DOE’s new Liftoff report updates deployment challenges and strategies for nuclear energy

DOE last addressed nuclear energy as part of its Pathways to Commercial Liftoff series in March 2023.  The report issued then aimed to create a shared fact base around nuclear energy by answering key investor and stakeholder questions, addressing topics like the value proposition of advanced nuclear, the need for new nuclear to reach net zero, and deployment aspects like timeline and cost.  We wrote about that initial report here. 

The new Pathways to Commercial Liftoff: Advanced Nuclear report (the “Report”), addresses the same topics but with an updated and broadened industry perspective.  For instance, unprecedented load growth coupled with a renewed interest in AP1000s—thanks to the successful start of Vogtle Units 3 and 4—provides new commercial opportunities for nuclear energy.  The Report incorporates these changes into its analysis of nuclear energy’s value proposition and deployment potential.  Particularly, this Report looks more closely at the deployment issues facing both small and large reactors, incorporating lessons learned from Vogtle and offering more broad-looking solutions for overcoming challenges.  Because the Liftoff Reports are meant to be “living documents” updated regularly, this new Report can be read as a replacement to the old version, focusing on the particular market conditions and challenges of 2024.

For background, DOE’s Pathways to Commercial Liftoff initiative is meant to show how various clean energy technologies can reach commercial liftoff, led by the private sector with support from the government.  DOE issued the first three reports as part of the initiative in March 2023, covering advanced nuclear, clean hydrogen, and long-duration energy storage.  DOE has since published other reports on industrial decarbonization (discussed here) and innovative and reliable grid deployment (also discussed, here), among other topics. 

A more detailed summary of the updated Advanced Nuclear Report is below.  Separately, DOE is hosting a webinar Friday, October 4, to discuss the Report.

Summary of Key Findings in the Updated Advanced Nuclear Report

• US nuclear capacity has the potential to triple from ~100 GW in 2024 to ~300 GW by 2050. The original report clarified nuclear’s value proposition and path to large scale deployment.  Since publication, a widespread surge in electricity demand after decades of stasis has increased the need for and interest in nuclear.  Much of this load growth is being driven by artificial intelligence and data centers with a particular need for carbon-free 24/7 generation concentrated in a limited footprint.  These conditions provide a set of customers who are willing and able to support investment in new nuclear generation assets.  Report at 1, 11-12.

• Nuclear offers a unique value proposition for a net zero grid.  Six features of nuclear energy 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, 8, 13-20.

• Achieving net-zero in the US by 2050 would require at least ~700–900 GW of additional clean firm capacity.  This figure is an increase over the 2023 report’s projected ~550-770 GW of additional clean firm capacity.  Clean firm power sources include nuclear, hydropower, geothermal, fossil generation with carbon capture, and renewables paired with energy storage.   Report at 9.  Including nuclear in a system with renewables and storage reduces overall system costs by 37%, and on its own it is cost-competitive with other sources of clean firm power.  Report at 10-11.  DOE modeling indicates the need for at least ~200 GW of new nuclear—triple the existing capacity and part of a commitment the United States made at COP28 in 2023.  Report at 11-12.

• Both new and existing reactors have roles to play. 

• • Advanced nuclear technology includes technology types across two generations—Gen III+ and Gen IV—and in three size categories—large, small, and micro.  Report at 20.  Tripling nuclear capacity will require both Gen III+ and Gen IV, with the former well-positioned to provide nearer term bulk electricity generation and the latter able to provide high temperatures for industrial use.  Report at 21.  Small and microreactors need to focus capital costs on factory production and modularity to be cost effective, but constrained labor conditions—like those in the United States and Western Europe—could give them an additional financial edge over large reactors in those markets.  Report at 27-28.
• • Building more large light water reactors using existing technology—including the Gen III+ AP1000s built at Vogtle—is increasingly attractive as well.  Large reactors have powerful economies of scale, which leads to lower costs per MW, and have decades of operating experience behind them.  Report at 26.  Despite these advantages, though, large reactors have proven difficult to construct in a manner that reaches nth-of-a-kind cost savings given megaproject issues—seen at Vogtle—and the over 50 different commercial reactor designs used in the United States limiting potential cost savings from standardization.  Report at 24, 26. 
• • Existing nuclear reactor sites—currently 54 across the country—are ideal sites for new nuclear reactors, as they provide benefits from economies of scale, often have existing site permits, and could take advantage of the Inflation Reduction Act’s (“IRA”) energy communities tax credit bonus.  Report at 21-22.  
• • The existing fleet of large light-water reactors can provide continued power with subsequent license renewals and power uprates.  Restarting shutdown reactors is now an option, as well, with Palisades setting a precedent.  The IRA created new financial incentives to keep online or restart these plants, including DOE Loan Program Office (“LPO”) authorities and a production tax credit.  Report at 25.

• 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 40.   

• • 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.  These 5-10 deployments need to be within the same design in order to see costs decrease with experience.  Report at 40.  Consortiums or partnerships can help not only lower risk by reducing the financial exposure of any individual participant, but by dividing responsibilities among parties with prior experience, consortiums could see increased cost savings.  Report at 41-44. 
• • 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 45.  Vogtle provides key lessons here—see below.
• • For 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 scaling up the nuclear workforce, fuel supply chain, component supply chain, licensing capacity, testing capacity, and spent-fuel capacity.  Report at 55.  
• • In all stages, equity and environmental justice must be considered.  This is a new addition to the Report.  Early, frequent, and transparent dialogue with host communities across the entire fuel cycle—beginning before submission of an application to the NRC—creates the greatest likelihood of project success.  Report at 65.

• Vogtle provides essential lessons for project delivery.  The cost overruns at Vogtle are not unique to the nuclear industry, but rather are a feature of most megaprojects.  However, most cost overruns seen at Vogtle need not be repeated.

• • Six of the seven root causes of Vogtle’s cost overruns are within project leadership’s control and could be avoided in future: (1) incomplete design, (2) limited constructability (efficiency) review, (3) inadequate detail in integrated project schedule with inflexible timelines and poor controls, (4) inadequate quality assurance, control, and documentation, (5) poor risk assessment, and (6) shortage of experienced labor.  Report at 49.
• • Vogtle specifically included costs that should not be incurred again if more AP1000s were built.  The project saw construction begin with an incomplete design, an immature supply chain, and an untrained work force.  Now that the reactors are complete, there is a supply chain infrastructure and work force pool that can be used on future AP1000s.  Report at 3, 52. 

• There are three overarching barriers to liftoff.  The Report offers solutions to each of these. 

• • Market power prices do not consistently compensate nuclear for the value it provides.  To solve this problem, states or other entities should consider ways to account creatively for nuclear energy’s decarbonization benefits, such as through a clean firm standard or broader electricity market reforms.  Report at 66, 67-68.
• • Many potential customers cite cost or cost overrun risk as the primary barrier to committing to new nuclear projects.  These risks can be reduced by sharing costs, insuring resiliency through cost scenarios, and ensuring project management best practices.  Credit tools and contractual methods can also help allocate risk and cost.  Report at 66, 68-71.
• • The U.S. lacks nuclear and megaproject delivery infrastructure.  Despite a lack of “muscle memory” for how build new nuclear reactors, various tools can help avoid the common pitfalls of nuclear construction seen at Vogtle.  For example, an integrated project delivery model can create a team that incentivizes on-time and on-budget delivery, and additional constructability research could help alleviate the drivers of cost overruns.  Report at 66, 71-73.

• Since the original publication of this report in 2023, US power demand projections have continued to increase.  After decades of stasis, U.S. utilities must adapt to a surge in electricity demand driven by data centers—particularly to support high performance computing and artificial intelligence applications—as well as increased manufacturing, industrial growth, and electrification, particularly transportation with additional building and industrial electrification.  Load growth is both widespread and concentrated at or near new load centers with a particular need for carbon-free baseload generation at industrial to utility scale with a limited footprint.  Many electricity customers such as tech companies or industrial manufacturers have made commitments to procuring clean electricity and highly value reliability.  Report at 8.  Tech companies in particular—e.g. Amazon, Apple, Google, Meta, and Microsoft—require firm power with high uptime to support artificial intelligence and data center operations.  Several of these companies have made commitments to achieve 100% clean energy for their global operations.  Nuclear is well-positioned to support those commitments.  Report at 18.

• The U.S. federal government is helping drive down the cost curve. The IRA provided substantial tax credits and increased the authorities of the LPO for the deployment of commercial technologies, while demonstration and research programs are funded and underway within the Office of Clean Energy Demonstrations and the Office of Nuclear Energy to de-risk more innovative technologies.  In addition to the billions of dollars available from the LPO through the Section 1703 and 1706 programs—$1.52B of which was recently committed to help restart Palisades Nuclear Plant in Michigan—DOE administers billion-dollar programs to support grid-scale deployment of Gen III+ SMRs, domestic commercial HALEU and LEU production, and civil nuclear credits.  Additionally, the IRA can add substantial cost reductions between the two technology-neutral clean electricity tax credits (48E and 45Y) and the zero-emission nuclear power production credit (45U).  Report at 3, 5, 31.  The investment tax credit in particular (48E) applies 30-50% to capital cost regardless of initial budget, effectively providing “overrun insurance.”  Report at 5.

For more information, please contact Amy Roma, Partner, Stephanie Fishman, Senior Associate, or Cameron Tarry Hughes, Associate.