Small Modular Reactors (SMRs) vs. Renewables: A comparison of two radically different energy technologies – which is more cost-effective?

By Denis Koshelev

The future of our energy grid hangs in a delicate balance, a complex equation of immense capital expenditure, enduring operational costs, and increasing power demand. As nations grapple with the imperative of electrification, the path forward is anything but clear. Which technologies promise the most cost-effective and sustainable solutions for powering our homes and industries? Where should we invest to maximize benefits and minimize the cost of ownership?

Solar Energy Systems

Utility-scale solar PV has among the lowest CAPEX/MW of any renewable energy resource. According to Ontario’s planning study, utility PV is about C$1,866/kW in 2024. [19] Recent Alberta installation costs (more residential but indicative of trends) are approximately $2.50–$3.50/W ($2,500–$3,500/kW), but utility-scale installations typically benefit from economies of scale, which lower the per-kW cost. [23]

Solar energy systems, particularly solar photovoltaic (PV) technology, have witnessed a decline in costs over the past decade, making them one of the most competitive sources of new electricity generation in many parts of the world. The cost of utility-scale solar energy plummeted by approximately 90% between 2009 and 2021, a trend driven by technological advancements, economies of scale in manufacturing (especially in China), and improvements in installation practices [9]. In the U.S., the last decade brought a 64% drop in residential system costs, 69% for commercial, and 82% for utility-scale PV systems. [10] This cost reduction has made solar PV highly attractive for a wide range of applications, from large utility-scale power plants to distributed residential and commercial rooftop installations.

When measured on a per-kilowatt-hour (kWh) basis, solar energy costs have similarly trended downward, although exact Levelized Cost of Electricity (LCOE) numbers depend on sunlight availability, system quality, and financing. Canadian solar installations in sunnier provinces like Alberta can achieve more competitive cost efficiency due to higher solar irradiation.

Wind Energy Systems

Wind energy, both onshore and offshore, has experienced substantial cost reductions as well. Land-based wind power costs, measured by LCOE, fell by about 60% between 2012 and 2022, reaching approximately $32 per MWh in 2022. Capital costs (CAPEX) for utility-scale onshore wind are relatively low compared to other energy sources: Lazard estimates a range of ~$1,260/kW to $2,580/kW, while Canada’s IESO lists new onshore wind at C$1,824/kW. [11]

The initial investment for a commercial onshore wind turbine translates to approximately $1.3 million per megawatt (M/MW) of capacity. Canadian data indicate capital costs on the order of C$1.6-1.9 M/MW, including turbines, foundations, grid hookups, and some site development costs. While supply chain pressures and inflation temporarily pushed prices higher in 2022 — Nordex, for instance, raised turbine prices by around 12% — the long-term trend remains downward due to ongoing technological improvements and the deployment of larger, more efficient turbines. [13][14][22]

Operations and maintenance costs for wind energy remain relatively low, typically ranging from 1 to 2 cents per kilowatt-hour, or about $42,000 to $48,000 per turbine annually. Although events like lightning strikes can require costly repairs — especially for offshore turbines — the overall O&M burden is modest and continues to decline over time as systems become more reliable. [14]

Nuclear: Small Modular Reactors (SMRs)

Small Modular Reactors (SMRs) represent an emerging class of nuclear reactors designed to be smaller in size and power output compared to conventional large-scale nuclear power plants. Proponents highlight several potential advantages, including lower upfront capital costs per unit, enhanced safety features, shorter construction timelines due to modularization and factory fabrication, and greater siting flexibility [1] [2].

The modular nature allows for phased deployment, potentially reducing financial risk and enabling SMRs to cater to a wider range of energy demands, including remote locations or industrial applications. However, the economic landscape for SMRs is still largely theoretical, with most designs in various stages of development and few operational units globally [3].

Initial cost estimates for SMRs have often been optimistic, and real-world projects, such as the NuScale project in the U.S., have faced significant cost escalations and project cancellations, raising concerns about their economic viability [4]. The levelized cost of electricity for SMRs is a critical metric, with estimates varying widely, often influenced by factors such as discount rates, financing assumptions, and the "nth-of-a-kind" (NOAK) versus "first-of-a-kind" (FOAK) cost dynamics [5]. While some projections suggest SMRs could achieve LCOEs competitive with renewables, particularly when considering their dispatchable nature (they offer baseload power, reducing the need for backup or storage), current data from early projects and independent analyses often paint a more expensive picture, especially for FOAK units. These high upfront capital costs, coupled with long licensing timelines, pose substantial financial risks that can deter private investment without significant public support, a stark contrast to solar and wind, which have already benefited from mass production. However, as we scale up and scale out, the cost should decrease significantly. It’s worth noting that with the ITC (Investment Tax Credit), a government incentive that reduces tax liability for investments in certain energy projects, the levelized cost of energy becomes more competitive, especially for renewables and emerging nuclear technologies.

CAPEX for SMRs is a significant driver of their overall economics. Estimates for SMRs range broadly, from approximately $50 million for microreactors to as high as $3 billion for larger SMR units [6]. On a per-kilowatt (kW) basis, CAPEX for Gen III SMRs (utilizing pressurized light water technology) can be up to $5,000/kW, with some Gen IV designs aiming for lower costs, potentially around $2,500/kW if they achieve significant scale [6]. For instance, the NuScale SMR design, before its project cancellation, saw its estimated "nth-of-a-kind" cost rise to about $3,672/kW [7]. These figures are considerably higher than the upfront costs for utility-scale solar and onshore wind projects in many regions.

Idaho National Laboratory's comprehensive literature review establishes operating expenses for SMRs in a range of $15-35/MWh, with their base analysis using $25/MWh as a medium estimate. This range reflects different technological configurations and deployment scenarios across various SMR designs. [27]

The correlation between higher CAPEX and higher OPEX suggests that more expensive SMR designs also face elevated operational costs, potentially due to increased complexity, higher financing costs from elevated capital requirements, or additional maintenance needs for more sophisticated systems. This pattern challenges assumptions that higher upfront investment necessarily yields lower operational expenses for nuclear technologies.

And when it comes to traditional large nuclear power plants, the IESO planning outlook estimates an overnight capital expenditure (total cost required to build a power generation asset) of C$11,542/kW for new large nuclear reactors (multi-hundred-MW CANDU or PWR units) [19]. However, this figure appears to be significantly lower than the costs observed in recent U.S. projects. For instance, the second new nuclear unit at Plant Vogtle in Georgia, US, completed in 2023, incurred a total cost of approximately US$35 billion [20]. This disparity is likely due to the IESO figure excluding financing costs, whereas the Vogtle figure represents the true final cost of a real-world project once extensive delays and financing are factored in. It is broadly emphasized across sources that the true costs of nuclear projects are highly contingent on financing arrangements and unforeseen contingencies.

Conclusion: A Comparative Cost Analysis

When measured by the direct metric of construction cost, the economic landscape of new power generation is clear. Utility-scale solar and onshore wind are, by a significant margin, the most affordable options. Based on current data, the upfront capital expenditure for utility-scale solar PV ranges from approximately $1,150 to $1,600 per kilowatt (kW), with onshore wind projects costing between $1,900 and $2,300 per kW [15]. These figures stand in stark contrast to nuclear technologies. First-of-a-kind (FOAK) Small Modular Reactors (SMRs) carry estimates upwards of $5,000/kW, and real-world large-scale projects like Plant Vogtle have demonstrated that final costs can balloon to over $10,000/kW when accounting for delays and financing [20].

However, upfront construction cost is only one part of the equation. A technology’s lifetime value is better captured by the Levelized Cost of Electricity (LCOE), which includes capital, fuel, and operational expenses. Here too, renewables lead, with Lazard’s analysis showing utility-scale solar and wind as the cheapest sources of new energy, even when paired with storage to address intermittency [15]. The primary value proposition for nuclear power — both large-scale and SMRs — is not its cost, but its ability to provide firm, dispatchable, carbon-free baseload power with a high capacity factor, a critical component for grid stability.

Ultimately, the potential for SMRs to become cost-competitive remains a highly uncertain prospect. While proponents point to future savings from factory fabrication and learning-by-doing ("nth-of-a-kind" models), current data shows a technology that is significantly more expensive than its renewable counterparts. The World Nuclear Industry Status Report 2024 highlights this gap, noting the average LCOE for nuclear power has risen to $182/MWh, far exceeding that of solar and wind [21]. Therefore, investment and policy decisions hinge on a fundamental trade-off: the proven low cost and rapid deployment of renewables versus the high-cost, high-reliability profile of nuclear power. This evolving economic dynamic demands that any path to electrification carefully weigh not just the price of construction, but the long-term value of grid resilience and energy security.

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