Small Modular Reactors (SMRs) are attracting growing interest as a reliable low-carbon technology, capable of complementing renewable energy sources (RES) while providing a foundation for hydrogen production and desalination systems. However, their economic viability depends largely on reactor capacity, capital cost trends, financing conditions and deployment readiness.

A recent techno-economic analysis by the H₂Zero Research Unit at Frederick University examines and evaluates the Levelised Cost of Electricity (LCOE), Levelised Cost of Water (LCOW) and Levelised Cost of Hydrogen (LCOH) produced by Small Modular Reactors across a range of capacity and cost scenarios, while also assessing their role within an integrated energy-water-hydrogen framework.

To address this challenge, the research varies the power output of small modular reactors (50–600 MWe), the capital cost, the discount rate and the load factor, to quantify how these key parameters determine the competitiveness of small modular reactors under various development scenarios. The results show that the cost of electricity generation ranges from approximately US$90/MWh for small-scale projects to around US$46/MWh for larger capacities, reflecting the combined effect of scale and the learning curve. For water desalination powered by small modular reactors, the cost of water production ranges from 0.65 to 0.43 US$/m³, whilst the cost of hydrogen production (pink hydrogen) ranges from 6.95 to 3.76 US$/kg H₂.

Accelerating decarbonisation, supporting key infrastructure

The modelling results for integrated energy-water-hydrogen systems are equally significant. Deploying SMRs alongside renewable energy sources and electricity interconnections substantially accelerates decarbonisation, enabling the electricity sector to achieve full decarbonisation considerably earlier than under a renewables-only scenario. SMR-supported hydrogen production enables large-scale production of pink hydrogen after 2035, complementing green hydrogen and increasing total production to several hundred thousand tonnes annually by 2060. SMR-powered desalination enhances water security by maintaining production in line with rising demand, while co-locating desalination and hydrogen infrastructure reduces infrastructure costs by between 20-30 per cent.

Beyond their traditional roles in electricity generation and hydrogen production, SMRs could also support strategic digital infrastructure. By providing stable, low-emission baseload power around the clock, SMRs are particularly well suited to network-scale data centres and artificial intelligence processing facilities that require guaranteed power availability and predictable long-term energy costs, requirements that variable renewable energy sources alone cannot reliably meet.

Challenges and recommendations

The analysis also identifies the principal challenges affecting SMR deployment readiness. Nuclear safety licensing, radioactive waste management, fuel supply security, public acceptance and first-of-a-kind financing risks remain the primary barriers, together with the need for dedicated regulatory frameworks aligned with European nuclear safety standards and the EU Sustainable Finance Taxonomy.

Based on the modelling results, the study recommends incorporating SMRs into an EU-aligned technology-neutral energy strategy that positions them as complementary to renewable energy and energy storage. It also recommends developing dedicated licensing and site selection frameworks at an early stage, coordinating SMR deployment with electrolysis facilities, desalination plants and hydrogen export infrastructure and implementing phased deployment guided by rigorous technology, regulatory and financial readiness assessments.

Andreas Poullikkas, Professor of Energy Systems at the School of Engineering of Frederick University and Head of the H₂Zero Research Unit, elaborated on the implications of the study.

“Our analysis shows that Small Modular Reactors can deliver competitive electricity, water and hydrogen production costs under realistic deployment conditions, particularly at larger capacities and under stable financing arrangements. Realising this potential, however, requires the timely resolution of key challenges, including early planning for radioactive waste management, secure nuclear fuel supply chains and sustained public engagement.

“The key message is clear: Small Modular Reactors are not intended to replace renewable energy sources. Rather, they can become a vital, stable low-carbon pillar within a diversified energy strategy aimed at achieving decarbonisation, strengthening energy security, enhancing water resilience and supporting sustainable economic development.”

About Frederick University

Since 2007, Frederick University has operated as an internationally recognised higher education institution committed to academic excellence, building on a 60-year history in education. Its mission is to provide high-quality education within an environment that promotes knowledge while supporting students’ academic and personal development, advancing research, innovation and the creation of new knowledge and contributing to society in ways that help bring about the change our world needs.

The University offers more than 80 undergraduate, postgraduate and doctoral programmes across the fields of science, technology, engineering, humanities and the arts. It operates campuses in Nicosia and Limassol.

In the Times Higher Education Impact Rankings 2026, Frederick University was ranked among the world’s top 101–200 universities for Quality Education and among the top 301–400 universities overall. It is the only private university in Cyprus and Greece to achieve this distinction for four consecutive years.