The economic organization of nuclear power construction projects: Organizational models for production and financing

Abstract

In order to limit the rise in global average temperature to 1.5 °C above pre-industrial levels, international organizations such as the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) suggest an increasing role for new nuclear power plants. Their pathways entail a large number of new builds by 2050. Given the projected large-scale deployment of new nuclear reactors, it is therefore essential to analyse the existing organizational models. This paper provides an institutional economic analysis of the organizational models for the production and financing of new nuclear power plants. A particular focus is on private sector involvement and competition. In this regard, the paper looks at the division of tasks between state and private actors in financing and production, the governance structures of the companies involved, their market shares, and their degree of vertical integration. The rate of nuclear expansion proposed under the IEA and IPPC scenarios is higher than has ever been achieved in the history of the industry, which has been in decline and contracting since the 1980s. Since the turn of the century, the nuclear sector has been dominated by Russia, while traditional reactor vendors are continually on the brink of bankruptcy and have more or less abandoned reactor exports. Heavy forging capacity for reactor pressure vessels continues to constrain the supply chain, although some new production capacity has been added. Small modular reactors would not alleviate this situation. On the contrary, they would also rely on heavy forges in Russia and Asia. Government support is required for new nuclear power plants (NPPs), be it in liberalized markets or coordinated economies. In liberalized markets support can take the form of federal loans, or power purchase agreements. Countries with regulated markets and a state-owned nuclear industry such as China, Russia or India will probably continue to build NPPs. However, expansion is slowing down even in these countries, while the share of renewables is on the rise.