Nuclear boom: The world's enthusiasm for nuclear energy faces economic uncertainty

“The Kremlin effectively used energy as a weapon against Europe to disrupt our economies, weaken society, and undermine confidence,” European Union Chairman Charles Michel stated on March 21 in Brussels while opening the IAEA’s first Nuclear Energy Summit. With energy independence from Russia an increasingly urgent priority, the European Union has set ambitious goals to produce more energy domestically while simultaneously reducing greenhouse gas emissions. According to attendees of the summit, nuclear energy can help the E.U. achieve these objectives.

In the summit’s final statement, all participating countries committed to “work towards unlocking the full potential of nuclear energy” and create conditions for “competitive financing” and “extension of the lifespan of existing nuclear reactors.” John Podesta, the U.S. president's senior advisor on green energy, said, “We consider nuclear energy vital to overcoming the climate crisis and building a clean, sustainable, and reliable economy both in the United States and globally.”

France is already preparing legislation to accelerate the construction of nuclear reactors, with plans for 14 new nuclear power plants. The U.S. is similarly inclined, having passed the Atomic Energy Advancement Act in February. The new law aims to reduce red tape around nuclear development.

Even before the summit in Brussels, the COP28 UN Climate Change Conference saw more than 20 countries sign a declaration pledging to triple their existing nuclear power capacities by 2050. This aligns with nuclear energy's dual benefits of zero greenhouse gas emissions and reduced reliance on fossil fuels.

But despite legislative improvements and declarations, the scale of new nuclear power plant construction thus far remains decidedly unimpressive.

Aging reactors, stalled progress

An American initiative to construct small modular reactors (SMRs) — NuScale's Carbon Free Power Project — had been certified by the Nuclear Regulatory Commission but was nevertheless cancelled towards the end of 2023 due to a significant surge in costs and subsequent price hikes for end consumers. Prospective buyers balked at paying $89 per megawatt-hour instead of the initially projected $58. Other small reactor initiatives, including those of Russian company Rosatom, also raise numerous questions, mostly of an economic nature.

France, the global leader in the share of energy produced by nuclear power, was compelled to fully nationalize its nuclear power plant operator, EDF, following multiple incidents at nuclear reactors in 2022. EDF is the world's largest operator of nuclear power stations, and yet in 2022, French reactors yielded their lowest output in the last 30 years.

Many of the nuclear industry's aspirations for major scientific breakthroughs and substantial reductions in the cost of nuclear electricity have failed to materialize. Thermonuclear fusion remains “somewhere in a 30-year perspective.” Instead of decreasing, the cost of nuclear electricity has only risen over the past decade.

The peak share of nuclear power plants (NPPs) in global electricity generation occurred in 1996, when it reached approximately 17.5%. However, since 2021, nuclear energy has accounted for no more than 10% of global generation (9.2% in 2022). Despite this, total nuclear electricity production remains relatively unchanged. According to the World Nuclear Industry Status Report (WNISR), the peak NPP output in absolute terms occurred in 2006, while the International Energy Agency (IEA) estimates that output was actually highest in 2021. A new peak is expected in 2025, and generation should continue to increase with the launch of significant new NPP capacities in China and India, as well as the restoration of French generation.

The IEA believes that nuclear energy production will more than double from 2022 to 2050. And yet, the share of nuclear energy in global generation is projected to decrease to 8% by 2050 — even in a scenario in which the world achieves carbon neutrality, doubles global energy consumption, and prioritizes renewable energy sources.

Nuclear power plants are getting older, with the average age of reactors in use increasing steadily since 1984. In 2022, it exceeded 31 years, as over the past three decades relatively few nuclear power units have been built in North America, Western Europe, or Central and Eastern Europe (Russia included). Meanwhile, the increase in nuclear capacities in Asia was not enough to offset the overall trend.

In the coming years, dozens of nuclear power plants will be retired without being replaced. According to WNISR estimates, to make up for all old reactors that will go out of service by 2030, it would be necessary to build 88 new nuclear reactors with a total capacity of 66.5 GW. This would require building twice as many reactors over the next six years than the number constructed over the past decade. Such a scenario appears highly unrealistic, contributing to the anticipated decline in the share of nuclear energy in the coming years.

To improve their prospects, advocates of nuclear energy in Russia and many other nations argue that it is the cleanest and safest available energy source, positioning it as the optimal solution for mitigating greenhouse gas emissions. Their opponents argue that improvements in nuclear technology instead act as a hindrance to the green transition: the service life of new third-generation reactors is over 60 years, they argue, and so capital invested in reactors risks diverting priority away from renewable sources for several decades to come. Over this timeframe, wind and solar power plants could be made two-to-three times more efficient provided that there is money available for upgrading current technologies.

Factors hindering the nuclear revolution

Nuclear energy is unlikely to reach the pinnacle it once enjoyed during the 1970s to 1990s, even if localized nuclear expansions in China and India remain possible. Several factors contribute to this outlook.

Firstly, nuclear power plants have the longest construction periods among all types of power stations. Typically, it takes 5 to 10 years to build a nuclear reactor, with instances in which construction exceeds 15 years not uncommon. In recent decades, construction times have extended significantly due to stricter safety standards and the increased power and complexity of the units. A recent example is the third unit of Finland's Olkiluoto Nuclear Power Plant, where the first unit was commissioned in 1979 after 5.5 years of construction, the second in 1982 after 6.5 years, and the third in 2023 after a 17.5-year construction period. Once it finally came online, however, the third unit's capacity of 1.6 GW was almost triple that of each of the first two units (660 MW).

Long construction times pose challenges for nuclear power plants in addressing the climate crisis. To limit the rise in the global average temperature to 1.5°C, as stipulated by the Paris Agreement, greenhouse gas emissions must be slashed by 43% by 2030. However, even with immediate construction of numerous new reactors, few would be operational by 2030. Nuclear energy's slow and inflexible nature contrasts with the urgent need for action in tackling the climate crisis now.

Solar and wind power stations can be constructed in less than a year, and with notable flexibility in terms of size. Nuclear power plants represent massive projects, and the feasibility of small modular reactors remains uncertain.

The second factor is the escalating costs of both the reactors and the electricity they generate. This is driven by prolonged construction times and the growing complexity of nuclear power plants. It has become customary for nuclear projects to exceed their initial budgets. Bent Flyvbjerg, an esteemed professor at the Saïd Business School, University of Oxford, has meticulously tracked data on around 16,000 mega-projects across 136 countries for nearly three decades. According to his research, the average cost overrun during nuclear plant construction stands at 120%, and for nuclear waste storage facilities, it is a staggering 238%. In contrast, cost overruns for the Olympic Games are 157%, for wind farm construction they're 13%, and for solar power plants construction they are a mere 1%. The disparity stems from the intricate and largely unique nature of nuclear projects, where for safety reasons precision is paramount from the outset. In contrast, wind and solar projects rely on standardized modular structures produced at scale.

Nuclear power plants represent the costliest form of electricity generation. In the United States, the price of nuclear electricity has nearly doubled over the past decade. Moreover, there remains a significant chance that the true cost of nuclear electricity remains underestimated. Questions linger regarding the accuracy of cost estimates not only for decommissioning the plants themselves but also for managing their fuel cycles and hazardous waste. Presently, there are no designated repositories for the disposal of spent fuel and high-level radioactive waste, leaving the full extent of burial costs uncertain.

The third factor is government intervention. Private companies in the nuclear energy sector are increasingly uncompetitive in global markets, as was noted in the 2023 World Nuclear Industry Status Report. Government intervention in the industry has been growing in many countries. Currently, around 45% of the world's nuclear power capacity is entirely state-owned, which is hardly a sign of a healthy industrial development.

Last but not least: safety concerns

It's worth mentioning that the potential for accidents, which can harm both people and the environment, is recognized by the International Atomic Energy Agency (IAEA) and the World Nuclear Association. The world has already witnessed three major nuclear accidents: at the Three Mile Island nuclear plant (USA, 1979), the Chernobyl nuclear power plant (USSR, 1986), and the Fukushima Daiichi nuclear plant (Japan, 2011). Although the threat in these cases was not directly related to the nuclear power plants themselves — but rather to the irresponsibility of those in charge of their construction or operation — nuclear energy is still associated in the public consciousness with increased danger, and this inevitably influences political decision making. Last year, for example, citing safety concerns, Germany shut down the last of its numerous nuclear power plants after nearly half a century of protests by the population.

While there have never been any disasters within the European Union, the radioactive cloud from the 1986 Chernobyl accident reached both Germanys of the time — the democratic Federal Republic of Germany and the Soviet-aligned German Democratic Republic — frightening residents and sparking protests. Today, the unified Federal Republic of Germany remains firmly opposed to nuclear energy and is betting on wind and solar power instead.