By way of background, on March 21, 2023, DOE issued the first three Pathways to Commercial Liftoff Reports, including the Pathways to Commercial Liftoff: Advanced Nuclear report (note, the other two reports were on Clean Hydrogen, Long-Duration Energy Storage, and a fourth report was released on April 24, 2023, covering Carbon Management). These reports are part of DOE’s new “Pathway to Commercial Liftoff” initiative. In preparing the reports, DOE noted that it is working to accelerate the commercialization of clean energy technologies and enabling the nation’s broader industrial strategy by creating high quality American jobs, strengthening domestic supply chains and global competitiveness, and facilitating an equitable energy transition.
With the passage of the Infrastructure Act, the Inflation Reduction Act, and CHIPS and Science Act, DOE is positioned to invest billions of dollars in large-scale demonstration and deployment of these clean energy technologies over the next decade. DOE’s Liftoff Reports provide public and private sector capital allocators with a perspective as to how and when various technologies could reach full-scale commercial adoption – including with a common analytical fact base and critical signposts for investment decisions. The Liftoff Reports are designed to be “living documents” given the constantly and rapidly evolving market, technology, and policy environment – which DOE plans to update as the commercialization outlook on each technology evolves. DOE also encourages direct public input which can be submitted via email to firstname.lastname@example.org.
As explained by Ms. Kozeracki in today’s webinar, the Report aims to create a shared fact base for answering key investor and stakeholder questions, such as:
- What is advanced nuclear and its value proposition? The Report covers the types of designs under Gen III+ and IV reactors, including large reactors, small modular reactors (“SMRs”), and microreactors; and explains that nuclear is clean, firm, uses land efficiently, requires less transmission buildout, provides regional economic benefits, and has additional use cases and benefits beyond traditional electricity generation.
- Do we need new nuclear for net zero? Yes, the demand needed to reach net-zero by 2050 likely requires an added 100-200 GW of new nuclear in the U.S. by 2050, especially given the rate of the renewables buildout.
- Why will it be different than recent over budget builds? SMRs may avoid historical cost and constructability challenges. The construction of Vogtle Units 3 & 4 provides lessons learned on the importance of rigorous pre-construction planning, and many of the challenges associated with the Vogtle construction impact many large infrastructure projects and were not unique to the nuclear aspects of the project.
Summary of Key Findings in the DOE Liftoff Report on Advanced Nuclear (the “Report”):
- Achieving net-zero in the U.S. by 2050 would require ~550–770 GW of additional clean, firm capacity. According to the Report, system modeling indicates achieving net-zero in the U.S. by 2050 requires adding on the order of ~550–770 GW of additional clean, firm power. These same models indicate advanced nuclear is likely to be the economic option for at least ~200 GW of this capacity addition, comparing favorably with other clean, firm options (e.g., renewables paired with long duration energy storage, fossil with carbon capture, geothermal). Report at 6. Deploying ~200 GW of nuclear capacity in the U.S. could require ~$700B in capital formation by 2050, with $35-40B required by 2030. Report at 25, 37.
- Nuclear has a unique and differentiated value proposition for the net-zero grid. Six features of advanced nuclear contribute to its value proposition in a decarbonized grid, including its (1) ability to generate carbon-free electricity, (2) ability to provide firm power that complements renewables, (3) low land use requirements, (4) lower transmission requirements than distributed or site-constrained generation sources, (5) the regional economic benefits, and (6) a wide variety of supplementary use cases that enable grid flexibility. Report at 1, 6, 8. Additional applications of advanced nuclear include clean hydrogen generation, industrial process heat, desalination of water, district heating, off-grid power, and craft propulsion and power. Report at 8, n1.
- Nuclear is expected to be cost competitive with other clean, firm resources. With an increasing portion of the grid supported by renewables, the value of grid stability provided by firm power increases. As a clean, firm power source, nuclear complements variable renewable generation and is expected to be cost competitive with other sources of clean, firm power (e.g., renewables with long duration energy storage and natural gas with carbon capture). Report at 9. The Report describes “firm power” as “generation sources that can provide stable energy supply during all seasons and during periods of weeks up to months.” Report at 9.
- Three key stages inform the path to commercial deployment of advanced nuclear at scale, and waiting until the mid-2030s to deploy at scale could lead to missed decarbonization targets. Following technical demonstrations, the key stages include (1) a committed orderbook, (2) project delivery, and (3) industrialization. Report at 26.
- A committed orderbook of at least 5–10 deployments of a single reactor design by 2025 is the first essential step for catalyzing commercial liftoff in the U.S. Report at 3, 26. This initial mass is required for suppliers to make capital investment decisions, e.g., for new manufacturing capacity, and to show the benefits of learning curve impacts on overnight capital cost reductions. The Report notes that a critical mass of orders for a single design is necessary, but not sufficient, and the market will likely support multiple designs at scale. For scale, 10 SMRs of 300 MW capacity would contribute 3 to 200 GW. Report at 26-27. To date, there is only one signed contract for advanced nuclear in North America, and it is between Ontario Power Generation and GE Hitachi to site a BWRX-300 reactor at Darlington. While customers have indicated their interest in building nuclear (e.g., via memoranda of understanding or letters of intent), they have not committed contractually. Report at 26, n.9.
- For project delivery, once a critical mass of demand is established, delivering the first commercial projects reasonably on time and on budget (±20%) will become the most important challenge. To build confidence that subsequent units (e.g., beyond the first 5–10) can be built on-time and on-budget, each step of the construction process needs to be executed in a timely and cost-effective manner. Report at 27. There are a number of factors that contribute to both project delivery, and also, to streamlining the process for subsequent builds at the same project. Report at 28-30.
- In terms of industrialization, once the nuclear industry has gained momentum and new projects are being ordered, the industrial base must scale accordingly. Successful deployment of 200 GW by 2050 requires continuing to support new reactor designs, and particular support for the additional applications (e.g., industrial heat, hydrogen generation, desalination, and global export), while also scaling-up the nuclear workforce, fuel supply chain, component supply chain, licensing capacity, testing capacity, and spent-fuel capacity. Report at 31-34.
- Ultimately, waiting until the mid-2030s to deploy at scale could lead to missing decarbonization targets and/or significant supply chain overbuild. If deployment starts by 2030, ramping annual deployment to 13 GW by 2040 would provide 200 GW by 2050; a five-year delay in scaling the industrial base would require 20+ GW per year to achieve the same 200 GW deployment and could result in as much as a 50% increase in the capital required. Report at 2, 24.
- New projects will be different than recent over-budget builds. Advanced nuclear capital cost reductions could lead to a significantly reduced levelized cost of electricity (“LCOE”) of nuclear power. For example, the Report provides data demonstrating the reduction from first-of-a-kind (“FOAK”) to Nth-of-a-kind (“NOAK”) overnight costs of $6,200 per kW to $3,600 per kW would reduce LCOE by ~25%. Report at 18-19. Therefore, while FOAK reactors may be more expensive, repeat deployments are expected to drive substantial cost reductions.
- Catalyzing the committed orderbook may require interventions to manage project completion risk. According to the Report, the nuclear industry is stuck in a stalemate where utilities and other potential owners recognize an increasing need for nuclear energy, but perceived risk of uncontrolled overrun and project abandonment have limited committed orders for new reactors. Report at 1, 39-40. The Report proposes that a pooling demand (e.g., of a consortium of utilities) would support developing a committed orderbook. Participation in this model could be further accelerated by financial support to help de-risk the first 5-10 projects. Report at 4, 40. Cost overrun insurance, financial assistance, the government acting as an owner, and the government acting as off-taker are four possible approaches to accelerating orders. Id.
- In addition to remedying the private sector stalemate, support from the Federal Government will help accelerate the commercial deployment of advanced nuclear in the United States. During the webinar, DOE discussed how recent legislation designated specific funds to support new nuclear projects and demonstrations. For example, following the passage of the IRA and the Infrastructure Investment and Jobs Act, the DOE Loan Programs Office (“LPO”) has been authorized to lend nearly $412 billion in remaining clean energy financing for four programs, including two newly created programs. One of the new programs established by the IRA, the Energy Infrastructure Reinvestment Program (Section 1706), authorizes the LPO to finance nuclear projects at energy infrastructure sites that have ceased operations, such as at retired coal sites. The second new authority under the IRA is for LPO to finance construction for nuclear fuel supply, to include using IRA funds to implement section 2001 of the Energy Act of 2020 for the creation of a domestic supply of HALEU. Report at 32.
General Information about the Commercial Liftoff Reports:
The first series of the reports are focused on clean hydrogen, advanced nuclear, carbon management and long-duration energy storage. These emerging technology areas have been chosen for their anticipated role in the clean energy transition, to complement that of mature clean energy technologies. The insights and takeaways found in these reports were developed through extensive stakeholder engagement and a combination of system-level modeling and project-level financial modeling.
According to DOE’s Introduction on Pathways to Commercial Liftoff (“Introduction”), “these reports are intended to reinforce dialogue with the private sector, and DOE will be seeking continuous feedback from industry as these reports are updated and revised over time.” Introduction at 3. DOE also noted that the Report initiative “does not represent a policy position for the DOE or the U.S. government; nor does it reflect intentions for DOE program execution or funding.” Introduction at 3, n.3.
While the technologies discussed in the reports face challenges to commercialization that need to be resolved through a combination of public and private sector actions and investment, they all have a critical role to play in the clean energy transition.
For more information contact Amy Roma, Partner, or Stephanie Fishman, Associate.