Nuclear in the Spotlight amid Oil, Gas Crunch

Global Energy Shakeup Boosts Nuclear's Appeal

A palpable shift is underway in global energy strategy, with nuclear power quietly re-emerging as a critical player. Amidst a volatile geopolitical climate and the ensuing crunch in oil and gas supplies, the appeal of nuclear energy as a reliable, low-emission baseload power source is accelerating. The inherent challenge, however, remains the lengthy development timelines for new nuclear capacity.

This pivot is marked by candid admissions from European leaders. Earlier this month, European Commission President Ursula von der Leyen acknowledged at a French nuclear energy summit that the continent's prior stance against nuclear power was a "strategic mistake." She highlighted the missed opportunity to harness a dependable, cost-effective, and low-carbon energy stream. This comes from a leader who previously supported Germany's nuclear phaseout. Now, von der Leyen has committed 200 million euro towards advancing "innovative nuclear technologies," with a particular emphasis on small modular reactors (SMRs). While SMRs are generating considerable media buzz, their practical implementation is proving more complex than initially anticipated.

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Fortunately, a substantial amount of existing nuclear capacity can be brought back online, particularly in Japan. Recent analysis from Wood Mackenzie suggests that the ongoing Middle Eastern crisis will likely steer both Japan and South Korea toward greater reliance on nuclear power in the long run. In the short term, coal is expected to bridge the supply gap. The firm noted that the crisis is "accelerating structural shifts toward nuclear expansion, slower coal retirements and the localisation of clean energy supply chains." This push for nuclear expansion is noteworthy, especially given that both nations have relatively limited direct exposure to the most severe impacts of the current geopolitical flare-up.

Asia and Europe Embrace Nuclear Resurgence

Japan has already taken significant steps, reactivating five nuclear reactors since 2022. This initiative has bolstered its baseload electricity generation by 4.6 GW, effectively reducing dependence on imported energy commodities. In South Korea, both public sentiment and political directives are increasingly favoring nuclear power. President Emmanuel Macron of France has also been a vocal advocate, urging Europe to expand its nuclear fleet. At the same summit where von der Leyen spoke, Macron stated that nuclear power is "key to reconciling both independence – and thus energy sovereignty – with decarbonisation, and thus carbon neutrality."

Further underscoring nuclear's growing favor among EU policymakers, von der Leyen reportedly penned a letter to member state leaders, advising them to explore extending the operational lifespans of their existing nuclear facilities. The letter suggested that "Avoiding the premature decommissioning of facilities such as existing nuclear power plants, which can continue to supply reliable, cost-effective, and low-emission electricity, can also play a role," as reported by Brussels Signal. This contrasts with earlier EU directives in the 1990s, which mandated Eastern European nations to shut down certain Soviet-era reactors deemed unsafe, despite expert assessments indicating their continued viability. This led to a reduction in nuclear capacity and an increased reliance on coal for stable power generation in those regions.

For South Korea, extending the life of its current nuclear reactors presents a clear advantage. Wood Mackenzie estimates that 7.8 GW of capacity, originally slated for retirement around 2030, could have its operational life extended. Nuclear power currently accounts for one-third of South Korea's electricity mix, with a total installed capacity of 26 GW. Despite this, past administrations have toyed with the idea of phasing out nuclear in favor of intermittent renewable sources, which have struggled to consistently meet reliable electricity demand.

Market Ripple Effects

Even the International Energy Agency (IEA) has voiced support for nuclear power, recognizing that wind and solar, even with battery storage, may not be sufficient to meet projected increases in electricity demand alone. The IEA reports that global nuclear capacity stands at 413 GW, contributing significantly by preventing 1.5 gigatonnes of global emissions and reducing global gas demand by 180 billion cubic meters annually. This reduction in gas demand is particularly relevant given the current disruptions to Qatari gas production, which the national energy company estimates could take several years to resolve.

While nuclear power offers a robust solution for electricity generation, it cannot substitute for natural gas in other essential sectors, such as fertilizer production. The supply chain disruptions stemming from the Middle Eastern conflict are already impacting the agricultural industry, signaling potential for considerable food price inflation. Although a swift resolution to these interconnected challenges is unlikely, nations with established nuclear fleets can find a degree of reassurance in their secure, reliable, and domestically sourced electricity supply. As Wood Mackenzie analyst Xiaonan Feng aptly put it, "Energy security considerations will continue to accelerate nuclear expansion, delay coal retirements and drive greater emphasis on domestic energy supply chains in both markets."