Preparing for a Nuclear Shift

In an increasingly electrified world, carbon-free power will play a vital role in addressing climate change. Utilities must address this challenge swiftly as the window to meet global temperature targets is quickly closing.

While renewable energy sources will play a massive role in the clean energy transition, utilities need the complementary stability and resiliency of nuclear energy to guarantee cleaner, cheaper and more reliable power.

A best-in-class nuclear supply chain drives down costs, mitigates risks and ensures compliance. By empowering nuclear supply chain and procurement teams with expertise, tools and digitalization, utilities can help enable nuclear power as the bridge to a clean energy future.

THE CLEAN ENERGY TRANSITION

As we pivot to clean energy, the world turns its attention to the most carbon-intensive industries, with the power sector becoming a specific target.¹ In response, electric utilities have begun to shift their portfolios from fossil fuels to renewable energy sources, relying primarily on wind and solar to transform their generation fleets.² In the U.S. alone, utilities have planned over 12 GW of wind and 15 GW of solar additions to their portfolios, which accounts for roughly 70% of all new generating capacity for 2021.³ In parallel, 2.7 GW of coal generation capacity will be retired in 2021 as utilities seek to abandon their most carbon-intensive assets.⁴

THE ROLE OF NUCLEAR ENERGY

While extensive renewable energy buildouts help bring nations closer to clean energy targets, there are some roadblocks on the path to carbon neutrality and 100% clean electricity. Utilities working to increase their clean energy capacity face three key challenges:

1. The intermittency of renewable energy sources;
2. The importance of reliability; and
3. The need for significant electric grid improvements.

Renewable energy sources require a complementary partner to address these issues. Existing nuclear energy assets offer reliable, resilient, and carbon-free power, filling in the gaps in our current renewable energy infrastructure and serving as a bridge to the clean energy future — a future that must also include the next generation of nuclear technologies.

While nuclear energy does generate carbon-free electricity, there is debate as to its environmental sustainability. Out of concern for the planetary impacts of nuclear waste, the European Union has excluded nuclear power from its sustainable finance taxonomy, preventing nuclear investments from being labeled sustainable.⁵

Most states in the U.S. also exclude nuclear power from their “clean energy” standards. However, the Biden administration plans to include nuclear power to reach climate goals more quickly in its clean electricity ambitions at the national level.^6,7 While concerns around nuclear waste are justified, the world needs reliable, carbon-free energy to complement renewables without sacrificing environmental progress.

THE COMPLEMENTARY NATURE OF NUCLEAR AND RENEWABLE ENERGY

Wind and solar are variable by nature, and in an industry where service reliability is paramount to customer retention, interrupted service can be extremely costly. For example, in the CAISO region, renewables generate large amounts of power during the day, but before sunrise and after sunset, natural gas is ramped up to ensure supply continuity. This intermittency is particularly problematic because of its inverse relationship with demand. When electricity is in high demand, renewable resources are at their worst.^8,9

All the while, nuclear energy remains consistent as a source of baseload power. While many utilities have explored energy storage to enable sustained usage of renewable energy, these technologies are still decades away from being cost-competitive.^10,11

Until battery storage can economically mitigate intermittency, utilities will depend on more consistent, reliable generation sources like nuclear, coal and natural gas to stabilize their generation.¹² While coal and natural gas help address reliability and affordability concerns, they simultaneously erode efforts to reduce emissions.

Coal and natural gas plants are also less reliable than nuclear energy. While coal and natural gas plants operate at capacity 40% and 57% of the time, respectively, nuclear plants do so more than 90% of the time.¹³ Using fossil fuels instead of nuclear to complement renewable assets is taking two steps forward and one step back on clean energy goals, slowing the speed at which we can reach carbon neutrality in the power sector.

Increasing renewable energy capacity faces another challenge: an outdated electricity grid. The most suitable locations for wind and solar are often in remote, hard-to-reach areas where the existing grid is least developed.

This misalignment has paused over 600 GW of proposed renewable energy capacity as developers wait to receive grid access.¹⁴ With clean energy deadlines fast approaching and customers demanding cleaner power, electric utilities cannot delay their carbon-free investments much longer.

As part of its efforts to enable new renewable energy, the Biden Administration’s $2 trillion infrastructure bill aims to spark extensive transmission buildouts throughout the U.S. If these efforts are successful, renewable energy will be empowered to meet a larger portion of U.S. demand, enabling utilities to abandon more fossil-based assets.

Nonetheless, this effort takes time. Because renewables can only accelerate at the rate allowed by the grid, the existing nuclear fleet will enable utilities to supply clean, stable power to their customers until the grid becomes more suitable for renewable energy.

MAKING NUCLEAR COMPETITIVE THROUGH AN EFFECTIVE SUPPLY CHAIN

While the existing nuclear fleet is crucial to the clean energy transition, the future hinges on the next generation of nuclear technologies. Small modular reactors (SMRs) have come into the spotlight in recent years as they offer the reliability of nuclear at a reduced size. These smaller reactors are cheaper, safer and more capable of responding to fluctuating power demand.

Additionally, utilities have begun to explore the role of nuclear in enabling the “hydrogen economy,” a concept that has floated around for decades but has never been economically feasible.

Producing hydrogen through nuclear energy would not only provide nuclear fleets with a supplemental source of revenue. It may be the same technology needed to make the hydrogen economy a reality.¹⁵ The existing nuclear fleet is vital to clean energy’s bridging strategy, but the next generation of nuclear technologies will serve as clean energy’s backbone.

Despite the clear benefits that nuclear brings to utilities working toward 100% clean electricity, nuclear energy faces powerful economic headwinds. While wind, solar and nuclear are in harmony operationally, they are at odds economically. Plummeting prices for renewables have helped decrease market electricity rates, pushing prices lower than the economic breaking point for many nuclear facilities.

In the U.S., over the past seven years alone, nearly 10,000 MW of nuclear capacity has been retired early due to high operational costs and falling market electricity prices¹⁶ or, for a few, operational issues. In the next five years, another 10,000 MW of capacity will be retired from operation. With razor-thin margins and increasing competition, nuclear energy is facing its greatest economic challenge precisely when it is needed most.

EARLY NUCLEAR RETIREMENTS

Source: World Nuclear Association

PLANNED UPCOMING NUCLEAR SHUTDOWNS

Source: S&P Global Market Intelligence; SNL Energy Data

As costs and clean energy goals bear down on utilities, a best-in-class nuclear supply chain has never been more vital to profitability. Given the challenges facing nuclear energy, supply chain and procurement teams must be proactively engaged in enabling the reliability and affordability of a nuclear plant.

Best-in-class procurement and supply chain teams enable utilities to drive down costs, mitigate risk, and ensure compliance — a trifecta that can help make existing nuclear fleets competitive once again.

Many nuclear supply chain teams lack the tools, staffing and expertise to unlock their economic potential. The complexity and uniqueness of nuclear energy mean supply chain teams are often siloed and not engaged. This results in a lack of talent, resources, visibility and technology needed to drive savings.

Most supply chain organizations are in a constant state of reaction, unable to reap the benefits of a proactive procurement approach. A prime example of this is outage milestones, where utilities routinely report a milestone as successfully met, only to repeatedly increase the scope and add needed materials or services after the milestone. This behavior stresses the supply chain team, preventing them from driving value to the business.

If utilities wish to enable nuclear as a bridge to their clean energy targets, the role of supply chain and procurement must grow. While the fate of existing nuclear fleets will be determined by various factors, investing in and empowering nuclear supply chain teams can have a significant impact on the economic feasibility of nuclear power.

CONCLUSION

Global carbon neutrality runs on clean energy. Customers, investors, and governments are demanding that utilities drive the clean energy transition at high speed, relying primarily on wind and solar to do so. The challenge for utilities is finding a way to transform their generation fleets without sacrificing safety, quality, or affordability.

Stakeholders expect greener, cheaper, and more reliable energy all at once. Utilities will not meet these goals through renewables alone and will need to rely on nuclear generation.

Through best-in-class supply chain and procurement practices, utilities can help extend the lifetimes of their nuclear fleets, keeping reactors operable at the time when they are needed most. Investments to empower nuclear supply chains with additional tools, human resources and expertise will pay dividends for the future. As nuclear fleets operate longer, clean energy capacity grows steadily, moving us all one step closer to a clean energy future.

1. Hannah Ritchie, “Sector by sector: where do global greenhouse gas emissions come from?” Our World in Data, 18 September 2020 | https://ourworldindata.org/ghg-emissions-by-sector
2. “Electricity explained: Electricity generation, capacity, and sales in the United States,” U.S. Energy Information Administration, 18 March 2021 | https://www.eia.gov/energyexplained/electricity/electricity-in-the-us-generation-capacity-and-sales.php#:~:text=Energy%20sources%20for%20U.S.%20electricity%20generation%20The%20mix,electricity%20generation%2C%20while%20coal-fired%20electricity%20generation%20has%20declined
3. “Renewables account for most U.S. electricity generating capacity in 2021,” U.S. Energy Information Administration, 11 January 2021 | https://www.eia.gov/todayinenergy/detail.php?id=46416
4. “Nuclear and coal will account for majority of U.S. generating capacity retirements in 2021,” U.S. Energy Information Administration, 12 January 2021, https://www.eia.gov/todayinenergy/detail.php?id=46436
5. Kate Abnett, “EU experts to say nuclear power qualifies for green investment label: document,” Reuters, 27 March 2021 | https://www.reuters.com/article/us-europe-regulations-finance-idUSKBN2BJ0F0
6. Tim De Chant, “Nuclear should be considered part of clean energy standard, White House says,” Ars Technica, 2 April 2021 | https://arstechnica.com/tech-policy/2021/04/nuclear-should-be-considered-part-of-clean-energy-standard-white-house-says/
7. Lesley Clark, “Gina McCarthy: Clean energy standard to include nuclear, CCS,” 2 April 2021 | https://www.eenews.net/stories/1063729097
8. Michael Burnett, “Energy Storage and the California ‘Duck Curve,’” Stanford.edu, 1 June 2016 | http://large.stanford.edu/courses/2015/ph240/burnett2/
9. “Today’s Outlook,” California ISO | http://www.caiso.com/TodaysOutlook/Pages/supply.aspx
10. “Storage Requirements and Costs of Shaping Renewable Energy Toward Grid Decarbonization,” Joule: Cell Press, 18 September 2019 | https://www.cell.com/action/showPdf?pii=S2542-4351%2819%2930300-9
11. Wesley Cole and A. Will Frazier, “Cost Projections for Utility-Scale Battery Storage,” National Renewable Energy Laboratory, June 2019 | https://www.nrel.gov/docs/fy19osti/73222.pdf
12. Electricity explained: Electricity generation, capacity, and sales in the United States,” U.S. Energy Information Administration, 18 March 2021 | https://www.eia.gov/energyexplained/electricity/electricity-in-the-us-generation-capacity-and-sales.php#:~:text=Energy%20sources%20for%20U.S.%20electricity%20generation%20The%20mix,electricity%20generation%2C%20while%20coal-fired%20electricity%20generation%20has%20declined
13. “5 Fast Facts About Nuclear Energy,” U.S. Department of Energy | https://www.energy.gov/ne/articles/5-fast-facts-about-nuclearenergy#:~:text=nuclear%20energy%20is%20the%20most%20reliable%20energy%20source,reliable%20than%20wind%20%2835%25%29%20and%20solar%20%2825%25%29%20plants
14. “Transmission Planning for 100% Clean Electricity,” Energy Systems Integration Group (ESIG) | https://www.esig.energy/wp-content/uploads/2021/02/Transmission-Planning-White-Paper.pdf
15. Ellie Potter, “‘Not bonkers’: Hydrogen could give US nuclear plants new lease on life,” S&P Global Market Intelligence, 5 April 2021 | https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/not-bonkers-hydrogen-could-give-us-nuclear-plants-new-lease-onlife-63423340
16. “Nuclear Power in the USA,” World Nuclear Organization, May 2021 | https://www.world-nuclear.org/information-library/country-profiles/countriest-z/usa-nuclear-power.aspx