Russia’s invasion of Ukraine has dramatically changed the global energy landscape. Three months after the Glasgow climate conference ended in November last year, conversations about going green have suddenly turned to nuclear power.
This shift is not just happening in Europe, which tolerates the threat of a strangled energy supply from Russia. Several Asian countries have also had to reconsider their net zero trajectory.
Some European utilities have relied on coal to heat homes and maintain industrial activity, underscoring how vital energy security is for economic prosperity and social stability. Meanwhile, nuclear-dependent countries like France were slightly less affected. This nuclear pivot of certain countries is also the sign of a multiplication of risks and global uncertainties.
Weeks after Russia invaded Ukraine, countries like Colombia, South Africa, Australia and Indonesia became attractive to coal traders as gas prices soared and that supplies from Russia seemed increasingly uncertain. Of course, Europe’s appetite for coal is transitory, driven primarily by an urge to reduce dependence on Russian coal and gas.
But the most important story is not the redemption of coal from all the climate sins it has committed for a century and a half, nor its restoration as the attractive fuel of the future. Instead, it is about the importance of energy security and the fact that this cannot be provided by solar and wind energy alone.
Currently, solar and wind suffer from intermittency – there is no perfect match between demand and supply; nor is there a large-scale storage system that could ensure a steady supply in all seasons. Although attractive as clean energy, wind and solar are not reliable partners for countries that are slow to industrialize and still have to overcome socio-economic problems.
In this context, nuclear energy has become a hot topic. The energy debate is increasingly turning to energy security as a crucial element of national security.
Recently, the Minister of Minerals and Energy, Gwede Mantashe, mentioned that his department intended to launch a call for proposals to build new nuclear capacity. It is likely to encounter resistance, with some brandishing the corruption card while others put forward logics of security and cost.
As far as corruption is concerned, this should not prevent politics from planning for the long term. It is myopic to oppose large-scale infrastructure programs or development plans because they might be corrupt instead of formulating anti-corruption strategies. We need strong governance standards, stricter procurement and greater oversight by independent institutions.
On the cost side, now that regions such as the European Union are reclassifying nuclear as green energy, and there seems to be a growing acceptance of nuclear as a carbon-free source that can help countries jump their energy transition and to offer a base load, it is possible that the cost of financing could drop. Technology breakthroughs to reduce costs, address security issues and pass the sustainability test are led by new technology companies that have significant financial backing from impact and capital funders. -risk.
The EU taxonomy, which now reclassifies nuclear as green, has signaling power: if the technology is classified as meeting clean energy criteria, it could potentially attract a lower cost of finance from financiers who seek to meet environmental, sustainability and governance (ESG) conditions.
Institutional investors, including pension funds and sovereign wealth funds, have been pursuing ESG criteria recently, with the low cost of capital hanging like a carrot.
Energy security and national security considerations are driving much of the policy change around the world. The majority of EU countries, with the exception of Germany, Austria, Denmark, Luxembourg and Spain, support the inclusion of nuclear as a form of green energy in the EU taxonomy.
Germany is caught between a rock and a hard place as it needs to slow down its exit from coal to reduce its gas dependence on Russia. Belgium has flip-flopped on its earlier decision to shut down two reactors and now swears by nuclear as a future. This is even more the case for countries in Russia’s backyard – Poland, Romania and the Czech Republic.
The EU has always prided itself on setting global standards — what’s good for Europe is also good for others.
The reclassification of nuclear as green power raises interesting questions about whether the EU will direct some of its clean energy funding to nuclear build programs in developing countries.
If nuclear energy is reclassified as green energy, the portion of the $100 billion that has not yet been released per year should be allocated to nuclear energy? This is also a question that financial services firms and institutional investors will need to consider, especially given the likely ESG benefits of nuclear power.
Outside of Europe, other countries are exploring nuclear power as a green investment for the future. In South Korea, Yoon Suk-yeol’s new leadership has decided to suspend the previous administration’s nuclear exit program and will instead allow more nuclear power plant operators to extend their service contracts. well past their expiration dates.
Singapore is also exploring nuclear options as a key part of its decarbonization. The high-level government task force mandated by the Energy Market Authority is studying an energy mix where nuclear will represent 10%, with hydrogen constituting the bulk of energy production.
The nuclear movement has strong supporters. Investors like Bill Gates have also bet on nuclear energy through his company Terra Power. Gates describes nuclear as “the only carbon-free energy source capable of reliably delivering electricity day and night, in every season, almost anywhere on Earth, [and] which has proven itself on a large scale.
A new wave of venture capital-backed tech start-ups is emerging amid growing efforts to advance a new generation of safer reactors, Generation IV, which Silicon Valley investor John Doerr says could offer safety, durability, efficiency and lower cost.
For many developing countries that still lag behind in industrial development, nuclear power could provide a pathway to clean energy.
On the African continent, countries like Kenya are stepping up efforts to build commercial nuclear reactors near Kilifi, north of Mombasa, and with a long-term goal of commissioning the first reactor by 2036.
Resource-dependent African countries may have to turn to nuclear power to achieve their industrial development plans as the window is gradually closing on fossil fuel-based energy sources. Countries like Angola have recently unveiled ambitious plans for the rehabilitation of ports, the construction of large-scale infrastructure and the diversification from oil dependence to the development of new industrial sectors – all of which cannot be achieved by relying only on solar and wind, as necessary as these technologies. are intended to mitigate climate-related risks.
South Africa is not doomed to anemic growth; if it is really ambitious, it will have to plan for long-term energy security where nuclear is an integral part of the energy mix and thus fuels its industrial development.
This is all the more important as South Africa does not have the security of gas supply as a transitional fuel offering base load.
When you don’t have energy security, the quality of your economic sovereignty is, as we have learned with many European countries, at the mercy of other countries that may be hostile in the future.