The dominoes keep falling. Momentum for new nuclear is cascading – forming such a wave that surely the only thing that can stop the industry from expanding globally is the industry itself.
The latest obstacle to crumble is the World Bank’s exclusion on financing nuclear projects. This exclusion had long been a sore spot (read gaping wound) for the nuclear industry, as even though it was widely understood that the Bank was incapable of single-handedly financing large-scale nuclear development due to insufficient funds, its willingness to invest even small amounts could de-risk projects in challenging newcomer markets, and act as a powerful signal to the rest of the financial system that nuclear energy was indeed safe and sustainable.
The World Bank decided to formally exclude nuclear projects from its portfolio in 2013, but as many have noted a de facto ban seems to have been in place since 1959 – which was the last time it loaned to a nuclear project (the Garigliano nuclear power plant in Italy).
This matters because the World Bank plays an important role in the developing world and emerging economies by providing both financing and technical assistance on infrastructure projects with the potential to promote sustainable social economic growth. The exclusion on nuclear meant that it was providing neither of these things to these countries – leaving advising activities to the likes of the IAEA, and financing activities to vendor nations (and one nation in particular).
The Bank initially justified the exclusion on perceived safety and proliferation concerns. It was no doubt influenced heavily by the anti-nuclear movement and pressure exerted by certain board member nations and especially Germany. In more recent years the Bank preserved the ban citing its own lack of competency on nuclear issues. This was obviously a self-fulfilling proclamation, since it could hardly become competent without either recruiting that competency or investing the resources required to build it from the ground up.
What has influenced the change? One supposes that the decision in May by Germany to drop opposition to nuclear projects at the EU level has played a substantial role, although it is surprising just how quickly this must have filtered through to the World Bank’s decision-making process. No doubt the change had long been under consideration and this was just the last straw on the camel’s back. In a video address World Bank President Ajay Banga noted year-long conversations with the French government as an influential factor, and discussions with IAEA Director General Rafael Grossi last year.
Other factors most likely include the statement last September by 14 major banks to endorse nuclear as a climate solution and to triple nuclear energy by 2050. And, the victory a few years earlier which saw nuclear energy listed as a sustainable activity within the EU taxonomy will no doubt have swayed things too. Both the societal consensus and the scientific argument for recognising nuclear energy as an essential and sustainable climate solution has grown enormously in recent years.
Before getting too excited, it must be noted that the change in the Bank’s policy is currently severely limited in scope. It applies to three things and none of these appear to be newbuild. The first change will allow the Bank to build up its own competency to advise countries on safeguards and non-proliferation. One hopes they will follow the IAEA’s lead on this and not go applying their own (or any one country’s) standard when it comes to approving technologies. This has always been a hot international political debate, and it would be sad to see pressurised heavy water reactors or fast reactors remain excluded, for example.
The second change means that the Bank may finance long-term operation and modernisation projects. Given that the Bank finances parts of the world (emerging and developing economies) that are not exactly overflowing with nuclear plants, it is curious which plants/countries actually fall within that scope. Will this benefit Armenia? Romania? Mexico? Ukraine? Or who, exactly?
Long-term operation of nuclear plants is also a lot less risky than new build, and in almost all cases it should be incredibly cost-effective. While the International Energy Agency remains quite negative on the viability of new nuclear projects, it recognises long-term operation as a no-brainer. This should make it a lot easier to find financing for, and one wonders whether involvement from the World Bank is strictly necessary here.
The last change is that the Bank has also pledged to support the “potential” of Small Modular Reactors, whatever that means. One could argue that the best way to support the potential of this class of nuclear technology is to finance the tricky and likely loss-leading first of a kind (FOAK) projects, but this does not appear to be on the Bank’s radar just yet. Perhaps it means building the grid, radiological protection system and other enabling infrastructure areas that are needed for nuclear projects both large and small? Perhaps it means building up local indigenous supply chains? This will certainly bear watching.
In fairness to the Bank there are not a lot of SMR vendors that seem particularly excited about the prospects of building in Africa and other newcomer regions at the moment. For the most part their attention is well and truly captured by lucrative and accessible European and American energy markets. Perhaps this is partly due to the particularly acute financing challenge in newcomer regions, and perhaps the change in World Bank policy may help to motivate their interest.
This should be recognised as an especially significant victory for western SMR developers as, let’s face it, the lack of World Bank financing was not interfering with Russian efforts to establish nuclear energy in newcomer markets. By contrast, Western nuclear vendors have not enjoyed the same kind of national export credit agency support.
These are clearly only ‘baby-steps’ in the right direction as the Bank cautiously finds its feet in this nuclear space it is re-entering. Nevertheless, the changes are a very welcome development which will have broad ramifications. Already, there is a signal that the Asia Development Bank will follow suit. Hopefully other development banks will soon join them. The announcement just a few weeks later that the World Bank would work closely with the IAEA is also a very promising indication that the silos are coming down between institutions.
There is still a long way to go. Put simply, it is crucial that the World Bank begins to finance new nuclear in the countries that need this the most. Listening to Banga describe the energy challenge, he seems to be under no illusions about the direction of travel, but still the Bank will not be rushed. These early days will be crucial in establishing core competencies. Success will breed success.
Looking forward, the day the Bank part finances a nuclear new build project will be another one for the record books. The day it finances a nuclear fuel cycle facility the nuclear industry should declare an ongoing annual celebration. At that point nuclear energy will be fully ‘normalised’ and understood to be a normal part of most countries’ development journey. While the nuclear financing challenge will never fully disappear, we can be confident that there will be competitive financing available for every viable project.
The apparently sudden change in World Bank policy places the nuclear industry in the spotlight yet again. It is the hero of the hour, but it is unfit for the challenge in front of it. Just how quickly it can get fit will become the rate-limiter for nuclear expansion going forward. If the industry is serious about meeting the 3x goal it has set for itself and even going beyond that, then profound innovative changes are needed – the equivalent to a full-body industry-wide transformation.
With this pen-stroke we may see an acceleration in many newcomer plans. We are on the path to seeing the fundamental equity issue of nuclear power distribution finally overcome. It is momentous development, and a welcome one. It also means there are no more excuses.
