The IAEA’s recently released Electricity 2024 report market analysis and forecast to 2026 reveals a positive outlook for nuclear generation on the back of projections for surging growth in electricity demand.
The report notes that while global electricity demand rose only moderately last year – with falling consumption in advanced economies limiting demand growth to 2.2% – it is set to grow much faster through 2026, average 3.4% annually during the forecast period.
According to the IEA, these gains will be driven by an improving economic outlook, which will contribute to faster electricity demand growth both in advanced and emerging economies and supported by the ongoing electrification of the residential, transport and data centre sector, notably in advanced economies and China.
Meanwhile, the share of electricity in final energy consumption is estimated to have reached 20% in 2023, up from 18% in 2015. However, the IEA notes that while this is progress, electrification needs to accelerate rapidly to meet the global decarbonisation targets. In their Net Zero Emissions by 2050 Scenario – a pathway aligned with limiting global warming to 1.5°C – electricity’s share in final energy consumption in fact nears 30% in 2030.
Nonetheless, they already forecast that electricity consumption from data centres, artificial intelligence (AI) and the cryptocurrency sector could double by 2026 with data centres alone consuming an estimated 460 TWh in 2022, and potentially reaching more than 1,000 TWh in 2026, roughly equivalent to the electricity consumption of Japan.
Nuclear and renewables driving future energy demand
Given the fundamentals for demand growth, the report notes that the rapid growth of renewables, supported by rising nuclear generation, is set to displace global coal-fired generation, which is forecast to fall by an average of 1.7% annually through 2026. Coal-fired generation in China is currently on course to experience a slow structural decline, driven by the strong expansion of renewables and growing nuclear generation, as well as moderating economic growth, the IEA says.
Meanwhile, nuclear power is on track to reach a new record high by 2025 and by then is forecast to exceed its previous record set in 2021. The IEA analysis observes that even as some countries phase out nuclear power or retire plants early, overall nuclear generation is forecast to grow by close to 3% per year on average through 2026 as maintenance works are completed within France, Japan restarts nuclear production at several power plants, and new reactors begin commercial operations in various markets, including China, India, Korea, and Europe.
Furthermore, the IEA report says, many countries are making nuclear power a critical part of their energy strategies as they look to safeguard energy security while reducing greenhouse gas emissions. The report points to the December 2023 COP28 climate change conference where more than 20 countries signed a joint declaration to triple nuclear power capacity by 2050 as evidence for the sustained growth in nuclear generation over the coming years. However, the Agency also argues that achieving this goal will require tackling one of the key challenges for nuclear power development – reducing construction and financing risks. Alongside large reactors, the IEA also points to the building momentum behind small modular reactor (SMR) technology. The analysis notes, for example, that SMR technology development and deployment remains modest so far and still faces some difficulties, but that R&D investment in the sector is starting to pick up.
Asia takes a lead
Despite new build reactors underway in Europe, the US and the Middle East, the IEA identifies Asia as the main driver of growth in nuclear power, with the region’s share of global nuclear generation forecast to reach 30% in 2026. Indeed, their forecast suggests that Asia is set to surpass North America as the region with the largest installed nuclear capacity base by the end of 2026, with a large number of plants currently under construction expected to be completed by then. Of these new reactors, more than half of those expected to become operational during the outlook period are in China and India. The IEA notes that nuclear power has seen particularly strong growth in China over the past decade, with capacity additions of about 37 GW. This is equivalent to almost two-thirds of its total current nuclear capacity and has resulted in China’s share in global nuclear generation rising from 5% in 2014 to about 16% in 2023. China has also started commercial operations of its first fourth-generation reactor in December 2023, further underscoring the country’s nuclear power advances.
The IEA conclusions are echoed in another more recent analysis which notes that China intends to build 150 new nuclear reactors between 2020 and 2035, with 27 currently under construction and the average construction timeline for each reactor about seven years, far faster than for most other nations. This build out is more than two and a half times bigger than any other country with China expected to build 6 to 8 new nuclear power plants each year for the foreseeable future.
The report, from the Information Technology & Innovation Foundation (ITTF), concludes that China is now likely to be 10 to 15 years ahead of the US in its ability to deploy fourth-generation nuclear reactors at scale, having become the world’s leading proponent of nuclear energy. This analysis places considerable weight on China’s government which has made domestic nuclear construction a priority part of its broader energy strategy. In particular the report emphasises the country’s coherent national strategy toward nuclear power at both federal and provincial levels. This strategy entails a range of supportive policies including low-interest financing, feed-in tariffs, streamlined permitting and regulatory approval and coordinating supply chains. This approach suggests sustained growth in nuclear in China as well as a new source of nuclear technology and development for other nations keen to embrace atomic energy.
Impact on emissions
Given the growth in both nuclear and renewables, the IEA argues that emissions from electricity generation are entering structural decline as decarbonisation gathers pace.
According to their forecast, global CO2 emissions from electricity generation are expected to fall by more than 2% in 2024, despite showing a 1% increase in 2023 on the back of strong growth in coal-fired power generation in 2023 – especially in China and India.
While this progress on emissions is set to be followed by small declines in 2025 and 2026, the share of fossil fuels in global generation is forecast to decline from 61% in 2023 to 54% in 2026. In the IEA analysis, emissions will fall below 60% for the first time in IEA records dating back to 1971. The broader decline in power sector emissions is expected to persist as renewables and nuclear power capacity continue to expand and further displace fossil-fired generation, with the CO2 intensity of global electricity generation set to fall at twice the rate recorded over the pre-pandemic period. The forecast average decline of CO2 intensity between 2023 and 2026 is 4%, double the 2% observed between 2015 and 2019.
In the longer term, the IEA also highlights a further potential factor in favour of more nuclear generation development – the energy security risk associated with climate change.
As the IEA report says, growing weather impacts on power systems highlight the importance of investing in electricity security. The report points out that global hydropower generation declined in 2023 due to weather impacts such as droughts, below average rainfall and early snowmelts in numerous regions. Current nuclear nations, including Canada, China, Türkiye, and the United States, all saw hydropower generation decline while the global hydropower capacity factor fell to below 40%, the lowest value recorded in at least three decades. The impact of reduced hydropower generation led to energy shortages in some nations along with increased reliance on fossil fuels like coal and gas. The IEA notes that the overall trend underscores the susceptibility of hydropower to weather patterns and the potential exposure of countries that rely heavily on hydro to generate electricity. The authors suggest that diversifying energy sources, building regional electricity interconnections and implementing strategies for resilient generation in the face of changing weather patterns will be increasingly important and again supports the notion of increases in global nuclear power capacity.
As ever, the future for nuclear development is uncertain but the underlying market fundamentals lend weight to the idea that nuclear is very much in the frame for a substantial share of the future low-carbon energy portfolio.
