IEA (2022), Nuclear Power and Secure Energy Transitions, IEA, Paris https://www.iea.org/reports/nuclear-power-and-secure-energy-transitions
Nuclear energy can help make the energy sector's journey away from unabated fossil fuels faster and more secure. Amid today’s global energy crisis, reducing reliance on imported fossil fuels has become the top energy security priority. No less important is the climate crisis: reaching net zero emissions of greenhouse gases by mid-century requires a rapid and complete decarbonisation of electricity generation and heat production. Nuclear energy, with its 413 gigawatts (GW) of capacity operating in 32 countries, contributes to both goals by avoiding 1.5 gigatonnes (Gt) of global emissions and 180 billion cubic metres (bcm) of global gas demand a year. While wind and solar PV are expected to lead the push to replace fossil fuels, they need to be complemented by dispatchable resources. As today’s second largest source of low emissions power after hydropower, and with its dispatchability and growth potential, nuclear – in countries where it is accepted – can help ensure secure, diverse low emissions electricity systems.
Advanced economies have lost market leadership. Although advanced economies have nearly 70% of global nuclear capacity, investment has stalled and the latest projects have run far over budget and behind schedule. As a result, the project pipelines and preferred designs have shifted. Of the 31 reactors that began construction since the beginning of 2017, all but 4 are of Russian or Chinese design.
Restrictions on nuclear power remain in certain countries, driven by concerns about safety and waste. The 2011 accident at the Fukushima-Daiichi plant in Japan following a major earthquake undermined public trust in nuclear power, underscoring the need for robust, independent regulatory oversight. Accident risks are one of the main factors behind bans on nuclear power or policies to phase it out. While there is progress on disposing of high-level nuclear waste, with three countries having approved sites, gaining public and political acceptance has been challenging.
The policy landscape is changing, opening up opportunities for a nuclear comeback. More than 70 countries, covering three-quarters of energy-related greenhouse gas emissions, have pledged to cut their emissions to net zero. While renewables would provide the largest share of low emissions electricity and many countries either do not foresee the need or do not want a role for nuclear power, a growing number of countries have also announced plans to invest in nuclear. The United Kingdom, France, China, Poland and India have recently announced energy strategies that include substantial roles for nuclear power. The United States is investing in advanced reactor designs.
Energy security concerns and the recent surge in energy prices, notably in the wake of Russia’s invasion of Ukraine, have highlighted the value of a diverse mix of non-fossil and domestic energy sources. Belgium and Korea have recently scaled back plans to phase out existing nuclear plants. The UK Energy Security Strategy includes plans for eight new large reactors. Faster restarts of Japanese nuclear reactors that have received safety approvals could free up liquefied natural gas (LNG) cargoes desperately needed in Europe or other markets in Asia.
In the decade following the 1973 oil shock, construction started on almost 170 GW of nuclear power plants. These plants still represent 40% of today’s nuclear capacity. Nuclear additions in the last decade reached only 56 GW. With policy support and tight cost controls, today’s energy crisis could lead to a similar revival for nuclear energy.
As an established large-scale low emissions energy source, nuclear is well placed to help decarbonise electricity supply. In the IEA’s Net Zero Emissions by 2050 Scenario (NZE), energy sector emissions fall by about 40% from 2020 to 2030, and then decline to zero on a net basis by 2050. While renewable sources dominate and rise to nearly 90% of electricity supply in the NZE, nuclear energy plays a significant role. This narrow but achievable pathway requires rigorous and immediate policy action by governments around the world to reshape energy systems on many fronts.
Extending nuclear plants’ lifetimes is an indispensable part of a cost-effective path to net zero by 2050. About 260 GW, or 63%, of today’s nuclear plants are over 30 years old and nearing the end of their initial operating licences. Despite moves in the past three years to extend the lifetimes of plants representing about 10% of the worldwide fleet, the nuclear fleet operating in advanced economies could shrink by one-third by 2030. In the NZE, the lives of over half of these plants are extended, cutting the need for other low emissions options by almost 200 GW. The capital cost for most extensions is about USD 500 to USD 1 100 per kilowatt (kW) in 2030, yielding a levelised cost of electricity generally well below USD 40 per megawatt-hour (MWh), making them competitive even with solar and wind in most regions.
Nuclear power plays a significant role in a secure global pathway to net zero. Nuclear power doubles from 413 GW in early 2022 to 812 GW in 2050 in the NZE. Annual nuclear capacity additions reach 27 GW per year in the 2030s, higher than any decade before. Even so, the global share of nuclear in total generation falls slightly to 8%. Emerging and developing economies account for more than 90% of global growth, with China set to become the leading nuclear power producer before 2030. Advanced economies collectively see a 10% increase in nuclear, as retirements are offset by new plants, mainly in the United States, France, the United Kingdom and Canada. Annual global investment in nuclear power rises from USD 30 billion during the 2010s to over USD 100 billion by 2030 and remains above USD 80 billion to 2050.
Less nuclear power would make net zero ambitions harder and more expensive. The Low Nuclear Case variant of the NZE considers the impact of failing to accelerate nuclear construction and extend lifetimes. In this case, nuclear’s share of total generation declines from 10% in 2020 to 3% in 2050. Solar and wind would need to fill the gap, pushing the frontiers of integrating high shares of variable renewables. More energy storage and fossil fuel plants fitted with carbon capture, utilisation and storage (CCUS) would be needed. As a result, the NZE’s Low Nuclear Case would require USD 500 billion more investment and raise consumer electricity bills on average by USD 20 billion a year to 2050.
The industry has to deliver projects on time and on budget to fulfil its role. This means completing nuclear projects in advanced economies at around USD 5 000/kW by 2030, compared with the reported capital costs of around USD 9 000/kW (excluding financing costs) for first-of-a kind projects. There are some proven methods to reduce costs including finalising designs before starting construction, sticking with the same design for subsequent units, and building multiple units at the same site. Stable regulatory frameworks throughout construction would also help avoid delays.
An even larger role for nuclear power will require greater declines in construction costs. Hydropower, bioenergy and fossil fuel plants equipped with CCUS are the main alternative dispatchable low emissions sources to nuclear. Each one also faces challenges to expand. Hydropower sites and sustainable bioenergy supply are limited, while there are economic, political and technical obstacles to scaling up CCUS. Where there is potential to expand these alternatives and CCUS is commercially available, the construction costs of nuclear power would need to fall to USD 2 000‑3 000/kW (in 2020 dollars) to remain competitive. Depending on financing costs, this would yield a levelised cost of electricity for nuclear power of USD 40‑80/MWh, including decommissioning and waste disposal. If new projects were able to achieve these costs in more markets, an even larger role for nuclear would be available.
Using electricity from nuclear to produce hydrogen and heat presents new opportunities. The rapid expansion of low emissions hydrogen is a key pillar of the NZE, with related investment rising from near zero today to USD 80 billion per year to 2040. Under the NZE’s cost projections, hydrogen production via natural gas with CCUS or via electrolysis using renewables are the cheapest options. For nuclear to compete with these alternatives, investment costs would need to decrease to USD 1 000‑2 000/kW. The economics would be more favourable if the nuclear reactor is co-located with a hydrogen user, avoiding transportation costs. The NZE estimates surplus nuclear electricity could be used to produce an estimated 20 million tonnes of hydrogen in 2050. There are also possibilities to co-generate heat from nuclear plants to replace district heating and other high-temperature uses, though the potential scale of this market is limited and construction costs would need to fall to USD 2 000‑3 000/kW to make it competitive.
Nuclear and other dispatchable power sources complement renewables by providing critical services to electricity systems. The predominance of wind and solar in the power mix and the end of unabated fossil generation must be complemented by a diverse mix of dispatchable generation to provide stability, short-term flexibility and adequate capacity during peak demand periods. For example, in an analysis of a carbon neutral power system in China, nuclear would provide only 10% of total electricity produced in 2060, but supply almost half the required inertia, a key component of system flexibility.
Wholesale markets should price system services to reflect their value. The need for system services such as flexibility, adequacy and stability increases sharply as the share of variable renewables increases. Electricity markets should be designed to fully value these services, not just electricity production. In addition, robust carbon pricing regimes would encourage a more decarbonised energy system at lowest cost.
Government involvement will be needed to finance new investment. Nuclear projects have long relied on state ownership or a regulated monopoly structure to guarantee revenues and reduce risk to investors because there is rarely sufficient private sector finance for such capital-intensive and long-lived assets, particularly those exposed to significant policy risk. Innovative financing mechanisms, such as the recently approved Regulated Asset Base (RAB) model by the United Kingdom, can help to secure adequate financing while assigning risks to those best situated to accept it.
The challenge of net zero has stimulated a burst of development in small modular reactor technologies. In the NZE, half of the emissions reductions by 2050 come from technologies, including small modular reactors, that are not yet commercially viable. SMRs, generally defined as advanced nuclear reactors with a capacity of less than 300 MW, have strong political and institutional support, with substantial grants in the United States, and increased support in Canada, the United Kingdom and France. This support makes it possible to attract private investors, bringing new players and new supply chains to the nuclear industry.
Being smaller can help SMRs fit in. Lower capital costs, inherent safety and waste management attributes and reduced project risks may improve social acceptance and attract private investment for research and development, demonstration and development. SMRs could also reuse the sites of retired fossil fuel power plants, taking advantage of existing transmission, cooling water and skilled workforces. Other opportunities include co-location with industry to provide electricity, heat and hydrogen.
Policy and regulatory reforms are needed to stimulate investment. The successful long-term deployment of SMRs hinges on strong support from policy makers and regulators to leverage private sector investment. Adapting and streamlining licensing and regulatory frameworks to take SMR attributes into account is key. International harmonisation of licensing and definitions are essential to developing a global market. Securing private financing will require a robust and technology-neutral policy framework, including in the area of taxonomies and environmental, social and governance that will have a growing influence on financial flows.
Decisions are needed now for SMRs to play a meaningful part in energy transitions. While only a small number of units are likely to start operating this decade, with recent momentum SMRs could start playing a significant role in energy transitions in the 2030s, provided that regulatory and investment decisions are made now, and commercial viability is demonstrated. This is true both for small evolutionary reactors that could achieve economic competitiveness more readily, but also for the advanced reactor models.
The following recommendations are directed at policy makers in countries that see a future for nuclear energy. The IEA makes no recommendations to countries that have chosen not to make use of nuclear power and fully respects their choice.
- Extend plant lifetimes. Authorise lifetime extensions of existing nuclear power plants so they can continue to operate for as long as safely possible.
- Make electricity markets value dispatchable low emissions capacity. Design electricity markets to ensure nuclear power plants are compensated in a competitive and non-discriminatory manner for the avoidance of emissions and the services they provide to maintain electricity security, including capacity availability and frequency control.
- Create financing frameworks to support new reactors. Set up risk management and financing frameworks to mobilise capital for new plants at an acceptable cost and with fair sharing of risks between investors and consumers.
- Promote efficient and effective safety regulation. Ensure that safety regulators have the resources and skills to undertake timely reviews of new projects and designs, develop harmonised safety criteria for new designs, and engage with potential developers and the public to ensure that licensing requirements are clearly communicated.
- Implement solutions for nuclear waste disposal. Involve citizens in prioritising approval and construction of high-level waste disposal facilities in countries that do not yet have them.
- Accelerate the development and deployment of small modular reactors. Identify opportunities where SMRs could be a cost-effective low emissions source of electricity, heat and hydrogen. Support investment in demonstration projects and in developing supply chains.
- Re-evaluate plans according to performance. Make long-term support contingent on the industry delivering safe projects on time and on budget.