IEA (2020), The Covid-19 crisis is undermining nuclear power’s important role in clean energy transitions, IEA, Paris https://www.iea.org/commentaries/the-covid-19-crisis-is-undermining-nuclear-power-s-important-role-in-clean-energy-transitions
The Covid-19 crisis has increased many people’s reliance on the internet for working, studying, shopping and other parts of day-to-day life. It also reinforced the importance of modern medical equipment for saving lives. Underpinning all of that is electricity, whose crucial role for modern societies and economies continues to grow.
Today, countries emerging from lockdowns face the task of reviving their economies without losing sight of long-term challenges such as climate change and energy security. In order to achieve a sustainable recovery from today’s crisis that makes energy systems cleaner and more resilient, it is important to pay attention to an often underappreciated energy source: nuclear power.
Nuclear power is the largest low-carbon source of electricity in both Europe and North America – and also will be in Japan, assuming the restart of reactors in the country goes ahead as planned. Nuclear plays a major role in ensuring secure supplies of energy in many economies. Some countries have chosen to refrain from using nuclear power, which is their sovereign right. But even in countries where the overall policy stance is favourable to nuclear power, the risk is growing that its role in energy systems will be undermined. And the Covid-19 crisis threatens to exacerbate the situation.
From an operational point of view, nuclear plants performed well during lockdowns. The main concerns were the health of personnel and the maintenance of social distancing in a highly regulated operating environment. So far, no nuclear plant has had to limit its operations for these reasons. Overall, electricity generation from nuclear plants has declined slightly in response to lower demand, with their output reduced during periods of high production from renewable power sources. In this way, nuclear power emerged as one of the key sources of flexibility for electricity systems, maintaining large and reliable supplies of low-carbon power.
Despite these strengths, the prospects for nuclear power have worsened and will require focused policy attention in countries that support its continuing role. A year ago, the IEA published a special report, Nuclear Power in a Clean Energy System, which warned of the risk of nuclear power fading out of energy systems in advanced economies unless policy makers acted to extend the lifetimes of existing plants and spur the construction of new ones. Our report estimated that without investment to extend the life of the existing fleet, as much as two-thirds of nuclear power capacity in advanced economies could be gone by 2040.
We estimated that such a loss would increase the global cost of transitioning to a sustainable energy system by USD 1.6 trillion. These increased costs would take the form of greater spending on wind and solar PV installations, additional transmission infrastructure, and more flexibility resources that would be needed to ensure the smooth operation of systems with very high shares of variable renewables. Social acceptance for these additional electricity generation facilities and transmission lines would also need to be secured.
Nuclear power and other dispatchable forms of electricity generation, such as hydropower and natural gas plants, play a major role in integrating variable renewables and maintaining grid stability. The continuing operation of existing nuclear plants does not require the development of any new transmission lines. The fade-out of nuclear power in advanced economies would not make clean energy transitions impossible, but it raises the financial costs and energy security challenges of achieving them.
Even before the start of the Covid-19 crisis, events over the past year had unfortunately been following the scenario of underinvestment in nuclear power that we outlined in our special report.
Firstly, permanent closures have been moving ahead accompanied by little new construction. Over the past year, 13 nuclear power plants in advanced economies have closed permanently, and construction has begun on only one new facility. Another plant will close on 30 June. Countries with important nuclear power fleets, including Spain and Sweden, have made decisions that will result in shutdowns well short of the 60-year lifetime that is operationally safe and secure for the majority of reactors. The low-carbon nature of nuclear power still goes unrecognised in most countries’ policies on clean electricity and frameworks for clean energy financing. Plans for new nuclear projects continue to be delayed. In the space of just over a year, these developments have led to a loss of future nuclear power output that is equivalent to the electricity generated each year by all the wind turbines in the United States.
Secondly, revenues from supplying electricity have been low, exceptionally so since the Covid-19 crisis began. This has undermined the case for investing in lifetime extensions for existing nuclear plants or the construction of new ones. Record low natural gas prices combined with low demand drove electricity prices down sharply, often into negative territory.
Thirdly, the physical operation of plants has also been constrained when nuclear capacity was cycled down to create room for renewable power. This provided valuable flexibility for power systems and reinforced nuclear power’s role in electricity security. However, this service of providing system flexibility is not appropriately compensated in most electricity markets even though it leads to higher operating and maintenance costs for the companies operating the nuclear plants.
Last but not least, most nuclear power plants are owned by utilities that also suffered revenue losses from their conventional plants and from their network businesses. These losses have increased the financial strains on the utilities, leading them to reduce investments. Global investment in the electricity sector is set to fall by 10% in 2020, according to the IEA’s recent World Energy Investment report. This decline deepens the downward trend in investment in the sector over recent years.
Modular, scalable technologies like wind and solar PV have been successful in attracting new investors beyond traditional energy utilities. But only a utility can realistically undertake a lifetime extension project for a nuclear plant. As a result, the financial weakness of the electricity sector is likely to shift investment away from nuclear power. There are indications that even utilities that have already made the necessary investments in safety measures and secured approvals for lifetime extensions could shut down their nuclear plants prematurely for financial reasons. A mothballed gas turbine can be restarted fairly easily, but the shutdown of a nuclear plant is usually final. If this trend takes hold, it will lead to a loss of relatively affordable low-carbon power generation. This in turn will have significant consequences for global efforts to achieve long-term sustainable energy and climate goals, requiring even more ambitious efforts to deploy renewables and upgrade transmission infrastructure.
With the heightened risk of nuclear power fading out of many energy systems, are renewables ready to fill the gap? Global deployment of wind and solar power was robust before the Covid-19 and has remained resilient since the start of the crisis. But overall additions of renewable capacity have remained in the range of 1% to 1.5% of global electricity demand annually, less than half the level needed in a sustainable development trajectory. If wind and solar are meant to squeeze out fossil fuels and replace nuclear power at the same time, they are currently far off track from achieving that goal.
Countries that aim to maintain nuclear power as part of their energy mix should make their immediate focus the need to avoid losing nuclear capacity that can continue to operate safely. In the context of ultra-low electricity prices, this could mean allocating funding from stimulus packages to nuclear plant lifetime extensions and upgrades that otherwise might be cancelled. While nuclear power is a capital intensive technology, the plants and their supply chains employ a significant amount of people. A nuclear power plant is usually the largest and most stable employer in the city where it is situated. In the longer term, countries committed to keeping their nuclear power industries alive should adapt regulations and market designs to appropriately value both the low-carbon electricity production and the dispatchability of nuclear plants in order to maintain their economic viability.
Based on the scientific consensus on limiting the effects of climate change, energy systems around the world will need to be largely decarbonised by the middle of this century. For nuclear power to play a role in this, new projects will eventually be needed to replace aging plants. The project lead times for building new plants using the current generation of nuclear technologies are too long for them to be a suitable focus for economic stimulus programs.
Nevertheless, it appears that after some painful lessons with “first of a kind” designs, experience is accumulating and project management performance is improving. There is no doubt that any new nuclear project will require a proactive support from public finance in the form of long-term contracts, capital guarantees and other measures. One bright spot for the future of nuclear power is the interest from private venture capital funds in investing in new nuclear technologies. These are still in the experimental and pilot-project stages, but they could potentially bypass some of the project management challenges of large conventional projects while offering safety and waste management advantages. There is a role for public support in bridging the difficult gap between experimental projects and early deployment.
The Covid-19 pandemic has highlighted the ever-growing importance of clean and secure electricity supplies. Nuclear power plants passed the test well, and in several countries provided the backbone for electricity systems operating under unprecedented conditions. However, there is a risk that with aging capacity and financial strains, their contribution might gradually fade away, increasing energy security risks and making clean energy transitions even more difficult. Countries that aim to maintain a diversified portfolio of clean energy technologies – such as renewables, energy efficiency, hydrogen, batteries and nuclear – need to translate this strategic decision into effective policy measures that generate investment in these technologies.