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Heading into COP29, finance lags behind ambitions – Clean Air Task Force
David Stearns
The world is going to need more energy, not less. Global electricity demand is expected to grow by as much as 75% by 2050, requiring strategies that limit emissions while meeting this increased demand. Nuclear energy stands out as a critical tool in this effort—offering the promise of reliable, round-the-clock, zero-carbon electrical and thermal energy.
Recognizing this potential, 22 nations committed to tripling their nuclear energy capacity by 2050 through the Net-Zero Nuclear (NZN) Initiative at COP28 in Dubai. While a sign of progress, particularly at a forum that has been slow to recognize nuclear energy’s value in addressing the climate challenge, commitments are nothing without action. As we mark the anniversary of the NZN Initiative, it’s important to evaluate what’s been accomplished to advance the promise of nuclear energy, and what still needs to happen as world leaders head to COP29 in Baku.
International collaboration to scale nuclear energy continues to gain momentum
In March 2024, world leaders, heads of state, and nuclear sector stakeholders gathered in Brussels for the first-ever Nuclear Energy Summit at the head of state level, organized by the International Atomic Energy Agency (IAEA) and the Belgian government. With participants from over 30 countries, mostly from Europe, the summit highlighted nuclear energy’s role in decarbonization and economic growth, signaling unprecedented interest in scaling up nuclear energy through international collaboration. Calls for innovative financial instruments to support nuclear energy projects and advocacy for an EU strategy to advance small modular reactors (SMRs) through a new EU industrial alliance underscored the urgency for action.
Building on this momentum, in September 2024, delegates from the 22 member nations of the NZN pledge convened at the second Roadmaps to New Nuclear Ministerial Conference in Paris. Hosted by the Nuclear Energy Agency (NEA) and Sweden’s Ministry of Climate and Enterprise, the conference reaffirmed the pledges to triple global nuclear capacity by 2050. Participants emphasized nuclear energy’s essential role in achieving a climate-neutral future, enhancing energy security, and reducing fossil fuel reliance amid geopolitical tensions. The resulting communiqué highlighted the importance of international cooperation, advancing small modular reactors and other new technologies, and involving global financial institutions to support nuclear expansion.
Private sector leaders are recognizing the advantages of nuclear energy
In a major shift, the private sector—particularly the tech industry—is making significant investments in nuclear energy to meet growing demand for power. Just before Climate Week NYC, Constellation Energy announced a 20-year agreement to supply Microsoft with 835 megawatts of zero-carbon power by restarting Three Mile Island (TMI) Unit 1 in Pennsylvania. Google and Amazon soon followed with landmark agreements of their own. For Google’s part, it agreed to purchase nuclear energy from small modular reactors (SMRs) developed by Kairos Power, marking the first corporate agreement of its kind. Amazon joined the wave of support by signing agreements to back multiple new nuclear energy projects, including SMRs.
Perhaps the biggest signal of shifting attitudes was the announcement from 14 major banks expressing their support for efforts to triple global nuclear energy capacity by 2050. But banks and investors are required to make risk-adjusted returns on the capital that is entrusted to them. This signal does not automatically translate into agreeable term sheets, information memoranda and transactions with drawdown approvals. Thus, incentives will be needed to unlock the significant levels of capital necessary for financing new reactors, eventually driving down costs and speeding up deployment. The announcement was just a moment; the heavy lifting for the industry and policymakers lies ahead, because mainstream finance is already very busy and has not felt any historical compulsion to support nuclear energy buildout.
Efforts to triple nuclear energy by 2050 severely lack financing
To triple nuclear energy capacity, an investment of between 3 to 9 trillion dollars1 will be needed between now and 2050, or about $250 billion annually. This unprecedented level of expenditure needs to be a mix of equity and debt from a variety of sources, since government fiscal capacities are increasingly limited. The industry can probably survive with its current “one and done” approach to each client market, but it cannot grow.
There is growing clamor from governments, industry, think-tanks and other stakeholders, but mainstream capital for new nuclear projects remains largely aloof, unconvinced and unattainable. The International Energy Agency (IEA) currently estimates that clean energy is attracting $2 trillion annually, but according to the International Atomic Energy Agency (IAEA) only $50 billion (2.5%) of that is going to work for new nuclear capacity. In countries like the UK, Poland, Romania and Czech Republic, despite highly advanced projects and investment structures, the financing order books remain unfilled. A key barrier is the high cost of capital, driven by a “nuclear risk premium” that acts as a costly, long-term tax on nuclear energy consumers. This premium reflects the high-risk perception among private lenders and investors who require hefty premiums to offset concerns around policy, project completion, and market price risks. If there is a proverbial wall of capital available for clean energy, what does it take to melt the capital glacier looming high above the ambitions of the nuclear industry?
New financing mechanisms are essential to overcome these hurdles:
CATF and partners are developing tangible, actionable policy recommendations, instruments, and project structures that address the financing conundrum: the industry needs multiple reactor orders from committed and funded clients to build up efficient supply chains, capitalize on learning-by-doing, and ultimately achieve next-of-a-kind market economics. At the same time, market finance needs bankable, well-managed projects with reasonable risk mitigation strategies. The first-of-a-kind (FOAK) funding gap is a major hurdle, and, while well-known, is not yet fully addressed in any market. The subsequent FOAK/NOAK investment gap is even larger, yet it is absent from multilateral policy dialogues and policymakers’ radars. The renewable energy playbook offers practical solutions that our team is working on.
Looking ahead to COP29
The world has seen unprecedented ambition to expand nuclear energy since COP28, but without tackling financing, the least-cost (or even cost efficient) critical path to 2050 cannot be met. With climate financing set to take center stage in Baku, world leaders have a unique opportunity to take action on their commitments. By prioritizing the development of new, effective financing solutions, they can help unlock the capital needed to meet the goal of tripling global nuclear capacity by 2050.
1 Assuming CAPEX of $4 000-12 000/kW for 800GW of new capacity over next 25 years.
David Stearns is an independent consultant and board director for the International Bank for Nuclear Infrastructure (IBNI). After a 20-year career in international utility finance, culminating as HSBC’s European head of power project finance and advisory, Mr. Stearns established an independent advisory practice raising capital for nuclear energy developers. Now in its 12th year, he serves on various boards and supports IAEA expansion and newcomer member states.
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