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  • LucidCatalyst study for ARPAE Program found that advanced reactors costing <$3,000/kW will drive dow
LucidCatalyst has performed a study for the ARPA-E MEITNER Program that is the first to derive the highest allowable capital cost for advanced reactors by modeling their performance in four of the major power markets in the U.S. in 2034.

Key Insights from the study include:

  • Advanced reactors that cost less than $3,000/kW will be attractive investments for owners. 

  • There will be large markets for advanced reactors that cost less than $3,000/kW.

  • Flexible advanced reactors complement wind and solar in markets with high penetrations of renewables.

  • Flexible advanced reactors can enable high penetrations of variable renewables in future energy systems. 

  • Together, renewables plus advanced nuclear (with thermal energy storage) lower overall system costs, reduce emissions, and improve performance in future U.S. electricity grids. 

  • In all of the markets modeled, adding advanced reactors lowered overall system cost.

  • Because advanced reactors can supply clean dispatchable power without raising the overall cost of electricity—ISO operators, public utility commissioners, policymakers, utilities, and other stakeholders should investigate the role that these products could play in grids of the future and  support acceleration of advanced reactor commercialization. 

Motivation for the Study

In the U.S., currently there are 64 advanced reactor developers at various stages of commercializing new products, including five companies that are already working with the Nuclear Regulatory Commission to prepare for licensing. 

Advanced reactor developers must design for market environments that will exist when their plants are commercially available. It is therefore critical to have a clear understanding about what plants will need to cost to be attractive investments, and what performance characteristics will create the most value for plant owners.

Future energy systems will have high penetrations of variable renewable energy will need complementary clean dispatchable generation. Most mainstream future energy systems modeling, even those with high penetrations of variable renewables, project substantial fossil fueled generation even as far out as 2050. 

This study shows how renewable and nuclear energy can work together, and how flexible advanced reactors can enable high penetrations of variable renewables in future energy systems. 

This study is among the first to show the substantial contribution that flexible advanced reactors—in combination with renewables—can make towards reliable, responsive, affordable, and clean future energy systems by supplying clean dispatchable generating capacity.

 

Adding advanced reactors to the grid lowers overall system cost while reducing emissions and improving the performance of future energy systems. Depending on specific market conditions, it may also be beneficial to co-locate thermal energy storage systems (ESS) with advanced nuclear plants. 

 
 
Study Objectives

  • Define the cost and technical performance requirements that advanced reactors need to meet in order to make useful contributions to clean, reliable, affordable and flexible future energy systems.

  • Establish an understanding among identified stakeholders and target audiences about the near-term viability of advanced nuclear technologies, the economic and technical roles they can play in future energy markets, and the potential market share for flexible nuclear.

The study asked the following questions about market conditions in 2034. This date was chosen as being halfway to 2050, as well as being a date when advanced reactors are expected to be a commercialized and available.

 

  • What is the maximum allowable CapEx?

  • What is the value of integrated thermal storage?

  • Are there significant differences between key markets?

  • How do OpEx and fuel costs affect allowable capital cost?

 

The study examines two future scenarios for each ISO in 2034:

  1. ‘Low renewables’ (Low RE) baseline scenario, assuming continuation (and eventual expiration) of existing renewables policy. 

  2. ‘High renewables’ (High RE) scenario based on NREL Regional Energy Deployment System (ReEDS) low renewables and natural gas costs.

 

These scenarios were modeled across four of the principal power markets in the U.S.: ISO-New England (ISO-NE); Pennsylvania, Jersey, Maryland Power Pool (PJM); Midcontinent Independent System Operator (MISO); and California ISO (CAISO). 

In addition, three further scenarios were also assessed for one ISO (PJM):

  1. Effect of CO2 Prices: How a $50/tonne CO2 price, with side cases of $25 and $75/tonne, affects revenue and maximum allowable CapEx.

  2. Market Penetration Potential: Assuming the operational characteristics of a flexible advanced nuclear plant are like a combined cycle gas turbine (CCGT), to what extent can these resources be deployed without significantly reducing energy prices (due to their low-price energy bids)? 

  3. Impact on Allowable CapEx from Alternative Fixed O&M Assumption: Considered what a halving of today’s fixed O&M costs would have.

 

Key Findings

  • Developers should aim for a CapEx of less than $3,000/kW. Increasing or decreasing the weighted average cost of capital (WACC) by a percentage point changes the maximum allowable CapEx by around 8 – 9%. Fuel cost and fixed O&M expenses are material considerations—as these decrease allowable CapEx increases.

  • A 12-hour thermal energy storage system enables higher allowable CapEx, assuming it receives capacity payments. Across ISOs modeled, co-locating ESS makes economic sense, on average, for less than $1,126/kW. Without energy storage, a plant’s capacity factor suffers in zones with high variable renewables. 

  • Developers should note that higher RE penetrations reduce average energy prices (and thus allowable CapEx). 

  • A ‘fleet’ deployment of advanced reactors combined with ESS that meet these cost targets, can lower the total cost of energy delivery within the ISO.

  • Capacity price is critically important. A ‘mid-range’ capacity price of $75/kW-year, relatively consistent with today’s prices, allows for:
    ~$2,500/kW CapEx without storage
    ~$3,500/kW CapEx with storage

Three additional scenarios and potential market conditions were examined in PJM, yielding these additional findings: 

 

CO2 price: A CO2 price dramatically increases allowable CapEx. For example, in the PJM mid-capacity price case, (assuming the high renewable scenario with thermal storage) if a price of $75/tonne for CO2 is established, the maximum allowable CapEx goes from $3,591/kW to $6,609/kW.

Fleet deployment: A large fleet supplying 2/3 of firm generation in PJM (and co-located thermal storage) dropped the maximum allowable CapEx by ~$500/kW (from the 1st plant to last plant).

 

Increased O&M and fuel costs: Increasing the fixed O&M assumptions from $31/kW to $61/kW reduces the maximum allowable CapEx by $377/kW. Raising fuel cost from $4/MWh to $12/MWh reduces allowable CapEx by ~$750/kW. 

These charts show the total plant installed capacity and generation for PJM. This market has the most coal capacity and generation of the four markets modeled. The High RE Future has several times more solar and wind capacity and generation than the Low RE Future. The addition of advanced nuclear plants significantly reduces both the amount of fossil capacity and generation. 

 

Recommendations

Only by designing to clear cost and performance targets will reactor developers be successful in delivering large-scale market transformation. Flexibility (without storage) may be good for the grid but it does not necessarily benefit a plant’s revenue. Nuclear plants inherently want to run at their maximum rated output. Making flexibility economic for nuclear producers will require either the inclusion of ESS, or major market reforms. 

Delivering plants for less than $3,000/kW requires meaningful cost reduction in all systems and components, and all aspects of the delivery process. Key strategies include standardization and reuse of designs, and separation of the heat source (nuclear island) safety case from the rest of the plant to enable use of off-the-shelf balance of plant. Advanced nuclear plants can supply a large fraction of dispatchable power without raising the overall cost of electricity.

 

This conclusion should motivate ISO operators, public utility commissioners, policymakers, utilities, and other stakeholders to investigate the role that these products could play in the grids of the future. And in particular to continue and increase their support of advanced nuclear commercialization efforts. This study should also motivate organizations responsible for national and international energy modelling to include flexible, advanced nuclear with energy storage in their projections for future energy systems.

 

Acknowledgements

Cost and Performance Requirements for Flexible Advanced Nuclear Plants in Future U.S. Power Markets

 

Report for the ARPA-E MEITNER Program

July 2020 

 

Copyright © 2020 LucidCatalyst

 

Authors: Eric Ingersoll, Kirsty Gogan, John Herter, Andrew Foss

With assistance from: Jane Pickering and Romana Vysatova

 

We are grateful to our reviewers and advisors:

  • Steve Brick, Senior Fellow, The Chicago Council on Global Affairs

  • Charles Forsberg, Principal Research Scientist and Executive Director, MIT Nuclear Fuel Cycle Project

  • Jesse Jenkins, Assistant Professor, Princeton University

  • Abram Klein, Managing Partner, Appian Way Energy Partners

  • Mike Middleton, Practice Manager Nuclear, UK Energy Systems Catapult

  • David Mohler, Former CTO and SVP, Duke Energy; Former Deputy Assistant Secretary for Clean Coal and Carbon Management, Office of Fossil Energy, U.S. Department of Energy

  • Bruce Phillips, Director, The NorthBridge Group

  • Dave Rogers, Former Head of Global Project Development & Finance Practice, Latham & Watkins LLP

All rights reserved. No part of this report may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from LucidCatalyst, except by a reviewer who may quote brief passages in a review.