Nuclear energy: fixing the finance
Why is there an urgent need to reassess nuclear financing policies in Multilateral Development Banks to accommodate private capital or blended financing models for the generation of nuclear energy? Why is the state of nuclear infrastructure development
The story so far: n March 21, Brussels hosted the firstever Nuclear Energy Summit, cochaired by the Prime Minister of Belgium Alexander De Croo and the Director General of the International Atomic Energy Agency (IAEA) Rafael Mariano Grossi. Several world leaders joined the summit to highlight the role of nuclear energy in addressing climate change.
OHow did this come about?
The UN Climate Change Conference (COP28) in Dubai (UAE) in December 2023 stated the indispensable role of nuclear energy to meet climate goals. The declaration signed by 22 world leaders mentioned the need to triple nuclear energy capacity by 2050. The Nuclear Energy Summit, an initiative in collaboration with the IAEA’s ‘Atoms4Netzero’ programme, is part of the multilateral approach to decarbonisation. Nuclear power emits four times less carbon than solar farms or other renewable sources such as wind, hydropower, and geothermal. Most importantly, nuclear power has the capacity to supply uninterrupted energy irrespective of geographical constraints making it a crucial component of the wider renewable energy mix. Nuclear power plants (NPP) also have low operating costs, smaller land imprint and a longer life cycle compared to all the other renewable energy sources.
How can nuclear energy be financed?
Two key motives for the largescale adoption of nuclear power as the base load energy source are technology and finance. Recent developments in nuclear technology including Small Modular Reactors (SMR), radiation proofing in existing plants, and extended fuel cycles, have the potential to substantially mitigate nuclearrelated risks. Signifying the destigmatisation of nuclear energy is the entry of technology startups in an the otherwise governmentrun industry. The role of technical advancements in reducing carbon emissions is highlighted by an IAEA study, which predicts that while existing technologies will play a significant role, by 2050, half of carbon reductions will come from technologies currently in the prototype stage.
However, in spite of technical advancements, Multilateral Development Banks (MDBs) and private investors have not made any significant contribution to the industry. The World Bank has not provided financing for a nuclear project since its $40 million loan to Italy in 1959. There is a pressing need to reassess nuclear financing policies of MDBS to accommodate private capital or blended finance models.
Has the cooperative model worked?
There are successful financial practices that can be replicated, for instance the cooperative funding models of France, South Korea, Russia, and the U.K. where a group of investors raise credit from the market and take full responsibility for project delivery. In Finland, large power plants have been funded by multiple private companies since the 1970s using a cooperative finance model called ‘Mankala’. Under this model, companies jointly own energy producers and share the costs of building and operating plants. They don’t pay dividends but can buy the energy at a cost based on their ownership share, with investors being wholesalers, retailers, or large industrial firms. Financial creativity and market support with low interest rates can unravel the potential of nuclear energy at scale.
There are 440 nuclear reactors in the