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Nuclear Renaissance, Part Deux

Updated: Jan 29

Is the recent hype around a global nuclear power resurgence for real this time?





“Nuclear energy remains the second-largest source of low-carbon electricity worldwide. And, indeed, if we are to meet our collective climate goals, nuclear energy is critical.” - IEA Executive Director, Maria van der Hoeven

Like the Brood X cicadas that swarmed here in the DC area last summer, the nuclear power renaissance is a phenomenon that seems to emerge every decade or so with great fanfare. Timed around the recently concluded COP26 meeting and the passage of the Biden infrastructure bill, the renewed optimism from the beleaguered industry has been spotlighted in a number of recent articles. But is this any different than the last time hopes grew for a nuclear renewal before being dashed by the 2011 Fukushima Daichi accident?


The short answer is a qualified yes. Unlike the last buildup in 2007-2009, which hinged on higher natural gas prices making nuclear power competitive on cost, this time the industry is seen as a key part in addressing a larger problem. The UN’s Intergovernmental Panel on Climate Change (IPCC) has warned that achieving net zero CO2 by 2050 requires a significant increase in nuclear energy—59-106 percent more than 2010 levels by 2030.


Currently 440 nuclear reactors provide over 10 percent of electrical demand, while in the US it provides ~20 percent and France a whopping 75%. Beyond meeting a significant part of global energy demand, a 2013 study by NASA found that nuclear power has saved millions of lives due to lower air pollution since it primarily offsets electrical generation from coal.

In fact, nuclear energy has emissions on par with wind and solar at 4 g CO2 per kWh, but unlike these intermittent sources provides uninterrupted electrical generation—critical for grid stability. Until there’s a solution to providing long-duration, utility-scale energy storage to complement renewables, something lithium ion batteries can’t accomplish economically, nuclear power is the only geographically agnostic source of clean energy around.


Despite these benefits, nuclear power has consistently been plagued by three downsides: safety concerns, uncompetitive economics, and long-term waste disposal. With these in mind, R&D has focused the last decade on next generation technology, particularly Small Modular Reactors (SMR). Unlike most of the highly customized plants that operate today, SMRs feature standardized designs that can be scaled up (thus in theory reducing costs), feature passive safety systems, and produce far less waste.


One company, NuScale, a US-based start-up, secured the first approval from the Nuclear Regulatory Commission (NRC) for a SMR pilot to be completed at the Idaho National Laboratory by 2029. The 12-module project uses a simplified design to circulate water around the reactor core without electricity or human intervention, a mechanism that would have prevented the Three Mile Island and Fukushima accidents.


While these new designs are promising, project execution and cost management is going to be critical. Here the industry has a horrendous track record as of late. In the US, only four new reactors have started construction in the last decade. Two of the projects were cancelled after a cost of $9B due to construction issues and persistently low natural gas prices. The remaining two active projects are estimated to cost a staggering $28B once completed in 2022-23—more than twice the proposed budget. These failures by Westinghouse forced it into bankruptcy in 2017 and created a shadow over the whole industry in the US.


With these failures in mind, the next decade will be key as technologies like SMR are being commercially scaled. These projects will need to show they can dramatically decrease average costs to at least half of current levels. As seen below whereas other energy sources have reduced costs over the last 20 years, nuclear has been on an upward trajectory:



Source: Lazards, WSJ


And while the US government has taken constructive actions to support next gen nuclear power development, including an additional $8.5B in DOE funding for SMR design and commercialization, it remains behind strategic competitors like China. With 16 reactors under construction and another 39 planned, including the world’s first commercial SMR, Chinese SOEs threaten to supplant American and European companies as the preferred supplier for new nuclear power plants.


The US and its allies can help close this gap by putting government policies in place to level the playing field. At the top would be to fully value nuclear as a low carbon energy generator. For the US this has been envisioned through a national carbon pricing standard, a measure supported even by the oil industry lobbying group API, and by offering similar tax and rebate incentives to new nuclear plants as those given to solar and wind projects. On the other side of the Atlantic, the EU Commission took a step in the right direction last month by designating nuclear as a ‘green’ energy source--sending an important signal to financiers that the industry is worth investing in long-term.


This ‘green’ designation by the EU for individual plants requires a secured long-term waste disposal site--a major issue facing the US, where the national waste disposal project at Yucca Mountain stalled out after years of local resistance. The bi-partisan Nuclear Waste Administration Act introduced in 2019 establishes a new starting point for the discussion, but it’s clear that state and local buy-in will be critical to making any real progress.


In the near-term extending the life of existing nuclear plants should be the main focus of policy makers. Active plants are not only reaching the end of their approved licensing, but are also being proactively shutdown earlier throughout the EU, Japan, and the US in reaction to Fukushima. In a study by Columbia University nearly half of the projected 7.5 GW capacity set to retire could be economically kept online through effective carbon pricing.


These existing nuclear plants not only are key to meeting the 2050 net zero goals, but also support thousands of high-paying jobs in economically diverse communities. In the US, keeping nuclear power plants active means fewer domestic natural gas plants and potential further growth of US LNG exports to Asia and the EU. These exports in turn have been shown to lessen new coal plant construction overseas and are one of the most effective ways to reduce CO2 emissions in the next 10 years.


Clearly for the nuclear renaissance to materialize a lot is going to have to go right in the next decade. But between additional public and private R&D funds, a push for clean energy subsidies and rebates, and renewed great power competition with China there’s enough incentives to think this time might actually be different.


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