Proving the bankable benefits of new nuclear

The UK government’s advanced nuclear framework defines a potential route for the UK to become a global frontrunner in nuclear energy, preceded by a £2.5 billion investment in small modular reactors (SMRs). Across the pond, Dow Chemical and X-energy are using SMRs to power Dow’s chemical and plastics manufacturing site in Texas, eliminating roughly 500,000 metric tonnes of annual greenhouse gas emissions, while a new Japan-US Strategic Investment initiative includes a $40 billion joint SMR construction project.

New nuclear technologies like SMRs and advanced modular reactors (AMRs) now have a precedent – and a framework – to seek investment and support. But, to date, there’s only one live, government-backed project in the UK and no guarantee of a fleet programme, indicating reticence around risk and ROI.

The crux is collaboration – defined by action as well as intent. Our recent survey of 120 nuclear industry leaders emphasises the need for cohesion, with 88 percent of respondents seeing misalignment between industry, regulators, and government as the key barrier to progress.

To build on promising momentum, nuclear needs to prove its place in the UK energy ecosystem through the delivery of bankable projects. This calls for a consolidated, joint effort from public and private bodies. Only then can advanced nuclear technologies realise their full potential as a stabilising, decarbonising energy source.

Share responsibility, solidify confidence

Nuclear could support sovereign energy capacity, drive decarbonisation of electrons and molecules, and provide continuous power to balance intermittent renewables. Nuclear could also play a role in meeting growing demand for industrial heat and hydrogen for hard-to-abate sectors. The UK government clearly recognises this potential, and has set up a dedicated delivery body and market frameworks to encourage progress. However, support explicitly exists on a case-by-case basis for multi-vector technology.

Regulatory and policy incentives are helping to unlock nuclear’s potential through the reassurance that developments can appropriately mitigate or backstop key risks throughout the project lifecycle. But it isn’t all about policy. Government-backed market support mechanisms help get ‘first of a kind’ (FOAK) projects over the line, but a world where nuclear fleets are developed through private sector investment still feels some way off.

Our survey research shows that 48 percent of nuclear energy leaders cite government as responsible for driving new nuclear, with the remaining 52 percent looking to either an independent public body, public-private partnership, or industry-lead alliance. The answer? Stakeholders need to be proactive in collaboration.

Create the right environment for success

Proving the technological feasibility and deployability for FOAK projects will build confidence, allowing NOAK to follow. But even with government frameworks, policies, and support packages, there’s a long road ahead. Stakeholders need to integrate technological and commercial aspects as an interconnected ecosystem. Given the complexity of the challenges, joining the dots requires genuine collaboration from a broad set of stakeholders. This is why sustainable aviation fuels struggled to get off the ground.

Government policy and market support mechanisms need to be co-developed with the stakeholder ecosystem, understanding the needs of technology providers, developers, investors, and end users. This collaboration could then inform policy, while maximising commercial opportunities for providers, offtakers, and regulators.

Market support mechanisms for other energy sources show what’s possible. In the UK, a simple feed-in tariff for renewable generators evolved into a two-way Contract for Difference, unlocking investability while cutting consumer costs. Contract mechanisms for bioenergy with carbon capture and storage (CCS) compensate for power production as well as negative carbon emissions. Hydrogen production is supported by long-term contracts that seek to boost competitiveness with conventional gas. These mechanisms have reduced the cost of capital for new projects, with the flexibility to incorporate consideration of multiple revenue streams or purposes. This offers inspiration for nuclear market support mechanisms that account for all potential outputs and benefits.

Build belief in bankability

Ultimately, nuclear has to generate a return for developers and utilities. It has to be commercially attractive – not only to boost grid resilience, but to enable other technologies to decarbonise, and also to provide heat, hydrogen, and electricity (both nationally and to industrial offtakers).

Over time, nuclear will deliver ROI as standardisation and modularisation drive down costs. Mature market pricing and support mechanisms for a multi-vector energy system will strengthen the financial case.

Stakeholders can look to the rise of renewables for reassurance. In a rapid timeframe, renewables went from fantasy to reality – and advanced nuclear technologies can follow suit. Already, our research shows that 81 percent of nuclear ecosystem leaders believe SMRs and AMRs represent the UK’s best chance to build global leadership in next generation nuclear. Of course, nuclear doesn’t rely on any single enabler or responsible party. It takes a shared commitment from government and industry to lock in for the long-term.

No risk, no reward

New nuclear can be a critical component of the energy mix, and a critical enabler of economic growth across multiple vectors – supporting use cases beyond electricity such as heat and alternative fuels.

In a nuclear resurgence driven by a rapidly evolving energy ecosystem, it’s time to think differently. There’s no single silver bullet: turning promise into reality will take a combo of scenario planning, techno-economic assessments, and the right market mechanisms. The only way to get there is through integration and true collaboration.