Nuclear Power in a Clean Energy System

In this report

Nuclear power and hydropower form the backbone of low-carbon electricity generation. Together, they provide three-quarters of global low-carbon generation. Over the past 50 years, the use of nuclear power has reduced CO2 emissions by over 60 gigatonnes – nearly two years’ worth of global energy-related emissions. However, in advanced economies, nuclear power has begun to fade, with plants closing and little new investment made, just when the world requires more low-carbon electricity. This report focuses on the role of nuclear power in advanced economies and the factors that put nuclear power at risk of future decline. It is shown that, without action, nuclear power in advanced economies could fall by two thirds by 2040.The implications of such a “nuclear fade case” for costs, emissions and electricity security using two World Energy Outlook scenarios are examined in the New Policies Scenario and the Sustainable Development Scenario. Achieving the pace of CO2 emissions reductions in line with the Paris Agreement is already a huge challenge, as shown in the Sustainable Development Scenario. It requires large increases in efficiency and renewables investment, as well as an increase in nuclear power. This report identifies the even greater challenges of attempting to follow this path with much less nuclear power. It recommends several possible government actions that aim to ensure existing nuclear power plants can operate as long as they are safe, support new nuclear construction and encourage new nuclear technologies to be developed.

With nuclear power facing an uncertain future in many countries, the world risks a steep decline in its use in advanced economies that could result in billions of tonnes of additional carbon emissions. Some countries have opted out of nuclear power in light of concerns about safety and other issues. Many others, however, still see a role for nuclear in their energy transitions but are not doing enough to meet their goals.

The publication of the IEA's first report addressing nuclear power in nearly two decades brings this important topic back into the global energy debate.

Key findings

Nuclear power is the second-largest source of low-carbon electricity today, with 452 operating reactors providing 2700 TWh of electricity in 2018, or 10% of global electricity supply.

In advanced economies, nuclear has long been the largest source of low-carbon electricity, providing 18% of supply in 2018. Yet nuclear is quickly losing ground. While 11.2 GW of new nuclear capacity was connected to power grids globally in 2018 – the highest total since 1990 – these additions were concentrated in China and Russia.

Global low-carbon power generation by source, 2018

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Cumulative CO2 emissions avoided by global nuclear power in selected countries, 1971-2018

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Nuclear power has avoided about 55 Gt of CO2 emissions over the past 50 years, nearly equal to 2 years of global energy-related CO2 emissions. However, despite the contribution from nuclear and the rapid growth in renewables, energy-related CO2 emissions hit a record high in 2018 as electricity demand growth outpaced increases in low-carbon power.

In the absense of further lifetime extensions and new projects could result in an additional 4 billion tonnes of CO2 emissions, underlining the importance of the nuclear fleet to low-carbon energy transitions around the globe. In emerging and developing economies, particularly China, the nuclear fleet will provide low-carbon electricity for decades to come.

However the nuclear fleet in advanced economies is 35 years old on average and many plants are nearing the end of their designed lifetimes. Given their age, plants are beginning to close, with 25% of existing nuclear capacity in advanced economies expected to be shut down by 2025.

It is considerably cheaper to extend the life of a reactor than build a new plant, and costs of extensions are competitive with other clean energy options, including new solar PV and wind projects. Nevertheless they still represent a substantial capital investment. The estimated cost of extending the operational life of 1 GW of nuclear capacity for at least 10 years ranges from $500 million to just over $1 billion depending on the condition of the site.

However difficult market conditions are a barrier to lifetime extension investments. An extended period of low wholesale electricity prices in most advanced economies has sharply reduced or eliminated margins for many technologies, putting nuclear at risk of shutting down early if additional investments are needed. As such, the feasibility of extensions depends largely on domestic market conditions.

Age profile of nuclear power capacity in selected regions, 2019

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Levelised cost of electricity in the United States, 2040

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United States

In the United States, some 90 reactors have operational licenses through 60 years, yet several have already retired early, and many more are at risk due to relatively low wholesale electricity prices.

Levelised cost of electricity in the European Union, 2040

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European Union

In the European Union, the case for nuclear lifetime extensions is stronger. The economic case remains compelling even if the decrease in wind and solar PV costs accelerates.

Levelised cost of electricity in Japan, 2040

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Japan

Nuclear extensions are an even more competitive in Japan, where renewables remain expensive and coal and gas must be imported.

Nuclear capacity operating in selected advanced economies in the Nuclear Fade Case, 2018-2040

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The Nuclear Fade Case

Given these challenges, there is a possibility that the nuclear fleet in advanced economies could face a steep decline. The IEA’s Nuclear Fade Case explores what could happen over the coming decades in the absence of any additional investment in lifetime extensions or new projects.

 

Under this case, nuclear capacity operating in advanced economies would decline by two-thirds by 2040, from about 280 GW in 2018 down to just over 90 GW in 2040. The European Union would see the largest decline with the share of nuclear in the generation mix falling to just 4%. The share in the United states would drop from to 8%, and in Japan the share would fall to 2% - well below their 2030 target of 20-22%.

Wind and solar PV generation by scenario 2019-2040

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The implications of the Nuclear Fade Case are numerous, including possible electricity security concerns as gas-fired capacity plays an even more central role in meeting peak demand, and the need for significant additional investment.

 

Without additional nuclear, the clean energy transition becomes more difficult and more expensive – requiring $1.6 trillion of additional investment in advanced economies over the next two decades. Critically, a major clean energy shortfall would emerge by 2040, calling on wind and solar PV to accelerate deployment even further to fill the gap.

In this context, countries that intend to retain the option of nuclear power should consider the following actions:

  • Keep the option open: Authorise lifetime extensions of existing nuclear plants for as long as safely possible. 
  • Value dispatchability: Design the electricity market in a way that properly values the system services needed to maintain electricity security, including capacity availability and frequency control services. Make sure that the providers of these services, including nuclear power plants, are compensated in a competitive and non-discriminatory manner.
  • Value non-market benefits: Establish a level playing field for nuclear power with other low-carbon energy sources in recognition of its environmental and energy security benefits and remunerate it accordingly.
  • Update safety regulations: Where necessary, update safety regulations in order to ensure the continued safe operation of nuclear plants. Where technically possible, this should include allowing flexible operation of nuclear power plants to supply ancillary services.
  • Create a favourable financing framework: Create risk management and financing frameworks that facilitate the mobilisation of capital for new and existing plants at an acceptable cost taking the risk profile and long time-horizons of nuclear projects into consideration.
  • Support new construction: Ensure that licensing processes do not lead to project delays and cost increases that are not justified by safety requirements.
  • Support innovative new reactor designs: Accelerate innovation in new reactor designs with lower capital costs and shorter lead times and technologies that improve the operating flexibility of nuclear power plants to facilitate the integration of growing wind and solar capacity into the electricity system.
  • Maintain human capital: Protect and develop the human capital and project management capabilities in nuclear engineering.


Executive summary

Nuclear power today makes a significant contribution to electricity generation, providing 10% of global electricity supply in 2018. In advanced economies1, nuclear power accounts for 18% of generation and is the largest low-carbon source of electricity. However, its share of global electricity supply has been declining in recent years. That has been driven by advanced economies, where nuclear fleets are ageing, additions of new capacity have dwindled to a trickle, and some plants built in the 1970s and 1980s have been retired. This has slowed the transition towards a clean electricity system. Despite the impressive growth of solar and wind power, the overall share of clean energy sources in total electricity supply in 2018, at 36%, was the same as it was 20 years earlier because of the decline in nuclear. Halting that slide will be vital to stepping up the pace of the decarbonisation of electricity supply.

A range of technologies, including nuclear power, will be needed for clean energy transitions around the world. Global energy is increasingly based around electricity. That means the key to making energy systems clean is to turn the electricity sector from the largest producer of CO2 emissions into a low-carbon source that reduces fossil fuel emissions in areas like transport, heating and industry. While renewables are expected to continue to lead, nuclear power can also play an important part along with fossil fuels using carbon capture, utilisation and storage. Countries envisaging a future role for nuclear account for the bulk of global energy demand and CO2 emissions. But to achieve a trajectory consistent with sustainability targets – including international climate goals – the expansion of clean electricity would need to be three times faster than at present. It would require 85% of global electricity to come from clean sources by 2040, compared with just 36% today. Along with massive investments in efficiency and renewables, the trajectory would need an 80% increase in global nuclear power production by 2040.

Nuclear power plants contribute to electricity security in multiple ways. Nuclear plants help to keep power grids stable. To a certain extent, they can adjust their operations to follow demand and supply shifts. As the share of variable renewables like wind and solar photovoltaics (PV) rises, the need for such services will increase. Nuclear plants can help to limit the impacts from seasonal fluctuations in output from renewables and bolster energy security by reducing dependence on imported fuels.

Policy and regulatory decisions remain critical to the fate of ageing reactors in advanced economies. The average age of their nuclear fleets is 35 years. The European Union and the United States have the largest active nuclear fleets (over 100 gigawatts each), and they are also among the oldest: the average reactor is 35 years old in the European Union and 39 years old in the United States. The original design lifetime for operations was 40 years in most cases. Around one quarter of the current nuclear capacity in advanced economies is set to be shut down by 2025 – mainly because of policies to reduce nuclear’s role. The fate of the remaining capacity depends on decisions about lifetime extensions in the coming years. In the United States, for example, some 90 reactors have 60-year operating licenses, yet several have already been retired early and many more are at risk. In Europe, Japan and other advanced economies, extensions of plants’ lifetimes also face uncertain prospects.

Economic factors are also at play. Lifetime extensions are considerably cheaper than new construction and are generally cost-competitive with other electricity generation technologies, including new wind and solar projects. However, they still need significant investment to replace and refurbish key components that enable plants to continue operating safely. Low wholesale electricity and carbon prices, together with new regulations on the use of water for cooling reactors, are making some plants in the United States financially unviable. In addition, markets and regulatory systems often penalise nuclear power by not pricing in its value as a clean energy source and its contribution to electricity security. As a result, most nuclear power plants in advanced economies are at risk of closing prematurely.

What happens with plans to build new nuclear plants will significantly affect the chances of achieving clean energy transitions. Preventing premature decommissioning and enabling longer extensions would reduce the need to ramp up renewables. But without new construction, nuclear power can only provide temporary support for the shift to cleaner energy systems.

The biggest barrier to new nuclear construction is mobilising investment. Plans to build new nuclear plants face concerns about competitiveness with other power generation technologies and the very large size of nuclear projects that require billions of dollars in upfront investment. Those doubts are especially strong in countries that have introduced competitive wholesale markets.

A number of challenges specific to the nature of nuclear power technology may prevent investment from going ahead. The main obstacles relate to the sheer scale of investment and long lead times; the risk of construction problems, delays and cost overruns; and the possibility of future changes in policy or the electricity system itself. There have been long delays in completing advanced reactors that are still being built in Finland, France and the United States. They have turned out to cost far more than originally expected and dampened investor interest in new projects. For example, Korea has a much better record of completing construction of new projects on time and on budget, although the country plans to reduce its reliance on nuclear power.

A collapse in investment in existing and new nuclear plants in advanced economies would have implications for emissions, costs and energy security. In the case where no further investments are made in advanced economies to extend the operating lifetime of existing nuclear power plants or to develop new projects, nuclear power capacity in those countries would decline by around two-thirds by 2040. Under the current policy ambitions of governments, while renewable investment would continue to grow, gas and, to a lesser extent, coal would play significant roles in replacing nuclear. This would further increase the importance of gas for countries’ electricity security. Cumulative CO2 emissions would rise by 4 billion tonnes by 2040, adding to the already considerable difficulties of reaching emissions targets. Investment needs would increase by almost USD 340 billion as new power generation capacity and supporting grid infrastructure is built to offset retiring nuclear plants.

Achieving the clean energy transition with less nuclear power is possible but would require an extraordinary effort. Policy makers and regulators would have to find ways to create the conditions to spur the necessary investment in other clean energy technologies. Advanced economies would face a sizeable shortfall of low-carbon electricity. Wind and solar PV would be the main sources called upon to replace nuclear, and their pace of growth would need to accelerate at an unprecedented rate. Over the past 20 years, wind and solar PV capacity has increased by about 580 GW in advanced economies. But in the next 20 years, nearly five times that much would need to be built to offset nuclear’s decline. For wind and solar PV to achieve that growth, various non-market barriers would need to be overcome such as public and social acceptance of the projects themselves and the associated expansion in network infrastructure. Nuclear power, meanwhile, can contribute to easing the technical difficulties of integrating renewables and lowering the cost of transforming the electricity system.

With nuclear power fading away, electricity systems become less flexible. Options to offset this include new gas-fired power plants, increased storage (such as pumped storage, batteries or chemical technologies like hydrogen) and demand-side actions (in which consumers are encouraged to shift or lower their consumption in real time in response to price signals). Increasing interconnection with neighbouring systems would also provide additional flexibility, but its effectiveness diminishes when all systems in a region have very high shares of wind and solar PV.

Taking nuclear out of the equation results in higher electricity prices for consumers. A sharp decline in nuclear in advanced economies would mean a substantial increase in investment needs for other forms of power generation and the electricity network. Around USD 1.6 trillion in additional investment would be required in the electricity sector in advanced economies from 2018 to 2040. Despite recent declines in wind and solar costs, adding new renewable capacity requires considerably more capital investment than extending the lifetimes of existing nuclear reactors. The need to extend the transmission grid to connect new plants and upgrade existing lines to handle the extra power output also increases costs. The additional investment required in advanced economies would not be offset by savings in operational costs, as fuel costs for nuclear power are low, and operation and maintenance make up a minor portion of total electricity supply costs. Without widespread lifetime extensions or new projects, electricity supply costs would be close to USD 80 billion higher per year on average for advanced economies as a whole.

Countries that have kept the option of using nuclear power need to reform their policies to ensure competition on a level playing field. They also need to address barriers to investment in lifetime extensions and new capacity. The focus should be on designing electricity markets in a way that values the clean energy and energy security attributes of low-carbon technologies, including nuclear power.

Securing investment in new nuclear plants would require more intrusive policy intervention given the very high cost of projects and unfavourable recent experiences in some countries. Investment policies need to overcome financing barriers through a combination of long-term contracts, price guarantees and direct state investment.

Interest is rising in advanced nuclear technologies that suit private investment such as small modular reactors (SMRs). This technology is still at the development stage. There is a case for governments to promote it through funding for research and development, public-private partnerships for venture capital and early deployment grants. Standardisation of reactor designs would be crucial to benefit from economies of scale in the manufacturing of SMRs.

Continued activity in the operation and development of nuclear technology is required to maintain skills and expertise. The relatively slow pace of nuclear deployment in advanced economies in recent years means there is a risk of losing human capital and technical know-how. Maintaining human skills and industrial expertise should be a priority for countries that aim to continue relying on nuclear power.

Key findings

The following recommendations are directed at countries that intend to retain the option of nuclear power. The IEA makes no recommendations to countries that have chosen not to use nuclear power in their clean energy transition and respects their choice to do so.

  • Keep the option open: Authorise lifetime extensions of existing nuclear plants for as long as safely possible.
  • Value dispatchability: Design the electricity market in a way that properly values the system services needed to maintain electricity security, including capacity availability and frequency control services. Make sure that the providers of these services, including nuclear power plants, are compensated in a competitive and non-discriminatory manner.
  • Value non-market benefits: Establish a level playing field for nuclear power with other low carbon energy sources in recognition of its environmental and energy security benefits and remunerate it accordingly.
  • Update safety regulations: Where necessary, update safety regulations in order to ensure the continued safe operation of nuclear plants. Where technically possible, this should include allowing flexible operation of nuclear power plants to supply ancillary services.
  • Create an attractive financing framework: Set up risk management and financing frameworks that can help mobilise capital for new and existing plants at an acceptable cost, taking the risk profile and long time horizons of nuclear projects into consideration.
  • Support new construction: Ensure that licensing processes do not lead to project delays and cost increases that are not justified by safety requirements. Support standardisation and enable learning-by-doing across the industry.
  • Support innovative new reactor designs: Accelerate innovation in new reactor designs, such as small modular reactors (SMRs), with lower capital costs and shorter lead times and technologies that improve the operating flexibility of nuclear power plants to facilitate the integration of growing wind and solar capacity into the electricity system.
  • Maintain human capital: Protect and develop the human capital and project management capabilities in nuclear engineering.


References
  1. Advanced economies consist of Australia, Canada, Chile, the 28 members of the European Union, Iceland, Israel, Japan, Korea, Mexico, New Zealand, Norway, Switzerland, Turkey and the United States.