A/SMRs will change the financial landscape for nuclear power. The unique benefits and risks attached to these technologies, the partnerships required and innovative approaches to financing were discussed over two sessions. The first session focused on existing and potential new financial schemes to fund an expansion of nuclear power to new markets and the position of international financial institutions, which refuse until now to cover nuclear power projects considering that they are not environmentally friendly. The second focused on the role of civil society, including philanthropies to increase investment in peaceful uses through partnership building and by promoting the benefits of peaceful uses.
Financial institutions: investing in the deployment of A/SMRs
A/SMRs offer the potential of less risk and lower costs than traditional nuclear power plants and also have diverse applications, which include non-electrical applications and off-grid use. A/SMR projects will likely be developed not only by states but also by the private sector, particularly for energy-intensive industries. This represents a shift towards a new business-to-business (B2B) approach in the nuclear industry. Such an approach has been rare in the nuclear sector, with Finland’s Mankala model being a notable exception until now.[1]
These features would be attractive to commercial banks. However in OECD countries banks would prefer to invest in SMRs connected to the electricity grid for the time being as they would benefit from guarantees from the public sector. The possibility of off-grid investment being potentially more bankable in developing countries was countered by the assertion that if big industries in small countries leave the grid, the grid could collapse. The banks are looking at the possibility of developing B2B projects with A/SMRs, but they are waiting for the first projects to prove their feasibility. Participants agreed that strong government support, politically and through public private partnerships, would be essential to attracting investment from financial institutions.
The absence of multilateral international financial institutions, in particular the World Bank, is concerning as the deployment of A/SMRs in many developing countries would require the support of financial institutions. To this end the International Bank for Nuclear Infrastructure (IBNI) is being established. The IBNI is a conceptual new IFI that would provide financing and other support for qualified nuclear energy projects within its member countries.[2] Nonetheless it is essential that African policy makers lobby the World Bank, the African Development Bank and other IFIs to support their nuclear power ambitions.
Various approaches to financing were discussed. Substantial funding would be required to expand nuclear power globally. A suggestion was made to deconstruct the supply chain into concrete projects which can be presented to banks. Another was for African countries to negotiate a carbon tax that could fund the energy transition in Africa.
The strengths and weaknesses of a supplier-driven market approach versus a consumer-driven market approach were also considered. Once “first-of-a-kind” technologies have been proven and are commercially viable, a supplier-driven market—by which the reactor vendor would bear some of the financial risk—could help to make international financing more palatable. Early investment in non-power applications can also help provide assurance that the recipient country is experienced in handling nuclear projects and related financing arrangements.
The role of civil society
Civil society organisations have an important role to play in convening stakeholders from diverse communities on the nuclear-climate-development nexus. As highlighted throughout this workshop a key obstacle to scaling up peaceful uses is the lack of awareness about the benefits of peaceful uses and the ongoing efforts of the IAEA, regulators and the nuclear industry at large to ensure that nuclear material, related facilities and radioactive waste are safe, secure and safeguarded.
Another challenge to scaling up peaceful uses is limited funding. The IAEA operates on a zero-growth budget and is not able to meet the growing needs of its Member States. Philanthropic foundations and ODA funders invest billions of dollars annually to support the attainment of development and climate goals, but nuclear science and technology are not integrated into these efforts. These institutions could be a force multiplier for the IAEA’s support to countries in capacity building, awareness raising, training and education. They could also contribute to nuclear technology development and deployment.
New partnerships and investment required to optimize the contribution of peaceful uses for climate change mitigation and development require a concerted effort to combat the negative perceptions around nuclear. The non-proliferation, safety and security community can be instrumental in this regard. These NGOs and think-tanks can change the narrative on nuclear threat and risk to a narrative that highlights the benefits of peaceful uses and the ongoing and successful efforts globally to ensure the safety of people and the environment. The workshop benefited significantly from the participation of a prominent philanthropy, which in turn gained valuable insights through engagement with African policymakers, regulators, international experts, and industry representatives. Engaging more philanthropies is a priority, as they can play a crucial role in supporting NGOs and think tanks. These organizations can then convene nuclear, climate, and development communities and industries to promote and facilitate the mainstreaming of peaceful nuclear uses in development and energy policies. The role of philanthropies would be important not only for advancing A/SMR projects in Africa but also for bringing reliable energy to isolated communities.
For instance, they could fund the installation of microreactors to power critical facilities like hospitals and schools, potentially replacing diesel generators – an approach similar to plans being developed in Canada.[28]
[26] “The Mankala model is a cornerstone of Finnish energy production”, TVO, February 2023, at www.tvo.fi/en/index/news/pressreleasesstockexchangereleases/2023/themankalamodelisacornerstoneoffinnishenergyproduction.html
[27] For more on the IBNI please see https://nuclearbank-io-sag.org/
[28] Canada’s SMR Action Plan Progress Update, SMR Action Plan Leadership Table, October 2022 available at: https://smractionplan.ca/sites/smractionplan/files/2023-01/full-appoved-progress-update-eng-access.pdf. “Stream 3 is focused on the provision of advanced reactors to off-grid or remote communities; a new class of micro-SMRs designed primarily to replace diesel use in remote communities and mines.”