Nuclear Energy: On the Way Up, or Out?

By Fahad Siddiqui

Third Way
Mar 15, 2017 · 5 min read

Headlines in recent months paint a picture of nuclear energy in decline, with the industry struggling to compete in today’s evolving energy markets. Yet at the same time, we see growing interest and private sector investment in the next generation of nuclear technologies. These conflicting signals make it difficult to get a firm understanding of the prospects for nuclear power. So let’s look a little deeper into the market trends affecting the nuclear industry — and what they mean for the future of America’s nuclear companies specifically.

Big Comeback, Big Business

The 1970s and 80s were the golden years of the nuclear industry. More than 200 GW of capacity came online during this time, with the U.S. alone accounting for a third. After a slump in the 1990s and the 2000s, nuclear generation is, in fact, making a comeback. According to Third Way analysis, the world will add 559 GW of new nuclear capacity between now and 2050. That means we’re looking at an annual investment of $75 — $90 billion (not including lucrative contracts for fuel and maintenance).

Figure 1: Historical Nuclear Capacity with Forecast from 2016–50; Source: IEA WEO 2016, WEO 2014, WNA, IAEA PRIS

There’s a New Center of Growth this Time Around

From 1960 through to 1990, OECD countries accounted for 85% of all global nuclear capacity coming online. This growth was fueled by the need to power their rapidly industrializing economies and energy security. However, this share has decreased sharply to 15% in the last ten years. Why? Stagnant growth, unfavorable public perception, and low energy prices (cheap natural gas is the major issue in the U.S.). With the exception of South Korea, nuclear capacity is expected to be almost flat in OECD countries and the majority of new capacity will replace retiring reactors.

The big markets to watch are in energy-hungry parts of the developing world. Almost 70% of all new nuclear capacity coming online in the next 35 years will be in non-OECD nations. What’s behind this surge? Growing demand for electricity coupled with international commitments to cut CO2. Countries will need to add massive amounts of zero-carbon generation to the grid.

Figure 2: Nuclear Capacity Planned and Under Construction; Source: WNA, IAEA PRIS

Competitive Landscape

From the birth of nuclear energy in the 1950s through the 1970s, U.S. firms dominated the global nuclear industry. During this time American companies supplied almost half of all nuclear plants in the world and established a multi-billion dollar domestic industry. But the U.S. started losing market share in the 1980s, hitting a low of 4%. Of all the nuclear capacity planned and under construction around the world today, only 7% is coming from American companies.

Figure 3: Percentage Share of Nuclear Market by Supplier Country; Source: IAEA PRIS, WNA

Lost Market Share Spells Trouble for U.S.

This slide in U.S. market share should be alarming, given the economic and geopolitical advantages we’re losing as our nuclear industry shrivels. What’s worse, our loss is our rivals’ gain — particularly China and Russia, who have overtaken the global market by providing attractive government-to-government deals and state-subsidized financing. In a recent Third Way report, we explained this transfer of power and its detrimental impact on the U.S., and suggested some steps that Washington can take to regain America’s share of the market. Perhaps the most important element of this strategy is supporting nuclear innovation.

Advanced Nuclear Innovation can Save the American Nuclear Industry

Numerous companies, startups, and universities are working on more than fifty advanced nuclear technologies across the country. These disruptive technologies can help the U.S. get back on top of the nuclear industry and also create entirely new markets for American products. Here are a few examples of how:

  1. Right-sizing to meet demand: Traditional Light Water Reactors come in one general size — huge. At roughly 1 GW, the average reactor can power a small city. But that rules out customers with a smaller appetite and/or budget. Advanced reactors are being designed in a wide variety of sizes, which will unlock new markets for nuclear technologies. For instance, demand for microgrids to power small towns, remote facilities, and military installations is booming, with that market expected to reach $35 billion worldwide by 2020. Today’s reactors can’t compete for that prize. But tomorrow’s could.
  2. Lower Costs: The cost of building a reactor can make it tough for nuclear to compete with other sources. Advanced reactors present opportunities to cut cost while improving performance. With enhanced safety features baked into their design, some reactors could reduce the need for expensive and redundant safeguards. And with their smaller size, advanced reactors could actually take advantage of factory-scale production, which would be much more cost-effective than today’s onsite construction.
  3. Hybrid applications: Today’s reactors are almost exclusively used to generate electricity, locking nuclear out of enormous markets for industrial process heat. Advanced reactors, on the other hand, are being designed to provide flexible combinations of electricity and heat. This would be perfect for something like a desalination plant that uses heat to purify water and sells extra power to the grid. How big of an opportunity are we talking? Desalination plants currently in operation require 14GW of capacity. That market is expected to grow steadily as water shortages become more prevalent.

Conclusion

Through dedicated public investment, the U.S. pioneered nuclear energy technology, dominated global markets, and reaped enormous benefits in the process. But the world has since caught up with us. Advanced reactors offer a chance to disrupt the market again, and capture a greater portion of the $3 trillion worth of nuclear plants that will be purchased between now and 2050. If we secured just 10% of this market, we’re looking at $300 billion in long-term business opportunities for American companies. And that doesn’t even include the new energy markets that advanced reactors could open up. With such high stakes, Washington should make advanced reactor commercialization a priority and ensure America’s nuclear innovators get their technologies across the finish line and into the market.

Third Way

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Third Way

Our work championing modern center-left ideas is grounded in the mainstream American values of opportunity, freedom, and security. Learn more: www.thirdway.org

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