The financing of new nuclear power plants is one of the biggest challenges facing the sector today. Despite a growing number of NEA member countries deciding that nuclear energy has a bigger role to play in the energy transition, a number of technical, economic, institutional and logistical challenges need to be overcome. Attaining sufficient financing is one of these key challenges.
To address this topic, the Nuclear Energy Agency (NEA) recently organised ‘Financing Nuclear New Build Today,’ a workshop to bring together the leading experts in nuclear energy, electricity market design and infrastructure financing along with national level decision makers in energy policy. During the event they compared a number of recently adopted or discussed financing models to better understand the allocation they imply for construction and price risks.
The event, which was held in Prague, Czechia, on 13 June and hosted by the Ministry of Industry and Trade of Czechia, also aimed to explore the degree to which the price risks will be borne by rates and taxpayers, and to which extent they can succeed in attracting third-party private investors.
NEA Director-General William D. Magwood, IV delivering opening remarks at the NEA event on financing new nuclear on June 13 in Prague, Czechia.
NEA Director-General William D. Magwood, IV gave an opening address alongside Tomáš Ehler, Deputy Director General for Energy and Nuclear Sources, Ministry of Industry and Trade, Czechia. During his opening remarks, the NEA Director-General highlighted that attaining net zero carbon emissions by 2050 will require developing significant new nuclear power generation capacity in the coming years and decades.
“As we saw in our 2023 Roadmaps to New Nuclear ministerial conference, all countries view financing of both Generation III reactors and new nuclear technologies like small modular reactors (SMRs) as a key challenge. At the NEA, we are focused on finding the most efficient ways to bring public and private financing together. Our goal is to create a system that is workable, financially efficient, and supportive of the goals of out member countries,” said Director-General Magwood.
The Director-General emphasised that this workshop was about enabling key decision makers to be able to take the action required to create visible outcomes for the energy sector and the environment. Providing these decision makers with the necessary information and pathway options for financing new nuclear will be central to this goal.
“We are past the age of talking about financing and now need to identify clear paths forward. We expect to advance these efforts in the lead-up to the second Roadmaps to New Nuclear meeting in September 2024,” added the Director-General.
The workshop included sessions on the state of nuclear finance today, financing models for nuclear new build, the differences between financing large scale reactors versus small modular reactors, and the needs of private and public investors to secure financing at low costs of capital.
Tomáš Ehler, Deputy Director General for Energy and Nuclear Sources, Ministry of Industry and Trade, Czechia, emphasised why financing in nuclear new build is an area of importance for the NEA member country during his address.
Representatives from a broad range of public and private organisations were present, including Barclays, Bpifrance, EDF Group, European Commission, European Investment Bank, Ministry of Climate and Enterprise (Sweden), Ministry of the Economy, Finance, and Industrial and Digital Sovereignty (France), MZ Consulting, Naarea, Nucleareurope, Polskie Elektrownie Jądrowe (PEJ), Rolls Royce SMR, Rothschild & Co, SFIL, University of Cambridge, and more.
Tomáš Ehler, Deputy Director General for Energy and Nuclear Sources, Ministry of Industry and Trade, Czechia, emphasised why financing in nuclear new build is an area of importance for the NEA member country.
"The event highlighted the crucial importance of this topic and the need to share our experiences and improve investment conditions for nuclear within the EU,” said Mr Ehler.
“We also discussed the newly approved support scheme for nuclear new-build in Czechia by the European Commission, which includes a state loan, purchase contract, and protection against political and legal changes, based on intergenerational sharing of costs and benefits," the Deputy Director General added.
Senior Economic Advisor at the NEA, Jan Horst Keppler, moderated a closing session where a number of key outcomes from the workshop were underlined. These included:
- A dynamic approach to the financing of Generation III plants is required. The shares of public and private actors over the project life-cycle should change at defined intervals through refinancing; private actors would assume a greater share of the financing and ownership as the project progresses and pre-agreed milestones are passed. These arrangements must be agreed before construction begins, even if re-financing is to take place some years in the future.
- Both electricity market risk, especially in the volatile low carbon markets of the future, and construction risk of new nuclear power plants, especially first-of- a- kind plants, will, as with many other technologies, need to be borne by consumers and the government.
- The division of labour for SMRs between private and public actors will need to be defined more comprehensively. While private actors in various forms, such as venture capital, family offices and private equity have been happy to engage in development, their willingness to engage in deployment is less sure and might require some forms of public support.
- For Generation III new build, public and private investors will need to get involved more systematically in project management proper in order to contain the risks of budget overruns. There are signs that private actors are increasingly willing to engage in project management and their skills in cost control, management and creating appropriate incentive structures will be highly welcome. Private investment can also help governments to better manage their balance sheets.
The NEA workshop to brought together leading experts in nuclear energy, electricity market design and infrastructure financing along with national level decision makers in energy policy.
Speaking at the conclusion of the event, Director-General Magwood shared the five ‘key ingredients’ which he sees as crucial to ensuring sufficient financial support for nuclear new build:
- social and political support,
- a system approach,
- stabilisation of designs,
- lowering overnight costs, and
- minimising financing costs.
The upcoming Roadmaps to New Nuclear 2024 conference will continue to explore the key challenge of financing for new nuclear and support NEA member countries in their endeavour to implement nuclear energy policies that will help to provide energy security while mitigating climate change.
