How cheap is nuclear power?
Samuel Thomas, Sustainable Investment Analyst at Schroders , analyzes nuclear energy as a possible option towards the energy transition
The prospects for nuclear energy – and for the sectors and companies linked to it – could be brighter in the near future, also thanks to proposals ranging from the development of at least 150 new nuclear reactors in China over the next 15 years to the new British government to build small modular reactors.
We are seeing growing support for nuclear power, with political commitments to build hundreds of new reactors around the world over the next decade. Five of the world's largest economies – the United States, India, the United Kingdom, Japan and China – have announced targets to substantially increase nuclear capacity. In Germany, which is the exception, opposition to nuclear power has eased.
According to data from the World Nuclear Association, 58 reactors are planned under construction, 103 planned and 325 proposed. This equates to 65,899 MWe of nuclear power currently under construction (as of July 2023), the highest recorded by the industry since 2015.
The role of nuclear power to achieve the Net Zero goals
There are currently 439 nuclear reactors in operation globally, with an estimated operating capacity of 413 GW in 2022, or around 10% of global power generation. According to the International Energy Agency's Net Zero scenario, the nuclear industry is expected to nearly double its capacity by 2050.
Nuclear investments must triple according to the IEA's Net Zero scenario. Between 2016 and 2020, the average annual global investment in nuclear power was $35 billion. To reach Net Zero, investment must rise to more than $100 billion annually by 2030 and remain above $80 billion by 2025.
Nuclear is green
Nuclear is one of the lowest carbon energy sources, it is in fact the second low carbon energy source after hydroelectric power, more than wind and solar combined.
Over the past five decades, nuclear power is estimated to have cumulatively avoided 70 Gt of CO2. For comparison, total annual carbon emissions in China reached 12.1Gt in 2022.
How cheap is nuclear power?
Nuclear power can be considered cost-competitive with other energy sources.
As regards reliability, it is characterized by a ratio between the energy actually generated over time and the energy that could have been produced at full capacity in the same period of 90-95%, the highest of all energy sources.
Finally, extending the lifetime of nuclear power provides a cost-effective means of producing energy. According to estimates by the International Atomic Energy Agency, the life cycle extension generates one of the highest kWh returns per dollar of investment among all sources of energy production.
The obstacles
Aside from safety and waste concerns, one of the biggest barriers to building new large-scale nuclear plants is the ability to mobilize investment.
While governments clearly believe that nuclear has a role to play in the future energy mix and decarbonization strategies, a large funding gap remains between nuclear goals and the capital needed to achieve them.
It will be necessary to explore new financing mechanisms that seek to better balance the allocation of risk between public and private capital. One of these options is the Rab (Regulated Asset Base) funding mechanism. Sizewell C (if successful) would be the first nuclear power station in the UK to be financed under a Rab model.
In addition, there are several barriers that can prevent nuclear from reaching its potential, such as upfront capital costs and perceived safety concerns. Similarly, a prerequisite for the re-emergence of nuclear power will be a constructive and stable political and supportive environment from the government, which in turn relies on a favorable public perception.
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This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/energia-nucleare-quanto-e-economica/ on Sat, 19 Aug 2023 05:14:02 +0000.