NEA has produced a series of briefing summaries. This is an introduction to the third one:
- Governments should incentivize investments in resilient low-carbon energy infrastructure, such as nuclear energy, in the aftermath of the COVID-19 pandemic.
- Proper policy and market frameworks to incentivize investment in essential infrastructure that supports low carbon electricity security and economic development are needed.
- transitional, targeted government support for nuclear energy projects will be indispensable to unlock the benefits of nuclear energy in the post-COVID-19 economic recovery.
- Government support can and should be leveraged to attract cost-effective private financing to deliver nuclear energy infrastructure projects.
- There is currently a window of opportunity for governments to support sustained cost reductions in nuclear energy projects through timely new build decisions – thus reinforcing the process of learning by doing and allowing these designs to move along their learning and cost curves.
What’s the problem?
The COVID-19 pandemic has highlighted the vitally important role played by stable sources of electricity generation. Nuclear energy is a proven low-carbon technology that produces large amounts of round-the clock, baseload electricity. Nuclear facilities have proved to be invaluable during the pandemic, in which reliable, high-quality electricity was produced on a continuous basis.
There is a growing recognition around the world that nuclear energy can play a significant role in decarbonizing energy systems cost effectively while ensuring electricity security and resilience. While some countries have adopted policies that eschew the use of nuclear energy in the foreseeable future, others have specifically included nuclear energy in their long-term energy plans or have adopted technology-agnostic, “all of the above” energy policies that allow for future nuclear energy deployment. However, the construction of new nuclear power plants is a complex industrial undertaking that can result in significant financial risks in a number of dimensions. Specifically, the challenge lies in the capital-intensive nature of nuclear energy projects and the multi-decadal project lifetimes over which costs are recovered. These lifetimes are often deemed too long by traditional private sources of capital to be acceptable without a robust allocation of construction and market risks.
In order to maximize the benefits and minimize the costs, the different risk dimensions of new nuclear projects need to be carefully defined and the risks allocated to those parties that can best manage and carry them. National governments have an essential role to play in this endeavor, as they do not only provide the general long-term policy framework for nuclear energy, but also the regulatory framework for a resilient low-carbon electricity industry.
As preparations are made for our long-term energy future, governments can establish the investment and policy frameworks needed to assure that nuclear energy continues to enable resilient stable electricity supply systems for the future. This requires, in particular, frameworks that allow investors to have clarity on the long-term revenues of low-carbon generation technologies (nuclear, hydro, variable renewable energy), which are all characterized by very high fixed investment costs even though their variable operating costs are low. In addition, specific regulatory provisions for sharing risks between vendors, investors, operators and electricity consumers can minimize the costs of bearing those risks and substantially contribute to lower the overall financing costs of nuclear projects. This can be accomplished in a technology-neutral manner applicable to all low-carbon technologies.
The fact that progress towards the effective deployment of nuclear technologies remains limited, can be attributed to a mismatch between governments’ stated policies on the possible role of nuclear energy in the energy systems of the future and concrete commitments by the same governments and industry towards the development and deployment of nuclear energy technologies.
Read on ...........................
Managed & Built by I2M Consulting, LLC | © 2010-
