Nuclear energy: fixing the finance

Subject: Science and tech

Section: Nuclear energy

Context:

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.

Details:

The UN Climate Change Conference (COP28) in Dubai in December 2023 highlighted nuclear energy’s essential role in achieving climate goals.
A declaration by 22 world leaders called for tripling nuclear energy capacity by 2050, aligning with the IAEA’s ‘Atoms4Netzero’ initiative.
Nuclear power is favoured for its low carbon emissions—four times less than solar farms and other renewables like wind, hydropower, and geothermal—and its ability to provide constant energy without geographical limitations.
Additionally, nuclear power plants boast low operating costs, require less land, and have a longer lifespan than other renewable sources.

How can nuclear energy be financed?

Financing nuclear energy, crucial for its large-scale adoption as a primary energy source, hinges on advancements in nuclear technology and financial strategies.
Innovations such as Small Modular Reactors (SMRs) and improved safety measures are pivotal in reducing nuclear risks and stigma, potentially attracting tech startups into this traditionally government-dominated sector.
Despite technological progress promising significant carbon emission reductions, with an IAEA study indicating half of the reductions by 2050 may come from emerging technologies, financial support from Multilateral Development Banks (MDBs) and private investors remains scarce.
The World Bank’s last nuclear project loan was in 1959, underlining the urgent need for policy reassessment to enable private or blended finance models in nuclear energy funding.

Has the cooperative model worked?

The cooperative model has proven successful in funding nuclear energy projects, with notable examples in France, South Korea, Russia, and the U.K.
This approach involves a consortium of investors raising market credit and assuming full project responsibility.
Finland’s ‘Mankala’ model showcases a cooperative finance structure where companies share the construction and operational costs of energy producers, benefiting from cost-based energy access without dividends.
Such financial innovation, coupled with market support and low-interest rates, can significantly advance nuclear energy.
Globally, 440 nuclear reactors contribute a quarter of the world’s low-carbon energy, with an increase indicated by 60 reactors under construction and 110 planned, particularly in Asia and notably in China.
China aims to escalate its nuclear energy production to 10% by 2035 and 18% by 2060.
Despite the expansion, challenges in nuclear infrastructure development and financing persist, as highlighted by the termination of NuScale Power’s SMR project in Utah and the financial difficulties faced by industry giants Westinghouse and Areva.

What about India?

India’s nuclear power, despite offering cost-effective energy solutions compared to solar power, constitutes only 1.6% of its renewable energy mix due to concerns such as stigma, safety risks, regulatory challenges, high initial costs, and project delays.
However, recent liberalization in the nuclear sector, including inviting $26 billion in private investments and plans to significantly increase nuclear capacity to 22,480 MW by 2031-2032, signals a positive shift.
Prime Minister Modi’s engagement with the Prototype Fast Breeder Reactor (PFBR), which can simultaneously produce fuel and power, highlights progress towards a more self-reliant and ambitious nuclear industry in India.

Atoms4NetZero

It is an IAEA initiative that supports efforts by Member States to harness the power of nuclear energy in the transition to net zero. The initiative provides Member States and stakeholders including industry, financial institutions, and international organizations with technical expertise and scientific evidence on the potential of nuclear energy to decarbonize electricity production as well as hard-to-abate sectors such as industry and transport.
As countries grapple with the climate crisis and growing energy security concerns, nuclear energy is increasingly recognized for the role it can play in an accelerated transition to net zero. Nuclear power currently provides about 10% of the world’s electricity, equivalent to about a quarter of all low-carbon electricity. Atoms4NetZero seeks to inform policymakers and decision-makers on the potential way forward for nuclear power as the reliable backbone of clean, affordable, resilient and more secure energy transitions.

Source: TH