The Path to a New Era for Nuclear Energy

Financing nuclear projects

  • Nuclear energy investments are mainly financed by governments through state-owned utilities. Even where the private sector takes the lead, as in the United States and Finland, governments still play a major role in enabling projects through supportive regulatory frameworks and tariff structures.
  • Nuclear projects are hard to finance due to their scale, capital intensity, long construction lead times and technical complexity. Cost overruns and delays, which have plagued some recent projects, are major sources of risk for investors. 
  • Government involvement is crucial to facilitate the involvement of commercial banks in financing nuclear power projects, by ensuring predictable cash flows and taking on the construction risk. This enables nuclear projects to benefit from quasi‑sovereign risk profiles, and a lower cost of capital.
  • Cash flow predictability is key for debt financing. Financial institutions lend based on reliable future cash flow expectations. In markets with volatile electricity prices de-risking instruments such as long-term power purchase agreements, contracts for difference and regulated asset base models are indispensable.
  • The capital structure of investments vary significantly between new large reactor builds and lifetime extensions. High risks associated with new nuclear projects, notably during the construction phase, mean banks are less likely to finance early stages. Lifetime extensions are easier to finance, because they involve already operating assets.
  • The smaller scale of SMRs makes them potentially more attractive to commercial investors, opening a door to broader private sector participation in nuclear energy. The payback period of an investment in an SMR could be half the typical 20- to 30-year period for conventional projects, thanks to shorter pre-project and construction periods.
  • MDBs, despite the high demand for their resources across other sectors, could facilitate the financing of nuclear by supporting market designs and regulatory frameworks. The typical investment needs of a single nuclear project exceed the annual energy lending of the eight largest MDBs combined, limiting the scope for them to finance new projects.
  • Green bonds and other green debt instruments can open up new sources of finance for nuclear energy projects. Green bond issuances for nuclear energy have provided over USD 5 billion in financing to date, mainly for lifetime extensions and refinancing of projects entering their operating phase.