Why PPP is poised to take nuclear global

Nuclear power is seen as an important part of the Net Zero energy mix, but remains hugely expensive. So how is the market developing globally to meet demand?

In the race to Net Zero, nuclear power has climbed up political agendas as a fossil fuel alternative with significant and proven energy generation capacity. Public opinion may have restricted its development lately, but the twin drivers of energy security and global warming, along with the sheer volume of growing electricity requirements, paint nuclear as a potentially major contributor to, and diversifier of future clean energy generation. For that, however, private funding is likely to be the real game-changer.

According to Juliet Reingold, partner at law firm Simmons & Simmons: “Even countries which banned new nuclear in recent decades are now reconsidering their appetite to promote nuclear.” This is perhaps unsurprising, given that  nuclear fission technology produced only 5% of global energy in 2021 and that some estimates put the increase in worldwide electricity demand  by 2050 at up to 185% compared with 2021 levels (RFF March 2023 Global Energy Outlook report).

The UK has clearly been a leader in the field to date and according to Amar Qureshi, joint managing director and co-founder of infrastructure consultancy Agilia Infrastructure Partners, there is “strong policy alignment to support nuclear energy” which is “unprecedented in our times and a testament to the work of the industry as a whole”. 

However, this is far from the full story. In April 2023, the World Nuclear Association reported that about 30 countries are considering, planning or starting nuclear power programmes. These range from sophisticated economies to developing nations across virtually all global regions and include Bangladesh, Egypt and Turkey, which are all constructing their first nuclear power plants.

Nevertheless, this is not an easy path to walk. Reingold describes nuclear projects as being “unique infrastructure investments in their scale, scope and longevity”. She goes on: “The risk profile involved is unlike any other large-scale infrastructure project, whether [that’s] the capital-intensive nature of investment required, management of health and safety risks, security considerations, plant decommissioning liabilities at end of life which can go on for hundreds of years and must be funded often to the tune of multi-billions, technical complexity, long construction phase with heavy reliance on supply chain integrity, risk of delays and cost overruns.”

Enter PPP as a likely mechanism to facilitate and enable global nuclear expansion. In fact, PPP has been referred to as a key driving force in the development of the nuclear industry.

For Reingold, new nuclear certainly brings huge opportunity to the private sector, with the blending of public and private engagement being the critical factor that will really allow meaningful market expansion. Her view is that “some form of government participation” is essential, for example, “to enable early-stage finance for the expensive and risky construction phase. Without public sector  participation, investors will be hesitant to commit and programmes will be slow to proceed to FID stage or will simply not get there, being deemed too risky.”

This is crucial, because, according to the International Energy Agency (IEA) “more than $50trn of cumulative investment will be needed in the electricity sector by 2050, including more than $2trn in nuclear power — primarily in Asia Pacific (especially in China), Europe and North America — to transition the global energy system onto a pathway to Net Zero.

Qureshi refers to the UK as “probably the most advanced jurisdiction as far as private sector financing for nuclear projects is concerned”.

The US government, though, is also heavily engaged with nuclear energy momentum, taking its lead from the current fleet of nuclear power reactors which already generate half of the country's carbon-free electricity. Reingold notes: “The USA Department of Energy’s plans [include] public-private partnerships or build-operate-transfer arrangements for deploying nuclear power technologies in the USA.” She continues: “They have a PPP with several nuclear energy companies to develop and deploy advanced Smaller Modular Reactors (SMRs); the PPP will drive reduced costs of designing and constructing SMRs, and will support safe and efficient operation of the reactors.”

Qureshi also points to the introduction of the Inflation Reduction Act as a method by which the US “has sought to improve the economics of building and operating nuclear reactors”.

Advanced nuclear reactors (ANRs) already benefit from the Advanced Reactor Demonstration Program (ARDP), which helps US private industry demonstrate advanced nuclear reactors through public-private cost-shared partnerships with US industry. Under the Act, ANRs, which are typically smaller, safer, and more efficient than their predecessors, qualify for either production tax credit or investment tax credit. The former is worth at least $25 per megawatt-hour for the first 10 years the plant is in operation, adjusted for inflation, and the latter offers a tax credit for 30% of the capital invested in constructing the facility. Both apply to facilities that go online after 2025 and there is a 10% uplift if they are built on a brownfield site or a fossil energy community.

Loan guarantee programmes and incentives of close to $300bn are also likely to help reactor operators remain competitive with other energy producers and will likely result in the expansion of the nuclear energy industry beyond the 28 states with operating facilities.

Beyond the US, in May this year, support for the Romania SMR project from the United States, Japan, Republic of Korea, and United Arab Emirates of up to $275m was announced as part of the G7’s flagship infrastructure initiative, the Partnership for Global Infrastructure and Investment (PGII). The US Department of State called this a demonstration of “the power of multinational cooperation and public-private partnership on transformative infrastructure projects”. It added: “This multilateral endeavour to deploy safe and secure civil nuclear technology is a testament to the essential role nuclear energy plays in the global clean energy transition.”

The US has also been undertaking ‘nuclear diplomacy’ with other eastern European nations, most notably Poland, with financial and technical support, paving the way for it to utilise reactors designed by US private sector companies.

The Czech Republic, another nation that has been engaging with the US on nuclear, is pursuing a multi-billion-dollar reactor project that will be, according to the Nuclear Energy Institute, the single largest investment in the country’s history.  Meanwhile, Belgium is extending its original nuclear plans and keeping its reactors online for another 10 years. France has plans to build 14 next-generation reactors.

Breaking the US monopoly in North America, Canada is also looking to deploy SMRs within its borders and in January this year Ontario Power Generation entered a deal with a consortium of private sector partners to deliver North America’s first grid-scale SMR through the Darlington New Nuclear Project in Clarington, Ontario. 

Also in 2023, it was announced that the nuclear regulators of Poland and Canada will establish a joint committee on advanced nuclear and small modular reactor (SMR) technologies, with the aim of coordinating co-operation between the two institutions.

In the Philippines the government is considering whether changes to its energy regulatory framework to create PPP or Build-Operate-Transfer deals is better than assigning a government-owned and controlled corporation for the development of nuclear power in the country. That includes the installation of SMRs and the targeted revival of the mothballed 620-megawatt (MW) Bataan Nuclear Power Plant (BNPP).

There is also the International Bank for Nuclear Infrastructure (IBNI), a new multilateral international financing institution planned to solely focus on supporting the development of new nuclear energy programmes or the expansion of existing programmes to achieve 2050 Net Zero. According to Reingold: “IBNI sees itself as the ‘game changer’ in global nuclear finance and will also support SMRs in both developed and developing countries.”

So, nuclear activity is building momentum worldwide, with the flexible models of PPP underpinning much of the vigour and positivity that views nuclear as a Net Zero hero.