The power sector will play a critical role in the net-zero transition. Power generation contributes about 30 percent of global CO2 emissions, primarily from combustion of fossil fuels. Many governments, utilities, and other companies are investing heavily in renewable sources of energy. As rapidly as renewables have scaled up in recent years, it’s unclear whether wind and solar—along with other emerging solutions, including carbon capture, long-duration energy storage, and hydrogen—can grow fast enough to meet net-zero targets and projected increasing electricity demand.
Nuclear power is a proven technology that can be called upon to play a bigger role in decarbonization. Its ability to scale up to meet rising demand, however, is in question.
According to McKinsey’s Global Energy Perspective 2022, global power consumption could triple by 2050 (Exhibit 1). The expected increase in demand will stem largely from a shift away from fossil fuels toward electrification of end uses, including transportation (electric vehicles), building operations (electrifying heat), and industrial processes (low-carbon steelmaking). The resulting need for new low-carbon and zero-carbon generation will be unprecedented in the history of the global electrical grid.
Nuclear power—a proven, zero-carbon electricity source—currently contributes about 10 percent of global electricity generation.1 As a firming, resilient, and dispatchable energy source, nuclear power can be generated at any time. It can also complement nondispatchable2 power sources, such as wind and solar, to ensure that the total power supply meets grid demand. After construction of new nuclear power plants surged in Europe and North America in the 1960s and 1970s, it has been relatively stagnant globally, outside of China, Russia, and South Korea. The stagnation stems from construction challenges in the West, political and social perceptions of nuclear power in some regions,3 and the overall transition to other clean technologies.
However, new developments suggest this period of stagnation may be ending. Factors such as energy security and resiliency, scarcity of top-quality land for renewables,4 interconnection and new-build transmission timelines, and the ability to scale up the renewables and storage industries fast enough5 have propelled nuclear power back into the energy transition discussion, while decades of progress in safety and waste-management practices6 have helped to allay historical concerns. Recently, multiple countries have announced intentions to either slow the phaseout of their nuclear fleets or begin exploring construction of new plants. Advancing reactor technologies offer the promise of plants that will be more cost-effective to both build and operate. And policy makers, through legislation such as the Inflation Reduction Act in the United States,7 are showing a willingness to offer incentives to accelerate the role of nuclear.
These developments indicate that nuclear power is emerging as a key component of decarbonization plans, but a big question remains: Can the industry reverse the trend of exceeding budgets and timelines while scaling up fast enough to rise to the climate challenge? In this article, we explore how much nuclear power could be essential in meeting net-zero targets, the current challenges in scaling nuclear, the promise of new technologies, and eight key actions for industry stakeholders.
Up to 800 GW of new nuclear could be necessary to meet net-zero targets
In estimating the nuclear power needed to support the energy transition, we used techno-economic grid modeling8 to project the overall power mix by 2050. Our scenario—based on “Further Acceleration” estimates from McKinsey’s Global Energy Perspective 2022 for global energy mix, as well as anticipated supply and demand for power9—accounts for potential constraints on scale-up in renewables, such as scarcity of land, raw materials, and transmission limitations. Although our scenario does not rely on a full analysis of grid models and energy-transition scenarios, it does estimate roughly how much additional dispatchable, low-carbon generation will be needed to meet net-zero targets.10
Our modeling reveals that the energy transition could require an additional 400 to 800 GW of new nuclear—which could represent up to 10 to 20 percent of future global electricity demand—to meet the need for dispatchable power (that is, not wind and solar) by 2050 (Exhibit 2).11
Notably, technology innovation, market dynamics, and construction costs could affect these projections significantly. In recent years, for example, the growth of renewables has consistently outperformed projections.12 In addition, alternative dispatchable low- and zero-carbon technologies outside of nuclear power (long-duration energy storage,13 geothermal, and tidal power, for example) could contribute to this potential need for dispatchable power. These technologies are at earlier stages of technical and commercial maturity, compared with nuclear, and each has different challenges in deploying at scale.
Can nuclear power provide this degree of additional electricity? Such a jump in nuclear capacity would be daunting for the industry, which at its peak has grown at a maximum of approximately 30 GW per year globally (a rate achieved in the 1980s but not since).14 With assumptions that new reactors begin coming online by 2030 and reach scale by 2035, this uptick could require approximately 50 GW per year of new nuclear capacity (Exhibit 3).15
To scale nuclear power’s capacity, numerous challenges must be addressed.
Building nuclear power plants comes with a complex set of challenges
During the past 20 years, construction of new nuclear power plants has presented an array of challenges. These hurdles have been particularly acute in Western countries but are not necessarily unique to the nuclear industry, as other sectors face complex regulatory requirements or a scarcity of required skills in the labor force, for example. Our experience shows that the challenges in building new nuclear plants include but are not limited to:
- Complexity and variation in reactor designs, such that every plant is a “first of its kind,” with little repetition of standard designs to capture project-over-project improvements.
- Limited industrial base for materials, systems, and components, as well as a need for specialized manufacturing processes and rare materials.
- Scarcity of both skilled-craft and salaried workers who have the required expertise, compounded by an aging labor force of experienced nuclear professionals.
- Limits on the ability to execute construction effectively, without rework, to ensure on-time and on-budget delivery that meets stringent quality standards.
- Partnerships and construction contracts that do not reflect the extent of project risks inherent to the complexity of the technology.
- Complex and changing regulatory requirements for plant construction that are not consistent among governments.
This web of issues has created a vicious cycle for the industry. New-build projects experience construction delays and cost overruns—which can reach billions of dollars—and then future projects struggle to attract financing. Projects in Canada,16 Finland,17 France,18 and the United States,19 for example, have experienced significant delays, cost overruns, or prohibitively high bid costs for investors. These impediments have the compounding effect of constraining the parts of the industrial base that are key to supporting future construction and operations.
The next generation of reactors have been designed with these challenges in mind
Nuclear reactors have historically been large, complex, costly projects that take many years—even decades—to complete. But emerging reactor technologies promise lower costs, faster build times, and other potential advantages.
Small modular reactors (SMRs), which are generally based on Gen III+ light water reactor (LWR) technology already in operation globally, are smaller in size and have a simpler, more modular design, which could help to reduce construction times and up-front costs. Other advanced reactor technology (Gen-IV) can be even smaller and could be deployed for microgrids, which power remote areas or a single facility. Additional advantages include lower operating costs, simplified systems that increase reliability, and better safety margins.
Gen-III+ SMRs are currently in the early phases of deployment, whereas Gen-IV reactors are primarily at a conceptual stage (outside of a few demonstration projects). In both cases, the required manufacturing and component supply chains would need to be scaled for broader deployment. However, greater investment in these technologies could, in the long run, significantly reduce the cost, timeline, and complexities of plant construction—and potentially speed up timelines for nuclear deployment. (For more on reactor technologies, see sidebar, “Innovations in reactor technology.”)
To meet the need for scale-up, industry stakeholders should consider eight key actions
Momentum for new-build nuclear is growing in many markets. For example, the US Department of Energy plans to award about $3 billion in the licensing, construction, and demonstration of two new Gen-IV plants through the Advanced Reactor Demonstration Program, in addition to the $1.4 billion cost-share for a new SMR plant.20 Additionally, the Inflation Reduction Act in the United States provides either an investment tax credit of up to 50 percent or a production tax credit up to approximately $30 per MWh for the first ten years of new-plant operation.21 As of January 2023, GE Hitachi Nuclear Energy, Ontario Power Generation, SNC-Lavalin, and Aecon have signed a contract for the deployment of a BWRX-300 SMR in Ontario, Canada.22 This is the first commercial contract for a grid-scale SMR in North America.
The United Kingdom recently announced an approximately $145 million fund to support new nuclear projects.23 South Korea has also announced increased capacity.24 In the United Arab Emirates, a plant has been in development for the past decade and is partially operational.25 Globally, about 178 GW of capacity is under construction or planned.26 According to the International Energy Agency, approximately 10 GW of new capacity has been connected to grids each year in recent years.27 Achieving additional capacity of approximately 50 GW per year thus means a roughly fivefold scale-up for the industry from today’s new-build activity levels, while maintaining existing nuclear plants online.
But the industry is at an impasse. Despite positive momentum for the first time in over a decade, the risk that initial construction will go over budget and over schedule may diminish chances that new nuclear will realize its full potential in supporting the energy transition at scale.
For the industry to scale up significantly, several near-term actions will need to be considered across financing, supply chain, and regulation. Industry players along the value chain—OEMs, plant operators, regulators, policy makers, and investors—would all play critical roles. We have identified eight key actions for stakeholders to consider.
- Source new financing for power plant construction across the value chain. Financing will be critical in kick-starting the industry—we estimate that capital costs for a rapid scale-up to meet decarbonization targets could be roughly $500 billion per year. Private investment will need to support the development of new technologies, scaling of the industrial base, and construction of new reactors. Regardless of investment sources, managing cost risks will be vital. Policy support may be necessary to backstop financial risk as the industry scales up. Governments could offer guarantees or direct financing. Global power producers could consider spreading risks over large balance sheets. For example, the US Department of Energy Loan Program Office is available to provide low-cost financing, but such support is not consistent across all future nuclear nations.
- Ramp up the labor force for manufacturing, construction, and operation. Today in the United States and Canada, for example, the nuclear industry provides approximately 130,000 direct jobs and nearly 600,000 total jobs (indirect plus direct). Our analysis suggests that the nuclear workforce in these two countries alone would need to grow to more than one million people—and to more than five million globally—for the industry to increase capacity to 50 GW per year. The industry and governments could coordinate on capability-building programs that include recruitment, training, apprenticeship, and placement, such as energy company EDF’s efforts to train welders in anticipation of a new nuclear power station in the United Kingdom.28
- Establish streamlined global licensing processes. Industry leaders, regulators, and policy makers could set up an industry consortium (or empower an existing one) to define global licensing requirements and proactively work with governments to lay out a road map for scaling up. In the natural gas industry, for example, the International Group of Liquefied Natural Gas Importers (GIIGNL)—often in cooperation with other organizations, such as the American Petroleum Institute—defines common technical standards for liquefied natural gas across the globe and works with governments to see those standards codified.
- Implement individual-project best practices. Applying best practices for large-scale investment projects can reduce the likelihood of cost and schedule overruns. In our experience, proven strategies and management tactics for successful megaprojects in other industries apply in the nuclear context in areas including site productivity; schedule optimization; cost control; commissioning and operational readiness; quality, project control, and risk management; and project organization and governance. Lessons from other industries will be invaluable if nuclear is to succeed.
Implement industry-wide best practices for scaling up. Toward that end, an asset-heavy industry can take several steps:
- Establish standard designs. Create an industry body to identify and implement standards for plant systems and components, which could streamline regulatory processes, engineering, and supply chains.
- Use a replicable model for construction. Building plants in rapid succession with a standard design will help workforce skills to remain relevant, the industrial base to scale up, and lessons from each build to inform successive builds.
- Repeat siting. Historically, building multiple reactors at a single location has proved to significantly reduce costs for successive buildouts—by minimizing mobilization costs, utilizing shared buildings and structures, and maintaining the necessary workforce for follow-on units.
- Increase use of modular construction for standardized components. In the 1960s, for example, the shipbuilding industry largely moved from bespoke, full-scale onsite construction to a more modular, “hull block” process, whereby sections are prefabricated in workshops and final assembly occurs in the drydock. For the nuclear industry, modular construction of plant sections can substantially drive down costs as processes become more predictable and repeatable, construction environments more controlled, workforces more stable, rework less frequent, and manufacturing times more efficient.
- Proactively coordinate and scale the industrial base. Supply chain bottlenecks are likely to emerge if the industry scales up quickly. Potential bottlenecks could affect, for example, heavy forgings for reactor pressure vessels, instrumentation, and control systems, as well as specialized nuclear-safety-rated (“N-stamped”) valves for critical control systems. More new-build program support by governments could boost investor confidence in building out supply chains for such components before construction begins. In addition, industry players can consider establishing centers of excellence to develop new manufacturing processes and help qualify more suppliers of components to meet the necessary performance and quality standards for the nuclear supply chain.
- Maintain the reliable and safe operation and maintenance (O&M) of current plants while continuing to improve financial performance. Today’s plants operate safely and reliably, but they face increasing economic challenges. For example, declining costs for wind and solar have forced nuclear providers in many markets to stay competitive on price, which has tightened margins. Maintaining today’s nuclear capacity through safe, reliable, and cost-efficient operation of existing plants would help to keep them running (instead of shutting them down because of high operational costs) and potentially help preserve current supply chains and the workforce.
- Expedite development of next-generation reactors. Accelerating commercial deployment of Gen-III+ and Gen-IV technologies could, over time, reduce capital costs and speed up plant buildouts through “learning by doing,” more efficient supply chains, and other benefits. Reactor technology owners could refine their equity stories for investors, with an emphasis on getting pilots right. Nuclear industry players could also consider public–private consortiums to expedite technology development.
The promise of nuclear energy is needed now more than ever to meet global net-zero targets. Scaling up the nuclear industry will be a significant undertaking that requires overcoming a substantial set of roadblocks. Even an optimistic scenario for an expanded nuclear economy would be likely to involve a complex, global web of policies, in addition to uneven cost levels, as technologies and the supporting industrial base emerge on different timelines. However, we believe a nuclear scale-up is achievable. It’s time for the industry to meet the challenge.