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Market-Based Solutions to Vital Economic Issues
Kenan Insight
Sep 21, 2022

Nuclear Energy Back on the Table as a Clean, Secure Alternative

As solar, wind and natural gas generation surged over the past decade, nuclear power seemed to fade from the scene like a relic from another era. Against a backdrop of general antipathy toward nuclear energy, the specter of Japan’s Fukushima meltdown in 2011 brought safety questions to the fore and seemed like the final nail in the coffin for new nuclear investments.

However, the tide has begun to turn. Russia’s war in Ukraine and its reverberating impacts on global energy markets have brought renewed attention to energy’s role in national security and economic stability. Although many questions remain about the economics, politics and public acceptance of nuclear technologies, nuclear power is increasingly being discussed as a means to support energy security and increase generation capacity while cutting carbon emissions.

The New Nuclear Power and Climate Strategy Conference, organized by UNC Kenan-Flagler Business School’s Energy Center, examined some of the drivers and remaining questions around nuclear energy. Below, we outline some of the key findings from the conference.

Seeking Energy Security

Energy supplies are not distributed equally among countries. Access to reliable and affordable energy is essential for modern economies, however, and securing an uninterrupted supply of sources is complex. Long-term security requires timely, environmentally sensitive investments in energy sources among nations committed to free trade. Short-term security is also critical; this necessitates creating domestic energy systems with adequate reserves of reliable and dispatchable power as well as avoiding dependance on suppliers prone to use energy exports as a weapon.

The war in Ukraine has made painfully clear the risks imposed by Europe’s reliance on Russian  energy supplies. This is leading many European countries – and because of the global nature of the energy market, countries throughout the world – to take a new look at nuclear power. Because nuclear plants are owned and located on domestic soil and can run for decades, they create a long-term reliable domestic energy resource. Many European countries that had been decommissioning their nuclear plants are now looking at ways to extend their operating lives. Some are even investing in new plants and advancing new technology.

This represents a significant reversal. After the Fukushima meltdown, Germany decided to stop using nuclear energy and planned to close the last of its remaining plants by the end of 2022. In light of recent events, the country has decided to keep two of its last few plants online. France, which already gets about 70% of its electricity from nuclear energy, is looking at ways to extend the life of its existing plants, many of which are old and offline. France also has announced plans to build new plants in the coming years. The U.K. recently announced a plan to build new nuclear plants to reduce its dependence on imported oil and gas. These are all large light water reactors with capacities of up to 2 gigawatts (2,000 megawatts) or more. Meanwhile, countries in Asia have been expanding their nuclear footprint. Of the more than 50 reactors under construction around the globe as of 2021, almost all are in the Eastern Hemisphere.

Clean and Stable Power

The drive for decarbonization is also promoting a renewed focus on nuclear power. More than 70 countries have agreed to cut greenhouse gas emissions as part of the Paris Agreement, which calls for reducing emissions by 45% by 2030 and reaching net zero by 2050. While most would like to achieve these targets by replacing coal and oil with renewable sources such as wind and solar, there isn’t yet a cost-effective way to store electricity for more than four hours.  This makes it difficult for utilities to assure uninterrupted power supplies when the sun isn’t shining or the wind isn’t blowing. The need to transport energy long distances from sunny or windy places to areas without these resources poses another challenge.

To complement intermittent renewables while phasing out fossil fuel sources, utilities must develop energy sources that provide “firm” consistent quality power, are resilient during weather events and minimize carbon emissions. This is no small feat. For example, to accomplish its goal of net-zero emissions, Duke Energy, one of the largest U.S. power producers, needs to grow its generation portfolio from 57 to 105 gigawatts by 2050 while retiring and replacing all coal plants. Despite the company’s aggressive plan to increase renewable energy generation, it is likely to still fall short of the net-zero target without developing other low-carbon generation. Duke and many other utilities agree that nuclear energy is a leading candidate to provide the clean, “firm” power needed to meet future energy demands while achieving net-zero emissions. Duke is seeking to extend the life of all its existing nuclear plants, and we could see new nuclear come into Duke Energy’s portfolio in the 2030s.

A Possible Solution for Developing Countries

Meanwhile, global decarbonization efforts face a different challenge. Developing countries account for almost half of global greenhouse gas emissions, and these countries are expected to see rapid growth in electricity demand as emerging markets develop. Keeping pace with that demand while also decarbonizing poses a formidable test.

Building new nuclear power plants in developing countries could offer clean, reliable, large-scale power generation for high-growth economies like China, India and Brazil. This domestic-sourced power also helps developing economies address security risks associated with importing oil and gas. New nuclear plants are prone to capital cost overruns, but once online they provide power that is relatively immune to price inflation. Despite these advantages, some question the ability of less stable developing nations to ensure proper oversight of safety, nuclear waste and nonproliferation at their nuclear plants. Inadequate safety and controls would raise the risk of catastrophic events like the Chernobyl plant explosion and meltdown.

A Brighter but Still Uncertain Path Forward

Although nuclear power is beginning to look more favorable, there remains significant uncertainty as to whether it will become a widely accepted solution. Will environmental groups get behind this power source as a primary means to decarbonization? Will next-generation nuclear technologies prove both safe and economically viable? Is it even possible for countries to commit to the sort of long-term, large-scale investments necessary to build new nuclear plants amid turbulent political environments in the U.S. and Europe? The answers to these questions will shape nuclear power’s future path – and the world’s energy future more broadly.  The stark winter now facing Europe, one characterized by extraordinarily high power prices and possible rationing, may remind many that despite its acknowledged risks, nuclear power can meet the most important requirements of industrial and developing economies.

This is the first of two Kenan Insights based on findings from the New Nuclear Power and Climate Strategy Conference. Read the second insight here. 

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