A Nuclear Renaissance Around the Corner? (Part I)

In the 70 years since the first civilian nuclear plant came online in 1954—deployed by the former Soviet Union—the nuclear industry has matured and become global. Today, there are 416 active nuclear reactors in the world, of which almost 60% are concentrated in four countries: United States, China, France, and Russia (see Figure 1).

Figure 1. Commercial Nuclear Reactors Concentrated in Just Four Countries Source: International Atomic Energy Agency (IAEA).

Yet while the global distribution of commercial nuclear has changed significantly, the industry itself has changed little. On cost, in addition to steep regulatory barriers and national security concerns of accessing uranium, nuclear power’s unit economics are still far from competitive with similar-sized coal plants. On technology, light water reactors are still the prevailing model, though with more advanced designs and safety features. On perception, the industry has yet to shake the image of being defined by the rare accidents rather than by the abundant record of safe operations.

These limiting factors on unleashing the full potential of nuclear power underscore why it remains just 10% of the global energy mix. But now more than ever, nuclear power may be on the cusp of a renaissance where emerging business model innovations, fundamental technology breakthroughs, and significant private and public capital commitments all conspire to drive the industry to new heights.

No net-zero scenarios are achievable without accounting for a significant increase in nuclear power capacity—projected to exceed 800 gigawatts (GW) by 2050—more than doubling from today. That’s because nuclear power remains the best low-carbon baseload alternative to coal—solar and wind are simply insufficient. It can power cities and data centers alike, all of which require constant and reliable electricity.

As such, the coming decade is likely to bring more dynamism in the nuclear power industry than seen in many decades. This mini-series will examine the industry’s potential renaissance, starting with this scene-setter on the current state of play. Future installments will focus on small modular reactors’ (SMRs) potential effect on cost and on the real and intense race toward capturing that elusive holy grail: commercial fusion.

1. Cost: Economies of Scale Still Elusive for Nuclear

Nuclear has always been touted as the optimal baseload alternative to coal—it is clean and reliable, can power medium-sized cities, and has no intermittency like solar and wind. But when compared to coal plants, nuclear power plants on average are still 2-3 times more expensive.

For instance, a 1 GW nuclear power plant can cost anywhere between $5.5 billion to $10.5 billion, whereas a coal plant with similar capacity runs about $1 billion to $4.5 billion (see Figure 2). The cheapness of coal, despite its negative externalities, means that globally coal plants outnumber nuclear by a factor of 16:1.

Figure 2. US Nuclear Plants Are Twice as Expensive as South Korean PlantsNote: Overnight cost compares plant construction costs—such as materials, labor, and permitting/licensing—excluding capital costs like interest payments.
Source: International Energy Agency (IEA).

Various factors contribute to cost differentials across countries. Take South Korea, which owes some of its lower cost to reactor standardization and modest economies of scale—that is, it focuses on fewer reactor models but larger plants housing multiple reactors with identical designs and specifications (see Figure 3). For instance, 35% of US nuclear plants have only one reactor, whereas nearly half of South Korean nuclear plants have six reactors with one or two models.

This approach makes it easier to regulate and build plants, because many of the components can be mass produced as there’s little variance. Moreover, by using just five reactor models, the construction workforce is familiar with them, making plant-building more standardized to keep projects on budget and on time.

Figure 3. South Korea Relies on Fewer Reactor Models and Larger PlantsSource: IAEA & World Nuclear Association.

A more general reason for cost differentials is regulatory. China, for example, approves up to 10 reactors annually, because the nuclear industry is entirely state run and essentially doesn’t have to deal much with regulatory snafus. The state monopoly on nuclear also means that the Chinese government typically shoulders the risk associated with high capital expenditure. The industry also benefits from cheap financing and land, further driving down the cost of plant construction.

Over that last decade-plus, China has quintupled its nuclear power capacity and currently has 42 units planned and 25 under construction, three times more than second-place India (see Figure 4). China is now nearly at parity with France on nuclear power capacity and is projected to surpass the United States by 2050.

Figure 4. China Building More Reactors Than Next Six Countries CombinedSource: IAEA.

By contrast, regulatory cost in the United States remains high. Not only is the approval process for new plants onerous and expensive, it can take up to a decade before they enter commercial operation. For instance, NuScale, a startup specializing in SMRs (the subject of the next installment in the series), spent over $500 million and more than two million work hours to get an approval.

On top of that, a three-decade drought in plant construction has led to more frequent cost overruns (see Figure 5). The latest American nuclear reactors Vogtle 3 and 4 in Georgia have racked up nearly $35 billion in cost since construction began a decade ago. Moreover, two Westinghouse projects in South Carolina and Georgia were cancelled as their costs ballooned from the initial $11.5 billion to $25 billion, resulting in Westinghouse’s bankruptcy in 2017.

Figure 5. Three Decades of Nuclear Power Drought in the United States Note: Construction cost measured in 2018 US dollars.
Source: IAEA; author’s calculations.

Similar to the United States, second-largest nuclear power France also saw no new reactors since the 1990s. Perhaps unsurprisingly, France’s decades-long pause on building nuclear is also contributing to delays and cost overruns with its Flamanville 3 reactor currently under construction.

So with some exceptions, the unit cost of nuclear power in major markets has generally gone up instead of down. The general stasis across the industry likely has much to do with it, as the lack of building for decades means it is difficult to rapidly reconstitute that knowledge or bring the right labor skills to complete projects on time and on budget. Moreover, when few nuclear plants are being built, it’s difficult to deploy new business models and pursue major technological breakthroughs and iterative innovations.

2. Technology: Incremental Advancements and Hard to Scale

Indeed, the core nuclear fission technology has remained light water reactors, the same fundamental technology since the 1960s. To be sure, reactors have become more sophisticated and safer, as well as seen improvements in using heavy water as coolant for fuel flexibility. But the vast majority are still light water reactors, typically of the pressurized water or boiling water varieties.

The lack of a step-change in technology or significant business model innovations within the nuclear industry means that regulations are still largely based on paradigms established in the mid-20th century, with little incentive to expedite the deployment of nuclear power. If anything, recent nuclear accidents, such as Fukushima in Japan, have only convinced regulators to lengthen the approval process and requirements for building plants.

And of course one of the obvious reasons is that civilian nuclear power still cannot be separated from national security because nuclear fissile materials are uranium and plutonium, which have clear dual use concerns for weapons. So long as civilian nuclear projects—from facilities to technologies to fuel—can be potentially used to produce nuclear weapons, the industry will be inevitably subject to stringent regulations under the non-proliferation framework.

It’s no surprise, then, that high regulatory cost and lengthy construction times still plague the industry. Even for China, considered a “fast builder”, it takes at least 5 years to build a nuclear plant, whereas it was building about 10 coal plants/month for much of the past two decades (see Figure 6).

Figure 6. Nuclear Plants Can Take Nearly a Decade To Begin Operations Sources: IAEA; author’s calculations.

3. Perception: Cognitive Dissonance on Nuclear Safety Remains Bottleneck

While the nuclear industry has a safety-first culture and a demonstrated record of generating a lot of clean energy without incident, the rare, high-profile accidents have shaped public perception of the risks. This is similar to the aviation industry. Despite flying being widely acknowledged as the safest form of transportation, a single fatal plane crash disproportionately heightens people’s fears associated with flying.

Nuclear power is subject to the same cognitive dissonance. The empirical reality is that nuclear power has had 18,500 cumulative reactor-years of safe operations globally, with only two major accidents, namely Chernobyl and Fukushima (Three Mile Island was a less significant incident).

Nonetheless, that perception of nuclear risk has had a significant impact on the industry. Following Fukushima, for example, Japan shut down and suspended a majority of its nuclear reactors, drastically lowering the nuclear share in its energy mix from 30% prior to the accident to a mere 6% now. In a more extreme move, Germany, once a staunch advocate for nuclear energy, responded to Fukushima by completely phasing out its nuclear power.

But on the flip side, the state of Illinois has operated the largest nuclear fleet in the United States for decades without major incident. As a result, nuclear energy accounts for almost 55% of Illinois’ energy mix, while the percentage of the state’s electricity generated from coal sharply declined to just 15%. That has helped the state avoid 82 million metric tons of carbon emissions.

Perhaps more than ever, new technological advancements and business model innovations are emerging that have the potential to overcome the constraints faced by the nuclear industry. As the bottlenecks in the nuclear power industry loosen, a renaissance seems more than simply wishful thinking. We will look toward those potential greener pastures in the next installments in the series.

Amy Ouyang is a research associate at MacroPolo. You can find her work on the global energy transition and its intersection with the economy, technology and industrial policy here.

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