Unafraid to ruffle a few feathers, maybe, the US banking group has issued a study into the case for why nuclear fission and fusion power will be increasingly important ways of producing power in the years and decades to come.

Nuclear energy, once frowned upon as unsafe by some, is likely to develop into a significant part of the power production pie, according to a white paper from Citigroup. 

The document, written by Arkady Gevorkyan, global commodity strategist, Edward L Morse, and Anthony Yen, Citi Research, argues that a variety of forces, such as the intermittency of solar and wind power, are driving increasing state and private sector interest in nuclear energy.

Such a view, if correct, has implications for sectors such as uranium mining and the companies that produce and run nuclear power plants. (See an analysis here.) The Citigroup paper says that financing strategies, such as public-private partnerships, and "green" bonds, could be areas where providers of capital could seek returns.

“Nuclear energy, one of the largest low-carbon sources of electricity, is set to grow exponentially in different parts of the world and as varying designs are prioritized and developed. A variety of factors contribute to this growth driven by potential acceleration of new technologies becoming scalable and commercialized,” the 42-page paper said. “The fight against climate change and the importance of low-carbon sources of power should inevitably secure a market share for nuclear in the broader energy mix. 2022 was a landmark year in the history of nuclear energy, as it gained public appreciation for the first time since the Fukushima Daiichi accident in 2011,” it continued. 

The revived interest in nuclear energy comes at a time when the demands of achieving a net zero status for worldwide carbon emissions by 2050 are being increasingly challenged politically and financially. In the UK, for example, a by-election result on the outskirts of London was seen as a defeat for “net zero” policies designed to curb car use. Germany has retired the last of its nuclear power plants and re-started coal production – provoking scorn from green activists and critics alike.

Renewable energy, such as wind and solar, has the quality of “intermittency” – when wind doesn’t blow or sun doesn’t shine, there’s no power, creating the need for vast batteries. Tidal, hydro and geothermal power have their uses but can be difficult to scale up, and have environmental side-effects (as in dam building). Some environmentalists, once hostile to nuclear power, have changed course, such as US-based activist and journalist Michael Shellenberger. The late James Lovelock, famed for his Gaia hypothesis and who warned about human impact on the Earth, became a supporter of nuclear energy. 

However, nuclear accidents, most notoriously that of the 1986 Chernobyl plant, have cast a pall on the sector, with relatively few new plants being built since. The construction of new plants can take years, if at all, in the face of opposition, planning delays and lawsuits. According to the US writer Alex Epstein (1), to "replace all existing fossil fuel energy (of all kinds) with nuclear energy by the end of 2050 would require building four 1-gigawatt nuclear power plants every day starting in January 2022. In the last thirty years, on average, 4 gigawatts of nuclear capacity have been created only every 540 days.”

There are signs of change, however. In 2022, the European Union tweaked its taxonomy for the term "green" to include gas and nuclear power. The EU’s actions took place when the drive against fossil fuels hit a roadblock following Russia’s invasion of Ukraine and the surge in global energy prices.

New tech
Developments such as small modular reactors – which could be built at scale – superior ways to store waste, and use it more safely – along with the promise of fusion energy, are changing the narrative, the Citigroup writers said in their paper.

“Advanced fission, including small modular reactors (SMRs) and advanced reactors (ARs), as well as fusion, are set to shape the future of nuclear, sealing its role in the energy transition era and the broader mix as being a dispatchable low-carbon source of electricity, small modular reactors and advanced reactors,” it said.

“Overall, we anticipate that SMRs and advanced fission reactors will be commercialized sooner around the world (excluding Russia and China) than fusion energy. Russia and China have already commercialized fission AR/SMR concepts. Meanwhile, reactors based on fusion energy most likely will be commercialized in the middle to end of the next decade, with a number of successful private firms navigating the space,” the paper continued. 

The paper noted that regulators are being more accommodating to existing nuclear capacity and investment in new and advanced projects, including in the US as a result of the Bipartisan Infrastructure Law and the Inflation Reduction Act; in the EU with regulatory initiatives like the EU Green Deal Industrial Plan; and in other countries such as the UK, China, Japan, and Canada. 

“Such regulatory advancements can unleash public spending while also having a multiplicative effect that stimulates private funding – a trend currently observed in both advanced fission and fusion nuclear energy. Improving public sentiment around nuclear energy – likely due in part to the unreliability of renewable energy and the volatility of the fossil fuel commodities used for power generation in the last two to three years – is serving as another positive development for the energy source,” it said.

“In the energy transition era, the role of nuclear energy has also been changing as the rising penetration of renewables potentially brings more intermittency to the grid. Load balancing and frequency regulation become increasingly vital given the importance of the power stack having either low-emitting dispatchable generation or battery storage to keep the grid balanced,” it said. 

The paper noted that nuclear power plants have some of the lowest land requirements of all low-carbon energy sources. 

“Per 1,000 megawatts of electricity (MWe) per year, power plants require one to three square miles at most, while solar and wind farms require a much larger footprint,” it said.

The report noted that up-front costs remain a headache for nuclear power.

"The history of cost overruns in nuclear projects presents a significant challenge in securing financing. Investors and financial institutions are often concerned about the financial risks associated with nuclear projects due to the industry's track record of costs exceeding initial estimates by a significant margin," it said. 

Footnote:
1, Alex Epstein, Fossil Future: pages 236-237.