Appetite for New Nuclear Gets Energy Security Boost

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Energy shortages prompted by the war in Ukraine, alongside the momentum toward carbon-free energy, have boosted the global appetite for new nuclear this past year, with governments from the UK to Poland to Kazakhstan firming up and even expanding their nuclear ambitions. Notwithstanding Russia's decision to invade Europe's largest nuclear power plant in March, the enthusiasm seemed only to grow.

Nuclear power is "set to make a comeback," International Energy Agency Executive Director Fatih Birol declared in June, while French President Emmanuel Macron touted a new "French nuclear renaissance" as he ordered 6-14 new reactors be built. Japanese Prime Minister Fumio Kishida joined the chorus, calling nuclear "indispensable" as he pushed for restarts and even "innovative [new] reactors” in the 2030s.

The annual outlook released last week by the International Atomic Energy Agency (IAEA) pushed up its 2050 high-case projection of nuclear capacity from 792 gigawatts in 2021 to 873 GW, the latter of which would require the construction of 588 GW of new nuclear capacity. But its low case saw just 404 GW by midcentury, only slightly up from the currently installed net nuclear capacity of 390 GW, from 437 power reactors. Either way, nuclear's share of total projected electrical generating capacity barely shifted, with only half a percentage point increase in the high case to 2050 and a 2.4 percentage decrease in the low case.

Key Policy Signals

More substantive were three key policy signals: South Korea's reversal of a nuclear phasedown following the election of pro-nuclear South Korean President Yoon Suk-yeul, who is promising to pursue newbuilds domestic and foreign; the construction start of new Russian reactors in Turkey and Egypt, the latter of which is now moving forward with its first nuclear plant; and most significantly new momentum for China's newbuild program with construction started on four units so far this year, and a speedier newbuild approval process. These are positive signals for the industry, but even in China, with its most bullish of newbuild programs, nuclear will remain a supporting player in the power mix, unlikely to ever account for even 10% of the installed power generation base.

By year's end China may have more nuclear capacity under construction than Germany ever built; it is now neck and neck with France in terms of its installed nuclear capacity, and only surpassed by the US, where capacity has fallen. Its recently accelerated newbuild program could see China surpass total US nuclear capacity by 2030. As of the end of September, the State Council had approved 10 newbuilds, the most in a single year since 2008. That suggests that Chinese energy planners are again comfortable building out nuclear power as a key pillar of the energy mix, after years of hesitation following Fukushima.

A Sword of Damocles

Over this momentum, however, hangs one inescapably menacing Damoclean sword: the prospect that an errant missile in Ukraine, where fighting has subsumed the immediate vicinity of the Zaporizhzhia nuclear plant and approached the South Ukraine nuclear plant, might prompt a radiological release on the order of Fukushima or Chernobyl.

"If we had the tragedy of a nuclear accident" at Zaporizhzhia, IAEA Director General Rafael Grossi told the recent Global Clean Energy Action Forum in Pittsburgh, then many opportunities and plans for building out new nuclear capacity "perhaps will fail completely."

One industry source complained about this terminology — a radiological release from Zaporizhzhia stemming from a missile attack could not properly be called "an accident" — but conceded the larger point: such an incident would almost overnight return the global nuclear industry to the aftermath of the accidents in 2011 and 1986, when newbuild plans were shelved and reactor closures accelerated.

A Partitioned Industry

For the moment the energy on the newbuild front is undiminished. But it's also uneven. In North America, Japan and some European countries almost all newbuild momentum is vested in unproven small modular (SMR) and advanced reactor developers, the vast majority of which have no realistic chance of commissioning a first-of-a-kind unit before the 2030s. (The US may finally commission twin AP1000s at Vogtle over the next year or two, but further large conventional reactors are unlikely in the US or even in Canada.)

In contrast, China and Russia, are at the forefront of building SMRs and advanced reactors, but are simultaneously pushing forward in conventional nuclear. In China domestic newbuilds are being approved with alacrity, and Russia appears determined to shore up its side of an ever chillier neo-Cold War by pushing forward with export projects in countries like Egypt, Hungary and Turkey.

In Europe, the Czech Republic, France, Poland and the UK are at the forefront of efforts to build conventional newbuilds, their governments haunted by an energy security crisis and under pressure to find solutions. Even so, none of them have found the silver bullet to the fundamental problem that has plagued multibillion-dollar nuclear megaprojects for decades: how to pay for them.

Prague and London have done the most to legislate for and detail a funding mechanism for their nuclear newbuild ambitions. In the UK the nuclear Regulated Asset Base (Rab) model would allow investors to enjoy revenues collected from ratepayers during construction, but the details — including a crucial government support package that assumes key construction risks — remain unclear, even though a nuclear Rab is now law. In the Czech Republic the government hopes to support a proposed newbuild at Dukovany II via cheap government debt and a power purchase agreement, but it's too soon to tell whether Brussels signs off on this and state-owned Cez agrees to adequate commercial terms.

Polish and French newbuild financing schemes remain embryonic, but particularly in France any further domestic newbuild will require massive government support. The scale of French ambitions is eye-popping — a fleet of 16 new EPR2s would be equivalent in capacity to Japan's entire remaining operating fleet — and they would presumably rely on operator EDF to be realized. EDF last week noted it would take a €29 billion ($29 billion) hit in 2022 alone from its nuclear outages.

French planners have mulled replicating a nuclear Rab, but given the scale of their ambitions and the limitations they face they may ultimately elect to simply funnel government cash or debt into newbuild projects. Even the UK may ultimately be forced to invest more than a mooted 20% equity stake in Sizewell C to get that project into construction, even with the nuclear Rab in place. But given rising interest rates the amounts required will only grow higher, putting ever heavier burdens on the treasuries of these countries.

The requirement for direct state support isn't new, given that the most successful nuclear newbuild programs of the past two decades — whether for Russian exports or domestic newbuilds in China or the United Arab Emirates — have been fueled by near top-to-bottom government financial support. However, such support will remain a heavier lift in the West, even ignoring inflationary pressures. The shibboleth that nuclear newbuilds might somehow become economically competitive and attract private capital persists, despite all evidence. But of the trillions of dollars likely to be spent on the energy transition over the next decades, much will come from governments determined to ramp up carbon-free capacity to meet their net-zero commitments. And whether newbuilds move into construction and operation at anything close to the rate planned by advocates will in part depend on the extent to which nuclear developers are able to attract and deploy those funds.

NIW Projections For Reactor Newbuild Projects by 2025


Phil Chaffee is Energy Intelligence's London bureau chief and deputy editor of Nuclear Intelligence Weekly, where a version of this article first appeared as part of the annual report on nuclear newbuilds.

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