Net zero nuclear: Momentum to action

Above: Existing nuclear power projects have provided plenty of lessons for project management strategies to build on (Photo credit: EDF Energy)

As recently as two years ago, nuclear was akin to a persona non grata at the COP26 in Glasgow, UK. The efforts of Rafael Mariano Grossi, Director General of the International Atomic Energy Agency, to defend the benefits of nuclear energy saw him outline the role of nuclear in decarbonising hard-to-abate sectors and dispel a slew of misconceptions about nuclear energy. Grossi was joined then by Sama Bilbao y Leo´n, Director General of the World Nuclear Association, and chiefs of other international organizations in calling for the greater recognition of nuclear energy – and nuclear science and technology broadly – as a part of the solution to tackle climate change. Now though, at the recent COP28, somehow nuclear seems to have become the guest of honor.

Translating momentum into action

The Net Zero Nuclear initiative, officially launched at COP28, unleashed unprecedented momentum with the goal of tripling global nuclear capacity by 2050. The parallel Net Zero Nuclear pledge mechanisms – Net Zero Nuclear Industry Pledge and Net Zero Declaration – both express commitment by the industry and national governments, respectively, to work toward increasing global nuclear capacity by at least three times. While the commitment of the nuclear industry may be unsurprising, if not expected, the commitment of more than 20 countries is a significant step toward closing the gap between rhetoric and action.

As the nuclear community gears up to meet such demand with sufficient human resources and financing, many reactor designers are expected to continue shifting their focus from initial design to implementation in a series of projects. The industry will likely face headwinds as this transition unfolds. However, given the challenges that competing clean energy technologies are likely to increasingly face as the energy transition unfolds, nuclear is in a strong position. Furthermore, given the selling points of these new reactor technologies – including increased safety, shorter construction time and eased operational burden – adoption of new reactor designs should be fostered.

Beyond a competitive design though, successful deployment of reactor technology – either conventional or based on advanced designs – requires the right project management strategy. Existing nuclear power projects have provided plenty of lessons with respect to the reasons behind cost-overruns and construction delays. Indeed, these are the lessons that persist in the minds of the financial investors analysing whether to contribute capital to a new nuclear power project. Project management strategy should build on these lessons and incorporate development of detailed design, understanding site conditions and other construction challenges, accommodating shifts in the costs of material and labour, developing supply chain partners (whether alone or in partnership with other reactor vendors) and cultivating a skilled workforce. Many of these aspects of a nuclear project will be more challenging in the next several years before a foundation of expertise and industry bandwidth has been established. Early prioritisation of a project management strategy that accounts for these variables provides a more realistic picture of risk and can de-risk deployment overall.

Nonetheless, risk is likely to remain higher for deployment of first-of-a-kind (FOAK) technologies than for deployment of large nuclear reactors built to a reference plant. A customer willing to deploy a FOAK nuclear power plant is likely to expect an increased return on that risk; and the vendor company putting in practice its design for the first time is likely to expect to retain the improvements and lessons learned. The specific allocation will depend on the commercial arrangements between the vendor company and a customer. However, the cost of the end product – electricity – still has to be palatable for consumers.

Making nuclear power attractive

Governments can make this cost more attractive. For the home governments of vendor companies, risks related to developing a novel reactor design and deploying it in a domestic market can be mitigated through financial incentives. In the United States, for example, recently enacted tax credits, loan guarantees and grants enable research and development, enhance project returns and reduce related risks. However, many vendors’ opportunities are likely to reside across national borders. Around the world there are whole regions struggling to keep up with energy demand while curbing their emissions. Incidentally, these regions also tend to bear the most burden from the changing climatic conditions, including extreme weather events. Considerations including grid size, limited human and financial resources and siting restrictions increase the appeal of advanced reactor technologies in such locations.

In the context of international deployment, while the vendor companies are finalising designs and building up the project management capabilities to match their technological acumen, the governments and international community at large can absorb some of the total deployment risk. This could be done through financial support mechanisms similar to those targeted to incentivise deployment in the domestic markets – like loan guarantee programmes or grants; but it can also be done through policies aimed at international financial institutions. Public Private Partnerships between a vendor company and its national government can also be developed to facilitate international deployment of FOAK technology in the international markets.

The recognition – at this scale and level – seen at COP28 that there can be no Net Zero without nuclear, is unprecedented. However, this is not the first time there has been a so-called ‘nuclear renaissance’. While it is important to keep the momentum going through statements and commitments, it is essential to translate these positive developments into a concerted effort. Luckily, we already have plenty of lessons learned, multiple tools and a variety of technological solutions to ensure that this latest ‘nuclear renaissance’ is the only one that will be necessary.

Author: George Borovas, Douglas Dua and Inna Pletukhina, Global Nuclear Practice, Hunton Andrews Kurth LLP