Construction strategies and lifetime uncertainties for nuclear projects: A real option analysis

Small and medium sized reactors, SMRs (according to IAEA, 'small' are reactors with power less than 300 MWe, and 'medium' with power less than 700 MWe) are considered as an attractive option for investment in nuclear power plants. SMRs may benefit from flexibility of investment, reduced upfront expenditure, and easy integration with small sized grids. Large reactors on the other hand have been an attractive option due to economy of scale. In this paper we focus on the advantages of flexibility due to modular construction of SMRs. Using real option analysis (ROA) we help a utility determine the value of sequential modular SMRs. Numerical results under different considerations, like possibility of rare events, learning, uncertain lifetimes are reported for a single large unit and modular SMRs.