Why the nuclear renaissance is ‘far from certain’ | Invesloan.com

Welcome to Energy Source, coming to you from New York.

Shale executives have warned that Donald Trump’s trade policies and rhetoric are threatening their drilling plans. My colleague Amanda Chu reported that one shale producer told a survey by the Federal Reserve Bank of Dallas that the administration’s “chaos is a disaster for commodity markets”.

Meanwhile UK oil major Shell aims to boost its valuation to compete with ExxonMobil and Chevron by cutting capital spending to pay for more share buybacks. But my colleague Malcolm Moore reports that few analysts expect that Shell will close the gap with its US rivals.

In today’s newsletter we look at an ICF report, shared exclusively with Energy Source, that reveals the cost challenges facing the resurgent nuclear industry. — Alexandra

High costs and lengthy timelines could threaten nuclear power’s comeback

The scramble to meet the electricity demands of artificial intelligence is reigniting interest in nuclear energy, but high costs and long lead times could complicate its comeback.

A new report from consultancy ICF found a nuclear renaissance was “far from certain”, citing doubts over economic viability, technological scalability and long timelines. 

The report found that restarting nuclear plants could cost between $356/kW a year to $407/kW a year, while small modular reactor (SMR) costs could be as high as $863/ kW a year, 50 per cent more than gas-fired power plants and those with carbon capture.

“There’s a lot of uncertainty around both the technology and, importantly, the cost,” said Shanthi Muthiah, ICF’s managing director for energy advisory. “That introduces significant financial risk.”

The US race to lead in AI has sparked a proliferation of energy intensive data centres and an unprecedented surge in electricity demand. The need for low-carbon, around-the-clock sources of power is driving companies to invest in emerging nuclear technologies or restart decommissioned nuclear reactors, including Microsoft’s 20-year power deal with Constellation Energy to revive Three Mile Island in Pennsylvania, notorious for being the site of the worst nuclear accident in the country’s history.

Earlier this month, Amazon, Google and Meta backed a call by big, energy-intensive companies for governments and utilities to triple nuclear capacity by mid-century. Amazon purchased a stake in SMR developer X-energy last year, while Google signed a power supply deal with Kairos Power. Meta is evaluating proposals from SMR developers seeking up to 4GW of new capacity starting in the early 2030s.

While restarting nuclear plants and increasing the production capacity of existing plants are much more cost effective than SMRs and could satisfy some near-term demand needs, they would not be able to provide enough meaningful new supply to data centres given that only a handful of facilities were in a position to reopen, said Muthiah. 

The future of nuclear power now relies on emerging technologies such as SMRs, which have yet to reach operation in the US and whose costs and viability are still unknown to investors.

Developer NuScale cancelled what would have been the first SMR project in the US in 2023 after not enough buyers signed up for its power. Oklo, another SMR developer, pushed back the date of the first deployment of its nuclear reactor from late 2027 to early 2028.

ICF found that revenues for new nuclear plants can be high enough for operators to break even and earn a sufficient rate of return. But this is heavily contingent on the availability of federal tax credits, which face an uncertain future in Congress and are slated to be phased out by 2034, a deadline that could be too soon for the slow-moving industry.

There’s also the problem of scalability. SMRs have yet to be demonstrated at scale and also require more enriched uranium than traditional facilities. The US is already facing price pressure for enriched uranium after restrictions imposed on supplies from Russia, a major supplier, and years of under-investment in the fuel.

NuScale has yet to sign a deal with a large data centre company in the US. During a fourth-quarter earnings call chief executive John Hopkins cited the “complexity of putting these deals together” as a reason for the delay.

Lawrence Coben, chief executive of NRG, a large power producer, told the Financial Times earlier this month that the Big Tech data centre developers “are not counting” on nuclear.

Matthew Crozat, executive director of the Nuclear Energy Institute, said that one of the biggest challenges facing the industry was the ability to build fast enough to meet rising electricity demand.

“We have new technologies . . . it takes a while to build them,” Crozat said. “We have data centres that are looking to come online in 18 months in some cases.”

Muthiah at ICF said that nuclear power’s “very significant capital expenditure requirements” had also limited the “offtakers that can put that on their balance sheet”.

She added that standardising the designs of nuclear reactors could also be economically advantageous because it could shorten construction times. 

Koroush Shirvan, a nuclear science and engineering professor at MIT, said that China had seen construction timelines for its nuclear reactors speed up by 50 per cent since standardising the design. But he warned that incentives were still crucial for building out the industry in the US. 

“We need enough incentives so that we can go and build more of them and actually leverage the economic advantage you get from standardisation,” Shirvan added. 

Job moves

• Kunlun Energy has named Jin Guanghui as chief financial officer, after Gao Xiangzhong resigned from his role.

• Mangalore Refinery and Petrochemicals has appointed Devendra Kumar as chief financial officer and director of finance.

• Randall James Connally has been named the new executive director and chief executive of ADM Energy. Connally previously served as chief financial officer of Atlantic Bridge.

• Top End Energy has appointed Luke Velterop as chief executive. Velterop previously served as vice-president of US operations and joined the company through its acquisition of natural hydrogen explorer Serpentine Energy.

Power Points

• Russia’s gas and oil company, Gazprom, has struggled to recover from record losses after the Ukraine war destroyed its business model.

• Rolls-Royce warned the UK government that it risks losing out in the race to build small nuclear reactors if it fails to select companies to build them by the end of June.

• Environmentalists have challenged the UK government’s decision to grant oil and gas licenses in the North Sea.

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.