Valuing modular nuclear power plants in finite time decision horizon

Shashi Jain, Ferry Roelofs and Cornelis Oosterlee

Energy Economics, 2013, vol. 36, issue C, 625-636

Abstract: Small and medium sized reactors, SMRs, (according to IAEA, ‘small’ refers to reactors with power less than 300MWe, and ‘medium’ with power less than 700MWe) are considered as an attractive option for investment in nuclear power plants. SMRs may benefit from flexibility of investment, reduced upfront expenditure, enhanced safety, and easy integration with small sized grids. Large reactors on the other hand have been an attractive option due to the economy of scale. In this paper we focus on the economic impact of flexibility due to modular construction of SMRs. We demonstrate, using real option analysis, the value of sequential modular SMRs. Numerical results under different considerations of decision time, uncertainty in electricity prices, and constraints on the construction of units, are reported for a single large unit and for modular SMRs.

Keywords: Real option; Stochastic grid method; Modularity; Nuclear power plants; Finite time decision horizon (search for similar items in EconPapers)
JEL-codes: D81 G11 Q40 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:36:y:2013:i:c:p:625-636

DOI: 10.1016/j.eneco.2012.11.012

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