Economic feasibility of high-temperature reactors for industrial cogeneration: an investor's perspective

Abstract

This paper studies the economic potential of using high-temperature nuclear reactors (HTRs) for cogeneration of industrial process heat and electricity. A reference case HTR is found to deliver cost-competitive process heat with temperatures of ≥200 °C, rendering the chemical and pulp and paper industries potential candidates. The reference case investment yields a positive net present value of €304 million. Real options analysis is employed to account for the uncertain environment and the resulting managerial flexibilities of the project. A real option model for optimal investment timing is adapted to HTRs for industrial cogeneration. The value of the option to invest in an HTR is determined at €667 million and the electricity price threshold for an optimal investment at 79 €/MWh. Though the option to invest in an HTR represents a significant value for a utility, the investment should be delayed until the electricity price has reached the threshold value. We also propose a model to calculate the option value of switching between two different operating modes (cogeneration vs. electricity only). For the reference case, this option value turns out to be €85 million.