SMRs are attracting growing attention as a firm, low-carbon technology that can complement renewables and underpin hydrogen and desalination systems, but their economic viability depends critically on reactor scale, capital cost trajectories, financing conditions and deployment readiness.

A new analysis from the H₂Zero Research Unit at Frederick University uses a parametric techno-economic framework to assess the Levelized Cost of Electricity (LCOE), Levelized Cost of Water (LCOW) and Levelized Cost of Hydrogen (LCOH) for SMRs across a range of capacity and cost scenarios and examines their role within an integrated energy-water-hydrogen nexus.

To address this challenge, the research systematically varies SMR capacity (50-600 MWe), capital cost, discount rate and capacity factor to quantify how key parameters drive SMR competitiveness across deployment scenarios. The results show that LCOE ranges from approximately 90 US$/MWh at smaller scales down to around 46 US$/MWh at larger capacities, reflecting the combined effect of scale and learning. For water desalination powered by SMRs, LCOW falls in the range of 0.65-0.43 US$/m³, while the Levelized Cost of nuclear-based (pink) hydrogen ranges from 6.95 to 3.76 US$/kg H₂, becoming increasingly competitive as SMR capacity and utilization increase.

The nexus modeling results are equally significant. Introducing SMRs alongside renewables and interconnections significantly accelerates decarbonization, with the electricity sector reaching full decarbonization substantially earlier compared with a renewables-only pathway. SMR-supported hydrogen production enables large-scale pink hydrogen output after 2035, complementing green hydrogen and driving total production toward several hundred thousand tonnes per year by 2060. SMR-powered desalination supports water security by keeping production in step with rising demand, while co-location with hydrogen facilities reduces infrastructure costs by 20-30%.

Beyond traditional power and hydrogen roles, SMRs can support strategic digital infrastructure. By delivering firm, low-carbon baseload electricity around the clock, SMRs are well suited to grid-scale data centers and AI processing facilities that require guaranteed power availability and predictable long-term energy costs, roles that variable renewables alone cannot reliably fulfil.

The analysis also identifies the key constraints shaping SMR deployment readiness. Safety licensing, radioactive waste management, fuel supply security, public acceptance and first-of-a-kind financing risks remain the primary barriers, alongside the need for dedicated regulatory frameworks aligned with EU nuclear safety standards and the sustainable finance taxonomy.

Based on the modeling results, the study recommends integrating SMRs within a technology-neutral, EU-aligned strategy that treats them as complements to renewables and storage; developing dedicated licensing and siting frameworks from an early stage; coordinating SMR deployment with electrolyzers, desalination and hydrogen export infrastructure; and implementing phased deployment guided by rigorous readiness assessments covering technology, regulation and finance.

Statement by Professor Andreas Poullikkas:

“Our parametric analysis shows that SMRs can deliver competitive levelized costs of electricity, water and hydrogen under realistic deployment conditions, particularly at larger capacities and stable financing. However, realizing this potential requires resolving key constraints upfront, that is, robust safety licensing, early-stage waste management planning, secure fuel supply chains and sustained public engagement. The key message is clear: SMRs are not a replacement for renewables, but when these conditions are met, they can become a vital, firm low-carbon pillar within a diversified energy strategy targeting decarbonization, energy security, water resilience and sustainable economic development.”