The opportunity for Nuclear power to be the answer to growing electricity needs is massive
The global demand for electricity is expected to grow by 50% by 2050 (~2% CAGR) in conservative scenarios to 75% in more aggressive ones (2.2-2.3% CAGR); in the US, 50% growth by 2050 is also considered a conservative estimate, fueled in part by:
- The electrification of everyday life
- Development of EVs and data centers: from 19GW to 35GW by 2030 in the US alone
- Upcoming ubiquity of AI / ML, requiring even more powerful data centers: additional 85-90 GW will be required for this use case alone by 2030 (source: Goldman Sachs)
- Reshoring of select industries in the US, e.g. semiconductors
- Other demonstrated use cases: desalination plants, industrial processes such as refining and chemical manufacturing,district heating
Nuclear is the only clean large-scale baseline electricity generation technology available today with almost no CO2 emission
- Fossil fuels are not considered clean sources of energy and battery systems are smaller in scale
- Most renewable sources of energy currently being built are either intermittent or not available everywhere
- Capacity factors are also much higher for Nuclear (90-95%) than for other sources (fossil fuels ~40-70%; on-shore wind: 30-45% and solar PV: 20-30%)
Since the 1970's, the need for more nuclear generation has been addressed through life extensions and power uprates (adding up to 40 years of life, and up to 10% of capacity), both thermal and electrical(through digital I&C and larger equipment), to the tune of the equivalent eight 1GW power plants, but additional installed capacity from these initiatives is slowing down
- Most reactors in the US have already received life extensions once, and are unsure of further extensions
- Nearly 90% of US reactors have received 20-yr life extensions, taking their operating age to 60 years
- While life extensions offer a comparatively cheaper alternative to new constructions, they still require significant investment to replace and refurbish key components; additionally,many plants face challenges due to obsolete parts
- More stringent operating regulations, together with lower wholesale electricity and carbon prices, make certain plants financially unviable
- Power uprates peaked in the early 2000s in the US, and have since consistently slowed down: only 1 power uprate per year has been recorded since 2021 on average vs. 11+ on average from 2001-2005
New growth levers are therefore needed to boost nuclear capacity
A second nuclear renaissance is under way after the abrupt slowdown following the Fukushima disaster (excl. China where nuclear power growth has been uninterrupted since Qinshan, then Daya Bay in the 80’s/90’s)
- It is already under way outside the US – it started with new plants in France / UK / Eastern Europe in the mid-2000’s (while those ideologically opposed to Nuclear are dealing with security of energy supply issues and higher costs, e.g. Germany): 33 units are currently under construction, of which 19 in China and 4 in Turkey
- It has picked up speed recently through new build orders (France in particular): 35 reactors are on order worldwide, notably 19 in APAC and 10 in Western Europe of which 6 in France
Existing plant designs are the first lever to satisfy nuclear capacity growth: in the US, many initiatives are under way, in increasing degree of complexity:
- Planned shutdowns being delayed, e.g. Diablo Canyon 1 and 2
- De-mothballing of plants:
- Constellation Energy is planning to de-mothball a dormant nuclear power plant (Three Mile Island in Londonderry, PA)
- Holtec International is re-opening a recently shut down nuclear power plant (Palisades Nuclear Plant in Covert, MI)
- New build proposals:
- US Nuclear Energy Deployment Framework of 2024 by the US DOE envisions 35 GW of new nuclear capacity operating or under construction in the US by 2035 through a mix of new large gigawatt-scale reactors
- Westinghouse has announced a program to start 10 AP-1000s in the US by 2030 and the second Trump administration committed to a PPP with its owners Brookfield Asset Management and Cameco Corporation to facilitate their construction across the country (streamlined permitting, regulatory review and financing as well as coordination of industrial base and workforce support)
New designs are also being developed…
- SMRs (based on LWRs), with first designs already approved by the US NRC and with capacity between 50-500 MW, together with microreactors that produce up to 50 MW or less, are an integral part of the US DOE Framework
- Advanced reactors (molten salt, etc.)
- Fusion
… and new non-utility players are entering the fray to secure power supply to their data centers, using various routes
- Google: partnership with Kairos Power to develop a fleet of SMRs expected to come online by 2030
- Microsoft: 20-year energy supply deal with Constellation on Three Mile Island
However, the road to the first kWh can be long, and to the first dollar of return even longer
Regulations have been a major sticking point, but are evolving
- New nuclear facilities are still subject to lengthy and complex regulatory approval by the likes of the NRC in the US and the ASN in France – and that’s a good thing from a safety perspective…
- … but some nuclear regulatory bodies (US, for example) are exploring ways to shorten approval processes and are generating regulatory frameworks for integrating SMRs and Data Centers; examples include
- The ADVANCE Act passed in the US in 2024:
- Enables the NRC to reduce certain licensing application fees and authorizes increased staffing to expedite review and approval processes
- Especially for microreactors, directs NRC to develop guidance to license and regulate microreactor designs within 18 months (vs. 5 years previously
- The ‘European SMR Partnership’ created by the European Commission in 2023:
- Cooperation scheme to develop frameworks to streamline and potentially shorten some regulations especially around SMRs
- Objective to facilitate SMR development and compliance with EU legislative frameworks with the aim of deploying SMRs in Europe by 2030
- In addition, after Jobs Act (2021) and IRA (2022) were passed under the Biden administration, there is now significant uncertainty around support for alternative renewable energy sources in the US under the second Trump administration
Economics / construction times and resulting competitive position continue to be a challenge
- Capital and financing costs are massive ($6-10B for a 1+GW plant) and are much higher than for fossil fuels and renewables (Coal: $600M - $1.4B; Wind offshore: $650M - $1.2B; Wind onshore: $240M - $640M; Solar: $250M - $800M)
- Construction timelines can be long and unpredictable (e.g. OL3, FA3, Vogtle), making nuclear plants less flexible and slower to deploy than other power sources, e.g. solar PV, wind or gas
- SMR cost and building duration are still uncertain (as all are vying to be FOAK plants)
- Scale matters, as unit cost of the kWh generated by SMRs is still much higher than large plants
- In all likelihood, the Nuclear option can be competitive in cost and construction time, only in cases where a multi-decade program is launched (e.g. in France and China)
Value chain capabilities have decreased and need to be recovered
- Part of the nuclear know-how has disappeared, as the leaders and skilled manpower of the nuclear birth and 1st renaissance in the 2000’s have retired; this is the case from utilities and nuclear EPCs to NSSS providers and to their suppliers up the value chain
- The amount of labor required to deliver the anticipated nuclear capacity increases is very high, esp. for highly qualified skills both for engineering studies (e.g. engineering, project management) and specialized operational tasks (e.g. welding)
- The security of nuclear fuel supply may become questionable should international relations continue to degrade (Russia currently accounts for 40-45% of the enrichment capacity and 17% of the fuel supply worldwide)
The grid is a constraint and a bottleneck
- Nuclear power plants may not be able to be deployed where the off-take is needed (e.g. data centers), as they need a cold-water source
- The electricity grid, e.g. in the US, may require substantial improvement programs to be able to support the transport of huge amounts of electricity generated by nuclear power plants to consumption centers
Public opinion on nuclear energy and waste is not always favorable
- While solutions exist / are being developed for low-level radioactive waste, battles around repositories and potential other treatment methods for medium and high-level radwaste continue
- Local opposition to hosting new nuclear plants (and even more so waste sites) is always to be reckoned with
Key considerations for investors – what, where and with whom to invest
Existing industry participants and Infrastructure funds with a long investment horizon need to have clear rationales and answers to the following questions:
- What type of actor to invest in?
- What is the Nuclear value chain and where are its profit pools?
- What are the steps in the value chain that will generate scale, growth and profitability: utilities, individual projects, EPCs, O&Ms, suppliers, etc.?
- Given the focus of investors and potential synergies with their other operations or investments, what are the assets to consider?
- What exit strategies could be contemplated?
- What geographies to prioritize?
- Where are the largest market opportunities for Nuclear energy over time, and for what applications? In particular, what is the competitive environment and how does Nuclear energy stack up? What are the geographies most conducive to building nuclear programs?
- Where is the environment most favorable for its development (regulations, supply chain, depth of expertise, financing availability, off-take guarantees, risk minimization, etc.)?
- Should investments be considered locally or globally?
Most venture-oriented firms (e.g. VCs and new design departments of existing NSSS suppliers) will also need to answer prospective technology questions:
- What nuclear technologies to focus on?
- What are the technologies being considered (SMRs vs. scale reactors, LWRs vs. advanced reactors, AI use cases, etc.)?
- What are their applications and which ones are most promising (e.g. grid infrastructure, data centers, H2 production, etc.)
- What are their stages of development and potential outlook?
