The world will need more energy, not less. Global electricity demand is expected to grow by up to 75% by 2018 2050This requires strategies to reduce emissions while meeting this growing demand. Nuclear energy is emerging as a critical tool in this effort, offering the promise of reliable, round-the-clock, carbon-free electrical and thermal power.
Realizing this possibility, 22 countries have committed to tripling their nuclear energy capabilities by 2050 Through the Net Zero Nuclear (NZN) initiative at COP28 in Dubai. Although this is a sign of progress, especially in a forum that has been slow to acknowledge the value of nuclear energy in addressing the climate challenge, commitments are worthless without action. As we mark the anniversary of the NZN initiative, it is important to take stock of what has been accomplished to advance the promise of nuclear energy, and what still needs to happen as world leaders head to the UN Climate Change Conference (COP29) in Baku.
International cooperation to expand nuclear energy continues to gain momentum
In March 2024, world leaders, heads of state and nuclear sector stakeholders gathered in Brussels for the conference The first nuclear energy summit At the level of heads of state, it is organized by the International Atomic Energy Agency and the Belgian government. With participants from more than 30 countries, mostly from Europe, the summit highlighted the role of nuclear energy in decarbonization and economic growth, signaling unprecedented interest in scaling up nuclear energy through international cooperation. Calls for the creation of innovative financial instruments to support nuclear energy projects and the call for an EU strategy to promote small modular reactors through a new EU industrial alliance underscore the urgent need for action.
Building on this momentum, in September 2024, delegates from the 22 member states of the NZN Pledge met for a second meeting. Roadmap for the new nuclear ministerial conference In Paris. The conference, hosted by the Nuclear Energy Agency (NEA) and the Swedish Ministry of Climate and Enterprise, reaffirmed pledges to triple global nuclear capacity by 2050. Participants stressed the essential role of nuclear energy in achieving a climate-neutral future, enhancing energy security, and reducing dependence on Fossil fuels amid geopolitical tensions. The resulting statement highlighted the importance of international cooperation, the development of small modular reactors and other new technologies, and the engagement of global financial institutions to support nuclear expansion.
Private sector leaders recognize the advantages of nuclear energy
In a major shift, the private sector – especially the technology industry – is making significant investments in nuclear energy to meet growing energy demand. Ahead of Climate Week in New York City, Constellation Energy announced a 20-year agreement to supply 835 megawatts of carbon-free power to Microsoft through the repowering of the Three Mile Island (TMI) 1 unit in Pennsylvania. Google and Amazon quickly followed suit with landmark agreements of their own. For Google’s part, it has agreed to purchase nuclear power from small modular reactors (SMRs) developed by Kairos Power, marking the first corporate agreement of its kind. Amazon has joined the wave of support by signing agreements to support several new nuclear power projects, including small and medium enterprises.
Perhaps the biggest sign of changing attitudes was the announcement by 14 major banks expressing support for efforts to triple global nuclear power capacity by 2050. But banks and investors are obligated to achieve risk-adjusted returns on the capital entrusted to them. This signal does not automatically translate into accepted term sheets, information memorandums and transactions with withdrawal approvals. Thus, incentives will be needed to unlock significant levels of capital to finance new reactors, which would ultimately reduce costs and accelerate their deployment. The announcement was just a moment. A heavy burden lies ahead on industry and policymakers, because mainstream finance is already too busy to feel any historical compulsion to support nuclear power construction.
Efforts to triple nuclear power by 2050 are severely underfunded
Triple the capacity of nuclear energy, with an investment ranging from $3 to $9 trillion1 It will be needed between now and 2050, or about $250 billion annually. This unprecedented level of spending will have to be a mix of equity and debt from a variety of sources, as government fiscal capabilities become increasingly limited. The industry can probably survive with its current “individualized” approach to each customer market, but it cannot grow.
There is growing clamor from governments, industry, think tanks and other stakeholders, but mainstream capital for new nuclear projects remains largely isolated, unconvinced and out of reach. the International Energy Agency The International Energy Agency currently estimates that clean energy attracts $2 trillion annually, but according to the International Atomic Energy Agency (International Atomic Energy Agency) Only $50 billion (2.5%) of it will be used to build new nuclear capabilities. In countries such as the United Kingdom, Poland, Romania and the Czech Republic, despite highly developed projects and investment structures, financing order books remain vacant. The main constraint is the high cost of capital, driven by a “nuclear risk premium” that acts as a costly, long-term tax on consumers of nuclear power. This premium reflects a higher risk perception among lenders and private investors who require hefty premiums to offset concerns about policy risks, project completions and market rates. If there is a wall of capital available for clean energy, what will it take to melt the glacier of capital that looms over the nuclear industry’s ambitions?
New financing mechanisms are necessary to overcome these obstacles:
- Additional measures and additional funding sources are needed to reduce development phase risks, as recent nuclear projects have taken 6 to 7 years to reach financial close – compared to just 6 to 8 months for renewables.
- Patient capital is required during construction to extend the return timeline beyond the current 20-year payback period, more closely in line with the typical nuclear plant design life of 60 years.
- Finally, innovative policies and financing instruments should incentivize various stakeholders – including investors, developers, contractors, and consumers – by reducing short-term risks and sharing long-term rewards. Governments can protect their financial capital and stimulate private capital through project-inducing financial structures in order to reduce the nuclear risk premium, making nuclear investments more attractive to the market.
CATF and its partners are developing concrete, actionable recommendations, tools, and project structures that address the financing conundrum: Industry needs multiple reactor orders from committed, funded customers to build efficient supply chains, leverage learning by doing, and ultimately achieve the next market economy of its kind. At the same time, market financing needs projects that are bankable, well-managed and adopt reasonable risk mitigation strategies. The first-of-its-kind financing gap (FOAK) is a major hurdle that, although well known, has not yet been fully addressed in any market. The subsequent investment gap between FOAK and NOAK was larger, but absent from multilateral political dialogues and policymakers’ radars. The Renewable Energy Guide provides practical solutions that our team is working on.
Looking forward to COP29
The world has witnessed unprecedented ambition to expand nuclear power since UN Climate Change Conference 28, but without addressing finance, a decisive, lowest-cost (or even cost-efficient) path to 2050 cannot be achieved. With climate finance on the verge of taking center stage In Baku, world leaders have a unique opportunity to take action on their commitments. By prioritizing the development of new and effective financing solutions, it can help unlock the capital needed to achieve the goal of tripling global nuclear capacity by 2050.
1 Assuming capex of $4,000-12,000/kW for 800 GW of new capacity over the next 25 years.
David Stearns is an independent consultant and Board Director of the International Bank for Nuclear Infrastructure (IBNI). After a 20-year career in international utility finance, culminating as Head of Energy Project Finance and Advisory at European bank HSBC, Mr. Stearns established an independent advisory practice raising capital for nuclear developers. Now at 12y He serves on various boards throughout the year and supports the expansion of the IAEA and new member states.