Director General of the World Nuclear Association Sama Bilbao y León is urging decision makers to convince investors that nuclear assets are investable, including the entire supply chain and the segment of small modular reactors. In an interview with Balkan Green Energy News, she expressed optimism regarding the efforts in Europe to support a new wave of nuclear energy investment, saying they would catch up with the measures underway in the United States and Canada.
Governments and companies committed at the United Nations Climate Change Conference COP28 to triple nuclear energy capacity by mid-century, formalizing the launch of the sector’s revival. Investments in Europe have mostly slowed over the past few decades, but the wheels were put in motion when in 2021 the European Union included nuclear energy in its green taxonomy.
With some of its recent legislative developments, the EU is making progress toward matching the support that the sector has in the US and Canada, according to Director General of the World Nuclear Association (WNA) Sama Bilbao y León. Still, more needs to be done to enable a carbon-free and reliable 24/7 supply of electricity with affordable prices for everyone, she underscored.
North America and Europe are competing for investments for the energy transition, renewables and decarbonization. What is the nuclear power industry’s point of view on the funding programs?
Many countries all over the world have realized that if they are serious about meeting net zero goals, they are going to need to consider many things including nuclear energy. The energy crisis has also been a rude awakening for many.
In the United States, the Inflation Reduction Act is a bottom-up type program, providing incentives to individual projects. If they meet the conditions, they will get some subsidies or tax credits.
But there is no real vision of how it is going to work. The concern is that, while some of the many projects will be profitable, it isn’t clear that it is going to result in an electricity grid that is carbon-free and reliable, providing electricity 24/7 and at an affordable price.
Funding programs in the US and Europe should be further adjusted to enable the increase in nuclear energy capacity required to meet decarbonization goals
In the case of nuclear, there are a number of interesting incentives in the US. The mechanism envisages not only new nuclear power plants but the development of the entire fuel cycle and supply chain for all these new projects.
Secondly, small modular reactors are getting a lot of support. The third important point is the enormous recognition in the US for its existing fleet. The country doesn’t want to lose any more of its capacity, so there are a lot of incentives to maintain it.
Europe is different. There is more of a top-down approach. And each country is different, as everyone ultimately decides on their own energy mix.
Some of the incentives that we saw in European legislation are not that well suited for nuclear projects. The amounts tend to be smaller while timeframes are not very well suited.
SMRs may benefit from that, but the reality is that a lot of large reactors are going to be built, too.
What is the appropriate financing model for large reactors?
They will need different types. For instance, the regulated asset base (RAB) model in the United Kingdom facilitates the creation of public-private partnerships for larger projects. We will see contracts for difference (CfDs), but not many.
There is the concept of longer-term power purchase agreements (PPAs) for incentivizing investments, alongside green bonds. Ontario in Canada is raising funds for nuclear energy through green bonds and they are all oversubscribed.
The European Union should take it into account, as nuclear energy is part of its taxonomy. Some of these frameworks are not there yet and I don’t think nuclear projects would be financed from the EU level.
There is more to be done in the EU beyond the green taxonomy, electricity market design reform and other recent legislation?
Yes, quite a lot. The electricity market design reform doesn’t address some key issues, and the levelized cost of electricity does not show the cost of producing electricity. Currently, weather-dependent energy sources are dispatched preferentially, while baseload is expected to remain available as backup, so there is overcapacity of less reliable sources and the market doesn’t reward availability.
The electricity market design in the EU is supposed to optimize the system by enabling the integration of all sources
We need to look at the entire system’s costs. We need to look at what is needed for all these energy sources to come together and result in a system that is stable, resilient and reliable, with affordable electricity prices for everybody.
The market designs that we are seeing are not incentivizing that. In many cases, the cost of producing electricity is bigger than the market price. That is very distorted. Namely, the price of the last kilowatt-hour, which is usually from natural gas, is incredibly expensive. So, you have windfall profits on one side, but on the other, the market is not incentivizing a reliable, constant baseload.
How troublesome are electricity grid constraints for your sector?
For nuclear energy, we see in countries like China, Turkey and South Korea that the average timeframe is just five or six years. There is a stereotype that nuclear projects take forever, but that’s not always the case. Something also to note for nuclear projects is that they are often built near existing sites and therefore benefit from a ready-built transmission network – which is a benefit when you consider the main constraint on electricity grids is lead time to build new transmission networks.
It is important to know that the United Arab Emirates will go from zero to 25% nuclear power in its electricity system in just 12 years. Bangladesh will reach 10% in less than ten years.
Moreover, nuclear power doesn’t require strong grid flexibility like renewables.
Yes, nuclear is very flexible. Being capable of running 24/7 doesn’t mean that you cannot adjust capacity utilization. Remember, 75% of the capacity in France is nuclear and very capable of going up and down as required.
Furthermore, SMRs are actually designed to ramp up and down very quickly.
In addition to electricity, nuclear units can produce heat for district heating or high-temperature steam for a petrochemical company, or power electrolyzers for hydrogen and ammonia. So now we have a completely different business model as all these energy markets are going to pick up.
Future energy systems will not look anything like today, given the all-out electrification push
We all need to take a step back. Future energy systems will not look anything like today with all the electrification of transportation and prosumers and so on. Demand will increase.
Decision makers need to be bold and pragmatic and look at all the options. We must plan ahead with the design, to see what we need to bring back industry to Europe. And power it.
Are European companies competitive enough technology-wise? With some exceptions, there was a big pause since the last wave of reactor development and in nuclear power plant construction. Germany is out of the market. At the same time, US companies are in an offensive in Europe, from big technology names to SMR developers like NuScale Power to some startups.
Many companies got a lot of support from the US government while it has taken us a bit longer to wake up to reality in Europe. But I think they are getting there, with examples in countries like the United Kingdom, France and the Czech Republic.
Europe will catch up. The European Parliament recently adopted an Own Initiative Report on Small Modular Rectors, confirming the importance of these technologies to Europe’s future energy system, while the Council recognizes nuclear as a strategic net-zero industry.
At the COP28 conference, 24 countries signed the Declaration to Triple Nuclear Energy by 2050. What will it take to achieve the new goal?
After the ministerial declaration, more than 120 companies accepted the challenge by signing the Net Zero Nuclear Industry Pledge. Now, these countries have to put in place policies for nuclear energy to get in a level playing field with all zero-carbon and low-carbon energies.
The next step is to incentivize investment. Investors have to have long-term visibility. Nuclear is not a four- or five-year option, for the term of one government. It takes more time to develop energy infrastructure for the sector.
Decision makers should make sure that investors understand how nuclear assets are investable. Not just a nuclear power plant itself, but the entire supply chain and industrial production with the fuel cycle and all other pieces of the puzzle, including for SMRs.
The licensing process has to be accelerated, but without compromising safety whatsoever
The third thing is to optimize licensing. Governments would need to signal to regulators that nuclear is important and that it should be delivered in an optimal manner. Of course, without cutting corners. We must still ensure the same level of safety and at the same time accelerate the way new reactors are licensed and regulated.
Tripling nuclear means many, many new reactors. We are talking about 40 GW per year for 25 years. It is an enormous amount of power. Approximately half would be large-scale ones and half small reactors.
It’s an enormous feat. Right now, we are building 10 GW per year.
The industry needs to invest now to get ready to deliver all these projects. In industrial infrastructure and construction capabilities but also the workforce. Over the last decade or a decade and a half, the workforce has shrunk, particularly in Western Europe, as there weren’t that many new projects.
Bulgaria and Romania are working on projects for the construction of two large reactors each and Slovenia is considering the possibility to add two large reactors – Croatia would be a co-owner, and Serbia is also a prospective partner. They all already have nuclear power plants, and were quick to understand it is probably unfeasible to reach net zero by 2050 without having more nuclear capacity.
In addition, Turkey is expected to commission its first reactor this year. And all four countries are looking to enable or are already developing SMR projects.