance (O&M) costs in the Electric Reliability Council of Texas (ERCOT) electricity market. We selected ERCOT for market modeling because of its competitive structure, available data, and extensive use in prior literature. We use a discounted cash flow model to calculate the SMR’s net present value based on the market prices and capacity factors from A-LEAF, hypothetical ranges of capital and variable O&M costs, and other input parameters, with or without the IRA tax credits. We determine the SMR owner’s optimal choice of PTC or ITC for the hypothetical ranges of capital and variable O&M costs. We also evaluate potential shifts in the SMR owner’s optimal choice of PTC or ITC based on historical patterns of nuclear capital cost overruns in the United States. We also assess the sensitivity of our results to longer PTC period and electricity prices from the New England market, which tend to be higher than electricity prices in ERCOT. We find that even with the IRA tax credits, only SMRs with low capital and variable O&M costs would be economically feasible in the low-price ERCOT market scenario modeled. A longer PTC period and higher-price market such as New England, however, would significantly expand the economic feasibility of SMRs in the United States.
Research Organization:
Idaho National Laboratory (INL), Idaho Falls, ID (United States)
Sponsoring Organization:
USDOE
Grant/Contract Number:
AC07-05ID14517
OSTI ID:
2382671
Report Number(s):
INL/JOU--24-76243-Rev000
Journal Information:
Frontiers in Nuclear Engineering, Journal Name: Frontiers in Nuclear Engineering Vol. 3; ISSN 2813-3412
Publisher:
Frontiers Media S.A.Copyright Statement
Country of Publication:
United States
Language:
English

References (7)

What you Should Know about Megaprojects and Why: An Overview journal April 2014
Techno-economic analysis of advanced small modular nuclear reactors journal March 2023
Uncertainties in estimating production costs of future nuclear technologies: A model-based analysis of small modular reactors journal October 2023
Economic evaluation of small modular nuclear reactors and the complications of regulatory fee structures journal May 2017
Transport, constructability, and economic advantages of SMR modularization journal April 2021
Capital cost estimation for advanced nuclear power plants journal March 2022
Remote nuclear microreactors: a preliminary economic evaluation of digital twins and centralized offsite control journal December 2023

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Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
Economics
Nuclear
Profitability
Small Modular Reactors