Nuclear Power and Secure
Energy Transitions
From today’s challenges to tomorrow’s
clean energy systems

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Nuclear Power and Secure Energy Transitions

Abstract

Abstract
Nuclear Power and Secure Energy Transitions: From Today’s Challenges toTomorrow’s Clean Energy Systems is a new report by the International Energy
Agency that looks at how nuclear energy could help address two major crises –energy and climate – facing the world today. Russia’s invasion of Ukraine and thedisruptions in global energy supplies that it has fuelled have made governments
rethink their energy security strategies, putting a stronger focus on developing morediverse and domestically based supplies. For multiple governments, nuclear energy
is among the options for achieving this. At the same time, many governments have inrecent years stepped up their ambitions and commitments to reach net zero
emissions. Nuclear Power and Secure Energy Transitions expands upon the IEA’s
landmark 2021 report, Net Zero by 2050: A Roadmap for the Global Energy Sector. It
does so by exploring in depth nuclear power’s potential role as a source of low
emissions electricity that is available on demand to complement the leading role ofrenewables such as wind and solar in the transition to electricity systems with net zero
emissions.

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IEA. All rights reserved.

In this context, the report examines the difficulties facing nuclear investment,
particularly in advanced economies, in the areas of cost, performance, safety andwaste management. It considers the additional challenge of meeting net zero targets
with less nuclear power than envisioned in the IEA Net Zero Roadmap, as well as
what kind of cost targets could enable nuclear power to play a larger role in energy
transitions. For countries where nuclear power is considered an acceptable part of
the future energy mix, the new report identifies the potential policy, regulatory andmarket changes that could be implemented in order to create new investment
opportunities. It also looks at the role of new technologies, particularly small modular
reactors, and their potential development and deployment.

Nuclear Power and Secure Energy Transitions

Acknowledgements

Acknowledgements, contributors
and credits
The study was designed and directed by Keisuke Sadamori, Director of Energy
Markets and Security.
The main authors of the study are Peter Fraser, Brent Wanner, Keith Everhart andAntoine Herzog. Luis Lopez, Zoe Hungerford, Max Schoenfisch and Yunyou Chen
were the other principal contributors to this report.
Valuable comments and feedback were provided by senior management andnumerous other colleagues at the IEA and, in particular, Laura Cozzi, Tim Gould,
Timur Gül, Amos Bromhead, Alessandro Blasi, Alejandro Hernandez, Fengquan An,
Brian Motherway, Hiroyasu Sakaguchi, Rebecca Gaghen and Nick Johnstone.
Thanks go to the IEA’s Communications and Digital Office for their help in producing
the final report and website materials, particularly to Jad Mouawad, Therese Walsh,
Jethro Mullen, Astrid Dumond and Allison Leacu.
For their editing support, we thank Trevor Morgan (principal) and Adam Majoe (copyeditor).
Additionally, the study team benefitted from meetings with specialists, including thosefrom the OECD Nuclear Energy Agency, and particularly Michel Berthélemy, whoprovided insights and helpful information. We also held useful discussions with Wei
Huang, Henri Paillère and colleagues at the International Atomic Energy Agency,
Sama Bilbao y León and colleagues at the World Nuclear Association, and Kirsty
Gogan and Eric Ingersoll of Terrapraxis.
Special thanks go to those who were interviewed on the topic of small modular
reactors, including Chris Levesque (Terrapower), Renaud Crassous (Nuward),
Dominique Minière (Ontario Power Generation), Cosmin Ghita (Nuclearelectrica),
John Parsons (Massachusetts Institute of Technology), Rumina Velshi (Canadian
Nuclear Safety Commission), Declan Burke (Department of Business, Energy andIndustrial Strategy, United Kingdom), Bruce Smith (Emirates Water and Electricity
Company), Sheng Zhou (Tsinghua University), Yasuharu Kimura and Ikuo Hoshino(JGC), and Alastair Evans (Rolls-Royce).

Daniel Balog

Ministry of Foreign Affairs, Hungary

Marco Baroni

Independent consultant

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IEA. All rights reserved.

We would also like to thank the external reviewers, including:Nuclear Power and Secure Energy Transitions

Acknowledgements

Maximilian Barth

German Corporation for International Cooperation

Jean-Paul Bouttes

Independent consultant

Diane Cameron

Nuclear Energy Agency

Ewa Chmura-Golonka

Ministry of Climate and Environment, Poland

Gwangjun Choi

Ministry of Foreign Affairs, Republic of Korea

Russell Conklin

United States Department of Energy

Renaud Crassous

Électricité de France

François Dassa

Électricité de France

Jac Goodman

United States Department of Energy

Hiroyuki Goto

Nuclear Energy Agency

Volker Holubetz

Federal Ministry for Climate Action, Environment,
Energy, Mobility, Innovation and Technology, Austria

Esa Hyvarinen

FortumJan Horst Keppler

Nuclear Energy Agency

Ken Koyama

Institute of Energy Economics, Japan

King Lee

World Nuclear Association

François Lévêque

École Nationale Supérieure des Mines de Paris

William D. Magwood IV

Nuclear Energy Agency

Kris McCoy

Ministry of Industry, Australia

Manabu Nabashima

Ministry of Foreign Affairs, Japan

Ritika Nandekeolyar

Global Affairs Canada

David Newbery

University of Cambridge, United Kingdom

Tomasz Nowacki

Ministry of Climate and Environment, Poland

Reelika Runnel

Ministry of the Environment, EstoniaBarış Sanli

Ministry of Energy and Natural Resources, Türkiye

Antonia Vaya Soler

Nuclear Energy Agency

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IEA. All rights reserved.

Juan Ignacio del Castillo Campos Ministry of Industry, Trade and Tourism,
SpainNuclear Power and Secure Energy Transitions

Acknowledgements

Markus Wrake

Energiforsk

Sheng Zhou

Tsinghua University, China

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IEA. All rights reserved.

The individuals and organisations that contributed to this study are not responsible forany opinions or judgments it contains. All errors and omissions are solely the
responsibility of the IEA.

Nuclear Power and Secure Energy Transitions

Executive summary

Executive Summary
A new dawn for nuclear energy?
Nuclear energy can help make the energy sector's journey away from unabatedfossil fuels faster and more secure. Amid today’s global energy crisis, reducing
reliance on imported fossil fuels has become the top energy security priority. No lessimportant is the climate crisis: reaching net zero emissions of greenhouse gases by
mid-century requires a rapid and complete decarbonisation of electricity generationand heat production. Nuclear energy, with its 413 gigawatts (GW) of capacity
operating in 32 countries, contributes to both goals by avoiding 1.5 gigatonnes (Gt) ofglobal emissions and 180 billion cubic metres (bcm) of global gas demand a year.
While wind and solar PV are expected to lead the push to replace fossil fuels, theyneed to be complemented by dispatchable resources. As today’s second largest
source of low emissions power after hydropower, and with its dispatchability andgrowth potential, nuclear – in countries where it is accepted – can help ensure secure,diverse low emissions electricity systems.
Advanced economies have lost market leadership. Although advanced
economies have nearly 70% of global nuclear capacity, investment has stalled andthe latest projects have run far over budget and behind schedule. As a result, theproject pipelines and preferred designs have shifted. Of the 31 reactors that began
construction since the beginning of 2017, all but 4 are of Russian or Chinese design.
Restrictions on nuclear power remain in certain countries, driven by concerns
about safety and waste. The 2011 accident at the Fukushima-Daiichi plant in Japanfollowing a major earthquake undermined public trust in nuclear power, underscoring
the need for robust, independent regulatory oversight. Accident risks are one of themain factors behind bans on nuclear power or policies to phase it out. While there is
progress on disposing of high-level nuclear waste, with three countries having
approved sites, gaining public and political acceptance has been challenging.

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The policy landscape is changing, opening up opportunities for a nuclear
comeback. More than 70 countries, covering three-quarters of energy-related
greenhouse gas emissions, have pledged to cut their emissions to net zero. Whilerenewables would provide the largest share of low emissions electricity and many
countries either do not foresee the need or do not want a role for nuclear power, agrowing number of countries have also announced plans to invest in nuclear. The
United Kingdom, France, China, Poland and India have recently announced energy
strategies that include substantial roles for nuclear power. The United States isinvesting in advanced reactor designs.

Nuclear Power and Secure Energy Transitions

Executive summary

Energy security concerns and the recent surge in energy prices, notably in the wakeof Russia’s invasion of Ukraine, have highlighted the value of a diverse mix of nonfossil and domestic energy sources. Belgium and Korea have recently scaled backplans to phase out existing nuclear plants. The UK Energy Security Strategy includes
plans for eight new large reactors. Faster restarts of Japanese nuclear reactors thathave received safety approvals could free up liquefied natural gas (LNG) cargoes
desperately needed in Europe or other markets in Asia.
In the decade following the 1973 oil shock, construction started on almost 170 GW ofnuclear power plants. These plants still represent 40% of today’s nuclear capacity.
Nuclear additions in the last decade reached only 56 GW. With policy support andtight cost controls, today’s energy crisis could lead to a similar revival for nuclear
energy.

Achieving net zero globally will be harder without nuclear
As an established large-scale low emissions energy source, nuclear is wellplaced to help decarbonise electricity supply. In the IEA’s Net Zero Emissions by
2050 Scenario (NZE), energy sector emissions fall by about 40% from 2020 to 2030,
and then decline to zero on a net basis by 2050. While renewable sources dominate
and rise to nearly 90% of electricity supply in the NZE, nuclear energy plays asignificant role. This narrow but achievable pathway requires rigorous and immediate
policy action by governments around the world to reshape energy systems on many
fronts.
Extending nuclear plants’ lifetimes is an indispensable part of a cost-effective
path to net zero by 2050. About 260 GW, or 63%, of today’s nuclear plants are over
30 years old and nearing the end of their initial operating licences. Despite moves in
the past three years to extend the lifetimes of plants representing about 10% of theworldwide fleet, the nuclear fleet operating in advanced economies could shrink by
one-third by 2030. In the NZE, the lives of over half of these plants are extended,
cutting the need for other low emissions options by almost 200 GW. The capital costfor most extensions is about USD 500 to USD 1 100 per kilowatt (kW) in 2030, yielding
a levelised cost of electricity generally well below USD 40 per megawatt-hour (MWh),making them competitive even with solar and wind in most regions.

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Nuclear power plays a significant role in a secure global pathway to net zero.
Nuclear power doubles from 413 GW in early 2022 to 812 GW in 2050 in the NZE.
Annual nuclear capacity additions reach 27 GW per year in the 2030s, higher thanany decade before. Even so, the global share of nuclear in total generation falls
slightly to 8%. Emerging and developing economies account for more than 90% of
global growth, with China set to become the leading nuclear power producer before
2030. Advanced economies collectively see a 10% increase in nuclear, as retirements
are offset by new plants, mainly in the United States, France, the United Kingdom andNuclear Power and Secure Energy Transitions

Executive summary

Canada. Annual global investment in nuclear power rises from USD 30 billion during
the 2010s to over USD 100 billion by 2030 and remains above USD 80 billion to 2050.
Less nuclear power would make net zero ambitions harder and more expensive.
The Low Nuclear Case variant of the NZE considers the impact of failing to accelerate
nuclear construction and extend lifetimes. In this case, nuclear’s share of total
generation declines from 10% in 2020 to 3% in 2050. Solar and wind would need tofill the gap, pushing the frontiers of integrating high shares of variable renewables.
More energy storage and fossil fuel plants fitted with carbon capture, utilisation andstorage (CCUS) would be needed. As a result, the NZE’s Low Nuclear Case would
require USD 500 billion more investment and raise consumer electricity bills on
average by USD 20 billion a year to 2050.

Nuclear has to up its game in order to play its part
The industry has to deliver projects on time and on budget to fulfil its role. Thismeans completing nuclear projects in advanced economies at around USD 5 000/kW
by 2030, compared with the reported capital costs of around USD 9 000/kW(excluding financing costs) for first-of-a kind projects. There are some provenmethods to reduce costs including finalising designs before starting construction,
sticking with the same design for subsequent units, and building multiple units at thesame site. Stable regulatory frameworks throughout construction would also help
avoid delays.

Using electricity from nuclear to produce hydrogen and heat presents newopportunities. The rapid expansion of low emissions hydrogen is a key pillar of the
NZE, with related investment rising from near zero today to USD 80 billion per year to2040. Under the NZE’s cost projections, hydrogen production via natural gas with
CCUS or via electrolysis using renewables are the cheapest options. For nuclear tocompete with these alternatives, investment costs would need to decrease to
USD 1 000-2 000/kW. The economics would be more favourable if the nuclear reactor
is co-located with a hydrogen user, avoiding transportation costs. The NZE estimates

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An even larger role for nuclear power will require greater declines inconstruction costs. Hydropower, bioenergy and fossil fuel plants equipped with
CCUS are the main alternative dispatchable low emissions sources to nuclear. Eachone also faces challenges to expand. Hydropower sites and sustainable bioenergy
supply are limited, while there are economic, political and technical obstacles toscaling up CCUS. Where there is potential to expand these alternatives and CCUS iscommercially available, the construction costs of nuclear power would need to fall to
USD 2 000-3 000/kW (in 2020 dollars) to remain competitive. Depending on financing
costs, this would yield a levelised cost of electricity for nuclear power of
USD 40-80/MWh, including decommissioning and waste disposal. If new projects
were able to achieve these costs in more markets, an even larger role for nuclear
would be available.

Nuclear Power and Secure Energy Transitions

Executive summary

surplus nuclear electricity could be used to produce an estimated 20 million tonnes ofhydrogen in 2050. There are also possibilities to co-generate heat from nuclear plants
to replace district heating and other high-temperature uses, though the potential scaleof this market is limited and construction costs would need to fall to
USD 2 000-3 000/kW to make it competitive.

Markets need to account for added value of all services
Nuclear and other dispatchable power sources complement renewables by
providing critical services to electricity systems. The predominance of wind andsolar in the power mix and the end of unabated fossil generation must becomplemented by a diverse mix of dispatchable generation to provide stability, shortterm flexibility and adequate capacity during peak demand periods. For example, inan analysis of a carbon neutral power system in China, nuclear would provide only
10% of total electricity produced in 2060, but supply almost half the required inertia,
a key component of system flexibility.
Wholesale markets should price system services to reflect their value. The needfor system services such as flexibility, adequacy and stability increases sharply as theshare of variable renewables increases. Electricity markets should be designed to
fully value these services, not just electricity production. In addition, robust carbon
pricing regimes would encourage a more decarbonised energy system at lowest cost.
Government involvement will be needed to finance new investment. Nuclear
projects have long relied on state ownership or a regulated monopoly structure toguarantee revenues and reduce risk to investors because there is rarely sufficientprivate sector finance for such capital-intensive and long-lived assets, particularly
those exposed to significant policy risk. Innovative financing mechanisms, such as
the recently approved Regulated Asset Base (RAB) model by the United Kingdom,
can help to secure adequate financing while assigning risks to those best situated toaccept it.

Momentum behind small modular reactors is building

Being smaller can help SMRs fit in. Lower capital costs, inherent safety and waste
management attributes and reduced project risks may improve social acceptance andattract private investment for research and development, demonstration andPage | 10

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The challenge of net zero has stimulated a burst of development in small
modular reactor technologies. In the NZE, half of the emissions reductions by 2050
come from technologies, including small modular reactors, that are not yet
commercially viable. SMRs, generally defined as advanced nuclear reactors with acapacity of less than 300 MW, have strong political and institutional support, with
substantial grants in the United States, and increased support in Canada, the United
Kingdom and France. This support makes it possible to attract private investors,
bringing new players and new supply chains to the nuclear industry.

Nuclear Power and Secure Energy Transitions

Executive summary

development. SMRs could also reuse the sites of retired fossil fuel power plants,
taking advantage of existing transmission, cooling water and skilled workforces. Other
opportunities include co-location with industry to provide electricity, heat andhydrogen.
Policy and regulatory reforms are needed to stimulate investment. The
successful long-term deployment of SMRs hinges on strong support from policy
makers and regulators to leverage private sector investment. Adapting andstreamlining licensing and regulatory frameworks to take SMR attributes into accountis key. International harmonisation of licensing and definitions are essential todeveloping a global market. Securing private financing will require a robust andtechnology-neutral policy framework, including in the area of taxonomies andenvironmental, social and governance that will have a growing influence on financial
flows.

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Decisions are needed now for SMRs to play a meaningful part in energy
transitions. While only a small number of units are likely to start operating thisdecade, with recent momentum SMRs could start playing a significant role in energy
transitions in the 2030s, provided that regulatory and investment decisions are madenow, and commercial viability is demonstrated. This is true both for small evolutionary
reactors that could achieve economic competitiveness more readily, but also for theadvanced reactor models.

Nuclear Power and Secure Energy Transitions

Executive summary

Policy Recommendations•

Extend plant lifetimes. Authorise lifetime extensions of existing nuclear power
plants so they can continue to operate for as long as safely possible.

•

Make electricity markets value dispatchable low emissions capacity. Design
electricity markets to ensure nuclear power plants are compensated in acompetitive and non-discriminatory manner for the avoidance of emissions and theservices they provide to maintain electricity security, including capacity availability
and frequency control.

•

Create financing frameworks to support new reactors. Set up risk management
and financing frameworks to mobilise capital for new plants at an acceptable cost
and with fair sharing of risks between investors and consumers.

•

Promote efficient and effective safety regulation. Ensure that safety regulators
have the resources and skills to undertake timely reviews of new projects anddesigns, develop harmonised safety criteria for new designs, and engage withpotential developers and the public to ensure that licensing requirements are clearlycommunicated.

•

Implement solutions for nuclear waste disposal. Involve citizens in prioritising
approval and construction of high-level waste disposal facilities in countries that do
not yet have them.

•

Accelerate the development and deployment of small modular reactors.
Identify opportunities where SMRs could be a cost-effective low emissions sourceof electricity, heat and hydrogen. Support investment in demonstration projects andin developing supply chains.

•

Re-evaluate plans according to performance. Make long-term support
contingent on the industry delivering safe projects on time and on budget.

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The following recommendations are directed at policy makers in countries that see afuture for nuclear energy. The IEA makes no recommendations to countries that havechosen not to make use of nuclear power and fully respects their choice.

Nuclear Power and Secure Energy Transitions

Introduction

Introduction
Nuclear energy could play an important role in ensuring that the energy sector’s
journey to net zero emissions is rapid and secure. While wind and solar PV are
expected to lead the decarbonisation of the global power mix, flexible anddispatchable 1 resources will be required to complement these supplies. There are
economic and technical challenges to be overcome, and not all countries will pursue
nuclear energy as an option, but rising climate ambitions in many countries andtoday’s energy crisis offer reasons to take a fresh look at what nuclear energy candeliver.
This report assesses the contribution that nuclear can make and the conditions thatwould need to be met for nuclear power to realise its potential in a secure and costeffective way. It builds on the analysis in our 2019 report, Nuclear Power in a Clean
Energy System, which focused on the role of nuclear power in developed economies
and the prospects for lifetime extensions of existing plants – a low cost option tosustain clean electricity supply today.
Since that last report, the policy landscape has shifted in ways that favour nuclear
energy. Many countries are recognising that a broad suite of low-carbon technology
options will be required to meet ambitious climate policy goals. Nuclear energy also
brings dividends for energy security, an important consideration at a time ofheightened attention to this issue in the wake of Russia’s invasion of Ukraine.

1What is the potential for growth in nuclear energy in those countries that decideto pursue it as part of their transition to a clean energy system?

What is the economic value of nuclear power and what elements of market design
are needed for this to be realised?

What are the cost metrics that nuclear power needs to hit to achieve this potential?

What other financial measures would be needed to support nuclear expansion?

How can small modular reactors (SMRs) complement existing technologies andwhat measures will ensure that they are safe, economic and deployed in a timely
manner for electricity generation and for the supply of heat and hydrogen?

Electricity that can be produced and dispatched to the system as and when required.

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This report addresses a number of questions, including:Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

1. Nuclear power in the world today
Nuclear remains a leading source of clean
electricity
Nuclear power made up about 10% of global electricity generation in 2020. This sharehas declined from 18% in the late 1990s, but nuclear is still the second-largest sourceof low emissions electricity (i.e. non-fossil-based) after hydroelectricity and the leading
source in advanced economies. 2 In 2020, nuclear electricity still exceeded the total
combined contribution of wind and solar PV generation worldwide, despite massive
growth in those renewable sources. At the end of 2021, there were 439 nuclear powerreactors in operation in 32 countries around the world, with a combined capacity of
413 GW. Around 270 GW of that capacity was in advanced economies.

TWh

Low emissions electricity generation by source worldwide, 2020
5 000
4 000
3 000
2 000
1 000
0

Hydro

NuclearWind

Solar PV

Bioenergy Geothermal

CSP

MarineCoal with
CCUS

IEA. All rights reserved.
Note: CSP = concentrating solar power; CCUS = carbon capture, utilisation and storage.
Source: IEA (2021), World Energy Outlook 2021.

Australia, Canada, Chile, the 27 members of the European Union, Iceland, Israel, Japan, Korea, Mexico, New Zealand, Norway,
Switzerland, Turkey, the United Kingdom and the United States.

2

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Nuclear power has made a major contribution to slowing the rise in global emissionsof CO2 since the 1970s. Around 66 Gt of CO2 was avoided globally between 1971 andNuclear Power and Secure Energy Transitions

Nuclear power in the world today

2020. 3 Without the contribution of nuclear power, total emissions from electricity
generation would have been almost 20% higher and total energy-related emissions
6% higher over that period. Advanced economies accounted for over 85% of theseavoided emissions: 20 Gt, or over 40% of total emissions from electricity generation,in the European Union and 24 Gt, or 25%, in the United States. Without nuclear
power, emissions from electricity generation would have been around one-quarter
higher in Japan and about 50% higher in Korea and Canada.

Gt

Cumulative CO2 emissions avoided by nuclear power by country/region
70

50Emerging market anddeveloping economies
Other advanced
economies
Canada

40

Korea

30

Japan

20

United States

10

European Union

60

0
1971

1980

1990

2000

2010

2020

IEA. All rights reserved.

Market leadership is shifting away fromadvanced economies

This assumes that other sources of electricity that were expanding alongside nuclear power would have been scaled up
proportionally in its place.

3

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Almost 70% of the global reactor fleet is in advanced economies, but this fleet isageing. There are big differences in the average age of nuclear capacity acrossregions, ranging from just 5 years in the People’s Republic of China (hereafter“China”) to 15 years in India, 36 years in North America and 38 years in Europe.
Market leadership has been shifting to the Russian Federation (hereafter “Russia”)
and China: 27 of the 31 reactors that began construction since 2017 are of Russianor Chinese design.

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

GW

Age distribution of operational nuclear capacity by region, end of 2021
60
45
30
15

0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
42
44
46
48
>50

0

Age (years)
OECD Europe

OECD Americas

OECD Asia

Russia

China

India
IEA. All rights reserved.

Note: OECD Europe includes Belgium, Czech Republic, Finland, France, Germany, Hungary, Lithuania, Netherlands, Slovakia,
Slovenia, Spain, Sweden, Switzerland and the United Kingdom. OECD Americas includes Canada, Mexico and the UnitedStates. OECD Asia includes Japan and Korea.
Source: IAEA Power Reactor Information System (PRIS).

Investment in nuclear power in advanced economies has stalled over the last two
decades because of high costs of new projects, long construction times, unfavourable
electricity market and policy environments, and, in some countries, a lack of publicconfidence after the accident at the Fukushima Daiichi Nuclear Power Station.
Construction of first-of-a-kind Generation III reactors 4 has been subject to delays andsignificant cost overruns. The competitiveness of new nuclear power plants is further
undermined by the fact that most power markets still do not adequately remunerate
the low emissions and dispatchable attributes of nuclear power.
Retirements of nuclear power plants are set to accelerate in the coming years,
particularly in advanced economies, as existing plants reach the end of their operating
licences, are forced to close due to policy-driven phase-outs or cease operation foreconomic reasons. Lifetime extensions will, nonetheless, slow the pace of retirements
to some degree. For example, the United States has to date issued 20-year
extensions of the original 40-year operating licences for 88 of the country’s 93 reactors
currently in operation, while 11 reactors have applied for a further 20-year extension,bringing their lifetimes to 80 years. France has developed a rolling 10-year extension
programme for plants that meet safety requirements, while plants in Hungary, Finland,
the Czech Republic and the United Kingdom have also recently received 20-year
extensions. In total, these extensions have already prevented the closure of nearlyThis generation of reactors aims to enhance safety, relative to the preceding generation, by incorporating design changes thatlower the risk of a severe accident and, should a severe accident occur, by using appropriate mitigation systems to limit its impact
on the population and the environment.

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4

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

one-quarter of total capacity that would otherwise have occurred by 2020, a sharethat rises to almost 40% by 2030.

Investment has started to recover, driven mainly by China
and Russia
Nuclear power capacity additions dwindled during the 2000s, but are now starting topick up, particularly in China and Russia. Capacity additions peaked in the 1980s,
when 230 GW of new nuclear power plants were brought on line across the globe,
primarily in Europe and North America. But new construction slowed sharply in the
1990s in the wake of the major nuclear accidents at Three Mile Island in the UnitedStates in 1979 and Chernobyl in Soviet-era Ukraine in 1986, with just 25 GW of new
capacity added.
Capacity additions rebounded to 46 GW in the 2000s and 56 GW in the 2010s,
despite the impact of the 2011 Fukushima Daiichi accident in Japan (much of thecapacity added since then was already under construction). Another 6 GW wascommissioned in 2020 and 5.6 GW in 2021. China contributed most of the capacitythat came online since 2010.
2021 saw a surge in construction starts, with ten units breaking ground compared to
the four to five per year that had been typical in recent years. Overall, there are
52 reactors currently under construction, totalling 54 GW of capacity. China iscurrently building 16.1 GW, Korea 5.6 GW, Turkey 4.4 GW, India 4.2 GW, Russia
3.8 GW, the United Kingdom 3.3 GW and other countries combined 16.6 GW.
Of the 31 reactors that commenced construction since the beginning of 2017, 27 ofthese are either of Russian design (17) or Chinese design (10) with two of European
design under construction in the United Kingdom and two Korean-designed units in
Korea. Russia dominates the export market: all ten Chinese-designed units are being
built in China, only three Russian-designed units began construction in Russia, withthe rest starting construction in Turkey (3), India (4), China (4), Bangladesh (2) and
Iran (1).

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Russia’s invasion of Ukraine raises questions about the export prospects for Russianbuilt nuclear plants. Finland has cancelled a contract, signed in 2013, for Rosatom tobuild a plant in Finland, citing delays and increased risks due to the war in Ukraine.

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

Number of reactor starts

Nuclear power construction starts by national origin of technology, 2017-2022
10
Other
8

ChineseRussian

6
4
2
0

2017

2018

2019

2020

2021

2022 Year to date
IEA. All rights reserved.

Source: IAEA Power Reactor Information System (PRIS).

Net zero pledges are reviving interest in
nuclear’s potential
The number of countries with net zero targets has increased rapidly over the last few
years. More than 70 countries, covering 76% of global energy-related CO2 emissions,have now adopted such a pledge, covering either CO2 or greenhouse gas emissions
more broadly. This compares with only six countries at the end of 2018. In addition,
more than 60 other countries have pledged to reach net zero or carbon neutrality, but
without specifying a timeframe. These pledges are not yet underpinned by all the
specific policies and measures that will be required for their realisation, but they areprompting deliberations on the mix of low emissions technologies, including energy
efficiency, that can move countries towards these goals. Nuclear energy has been
one of the beneficiaries.
Significant developments in support of nuclear power 2020-2022
Policy••United States•

As part of the 2022 Civil Nuclear Credit Program, a USD 6 billion
investment to help preserve the existing U.S. reactor fleet.
Allocation of USD 8 billion to demonstrate clean hydrogen hubs,
including at least one hub dedicated to the production of hydrogenwith nuclear energy.
Following the Advanced Reactor Demonstration Program, a total of
USD 3.2 billion investment over seven years on two nuclear
projects.

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CountryNuclear Power and Secure Energy Transitions

Nuclear power in the world today

Country

PolicyCanada••France•••United Kingdom••

Belgium

Netherlands

PolandIndia

As part of the 2022 Energy Security Strategy ambitions for eight
new large reactors, as well as small modular reactors, to achieve
nuclear generation capacity of 24 GW by 2050, or around 25% of
the forecast electricity demand.
The Nuclear Energy (Financing) Act, enacted in 2022, made a
provision for the implementation of a regulated asset base model.
In 2021 a government commitment of GBP 210 million in funding todevelop an SMR, matched by GBP 250 million in private
investment.
In March 2022, the Belgian government decided to take thenecessary steps to extend the lifetime of two reactors by a decadethrough 2035.

•

Discussions in 2022 on the construction of two new nuclear
stations.

•

The 2020 Polish Nuclear Power Programme plans the constructionof large reactors with a total capacity of between 6 GW and 9 GW.
In 2022 the government agreed to the deployment of SMRs basedon US technology to replace existing coal-fired co-generation
plants.
The new government elected in 2022 plans to support lifetime
extensions of current facilities, restart construction at two sites,
develop and enhance cooperation on SMRs, seek to build ten
plants overseas by 2030.

•

Korea

China

Following the France 2030 investment plan, announcement toextend the lifetime of all nuclear reactors that can be extended
while ensuring safety.
Announcement of plans to build six new large reactors starting in
2028 at a cost of around EUR 50 billion, with an option to build
eight more by 2050.
A EUR 1 billion investment to develop innovative reactors, includinga small modular reactor by 2030.

•

•

Japan

The 2020 SMR Action Plan lays out the steps for the deployment of
SMRs. Several projects have obtained federal and provincial
government funding.
Announcement of an SMR project at Darlington based on GEHitachi technology to be commissioned by the late 2020s.

•

In 2022, the government announced it would increase energy
security with a view to restart existing reactors provided they are
safe.

•

Under the 14th Five Year Plan period (2021-2025), maintain asteady pace of construction setting the goal of about 70 GW by2025, versus 53 GW at the beginning of 2022.

•

Start of construction of a new ten reactor fleet expected between
2023 and 2025, for a total of 9 GW.
Political steps towards the construction of six large reactors using
French technology.

•

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•

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

Renewables, particularly wind and solar PV, are typically foreseen as providing thelargest sources of electricity as countries move to a net zero future. However, agrowing number of countries have also announced plans to support new nuclear
investment. For example, President Macron of France announced in February 2022
plans to build six new large reactors starting in 2028 at a cost of about EUR 50 billion,
with an option to build eight more by 2050. The French government previously
pledged EUR 1 billion to develop innovative reactors, including a small modular
reactor by 2030. China plans to continue its current pace of construction of nuclear
reactors in order to help meet its goal of carbon neutrality by 2060. The newly-elected
President of Korea made an election pledge to reverse the country’s nuclear phaseout by supporting lifetime extensions of current facilities and restarting construction at
two sites while also seeking to build ten plants overseas using Korean technology by
2030.

Today’s focus on energy security provides an
opening for nuclear
Deployment of nuclear energy increases the diversity of the energy mix, can facilitate
the rise of variable renewables such as wind and solar, and also provides anopportunity – at scale – to reduce reliance on fossil fuels. The oil security crisis of the
1970s spurred the first wave of nuclear new-builds: in the decade that followed thefirst oil shock, construction started on almost 170 GW of nuclear power plants; theseplants still represent 40% of the nuclear capacity that is operating today. If policy
support is forthcoming and costs are kept under control, the renewed interest in
nuclear today could point in a similar direction.
Russia’s invasion of Ukraine has exacerbated the tightness that was already apparent
in fuel markets around the world. This has in turn driven up electricity prices.
According to the European Union Agency for the Cooperation of Energy Regulators(ACER), retail electricity prices were on average 30% higher year-on-year in February2022, with prices increasing the most in places that depend heavily on natural gas inpower generation, like Madrid, where they have risen 55%, and Rome (80%).
Europe’s push to diversify away from Russian supply could maintain upward pressure
on fuel prices for some time to come.

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Nuclear energy is one of the options that can be deployed by governments to reducereliance on fossil fuels for the power sector, in particular for natural gas. For example,
Korea’s plans to lift the share of nuclear in Korea’s total generation would, in ourassessment, reduce natural gas use in the electricity sector by 5 bcm to 7 bcm per
year within the next decade.

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

GW

Impact of Korea’s policy reversal on nuclear power capacity
40

Previous policy
New policy

30

20

10

0
2020

2030

2025

IEA. All rights reserved.
Sources: IEA Analysis based on IEA (2021) World Energy Outlook 2021.

Many countries with nuclear reactors depend on imported uranium for fuel. However,nuclear power plants need to refuel infrequently, reducing exposure to short-term
disruptions, and fuel can be stored for a few years before being used.

Challenges to an expanded role for nuclear
Attracting increased investment in nuclear energy will hinge on efforts to manage andallocate the risks, which include project risks, such as those related to the constructionof plants and technology, political risk, regulatory risk, operational risk and market or
price risk.
Conventional nuclear plants are large and highly capital-intensive, involving long leadtimes and complex construction works. These risks directly affect the cost of capital,
and ultimately the levelised cost of electricity, by increasing the returns demanded byinvestors to account for them. Like other projects of similar complexity, nuclear
projects can carry substantial risks of delays, particularly for first-of-a-kind units. Once
built, market risks can also be substantial as these may depend on the electricity
market design, which can change, or policy interventions that affect profitability.
Governments have made renewed efforts to identify, mitigate and assign these risks
to the various stakeholders through financing support mechanisms like direct financial
support, power purchase agreements, and regulated models.

Rising construction costs and lead times have plagued the nuclear industry in many
countries in recent years. There is a wide variation in the average construction time
for nuclear reactors across countries, historically. The nuclear reactors in operation

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IEA. All rights reserved.

Construction costs and lead times have risen in advanced
economies

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

around the world today took on average seven years to build, but 15 of them took 15
years or more, while 152 were built in five years or less. Countries with mature nuclear
programmes, like the United States, Canada, France, China, Korea and Japan havegenerally been able to complete construction more quickly. Licensing, site selection
and permitting have usually added several years to the time needed to complete eachnew nuclear reactor project.

Years

Construction times for new nuclear power plants by country, 1967-2021
25

Average

20

Maximum

15

Minimum

10

0

Iran
MexicoRomania
BrazilArgentina
United Kingdom
Slovakia
Czech Rep.
Spain
India
South Africa
United States
Hungary
Bulgaria
United Arab Emirates
Belarus
RussiaSwedenUkraineCanadaGermany
FranceChinese Taipei
Pakistan
Slovenia
China
Belgium
Finland
Switzerland
Korea Rep.
Armenia
Netherlands
Japan

5

IEA. All rights reserved.
Note: Excluding temporary pauses on construction activities for individual projects.
Source: : IEA analysis based on IAEA Power Reactor Information System (PRIS).

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IEA. All rights reserved.

Recent nuclear power plant construction projects in Europe and the United States
have experienced considerable delays and cost overruns. Vogtle Units 3 and 4 in thestate of Georgia were originally projected to cost around USD 4 300/kW on an
overnight basis and take four years to complete, but the most recent estimate has
increased to nearly USD 9 000/kW and the units are now expected to come online
only in 2023 – nine years after the start of construction. These will be the first AP1000
units built in the United States, adding to the four already in operation in China. Evenin Korea, which has had relatively good construction performance, most recent units
have experienced delays and cost overruns. The Shin Kori 3 and 4 pressurised water
reactors, the first APR1400 designs, were commissioned in Korea in 2016 and 2019respectively after 7.5 and 10 years of construction, compared with the 5 years they
were originally expected to take.

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

Overnight cost and construction times for selected recent nuclear projects
10 000Initial Estimate

USD/kW (2020)

8 000

Flamanville 3(France)Vogtle 3 and 4(United States)

Latest Estimate
Final Cost

6 000

Olkiluoto 3(Finland)4 000
Shin Kori 3 and 4(Korea)

2 000
0

0

5

10
Years

15

20
IEA. All rights reserved.

Source: Nuclear Energy Agency (2020), Unlocking Reductions in the Construction Costs of Nuclear.

Similar delays and cost overruns have been experienced with the EPR, a third
generation pressurised water reactor, in Europe. This is due to several factors
including a low level of design maturity at the onset of construction, challenges withproject management, regulatory changes during the construction period and delays
in parts manufacturing in the absence of an active supply chain. The first EPR to start
construction, at Olkiluoto in Finland in 2005, began producing electricity in 2022, adelay of 13 years from its original planned date. The EPR at Flamanville in France,
construction of which started in 2007, has also encountered lengthy delays. It is now
expected to be commissioned in 2023. Both EPRs have cost far more than originallyprojected. For example, the Flamanville plant is now expected to cost EUR 12.7 billion
compared with an initial estimate of EUR 3.3 billion. The two EPRs built in China –Taishan 1 and 2 – have also experienced significant delays, both doubling theirconstruction time to nine years though limiting the final construction cost to around
USD 3 200/kW.

Techniques to make it easier to construct the civil works, such as modularisation andstandardisation, could reduce the cost and complexity of construction at the plant site.
Experience has shown that the construction period, particularly for “first-of-a-kind”
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IEA. All rights reserved.

Reducing the costs of constructing new nuclear power plants and the time required toconstruct them, particularly in advanced economies, will be vital if nuclear power is toplay its part in supporting energy transitions. The size and the complexity of
constructing the civil works associated with a nuclear power plant are typically
responsible for much of the delays: the nuclear “island”, which is the heart of thenuclear power plant and contains the containment building, auxiliary building, and fuelhandling area, usually accounts for less than 20% of the total costs.

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

units, tends to take significantly longer than for subsequent units. Conversely, once acommitment is made to build several units of the same design, the construction period
for the latter units can fall considerably. In the case of France, building the first of akind of the N4 series required nearly 12 years, the fourth unit just over 8 years – a
30% reduction. But staying with the same design also mattered: moving from theprevious series (known as P4) to N4 resulted in an increase in costs and theconstruction period, although the whole overnight cost of construction of the French
nuclear fleet was contained at under EUR 2 000/kW for each pair of reactors, 5 thanks
to a combination of factors including the series effect, an active nuclear industry andthe absence of major changes in regulatory standards.

Attracting private sector financing is hard without
government involvement
Due to their size and complexity, nuclear projects have historically relied upon someform of state ownership or regulated monopoly structure in order to guaranteerevenues and reduce risk to investors. All the plants recently commissioned orentering the construction phase involve capacity in excess of 1 GW. Very few utility
company balance sheets can support the risks associated with building and operating
a fleet of such large nuclear power plants without some form of guarantee from thegovernment. Mechanisms for policy support have included feed-in tariffs andcontracts for differences. 6 Alternatively, utilities can be allowed to include nuclear
facilities as part of their portfolio of regulated assets to guarantee a return on
investment.
The UK government, having identified the need for new nuclear power plants as partof its future low carbon energy mix, introduced the Nuclear Energy (Financing) Act
2022 with the aim of reducing the costs that consumers would need to pay for energy
from new nuclear power plants. Although many of the specific mechanisms will bespelled out in future regulations, the intent of the legislation is to provide better value
for money for consumers by reducing the cost of capital for investors in new nuclear
power plants. This is to be achieved through providing the owners of the project witha right to a regulated revenue stream during the construction, commissioning andoperating phases of a project. Through this mechanism, consumers will begin
contributing financially to a project during the construction phase and will be sharing
risks with the investors associated with cost overruns. As a consequence, it isexpected that projects will be able to attract capital at a much lower cost and, as
regulated projects, these lower costs will ultimately feed through to the consumers.
The government’s impact assessment estimates costs to consumers could fall by
44% or more compared to the contract-for-difference approach that was used tofinance the Hinkley Point C project.

World Energy Outlook 2014, Fig. 10.6 page 367.
Financial contracts-for-differences involving the payment of the difference between a fixed price and the settlement price of acommodity over a specified period.
6

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5

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

The current market designs in most advanced economies increases price risk forinvestors, but reduce risk for end consumers compared with regulated markets.
Electricity price volatility, caused in part by increasing shares of resources with zeromarginal cost like wind and solar, but also by swings in gas prices, creates unevenand unpredictable returns for market participants unless they hedge their exposure tomarket prices. Hedging this exposure through long-term contracts is one solution, but
it requires counterparties willing to accept prices that are high enough to ensure areturn for the nuclear power operator well into the future.

Remuneration for nuclear’s contribution to secure and low
emissions power systems is often inadequate
Current power market designs fail to adequately remunerate two benefits of nuclear
power generation. Nuclear power is a dispatchable resource that is able to generate
during periods of system stress, when load is approaching the level of available supply
capacity. This contributes to the secure operation of the system, avoiding costly
outages that cause economic and social harm. This service could be compensatedthrough either a separate capacity payment or through unfettered market pricing
arrangements that account fully for the ability of resource to secure against shedding
load, sometimes called “scarcity pricing”. However, most markets today limit prices
from reaching the levels associated with the value of lost load through price caps, andwithout a supporting capacity mechanism, deprive operators of dispatchable capacityof revenues 7.
Most power markets also fail to reward the low-carbon attributes of nuclear power.
Where they exist, carbon prices rarely approach the levels needed to reach net zero
emissions. For example, the most recent auction of allowances for the Regional
Greenhouse Gas Initiative, which covers 11 states in the eastern United States,
yielded a CO2 price of just USD 13/t– far below the prices that are required to spurdeep decarbonisation. In addition, in many countries support for clean energy
production like production and investment tax credits and feed-in-tariffs excludes
nuclear power from subsidies or other support mechanisms that are available to windand solar.

Ageing fleets require maintenance work that reduces
availability

7
Governments and consumers have difficulties accepting high and unstable electricity prices. For example, Spain and Portugal
recently set a price cap of EUR 50/MWh for gas in response to the recent jump in prices and some governments have called for
scrapping the marginal pricing system entirely. ACER’s recent assessment of the EU wholesale market concludes that the current
marginal price-based market design should be retained and cautions that ill-designed interventions could endanger the benefitsof market integration, which they estimate to be worth approximately EUR 34 billion per year through efficiencies gained by crossborder trading.

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Some countries, including France, the United Kingdom and Korea, have seen theavailability of their plants decline since 2015, due mainly to the need to carry out work
to extend lifetimes and, in some cases, unplanned shutdowns. In France, theNuclear Power and Secure Energy Transitions

Nuclear power in the world today

availability factor 8 of nuclear plants dropped to 54% in March 2022. The recent decline
is due to a combination of factors, including the peak of the Grand Carénage
programme, which aims to extend the operating lifetimes of most reactors beyond
40 years by means of large-scale renovation work, rescheduled maintenance outages
after the Covid-19 crisis and unplanned outages to investigate signs of corrosion
found in pipes in at least 9 of the country’s 56 operating reactors. By contrast, in the
United States, where nuclear plants have a similar age profile to those in France, theaverage availability factor was broadly constant until the year 2000 and has sinceincreased, reaching 91% in 2020.
Average nuclear capacity availability by country
100
90

Percent

80
70
60
50
40
1970

1980
FranceUnited States

1990
Finland2010

2000
United Kingdom

China

2020
Korea

IEA. All rights reserved.
Source: IAEA Power Reactor Information System (PRIS).

Some countries rule out nuclear, largely due to concerns
over safety and waste management
Some countries have decided to phase-out the use of nuclear power, primarily due topublic concerns about safety issues (not necessarily in their own country). Public
support waned in many countries after each of the three major nuclear accidents, atThree Mile Island, Chernobyl and Fukushima Daiichi. In those countries that haveretained nuclear, there are strong requirements on industry to enhance safety.

8

The share of installed capacity that are available to generate at any given time.

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IEA. All rights reserved.

The Fukushima Daiichi accident in 2011 prompted countries to re-evaluate andstrengthen nuclear safety and emergency preparedness. Safety inspections or “stresstests” were carried out at existing reactors in many countries and certain types ofreactors were ordered to make safety modifications. These considerations led several
countries to adjust their planned use of nuclear power. Germany, which had built
36 nuclear reactors with a combined capacity of 30 GW, subsequently accelerated
the phased closure of all this capacity. Most of the reactors have already shut, andthe three still operating are due to close by the end of 2022. Elsewhere in Europe,

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

Spain, Sweden and Switzerland have also announced the gradual phase-out or
non-replacement of their nuclear fleets. In Japan, many of the nuclear plants that wereshut after the Fukushima Daiichi accident have not yet restarted operation, and theshare of electricity generation from nuclear has dropped as a result from a high of
35% in 2002 to around 5% today.
The accident at Fukushima Daiichi drew global attention to the risks and potential
costs of a nuclear accident. The decision to idle or close other reactors necessitatedincreased thermal power generation, which led to substantial fossil-fuel import costs,
contributing to a record high trade deficit, and higher CO2 emissions.
Official investigations into the Fukushima Daiichi accident concluded that the accident
could and should have been foreseen and prevented. It stressed the need to improvethe competence and independence of the regulatory body. This underscores the factthat an effective regulatory framework and sound, independent regulatory oversightare prerequisites for the safe operation of a nuclear fleet and critical to establishingand maintaining public confidence in nuclear power.
The safe disposal of spent fuel and other radioactive waste material remains criticalto the public acceptance of nuclear energy programmes. Spent fuel rods that havebeen removed from the reactor core remain highly radioactive and continue togenerate large amounts of heat for decades. Public acceptance of the long-term
storage of high-level waste is key. Currently, 47% of spent fuel worldwide is stored onsite at nuclear power plants, usually in large concrete-lined water tanks. Few countries
have developed long-term solutions for recycling and/or the geological disposal of
spent fuel, mainly due to the large investments involved and hard political decisions
on siting.
Timeline for deep geological nuclear waste storage facilities in selected countries
Country

Application
submitted

Construction licencegrantedStart of construction

Finland

2012

2015

2016

France2021

2025(e)2022(e)Sweden2011

2022(e)Early 2023 (e)China

2041(e)Canada2028(e)2032(e)Switzerland

2024(e)2031(e)Note: (e) = estimate.
Source: Nuclear Energy Agency (2020), Management and Disposal of High-Level Radioactive Waste: Global Progress andSolutions.

Decommissioning is particularly important in the case of a nuclear power plant given
the need to safely manage radioactive materials. It includes all activities fromshutdown and removal of fissile materials to environmental restoration of the site.

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IEA. All rights reserved.

Safe decommissioning of plants must also be ensured

Nuclear Power and Secure Energy Transitions

Nuclear power in the world today

Costs depend on many factors, including the decommissioning schedule, the plant
location, the arrangements for the storage and disposal of nuclear waste, the level ofdecontamination required, legal requirements, any cost escalation and the assumed
discount rate. This range of plant-specific cost drivers and the relatively limited
experience in completing decommissioning projects, albeit increasing in recent years,
leave some uncertainty as to the magnitude of the expected decommissioning costs.
Most countries legally require utilities to arrange adequate funding fordecommissioning activities, with regulators playing a major role in approving themechanism to secure funding and the amount to be set aside. For a nuclear power
plant built today, the decommissioning cost is assumed in our analysis to be around
15% of the plant investment cost (in real terms). When funds are collected during theoperation of a nuclear power plant, these costs represent a small percentage ofelectricity rates. An increase in the decommissioning cost of a nuclear power plantfrom 15% to 25% of the investment cost, raises generating costs by just around 1%.

Russia’s invasion of Ukraine could also have negative
consequences
Heightened energy security concerns resulting from Russia’s war in Ukraine could
bolster the case for nuclear energy in some countries as they seek to reduce relianceon expensive and volatile fossil fuels and accelerate transitions. However, it could
also have negative impacts. Aside from the effects on public opinion of active conflictin the vicinity of Ukraine’s nuclear facilities, the conflict raises questions about
Russia’s future as a producer and exporter of nuclear fuel supplies.

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IEA. All rights reserved.

Through the Rosatom subsidiary TVEL, Russia supplies nuclear fuel to 73 Russiandesigned (VVER) reactors inside Russia and in other countries, including Ukraine,
Belarus, Armenia, Bulgaria, Finland, the Czech Republic, Hungary, Slovakia, China,
India and Iran, making up around 16% of the world market in 2020. CEZ, the Czech
state-owned electric utility, recently announced it will obtain its fuel supplies for its
Temelin nuclear power station from two western suppliers from 2024. Russia plays
an even more significant role in the production of uranium fuel, accounting for 38% of
uranium processing (conversion) worldwide and over 45% of fuel enrichment capacity
in 2020. Much of the uranium processed and enriched by Russia is sourced from
Kazakhstan, which was responsible for 41% of global uranium production in 2020.
Euratom, which monitors European uranium trade, estimates that Russian companies
provided about 24% of uranium conversion services and 25% of enrichment services
to EU utilities in 2020. A French company, Orano, supplies the majority of enrichmentservices and the largest share of conversion services to those utilities, while Canada
and the United States are also significant suppliers of conversion services to them.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

2. The role of nuclear energy on theroad to net zero emissions
Opportunities for nuclear in energy transition
There are five features of the journey to net zero emissions, common to almost all
scenarios that meet exacting climate goals, that open up opportunities for nuclear
energy:

Widespread electrification of end-uses, with electricity taking progressively higher
shares of final consumption.



Rapid growth in low emissions electricity generation.



The need to curb emissions from heat production.

Fast-growing demand for low emissions hydrogen.



The continued need to support innovation, which facilitates the development ofadvanced nuclear technologies.

This chapter explores the contribution of nuclear energy in these areas with reference
to the IEA’s Net Zero Emissions by 2050 Scenario (NZE) 9, which shows what isneeded for the global energy sector to achieve net‐zero CO2 emissions by 2050.
Alongside corresponding reductions in GHG emissions from outside the energy
sector, this is consistent with limiting the global temperature rise to 1.5 °C in 2100
without a temperature overshoot (with a 50% probability).

The NZE is set out in detail in our landmark report, Net Zero by 2050: a Global Roadmap for the Energy Sector, released in
2021.
9Page | 29

IEA. All rights reserved.

The global emissions pathway in the NZE represents a significant departure from a
trajectory based on today’s policy settings. This is described in the Stated Policies
Scenario (STEPS), which takes account of policies and targets currently in place but
not pledges or announcements not yet backed by implementation plans. It is also very
different to that in the Updated Announced Pledges Scenario (UAPS), in whichcountries and companies are assumed to meet all their announced pledges to cut
emissions, including those made at the 26th Conference of the Parties (COP26) in
Glasgow in November 2021 and submitted as Nationally Determined Contributions(NDCs) under the Paris Agreement to the United Nations Framework Convention on
Climate Change (UNFCCC), on time and in full. Global emissions plateau and decline
only slightly by 2050 in the STEPS (see World Energy Outlook 2021 for more details),
which is consistent with a global temperature increase of 2.6 degrees Celsius (°C)
above pre-industrial levels in 2100. Emissions fall much more in the UAPS, by around18 Gt in 2050, consistent with a global temperature increase of 1.8 °C.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

Gt

Global energy sector CO2 emissions by scenario, 2000 to 2050
40Stated Policies
30

20
Updated Announced Pledges
100

Net Zero Emissions by 2050
2000

2010

2020

2030

2040

2050

IEA. All rights reserved.
Note: Energy sector emissions includes those from the combustion of fossil fuels and industrial processes.
Sources: IEA (2021), World Energy Outlook 2021; IEA analysis based on IEA (2001), COP26 Climate Pledges Could Help Limit
Global Warming to 1.8 °C, but Implementing Them Will Be the Key.

The five opportunities arising for nuclear energy in the net zero transition arecharacterised in the NZE in the following terms.

Electrification as a key pillar of decarbonisation

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IEA. All rights reserved.

The use of electricity in place of unabated fossil fuels helps to cut global energy sector
CO2 emissions in 2050 by about 7 Gt in the NZE, accounting for 20% of the total
reduction. Global electricity demand increases from about 23 000 TWh in 2020 toover 60 000 TWh in 2050, with the share of electricity in total final consumption
jumping from 20% to nearly 50%. Merchant hydrogen production is the leading driverof the increase in global electricity demand, adding over 12 000 TWh – an amountgreater than the total electricity demand in advanced economies today. Among enduse sectors, industry sees the largest increase in electricity consumption at almost
11 000 TWh, mainly in low and medium temperature applications, primarily in lightindustry. Rapid growth in the fleets of electric cars, buses and trucks pushes up global
electricity use in transport by over 9 000 TWh. The rest of the increase comes fromthe electrification of other end-uses, including heating in buildings and cooking.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

Global electricity demand and share of electricity in total energy consumption in selected
applications in the Net Zero Emissions by 2050 Scenario

TWh

0.000

1.000

2.000

3.000

4.000

5.000

6.000

7.000

12 000

75%

8 000

50%

4 000

25%

0

Merchanthydrogen

CookingLight duty
vehiclesElectricity demand:

2020

2050

Electricity share in consumption (right axis):

2020

2050

Heavy industry Light industry

Heating inbuildings

Heavy
trucks0%

IEA. All rights reserved.
Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

Emerging market and developing economies (EMDEs) make up three-quarters ofglobal electricity demand growth in the NZE, due to their more rapid growth inpopulation, incomes and living standards. Greater reliance on electricity to meet theincrease in demand for energy services causes electricity demand growth to rise froman average of 3.7% per year in 2016-2020 to 3.9% in 2021-2050. Advanced
economies see a return to growth in electricity demand, having plateaued in recent
years, due to more rapid electrification of end uses and the take-off of electrolytichydrogen production.

Rapid growth in low emissions electricity generation

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IEA. All rights reserved.

The rise in low emissions electricity generation in the NZE, both to meet rising
electricity demand and displace unabated fossil fuels, is staggering. In 2021,
unabated fossil fuels accounted for over 60% of electricity generation worldwide, led
by coal (35%), natural gas (23%) and oil (3%). Hydropower was the largest low
emissions source of electricity (16% of generation), followed by nuclear power (10%),wind (7%) and solar PV (4%). The power sector emitted 13.8 Gt in 2021, the most of
any sector and nearly 40% of the energy-related total. The picture changes radicallyover the three decades to 2050 in the NZE. Global electricity generation increases
two-and-a-half times over 2020-2050 to keep pace with demand. The electricity sector
is the first to achieve net zero emissions, doing so by 2035 in advanced economies
collectively and by 2040 worldwide. Low emissions sources expand sevenfold by
2050, an average rate of growth of about 2 000 TWh, or 7%, per year, equivalent toadding over 1 400 GW of solar PV capacity, 750 GW of wind or 280 GW of nuclear
each year.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

80 000Electricity generation by source

USD billion (2020)

TWh

Electricity generation by source and average annual investment in low emissions sourcesin the Net Zero Emissions by 2050 Scenario

60 00040 000

Average annual low emissions electricity investment
1 600

1 200

20 000

0
2010

800

400

2020

Low emissions sources

2030

2040

Unabated coal

2050

Unabated natural gas

0

2011-202021-30

2031-40

2041-50

Oil

IEA. All rights reserved.
Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector

Global investment in low emissions sources of electricity surges over the current
decade, reaching over USD 1.1 trillion per year on average over 2021-2030 – almost
four times that in 2011-2020. The push to fully replace unabated fossil fuels in power
generation by 2040 lifts the pace of investment even higher in the 2030s, signalling ahuge opportunity for all low emissions sources of electricity that are commerciallyavailable and cost-competitive. Beyond 2040, investment in clean electricity falls
back, with new sources needed solely to meet electricity demand growth.

Curbing emissions from heat production
Reducing emissions from the production of commercial heat, injected into district heat
networks or sold to industry, is a major task in getting to net zero. In 2021, nearly 90%of the heat sold commercially worldwide was provided by unabated fossil fuels and
75% from combined heat and power (CHP) facilities. Coal was the largest source ofheat, making up 45% of the total, followed by natural gas (41%) and bioenergy (8%).
Nuclear power provided just 0.1%. Global heat production emitted 1.3 Gt of CO2 in
2021, 4% of total energy sector emissions.

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IEA. All rights reserved.

Global emissions from heat production are almost entirely eliminated in the NZE
thanks to a combination of lower demand due to efficiency gains and electrification inbuildings and industry, and switching to low emissions energy sources. Commercial
heat demand falls steadily, by 15% in 2030 and almost 60% by 2050 compared with
2020. Low emissions sources rise to close to 40% of the total heat supply in 2030 andnearly 100% in 2040. Between 2020 and 2040, the supply of low emissions heatgrows by about 400 petajoules (PJ) per year, equivalent to adding 25 GW of thermalenergy (GWth) of new bioenergy CHP capacity, 20 GWth of nuclear CHP or 18 GWth

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissionsof large-scale heat pumps annually. Additions of capacity based on low emissions
sources fall back sharply as they are needed solely to replace retired capacity.
Commercial heat production by source and average annual investment in low emissions
sources of heat in the Net Zero Emissions by 2050 Scenario
Heat production by source

Average annual low emissions heat investment
50

USD billion (2020)

100%
80%
60%

40
30

40%

20

20%

10

0%

2010

Unabated coal

2020

2030

Unabated natural gas

2040
Oil

2050

0

2011-2020 2021-30 2031-2040 2041-50

Low emissions sources
IEA. All rights reserved.

Note: Commercial heat production includes district heating and industrial applications.
Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

Investment in low emissions heat plants increases rapidly to 2040 in the NZE,
averaging well over USD 30 billion per year in the 2020s and about USD 27 billion in
the 2030s before falling back substantially. As with low emissions electricity,
technologies that are already commercially available and cost-competitive account formost of this investment.

Fast-growing demand for low emissions hydrogen

Global hydrogen production expands rapidly in the NZE, more than doubling to 200 Mt
in 2030 and over 500 Mt in 2050. All of the increase comes from low emissions
production technologies, with unabated fossil-based production falling steadily as
existing plants are retired to just 25% of total hydrogen output in 2030 and under 10%
in 2040. Fossil fuels with CCUS become the leading source of hydrogen in 2030 but
are quickly overtaken by electrolysis. With 350 projects currently under development,
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IEA. All rights reserved.

Hydrogen, as an energy carrier like electricity, is expected to play a vital role infacilitating emissions reductions in all end-use sectors. In 2020, global hydrogenproduction was about 90 Mt, the bulk of which was produced from unabated fossil
fuels and used in refining or industrial applications. Low emissions hydrogenaccounted for about 10% of the total, produced almost entirely by fossil fuels with
CCUS (hydrogen produced through electrolysis using renewables-based electricity is
minimal as yet). Global hydrogen production emitted close to 0.9 Gt of CO2 emissions,making up 2% of all energy sector emissions.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

electrolytic hydrogen production is about to take off, though the long term pace of
expansion hinges on effective hydrogen strategies and policies. Global investment in
the production of low-carbon hydrogen grows rapidly in the NZE in the medium term,
averaging over USD 80 billion per year in the 2020s and 2030s, before falling back inthe 2040s as net zero emissions come into sight.
Hydrogen production by source and average annual investment in low carbon sources ofhydrogen in the Net Zero Emissions by 2050 Scenario
Average annual low emissions hydrogen investment
90

600

USD billion (2020)

Mt

Hydrogen production by source

400

60

200

0

30

2020
Refining CNR

2030
Fossil fuels

2040
2050
Fossil fuels with CCU

0

2011-202021-30
2031-40
2041-50
Fossil fuels with CCS
Electricity
Biomass

IEA. All rights reserved.
Note: CNR = catalytic naphtha reforming.
Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

Support for innovation

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IEA. All rights reserved.

Fully half of the emissions reductions in the NZE in 2050 compared with 2020 are
associated with technologies that are not yet on the market, though many are at thedemonstration or prototype phases today. Innovation is needed most in long-distancetransport and heavy industry, where reducing emissions with current technologies ishardest and most costly. Key areas include advanced battery designs, carbon capturein the cement industry, carbon removal technologies and large-scale electrolysers forhydrogen production, as well as advanced nuclear designs such as small modular
reactors (SMRs), advanced biofuels, optimised heat pumps with storage andautonomous trucks. Accelerating innovation calls for more spending on clean energy
research and development (R&D) and enhancing international cooperation andcollaboration.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

The role of nuclear in achieving net zero
emissions by 2050
Nuclear energy is an important low emissions technology in the NZE pathway to net
zero. In particular, it complements and supports the rapid growth of renewables inbringing emissions from the electricity sector worldwide down to net zero by 2040.
Nuclear power contributes to the low emissions electricity supply and, as adispatchable generating source, enhances the security of supply by providing system
adequacy and flexibility. It also continues to the supply of heat for district heating
networks and some industrial facilities. The projected role of nuclear, nonetheless,hinges on decisions by policymakers and companies about the pace of constructionof new reactors and the duration of continued operations for existing nuclear reactors.
The projections of nuclear power and other power generation options in the scenario
are based on economic analysis within the IEA’s long-term energy modelling
framework, which includes cost projections for each fuel, technology and region, todetermine the most cost-effective pathway to net zero emissions across all sectors by
2050. The nuclear power projections also take account of technology preferences andpublic acceptance, including national policies in favour of or opposed to the use of
nuclear power. As such, they are consistent with planned reductions and phase-outs,
such as those in Germany, Belgium and Switzerland.
The NZE incorporates technology innovation with the commercialisation of sometechnologies currently in advanced stages of development, but does not rely ontechnology breakthroughs. The projected construction costs of large-scale reactors
decline for designs under construction, such as the EPR, AP1000 (developed byWestinghouse, a US company) and Hualong-1 (jointly developed by the China
General Nuclear Power Group and the China National Nuclear Corporation)pressurised water reactors, as experience gained in their initial deployment is applied
to subsequent projects. The analysis also considers advanced designs, such as
SMRs, and these are deployed in significant number in the NZE for electricity
generation, particularly in advanced economies. SMRs and high-temperature gas
reactors (HTGRs) could be used in other ways than simply supplying electricity to thegrid, though they are not projected to be deployed on a large scale to primarily
produce heat or hydrogen before 2050 due to the availability of lower cost alternatives.
Nuclear fusion is not included in the NZE due to significant uncertainty about its
technical and economic feasibility.

Nuclear power capacity doubles by 2050 in the NZE

All figures for nuclear capacity are presented here in gross terms before accounting for onsite electricity consumption, rather
than in net terms at the point of injection into the grid.
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IEA. All rights reserved.

Global nuclear power capacity 10 almost doubles from 413 GW at the start of 2022 to
812 GW in 2050 in the NZE, with new construction more than offsetting theNuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

progressive retirement of many existing plants. This represents a major accelerationcompared with the last three decades, when capacity increased by about 15%, or
about 60 GW. The projected expansion of nuclear power capacity is also much larger
than that set to occur under current policies and regulations that have been formalised
or written into law: capacity nears 530 GW in 2050 in the STEPS, 35% less than in
the NZE. Without a significant change in the recent trends in nuclear power
development, the path to net zero emissions would need to rely on a smaller set of
low emissions technologies, reducing energy security and raising total investment
costs and ultimately the cost of electricity to consumers.

GW

Nuclear power capacity by country/region in the Net Zero Emissions by 2050 Scenario
1 000

Other emerging market anddeveloping economies

800

China

600

Other advanced economies

400

G7 members

200
0

1990

2000

2010

2020

2030

2040

2050

IEA. All rights reserved.
Note: Power capacity refers to gross capacity, before accounting for onsite electricity consumption.
Sources: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector; IEA (2021), Achieving Net Zero Electricity
Sectors in G7 Members.

Nuclear capacity grows even more rapidly in emerging market and developing
economies in the NZE, from less than 120 GW in 2020 to 480 GW in 2050 – about
90% of the global increase. All low emissions technologies are scaled up in these
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IEA. All rights reserved.

Nuclear power undergoes strong growth in advanced economies in the NZE. These
economies have long been leaders in nuclear energy technology, but a lack of new
construction in recent years is already causing a contraction in capacity. Capacity
shrinks by about 5% between 2020 and 2030, as new plants are unable tocompensate for planned retirements of ageing reactors. A renewed construction effort
leads to a rebound in capacity to 330 GW in 2050, 10% above the current level and
50% above that in the STEPS. This return to growth accelerates the decarbonisationof electricity supply, diversifies the generation mix, supports grid stability and fulfils
the long-term vision of maintaining an important role for nuclear power in several
advanced economies. Five of the G7 members – the United States, Canada, United
Kingdom, Japan, and France – collectively continue to account for the vast majorityof nuclear capacity among advanced economies. By comparison, renewables
capacity in advanced economies grows fivefold over the same period in the NZE.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

economies, including a ninefold rise in renewables capacity, in an effort to meet risingdemand for electricity services from growing populations with rising incomes, whiledriving down emissions. China soon becomes the global leader in nuclear capacity,
overtaking the United States and European Union before 2030 and is home to onethird of the global nuclear fleet by 2050. Other EMDEs accelerate the expansion of
their nuclear programmes, including India, Brazil and South Africa. New nuclear
power producing countries emerge in Southeast Asia, Africa and the Middle East inline with current long-term plans and announcements.

How does the path to net zero look with less nuclear?
Our Low Nuclear Case considers how the NZE might look if, instead of rising, global
nuclear capacity declines from 413 GW at the start of 2022 to 310 GW in 2050. Thisis about 500 GW less than in the NZE. The share of nuclear in total generation would
fall from 10% in 2020 to 3% in 2050. Key assumptions are as follows:

In advanced economies, no additional lifetime extensions are granted and no new
nuclear projects are started.

In emerging market and developing economies, nuclear construction remains at
the same average rate seen during 2016-2020, i.e. about 6 GW of capacity added
per year to mid-century

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IEA. All rights reserved.

In the Low Nuclear Case, several other low emissions sources would need to step up
to decarbonise electricity by 2040 and maintain energy security. Solar PV and wind
power would be the primary replacements for nuclear, with an additional 1 300 GW of
combined capacity in 2050, boosting the total generating capacity by about 5%
compared with the NZE (as those sources are not always fully available). This would
increase the challenges associated with integrating high shares of variable
renewables, which rise above 70% of total generation in many parts of the world. To
maintain electricity security, far more battery storage is needed as well as fossil fuels
plants with CCUS, their combined capacity increasing by 50% compared with the NZE.
The capacities of other dispatchable sources of generation, including hydrogen andammonia, also expand faster to aid grid stability and adequacy.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

GW

Change in global power capacity in the Low Nuclear Case relative to the Net
Zero Emissions by 2050 Scenario
2 000

Other dispatchable
Batteries

1 500

Wind
1 000

Solar PV
Fossil fuels with CCUS

500

Nuclear0- 500-1 000

2025

2030

2035

2040

2045

2050

IEA. All rights reserved.

In addition to the need to integrate more renewables into electricity systems, there arethree main implications of the Low Nuclear Case of the NZE:

Higher overall costs: Cumulative investment increases by over USD 500 billion
and consumer electricity bills by almost USD 600 billion over the period to 2050.
This includes the additional investment costs for power technologies, the costs ofgrid expansion to support additional renewables and additional fuel costs for coaland natural gas.

Additional strain on clean energy supply chains: For every 1 GW reduction in
nuclear capacity in the Low Nuclear Case, an additional 3.5 GW of capacity fromother sources is needed, with a greater call on critical minerals for both power
generation technologies and grid infrastructure.

Higher exposure to natural gas and coal market prices: Coal and gas prices would
be more important for consumer electricity bills, removing a degree of the shelter
offered in the NZE.

Not all countries are assumed to pursue this option, but the nuclear power industry
enters a new period of growth in the NZE, with a large new wave of construction of
nuclear plants getting underway around the world. From 2021 to 2050, 640 GW of
new nuclear capacity is brought online worldwide. An average of over 27 GW ofcapacity is commissioned each year in the 2030s, surpassing the average height ofthe previous wave of construction in the 1980s (though the record for a single year of
34 GW was set in 1984). To achieve this pace, the number of new construction starts

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IEA. All rights reserved.

New nuclear construction reaches new highs in the 2030s

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

for large-scale plants increases sharply from an average of just five per year in recent
years to around twenty per year over the next decade. The pace of construction slows
in the 2040s as unabated fossil fuels are largely phased-out, reducing the need for
new dispatchable low emissions capacity. Despite the return to growth for the nuclear
industry in the NZE, nuclear power represents just 2% of all new power capacity built
over 2021-2050, with solar PV and wind power accounting for the bulk.
China remains the global leader in new nuclear construction in the NZE. It added more
new nuclear capacity than any other country in each of the nine years to 2021 andthis trend is projected to continue. In the period to 2040, China builds an average of
9 GW per year of nuclear capacity in the NZE, 40% of the world total. The otheremerging market and developing economies combined add 8 GW per year. The
combined share of China and other EMDEs in global nuclear construction falls backin the 2040s, as construction in G7 members picks up to offset a wave of retirements.
Nuclear power capacity additions and retirements in the Net Zero Emissions by 2050
Scenario by country/region and decade
Retirements

Capacity additions

G7 members

2041-2050

Other advanced economies

2031-2040

China

2021-2030

Other emerging market anddeveloping economies

2011-2020
2001-2010
1991-2000
1981-1990
1971-1980
- 30

- 20

- 10

0

10

20

30
GW

IEA. All rights reserved.

The shift in the centre of gravity of the nuclear energy industry to China and otheremerging market and developing economies has important implications for nuclear
technologies and trade. China’s current nuclear development is focused mainly onlarge-scale reactors and domestic designs, including the successful Hualong-1
technology. China is also developing HTGRs with the aim of displacing coal-fired
power and heat plants (9 GW of nuclear CHP is added in China over 2021-2050 in
the NZE). The new push for nuclear energy in advanced economies is based on newdomestic designs, including EPRs in Europe and SMRs in Europe and the UnitedStates. The rapid expansion of nuclear construction in emerging market anddeveloping economies other than China would rely on importing nuclear technologies
from China, Europe and the United States, creating competition among technology

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IEA. All rights reserved.

Sources: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector; IEA (2021), Achieving Net Zero Electricity
Sectors in G7 Members.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

providers in those countries. The affordability of energy will remain of vital importancein emerging market and developing economies, providing a strong incentive fordevelopers of advanced reactor designs to shorten construction times and minimise
costs.

Nuclear lifetime extensions provide a cost-effective
foundation for energy transitions
The existing fleet of nuclear power plants around the world can provide a solid
foundation on which to build clean energy transitions. Yet decisions about how longto operate these plants threaten to erode that foundation. Of the 413 GW of nuclear
capacity operating worldwide at the start of 2022, about 290 GW was made up ofreactors in advanced economies, many of which are approaching the end of theirinitial operating licences. How many of these licences will be extended and for what
duration remains very uncertain.
The NZE assumes that the existing fleet of nuclear power plants in advanced
economies will continue to operate for as long as technically and economicallypossible. Unless retirements are already planned, operational lifetimes of nuclear
reactors extend to 60 years in most cases and 80 years where this is already being
considered, such as in the United States. As a result, the capacity of existing plants
in advanced economies declines only moderately, to 250 GW in 2030 and just over
200 GW in 2040, but falls more rapidly thereafter to about 100 GW in 2050. Lifetime
extensions are a very cost-effective source of low emissions electricity, estimated atless than USD 50/MWh for a 10- to 20-year extension in major markets in the 2019
IEA report, Nuclear Power in a Clean Energy System. With the long lead times fornuclear construction, lifetime extensions also provide time to build new nuclear plants
and other low emissions sources fast enough to meet new electricity demand anddisplace fossil fuels.
Where the operations of reactors can be safely extended, obtaining new regulatory
approvals and mobilising investment in them will be critical to maximising the overall
contribution of nuclear power to the clean energy transition. A failure to do so could
have far-reaching consequences.

In the event that no further lifetime extensions to existing nuclear reactors are granted(as well as no new investment in existing plants occurs and no new nuclear power
capacity is built beyond those projects already under construction), the existing
nuclear fleet in advanced economies would shrink rapidly. In an updated Nuclear
Fade Case, we revisited analysis first done in Nuclear Power in a Clean Energy
System, and found that, in these circumstances, the capacity of the existing nuclear
fleet in advanced economies contracts by one-third by 2030 and over 70% by 2040,
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IEA. All rights reserved.

Backing away from nuclear would reduce advanced
economy nuclear capacity by 70% by 2040

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

to about 80 GW. The largest declines are in the European Union and the UnitedStates, but without additional positive regulatory decisions, there are significant
reductions in Japan, Canada and other advanced economies too.
Capacity of existing nuclear power capacity in advanced economies by scenario/case300
GW

Total advanced
economies
Other advanced
economies

200

CanadaUnited States

100

European Union

0

Previous Updated Net Zero Previous Updated Net Zero
Nuclear
Nuclear
Nuclear
NuclearFade Case Fade Case
Fade Case Fade Case
2021

2030

2040
IEA. All rights reserved.

Notes: Net Zero = Net Zero Emissions by 2050 Scenario. The Nuclear Fade Case assumes that no further lifetime extensions toexisting nuclear reactors are granted in advanced economies. The Previous Nuclear Fade Case refers to the IEA’s 2019 report(see source), which is updated here.
Sources: IEA (2019), Nuclear Power in a Clean Energy System; IEA (2021), Net Zero by 2050: A Roadmap for the Global
Energy Sector.

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IEA. All rights reserved.

The losses of capacity in the Updated Nuclear Fade Case are significantly smaller
than in the previous version thanks to policy and regulatory decisions to extend thelifetime of over 50 GW of nuclear reactors between May 2019 and April 2022. Those
decisions concern almost 20% of the nuclear fleet today in advanced economies. In
the United States, an additional reactor has been granted an initial 20-year extension
and six others approval for a subsequent 20-year extension since 2019. In France,
regulatory approval has been granted for 32 reactors to be extended by ten years.
These approvals are alongside EDF’s Grand Carénage programme, which runs from2014 to 2025. It involves substantial investment in enhancing reactor safety throughmaintenance and technical modifications, with the goal of prolonging the lifetimes ofmost of the fleet of 56 reactors beyond 40 years. In Japan, two additional reactors
received regulatory approval to re-start since 2019.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

Policy and regulatory decisions made between May 2019 and May 2022 for existing
nuclear reactors by country
Country

Decision type

Comment

Capacity(GW)

FranceExtension ofoperating licence

Thirty-two reactors (each with a capacity of about
900 MW) received regulatory approval for a 10-year
extension

30.4

UnitedStatesExtension ofoperating licence

Spain

Initial 20-year extension granted for Seabrook 1

1.3

Six reactors received approval for a subsequent 20year extension

6.3

Extension ofoperating licence

Seven reactors approved or pending final approval
for extensions of 5 to 10 years, operating up to 2035

7.4

Belgium

Extension ofoperations

Two reactors put forward to extend operations by 10
years to 2035

2.2

Japan

Decisions torestart reactors

Two reactors received regulatory approval to re-start

1.7

Bulgaria

Extension ofoperating licence

Approved extension for unit 6 of Kozloduy nuclear
power plant to operate to 2029

1.0

MexicoExtension ofoperating licence

Approval received for Laguna Verde Unit 1 tooperate to 2050

0.8

Romania

Extension ofoperations

Cernavoda Unit 1 refurbishment to extend lifetimeby 30 years to 2059

0.7

Total

51.8

Decisions to extend the lifetimes of nuclear reactors will have a significant impact onnatural gas demand, with important implications for energy security in importing
countries. Without the recent regulatory decisions, natural gas demand in advanced
economies would be almost 50 bcm higher in 2030 in the NZE. Further lifetime
extensions could reduce natural gas demand in advanced economies by another70 bcm in 2030, lowering demand for LNG imports in Europe, Japan and Mexico,while making more gas available for export in the United States. There are a host ofpolicy and regulatory decisions to be made in the near term about safety inspections
and extending the operating licences of existing reactors concerning a total of 57 GW
of capacity.
Pending policy and regulatory decisions on restarts or lifetime extensions by country

UnitedStates

Decision type

Extension ofoperating licence

Comment
Four operating reactors awaiting decision on
initial 20-year extensions
Applications for subsequent 20-year extensions
under review for nine reactors and planned forfive more by 2024

Page | 42

Capacity
(GW)
4.9

13.3
IEA. All rights reserved.

CountryNuclear Power and Secure Energy Transitions

Country

The Role of Nuclear Energy on the Road to Net Zero Emissions

Decision type

Capacity(GW)

Comment

Japan

Pending decisions
to restart reactors

Ten reactors are under review to restart
operations

9.0

FranceExtension ofoperating licence

Twenty-two reactors must pass inspection
before 2025 to continue operations

24.2

Korea

Extension ofoperating licence

Five reactors will reach the end of their licences
to operate by 2026

4.8

UK

Extension ofoperations

20-year extension of Sizewell B to operate to2055 under consideration

1.3

Finland

Extension ofoperating licence

Application for continued operations planned for
two nuclear units at Loviisa plant

1.0

MexicoExtension ofoperating licence

Application submitted pending for Laguna Verde
Unit 2

0.8

Total

57.3

Nuclear output doubles by 2050 in the NZE, though its
share of total electricity supply falls
The projected global expansion of capacity underpins a more than doubling of nuclear
electricity generation from 2 690 TWh in 2020 to nearly 5 500 TWh in 2050 in the
NZE. The rate of increase is nonetheless less than that of other zero carbon
generating options, with nuclear power’s share in total electricity generation fallingfrom 10% to 8% over the same period. The last time that nuclear power accounted
for less than 10% of total generation was in 1980. After renewables, nuclear power
still becomes the largest source of electricity by 2040, surpassing that of fossil fuels
equipped with CCUS, hydrogen and ammonia (also used as a means of cutting
emissions from coal- and gas-fired power plants through co-firing).
Global nuclear power generation and total generation by type of energy in the Net Zero
Emissions by 2050 Scenario
TWhElectricity generation by source
80 000100%

Energy shares in total generation

Unabated fossil fuels
Fossil fuels with CCUS

60 000Hydrogen and ammonia

75%

Hydro and other renewables
40 000

Solar PV and wind

50%

Nuclear
20 00025%

0%02000 2010 2020 2030 2040 2050

2000 2010 2020 2030 2040 2050

Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

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IEA. All rights reserved.

IEA. All rights reserved.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

In advanced economies, nuclear electricity generation edges up by 15% between
2020 and 2050 in the NZE. Its share of total generation falls from 18% to 10%, astotal generation doubles to meet new demand from the electrification of transport,
industry and heating in buildings and hydrogen production. The capacity factor –output as a share of the maximum capacity – of nuclear power in those countries rises
from an average of 72% in 2020 to 85% in 2030, thanks in part to reactors being
gradually restarted in Japan. In the long term, the capacity factor falls back below
80%, as the share of wind and solar PV rises and dispatchable plants need to operate
flexibly more often.
Nuclear power generation and share of total generation by type of economy in the Net
Zero Emissions by 2050 Scenario
Advanced economies

Emerging market and developing economies
24%

4 000

24%

TWh

TWh

4 000

3 000

18%

3 000

18%

2 000

12%

2 000

12%

1 000

6%

1 000

6%

0%
2050
G7 members

0

0%

0

2000

2010
China

2020

2030 2040
Others2000 2010 2020 2030 2040 2050
Nuclear share of electricity supply (right axis)

IEA. All rights reserved.
Sources: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector; IEA (2021), Achieving Net Zero Electricity
Sectors in G7 Members.

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IEA. All rights reserved.

In emerging market and developing economies, nuclear electricity generation
increases more than fourfold over 2020-2050 in the NZE, its share of total generation
rising from 5% to 7%. The share rises even more in China, from 5% to 11%, becoming
the third-largest source of electricity behind wind and solar PV. In other EMDEs, thegrowth of nuclear power keeps pace with overall demand, with its share remaining
broadly constant at about 5% through to 2050.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

How does the role of nuclear in the NZE compare with other
1.5°C scenarios assessed by the IPCC?
The role of nuclear power, measured both by total nuclear power output and its sharein total generation, in the NZE is broadly similar to that of the 97 scenarios assessedby the IPCC that limit warming to 1.5°C (with a greater than 50% probability) with noor limited overshoot (category C1). Nuclear power output and total generation in thosescenarios varies markedly: nuclear output ranges from 1 000 TWh to 26 000 TWh in
2050, with a median value of 5 600 TWh. Nuclear’s share of electricity generation in
the same year ranges from 1% to 29%, with a median value of 7.6%. Generally,
compared with other scenarios in the C1 category, the NZE pathway relies less on
bioenergy and more on wind, solar PV and hydrogen.
Share of nuclear power in world electricity generation in the Net Zero Emissions
by 2050 Scenario and comparable IPCC scenarios, 2050
30%

IEA NZE
IPCC AR6

25%
20%
15%
10%
5%

IEA. All rights reserved.
Notes: NZE = Net Zero Emissions by 2050 Scenario; AR6 = IPCC’s sixth assessment report.
Sources: IPCC (2022), Climate Change 2022: Mitigation of Climate Change, Working Group III Contribution to the IPCC
Sixth Assessment Report; IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

Page | 45

IEA. All rights reserved.

Another important comparison is the International Atomic Energy Agency (IAEA)
study, Energy, Electricity and Nuclear Power Estimates for the Period up to 2050,
released in 2021. It is designed to set out a “conservative but plausible” range fornuclear power development over the next three decades. In the study’s high case,which takes into consideration potential policy action on climate change, though not
specifically net zero emissions goals, gross nuclear power capacity reaches about
830 GW in 2050 (792 GW in net terms) – close to that in the NZE. In the study’s low
case, global nuclear capacity remained largely unchanged from the 2020 level of
415 GW (393 GW in net terms).

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

Nuclear power can make an important contribution to
overall power system adequacy
Nuclear power plants have long contributed to the reliability of power systems,
including through contributions to system adequacy. 11 Historically, nuclear power
plants in most countries have been operational and available to generate power at
least as often as all other sources of electricity, with availability factors regularly above
90%. Since the vast majority of nuclear power capacity counts towards system
adequacy, its contribution to system reliability and adequacy is typically far greaterthan its share in total power capacity.
The share of nuclear power in total dispatchable power capacity – a metric of its
contribution to system adequacy – holds steady at around 8% over 2021-2050 in the
NZE. Dispatchable sources of electricity have long been the principal means of
ensuring system adequacy. This remains the case in the NZE as electricity systems
evolve with increased reliance on variable solar PV and wind. Unabated fossil fuels
make up the majority of dispatchable capacity today, but they decline by one-quarterto 2030 in the NZE and sharply thereafter. Unabated coal-fired power is the largest
dispatchable source today, but capacity in operation declines by over 40% by 2030
and approaches zero in the early 2040s. Unabated natural gas-fired power capacity
remains broadly constant to 2030, buoyed by the need to compensate for the
reduction in coal, but then declines rapidly in the 2030s. Oil is a relatively minor
contributor today and, aside from remote locations, is phased out quickly in this
scenario.
Global dispatchable power capacity by type in the Net Zero Emissions by 2050 Scenario

GW

Unabated fossil fuels

Low emissions sources

10 000
8 000
6 000
4 000
2 000
0

2010

2020 2030
Coal
Natural gas
Oil

2040

2050

2010
2020
Fossil fuels with CCUS
Hydro
Other renewables

2030

2040
2050
Nuclear
Bioenergy
Storage
IEA. All rights reserved.

11Power system adequacy refers to the ability of available generators to meet electricity demand at all times.

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IEA. All rights reserved.

Note: Storage includes hydrogen, ammonia and batteries. Pumped storage is included in the hydro total. Storage is notinherently low emissions, but depends on the primary source, which is increasingly low emissions in the NZE.
Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

The contribution of low emissions energy sources to dispatchable generating capacity
grows substantially in the NZE, with their combined capacity rising fivefold worldwide
to 2050. Hydro and nuclear power have long made up the bulk of low emissions
dispatchable capacity. The capacity of hydropower and other dispatchable
renewables, including bioenergy, geothermal and solar thermal, more than doubles
over 2021-2050, complementing the growth of non-dispatchable solar PV and wind
power. Energy storage, in a variety of forms, is set for massive expansion. Batteries,hydrogen and ammonia play increasingly important roles where the fleets of coal- andgas-fired power plants are young. Fossil fuels equipped with CCUS also emerge asimportant contributors to system adequacy.

Nuclear also helps to meet the rapidly rising need for
power system flexibility in the NZEElectricity system flexibility – the ability of the system to reliably and cost‐effectively
manage the variability and uncertainty of demand and supply – is becoming
increasingly central to electricity security as the share of variable renewables ingeneration grows. Flexibility over different timeframes, from minute‐to‐minute, hour‐
to‐hour and season‐to‐season, is needed to ensure instantaneous stability of thepower system and long‐term security of supply. Hour-to-hour flexibility needs inelectricity systems worldwide quadruple on average from 2020 to 2050 in the NZE –twice as much as overall electricity demand. The growing share of generation linked
to weather conditions (sunshine and wind) means that other generators are called
upon to change their output more often and by larger amounts. Changes in the patternof electricity demand, which varies more within the day as a result of the increasing
electrification of road transport, heating in buildings, industrial processes and the
expansion of electrolytic hydrogen, also drive up flexibility needs.

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IEA. All rights reserved.

The balance of solar PV and wind influences the kind of flexibility that will be needed
as electricity supply is increasingly decarbonised. Solar PV output varies regularly
within the day, from zero at night (without storage) rising to a peak around midday
before falling back to zero. Cloud conditions add a layer of variability within the day.
Short-duration flexibility, able to span a few hours or up to a day, is well adapted tothis regular pattern. Emerging market and developing economies rely heavily on solar
PV in the NZE, putting short-term flexibility at the heart of their energy security. Wind
conditions and related power output have less regular variability across the day, butmore variability from week to week and across seasons. Systems that incorporate
greater wind capacity will look more to longer-duration flexibility to balance electricity
supply and demand across several days or weeks. This is the case for advanced
economies in the NZE, where wind remains a bigger source of generation thansolar PV through to 2050.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

Advanced economies

6 000

60%

5 000

50%

4 000

GW

GW

Wind and solar PV installed capacity and shares in electricity generation by regionalgrouping in the Net Zero Emissions by 2050 Scenario
Emerging market and developing economies
6 000
60%
5 000

50%

40%

4 000

40%

3 000

30%

3 000

30%

2 000

20%

2 000

20%

1 000

10%

1 000

10%

0%

0

0

2020

2030

2050

Solar PV

2020

2030

2050

2020

Wind

2030

2050

2020

Solar PV

Installed capacity

2030

2050

0%

Wind

Share of generation (right axis)

IEA. All rights reserved.
Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

A suite of flexibility sources, including primarily low emissions generation, is used tomaintain electricity security in the NZE. Unabated fossil fuels provide over 60% of
hour-to-hour power system flexibility today. Over the next decade, unabated coal-,gas- and oil-fired plants continue to provide the lion’s share of flexibility, even as theirshares of generation decline. Demand response, whereby consumers adjust theirelectricity consumption in real time in response to system needs and price incentives,and storage technologies, including batteries, become the largest sources of shortduration flexibility after 2030, making up almost half the global total by 2050. A mix of
low emissions generation take the place of unabated fossil fuels. Hydropower has
long been a major provider of flexibility, with reservoirs acting as large energy storage
facilities. In the future, new reservoir hydro capacity is limited to a few markets due toenvironmental concerns and public acceptance, though pumped storage capacity
continues to grow. Other dispatchable renewables, such as bioenergy andgeothermal, also contribute. Low-carbon hydrogen and ammonia also contribute toseasonal storage.

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IEA. All rights reserved.

Nuclear power continues to contribute to power system flexibility in the NZE. In
advanced economies, its share of hour-to-hour flexibility rises from around 2% today
to 5% in 2050. In emerging market and developing economies, it increases from 1%
to 3%. In France, where nuclear meets the bulk of electricity generation needs,
flexibility has been incorporated into reactor designs to allow some plants to ramp up
and down their output quickly at short notice so as to operate in a load-following mode
to align electricity supply and demand. While many countries have not regularly calledon nuclear power to operate in this way to date, many reactors are able to do so withno or minimal technical modifications.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

Hour-to-hour power system flexibility by source and regional grouping in the Net Zero
Emissions by 2050 Scenario

Emerging market anddeveloping economies

Advanced
economies

Unabated fossil fuels
Hydrogen and ammonia

2020

Nuclear
Hydro

2050

Other renewables
Batteries
Demand response

2020
2050

0%

20%

40%

60%

80%

100%

IEA. All rights reserved.
Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

Innovation has the potential to make nuclear power more flexible. Advanced
technologies, including SMRs, could open up the possibility for nuclear reactors tovary their output of electricity more readily, possibly switching to produce heat orhydrogen instead of or alongside electricity. Efforts are being made to inform
policymakers and planners about the potential cost benefits of making nuclear power
more flexible, such as the campaign led by the Clean Energy Ministerial.

Nuclear power investment and costs
Annual investment in nuclear power triples by 2030 in the
NZE

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The resurgence of nuclear power in the NZE entails a massive increase in investmentin the coming decades, to build new nuclear reactors and extend the operational
lifetimes of existing ones. Annual global investment in nuclear in this scenario surges
to over USD 100 billion in the first half of the 2030s in the NZE – over three times theaverage of USD 30 billion in the 2010s. It falls steadily thereafter as the need for
dispatchable low emissions generating capacity subsides, reaching around
USD 70 billion in the second half of the 2040s. The investment in nuclear power over
2021-2050 accounts for less than 10% of the total for low emissions sources ofelectricity. By context, annual investment in renewables in this scenario rises from to
USD 325 billion on average over 2016-2020 to USD 1.3 trillion in 2031-2035.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

USD billion (2020)

Global average annual nuclear power investment by country/regional grouping in the Net
Zero Emissions by 2050 Scenario
120

Other emerging market anddeveloping economies

100

China

80
60

Other advanced economies

40

G7 members

20020112015

20162020

Historical20212025

20262030

20312035

20362040

20412045

20462050

Projections

IEA. All rights reserved.
Sources: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector; IEA (2021), Achieving Net Zero Electricity
Sectors in G7 Members; IEA (2021).

The focus for nuclear investment in the NZE shifts gradually from emerging market
and developing economies to advanced economies over 2021-2050. They averageclose to USD 50 billion per year in advanced economies, accounting for about half
the global total. This is almost fourfold the average over the 2010s. These countries’
investment needs are high relative to their share of global capacity due to higher
construction costs and the need for large investments to extend the lifetimes ofexisting reactors and build new ones to offset retirements. The latter factor also
explains why investment in advanced economies is skewed towards later decades.
China needs to spend close to USD 20 billion per year on nuclear on average to 2050,
nearly double the average over the 2010s. Other EMDEs triple investment to about
USD 25 billion per year on average. In contrast to advanced economies, investmentin these countries is needed more in the period to 2035.

The cost of new nuclear reactors varies widely by region

Additional regional cost assumptions for nuclear power and other power technologies from the World Energy Outlook 2021 arefreely available for download.

12

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The cost of construction of new nuclear reactors – an important factor in determining
relative investment in competing dispatchable generating sources – is far from
uniform across the world. 12 In the NZE, it is assumed that China and India are able tobuild new nuclear plants at the lowest cost, at less than USD 3 000/kW, with projects
completed in five to seven years. This means that a new large-scale reactor with acapacity of 1.1 GW would cost roughly USD 3 billion (in 2020 USD). Costs are
assumed to remain a lot higher in the European Union and United States, though they
decline progressively over the next three decades to around USD 4 500/kW.
Achieving these cost reductions would require the nuclear industry to deliver projects

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

on time and on budget. There are some proven methods to reduce costs for
subsequent investments, including beginning construction only after designs are
finalised, maintaining the same design for subsequent units to achieve “nth of a kind”
efficiencies and building multiple units at the same site. Innovation is also being
applied to the siting process, which could shorten lengthy pre-construction periods.
The nuclear construction cost assumptions apply to all sizes of reactors in our
analysis.
Nuclear power construction cost assumptions for selected countries and regions in the
Net Zero Emissions by 2050 Scenario (USD/kW at 2020 prices)
Region

2020

2030

2050

European Union

6 600

5 100

4 500

United States

5 000

4 800

4 500

India

2 800

2 800

2 800

China

2 800

2 800

2 500

Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

Nuclear power must overcome economic barriers toinvestment

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Aside from non-economic barriers such as public acceptance, the nuclear industry
must overcome several economic barriers to investment for it to contribute to reaching
net zero as depicted in the NZE. The primary economic barrier is cost relative to thatof other low emissions energy sources. Measured by the levelised cost of electricity(LCOE) – the average cost of electricity generation for a plant over its operating
lifetime – solar PV is already the cheapest new source of electricity in most markets,with costs having fallen some 85% over the past decade. Solar PV costs continue tofall in the NZE driven by massive deployment and innovation (after temporary priceincreases in the near term due to supply-chain disruptions). Onshore wind is the only
low emissions technology that can compete with solar PV on cost, with offshore windon track to approach the cost of onshore projects in many cases within the next few
years. By 2030, the costs of solar PV and onshore wind are projected to fall to lessthan USD 50/MWh in most markets – well below the costs of new nuclear projects.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

USD (2020) per MWh

Levelised cost of electricity for selected technologies and countries in the Net Zero
Emissions by 2050 Scenario
160

European Union
United States

120

India
China

80

40

0

2020

2030
Nuclear

2050

2020

2030

2050

Solar PV utility

2020

2030

2050

Wind onshore

2020

2030

2050

Wind offshore

IEA. All rights reserved.
Note: Levelised costs for nuclear include the costs of decommissioning.
Source: IEA (2021), Net Zero by 2050: A Roadmap for the Global Energy Sector.

Yet, in many instances, nuclear power can still be competitive with renewables whenits broader electricity system benefits are considered. The LCOE is a common metricfor comparing and screening low emissions generating options but does not allow fordifferences in the way each technology operates, notably dispatchability. Morecomplete metrics, such as the value-adjusted LCOE, quantify the system value ofdifferent technologies, through their contributions not only to low emissions electricity,
but also to system adequacy and flexibility. The value-adjusted LCOE of wind andsolar PV tends to rise as their share of total generation increases, while that of nuclear
and other dispatchable generating options falls, making them more competitive andgranting them a larger role in least-cost systems than the LCOE alone might indicate.

What is the value of nuclear output?

As the share of variable renewables rises, the energy value of an additional solar PVor wind project tends to decline. The regular output pattern of solar PV means that

Page | 52

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The competitiveness of nuclear in relation to other power generation technologies isdetermined by the value of its output as well as its cost of production. The ability of anelectricity source to be available during times of highest system needs, for example,
helps to raise its energy value, measured by the average wholesale price obtained for
its output in a competitive market. At the same time, an abundance of output when it
is not needed reduces the energy value. The energy value of a particular technology
in a system depends on the pattern of demand, the mix of generating resources, fueland CO2 prices, and other system-specific elements.

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

without storage, its energy value declines the most. In our simulations of the European
Union, China and the United States, each percentage point rise in the share of variable
renewables in total generation reduces the energy value of solar PV by 1-2% relative
to the average wholesale electricity price. The loss of value is less marked for wind:for each percentage point increase in the share of variable renewables, the energy
value of onshore or offshore wind declines by just 0.3% or less. By contrast, nuclear
power’s energy value relative to the system average is stable or increases in thesemarkets as the share of variable renewables rises, rewarding its dispatchability.
Energy value of low emissions electricity relative to the average wholesale
electricity price with rising shares of variable renewables by technology
European Union

United States

China

120%
100%
80%
60%
40%
20%

20%
40%
60%
80%
Share of variable renewables
Nuclear
Solar PV

20%

40%

60%

80%

Onshore wind

20%

40%

60%

80%

Offshore wind

IEA. All rights reserved.
Note: Energy value is calculated as the average price per unit of output over the year, based on the simulated hourly
wholesale electricity price and production profile by technology in the Sustainable Development Scenario, which achieves
key energy-related United Nations Sustainable Development Goals related to universal energy access and major
improvements in air quality, and reaches global net zero emissions by 2070.
Source: IEA (2021), World Energy Outlook 2021.

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IEA. All rights reserved.

The relatively large size and high associated upfront costs of conventional nuclear
reactors are another economic barrier. A single large-scale reactor can have thecapacity to produce over 1 600 MW of power – the largest of any technology. Smaller
reactors are possible, but are less able to exploit economies of scale. By comparison,hydropower has the next largest plant capacity, with individual turbines capable ofproducing up to about 800 MW. At the other extreme, a single solar PV panel has acapacity of 300 W in utility-scale projects and as little as 100 W in rooftop installations.
The large capacity of nuclear reactors combined with their relatively high construction
costs mean that the cost of a single reactor can exceed USD 10 billion in somecountries – an order of magnitude greater than any other low emissions technology.
Only a few companies in the world are capable of handling projects of this scale and,even for them, such projects present considerable risks in the case of

Nuclear Power and Secure Energy Transitions

The Role of Nuclear Energy on the Road to Net Zero Emissions

delays or cost overruns. This can deter investment in a single reactor as well as thedevelopment of a series of reactors necessary to drive down the costs of new reactor
designs.
Range of plant capacity and cost of selected electricity generating technologies, 2020
Unit investment
10 000 000 000

1 000 000 000

1 000 000 000

USD (2020)

W

Unit capacity
10 000 000 000
100 000 000
10 000 000
1 000 000

100 000 000
10 000 000
1 000 000

100 000

100 000

10 000

10 000

1 000

1 000

100

100

10

10

1

Nuclear Hydro
Wind
Wind Solar PV
reactors turbines offshore onshore panels
turbines turbines

1

Nuclear Hydro
Wind
Wind Solar PV
reactors turbines offshore onshore panels
turbines turbines

IEA. All rights reserved.
Note: Log scales.

In countries that plan for nuclear power to play a part in the energy transition,
governments must intervene to help overcome these economic barriers. It is criticalthat the contributions of low emissions technologies, including nuclear power, toemissions reductions and energy security are appropriately valued. Pricing CO2
emissions and other pollutants is the most efficient means of valuing low emissions
contributions, while markets for power system services are well-suited to value
contributions to electricity security. Where these are not in place, it may be necessary
to intervene directly in competitive markets to incentivise private investment, or toprovide price or revenue guarantees under long-term contracts to new generators aspart of an overall plan for the energy sector. Government actions can also drive
nuclear innovation, helping advanced designs through the various stages ofdevelopment to commercialisation, for example by supporting construction of a seriesof reactors, for which the initial costs are likely to be high.

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Advanced reactor designs, in particular SMRs, have the potential to address both theeconomic barriers described above, in turn making it more feasible to develop multiple
projects and drive down costs. The extent to which costs can be lowered will
determine the degree to which nuclear technologies are able to produce low
emissions electricity, heat or hydrogen in the long term. If costs can be reduced morethan assumed in the NZE relative to other low emissions technologies, the role ofnuclear energy could be significantly larger than that projected.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

3. The competitiveness of nuclear
energyAssessing the value of nuclear todecarbonising energy systems
Reducing emissions from power generation cost-effectively while ensuring energy
security requires a market framework that adequately values both low emissions
generation and the full range of electricity system services. Energy transitions require
shifting away from the unabated use of coal and natural gas to a suite of low emissions
technologies in the power sector. The favourable attributes of nuclear power – notably
its low emissions, dispatchability and flexibility – will boost its value to electricity
systems as they are progressively decarbonised. In particular, dispatchability will
become increasingly valuable as variable renewables, which are not dispatchable andare less flexible than thermal generating sources, provide an increasing share of
power generation. Other sources of flexibility such as hydropower or geothermal facedifficulties in scalability or acceptable sites, or have yet to prove themselvescommercially in the case of electrolytic hydrogen and CCUS.
For these reasons, electricity markets need to be designed to ensure that theeconomic value of nuclear power, alongside other low emissions technologies, is fullyreflected in price signals in order to incentivise investment in a non-discriminatory
manner. In the absence of good market design, governments will need to rely to agreater extent on other incentives, such as administratively defined payments, tomake these investments happen, often with higher cost outcomes.

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IEA. All rights reserved.

Nuclear energy can also contribute to the expansion of low emissions heat and low
emissions hydrogen production. Competition between the technological options for
supplying those growing markets is significantly different than in the power sector andthe impact of site-specific considerations is more important for the investment
decisions taken. Exploiting this potential could strengthen business cases for new
reactors by increasing revenues and reducing the risk of having to curtail production
in systems with high shares of variable renewables.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Electricity generation
New nuclear reactor construction costs need to fall sharply
to compete for more market share with solar PV and wind
The cost of building new nuclear reactors will be crucial to the future role of nuclear
power in the global clean energy transition. At the cost assumptions in the NZE,
nuclear plays a complementary role, contributing to system stability, expanding thesuite of low emissions sources and stepping up where renewables are constrained.
However, in order to compete directly with solar PV and wind power, considering boththe costs and system value for each technology, the construction cost of new nuclear
would need to be reduced to USD 2 000/kW (in 2020 USD) or less for capacity to be
added in 2030. At this construction cost, the LCOE of nuclear power would be in therange of USD 40-60/MWh, depending mainly on the cost of financing. The lower endof that range corresponds to a weighted average cost of capital of 4%, which requires
project- and technology-specific risk to be minimised or transferred to other parties.
Support measures should be technology-neutral whenever acceptable and possible
to ensure the most affordable energy transitions. The duration of construction and thecapacity factor, which also influence the LCOE, vary by region. For example, shorter
construction periods and higher projected capacity factors result in a lower LCOE in
China.
Where the costs of nuclear construction are closer to USD 4 000/kW, the LCOE jumps
to USD 60/MWh to USD 100/MWh, which exceeds that of solar PV and wind projects,
including with storage, in most cases. The value-adjusted LCOE (VALCOE) of nuclear
power is very similar to the LCOE in the European Union, China and the United States
as nuclear power’s contribution to low emissions electricity supply, power system
adequacy and flexibility is roughly equal to the average of the entire power plant fleet.

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IEA. All rights reserved.

Nuclear lifetime extensions are a competitive source of low emissions electricity,
especially in Europe and the United States. The capital cost for most extension
projects is in the range of USD 500/kW to USD 1 100/kW in 2030, yielding an LCOE
generally below USD 40/MWh. At this cost, nuclear lifetime extensions arecompetitive with low cost solar PV and wind under most conditions, despite solar PV
and wind power costs falling heavily. Extensions contribute to power system services
to a similar degree as new projects, so there is little difference between their VALCOE
and LCOE.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Levelised cost of electricity and value-adjusted levelised cost of electricity for selected
generating resources in selected countries, 2030

USD (2020) per MWha) European Union
120
LCOE

VALCOE

500
8%

1100
4%

80

40

USD/kW:
WACC:

500
4%

1100
8%

2000
4%

Nuclear lifetime extensions

2000
8%

4000
4%

4000
No 4-hour 8-hour No 4-hour 8-hour
8% storage storage storage storage storage storage

New nuclear

Solar PV utility

Wind onshore

USD (2020) per MWhb) China120
LCOE

VALCOE

500
8%

1100
4%

80

40

USD/kW:
WACC:

500
4%

1100
8%

2000
4%

Nuclear lifetime extensions

2000
8%

4000
4%

4000
No 4-hour 8-hour No 4-hour 8-hour
8% storage storage storage storage storage storage

New nuclear

Solar PV utility

Wind onshore

USD (2020) per MWhc) United States
120
LCOE

VALCOE

500
8%

1100
4%

80

40

USD/kW:
WACC:

500
4%

1100
8%

Nuclear lifetime extensions

2000
4%

2000
8%

4000
4%

New nuclear4000
No 4-hour 8-hour No 4-hour 8-hour
8% storage storage storage storage storage storage
Solar PV utility

Wind onshore

Notes: LCOE = levelised cost of electricity; VALCOE = value-adjusted LCOE; WACC = weighted average cost of capital.
VALCOE is a metric in the IEA energy modelling framework that reflects technology-specific LCOEs and contributions to system
value. The size of storage is assumed to be one-quarter of that of the renewable energy project (e.g. a 100 MW solar PV arrayhas a 25 MW battery with 4 hours or 8 hours of duration). Construction costs for solar PV and wind onshore and simulated
operations are based on the Net Zero Emissions by 2050 Scenario.
Source: IEA (2021), World Energy Outlook 2021.

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IEA. All rights reserved.

IEA. All rights reserved.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

The competitiveness of nuclear depends also on the prospects for further reductionsin the cost of generating electricity from solar PV and wind. Solar PV is the cheapest
source of electricity in most regions today; it is also widely available and scalable. The
LCOE of solar is projected to fall by more than 40% by 2030 in the NZE, with mostutility-scale projects costing around USD 20/MWH to USD 40/MWh. However, thevariable output of solar PV does not match patterns of electricity demand very well,reflected in a VALCOE that is notably higher than its LCOE. Pairing solar PV witheither 4-hour or 8-hour storage makes it more competitive, with co-location offering
cost advantages, with a lower VALCOE than solar PV on its own in China, theEuropean Union and the United States.
As with solar, wind power is widely available and scalable in most markets. It is amore mature technology than solar PV, though innovations continue. As withsolar PV, the LCOE of most onshore wind projects is expected to fall to USD 30/MWh
to USD 70/MWh in 2030. The profile of wind output, which depends on windconditions, are often misaligned with demand patterns, so wind’s VALCOE isgenerally well above it’s LCOE, making it less competitive than the LCOE alone would
suggest. Pairing storage with onshore wind can lower the VALCOE, particularly where
the share of wind in total generation is high, such as in the European Union.
Non-economic factors, including the availability of suitable sites and public
acceptance, will also affect their deployment.

Nuclear is better able to compete with other dispatchable
low emissions options

The global potential for building more hydropower capacity, which has been a lowcost source of low emissions electricity for decades, is limited. The costs and eventual
performance of hydroelectric plants depend heavily on project-specific factors. The
LCOE for new projects is projected to dip to USD 40/MWh to USD 100/MWh by 2050
in the NZE, with new projects increasingly concentrated in a few regions withremaining potential and the best site conditions. Most high-quality resources

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IEA. All rights reserved.

The cost of building new nuclear power plants needs to fall much less to compete withother dispatchable sources of low emissions electricity. In most places, nuclear
construction costs would need to fall to USD 2 000/kW to USD 3 000/kW (in2020 USD) to compete with other dispatchable sources, including hydropower,
bioenergy and fossil fuel plants equipped with CCUS, though the potential of thesealternative dispatchable sources may be limited in some regions. Depending on
financing costs, this would yield a LCOE of nuclear power of USD 40/MWh to
USD 80/MWh. Among these sources, the LCOE is a good measure of theircompetitiveness since their dispatchability and value to electricity systems are similar.
While the use of fossil fuels with CCUS carries a greater risk of price volatility, falling
dependence on fossil fuels across the global energy system would put downward
pressure on prices in the long term.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

developed long ago and many sites are unavailable due to environmental concernsand social impacts, with the expansion of hydropower with reservoirs limited mainly
to China, Southeast Asia and Africa.
Bioenergy power plants are scalable and can be built at most sites, but are limited byrelatively high costs. This is particularly the case where sustainable domestic suppliesof biomass are limited and biomass pellets need to be imported, such as in Europe.
As a result, the LCOE of these plants often exceeds USD 150/MWh by 2050 in the
NZE. While the availability of low-cost fuel in the form of agricultural residues cangreatly improve the economics of bioenergy power plants, such projects tend to besmall in size and their overall contribution to electricity generation modest.

USD (2020) per MWh

Levelised cost of electricity for selected dispatchable low emissions electricity generation
sources200

2050

8 000 USD/kW

2040
160

2030

120
80
40
2 000 USD/kW
0

WACCWACC 2030 2040 2050 2030 2040 2050 2030 2040 2050 2030 2040 2050
4%8%Nuclear

Hydro

Bioenergy

Coal CCUS

Gas CCUS
IEA. All rights reserved.

Notes: WACC = weighted average cost of capital. Ranges represent variations across major regions with at least 10 GW ofdeployment over 2020-2050 for each technology, reflecting regional construction costs, fuel prices, CO2 prices and simulated
operations in the Net Zero Emissions by 2050 Scenario.
Source: IEA (2021), World Energy Outlook 2021.

Another critical factor is the price of natural gas. Russia’s invasion of Ukraine is set tomaintain upward pressure on price levels for some time to come; if high prices persist,

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Natural gas-fired power plants equipped with CCUS have the potential to be among
the cheapest dispatchable sources of low emissions electricity. An important factor isthe cost of the carbon capture equipment, which has been in the development anddemonstration phases for more than a decade. Full-scale commercial projects areneeded urgently to drive down costs and reduce uncertainties for the technology.
There are signs of progress, as policy support for the development of CCUS is
expanding, for example in the United States and Canada, and the number of projects
under development worldwide is increasing. A spillover benefit would be to makecapture equipment available for industry in hard-to-abate applications, such as ironand steel production.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

or if the carbon capture technologies were to progress only slowly, the cost ofgeneration at gas-fired power plants with CCUS would be substantially higher, making
nuclear power relatively more competitive. But if prices in some regions were to returnto levels in the USD 2/mmBtu to USD 6/mmBtu range, then gas-fired power plants
with CCUS could generate power at a cost of less than USD 70/MWh in 2030.
The competitiveness of coal-fired power plants equipped with CCUS versus nuclear
power depends on whether those plants are new or retrofitted. New coal plants, likenew nuclear ones, are relatively expensive to build but operate in most hours andprovide a suite of system services. With technology improvements, the projected
LCOE of new coal CCUS projects is in the range of USD 80/MWh to USD 110/MWh
by 2040. Retrofitting existing plants with carbon capture equipment offers a way forsome of the highest emitting power plants in the world to become low emissions
sources. This could be significantly cheaper, especially for recent plants that were
designed to be CCUS-ready, although CO2 networks and storage need to be
developed in parallel with individual facilities, which complicates the use of CCUS
technology. An alternative is to permanently shut down existing coal plants and re-use
the sites to host new nuclear projects, sized to fit the space and exploit the existing
grid connection. This option has the potential to host a significant amount of new
nuclear capacity, most likely in the form of small modular reactors.
Low-carbon hydrogen and ammonia, which can in principle be used as inputs to gasand coal-fired power plants to provide dispatchable power, are essentially carriers of
low emissions energy – not sources – and so are not primary competitors with nuclear
power. Rather, they could complement nuclear power if they are used to produce
those fuels as a way of storing electrical energy for subsequent use in meeting peakdemand. Hydrogen and ammonia are not yet used on a significant scale in the power
sector, and start to take off only after 2030 in the NZE. This is because the share ofvariable renewables reaches high levels and the seasonal variability of wind and solar
PV creates new demand for flexible sources of electricity. As relatively expensive fuels(due mainly to the large energy losses in producing and using them), hydrogen andammonia are best suited to meet peak demand needs and provide long-duration orseasonal storage. While large-scale nuclear power can also contribute to peak systemneeds, it is best suited to operate in baseload mode.

Electricity system services

The transition to net zero emissions requires a radical change in the way various
electricity system services are provided to ensure secure, flexible and stable system
operation. These services include system stability, ramping and other forms of shortterm flexibility, and capacity at times of peak demand, in addition to the supply ofPage | 60

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Nuclear has important energy security attributes for theroad to net zeroNuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

electricity itself. While variable renewables, mainly wind and solar PV, become themost cost-effective source of energy on an LCOE basis in many locations and, thus,
generate most electricity in fully decarbonised systems in the NZE, other generating
sources – including nuclear in some countries – are required for the secure operationof the system.
China provides an example of the role that nuclear power could play in ensuring
electricity security in a decarbonised system. In September 2020, the Chinese
government announced a pledge to have CO2 emissions peak before 2030 andachieve carbon neutrality before 2060. The IEA released a report in September 2021,
An Energy Sector Roadmap to Carbon Neutrality in China, presenting a scenario in
which this goal is achieved, based on detailed modelling of the power and othersectors. In this scenario (which reaches net zero emissions later than in the NZE),
variable renewables provide 58% of total electricity supply in 2060, up from about 4%
in 2020. However, they contribute only around 8% of peak capacity. Storage, demand
response, hydropower and plants with CCUS each contribute more. The share of
nuclear in total generation in 2060, at around 10% in 2060, is much lower than that ofvariable renewables, yet nuclear contributes equally to meeting peak capacity needs.
Nuclear also contributes much more to stability services, including inertia, whichreaches 48% in 2060 compared with just 3% in 2020.
Contribution to electricity system services by resource in China
2020

2060
Inertia
Ramping
flexibility
Peakcapacity/adequacy
Energy0%
Thermal20%

Variable renewables

60%
80%
40%
Abated thermal
Bioenergy

100%
Clean fuels0%

Other renewables

20%
40%
Hydro
Storage

60%

80%
100%
NuclearDemand response

IEA. All rights reserved.
Note: Inertia is based on the contribution to inertia in the 100 lowest-inertia hours. Ramping is calculated from the contribution to
the top 100 hourly ramps. Energy is total generation. These measures aim to illustrate the diverse aspects of electricity security,
but do not encompass all relevant components or potential technology contributions.
Source: IEA (2021), An Energy Sector Roadmap to Carbon Neutrality in China

A major consequence of the increase in the shares of variable wind and solar energy
in total power generation is an increase in the volatility in net load – total load minus

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Transitions will change the optimal mix of generating
resources

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

wind and solar generation – over all timescales, from minutes to hours, days, weeks
and seasons, as well as major changes in net load profiles. Wind and solar plants
always generate when available given their extremely low operating costs. Net load
represents the demand that must be met with dispatchable sources, including nuclear
power, thermal plants, hydro, storage or imports from outside the system. That
demand inevitably increases as more variable renewables are added to the system.
Just how much in practice depends on local climatic and seasonal factors, as well as
the mix of solar and wind. For example, in the summer, solar generation in some warm
locations tends to coincide with electricity demand, as cooling needs peak during
daylight hours, reducing net load, i.e. the generation needed from dispatchable plants.
The reverse may be true in the winter, when demand may be highest in the evening
after the sun has gone down.
Korea illustrates this phenomenon, which we recently highlighted in our report
Reforming Korea’s Electricity Market for Net Zero, by carrying out detailed powersystem modelling of a pathway to net zero energy-related CO2 emissions by 2050. In
that scenario, the share of variable renewables in total electricity rises from 4% in2020 to 50% in 2035, increasing the range of hourly net load fourfold. 13 The net load
duration curve – net load for each hourly period over the year ranked in descendingorder of magnitude – also shifts markedly. More dispatchable capacity is needed onethird of the time in 2035 compared with 2020, but none is needed about one-fifth of
time.

GW

Hourly net load and load duration curve in Korea
150

Net load duration curve

Hourly net load

150

100

100

50

50

0

0

-50

-50

-100

-100

-150

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

-150

2020

2035
IEA. All rights reserved.

Note: Net load = total load minus wind and solar power generation.
Source: IEA (2021), Reforming Korea’s Electricity Market for Net Zero.

As electricity systems experience increasingly pronounced hourly and sub-hourly
ramps – real-time increases and decreases in electricity supply in response to
Net load ranges from a minimum of -108 GW (when variable renewables output exceeds demand, resulting in potential
curtailment, or disconnection from the grid) to a maximum of plus 115 GW, i.e. a range of 223 GW in 2035, compared to a rangeof 54 GW (32 GW to 86 GW).

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13

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energychanges in load – and larger differences between minimum and maximum daily
demand, the need for intraday flexibility on the supply and demand sides will grow.
This flexibility can be provided by pumped storage and batteries, as well as demand
response programmes, including smart vehicle charging, appliances and thermostats.
The more frequent occurrence of periods during the day with very low or even zero
prices, when load is met entirely by zero marginal cost renewables, will provide
opportunities for energy-intensive industries that can adjust their production
schedules flexibly to reduce their costs.
The optimal mix of dispatchable capacity to meet the shifting demand curve in any
given system is determined by the relative cost of input fuels and the capital andoperating costs of each type of plant, taking account of their capacity factors. As eachgenerating option has a mix of fixed and variable costs, plants with high fixed costs
but low operating costs operate most economically at higher capacity factors. Thosewith low fixed costs but high operating costs operate more economically during peak
periods. In Korea, for example, net load at present is met by a mix of oil, natural gas,coal, hydro and nuclear power, in increasing order of utilisation. As the shares of windand solar increase, the changing shape and level of the net load duration curve affectthe way net load is met considerably, as the costs of low emissions dispatchable
technologies fall relative to those of high-emissions sources like coal and gas.
A “screening curve” approach shows how these dispatchable generating resources
complement each other in the Korean net zero scenario. The screening curve takes
the total cost of a resource, including its annualised capital costs, operating andmaintenance costs, and fuel costs, and finds the lowest cost solution at each capacity
factor along the net load duration curve. The lowest-cost resource is then mapped
onto the net load curve to determine both the amount of capacity needed and the
expected total energy supplied by each resource. In the scenario, nuclear accounts
for the bulk of dispatchable generation in 2035, while coal and gas are used as
peaking resources.

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In other systems with higher nuclear construction costs and lower coal and gas prices,
the contribution of nuclear would be lower and that of coal and/or gas higher. In
completely decarbonised electricity systems, peaking resources could include lowcarbon fuels like electrolytic hydrogen and ammonia and the intermediate (mid-load)
resource could be coal or gas plants with CCUS. The use of low carbon fuels as apotential peaking resource is explored in more detail in the IEA report, The Role of
Low-Carbon Fuels in the Clean Energy Transitions of the Power Sector.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Illustrative lowest cost dispatchable power generation mix to meet net load in Korea, 2035
Coal

Nuclear

Total generation costGas

120 000MW

100 000
80 00060 00040 000
20 000
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
3200
3400
3600
3800
4000
4200
4400
4600
4800
5000
5200
5400
5600
5800
6000
6200
6400
6600
6800
7000
7200
7400
7600
7800
8000
8200
8400
8600

0

Annual Operating Hours

IEA. All rights reserved.
Note: Net load = total load minus wind and solar power generation. The analysis assumes a 7% weighted average cost ofcapital.
Source: IEA (2021), Reforming Korea’s Electricity Market for Net Zero. Design adapted from Baik et al (2021).

Dispatchable low emissions generation

Market reforms need to value the benefits brought by nuclear power and other lowcarbon and dispatchable generating options. The electricity supply industry has beenliberalised or is in the process of being liberalised in most advanced economies anda growing number of emerging market and developing economies. A competitive
wholesale electricity market is the central feature of a liberalised power system, aimed
at sending economically efficient cost-reflective price signals while respecting
physical system constraints. This requires coordinating the actions of each participant– generators that make available energy and other services to the system andwholesale buyers – in real time through bids, in which the last source of supply drawn
upon in the merit order sets the price for everyone.

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Appropriate market design is critical to achieve a clean andsecure power system transformation, at least costNuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Marginal cost pricing, whereby the costliest action taken to balance the system sets
the price, encourages efficient outcomes because the price reflects the aggregate
supply and demand of all system actors. Each generator produces until the point at
which its marginal cost is equal to the price received in the market, while customers
consume electricity only when its cost is less than the value of their consumption. At
the market price, no actor is enriched by changing their level of supply or demand.
Dispatching power this way encourages efficient investment decisions, as therevenues earned in the wholesale market at times when market prices exceed
variable operating costs allow generators to recover their investment costs and earna rate of return.
Wholesale market prices, which can vary greatly by location and time, guide decisions
by generators about operational behaviour, investment in new physical system assets
and the retirements of existing assets. Expectations of spot market prices form thebasis of financial instruments used to hedge price exposure or for speculation.
Investment decisions need to take account of the relative merit of peaking or baseload
generating capacity or storage technology (such as batteries), which is determined by
the amount of price volatility in the system. For electricity retailers who buy from thewholesale market, these prices form the basis of the tariffs offered to their customers,
which may include prices that vary according to time. It is, therefore, imperative thatspot market prices accurately reflect both the cost of providing electricity services andthe actual economic value of electricity taking account of environmental factors,
including CO2 emissions in generation.

Carbon pricing puts an explicit value on the low emissions
benefits of nuclear power

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In a competitive system, it is crucial that the cost of CO2 emissions is reflected in theprice of electricity generated from fossil fuels so as to favour generating options that
incur little or no emissions, such as nuclear power. This encourages a more
decarbonised energy system at the lowest cost. A carbon price is the principal
mechanism for achieving this. Carbon pricing affects the merit order of generation,encouraging emissions-saving behaviour at any given time and location through fuelswitching and the storage of renewables for later use. In principle, including a carbon
price in the wholesale market price, either through an emissions trading system orcarbon tax, is economically more efficient than other types of decarbonisation
incentive because it targets emissions directly and does not discriminate between
technologies, whether on the supply or demand side (energy efficiency and demand
response), other than on the basis of CO2 emissions.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Illustrative example of the shift in the merit order due to a carbon price
Merit order with carbon price

Merit order

DemandPrice

DemandEmissions
costs

Quantity
Renewables

Nuclear

Coal

Gas

Coal with CCUS
IEA. All rights reserved.

Source: IEA (2021), Korea Electricity Security Review.

Although carbon pricing has been introduced in the electricity and other sectors inmany parts of the world, prices have often been too low to have a significant impact
on investment decisions on new capacity. At present, some 45 countries and 34
subnational jurisdictions have some form of carbon pricing scheme, covering over
21% of greenhouse gas emissions. CO2 emissions trading systems have been
implemented in several electricity markets, including the European Union, a group ofstates in the northeastern United States and California, and China, where a national
scheme was launched in 2021, immediately becoming the world’s largest carbon
market (by volume) covering over 4 Gt of CO2 emissions. Until recently, carbon prices
in most of these systems have been low, having only a modest impact on wholesale
electricity prices. This has changed recently, with significant increases occurring inEurope, where prices surged to around EUR 100/t in early 2022, though they fell backsharply in the wake of the Russian invasion of Ukraine; permits had previously neverconsistently traded above EUR 30/t. Prices have also risen in the United States,
though they have stagnated in China.

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Nuclear power is always behind both wind and solar PV in the merit order in wholesalemarkets, even with carbon pricing, as the latter has zero marginal costs. However,
the introduction of carbon pricing or an increase in the CO2 price has the effect ofpushing up the cost of fossil-based generators, which raises the wholesale electricity
price and increases the revenues received by nuclear plants without changing theircosts. In the illustrative example, the change in the generating cost of fossil plants
results in a change in the merit order and roughly doubles the marginal price. This
helps to compensate for any decline in the demand for nuclear power caused by risingvariable renewables capacity, which automatically pushes nuclear down the meritorder.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Carbon pricing mechanisms are implemented only in part across the United States.
As a result of an expansion in variable renewables capacity and stagnating electricity
demand, nuclear power plants have been coming under increasing financial pressure
in some states. Since 2013, 12 nuclear plants have closed for financial reasons, andseveral others remain at risk of closure. Some states have adopted zero emission
credits as a temporary measure to provide financial relief and support the continued
operations of nuclear reactors. The credits work in a similar way to renewable
obligations, which are used in some other states, providing an additional revenue
source for low emissions technologies. More recently, as part of the Bipartisan
Infrastructure Law of 2021, a USD 6 billion Civil Nuclear Credit Program waslaunched to help preserve the nuclear fleet. Under the programme, owners or
operators of commercial reactors can apply for certification and competitively bid for
credits to support their continued operation.

Remuneration for capacity and ancillary services
Wholesale market prices, even with high scarcity and carbon prices, may not induce
adequate investment in dispatchable assets if price signals are volatile or projects are
subject to other risks that are difficult to hedge, like policy risk. This may be the casefor long-lived asset like nuclear power plants with large investment costs and low
operating costs.
The provision of electricity system services other than the supply of energy, including
capacity availability and ancillary services (a variety of operations required to maintaingrid stability and security), can be incorporated into wholesale markets. This is alreadythe case in several countries. The costs of these system services, harmonised withthe energy market, need to be embedded in the marginal cost of electricity for thesystem to operate efficiently in a competitive market. This ensures that the prices paid
for the services increase during periods of system stress, such as when shortages ofreserve capacity emerge, so as to reward actions taken by market participants torelieve stress.

Nuclear power can benefit from these mechanisms by guaranteeing a portion of theirrevenues on an annual or longer basis. This can lower the cost of capital and help tomake plants more financeable. But capacity mechanisms need to be designed so thatthey reward actual contributions to system security instead of just year-roundavailability. There are concerns that poorly designed mechanisms can lead tooverinvestment and excessive costs and prices, especially if wholesale markets do
not function well.

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Capacity mechanisms, which remunerate generators for making capacity available atexisting and future plant, have been adopted in several markets as a way of attracting
investment in new capacity or keeping existing plants from retiring prematurely.
Capacity mechanisms are common in US markets and have been introduced in some
European countries, including France and the United Kingdom.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Adequately remunerating the provision of ancillary services can also be a means ofboosting revenues to the operators of nuclear reactors, thereby increasing theirprofitability and the attractiveness of investing in them in the first place. Flexible
nuclear power plants can typically increase or reduce power by 10% within a few
minutes to control the flow of alternating current power from multiple generators
through the network (frequency control) and by up to 80% within a few hours to meetload variation.

The effects of carbon pricing and capacity remuneration: acase study
Carbon pricing and capacity remuneration, either through scarcity pricing or a capacity
market, can boost significantly the competitiveness of nuclear and other low emissions
generating options vis-à-vis fossil fuel based generation. This would lower the needfor out-of-market incentives, such as tax credits or feed-in tariffs, to build and operate
low-carbon generation sources. In order to illustrate this, we have taken the resultsfrom the hourly model of China’s electricity market based on its 2060 carbon neutrality
target, in the year 2035, and tested how a CO2 price affects the profitability of different
generation types. In the absence of a CO2 price, none of the main generation types
would earn enough revenue through the energy market to support new investment.
Introducing scarcity pricing and assuming a USD 100/t CO2 price increases
substantially the profitability of all low emissions generating types, making theoperation and construction of new capacity more financially attractive.

Percentage of total cost of new entry

Impact of CO2 price and capacity scarcity pricing on profitability of electricity
generation in China by type, 2035
300%

200%

100%

0%

Gas

Coal

2035 net energy revenues

Solar

Wind

Nuclear

Hydro

PSH

Battery2035 net energy revenues with scarcity and USD 100/t CO2 price

IEA. All rights reserved.
Notes: PSH = pumped storage hydropower. The comparison is between net energy revenues on the one hand and fixed
operation and maintenance and annualised capital costs on the other. The weighted average cost of capital is assumed to
be 7%. The analysis is based on the system reference marginal cost and scarcity pricing, with an assumed CO2 price of
USD 100/t.

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IEA. All rights reserved.

Source: IEA (2021), An Energy Sector Roadmap to Carbon Neutrality in China.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Average annual revenue for nuclear power in this case study increases from
USD 130/kW to USD 640/kW when scarcity pricing and a USD 100/t CO2 price areadded. This compares with an annualised cost of new capacity of USD 260/kW, ofwhich fixed operation and maintenance make up USD 90/kW. Without scarcity pricing
or a CO2 price, revenues are high enough to cover the operating costs of existing
reactors, but not to make new plants profitable.

USD/kW per year

Impact of CO2 price and capacity scarcity pricing on profitability of nuclear
power plants in China, 2035
800

Net energy revenues
Annual fixed cost

600

Annualised capital cost
Profits

400

200

380

0
-132
-200

Revenues

Costs

Profits

No scarcity or carbon pricing

Revenues

Costs

Profits

Scarcity and 100 USD/t CO2

IEA. All rights reserved.
Notes: The weighted average cost of capital is assumed to be 7%, the construction cost USD 2 500/kW, construction time
7 years and technical lifetime 60 years. The analysis is based on the system reference marginal cost and scarcity pricing,with an assumed CO2 price of USD 100/t.
Source: IEA (2021), An Energy Sector Roadmap to Carbon Neutrality in China.

Electrolytic hydrogen and heat production

Today, hydrogen is an important feedstock in the chemical industry and in refineries.
In the NZE, the global use of hydrogen and hydrogen-based fuels expands rapidly to
reduce emissions in hard-to-abate sectors that are difficult to electrify, such as heavy
industry and long-distance transport. Blending hydrogen into natural gas grids plays
an increasingly important role as a means of reducing emissions in end-use sectors.
It is also blended, in the form of ammonia, with coal and used in the electricity sector,

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This section looks at two new ways in which nuclear power could be used, beyond
simply supplying electricity to the grid: the on-site production of low-carbon hydrogenand the large-scale supply of low emissions heat to industrial consumers and district
heating networks. These applications are not deployed in the NZE on economic
grounds: renewables, such as bioenergy, solar thermal or geothermal, and other low
emissions energy sources may to be able to meet needs more cheaply. However,faster than expected reductions in the cost of nuclear power could in principle enable
it to compete on cost, opening up new opportunities in these markets.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

though on a relatively small scale given its high cost. Global hydrogen consumption
grows from roughly 90 Mt/year today to 212 Mt/year in 2030 and 390 Mt/year by 2040.
The share of hydrogen that is low-carbon, i.e., produced without unabated fossil fuels,
rises from 10% to 70% in 2030 and over 90% in 2040. More than half of it is produced
by electrolysis, with the remainder from coal or gas with CCUS.

Nuclear-powered electrolysis could provide a source of low
emissions hydrogen
Many electrolytic hydrogen projects currently under development are linked tovariable renewables, either physically or through power purchase agreements.
Locating an electrolyser close to the point of generation can reduce the cost ofelectricity through lower generation and transmission costs, as well as making it easierto verify that the hydrogen is certifiably low emissions (hydrogen produced fromelectricity taken from the grid is only as “low emissions” as the electricity itself). This
trend accelerates in the NZE, with more than 75% of installed electrolyser capacity
being linked to at least one renewable energy source by 2040.
Consideration is being given to the idea of devoting all or most of the output of a
nuclear power plant to the electrolytic production of hydrogen as an alternative torenewables-based production. The key advantage of nuclear power plants is that they
are dispatchable and able to operate at very high annual capacity factors, enabling ahigh utilisation of the electrolyser and the production of steady and adjustable streamsof low-carbon hydrogen. This means that less hydrogen storage is required to smoothout daily, monthly and seasonal fluctuations in the supply of hydrogen. A stable,
reliable flow of hydrogen is important to industrial users in particular for making
optimal use of their production facilities.

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There are currently around a dozen demonstration electrolyser projects indevelopment with a combined capacity of 250 MW that are exploring the use of
nuclear power in Canada, China, Russia, Sweden, the United Kingdom and the UnitedStates. Some commercial projects are also advancing. For example, in early 2021,
the operator of the Oskarshamn-3 boiling water reactor in Sweden entered into anagreement with Linde, a chemicals company, to supply hydrogen from one of its onsite electrolysers powered directly by the plant.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Alternative technologies to produce hydrogen from nuclear
energyMost of the electrolysers in production or under construction today use conventional
polymer electrolyte membrane or alkaline technologies. New electrolyser technologies
that could better exploit the characteristics of nuclear power are under development.
One promising technology, which could be compatible with current and advanced
nuclear reactor designs, is high-temperature electrolysis based on solid electrolysis
cells, which use ceramics as the electrolyte and steam for electrolysis. This technology
promises electrical efficiencies of 79-84% (lower heat value), compared with 67-80%
for conventional low-temperature electrolysis. Nuclear power plants could provide boththe steam and the electricity necessary to drive the process.
Because of their higher efficiency, solid electrolysis cells may be a cheaper way ofmaking hydrogen using nuclear electricity. Depending on the levelised cost ofelectricity of the power plant, an increase in electrolyser efficiency from 70 to 80%, forexample, would reduce the levelised cost of hydrogen by USD 0.2/kg to USD 0.6/kg(in 2020 USD). However, the technology is still at the demonstration phase for largescale applications. The biggest system in operation is smaller than 1 MW, althoughlarger projects are currently being developed, putting the technology on the path
towards commercialisation.
Advanced nuclear reactors with coolant outlet temperatures of 800 °C to 1 000 °C
could become an option for the thermochemical production of hydrogen.
Thermochemical cycles, such as sulphur-iodine, use high-temperature heat (greaterthan 950 °C) to drive a series of chemical reactions that split water into hydrogen andoxygen. The chemicals can be reused in a closed loop and water and thermal energy
are the only other inputs required. Since the reactor’s thermal energy is used directly,
the efficiency losses associated with first converting thermal energy into electricity andthen into hydrogen are avoided.
While a thermochemical cycle operating at 950 °C can reach a thermal efficiency ofover 40%, the thermal efficiency of a reactor with a steam turbine turning a generator,
which then supplies an electrolyser with electricity, is only around 20-30%. Using avery high-temperature reactor to drive thermochemical hydrogen production could,
therefore, result in lower hydrogen production costs than if the same reactor were used
to power an electrolyser. However, both very high-temperature reactors andthermochemical hydrogen production are still in an early stage of development andare unlikely to be commercially available at scale before 2030.

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High temperature gas-cooled reactors could be suitable for hydrogen production. A
demonstration project was connected to the grid in China in December 2021. At
750 °C, its coolant outlet temperature is high enough to support high-temperature
steam electrolysis. Research is underway to boost temperatures to over 950 °C, which
would allow high temperature gas-cooled reactors to be used for thermochemicalhydrogen production as well. In September 2021, Tsinghua University, China National

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

Nuclear Corporation Limited, China Huaneng Group Limited, China Baowu Iron andSteel Group Limited and China Citic Group Limited established a technology allianceto develop and scale up HTGR-based hydrogen production, focusing on applicationsin the steel and chemicals sectors. In Japan, the High Temperature Engineering Test
Reactor, which was shut down for safety checks following the accident at Fukushima
Daiichi, resumed operations in 2021. A thermochemical hydrogen production cycle
using this reactor is currently under development, with demonstration production
scheduled to begin in the late 2020s.
Sources: POWER (2022), China Starts Up First Fourth-Generation Nuclear Reactor; Sato, H. (2021), Role of High
Temperature Gas-cooled Reactor Technologies to Attain Carbon Neutrality, IAEA Technical Meeting on the Role of Nuclear
Cogeneration Applications Towards Climate Change Mitigation, October 11-13.

The competitiveness of nuclear-based hydrogenproduction would require a big reduction in costs
Substantial capital cost reductions relative to both renewables and fossil fuels with
CCUS would be necessary for nuclear power to become a cost-competitive option forlarge-scale hydrogen production. The cost of producing hydrogen through electrolysis
powered by a new dedicated nuclear power plant is determined mainly by the upfront
cost of building the reactor, which is currently very high. The rapid rollout ofrenewables and electrolysers in the NZE leads to a marked decline in the capital costof both up to 2030. This substantially reduces the levelised cost of producing
hydrogen from electrolysis powered by renewable electricity, especially in regionswith large renewable energy potential such as the United States, parts of western
Europe, China, India, and the Middle East. In those regions, costs are projected to fall
to as little as USD 1.10/kg of hydrogen (kgH2) in 2020 USD by 2040.

14

Reflecting mine mouth prices plus transport and handling costs.

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In some regions, producing low-carbon hydrogen with fossil fuels – primarily natural
gas and coal – in conjunction with CCUS is projected to become a viable alternative
to renewables on the assumption that fossil fuel prices fall back from their current
record levels. The cost of that production route is determined mostly by the price of
the input fuel. At a natural gas price of USD 12/mmBtu (compared with
USD 50/mmBtu at the TTF hub in the Netherlands in the first half of March 2022), thelevelised cost of hydrogen produced by steam reforming natural gas with CCUS would
be around USD 3/kgH2 in 2030 and 2040. Similarly, with a coal price 14 of USD 125/t(compared with over USD 360/t at the Antwerp-Rotterdam-Amsterdam hub in the firsthalf of March 2022), the cost of producing hydrogen from coal gasification with CCUS
would be around USD 2.90/kgH2 in 2030 and 2040. In the NZE (as modelled in 2021,
prior to the current energy crisis) gas prices fall back into the USD 2-6/mmBtu range
in many markets, while coal prices fall to around USD 22/tonne in the United States,
USD 44/t in Europe and USD 60/t in East Asia. At these fuel prices, the levelised costsof producing hydrogen are much lower, averaging USD 1.30/kgH2-1.80/kgH2 for gas
with CCUS and USD 2.00/kgH2-2.40/kgH2 for coal with CCUS.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

As things stand, new nuclear power plants as a power source for electrolysers appear
unlikely to be competitive with renewables or fossil fuels with CCUS to producehydrogen in many parts of the world. Compared with fossil fuels with CCUS, nuclearpowered electrolysis would be a competitive option only if investment costs for nuclear
power plants could be reduced to below USD 2 000/kW (costs currently range from
USD 2 800/kW to nearly USD 13 000/kW) and gas and coal prices were to remain
above USD 9/mmBtu and USD 70/t respectively. Such a development cannot be
excluded. However, to be competitive with renewable electricity in countries with astrong renewable resource, nuclear investment costs would need to fall even further,to around USD 1 000/kW in order to produce hydrogen at a cost of about USD 2/kgH2
in 2030. In short, dedicated nuclear-based hydrogen could become a viable option
only in regions with more limited renewables potential and higher costs, or if coal andgas prices remain high by historical standards.

USD (2020) per kgH2

Levelised cost of hydrogen production by energy source/technology
8
CAPEX: 6 000 USD/kW

6

Gas: 12 USD/mmBtu

42

Coal: 125 USD/tonne

CAPEX: 2 000 USD/kW
Gas: 2 USD/mmBtu

0

2030

2040
Nuclear

2030

2040

Gas with CCUS

Coal: 25 USD/tonne
2030

2040

Coal with CCUS

2030

2040

Renewables

IEA. All rights reserved.

It should be emphasised that this analysis only considers production costs. It does
not take into account other potential benefits that the use of nuclear power forhydrogen production may offer, such as its dispatchability and ability to produce in aconstant manner, nor the drawbacks. With nuclear, large volumes of hydrogen could
potentially be produced closer to where it is consumed, reducing the need forhydrogen transport and distribution infrastructure and, thus, delivery costs.
Transporting hydrogen over a distance of 1 000 km by pipeline would add
USD 0.40/kgH2 to 1.80/kgH2 to the total cost of supply, depending on the line’s
capacity and throughput. Maritime shipping would cost even more, at USD 1.20/kgH2
to 1.80/kgH2 for the same distance. Lower costs might be possible if the existing
natural gas pipeline infrastructure can be converted, but this option is not available
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Notes: Levelised cost is the average net present value of the cost of producing hydrogen using renewable electricity for a plantover its operating lifetime. The cost of hydrogen production from nuclear power is for a nuclear power plant operating at an
average 85% annual utilisation, with overnight investment cost (CAPEX) ranging from USD 1 000/kW to USD 6 000/kW,
assuming a weighted average cost of capital of 7%, a construction time of 6 years and a depreciation period of 35 years. For theelectrolyser, investment costs of USD 463/kW and an efficiency of 69% are assumed for 2030, and USD 386/kW and 72% for2040. The depreciation period of the electrolyser is 25 years, with a lifetime of the stack (where the splitting of water intohydrogen and oxygen takes place) of 50 000 hours. The cost range for gas with CCUS is for the steam reforming of natural gas
with prices between USD 2/mmBtu and USD 12/mmBtu. The cost range for coal with CCUS is for coal gasification with coalprices between USD 25/t and USD 125/t.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

everywhere. Furthermore, compared with low-carbon hydrogen based on fossil fuelswith CCUS, nuclear brings energy security benefits as it is far less vulnerable tovolatile input fuel prices.

Hydrogen production could exploit surplus nuclear power
Using electrolysis to take advantage of curtailed nuclear generation and lowwholesale prices during periods of low electricity demand could be a more viableoption. This could raise the capacity factors of these plants and provide an additional
revenue stream to their operators. In the NZE, the fast-growing shares of variable
solar PV and wind in the global electricity mix, as well as the progressive electrificationof energy end uses such as heating and road transport, erodes the capacity factorsof baseload power generating plants, including nuclear plants, as renewables
increasingly drive nuclear power down the merit order. They also increase the needfor system flexibility.
Flexible hydrogen production could provide a means of exploiting underutilised
capacity. In the NZE, the average capacity factor of the global fleet of nuclear power
plants falls from 84% in 2030 to 76% in 2040 and 77% in 2050, while total installedcapacity increases from 512 GW in 2030 to 730 GW in 2040 and 812 GW in 2050.
Raising the capacity factor of the global nuclear fleet to 90% and using the additional
electricity for electrolysis would theoretically allow for the production of additional lowcarbon hydrogen, reaching 6 Mt (4% of total low-carbon hydrogen production) in
2030, 19 Mt (5.5%) in 2040 and 20 Mt (3.9%) in 2050. More hydrogen could be
produced using the global fleet of nuclear reactors, but this would mean reducing low
emissions electricity output.

Mt

Global technical hydrogen production potential from nuclear electricity generation with anincreased capacity factor in the Net Zero Emissions by 2050 Scenario
25

6%
5%

20

4%

Hydrogen production
potential (left axis)

15
3%
10
2%
5

Share of global lowcarbon hydrogenproduction (right axis)

1%

2030

2040

2050

0%
IEA. All rights reserved.

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IEA. All rights reserved.

Note: Hydrogen production potential assumes an increase in the capacity factor to 90% from 84% in 2030, 76% in 2040 and
77% in 2050 as projected in the Net Zero Emissions by 2050 Scenario, with all the additional output used to produce hydrogenusing electrolysers.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

The technical potential for producing hydrogen using nuclear power that would
otherwise be curtailed is greatest for systems with high shares of nuclear in total
capacity and where nuclear plants are regularly used to load-follow, such as inFrance. A recent study suggests that close to 70% of Europe’s additional sparenuclear generation potential by 2030 would be in France alone.
The economic potential of this mode of hydrogen production is system- and marketspecific: it depends on the operating profile of the nuclear power plant, the capacity
factor of the electrolyser and electricity prices across the year. Where there are gridconstraints, diverting electricity to a flexible on-site electrolyser could increase theflexibility of electricity systems. The optimal size of the electrolyser at each plant would
be determined by the competing objectives of maximising the annual utilisation of theelectrolyser and taking advantage of cheap electricity during low-price periods, as wellas the operational flexibility of the power plant.
Conditions on the hydrogen side, including proximity to markets or hydrogen transport
infrastructure, flexibility requirements and the cost of producing hydrogen fromcompeting options, would also be important factors in determining the economic
viability of nuclear-based hydrogen production.

Nuclear-based heat production is another possibility
Supplying heat produced in conjunction with electricity by nuclear reactors to large
industrial customers (process heat) or district heating networks is another possibility.
Today, the production of industrial process heat accounts for roughly two-thirds oftotal industrial final energy demand, slightly less than half of which is for hightemperature heat (above 400 ⁰C). In the NZE, demand for commercial, low emissions
heat, mostly in district heating networks, grows sharply over 2021-2040, by about
400 PJ per year on average, because of the need to replace unabated fossil fuels.
This requires investments averaging about USD 20 billion/year (in 2020 USD) in the
2020s and over USD 30 billion/year in the 2030s. After 2040, growth in demand for
new low emissions heat is minimal as most heat is already decarbonised by then.

Nuclear co-generation has historically mostly been used in Europe and countries ofthe former Soviet Union. In Switzerland, for example, heat extracted from the Benznau
and Gösgen nuclear power plants is fed into heat networks supplying factories andbuildings in surrounding towns. In Russia, several nuclear power plants supply heat
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Although improvements in energy efficiency reduce overall heat demand in the NZE,
the push to decarbonise it could present an opportunity for nuclear power plants ifthey can be cost-competitive. Current reactor designs are well-suited to supply large
amounts of low- to medium-temperature heat to industrial consumers and district
heating networks. Typically, only around one-third of the thermal energy produced bya reactor is converted into electricity, while the remainder is ejected into theenvironment. In a nuclear-based co-generation plant, some of that excess thermalenergy is converted into useful heat through heat exchangers.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

to municipal heating networks. More recently, nuclear co-generation has attracted
significant interest in China, where many northern cities maintain extensive district
heating networks based mostly on coal. The country’s first large-scale nuclear
co-generation project, in Haiyang in Eastern Shandong province, started up in late2020, supplying heat extracted from two newly commissioned AP 1000 reactors to
the local heat network. It provides heat to a total floor area of 4.5 million m2, avoiding
the consumption of 180 000 tonnes of coal during the winter heating period.
For nuclear to supply high-temperature industrial heat, advanced high-temperature
reactors, such as the Chinese high temperature gas reactor, would be required.
Today, high-temperature heat (above 400 ⁰C) is provided mostly from the combustionof fossil fuels, making it emissions-intensive. Producing high-temperature heat directlyfrom electricity is likely to remain impractical and costly in most cases. Low emissions
alternatives include coal or gas combustion with CCUS, biomass or hydrogen
combustion. Some SMRs being developed now operate at much higher temperaturelevels than conventional large-scale reactors, allowing them to be integrated with andsupply electricity and heat (and potentially low-carbon hydrogen) to industrial facilities
such as chemicals, iron and steel, metals manufacturing or non-metallic minerals
industries (see below).

As with electricity and hydrogen, competitive nucleargenerated heat would require a large reduction in costs
For nuclear-based co-generation to be competitive with fossil fuels in conjunction with
CCUS, biomass or electric heat pumps for industrial applications and district heating,plant investment costs would generally need to be below about USD 3 000/kWe. The
cost of heat produced using those alternatives is determined mainly by plant
construction costs and fuel input prices. For low- to medium-temperature heatapplications such as district heating, heat produced by a natural gas co-generation
plant equipped with CCUS would cost more than USD 40/GJ (in 2020 USD) basedon a construction cost of USD 2 500/kWe and a natural gas price of USD 12/mmBtu.
Similarly, heat from a coal-fired co-generation plant with CCUS would cost up to
USD 60/GJ assuming a construction cost of USD 5 500/kWe and a coal price of
USD 125/tonne.

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Were natural gas and coal prices to return to the long-term trajectory projected in the
NZE, the cost of heat supplied by fossil fuel-based co-generation with CCUS would
be much lower, ranging from less than USD 15/GJ to USD 50/GJ, with the lower endof the range representing regions with low fossil-fuel prices and plant construction
costs. Biomass co-generation plants could produce heat for as little as USD 12/GJ to
USD 25/GJ if cheap feedstocks, such as agricultural residue, are available locally.
Large-scale heat pumps could produce heat for as little as USD 10/GJ even atcomparably high average electricity prices.

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

USD (2020) per GJ

Levelised cost of heat supplied to district heating networks by source
80

Biomass: 20 USD/mmBtu

Coal: 125 USD/tonne
60
Gas: 12 USD/mmBtu
40

Biomass: 2 USD/mmBtu
Gas: 2 USD/mmBtu

20

Electricity: 100 USD/MWh
Electricity: 25 USD/MWh
Coal: 25 USD/tonne

USD/kWe:

2 500
Nuclearco-gen1 300

Gas co-gen with
CCUS

5 500

1 600

Coal co-gen with
CCUS

3 800

2 500

Biomass co-gen

1 000

400

Large-scale heatpump
IEA. All rights reserved.

Notes: Co-gen = co-generation. The levelised cost is the average net present value of the cost of producing heat for a plant overits operating lifetime. The cost of heat production from nuclear co-generation is for units with an overnight investment cost
ranging from USD 2 000/kWe to USD 6 000/kWe with a thermal efficiency of 75%, a construction time of 6 years and a
depreciation period of 35 years. All co-generation plants are assumed to have a heat-to-power ratio of 1 and an annual
utilisation of 75%. An average selling price of USD 70/MWh (in 2020 USD) for the electricity produced is credited against thecost of heat. A uniform weighted average cost of capital of 7% is applied to all investments. The cost range for natural gas cogeneration with CCUS corresponds to gas prices of USD 2/mmBtu to USD 12/mmBtu, that for coal co-generation with CCUS tocoal prices of USD 25/t to USD 125/t and that for biomass co-generation to feedstock costs of USD 2/mmBtu to USD 20/mmBtu.
The assumed CCUS capture rate is 95%. A CO2 price of USD 160/t is assumed to be levied on uncaptured emissions. The
large-scale heat pump has a coefficient of performance of 3.5, and heat production costs correspond to electricity input prices of
USD 20/MWh to USD 100/MWh.

As with electricity, the cost of heat produced by nuclear co-generation plants is mainly
a function of the upfront investment cost of the plant. At a cost of USD 4 000/kWe,which is close to the projected global average in the NZE, low- to medium-temperature
heat production costs would be around USD 25/GJ, which is above that for fossil fuelswith CCUS in most regions and well above that using large-scale heat pumps. To
compete with low-cost fossil fuels with CCUS and heat pumps, nuclear construction
costs would have to be less than USD 3 000/kWe in most cases. Planning andconstruction times would also need to be reasonably short in order to limit the risk ofmajor cost overruns. Public acceptance could be a major concern, since cogeneration plants need to be sited close to population centres to minimise the losses
and associated costs of transmitting heat over long distances.

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For high-temperature reactors to compete with the main alternatives for the provisionof high-temperature heat, heat production costs would need to fall to USD 5/GJ to
USD 20/GJ, again implying that plant investment cost would need to be no higher
than USD 3000/kWe. Depending on the prices of coal and natural gas, coal or gas
combustion with CCUS produces heat at a cost of USD 9/GJ to USD 20/GJ, with thefossil fuel prices projected in the NZE yielding costs at the lower end of that range.
Biomass combustion could be even cheaper if feedstock costs are very low, butsustainable, low-cost biomass potentials are too small for it to make a significant
contribution to the global high-temperature heat supply. If low-carbon hydrogen at a

Nuclear Power and Secure Energy Transitions

The competitiveness of nuclear energy

cost of USD 1/kg to USD 2/kg is available, hydrogen combustion would be an
economically competitive option too.

USD (2020) per GJ

Levelised cost of high temperature heat production by source
60
Hydrogen: 4 USD/kg

CAPEX: 6 000 USD/kWe40
Biomass: 20 USD/mmBtu
Gas: 12 USD/mmBtu Coal: 125 USD/tonne
20

CAPEX: 2 000 USD/kWe

Gas: 2 USD/mmBtu

Coal: 25 USD/tonne

Hydrogen: 1 USD/kg
Biomass: 2 USD/mmBtu

Nuclear co-gen
Gas combustion with Coal combustion with Biomass combustion(advanced high
CCUS
CCUS
temperature reactor)

Hydrogencombustion

IEA. All rights reserved.

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IEA. All rights reserved.

Notes: The levelised cost is the average net present value of the cost of producing heat for a plant over its operating lifetime.
The cost of heat production from nuclear co-generation is for units with an overnight investment cost (CAPEX) ranging from
USD 2 000/kWe to USD 6 000/kWe, a construction time of 6 years, a depreciation period of 35 years and an annual utilisation of
75%. An average selling price of USD 70/MWh (in 2020 USD) for the electricity produced is credited against the cost of heat. A
uniform weighted average cost of capital of 7% is assumed for all investments. The cost range for natural gas combustion with
CCUS corresponds to gas prices of USD 2/mmBtu to USD 12/mmBtu, that for coal combustion with CCUS to coal prices of
USD 25/t to USD 125/t and that for biomass combustion to feedstock costs of USD 2/mmBtu to USD 20/mmBtu. The CCUS
cost is assumed to be USD 70/t and the CO2 capture rate 95%. A CO2 price of USD 160/t is assumed to be levied on
uncaptured emissions.

Nuclear Power and Secure Energy Transitions

Small modular reactors

4. Small modular reactors
How could SMRs help energy transitions?
Our discussion in previous chapters has focused on the general opportunities andchallenges facing nuclear energy in energy transitions. A doubling of nuclear power
capacity by mid-century, as envisaged in the NZE, is clearly an enormous task,
requiring capital spending on nuclear power of USD 2.6 trillion over 2021-50 is neededin that scenario. Much of that capital would need to be backed by governments given
the investment risks associated with nuclear power projects.
Advanced reactors that are smaller in size, more affordable, easier to build andoperate, and therefore easier to manage and finance are an alternative or acomplement to large-scale reactors. A category of reactors, known as small modular
reactors (SMRs), hold particular promise. This chapter maps out the nature of thispromise, the state-of-play with SMR technology and investment, and considers someof the key uncertainties that lie ahead.
SMRs are generally defined as nuclear reactors with an electrical capacity of less than
300 MW per module, though some models under development could be larger. They
include micro-modular reactors which have a capacity of less than 10 MW. The variety
of designs now in development around the world, of which there are approximately
70, include different underlying technologies, including water, gas, liquid metal or
molten salt cooled reactors, as well as different fuel cycles. They vary markedly
according to their levels of technology and licensing readiness. None are as yet at thestage of full commercialisation.

SMRs are designed to be deployed in series, using a global supply chain to reduce
costs, as is the case for other sectors such as naval construction or aircraft
manufacturing. They could be installed as single modules distributed over the whole
electricity network, which could be of particular value in countries or regions with lessdeveloped networks, in remote areas or as dedicated sources of electricity, heat
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IEA. All rights reserved.

As SMRs are smaller than existing reactor designs, the investment needs are smaller
in absolute terms. They are usually designed to be factory built in modules and thentransported to the site where they are to be installed. This reduces project
management risk during construction, one of the most significant challenges infinancing large nuclear projects. However, some designs require transport of fully
fuelled cores, and the associated transport routes, security and safeguards aspects,
should not be underestimated. Several SMR designs have inherent safety and waste
management attributes that could support social acceptance and unlock significant
private venture capital for research and development, as well as demonstration anddeployment.

Nuclear Power and Secure Energy Transitions

Small modular reactors

and/or hydrogen for cities and industrial hubs. They could also be deployed in groups
of modules on single sites. SMRs may also be well-suited to replacing fossil fuelpower plants, taking advantage of an existing connection to the transmission network,
the availability of water for cooling and a skilled workforce.

SMRs have several technological and financial attributes
that could underpin their future viability
SMRs have important attributes that could equip them well for a role in energy
transitions. One of the most important is their intrinsic safety features. Lower power
output and smaller reactor cores should increase the effectiveness of passive safetysystems. Many SMRs include inherent safety features that all but eliminate thepossibility of serious accidents. A greater reliance on passive cooling systems alsoenables simpler reactor designs, which should lower costs. The benefits of passive
safety systems may also lead to smaller offsite emergency planning zones, which
would make it easier to site plants close to population or industrial centres.
SMRs also offer a number of other technical benefits. If used to supply electricity to
the grid, for example when replacing coal power plants, they would reduce the needfor reinforcements to the transmission network, boosting their economic viability. Thisfactor is set to become increasingly important as more distributed power generation
grows with the increased penetration of solar PV and wind power. As with large
reactors, SMRs can have different applications beyond electricity, including the
production of heat and hydrogen, and the desalination of water. Due to their smallersize, SMRs may be particularly attractive for countries with smaller and less robustelectricity grids, although it remains essential to have robust regulatory bodies andwaste management in place. Construction times are expected to be much faster,
thanks to factory fabrication and use of modular construction techniques.
Several advanced SMR designs under development also involve innovative strategies
for recycling spent nuclear fuel. These strategies aim to reduce the volume andradiotoxicity of high-level waste that eventually have to be managed in deep
geological repositories and the need for uranium mining for the front end of the nuclear
fuel cycle. These designs could enhance nuclear energy’s contribution to long-termsustainability objectives.

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SMRs could also be used to meet the need for flexibility in power generation
demanded by electricity systems with high shares of wind and solar. SMRs may bewell suited for flexible operation, as is already the case for some traditionally largescale reactors, which in high renewable scenarios could improve profitability as
captured electricity prices increases. In addition, flexibility could be achieved not only
through load-following of electricity production, but also with flexible co-generation,for instance via hydrogen production or thermal storage.

Nuclear Power and Secure Energy Transitions

Small modular reactors

The smaller size, shorter project lead-times and siting attributes of SMRs may makethem an attractive option for private investors. The total size of the investment would
be more affordable, though not necessarily cheaper on a per MW basis. Together withthe lower project risks associated with shorter construction periods and factory
construction, this could encourage new ways of financing new nuclear plants. SMRs
also offer the advantage of scalability, enabling utilities to add capacity to the grid insmaller increments.

Status of SMR research, development anddeployment
Momentum behind SMRs is picking up
The urgency of the net zero challenge, alongside heightened concerns about the
security of electricity supply, is increasing the readiness of governments to consider
and support technological solutions. As noted in Chapter 2, half the emissions
reductions in the NZE come from technologies, like SMRs, that are not yet available
commercially.
Uncertainties about when SMR technology will be ready for commercial-scale
deployment at scale make it difficult to project their future role in decarbonising theenergy system. In the NZE, all the world’s fossil fuel plants would need to be replacedby low emissions alternatives, including nuclear power, no later than 2040. Becauseof the uncertainties about the technology, we do not explicitly project the contributionof SMRs in total nuclear power in this scenario. However, we do expect SMRs to
account for an increasing part of new nuclear capacity additions after 2030, on theassumption that continued progress is made in developing and demonstrating thetechnology, and bringing down costs.

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There is extremely strong political and institutional support, with government grants
to R&D as well as demonstration projects having increased by an order of magnitude
over the last two years in some countries and now running into the billions of USD.
This is making it possible to attract large private investments, bringing new players
and new approaches to developing projects into the nuclear industry. It is also seen
in some countries as an opportunity to assert technological leadership.

Nuclear Power and Secure Energy Transitions

Small modular reactors

Design

ARC-100
CAREM

Net
outputper
module100
MWelectric
25 MW
electricType

Designer

Country

StatusSodium fast
reactor

ARC Clean
EnergyCanadaDemonstration projectplanned in New Brunswick

Pressurised
water
reactor

CNEA

Argentina

Under construction (Zárate)

BWRX-300

300
MWelectric

Boiling water
reactorGE-Hitachi

UnitedStates /CanadaFirst commercial deployment
announced with Ontario
Power Generation(Darlington, Canada) andunder discussion with
Tennessee Valley Authority(Clinch River, United States)eVinci5 MWelectric
and upto
13MW
thermalHeat pipe

Westinghouse

UnitedStates /CanadaPre-licensing application
submitted in the UnitedStates in 2021

KairosPower FHR

140
MWelectric

Molten salt
reactorKairos Power

UnitedStatesUnder licensing withdemonstration projectplanned with Oakridge
National Laboratory

MicroModular
Reactor
Project

15 MW
thermalHigh
temperature
gas-cooled
reactorGlobal FirstPower / Ultra
Safe Nuclear
Corporation

CanadaUnder licensing withdemonstration projectplanned at Canada National
Laboratories site (ChalkRiver)

Stable Salt
Reactor –Wasteburner(SSR-W)

300
MWelectric

Molten salt
reactor

MoltexCanadaDemonstration projectplanned in New Brunswick

NuScaleSMR

50 MW
electric(× 12)

Pressurised
water
reactor

NuScalePower

UnitedStatesUnder licensing withdemonstration project with
Idaho National Laboratories
and Utah AssociatedMunicipal Power Systems

Natrium

345
MWelectric

Sodium fast
reactorTerraPower /GE-Hitachi

UnitedStatesDemonstration project withpreferred site identified at
Kemmerer (Wyoming)

NUWARD170
MWelectric(x2)

Pressurised
water
reactor

EDF-ledconsortium

FranceDemonstration projectplanned for 2030

RITM-200

55 MW
electric

Pressurised
water
reactor

OKBM
Afrikantov

RussiaFirst land-based version
planned for 2028 in Yakutia

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Small modular reactors under development worldwide with significant near-termmilestones

Nuclear Power and Secure Energy Transitions

Small modular reactors

DesignNet
outputper
moduleType

Designer

Country

StatusUK SMR

470
MWelectric

Pressurised
water
reactorRolls-Royceled
consortium

UnitedKingdom

Under licensing with Wylfa
and Trawsfynydd identified
as potential sites in thelicence application

Xe-10080 MWelectric
(x 4)

High
Temperature
gas-cooled
reactorX-energy

UnitedStatesDemonstration project with
Energy Northwest(Washington)

Note: This list includes designs for which a site has been identified, a formal licence application made or that have been
selected by government for near-term deployment.
Source: OECD/NEA 2022, All rights reserved.

Number of small modular reactor projects in the world by status of development50< 25 MW25 MW < C < 100 MW

40

100 MW < C < 300 MW
30> 300 MW20
100Conceptual
designBasic and detailed
designs

Under
construction

In operation

Notes: C = electrical capacity.
Source: IAEA 2022, All rights reserved.

The federal Infrastructure Investment and Jobs Act of 2021 embraces many nuclear
energy-related provisions, including funding for the US Department of Energy’s
Advanced Reactor Demonstration Program, which is intended to speed thedemonstration of advanced reactors through cost-sharing partnerships with US
industry. Under this programme, the Department of Energy has selected two reactor
designs that are due to be fully operational within the next seven years and awarded

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In the United States, some recent major initiatives involving federal government
support have made it possible to envisage a concrete push for SMRs, despite ageneral market context that is unfavourable to nuclear power in some states. Several
sites have been selected for demonstration projects involving different reactor
designs, though construction has not yet started as financing arrangements have yet
to be completed. Two projects – the Kairos Power FHR and NuScale SMR – have so
far reached the licensing application stage.

Nuclear Power and Secure Energy Transitions

Small modular reactors

USD 160 million in initial funding to test, licence and build prototypes: TerraPower’s
345 MWe Natrium plant and X-energy’s 80 MWe pebble-bed unit. The Department ofEnergy will invest a total of USD 3.2 billion over seven years, subject to the availabilityof future appropriations, with these industry partners providing matching funds.
Through the Office of Clean Energy Demonstrations, it has already provided
USD 2.5 billion in funding for the Advanced Reactor Demonstration Program.

A range of potential applications: A focus on SMRdevelopment in Canada
Canada is at the forefront of the development of SMRs. In 2018, it developed an
SMR roadmap in consultation with economic and civil society stakeholders, including
several provinces, territories and power utilities, to map out the role SMRs could playin Canada’s energy mix, in parallel with the introduction of regulations that havehelped attract new small reactor concepts. In addition, an SMR Action Plan was
released in 2020, as well as a provincial memorandum of understanding signed byAlberta, New Brunswick, Ontario and Saskatchewan, to work co-operatively toadvance the development and deployment of SMRs and to encourage the federal
government to provide support for SMR demonstration projects. As a result, several
such projects are currently under consideration targeting the decarbonisation of hardto-abate sectors in industry, the electrification of remote mining operations andindustrial heat applications.

•On-grid power (150 MWe to 300 MWe): Replacing coal-fired power generation
represents a key near-term opportunity for SMRs. A first of a kind project at anexisting nuclear site at Darlington in Ontario based on the BWRX300 reactor being
developed by GE-Hitachi – a US-Japanese joint venture – to be commissioned by
the late 2020s has been announced. Saskatchewan is also considering on grid
SMRs. The provincial power corporation in New Brunswick is also pursuing the
installation of SMRs at its Point Lepreau nuclear power station site. Generation-IV
technology – a set of nuclear reactor designs currently being researched by theGeneration-IV International Forum – which would enable spent fuel recycling fromthe early 2030s is being considered for this project.

•

Extractive and heavy industries (10 MWe to 80 MWe): This market segment
concerns off-grid SMRs for mining, oil sands and other heavy industries, whereemissions are hard to abate due to the need for high temperature heat. For many

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The roadmap identifies the potential for SMRs to meet a range of energy needs,
along with opportunities for the Canadian nuclear industry to export these innovative
nuclear reactor technologies. It also assesses the different reactor design
characteristics, for instance reactor size or heat temperature, required for specificapplications:Nuclear Power and Secure Energy Transitions

Small modular reactors

years, extractive industries in Canada have maintained a keen interest in hightemperature SMRs to replace diesel generators.
•

Remote communities (1 MWe to 10 MWe): Remote communities that currently rely
primarily on off grid diesel generators for their electricity supply have been identified
as a long term market opportunity for micro-modular reactors. Global First Power,a joint venture between Ontario Power Generation and USNC Power, has submitted
an application to prepare a site to build a micro-modular reactor at the Atomic
Energy of Canada Limited’s Chalk River laboratories. This project is currently
undergoing an environmental assessment.

The 2020 SMR Action Plan lays out the steps for the deployment of SMRs andenvisages the first units to come online in the late 2020s. Several projects haveobtained federal and provincial government funding, including the Integral Molten
Salt Reactor being developed by Terrestrial Energy, the Moltex Energy molten salt
SMR, the Canadian ARC-100 sodium-cooled SMR and Westinghouse’s eVinci micro
reactor.

China is a leader in advanced nuclear technology development. A demonstration
plant with two high-temperature gas-cooled reactor pebble-bed module (HTR-PM)
units – the first of their kind – at Shidao Bay was connected to the grid in 2021. China
Huaneng was the lead organisation in the consortium building the units, together with
China Nuclear Engineering Corporation (a subsidiary of China National Nuclear
Corporation) and Tsinghua University's Institute of Nuclear and New Energy
Technology, which is the nuclear R&D leader in the country. Each reactor drives asingle 210 MW steam turbine, using helium gas as the primary coolant and reachingtemperatures as high as 750°C. Other HTR-PM projects, at Wan’an in Fujian
province, Sanmen in Zhejiang province and Bai'an in Gunagdong province, have beenannounced. In addition, the construction of the ACP100 SMR demonstration projecton the island province of Hainan started in 2021. This multi-purpose 125 MWepressurised water reactor is designed for electricity production, heating, steam
production or seawater desalination.

In Japan, the priority is to restart existing nuclear power plants and the constructionof SMRs is not envisaged in the short term. Nevertheless, the Green Growth Strategyof the Ministry of Economy, Trade and Industry has set goals for the nuclear power
sector. These include promoting the development and demonstration of fast-reactor

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In Russia, Akademik Lomonosov brought the world’s first floating nuclear power plant
into commercial operation in May 2020 at Pevek in the Chkotka region, which
comprises two 35-MWe SMRs. In addition, Rosatom Overseas has been licensed tobuild the country’s first onshore SMR power plant. Located in Ust-Kuyga in the
Russian Far East, it will be equipped with a 55 MWe RITM-200 SMR with the aim of
producing electricity from 2028.

Nuclear Power and Secure Energy Transitions

Small modular reactors

technology for SMRs to produce hydrogen using high temperature gas reactors by
2030. This is to be achieved through international cooperation. IHI Corporation and
JGC Holdings Corporation announced in 2021 that they would invest in United States
based NuScale Power for overseas developments, with Japan Bank for International
Cooperation also becoming involved in 2022. Others, such as Mitsubishi Heavy
Industries and Hitachi are also seen closely in discussion with the Japanese
government for the development of Japanese SMR technology and the sustainability
and improvement of the supply chain.
In Korea, the recent reversal in nuclear policy by the new government led byPresident Yoon is expected to revive the country’s nuclear industry. In 2020, theKorean government and the King Abdullah City for Atomic and Renewable Energy in
Saudi Arabia updated their agreement to create a joint venture for the construction of
a 100 MWe SMR using SMART SMR technology being developed by the Korea
Atomic Research Institute. Several Korean companies are also partnering withinternational SMR vendors.
In the United Kingdom the government has committed GBP 210 million in funding todevelop the Rolls-Royce SMR, matched by a similar amount of private investment (byRolls-Royce Group, BNF Resources UK Limited and Exelon Generation). The 2022
Nuclear Energy (Financing) Act establishes a new financing model for nuclear
projects, known as the Regulated Asset Base. It aims to attract a wider range ofprivate investment in both new large-scale reactors and SMRs and reduce
construction costs, consumers’ energy bills and reliance on overseas developers forfinance. In 2022, the government published its Energy Security Strategy, which setsambitions for eight new large reactors, as well as small modular reactors, to achieve
nuclear generation capacity of 24 GWe by 2050, or around 25% of forecast electricity
demand in the United Kingdom.

Interest in SMRs is also growing in Northern, Central and Eastern Europe, where
the potential market is significant, as many countries there need to replace a large
amount of fossil fuel power stations and boost generating capacity to meet growing
electricity demand. In several countries like the Czech Republic and Poland, there isinterest in SMR technology, especially for meeting industrial heat and district heatingneeds. Some emerging market and developing economies are also developing
roadmaps for SMR deployment, based on the generic IAEA roadmap, including
institutional capacity-building. SMRs are more feasible for many of these countries
than large-scale plants owing to grid constraint and lower initial investment costs.

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In France, the France 2030 re-industrialisation plan, unveiled in October 2021,
includes EUR 1 billion in funding for the period to 2030 for innovative designs including
Generation-IV concepts and light water SMRs, such as the NUWARD SMR being
developed by Électricité de France with major contributions from TechnicAtome,
Naval Group, the French Alternative Energies and Atomic Energy Commission,
Framatome and Tractebel. One goal is to build a first SMR unit in France by 2030.

Nuclear Power and Secure Energy Transitions

Small modular reactors

SMRs are targeting some of the most difficult tasks ofenergy transitions
SMRs could play a role to complement variable renewables and other low emissions
generating technologies in achieving net zero goals both in supplying electricity to thegrid, for producing heat and hydrogen, and desalinating water. Some projects target
industrial sectors where emissions are hard to abate and specific applications whereother low emissions technologies are less technically or economically viable. These
applications include replacing coal-fired power stations, replacing fossil fuels for
producing heat in industry and district heating, and various other uses such as the
production of hydrogen and hydrogen-based synthetic fuels, desalination andmerchant shipping.

Replacement of coal plants to supply on-grid power
Decarbonising the power sector requires the replacement of a very large number ofcoal-fired power plants and retrofitting many others to capture CO2 emissions. In
countries open to nuclear power, close to 8 000 coal-fired units are shut down by 2040
in the NZE scenario, including all coal plants in advanced economies by 2030.
Reusing sites for low emissions power generation such as SMRs would offer certain
technical and cost advantages, including the opportunity to make use of existing
onsite utilities, buildings and other facilities, the connection to the transmission
network, the availability of cooling water and a skilled local workforce. There would
also be substantial local economic and social benefits from maintaining local
economic activity and skills.
In Europe alone (excluding countries that oppose nuclear or are phasing it out), forexample, 34 GW of installed coal capacity, or 32% of the total, is made up of plants
with 50 MW to 700 MW of capacity. While these coal-fired power stations could,
depending on the case, be replaced by large reactors ensuring the equivalent
production of electricity into the grid, SMRs with a capacity of 200 MW to 300 MW are
well placed to replace some of this coal-fired capacity, depending on timing and otherconsiderations. Various initiatives can facilitate the replacement of coal-fired plants
with SMRs, such as that of TerraPraxis which aims to prepare standardised and prelicensed designs supported by automated project development and design tools.

Many SMR designs operate at high temperatures and could create the first real low
emissions alternative to fossil-fuel co-generation of power, heat and hydrogen forindustrial customers. Industries that could make commercial use of this technology
include chemicals, steelmaking and ammonia. Several smaller SMRs, including
reactors as small as 1 MWe, are under development for off-grid applications, including
as an alternative to diesel generators in resource extraction sites.

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Replacement of fossil fuels in heavy industry, off-grid mining anddistrict heating

Nuclear Power and Secure Energy Transitions

Small modular reactors

District heating is another potential application. Several countries and regions rely
heavily on district heating from co-generation plants based on fossil fuels. Switching
to biomass may be possible in some cases, but constraints on the availability or reachof sustainable biomass resources will limit the extent to which this could occur
globally. If they reach commercial maturity, SMRs may be one of the few otherpractical solutions that can fuel low emissions district heating.

Hydrogen production, desalination and merchant shipping
Nuclear power plants, large and small, are well suited to meet the growing demand
for low-carbon hydrogen as well as hydrogen-based synthetic fuels. High temperature
reactors can be coupled with either high-temperature electrolysis or thermochemical
cycles to produce hydrogen. The possibility of locating SMRs near industrial hubs
could boost the competitiveness of SMR-based hydrogen as this would reducehydrogen transport and distribution costs, which can be very high.
SMRs could also be used to power desalination plants or aim to provide low emissions
propulsion for maritime merchant shipping.

SMR designs vary in size and heat output according totheir potential use
The SMRs being developed at present vary considerably in size, power and heat
output, technology and fuel cycle, mainly according to the way they are expected to
be used. Among the most mature designs, almost half involve a heat output
temperature of less than 400 ⁰C, making them suitable for paper and methanol
production and oil refining. One produces heat in excess of 800 ⁰C, which is requiredfor coal gasification and iron and steel production.
Number of leading SMRs projects globally by temperature range and targeted use
12
9
6
3
0

200 < T < 400
Paper and methanol
production,
petroleum refining

400 < T < 600
Chemicals and ammonia
production,
heavy oil desulphurisation

600 < T < 800
Aluminium production,
steam reforming of methane,hydrogen production

T > 800
Coal gasification,
desulphurisation
blast furnaces

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Notes: T = temperature in ⁰C.
Source: OECD/NEA 2022, All rights reserved.

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Small modular reactors

Almost half of current projects make use of Generation III technology, which aims toenhance safety by incorporating design changes that lower the risk of a severe
accident and, should a severe accident occur, use appropriate mitigation systems tolimit the impacts on the population and environment. These mainly take the form oflight water-cooled designs, based on years of operating experience. Some concepts
under construction or at a very advanced stage in the licensing process are likely tocome onto the market by 2030.
The development of liquid metal cooled SMRs, molten salt cooled and gas cooled
SMR designs – referred to as Generation-IV SMRs – is generally less advanced.
However, these designs may prove attractive as they have the potential to reachhigher temperatures to optimise co-generation and non-electric applications, as well
as being compatible with the recycling of used nuclear fuel. It may take a longer timefor Generation-IV models to be proven industrially, leading to the commercial
deployment of a series of reactors. One of the biggest challenges, other than thetechnological demonstration still necessary in several cases, is establishing asustainable fuel cycle for the reactor. Nevertheless, political leadership and significant
financial support should accelerate technological advances and result in a
breakthrough in the coming years.

Challenges facing SMR deployment
Cost-competitiveness is an open question, and SMR costs
need to come down substantially

These estimates tend to be in the USD 45 - 110/MWh for projects in some advanced
economies, depending on the degree of technology maturity and discount rate being
considered (6% or 9%), while some developers aim for a range of USD 50 - 60/MWh
for nth of a kind units. The costs of certifying new designs and the cost of factories yet
to be built are subject to high uncertainties. Historically, economies of scale have
driven an increase in the size of reactors, with current conventional large-scale
designs involving more than 1 GW of electrical output capacity. In the case of SMRs,
a series-construction approach is expected to be used to bring down costs. Several
technical features such as design simplification, standardisation and modularisation,
as well as factory fabrication, are expected to underpin this new approach. The
benefits of series construction have been proven in other industries, including the
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The cost-competitiveness of SMRs relative to other types of low emissions
dispatchable power and heat generation will be crucial to the widespread deploymentof the technology. How costs evolve is highly uncertain and the range of current SMR
cost estimates is wide. Most of the numbers that are quoted at present are estimates
produced by project developers; they have yet to be tempered by much in the way ofreal-life experience and so should be treated with great caution.

Nuclear Power and Secure Energy Transitions

Small modular reactors

the lessons learned from these sectors. Observations of modularisation in someindustries, including the power sector, indicate lead-time reductions of 40%, and 20%
in terms of cost savings. For early SMR units, mass production may result in theamortisation of one-time costs, such as research, development, and design
certification costs.
The competitiveness of SMRs should also benefit from several other features thatmake financing easier, notably their smaller construction cost and scalability
compared with large reactors and overall easier project manageability. Investment in
the development of industrial capacities is therefore a critical success factor for the
long-term economic performance of SMRs. A successful pathway to competitivenessfor SMRs also implies that only part of the 70 current designs under development
reaches commercial maturity so as to secure a significant number of units per design
as needed by economies of mass production.
The potential competitiveness of SMRs is best measured in comparison withalternative technological options for the specific applications targeted by SMRs. For
instance, Canada’s SMR roadmap concludes that SMRs could be a particularly
attractive solution for remote regions where the alternative would be diesel powered
generators. Most concepts or projects are at far too early a stage to consider
developing detailed capital cost estimates, making it difficult to determine precisely
which designs might prove to be the most competitive for specific applications.
Moreover, for nuclear energy, the economics are only one development factor. Thismeans that other factors, such as public acceptance related to safety features or spent
fuel management, will be critical to the deployment of a particular design.
SMRs will only become economically viable once demonstration units have beensuccessfully built and operated, and where well-defined and predictable licensing
processes are in place. Some proponents expect commercial competitiveness to beconsidered once a few units are deployed.

The successful long-term deployment of SMRs hinges critically on strong support
from policy makers and regulators for innovation and commercialisation to leverage
private sector investment in R&D and developing supply chains. This support needs
to go beyond funding of R&D and demonstration projects. Adapting and streamlining
licensing and regulatory frameworks to take account of the unique safety features of
SMRs is an important element: in most countries with nuclear energy, existing
regulations have been developed for large reactors. Enhancing regulatory processes
could greatly improve the future competitiveness of SMRs. International
harmonisation of licensing approaches, as supported by the IAEA, could beparticularly important in facilitating the emergence of a global market, which could
take full advantage of the economies of scale of large-scale production of individual

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Policy and regulatory support is needed to stimulate
investment

Nuclear Power and Secure Energy Transitions

Small modular reactors

reactors. However, licensing would still need to comply with national and local
regulatory requirements such as the environmental impact assessment or public
consultation processes.
Policy makers also need to look at ways of mitigating risks for technology and project
developers. As with large-scale nuclear projects, the cost of capital, which reflects risk
allocation and mitigation decisions, is expected to remain a key driver of thecompetitiveness of SMRs. Both public and private financing will be required as SMRs
move from the demonstration stage to commercial deployment. Securing private
financing will be a key condition for success but will require a robust and technologyneutral policy framework, including in the area of taxonomies and environmental,social and governance that will have a growing incidence on financial flows. Someemerging market and developing economies will require the engagement ofmultinational financial institutions.
Regulators will also need to consider the safety and security of nuclear fuel supply,
which differs considerably from that for large conventional reactors. Some SMR
designs and other advanced reactors in development rely on innovative fuels, such
as High Assay Low Enriched Uranium, which have few suppliers or are not yet
commercially available. Existing regulations will need to be adapted to cover the
specific characteristics of the supply chains for these types of fuels. Regulators andpolicy makers also need to keep in mind the potential implications of a very large
number of small reactors being built around the world on the risks of proliferation.

The opportunities for SMRs depend on the speed of its own
development, and the broader pace of transitions
The prospects for the deployment of SMRs and the degree to which they could
contribute to achieving net zero goals remain uncertain. Most SMR concepts have yet
to be demonstrated and new nuclear plants have typically had long lead-times. Theremay be significant risk of construction delays and cost-overruns for demonstration
units and first-of-a-kind commercial SMRs. Indeed, the SMRs that have already beencommissioned generally took a long time to build: for example, 12 years in the caseof the Russian floating SMR and nine years for China’s HTR-PM demonstration plant.
These delays can be explained by the technological and industrial challenges that
had to be overcome for these two concepts. Yet, unlike in Western countries, thesereactors were built in countries with an active nuclear construction industry.

•

Designs resulting from proven technologies and benefitting from an existing
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Based on recent experience, SMRs may be ready to start to play a role indecarbonising electricity supply from the mid-2030s. Within the next ten years, only a
few SMR concepts are likely to approach commercial maturity. These can beclassified into two categories:

Nuclear Power and Secure Energy Transitions

Small modular reactors

reduce the risks and costs linked to licensing, such as meeting environmental
rules. For example, this could be the case for the BWRX-300 model at
Darlington, Canada.
More innovative designs, provided that they are supported by a substantial
government programme. This is the case in the United States for the twoadvanced designs being developed by TerraPower and X-energy, which haveobtained significant funding from the US Department of Energy. Such funding
can help meet the large costs needed to pass the technology development andlicensing stages, which represent a substantial part of the total upfront cost of
the first unit. In turn, this would help to attract private finance and limit the riskfor end-users.

•

How these developments ultimately intersect with the journey to net zero emissions
depends also on the speed of these broader transitions. As noted in the opening
chapter to this report, the world is not yet on track to reach net zero emissions by
2050. A scenario based on the climate pledges actually made by governments falls
short of this goal, even if all of these pledges are implemented on time and in full. A
scenario based on the policies that are actually in place would move the world evenfurther away from a 1.5⁰C stabilisation in rising global temperatures. The opportunities
and roles open to SMRs would vary widely across these different scenarios.
In the world of the NZE, which depicts an extremely rapid transition, the number of
SMRs built in the next decade will clearly fall far short of the capacity that is lost by
the accelerated closure of coal-fired power plants in the NZE. This situation isespecially true for advanced economies where the power generation sector reaches
carbon neutrality in 2035 in this scenario (emerging market and developing
economies reach that goal ten years later). Yet this does not mean that governments
in advanced economies should dial back their support. In the NZE, nuclear investment
needs in the G7 countries peak in the 2040s. There is, therefore, a significant
opportunity for SMR designs to reach technical and commercial maturity ahead of that
decade, when new capacity is most needed. This is true both for small evolutionary
reactors that may be able to achieve economic competitiveness compared with otherdispatchable low emissions sources, but also for the advanced reactor models that
may be able to achieve a sufficient break-even point while benefiting from new
attractive design features related to intrinsic improvements in terms of safety or waste
production.

•

During the period to 2040, SMRs can contribute to the decarbonisation of thepower sector. However, this will crucially depend on investment decisions
made now to begin deployment at scale during the 2030s. Most early
deployments are expected to be at existing power plant sites.

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In a world moving rapidly towards net zero emissions, as in the NZE, there are two
important windows of opportunity for SMRs:

Nuclear Power and Secure Energy Transitions

Looking beyond 2040, if investment decisions are made this decade, then the
period beyond 2040 would open up opportunities for large scale deploymentof SMRs, including the currently less-mature reactor designs and reactors
associated with spent nuclear fuel recycling strategies. These could be more
widely deployed in the 2040s to supply low emissions electricity, heat andhydrogen.

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•

Small modular reactors

This publication reﬂects the views of the IEA Secretariat but does not necessarily reﬂect those of individual IEA member
countries. The IEA makes no representation or warranty, express or implied, in respect of the publication’s contents(including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the publication.
Unless otherwise indicated, all material presented in figures and tables is derived from IEA data and analysis.
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