Nuclear Energy Gets a Major Boost From World Bank

The global tide is turning in favor of nuclear energy after decades of distrust and an adverse policy environment. This week, the sea change picked up speed as the World Bank announced that it would return to the nuclear energy space as a funder, marking a “major reversal” and “a momentous shift for international energy policy” according to the World Nuclear Association. 

The World Bank credited this groundbreaking pivot to the need to meet ballooning energy demand from the developing world without compromising on climate goals. The imperative to build new, low-emissions energy projects is more urgent than ever as electrification picks up speed in developing countries and developed countries see a rising energy demand driven by data centers and artificial intelligence.

“The acceleration of global electricity demand highlights the significant changes taking place in energy systems around the world and the approach of a new Age of Electricity. But it also presents evolving challenges for governments in ensuring secure, affordable and sustainable electricity supply,” says IEA Director of Energy Markets and Security Keisuke Sadamori. 

The World Bank calculates that the annual cost of building energy production capacity and supportive infrastructure will rise from its current rate of $280 billion to a whopping $630 billion by 2035. And an increasing amount of that investment, from the World Bank as well as from private and public investors, is going to go to nuclear power projects. 

The World Bank’s initial priority will be to extend the life of existing nuclear power plants, and then to expand the development of small modular reactors (SMRs) in the longer term, with a focus on developing countries. “We won’t be doing work in France or the US. But Brazil and Romania and India and anybody else who could need it. And clearly, the economics of extending the life of these nuclear power projects is now far more preferential to building a new one,” said World Bank president Ajay Banga.

This bold pivot on the part of the World Bank will likely cause a domino effect for other development banks. The Financial Times reports that the Asian Development Bank has already indicated that it intends to review its own ban on funding nuclear energy projects and is in dialogue with key stakeholders about “expanding engagement on nuclear energy”. The Times goes on to say that “other lenders, such as the African Development Bank and the Asian Infrastructure Investment Bank, could follow.”

The World Bank is just the latest major global policymaker to jump on board the global return to nuclear energy development. At last year’s COP28 global climate conference, more than 20 countries – including the United States – cooperated to launch an ambitious Declaration to Triple Nuclear Energy. And so far, nuclear energy seems to be one of the vanishingly few Biden-era priorities that Trump will continue to back.

European leaders, too, have recently been reembracing nuclear energy “with a new vigor.” In just the past few months, the governments of Italy and Denmark started motions to overturn their 40-years ban on nuclear power production, Spain indicated new openness to extending the lives of its nuclear plants, and Germany – historically one of the world’s staunchest nuclear adversaries – agreed to drop its opposition to nuclear power in European Union legislation.

Lauren Hughes, deputy director of the Nuclear Energy Policy Initiative, recently told the Atlantic Council that taken together, these major policy decisions “indicate that nuclear is coming back into favor and being recognized for its ability to provide reliable baseload power.”  

However, this is not the only motivation. The Financial Times reports that “the drive in Washington over recent years to persuade the World Bank to change its policy on supporting nuclear also reflects a strategic objective: competing with Russia and China.” Currently, Russia and China are far ahead of the game in terms of building nuclear power plants and expanding nuclear energy supply chains in emerging economies. The World Bank’s foray into the sector could help to level the playing field.

By Haley Zaremba for Oilprice.com

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