The Inflation Reduction Act Will Spawn Nuclear Energy’s Growth

There’s been echoes of a nuclear renaissance for two decades. But the passage of the Inflation Reduction Act may be the catalyst that brings it to fruition. The law provides a production tax credit for existing nuclear energy units — similar to the ones received by wind and solar farms. That is something that will keep those plants competitive, preventing their early retirement. Lenders and investors will now perk up because of those tax benefits.

But the industry will look differently, comprised of small modular reactors — not the jumbo-sized ones, which have been unable to meet their timetables or budgets. The smaller ones, assembled onsite, are cheaper to build, safer to operate, and could soon appear in North America.

“The Inflation Reduction Act puts nuclear on the same playing field as renewables,” says Doug True, the chief nuclear officer at the Nuclear Energy Institute, during a symposium hosted by the United States Energy Association, in which this reporter was a panelist. “It will stimulate more interest in nuclear. Adding 300 reactors that generate 90 gigawatts over 30 years might be on the low end once this plays out.”

The Princeton Zero Lab estimates that the Inflation Reduction Act will lead to a 42% decrease in CO2 emissions by 2030 from a 2005 baseline. Before the law’s enactment, it said such cuts would amount to 27%. But getting there means the electrification of the American economy — the use of fewer fossil fuels.

Nuclear energy is carbon-free and runs 24-7. Right now, 93 nuclear reactors provide about 20% of the U.S. electricity portfolio. But that energy makes up about half of the country’s carbon-free electricity. Those reactors can operate safely until at least 2050. However, the production tax credits, which start in 2024 and last until 2032, will inspire the building of small modular reactors — units that will last at least 60 years and replace those existing plants.

Right-sized reactors can run from 50 megawatts to 300 megawatts. But the modules can be combined to form a 1,000-megawatt plant. And if one module goes down, it can be repaired while the rest of them would still operate. Such units have some built-in advantages: they generally come with a nuclear waste storage containment device while they could be used to create potable water supplies and produce hydrogen for industrial steelmaking. They can also firm up wind and solar plants, although the experts say they are meant to run all day, everyday.

‘Flood of Investors’

According to the Third Way, the total electricity consumption could double over 30 years. And much of that demand will come from emerging countries. The think tank says that advanced, futuristic nuclear power could serve 16% of the electricity demand by 2050. The International Atomic Energy Agency adds that the use of nuclear energy would need to double by 2050 to meet global climate goals. Just who will lead this nuclear resurgence?

“You will see a flood of investors come into the marketplace to lead a parade that has already started,” says Bud Albright, chief executive of the U.S. Nuclear Industry Council. “Small Modular Reactors will last 60 years, and 100 if properly maintained. The cost of the first one will be high. But we are counting on volume, which should bring costs down.”

TerraPower and GE Hitachi Nuclear Energy launched the so-called Natrium project in September 2020 — a small modular reactor that they hope to commercialize by 2030. They are now testing the technology, along with Berkshire Hathaway’sBRK.B
PacifiCorp. The Natrium reactors position themselves as a cleaner alternative to natural gas when backing up wind and solar.

NuScale, owned mainly by FluorFLR
Corp., will also build at a prospective site in Idaho in 2029. It says 12 modules can combine to form a 924-megawatt unit. Meantime, Ontario Power Generation is expected to start construction on a small modular reactor in late 2024 and will begin operating in 2028. The Tennessee Valley Authority is using the same technology. It expects to rev up a small nuclear plant in the early 2030s.

Beyond those early adopters, Scott Strawn, vice president of Burns & McDonnell, told the audience that the owners of existing nuclear reactors are assembling teams, studying technologies, and assessing their sites — all with an eye on small nuclear reactors. As those prices fall, it may compel others to get in the game.

Meanwhile, Europe is planning for at least 10 small modular reactors. Poland, which relies on coal, is the most interested. So is Sweden. Its state-owned utility Vattenfall said it must turn to fossil-free energy sources to meet the nation’s growing energy demand. And the French government is investing $1 billion in the technology. Electricite de France SA will build them by 2030.

“There’s a sense of urgency because Russia invaded Ukraine,” says Jon Ball, executive vice president for GE Hitachi Nuclear Energy, during the program. “Countries want to be independent of Russian natural gas and nuclear technology. We have seen an unprecedented interest in U.S. technology.”

The Russian Undercurrent

The climate cause is undoubtedly prompting the renewed interest in nuclear power. But the passage of the Inflation Reduction Act will spur it on. Despite the favorable market dynamics, Russia’s invasion of Ukraine is creating an undercurrent that could trip up the nuclear sector.

It’s ironic because Russia has been a major force on the global nuclear stage. It provides 16% of this country’s uranium and 20% of Europe’s, all under long-term contracts. Currently, Russia has much of the capacity to offer the highly-enriched uranium to fuel the reactors on the drawing board — the ones to be built by TerraPower and NuScale Power.

Russia assaulted Chernobyl and Zaporizhzhya. Ukraine has 15 nuclear plants, all of which are potential targets. When Russian tanks and artillery hit Zaporizhzhya in late winter, it could have released deadly radiation locally and across international boundaries — including into Russian airspace.

On March 4th, Russian forces took control of the Zaporizhzhya plant, the largest nuclear plant in Europe. Only two of its six reactors are operating, and Russia is threatening to disconnect the remaining two from the grid. Chernobyl is where the fourth of four reactors exploded and caught fire in 1986. The Russian military attacked that same — dormant — plant on February 24th.

“The political consequences are real,” says Nuclear Industry Council’s Albright. “But we are looking at very different technologies, particularly from a fuel perspective. The risk of a bomb during wartime and the major release of radioactive material is minimal concerning small modular reactors.”

Russia’s invasion of Ukraine could deter the rollout of new nuclear units regardless of size. But it could also spawn the growth of smaller reactors, designed and engineered by friendly countries — a way to wean the world from Russian gas. Geopolitics aside, climate considerations are paramount. Eco-friendly laws and governmental preferences will therefore energize all forms of carbon-free energy, specifically small modular reactors.