The story so far: On March 21, Brussels hosted the first-ever Nuclear Energy Summit, co-chaired by the Prime Minister of Belgium Alexander De Croo and the Director General of the International Atomic Energy Agency (IAEA) Rafael Mariano Grossi. Several world leaders joined the summit to highlight the role of nuclear energy in addressing climate change.
How did this come about?
The UN Climate Change Conference (COP28) in Dubai (UAE) in December 2023 stated the indispensable role of nuclear energy to meet climate goals. The declaration signed by 22 world leaders mentioned the need to triple nuclear energy capacity by 2050. The Nuclear Energy Summit, an initiative in collaboration with the IAEA’s ‘Atoms4Netzero’ programme, is part of the multilateral approach to decarbonisation. Nuclear power emits four times less carbon than solar farms or other renewable sources such as wind, hydropower, and geothermal. Most importantly, nuclear power has the capacity to supply uninterrupted energy irrespective of geographical constraints making it a crucial component of the wider renewable energy mix. Nuclear power plants (NPP) also have low operating costs, smaller land imprint and a longer life cycle compared to all the other renewable energy sources.
How can nuclear energy be financed?
Two key motives for the large-scale adoption of nuclear power as the base load energy source are technology and finance. Recent developments in nuclear technology including Small Modular Reactors (SMR), radiation proofing in existing plants, and extended fuel cycles, have the potential to substantially mitigate nuclear-related risks. Signifying the destigmatisation of nuclear energy is the entry of technology startups in an the otherwise government-run industry. The role of technical advancements in reducing carbon emissions is highlighted by an IAEA study, which predicts that while existing technologies will play a significant role, by 2050, half of carbon reductions will come from technologies currently in the prototype stage.
However, in spite of technical advancements, Multilateral Development Banks (MDBs) and private investors have not made any significant contribution to the industry. The World Bank has not provided financing for a nuclear project since its $40 million loan to Italy in 1959. There is a pressing need to reassess nuclear financing policies of MDBS to accommodate private capital or blended finance models.
Has the cooperative model worked?
There are successful financial practices that can be replicated, for instance the cooperative funding models of France, South Korea, Russia, and the U.K. where a group of investors raise credit from the market and take full responsibility for project delivery. In Finland, large power plants have been funded by multiple private companies since the 1970s using a cooperative finance model called ‘Mankala’. Under this model, companies jointly own energy producers and share the costs of building and operating plants. They don’t pay dividends but can buy the energy at a cost based on their ownership share, with investors being wholesalers, retailers, or large industrial firms. Financial creativity and market support with low interest rates can unravel the potential of nuclear energy at scale.
There are 440 nuclear reactors in the world, accounting for a quarter of the world’s low-carbon energy. The number of nuclear reactors is increasing, with 60 reactors under construction and 110 in the planning stage, most being in Asia, particularly China, which is soon to overtake the U.S. and the nuclear giant France. China has set a target to produce 10% of its electricity from nuclear energy by 2035 and 18% by 2060. However, the state of nuclear infrastructure development and finance mobilisation is not proportional. NuScale Power, previously expected to be the first U.S. company licensed to build a 462MW SMR in Utah, terminated its planned project due to rising costs. Nuclear powerhouses Westinghouse and Areva also filed bankruptcy due to project overruns.
What about India?
India’s first commercial NPP in Pahalgarh, Tarapur offers reliable energy at 2/kWh lower than solar power tariffs. At Kudankulam, Tamil Nadu, a newer power plant offers electricity in the range of 4-6/kWh comparable to coal-fired thermal power plants. Despite its versatile nature, nuclear power contributes only 1.6% of the total renewable energy mix in India. Stigma, weaponisation risk, radiation leak, regulation, high upfront cost, and long project overruns are the reasons for low adoption rate of nuclear energy.
Recently, the nuclear industry has been undergoing novel liberalisation, with ambitious plans for growth in India and abroad. Beginning with the invitation of $26 billion in private investments, a phase-wise tripling of nuclear capacity from 7,480 MW to 22,480 MW by 2031-2032, and Prime Minister Modi’s attendance at the core loading of the Prototype Fast Breeder Reactor (PFBR) all mark a positive future for the industry. The PFBR’s ability to generate fuel and power at the same time represents a significant advancement in India’s mostly self-reliant nuclear industry.
The author is a policy professional and a consultant at RIS, New Delhi. Tweets @Alinyst
- Two key motives for the large-scale adoption of nuclear power as the base load energy source are technology and finance.
- Recent developments in nuclear technology including Small Modular Reactors (SMR), radiation proofing in existing plants, and extended fuel cycles, have the potential to substantially mitigate nuclear-related risks.
- Signifying the destigmatisation of nuclear energy is the entry of technology startups in an the otherwise government-run industry.
