Meeting global climate goals requires a step change in nuclear investment

Including nuclear power in the first Global Stocktake agreed at last year’s United Nations Climate Conference in Dubai (COP28) was nothing short of historic. After almost 30 years of COPs, nuclear power was, for the first time, explicitly mentioned in a negotiated outcome.

All countries – not just those 31 operating nuclear power plants – party to the UN Framework Convention on Climate Change agreed that nuclear acceleration was needed to achieve deep global decarbonization.

The first stocktake under the Paris Agreement said wind, solar and other low-carbon sources should be accelerated too but the overwhelming consensus was that renewables needed nuclear power.

And time is of the essence. Climate change-driven events such as heat waves, floods and powerful storms have affected every part of our planet. Last year was the hottest in the 174 years we have data and this year threatens to break that record.

Acknowledging nuclear energy’s crucial role in accelerating the energy transition reflects how much global attitudes have shifted in the past few years.

In addition to the agreement reached at COP28, 25 countries (and the nuclear industry) pledged to work towards tripling nuclear power capacity by 2050. The urgency of mitigating carbon emissions was joined by a renewed push for energy security.

It shows that fact-based analysis and science have finally overcome misunderstanding and ideology regarding nuclear, which is evident in the data too.

The International Atomic Energy Agency’s (IAEA) recently released nuclear capacity projections show that the high-case scenario sees nuclear capacity in 2050 as two and half times greater than today.

This expansion will require extending the operational years of existing nuclear power plants, many built in response to the 1970s oil shocks and an ambitious effort to build 640 gigawatts of new reactor capacity.

We will need to build a greater number of large reactors than the 415 that operate today and introduce a significant number of small modular reactors.

Small modular reactors are not yet available on the market but will need to account for a quarter of the increased capacity in 2050 if climate targets are to be met.

To fulfil this demand will necessitate a step-change in financing. Between 2017-2023 the world spent an average of about $50 billion on nuclear energy every year. That must increase to $125 billion from 2030 onwards.

Tripling nuclear capacity by 2050 would require yearly investments of about $150 billion. To put that into perspective, it is just a tenth of what is needed every year to triple renewable capacity by 2030.

Nuclear energy is sometimes pitted against wind and solar energy, with some opponents arguing that a dollar of investment in nuclear energy is a dollar less invested in wind and solar energy. That’s not true.

Because nuclear is available 24-7, investing in it actually facilitates investment in intermittent renewables such as wind and solar. Having nuclear power in the grid lowers overall costs because it negates the need for expensive battery storage and investment in overcapacity.

A nuclear power plant built today will pay off by providing low-carbon energy at affordable rates for about a century. No other scalable, proven, low-carbon energy source can do that, making investing in nuclear highly attractive to those who can take a long-term view.

In other words, financing nuclear power plants, particularly the upfront costs, requires government participation.

In economies similar to Russia, which holds the largest share of the overall nuclear market and China, which is building about as many new nuclear power plants as the rest of the world combined, the effect of government involvement is evident.

But even in market-driven economies, such as the United States, which operates more nuclear power reactors than any other country and France, where nuclear power plants generate more than two-thirds of the electricity, a combination of public and private involvement can clearly build sizeable nuclear power programmes.

As the need for nuclear has risen, so has the appetite of private investors.

In September, on the margins of the New York Climate Week, 14 major global banks and financial institutions expressed their support for financing the tripling of nuclear capacity by 2050.

New approaches are being implemented in the nuclear sector that are attracting financing. Financial mechanisms such as green bonds, loans and guarantees facilitate broader investor participation.

Including nuclear power in sustainable taxonomies, as has been the case in the European Union, can further catalyze commercial bank involvement.

Meanwhile, the support of multilateral development banks could offer a wider choice of options to developing countries with nascent financial markets looking for outside help to build a nuclear power programme.

Nuclear power is crucial not only for electricity but also for producing hydrogen and heat to decarbonize transport and industry and for desalination.

For a long time, the IAEA has advised nuclear energy newcomer States. The agency is now finding itself increasingly sought after by digital technology companies entering the market as buyers looking to secure the low-carbon power required to operate their energy-hungry data centres, which are driving the production of artificial intelligence.

In September, Microsoft agreed to a 20-year energy supply deal that sees the Three Mile Island Nuclear Power Plant reopening in 2028, less than a decade after its last reactor was shut.

In October, Google struck a deal with Kairos Power that will see its first commercial small modular reactor move from development to deployment in 2030. Just a few days later, Amazon announced a deal with small modular reactor startup X-Energy.

Small modular reactors are more like products than mega construction projects. They are smaller and can be built in modular form to be shipped to their final location.

The dozens of designs under development worldwide are a testament to the level of innovation and excitement these technologies are generating. But there is work to do before their potential can be realized.

The IAEA, through its Nuclear Harmonization and Standardization Initiative, for example, has brought together the nuclear community to develop more harmonized regulatory and industrial approaches.

It is also a contributor to the World Economic Forum’s Advanced Energy Ecosystems initiative which, together with various stakeholders across the nuclear ecosystem, has developed A Collaborative Framework for Accelerating Advanced Nuclear and Small Modular Reactor Deployment.

Energy-hungry technology, electrification, the shift to low-carbon energy, concern about energy security and population growth all contribute to greater demand for nuclear.

This November, I will attend my fifth COP meeting – COP29 in Baku, Azerbaijan. In just five years as the IAEA’s director general, I have gone from attending COP when nuclear was not on the guest list to helping nuclear gain a seat at the COP table and seeing it become part of the COP consensus.

At COP29 in Baku, the world must discuss concrete steps to get nuclear from consensus to construction. That means financing will be a central part of the conversation.