Growing competition from cheap renewable electricity, safety concerns, and rising costs of new plants are slowly driving nuclear power over the edge – except in Russia and China where the industry continues to enjoy extensive state support, S&P said in a note to investors.
It’s probably one of the worst kept secrets in the energy world: nuclear power wouldn’t be able to stand on its own feet without massive government support.
Now, S&P Global Ratings has made it plain and clear to investors.
“The global nuclear industry is facing challenges to do with safety concerns, tightening regulations post-Fukushima, phase-out policies in several countries, aging asset bases, increasingly volatile energy markets, and competition with renewables,” the rating agency wrote in the note, released on Monday (11 November).
“We see little economic rationale for new nuclear builds in the US or Western Europe, owing to massive cost escalations and renewables cost-competitiveness, which should lead to a material decline in nuclear generation by 2040,” S&P said.
But despite those challenges, it would be too soon to pronounce nuclear power dead, S&P adds. China and Russia, for instance, continue to build new nuclear capacities, supported by energy policies and significantly lower construction costs, the rating agency remarked.
In the US, Energy Secretary Rick Perry has touted small modular reactors (SMRs) as key to the industry’s future, saying small reactors could provide access to electricity in areas of the globe which are currently “shrouded in darkness”.
Moreover, the climate crisis has drawn attention to existing nuclear plants as an essential part of Europe’s low-carbon energy mix. And nuclear has proved to be a key asset for countries like France, which have an existing fleet of nuclear power plants that has already been largely amortised.
All this means nuclear will stay relevant until 2040 as countries seek to lower carbon emissions, S&P said.
“We believe that carbon-free generation that existing nuclear assets provide, combined with steady growth in renewables, will be important at least over the next few decades to meet climate goals and to support stable electricity supply given intermittent nature of renewables,” S&P wrote.
But beyond 2040, the future of nuclear looks much more uncertain and largely dependent on government support, S&P pointed out.
“We expect the credit trajectories of nuclear companies worldwide to differ depending on national energy policies and the degree of state support for nuclear,” the rating agency said.
In Europe, a battle has been raging below the radar on whether to include or reject nuclear power from an upcoming sustainable finance classification scheme aimed at driving private investments into the green economy.
While France supports the inclusion of nuclear in the EU’s draft green finance taxonomy, Germany and Austria argue nuclear isn’t sustainable and shouldn’t be eligible for any kind of EU support. A final decision on the EU’s sustainable finance taxonomy is expected in December.
Read the full note from S&P Global Ratings: The Energy Transition: Nuclear Dead And Alive
[Edited by Zoran Radosavljevic]