Can nuclear energy quench America’s growing thirst for electricity?

A robust American economy, artificial intelligence, and electrification are all contributing to new electric demand that’s expected to grow 9% by 2028. By 2050, electricity demand could rise by 57%.

Much of the new load, including from data centers, AI, and manufacturing, requires significant around-the-clock, firm power. While the rise of renewable energy is helping, the intermittency of renewables doesn’t deliver firm power.

Together, these dynamics are contributing to falling electricity reserves across the country, suddenly making nuclear energy—and its firm, around-the-clock, zero-carbon power—a potential part of the solution after decades of decline.

Renewed excitement for nuclear energy started to grow with plants coming back from retirement. At the same time, several big tech companies began announcing contracts with developers of new plant designs, particularly small modular reactors (SMRs).

Should these new investments in nuclear energy come to pass, they could make a dent in the growing electricity demand. But a nuclear renaissance isn’t written in stone. It faces significant challenges and limitations that will determine whether it will expand its role as a core technology underpinning the U.S. energy system.

While nuclear restarts are attractive, their scalability is quite low. Beyond Palisades, the Crane Energy Center, and Duane Arnold, few facilities could feasibly return to service. New technologies and builds are potentially more scalable but come with more technological and market uncertainty as shown in figure 1.

Here are five key factors that will help determine the future of nuclear energy in the United States.

1. Nuclear costs and revenue

Over the past several decades, the U.S. nuclear industry has failed to drive down costs. The main reason is that the U.S. has built many plant designs; over 50 designs exist across the U.S. This has prevented the industry from achieving consistent cost reductions by riding down the learning curve, which requires numerous factors, including a common workforce, stable regulation and policy, and continuous deployment. In short, for nuclear costs to decline in the United States, the nuclear industry needs to pick a design and stick to it.

Whether an SMR or a large nuclear design wins out depends on their unique advantages and disadvantages. Large nuclear plants generally have an advantage in terms of economies of scale at each site—that is, since costs do not scale proportionately with output, bigger plants can achieve lower costs per megawatt. However, SMRs may have an advantage in terms of economies of scale in manufacturing. Each unit will be small enough to be made in a factory and shipped to the installation site.

SMRs also have an advantage in terms of the total cost per plant. As a result, SMRs can appeal to a wider range of offtakers to buy nuclear power than large nuclear can, as evident by the recent interest by technology companies. With more potential offtakers, SMRs may be able to ride down the cost curve more quickly than large nuclear can.

SMRs also have the potential to be installed on the sites of retired coal plants, reaping savings by leveraging existing structures. In addition, interconnection rights may be transferrable to the SMR, which can help developers circumvent clogged interconnection queues. They also may be able to achieve lower construction financing costs due to shorter construction times compared to large nuclear plants.

In addition to cost, the potential revenue from a nuclear facility's design will influence the economic viability of nuclear energy. Both SMRs and large nuclear plants benefit from high capacity factors, operating at their maximum power output most of the time. Their high effective load carrying capability also means they can also produce energy when the grid is most likely to experience electricity shortfalls.

As shown in figure 2, nuclear is expensive, but these costs need to be weighed against the potential revenues. Nuclear restart costs could range from $356/kW-year to $407/kW-year while new nuclear plant costs could range from $456/kW-year to $863/kW-year.

The revenues for both nuclear technologies are higher than most other technologies except CCGT with CCS, ranging from $617/kW-year to $677/kW-year on a levelized basis.

In several cases, the revenues from nuclear energy are high enough to break even and earn a sufficient rate of return.

2. The timing of the next nuclear plant

Nuclear may be able to ride down the learning curve. But that curve needs a starting point.

The Vogtle nuclear plant had the potential to be the starting point for the large nuclear learning curve, but there are no pending orders for that plant design. Many of the workers for Vogtle have moved on to other work or retired. Thus, much of the learning gained from Vogtle may be challenging to build upon.

As for SMRs, no demonstration projects have been developed outside of Russia and China. The progress towards SMR demonstration faced a setback in 2023 with the cancellation of the Carbon Free Power Project. In 2016, NuScale had a targeted price of $55/MWh. This number was then revised to $58/MWh in 2021, before reaching $89/MWh in 2023. While this may still be a competitive price given the plant’s attributes, it was too much for the off-taker—or at the very least, the revisions created too much uncertainty.

The timing of the next nuclear plant also matters because buyers are looking for solutions today. The lack of readily available nuclear options will lead them to seek out alternatives, like CCGTs, with CCS optionality. The more alternatives get built, the faster they will move down their own cost curves.

3. Federal incentives for nuclear

Tax credits have a significant impact on the cost, and ultimately, the return on investment from nuclear energy.

Developers of new nuclear plants will likely opt for the Investment Tax Credit (ITC), which is based on a percentage of capital costs. Developers could also opt for the Production Tax Credit (PTC), which is provided per unit of energy generated. As shown in figure 3, our analysis indicates the ITC is generally more beneficial for new builds given the high capital costs of projects. The PTC will be preferred for nuclear re-starts.

The availability of the ITC is a critical driver of new nuclear plant economics. Figure 4 shows that without the ITC, SMRs fail to earn a sufficient rate of return in nearly all of our cost and revenue scenarios.

The law establishing the ITC stipulated that the incentive will begin to phase out at the later of two dates: 2032 or the year that the U.S. power sector achieves 25% of its 2022 emissions. According to our modeling, the latter will be achieved in the early 2040s.

In general, the nuclear industry moves quite slowly—as it should, given the risk involved. But much still needs to happen before the ITC phases out: a successful demonstration project—potentially not until the late 2020s or early 2030s—new manufacturing facilities, and an initial round of projects. If tax credits expire before nuclear achieves meaningful cost reductions, it could stall this emerging industry.

4. Nuclear fuel availability and disposal

Nuclear plants require enriched uranium, a market that is ensnared in geopolitics. Russia has historically been a major supplier of enriched uranium to the West. Since the outbreak of war in Ukraine, Western utilities have been reluctant to enter into new contracts. Furthermore, in May 2024, the United States passed legislation banning the imports of enriched uranium from Russia and Russian entities. Meanwhile, there is limited capacity for enrichment and conversion in Western countries, putting upward pressure on prices.

An additional complication is that the enrichment level of fuel for SMRs is generally higher than that for traditional facilities. Currently, the production of such fuel outside of Russia and China is limited to a single pilot project run by Centrus Energy in the United States. The U.S. government is supporting efforts to expand the domestic supply chain, but these efforts will take time to bear fruit.

The U.S. still lacks a long-term nuclear waste storage solution. The Yucca Mountain repository has stalled for decades, while Holtec’s proposed underground facility in New Mexico recently had its license vacated by a federal appeals court.

5. Public acceptance of nuclear energy

Many forms of energy infrastructure face community opposition, but concerns about nuclear energy are especially strong. The opposition to nuclear is generally about safety; stakeholders fear that their community could be the next Three Mile Island. But nuclear plants have a high energy density relative to other forms of power, like renewables, that also encounter community opposition. While a nuclear plant may be more likely to be affected by community opposition than a renewable energy plant, nuclear has a substantially lower land footprint per unit of energy than many other energy technologies. 

Nuclear developers can attempt to reduce the potential for community opposition by communicating the benefits of nuclear plants to communities. Nuclear plants provide hundreds of jobs, some of which may replace lost jobs from traditional forms of energy, such as coal. These jobs also have higher-than-average wages. Moreover, despite three well-known nuclear energy disasters, developers can communicate that nuclear is one of the safest forms of energy, as measured by direct or indirect deaths per unit of energy generated.

Nuclear developers may find a receptive audience in many communities. A Pew Research poll from August 2024 found that 56% of Americans support nuclear energy, compared to 43% in 2016. Another survey by Bisconti Research also found a growing public support for nuclear in recent years.

As the nuclear industry stands at this critical juncture, the interplay of economic viability, lead time, technological uncertainty, scalability, federal incentives, fuel availability, and public acceptance will ultimately determine whether nuclear energy can rise to the challenge of meeting America's growing electricity demand and contribute to a reliable energy future.