Even as climate change spurs interest in low-carbon energy sources, high costs and stubborn construction delays are impeding global investment in nuclear power, an expert told Congress this month.
Armond Cohen, executive director of the nonprofit Clean Air Task Force, told the House Subcommittee on Energy, Climate and Grid Security that the federal government needs to collaborate with the nuclear industry and investment community to grow atomic energy. In two congressional hearings related to nuclear energy, lawmakers on both sides of the aisle expressed support for expanding the domestic industry.
“As many of you know, I believe that safe nuclear power plays an essential role in our efforts to address the greatest challenge of our time, the climate crisis,” the Democratic chairman of the Senate Environment Committee, Sen. Tom Carper of Delaware, said at that panel’s hearing.
With 93 reactors across 28 states, nuclear power plants currently generate half of the non-fossil-fuel power in the U.S., or a little over 19 percent of the nation’s total electricity. The newest plant, Plant Vogtle Unit 3 in Georgia, connected to the grid just this month.
But growth in the industry has remained stagnant for decades, according to a recent memorandum released by the House committee. Only two new reactors have been built since 2009, even though 14 licenses have been issued for construction. Growth has been stymied not only by up-front construction costs but by flagging electricity demand and competition from other energy sources. A divide remains between those championing the low-carbon benefits of nuclear energy and investors who feel that the financial risks are too great.
A report issued last month by the Department of Energy echoed some of those concerns, declaring that the nuclear industry was at a “commercial stalemate.” Many of the investments needed for deployment have been deemed too risky to pursue because of potential cost overruns and the possibility that construction will ultimately be abandoned, it noted. The industry has also traditionally struggled to gain traction among investors who factor environmentally and socially responsible goals into their decisions.
Yet, as the bipartisan interest in Congress suggests, the winds could be shifting. With demand for climate action heating up, the industry is mustering renewed support as a low-emissions alternative to fossil fuels.
“The last two years have done more to change nuclear prospects than about the 15 or 20 years before,” said David Hess, a policy analyst at the World Nuclear Association who focuses on sustainability financing. Speaking in a global context, he referred to both the growth of the climate advocacy movement and recent demand spurred by the energy crisis. “There are a whole bunch of climate advocates who advocate for nuclear energy now,” he said.
At the House subcommittee hearing on April 18, Cohen was frank about the state of the industry. “Nuclear energy has stagnated globally,’’ he noted. Cost overruns and delays in recent custom-built large light-water projects “have rightly led critics to question whether nuclear energy is a viable pathway.”
But according to the Department of Energy’s report, the nation’s domestic nuclear capacity has the potential to scale from a current 100 gigawatts to 300 gigawatts by 2050 if advanced technologies are deployed. This would comprise a substantial chunk of the 550 to 770 gigawatts of additional “clean” power capacity needed to achieve net zero carbon emissions by 2050, the department said.
Deploying those advanced technologies, from water-cooled reactors to microreactors, would require massive investment. Jan Haverkamp, a Dutch-based expert on nuclear policy for Greenpeace, said he doubted that a buildout at this scale would be possible.
“History has shown us that it never works,” Havercamp said. In his experience, he explained, such projects are often scuttled when they overshoot their projected costs and timelines.
Hess agreed that it would require an unrealistic leap of faith for investors. “New nuclear power plants are what we call megaprojects,” he said. “The amount of money required up front is very high.” Recent nuclear construction projects in the U.S. have had overnight capital costs of over $10,000 per kilowatt, according to the Department of Energy’s report. (In industry parlance, “overnight” is an estimate of construction costs exclusive of inflation and the interest to be paid as a project slowly progresses.)
Nonetheless, with a growing sense of urgency to address climate change, nuclear power could have an edge, Hess added. “Nuclear isn’t just low carbon, it’s really low carbon.”
The life cycle emissions associated with nuclear energy are estimated at 5.5 grams of carbon dioxide per kilowatt-hour of electricity generated. This sits just below the emissions figure for hydropower or wind power, and well below that for solar energy generated by conventional solar panels. The figure takes into account the emissions associated with mining and transporting uranium, constructing power plants and storing nuclear waste; the actual generation of nuclear power by the plants does not produce emissions.
In his testimony, Cohen argued for the importance of nuclear power as part of any sustainable clean energy mix. While the potential of wind and solar energy is great, the daily and seasonal output of each resource is variable, he noted: There may be months where production is as low as half of what either generates at peak periods.
“Modeling for an energy future typically combines wind and solar with a baseload of something else that is zero-carbon,” Cohen said—namely nuclear. But providing sufficient nuclear infrastructure to provide that baseload will require significant investment. According to the Department of Energy, building out domestic capacity to 300 gigawatts by 2050 would require more than $700 billion in investment from private and public sources.
Globally, investors are feeling the pressure to act more sustainably as consumers become increasingly concerned about reducing emissions. But whether the pressure will be sufficient to overcome the risks associated with nuclear ventures has yet to be seen.
Nuclear Power as a ‘Sin Stock’ for Investors
Hess pointed out that ESG investing, which employs criteria measuring environmental, social and governance factors, has often sidelined nuclear power. “For some investors, it has been put onto a ‘sin stock’ list” for ethical reasons, he said, along with products like firearms and tobacco.
Todd Cort, a senior lecturer at the Yale School of Management, emphasized that ESG is simply data and criteria: “It doesn’t dictate where and how the investors use it.”
According to Cort, the vast majority of investors are “ESG integrated investors,” meaning that they use ESG data to maximize financial performance. In considering investment in nuclear energy, a main concern is whether it is likely to be a growth industry. “These investors aren’t hugely bullish on nuclear energy right now,” he said. “But that’s not because of climate issues—there’s just not a lot of activity in the sector.”
“Impact investors,” on the other hand, prioritize weighing environmental or social factors with the intention of generating positive, measurable change in the world. Such investors may well see nuclear energy as a necessary part of the clean energy transition and determine that any associated risks are worth accepting in order to avoid a climate catastrophe, Cort said.
But this is a small group. “There aren’t many investors that use morality to drive their decision-making,” he observed.
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Hess contends that many players in the financial community fail to understand the opportunities offered by investing in nuclear power. “I’m Australian—I’m anti-nuclear by default,” he joked, referring to the country’s long-standing anti-nuclear movement. “But I came around by understanding its impacts and benefits better.”
Nuclear industry advocates cast the climate change discussion as an opportunity to educate investors. The debate is shifting from whether nuclear energy is inherently good or bad to whether it can be a cost-effective component of the clean energy transition, they say.
“In the last three or four years I’ve seen a lot of investor reports come out which have made the environmental case for including nuclear in ESG frameworks,” Hess said, citing Barclays and Morgan Stanley’ reports as examples.
Benton Arnett, director of markets and policy at the Nuclear Energy Institute, says he sees a shift toward nuclear energy investments materializing. “We did an analysis of the deal space within nuclear, and we found a 400 percent increase in nuclear financial transactions over the last five years,” he said.
But that is a small subset. For the vast majority of investors, interest will only grow if they view the sector as profitable. “At the end of the day, the goal of the financial industry is to make money,” Arnett said.
Drumming up interest will require support from the government, witnesses told the House subcommittee. All four experts who testified mentioned financial aid and streamlining the licensing process as important priorities. “The need for more domestic suppliers of nuclear fuel cannot be achieved without some federal direction,” Cohen said. “We need a radical rethink of how we conceive, build, regulate and finance this technology.”
Asked for examples of federal funding needs, witnesses listed options like cost-share arrangements for the first few major nuclear projects and federal insurance against market risks.
While it is unclear whether those suggestions will receive legislative support, there does appear to be growing bipartisan interest in supporting the sector.
Arnett cited support at the state level, like a decision to lift a ban on construction of nuclear power plants in West Virginia last year and recent moves in Illinois to do the same. “We’ve also seen Virginia and Tennessee come out with aggressive programs to try to attract new nuclear builds within their states and support the supply chain buildout,” he said.
At a federal level, last year’s Inflation Reduction Act included a “zero-emission nuclear power production tax credit” intended to support existing nuclear generators and delay the potential retirements of others. It also provides many technology-neutral credits, which focus on energy production with a low-carbon footprint rather than specific technologies and could therefore improve access to financing for advanced nuclear projects.
While those moves reflect some progress for the industry, witnesses told House lawmakers that more work is needed to ensure that investments will yield returns. That will be the key to enticing investors, Cort said.
“There might be some resistance by investors right now towards nuclear,” he acknowledged. “But once it’s profitable, I bet a lot of that resistance will crumble.”