Evaluation of the Industrial Feasibility of Hydrogen Production with Small Modular Reactors : With insights from a case study in Sweden

Sammanfattning: This report conducts an in-depth examination of the potential for Small Modular Reactor (SMR)-based hydrogen production in Sweden's emerging nuclear market. Aligned with Sweden's ambitious targets of achieving carbon dioxide neutrality by 2045 and transitioning its steel and industry sectors to fossil-free production by 2035, the report explores the unique value proposition that a focal company can offer. This strategic positioning centres on supplying large volumes of hydrogen to the steel and iron industry while ensuring reliability and stability in production. To safeguard its competitive edge, the focal company leverages lock-in effects, capitalizing on the geographical placement of its facility and the establishment of a long-term Hydrogen Purchase Agreement (HPA) with its customers. Key findings highlight the levelized cost of hydrogen (LCOH) of 3.46 €/kg to 8.27 €/kg in the SMR-based production process. It reveals that transitioning from natural gas-based hydrogen is cost-intensive, resulting in a green premium (GP) ranging from 257% to 1134%. However, when compared to renewable energy sources and other fossil-free competitors, the LCOH proves competitive in every case except for HYBRIT’s, which is relying on low grid electricity prices in Sweden. When stipulating a HPA with a customer and using a real discount rate (RDR) of 3 % and a profit margin (PM) of 50 % over a 20-year analysis period, the project can reach a net present value (NPV) of 920 MEUR and discounted payback time (DPB) of 12 years in the most profitable case. In a more realistic scenario with a RDR of 7% and a PM of 30% the NPV becomes 497 MEUR with a DPB of 13 years. The economic feasibility is in general given at other, less favourable terms as well. This proves that the focal company’s business strategy is feasible. In conclusion, this report offers a strategic pathway for SMR-based hydrogen production in Sweden's evolving nuclear landscape. While feasibility is theoretically established, the presence of uncertainties cannot be overlooked. The report provides valuable insights for influential stakeholders in their decision-making processes and recognizes the substantial challenges and promising opportunities that lie ahead.