IEA sees rapid potential growth in nuclear, if key challenges overcome

Thursday, 16 January 2025

The report, The Path to a New Era for Nuclear Energy, reviews the status of nuclear energy around the world and explores risks related to policies, construction and financing. It provides the long-term outlook for nuclear power in light of policies and ambitions, quantifying nuclear power capacity and the related investment over the period to 2050. The report shows that with continued innovation, sufficient government support and new business models, small modular reactors (SMRs) can play a pivotal role in enabling a new era for nuclear energy.

According to the IEA, interest in nuclear energy is at its highest level since the oil crises in the 1970s: support for expanding the use of nuclear power is now in place in more than 40 countries. There are currently around 63 nuclear reactors under construction, representing more than 70 GW of capacity, one of the highest levels seen since 1990. In addition, over the last five years, decisions have been taken to extend the operating lifetimes of more than 60 reactors worldwide, covering almost 15% of the total nuclear fleet. Annual investment in nuclear – for both new plants and lifetime extensions of existing ones – has increased by almost 50% in the three years since 2020, exceeding USD60 billion.

Innovations in nuclear technologies are helping to drive momentum behind new projects, the report finds. SMRs are drawing increasing interest from the private sector. The report highlights how the introduction of SMRs could lead to lower financing costs. With the right support, the IEA says, SMR installations could reach 80 GW by 2040, accounting for 10% of overall nuclear capacity globally. However, the success of the technology and speed of adoption will depend on the industry's ability to bring down costs by 2040 to a similar level to those of large-scale hydropower and offshore wind projects (around USD60-80 per MWh).

Attracting finance
 

"A new era for nuclear energy will require a lot of investment," the IEA says. "In a rapid growth scenario for nuclear, annual investment would need to double to USD120 billion already by 2030."

The IEA says that for this scale of investment, the expansion of nuclear power cannot rely exclusively on public finances. "Ensuring the predictability of future cash flows is key to bringing down financing costs and attracting private capital to the nuclear sector," the report says. However, it notes that the private sector is increasingly viewing nuclear energy as an investible energy source. "To take advantage of the opportunities that nuclear power offers, governments must be prepared to provide the strategic vision alongside stable regulatory frameworks that will give the private sector confidence to invest."

It adds: "The positive news for the nuclear industry is that for the first time in a long time, more and more parts of the private sector now see nuclear as investible thanks to the promise of SMRs. Major technology companies building data centres can also take advantage of their strong credit ratings to facilitate financing for SMR projects.

"Reducing the risk of cost overruns and delays is a prerequisite for expanding finance, both public and private, and protecting the interests of consumers. SMRs have the potential to be a game-changer when it comes to financing. They can dramatically reduce the overall investment costs of individual projects."

According to the IEA, under current policies, total SMR capacity reaches 40 GW by 2050. However, "in a scenario in which tailored policy support for nuclear and streamlined regulations for SMRs align with robust industry delivery on new projects and designs, SMR capacity is three times higher by mid-century, reaching 120 GW, with more than one thousand SMRs in operation by then." This rapid growth scenario would raise required investment in SMRs from less than USD5 billion today to USD25 billion by the end of this decade, with cumulative investment of USD650 billion by 2050.

"If construction costs for SMRs are brought down over the next 15 years to parity with large-scale reactors built on budget, this could see the cost-effective uptake of SMRs increase by a further 60%, with deployment reaching 190 GW by 2050 ... Cumulative global investment in SMRs in this case totals USD900 billion to 2050."

Supply chain diversity
 

The IEA also said steps should be taken to ensure reliable and diversified supply chains for constructing new nuclear power plants and for fuelling them.

"For the moment, the renewed momentum behind nuclear power is heavily reliant on Chinese and Russian technologies," the report notes. "Of the 52 reactors that have started construction worldwide since 2017, 25 of them are of Chinese design and 23 of them of Russian design."

Greater diversity of uranium supply and enrichment services is essential for a secure and affordable expansion of the nuclear sector, the IEA says. Uranium production is highly concentrated in four countries, which jointly account for more than three-quarters of global uranium production from mines. Enrichment capacity is also highly concentrated, with more than 99% of the enrichment capacity in four suppliers, with Russia accounting for 40% of global enrichment capacity. "This area needs to be given much greater attention, particularly for countries that import enriched uranium."

IEA Executive Director Fatih Birol said: "While taking these risks into account, the market, technology and policy foundations are in place today for a new era of growth in nuclear energy over the coming decades. Governments and industry now need to build on these foundations if they want to make it a reality."

During COP28 - held in Dubai, UAE, in December 2023 - 25 countries backed a Ministerial Declaration calling for the tripling of global nuclear energy capacity by 2050. The heads of state, or senior officials, from Bulgaria, Canada, the Czech Republic, Finland, France, Ghana, Hungary, Jamaica, Japan, South Korea, Moldova, Mongolia, Morocco, the Netherlands, Poland, Romania, Slovakia, Slovenia, Sweden, Ukraine, the UAE, the UK and the USA signed the declaration on 2 December, with Armenia and Croatia also signing up during the summit.

At the COP29 UN climate change conference held in Baku, Azerbaijan in November last year, six more countries - El Salvador, Kazakhstan, Kenya, Kosovo, Nigeria and Turkey - added their support for the tripling of global nuclear energy capacity by 2050.