Q-Series: Is a nuclear power renaissance coming?

For decades, nuclear energy was considered problematic by investors, regulators, utility companies, and others through the value chain. We think that has largely reversed. Nuclear is now being posited as "the" solution to the interconnected issues of high electricity demand growth and climate change, where future forecast electricity demand growth (plus, ideally, replacing existing fossil fuel generation) could optimally be delivered with low carbon solutions. Energy security, in replacing the need for fossil fuel imports, is also a consideration (though with material geopolitical risks in the uranium supply chain). Alongside COP28, the announcement of "a global aspirational goal of tripling nuclear energy capacity by 2050" to us was important (though for the moment, symbolic).

Nuclear is a proven low-carbon power source and can deliver large amounts of baseload power: 1GW of nuclear provides significantly more electricity output than 1GW of installed capacity from any other source. Renewables are intermittent, require grid investment/adjustment, have lower load factors and typically require more land.

Nuclear energy has a chequered, controversial history due to accidents, waste disposal concerns, and significant cost overruns and delays. Lengthy and complicated permitting and approval processes (encompassing social licence considerations) are also a factor. Government policy in many jurisdictions over the past several decades was largely restrictive (including enforced shutdowns). China has succeeded in an accelerated rollout of new nuclear facilities over the past several years, but that has not been replicated elsewhere, yet.

We see two theoretical catalysts to significantly accelerate nuclear capacity rollout: 1) sizeable, coordinated government backstop and support, along the lines of what we are currently seeing in China; and 2) possibly in combination with the above, AI/ datacentre buildouts. Tech (or other industries with similar considerations) could put enough resources behind nuclear technologies to achieve breakthroughs.

Our scenario for nuclear capacity additions suggests a range of c.2-3% compound annual growth rate (CAGR) of new nuclear capacity by 2030 with more than half of the additions coming from China.