Market dynamics are contributing to falling US electricity reserves, suddenly making nuclear energy and its firm, around-the-clock, zero-carbon power a potential part of the solution after decades of decline. This is the conclusion of a new report from consultancy firm ICF which notes that a robust American economy, artificial intelligence, and electrification are all contributing to new electric demand. By 2050, electricity demand could rise by 57%, the analysis forecasts, adding that much of this new load requires around-the-clock firm power.
While the report highlights renewed excitement for nuclear energy, which started with plants coming back from retirement and big tech companies announcing contracts with developers of small modular reactors (SMRs), the author, Dino Vivanco, Senior Energy Markets Consultant at ICF, warns that a nuclear renaissance isn’t written in stone. It faces significant challenges and limitations that will determine whether it will expand its role as a core technology underpinning the US energy system, the report says. For example, while nuclear restarts are attractive, the opportunity for scaling is quite low. Beyond Palisades, the Crane Energy Center, and Duane Arnold, few other nuclear facilities could feasibly return to service. And, while new technologies and builds are potentially more scalable they also come with more technological and market uncertainty.
The report emphasises five factors that will be key to determining the future of nuclear energy in the US.
Nuclear costs and revenue
Over the past several decades, the report says, the US nuclear industry has failed to drive down costs mainly because it has built many plant designs. Over 50 designs exist across the country and this has prevented the industry from achieving consistent cost reductions by riding down the learning curve. To achieve that requires numerous factors, including a common workforce, stable regulation and policy frameworks, and continuous deployment. In short, says the report, for nuclear costs to decline in the United States, the nuclear industry needs to pick a design and stick to it. Whether this choice will be an SMR or a large nuclear design will depend on their unique advantages and disadvantages. For example, while large nuclear plants generally have an advantage in terms of economies of scale at each site since costs do not scale proportionately with output, SMRs may have an advantage in terms of economies of scale in manufacturing. SMRs also have an advantage in terms of the total cost per plant and can appeal to a wider range of offtakers. With more potential offtakers, SMRs may be able to ride down the cost curve more quickly than large nuclear can.
SMRs also have the potential to be installed on the sites of retired coal plants, reaping savings by leveraging existing structures. In addition, interconnection rights may be transferrable to the SMR, which can help developers circumvent clogged connection queues. They may also be able to achieve lower construction financing costs due to shorter construction times compared with large nuclear plants.
Alongside costs, the potential revenue will also influence economic viability. Both SMRs and large nuclear plants benefit from high capacity factors and can also produce energy when the grid is most likely to experience electricity shortfalls.
Nuclear power is expensive to build, says the author, but these costs need to be weighed against the potential revenues. Nuclear restart costs could range from $356/kW-year (roughly ¢4/kWh) to $407/kW-year while new nuclear plant costs could range from $456/kW-year to $863/kW-year.
The revenues for both kinds of nuclear plant are higher than most other technologies except combined cycle gas turbine (CCGT) with carbon capture and storage (CCS), ranging from $617/kW-year to $677/kW-year on a levelised basis. In several cases, the revenues from nuclear energy are high enough to break even and earn a sufficient rate of return.
Timing of the next nuclear new build
While nuclear may be able to ride down the learning curve that curve needs a starting point. The report argues that the Vogtle nuclear plant had the potential to be that starting point, but there are no pending orders for that plant design. At the same time, many of the workers on Vogtle have moved on to other work or retired meaning that much of the learning gained from the project may be challenging to build upon.
The Vogtle nuclear plant had the potential to be the start of a declining cost curve, but there are currently no pending orders for that plant design (Source: Southern Nuclear)
As for SMRs, to date no demonstration projects have been developed outside Russia and China and progress in the US faced a setback in 2023 with the cancellation of the Carbon Free Power Project. In 2016, NuScale had a targeted price of $55/MWh. This number was then revised to $58/MWh in 2021, before reaching $89/MWh in 2023. While this may still be a competitive price given the plant’s attributes, it was too much for the off-taker or, at the very least, the revisions created too much uncertainty.
The timing of the next nuclear plant also matters because buyers are looking for solutions now. The lack of readily available nuclear options will lead them to seek out alternatives, like CCGTs, with CCS optionality. The more these alternatives get built, the faster they will move down their own cost curves to the potential detriment of the nuclear sector.
Federal incentives
Tax credits have a significant impact on the cost, and ultimately, the return on investment for nuclear. Developers of new nuclear plants will likely opt for the Investment Tax Credit (ITC), which is based on a percentage of capital costs. Developers could also opt for the Production Tax Credit (PTC), which is provided per unit of energy generated. ICF analysis indicates that the ITC is generally more beneficial for new build given the high capital costs of projects. The PTC would be the preferred option for nuclear re-starts. However, the availability of the ITC is a critical driver of new nuclear plant economics and without it, SMRs fail to earn a sufficient rate of return in nearly all the cost and revenue scenarios modelled by ICF.
The law establishing the ITC stipulated that the incentive will begin to phase out at the later of two dates, either 2032 or the year that the US power sector achieves 25% of its 2022 emissions. According to ICF modelling, the latter will be achieved in the early 2040s. The report adds that while the nuclear industry moves quite slowly in general, much still needs to happen before the ITC phase out. This includes a successful SMR demonstration project, new manufacturing facilities, and an initial round of projects. If tax credits expire before nuclear achieves meaningful cost reductions, it could stall this emerging industry.
Fuel availability and disposal
Nuclear plants require enriched uranium, but this is a market that is ensnared in geopolitics, the ICF says. Russia has historically been a major supplier of enriched uranium to the West but since the outbreak of war in Ukraine, Western utilities have been reluctant to enter into new contracts. Furthermore, in May 2024, the United States passed legislation banning the imports of enriched uranium from Russia and Russian entities. Meanwhile, there is limited capacity for enrichment and conversion in Western countries, putting upward pressure on prices.
An additional complication is that the enrichment level of fuel for SMRs is generally higher than that for traditional facilities. Currently, the production of such fuel outside of Russia and China is limited to a single pilot project run by Centrus Energy in the United States. The US government is supporting efforts to expand the domestic supply chain, but these efforts will take time to bear fruit.
Furthermore, the US still lacks a long-term nuclear waste storage solution. The Yucca Mountain repository has stalled for decades, while Holtec’s proposed underground facility in New Mexico recently had its license vacated by a federal appeals court. Both of these issues will need to be addressed to support a long-term and thriving domestic nuclear sector.
Public acceptance
While many forms of energy infrastructure face community opposition, concerns about nuclear energy are especially strong. While opposition is focused on safety, nuclear plants have a very high energy density and a substantially lower land footprint than many other energy technologies, which also encounter community opposition. A nuclear plant may be more likely to be affected by community opposition though and nuclear developers can attempt to reduce the potential for community opposition by communicating the benefits of nuclear plants. Nuclear plants provide hundreds of jobs, some of which may replace lost jobs from traditional forms of energy, such as coal. These jobs also have higher-than-average wages. Moreover, despite some well-known nuclear energy disasters, nuclear is one of the safest forms of energy, as measured by direct or indirect deaths per unit of energy generated. And nuclear developers may find a receptive audience in many communities. The author cites a 2024 Pew Research poll which found that 56% of Americans support nuclear energy, compared to 43% in 2016.
The report concludes that the nuclear industry stands at a critical juncture. It is the interplay of economic viability, lead time, technological uncertainty, scalability, federal incentives, fuel availability, and public acceptance will ultimately determine whether nuclear energy can rise to the challenge of meeting America’s growing electricity demand.
