In a report which offers a post-pandemic recovery plan for the energy sector, the Paris-based agency says hydropower and nuclear power are the two largest sources of low-carbon generation, together providing 70% of all low-carbon electricity.
However, many facilities are ageing and face financial challenges because of lower revenues as a result of the pandemic, heightening the risk of early retirements and limiting the prospects for new investment.
“Modernising and upgrading existing nuclear plants would avoid a steep decline in low-carbon electricity generation; new construction would further boost low-carbon generation, and could also be considered where appropriate,” the report says.
The report warns that early retirements of nuclear power plants threaten thousands of jobs, concentrated in Europe and the US, while the loss of nuclear capacity will hinder climate mitigation activities.
In advanced economies, nuclear is the largest low-carbon source of electricity by a wide margin, but its future role is uncertain. Without additional lifetime extensions, nearly 40% of the nuclear reactor fleet in advanced economies will retire by 2030.
Nuclear power development requires “sustained support” from governments, the report says. It is capital intensive and projects can be among the largest in the energy sector in terms of total investment. First-of-a-kind nuclear reactors and large refurbishment programmes can each require more than $10bn in capital spending. Nuclear lifetime extensions of 20 years cost between $0.5-1.1bn per GW.
With long development times and high capital requirements, finding ways to limit risks and facilitate low-cost financing for nuclear is “clearly very important”, the report says. Direct financial support is not always necessary: long-term power purchase agreements or feed-in tariffs can offer a degree of price certainty and have been used extensively in China. Loan guarantees and preferential loans, where available, can also lower the cost of financing. Market-based solutions, such as carbon pricing or capacity payments, could significantly improve the financial position of both nuclear and hydropower.