plans to spend £100 to £200m on the heavy pressure vessels factory that will produce and assemble some of the largest and most complex components.
The facility will be around the size of three football pitches and create more than 200 long-term, highly skilled roles.
The Teesworks Redcar regeneration site is up against Sunderland’s International Advanced Manufacturing Park in Sunderland and and Deeside’s Gateway site in Wales.
A final decision on the location will be made early next year after final evaluations and detailed assessments are made against the requirements and criteria for the factory.
Rolls-Royce SMR chief executive, Tom Samson, said: “I want to thank everyone involved in the selection process.
“This is part of the process to build the first of at least three factories that will manufacture components for a fleet of small modular reactors and will present an incredible opportunity for a region of the UK.
“Our power stations will be built in British factories situated in the north of England or Wales and will generate tens of thousands of long-term highly skilled jobs – accelerating regional economic growth.”
Rolls-Royce SMR has already identified four potential sites to build the first small nuclear power stations.
These are at Nuclear Decommissioning Authority land at Trawsfynydd and the neighbouring Sellafield site, Wylfa and Oldbury.