What makes nuclear power different?

I recently took part in an interesting one day workshop at Churchill College on the future of nuclear power. My small contribution was a short presentation that tries to identify what it is that makes nuclear power currently all but impossible to finance through conventional private finance. I argue that it’s not the scale, capital intensity, complexity or asset length, since none of these is unique to nuclear. And private capital markets and banks routinely finance very large projects such as the Sakhalin oil and gas projects which are many billions of dollars for each stage. Instead I argue that nuclear has two challenges at present. First, it’s uneconomic in most countries in power markets that don’t put a full price on carbon emissions by fossil fuel generation. And second, the record of construction over-runs in nuclear is very bad, so investors need some form of hedge against construction risk. So the proposed new nuclear station at Hinkley Point in the UK will only proceed with the benefit of a 35 year fixed price power contract backed by the UK government and a state guarantee on the debt.

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