More than 20 countries got behind nuclear power at COP28 in Dubai by signing a Ministerial Declaration aimed at boosting the support that nuclear power will receive. The parties that signed the agreement include the likes of the US and France among a bloc of other European countries. Nuclear is facing a small technological revolution as the industry is looking to transition to the smaller and safer SMRs (Small Modular Reactors) while new breakthroughs and startups are emerging, but the question still remains: Can nuclear be more than a support for wind and solar during the energy transition?
We don’t think it can. All of the efforts that will go into nuclear between now and 2050 will be channeled through either the refurbishment of old plants or the – relatively small – new installations of emerging technology.
The IRA (Inflation Reduction Act) has set aside $370 billion in tax credits for the reconditioning of nuclear plants in the US that would otherwise be destined for decommissioning. Which makes sense because the world is expected to keep on demanding more and more electricity, especially the US, so when you are trying to make all that electricity green, having to think about replacing the zero-carbon electricity generated today too, it would be an extra burden. But building new nuclear is a different story and cost is the problem.
The Declaration signed at COP28 aims to triple nuclear energy generation by 2050. According to our Global Electricity Outlook to 2050 released in 2023, Rethink expects nuclear will fail to even double in generation. And our model has the bulk of the additional capacity coming from China, which is not even one of the countries that signed the Declaration.
The SMR is regarded as the current latest and greatest nuclear tech but it is constantly suffering from Capex issues. And inflation made them even more expensive and has in fact pulled SMRs out of the ‘economically viable’ territory where they were competitive with wind and solar farms.
NuScale, one of the leaders in SMR technology, has been struggling to grow its existing pipeline of SMR projects. Its first US project, the Carbon Free Power Project developed in association with Utah Associated Municipal Power Systems (UAMPS) in Idaho, was initially quoted at $5.3 billion, a value which jumped to $9.3 billion at the beginning of the year according to UAMPS. This translates into an electricity cost jump from $58/MWh to $119/MWh. Luckily for NuScale, the US Department of Energy (DOE) and the Inflation Reduction Act (IRA) will collectively see $4.2 billion covered through funding and subsidies which will in turn bring the electricity cost down to $89/MWh, according to UAMPS. But this is still far from competitive and will ultimately decide what is being built or not since solar can undercut this. Yes, wind is dealing with similar issues but there are a lot more companies contributing to learning curve improvements than in the nuclear space.
The other option for nuclear is the innovation route. We’ve been in touch with companies like Copenhagen Atomics, which boasts a thorium fueled breeder reactor which is a type of SMR that can be safer and deal with waste nuclear fuel more effectively. Although companies like Copenhagen Atomics claim they can deliver $20/MWh from this technology, it’s still early days for them. Currently in testing mode, companies like Copenhagen Atomics may only get to see the light of ‘commercial’ day far into the 2030s, at which point we must ask how much they can install in time to make a difference by 2050.
If nuclear does get unimaginable amounts of subsidies then it can grow by a factor of 3 by 2050 but this is not financially sustainable for any government. The Declaration is not doing much anyway besides having those participating countries pledge that they will promote investment into nuclear power and attempt to get the World Bank behind it.
LCOE of $89/MWh with subsidies won’t look too good on paper in front of any investor. $20/MWh probably will but by then the 2050 context will have changed the narrative.
The full list of countries that signed the declaration: Bulgaria, Canada, Czech Republic, Finland, France, Ghana, Hungary, Japan, Moldova, Mongolia, Morocco, The Netherlands, Poland, Republic of Korea, Romania, Slovakia, Slovenia, Sweden, Ukraine, United Arab Emirates, United Kingdom, and the United States.