Levelized Cost of Energy (LCOE) is the standard metric for comparing the economic competitiveness of different electricity generation technologies on an apples-to-apples basis. Expressed in dollars per megawatt-hour ($/MWh), LCOE divides the total lifetime costs of building and operating a power plant, including overnight capital cost, financing charges, fuel procurement, operations and maintenance, and decommissioning, by the total expected electricity output over the plant's operational life. For nuclear plants, LCOE is heavily front-loaded due to high capital costs, but benefits from low marginal fuel costs and long operating lifetimes of 60 years or more.
The SMR industry's central economic challenge is demonstrating LCOE competitiveness with natural gas combined cycle plants ($40-70/MWh) and onshore wind and solar ($25-50/MWh before integration costs). First-of-a-kind (FOAK) SMR units will inevitably carry higher costs due to regulatory licensing expenses, first-build construction learning, and supply chain development. The cancellation of NuScale's Carbon Free Power Project (CFPP) in Idaho in November 2023, driven by cost escalation from an original target of $58/MWh to over $89/MWh, underscored the difficulty of achieving competitive LCOE for initial deployments. However, SMR proponents argue that factory fabrication, modular construction, and fleet learning curves will drive nth-of-a-kind (NOAK) costs to $50-70/MWh range, with some designs targeting below $50/MWh at scale.
Several factors are shifting the LCOE comparison in nuclear's favor. Rising natural gas prices, carbon pricing mechanisms, and the increasing system integration costs of intermittent renewables (backup storage, transmission upgrades, curtailment) improve nuclear's relative position when evaluated on a system LCOE basis rather than plant-level LCOE. The DOE's Advanced Reactor Demonstration Program has committed over $4 billion to de-risk FOAK deployments, with TerraPower receiving up to $2 billion and X-energy up to $1.2 billion in cost-share funding. Long-term PPAs from creditworthy counterparties like Google, Amazon, and Meta provide revenue certainty that improves project financeability and reduces the cost of capital. OPG's CAD $3 billion investment in the Darlington BWRX-300 project similarly aims to de-risk the first North American SMR construction and establish a reference cost baseline for subsequent units.