Nuclear power is set to reach a new record in 2025 and can improve energy security as electricity demand accelerates, although costs, project overruns and financing must be addressed, according to a new International Energy Agency (IEA) report. The 98-page report, The Path to a New Era for Nuclear Energy, says renewed momentum behind nuclear energy has the potential to open a new era for the secure and clean power source as demand for electricity grows strongly around the world.
It shows the fresh impetus behind nuclear in the form of new policies, projects, investments and technological advances, such as small modular reactors (SMRs). It provides a comprehensive assessment of the current situation, identifying the major challenges that need to be addressed to build on the current momentum and enable a new era to take hold. These include insights on how to finance new nuclear projects while ensuring reliable and diversified supply chains for building and fuelling them.
IEA Executive Director Fatih Birol noted in his Foreword to the report that four years ago, IEA had said that nuclear energy was well positioned to make a comeback after a difficult period following the 2011 accident at the Fukushima Daiichi NPP. “Today, this comeback is clearly underway and nuclear now stands on the cusp of a new era, owing to a combination of government policies, technological innovation and private sector interest. At the same time, several major challenges still need to be overcome on the path to this new era.”
He added: “It is important to note, however, that some countries, including some IEA Members, do not see a role for nuclear energy in their future, and the IEA Secretariat fully respects their position. This report should not be seen as representative of their views.”
He said innovation is changing the nuclear technology landscape through the development of small modular reactors (SMR), the first of which are expected to start commercial operations around 2030. “Alongside renewable technologies such as solar and wind, whose electricity output is expanding rapidly, nuclear can play an important role in meeting growing power demand securely and sustainably.”
Birol noted that the global map of nuclear is changing. “In the 1990s, for example, Europe was a frontrunner in nuclear power, but its nuclear industry has shrunk. Today, half of nuclear power projects under construction are in China, which is set to overtake both the European Union and the United States in nuclear capacity by 2030. The picture may change again, though, as new technologies such as SMRs come to market.”
The report notes that Russia is also a major player in the nuclear technology landscape. Of the 52 reactors that have started construction worldwide since 2017, 25 are of Chinese design and another 23 are of Russian design. The report comments: “Highly concentrated markets for nuclear technologies, as well as for uranium production and enrichment, represent a risk factor for the future and underscore the need for greater diversity in supply chains.”
It continues: “In advanced economies, the rise in SMRs and new construction of large-scale reactors only just offset the effects of an ageing fleet, meaning that capacity is slightly higher in 2050 than today. In the European Union, the share of nuclear power in the electricity mix peaked at 34% in the 1990s but has already fallen to 23% today and continues to fall steadily in this scenario. By contrast, in China, installed capacity more than triples to mid-century, and it also doubles in other emerging and developing economies.”
The report is optimistic about SMRs. “Cost-competitive SMRs, boosted by government support and new business models, can help clear the path to a new era for nuclear energy. Demand for firm, dispatchable and clean power from the private sector is a major driver of interest in these emerging technologies, and there are plans of varying maturity for up to 25 GW of SMR capacity, in large part to meet growing electricity demand for data centres.”
It adds: “Under today’s policy settings, total SMR capacity reaches 40 GW by 2050, but the potential is far greater. In a scenario in which tailored policy support for nuclear and streamlined regulations for SMRs align with robust industry delivery on new projects and designs, SMR capacity is three times higher by mid-century, reaching 120 GW, with more than one thousand SMRs in operation by then.” This rapid growth scenario would raise required investment in SMRs from less than $5bn today to $25bn by the end of this decade, with cumulative investment of $670bn by 2050
IEA believes the rise of SMRs, alongside a new wave of large-scale reactors built on time and on budget, can open the possibility for Europe, the United States and Japan to reclaim technology leadership. “In a rapid growth scenario, nuclear capacity in advanced economies grows by over 40% to 2050, helping to meet energy security and emissions goals. The share of large-scale nuclear construction starts using designs from advanced economies rises from less than 10% in recent years to 40% by 2030 and over 50% thereafter, spurred by new projects in Europe, the United States, Japan and Korea. The widespread deployment of SMRs reinforces this trend, with over half of new construction starts to 2050 using designs from the United States or Europe. A more competitive and diverse market brings broad benefits for countries seeking to step up deployment of nuclear technologies.”
However, a rapid growth scenario requires a major expansion in annual investment, which doubles to $120bn already by 2030. “Nuclear projects have traditionally been hard to finance due to their scale, capital intensity, long construction lead times, technical complexity and risk liability in some countries. This has meant heavy involvement of governments, and typically a major role for state-owned enterprises (SOEs) as owners and operators of nuclear plants. SOEs can often obtain large amounts of financing at relatively competitive rates, close to those of sovereign entities.”
IEA says public funding alone will not be sufficient to build a new era for nuclear: private financing will be needed to scale up investments. “However, the long timelines for permitting and construction make nuclear a tough proposition for commercial lenders, as they can push the breakeven point for a new large reactor to 20-30 years after the project start. These factors also limit the use of project finance structures, which are often used to support other large infrastructure projects.”
Reducing the risk of cost overruns and delays is a prerequisite for expanding finance, both public and private, and protecting the interests of consumers. “This requires a multifaceted approach. Adopting well-established reactor designs and then building them in series can greatly help to build up capacity, supply chains, and a strong and skilled workforce. Standardisation allows for a streamlined construction process, reducing the time and cost associated with building each reactor, and lowering costs over time through learning.”
According to IEA, SMRs can dramatically cut the overall investment costs of individual projects to levels similar to those of large renewable energy projects such as offshore wind and large hydro. “This makes SMRs less risky for commercial lenders, once first-of-a-kind projects are established and technologies are proven. The more modular design of SMRs significantly cuts construction times, with projects expected to reach cash flow break-even up to 10 years earlier than for large reactors. The strong credit rating of the technology players behind data centres can also facilitate financing for SMR projects targeting this sector.”
The report concludes that governments have a unique capacity to provide the strategic vision, and the policies, incentives and public finance that can move the nuclear sector forward. Not all countries see a role for nuclear technologies, and nuclear power is only one of multiple fuels and technologies that are required globally for a safer and more sustainable energy future. But nuclear can provide services and scale that are difficult to replicate with other low-emissions technologies.
“Taking advantage of this opportunity requires a broad approach from governments, encompassing robust and diverse supply chains, a skilled workforce, support for innovation, de-risking mechanisms for investment as well as direct financial support, and effective and transparent nuclear safety regulations, alongside provisions for decommissioning and waste management. There are multiple signs pointing towards a new era for nuclear; the task now is to build it.”
