Nuclear power generation should remain a part of the global energy mix despite challenges related to tightening regulations, safety concerns, aging asset bases, and increasingly volatile energy markets.
That’s the conclusion of two new reports from S&P Global Ratings; The Energy Transition: Nuclear Dead and Alive, and The Energy Transition: Different Nuclear Energy Policies, Diverging Global Credit Trends.
"We see little economic rationale for new nuclear builds in the US or Western Europe, owing to massive cost escalations and renewables cost-competitiveness, which should lead to a material decline in nuclear generation in those countries by 2040," said S&P Global Ratings credit analyst Elena Anankina.
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But she added that “developing countries such as China and Russia continue to build new nuclear capacities to supply growing energy demand, supported by funding from the government or from state-related banks and significantly lower construction costs."
Nuclear currently accounts for 10% of global power generation. Carbon-free generation that existing nuclear assets provide, combined with steady growth in renewables, will be important at least over the next few decades to meet climate goals and to support stable electricity supply given intermittent nature of renewables, say the reports.
S&P states that “nuclear emits no CO2, is a reliable energy source, and promotes grid stability. The post-2040 outlook for the nuclear industry will depend on development of broad-scale energy storage solutions--through batteries or hydrogen--and smart grids, as well as on government support.”
Anankina explained: "We expect the credit trajectories of nuclear companies worldwide to differ depending on national energy policies and the degree of state support for nuclear.”
Other important credit drivers S&P highlights include merchant exposure, asset efficiency, construction risk, waste, and end-of-life management, as well as availability of long-term offtake contracts, subsidies, or funding from government-related entities.
In most countries, the cost of nuclear construction has dramatically increased in the past decade to meet more drastic security and safety requirements.
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