Nuclear Power in 2024: Q&A

Q: According to the IEA, nuclear power generation is expected to reach an all-time high globally in 2024. What are the drivers of this growth and what should we expect in the medium to long term?

There are 2 main direct drivers to this trend: new plants being brought into operation and, more importantly, lifecycle extension of nuclear plants in the developed world. The nuclear energy revival trend started in the wake of the Ukraine war, when the European gas prices shot up and carried the electricity prices to historical maximums. This motivated governments to reopen reactors to ease the pressure on consumers and extend lifecycle of the existing reactors with 75 out of 109¹ European reactors receiving such approval.

On the demand side, the spike in data center-driven electricity consumption has spurred search for sources of stable and clean energy, benefitting nuclear energy, known for its consistency and low carbon footprint². Microsoft and US utility Constellation Energy signed a deal to resurrect a unit of the Three Mile Island nuclear plant in Pennsylvania. The deal would revive, subject to regulatory approval, Unit 1 of the power plant that was retired in 2019 due to economic reasons. Unit 2, which suffered a partial meltdown in 1979, will not be restarted. Constellation plans to spend about $1.6 billion to revive the 835-Megawatt plant, which it expects to come online by 2028. Under the terms of the deal, Microsoft will purchase energy from the restarted plant for a period of 20 years.³

Medium-to-long term there are several trends that could be worth following. Low carbon footprint and reliability make nuclear energy very desirable for countries seeking stable electricity supply. China is the obvious hotspot, with 26 reactors being constructed and further 41 planned⁴. India is another significant player looking to add nuclear to its energy mix, but it’s ambitions trail that of China for now.

Another important development is emergence of small modular reactors (SMR) - their compact size allows SMRs to be installed in remote locations and sites unsuitable for larger reactors, which means they can be deployed closer to the final user, reducing transmission losses and enhancing the reliability of power supply. At the same time, the modular nature of SMRs allows for the addition of extra units as needed, thus offering superior scalability, shorter constructions times and potentially lower investments outlays, addressing one of the nuclear industry’s largest issues – construction costs. However, SMRs are still facing numerous barriers to widespread adoption:

• Regulatory: Nuclear plants have to undergo rigorous regulatory approval processes with existing regulatory frameworks tailored mostly to large-scale reactors.
• Financial: Although SMRs are designed to be more cost-effective in the long run, due to their relative novelty, SMRs require high capital investments in R&D, testing and approval, with very limited government participation. Higher interest rates and material costs are biting as well and estimates for some of the existing projects were revised upwards.
• Social: Public skepticism, especially in regions with higher concentration of people
• Technological: Limited real-world deployment, underdeveloped supply chains and potential grid integration issues

Q: What is the impact on uranium? After a rally lasting more than two years that brought the price to over $100 per pound, the market for this commodity seems to have stabilized. How do you see the future?

Q: An opportunity but also several risks. Is geopolitics among them, given the commodity's use?

Major uranium players usually sign delivery contracts 2-3 years in advance. In the light of geopolitical turbulence, Eastern European and Finnish power plants with Soviet-era reactors scrambled to find replacement for Russian fuel and paid premium to secure uranium supply. Since then, the spot uranium prices have dropped, however the long-term contractual uranium price has steadily climbed from $72 in the beginning of 2023 to $81.5 as of August 2024⁵.

Despite short-term supply problems having resolved, geopolitics remain an issue for the sector. Delivery problems with Kazakhstan (~40% of global production) still persist, as most of the Kazakh Uranium passes through Russia, and the political situation in Niger (~20% of French uranium supply) remains complicated.