In one of my first projects in investment banking, I was tasked to perform the valuation of a leading industrial player across the nuclear power value chain: uranium mining, fuel recycling, power plant construction, waste management, and plant decommissioning. It remains, to date, the most complex valuation assignment I have ever undertaken. This experience also sparked my appreciation for the potential of nuclear power generation.
Much later, around 15 years ago, an attempt at a global ‘nuclear renaissance’ took place, as illustrated by a bold International Energy Agency report (2010) dedicated to the future of nuclear energy and prominent scientific articles discussing nuclear power innovations such as longer-life reactors with replaceable parts, small modular reactors, mobile, ship-borne reactors, and even portable power plants. The Fukushima disaster halted these ambitions in 2011.
They are being revived today as the world seeks to solve a well-identified trilemma: decarbonization, security, and affordability. In a record time, sentiment towards nuclear power has shifted toward greater acceptance. Faced with surging power requirements driven by electrification and digitization trends, nuclear power’s advantages (scale, high load, high-quality electricity, zero-emission) are eclipsing its disadvantages (location of uranium, safety, waste management.) The powerful combination of bipartisanship, technological advancements, and acute power needs has set the stage for a new attempt at a nuclear renaissance.
There is an important geopolitical imperative that comes on top of economic and environmental matters: Russia, the global leader in nuclear power, and China, its immediate challenger in this domain, are using nuclear exports to enhance their influence worldwide.
For those interested in putting nuclear power in a climate change perspective, MIT has released a free simulation tool called ‘En-Road.’ Users are invited to adjust assumptions across multiple factors – from energy mix to deforestation via carbon capture – and assess the estimated impact on global warming. Assuming the status quo, Earth’s temperature is expected to rise by 3.3˚ Celsius (6˚ Fahrenheit) by 2100. According to the model, accelerating annual gains in the energy efficiency of buildings from 1% to 5% reduces the increase to 2.9%. Actively managing agricultural emissions lowers it by an additional 0.2%.
When nuclear power-related model assumptions are maxed out, the temperature rise is further lowered by 0.1%. The chief reason for the relatively modest impact is the anticipated time and complexity to build a new installed base: Outside of Russia and China, nations face formidable hurdles to get back in the game: an inexistent supply chain, a dearth of nuclear engineers, limited expertise in scaled project management, and constrained government funding.
It may be tempting to conclude that nuclear power generation is irrelevant to mitigating climate change, but that would be erroneous. In fact, short of introducing global carbon prices – an impossible topic for the foreseeable future – the path to stabilize Earth’s temperature will involve a multitude of initiatives that build on one another. A nuclear renaissance is part of that set. Besides, the rare topics benefiting from bipartisanship must be cultivated.
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