The Case For Nuclear Power and Small Modular Reactors

THE COWEN INSIGHT

The need to decarbonize while simultaneously ensuring energy security has driven increased interest in nuclear power. We discuss debates and misconceptions around nuclear and present a proprietary capacity forecast, which could have upside if small modular reactors gain traction. We also explore the policy landscape, how ESG investors view nuclear, and how that may change over time.

THE SHIFTING PERCEPTION AROUND NUCLEAR

To achieve decarbonization targets while simultaneously providing and ensuring energy security, we see a need for carbon-free, reliable, high-density power from nuclear. This comes with increased urgency in the wake of Russia’s invasion of Ukraine and ensuing energy inflation. We also see the emergence of small modular reactor (SMR) technology specifically addressing public concerns. However, nuclear power still faces public opposition. This is partly due to misconceptions around safety and an expectation that renewables can entirely satisfy demand.

Factors that help shift the perception around nuclear include:

  • low life cycle green house gas (GHG) intensity
  • reliability
  • low land use
  • safety record, contrary to common public perception

We also synthesize forecasts for decarbonization, energy transition, and nuclear capacity retirements in order to project incremental nuclear capacity additions. Moreover, with Cowen’s ESG and Sustainability Policy analyst John Miller, we review policy and describe current ESG aversion to nuclear. We also cover how Europe’s response to the current energy crisis may tilt that perception.

KEY CATALYST IN NUCLEAR ENERGY

The first public SMR company started trading recently. We think commercial success with further customer additions and the passing of regulatory milestones will be key catalysts for SMR companies and the broader group of SMR technologies under development. Likewise, the EU taxonomy vote expected this summer is also an important catalyst to determine if nuclear can be classified as sustainable.

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