Offering a clean, firm source of energy, nuclear is set to become an important part of transition programmes across the globe. Yet after more than two decades of stalling, the industry must invest in new technology – and fast.
As the energy transition gathers pace and geopolitical tensions continue to pressure energy supply, finding viable, low-carbon replacements for fossil fuels has become more urgent than ever before. And while reducing emissions is a key target for governments across the globe, ensuring security of supply is paramount.
Nuclear energy can provide a solution to both these issues. One kilowatt (kW) of nuclear electricity produces just six grams of carbon dioxide – less than both solar and wind. And unlike renewable energy sources, nuclear is not affected by intermittency issues – promising a stable, reliable source of energy.
However, the industry is currently at a crossroads. Over half of the 437 active reactors are aged 35 or older, and with lifespans of just 40 years, many will be approaching the end of their lives. And given it takes around eight years to build a new plant, action must be taken quickly.
The journey ahead is far from straightforward. Between Generation III and IV reactors, the emergence of Small Modular Reactors (SMRs), and the development of nuclear fusion, there are a number of different paths nuclear could take. The decisions made today will impact the industry for the next 50 years.
Is Generation III the right way forward?
Since the 1950s, nuclear energy has undergone a steady evolution. Generation II reactors marked the beginning of large commercial power plants in the 1970s and 1980s, and Generation III reactors have since succeeded them – boasting increased efficiency and passive safety mechanisms.
Yet while the construction of the first of these units began in the early 2000s, plants have suffered long production delays and have somewhat fallen short of expectations when it comes to competitiveness, efficiency, flexibility, proliferation, and radioactive waste management.
The French Evolved Pressurised Reactor (EPR), for instance, has been criticised for the complexity of its design and technological complexity, as well as the financial risks associated with its deployment. Even since the design of the original EPR was updated to lower construction time and costs and further increase safety, the EPR-2 continues to attract criticism, with former CEO of EDF, Henri Proglio, describing the project as "too complicated, almost unbuildable” in December 2022.
Coupled with the enormous capex required to fund such projects, continued investment in the evolution of Generation III may not be the most effective way forward. So, what are the alternatives – and are they viable?
From Generation IV to SMRs: is bigger better?
Improving nuclear technology has been the focus of research and development (R&D) experts across the globe, with a number of possibilities on the table. But for the most part, these require further research and investment before they can be commercially implemented.
Generation IV systems, for instance, are a promising prospect. With improved safety mechanisms, increased efficiency and decreased waste production, these technologies provide compelling answers in an industry frustrated by ineffectual solutions.
Unfortunately, their development has been expensive and, so far, unsuccessful in achieving commercial-scale production. This is primarily due to the fact that Generation IV systems still have issues that need resolving and solving ongoing questions will entail further investment. Given the scale and time it takes to develop these projects, for investors, this is not always an attractive option.
At the other end of the spectrum, SMRs are believed by many to present a perfect solution. With an electrical output of 10-300 megawatts (MW) and a high degree of modularisation obtained through the extensive use of factory construction, these reactors are more affordable and benefit from enhanced quality and superior manufacturing techniques.
The smaller, modular nature of SMRs also means that they can be used in a variety of locations – from remote, off-grid areas to cities and industrial sites where energy is in high demand. They also enjoy greater flexibility and robust passive safety features that allow for a smoother integration into future energy networks.
What’s more, SMRs are scalable, offering stakeholders a "plug and play" approach – adding reactors to a plant one by one as demand for electricity increases. This, from an investment perspective, minimises the need for large capital injections.
However, the success of SMRs will be dependent on a combination of technological, industrial, and regulatory factors. And while SMRs appear promising in terms of technological affordability, this does not necessarily equate to competitiveness once the reactor is up and running. Recent research suggests overnight costs may be higher than initially expected, and that SMRs may generate larger quantities of nuclear waste than their competitors.
Fission vs fusion
Another area offering potential within the industry is nuclear fusion. Unlike nuclear fission, which consists of splitting atoms to release energy, nuclear fusion involves combining light atomic nuclei to form heavier particles.
Nuclear fusion offers a promising source of clean energy, with the potential to provide abundant power to entire countries. It relies on widely available and virtually inexhaustible fuels, does not emit any CO2, produces non-toxic gas and nuclear waste with a far shorter half-life, and does not carry any risk of catastrophic reactor meltdown given the reaction stops by itself if something goes wrong.
Despite 80 years of intense research, scientists are still struggling to make it commercially viable. However, recent progress – such as the reaction at the Lawrence Livermore National Laboratory in California – has demonstrated that the science does work, and physical barriers no longer stand in the way of its implementation.
Organised action from the government is essential to making fusion technology commercially viable. But we are starting to see action in this space. Last year, the White House launched a cost share programme with a US$500 million appropriation to develop a fusion power plant design by the end of the decade. This year, the programme is beginning to take shape, and fusion is being included in national energy policy conversations.
To ensure the success of new developments, financial institutions and governments must be willing to provide robust support and creative solutions. However, relying solely on public investment leaves developers at the mercy of budget cuts and recessionary measures. As such, a more diversified approach to funding would better support the industry’s more ambitious goals.
A deeper focus on public-private partnerships (PPPs) and the inclusion of nuclear in international green bond frameworks, for instance, could go a long way in bolstering investments within this space. Meanwhile, the continued support of start-ups – which are generally more experimental and less risk-averse than their larger corporate counterparts – will enable entrepreneurs to increasingly push the boundaries of current capabilities through the use of AI, machine learning and supercomputing. Indeed, we are already seeing success in this area, with US$4-5 billion being pumped into new alternatives in the clean fusion energy space from in the past three years alone – with the likes of Bill Gates, Jeff Bezos and multinationals such as Shell all making sizeable investments.
As things currently stand, nuclear power is becoming an increasingly accepted source of energy in the context of national energy transition programmes. However, there is still a need for a deeper debate about the exact nature of the next generation of reactors and technology choices.
For further information:
See Natixis CIB’s research miniseries "The Future is Nuclear, The Future is Unclear":
Watch the replay of the Natixis CIB webinar below
