Austria

Belgium

Bulgaria

Croatia

Cyprus

Czech Republic

Czechia

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

United Kingdom

Isabelle-Chan

Lindsey Walter

How Much Will It Take?

alan-ahn

Deployment of Nuclear Energy in the EU and UK Under Different Reactor Cost Assumptions

Key Principles to Consider When Redesigning the EU’s Electricity Market

maggie-sepulveda

How Much Will It Take? Feature

Deployment of Nuclear Energy in the EU and UK Under Different Reactor Cost Assumptions v2

Infographic

Alan Ahn

Senior Resident Fellow for Third Way’s Climate and Energy Program

White Paper

Maggie Sepulveda

Former Multimedia Designer, Climate and Energy Program

Isabelle Chan

Non-Resident Fellow

Co-founder of Carbon-Free Europe

Report

<div class="Highlight">
<div class="content">
<h2>Overview of CFE’s Modelling Analysis</h2>
In 2022, Carbon-Free Europe (CFE) released its first energy systems modelling analysis, identifying five pathways for the EU and UK to reach their 2050 net-zero emissions commitments. Starting in 2023, CFE will update our analysis annually to capture the changing energy and policy landscapes.
The Core pathway is the least constrained, allowing countries to use all available clean energy technologies and assuming high energy efficiency and electrification levels. This is the most feasible, cost-effective pathway to net-zero. The other scenarios explore how different policy and implementation constraints impact the route to carbon neutrality. To learn more, visit <a class="c-link" href="http://www.carbonfreeeurope.org/modelling" target="_blank" rel="noopener noreferrer" data-stringify-link="http://www.carbonfreeeurope.org/modelling" data-sk="tooltip_parent">www.carbonfreeeurope.org/modelling</a>.
</div>
</div>
Due to recent energy supply constraints and electricity price volatility, there is renewed appetite to reform <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52023PC0148&amp;qid=1679410882233" target="_blank" rel="noopener">the current EU electricity market</a> under the Green Deal Industrial Plan. Carbon-Free Europe supports an electricity market restructuring that is equitable to all clean power technologies (both firm and intermittent), allows for reliable, secure, and affordable clean energy, and embeds emerging technologies, such as long duration energy storage, in a cohesive and resilient way.
<h2>Current Renewable Integration Flaws</h2>
In Carbon-Free Europe’s modelling, market prices, both in terms of the average annual price as well as price patterns, change dramatically with the introduction of hundreds of GWs of renewable generation. The chart below shows the significant pattern of solar generation in the middle of the day progressing through 2050.
<img src="//images.ctfassets.net/228txxvb8tt7/67bDI0j640mgt8T3qZXdZw/9c7dc069f861f7a71a698ffa2d7244cc/CFE_EMD_white_paper_charts.jpg" alt="" width="2750" height="2250">
This is not a stable investment environment for long-term assets without contractual support. While energy market prices maintain their value as a signal for balancing services, they are insufficient to support renewable energy deployment. Power Purchase Agreements (PPAs) and Contracts for Differences (CFDs) encourage long-term contracting vehicles to provide cost stability to consumers and reduce excess generator profits. While these contractual vehicles may have distorting effects on price and other market signals when applied under various scenarios, PPAs and CFDs will become increasingly important in providing revenue stability for renewables.
<h2>The Significance of Load Flexibility &amp; Energy Storage</h2>
<img src="//images.ctfassets.net/228txxvb8tt7/6eddhPyepPVack5AEGFOry/d69a1a83fcfee518fee63763e18de9eb/CFE_EMD_white_paper_charts2.jpg" alt="" width="2750" height="1896">
Market mechanisms that encourage load flexibility are critical: By 2050, in CFE’s Core pathway, we see 445 GWs of electricity load from hydrogen; 175 GWs of energy from flexible electric heat production; and 75 GWs of coincident end-use load flexibility from space conditioning, water heating, and vehicles. Carbon-Free Europe, therefore, supports the Commission’s efforts to enhance the use of end-use metering data, allow for further sub-metering of customer premise electricity loads, lower the minimum energy bid size to encourage the participation of smaller customers, and expand the use of demand response methods, like peak shaving. In the absence of the participation of these loads, which we term ‘latent storage’ (i.e., storage that already exists in the provision of an energy service), by 2050, we would see a need for an additional 130 GWs of energy storage to balance renewables and avoid peak impacts on the transmission and distribution system. Many of these loads can be optimized both temporally as well as spatially (EV charging, electrolysis, etc.), and information provided by Transmission System Operators (TSOs) in terms of current anticipated grid conditions will be important for their efficient deployment. Even with electricity load flexibility, we see the necessity to deploy hundreds of GWs of storage over the next three decades. However, in order to encourage installed durations (i.e., the amount of time storage can discharge continuously) adequate to meet long-term capacity needs, it’s an open question whether market revenues will be enough, as much of the installed capacity will only be discharged for a few hours every year.
<img src="//images.ctfassets.net/228txxvb8tt7/4gdWgMr1PxgQF6INnw8bDb/ecc6f394ff6c048561a42a5134d1c102/CFE_EMD_white_paper_charts3.jpg" alt="" width="2750" height="1604">
Carbon-Free Europe welcomes the European Commission’s proposal to reform the EU’s electricity market design to align with the EU’s climate commitments, and to protect consumers, CFE therefore, provisionally supports the idea of a low-carbon capacity mechanism, with some caveats. First, much of the existing capacity payment support in Europe is provided to fossil and nuclear resources, with unlimited ability to sustain their energy production for any duration of time. Instead, co-legislators should consider that capacity remuneration will need to be differentiated by resource capabilities to procure an efficient set of flexibility resources. Second, we see an important role for thermal generators as they transition to backing up renewables and are called on only in the event of sustained low renewable outputs. This limited role naturally limits their emissions impacts. Market mechanisms must adequately compensate thermal generators for this continued role as backup generators, even as they run less and less over time and earn limited (and unpredictable) revenue in the electricity markets. If they are not adequately compensated in the electricity markets in the long-term and are not compensated for their capacity provision, this could significantly increase the costs of providing reliable electricity service in a high renewables environment. We see the need for over 500 GW of non-nuclear dispatchable thermal generation running only ~5% of the year in order to provide reliability in an electrified, highly renewable world.
<img src="//images.ctfassets.net/228txxvb8tt7/1boIEOTVTTxucbvi1kBIKk/fa7455a0279f4bd0ba7eb2d2e6f83824/CFE_EMD_white_paper_charts4.jpg" alt="" width="2750" height="1792">
<h2>Prioritizing Energy Consumer Protection</h2>
Carbon-Free Europe also supports some of the targeted energy consumer protection proposals in the EU including requiring the transparent appointment of last resort suppliers and improving the process for consumers who must be switched to these suppliers, clarifying the conditions and procedures under which an emergency can declare price support intervention, and protecting the EU’s most vulnerable citizens from disconnection—an imperative that becomes even more important as the EU transitions to a highly electrified future with over 50% of end-use energy satisfied by electricity.
<h2>Conclusion</h2>
As the EU institutions work to negotiate and finalize the Electricity Market Design reform as part of the Green Deal Industrial Plan, CFE stresses that the final agreement must accelerate the deployment of clean energy technologies in an equitable way. This should include a detailed plan on allowing flexibility via direct access to electricity markets, and reliability via the structural acknowledgement of capacity needs at certain durations.

<h2>Overview</h2>
In March 2022, Carbon-Free Europe released our <a href="https://www.carbonfreeeurope.org/modeling" target="_blank" rel="noopener">original analysis</a> of five different pathways for the EU and UK to reach net-zero emissions by 2050. Our results showed crucial steps Europe must take over the next three decades to implement credible trajectories to carbon neutrality. The analysis reinforced that the feasibility of reaching emissions goals, both for individual countries and the EU as a whole, is greater when net-zero pathways incorporate a wider range of clean technology options. Increased optionality reduces risk and makes it more likely that clean energy will be cost-effective and net-zero goals can actually be achieved.
Nuclear energy emerged in our analysis as an important zero-carbon technology that, when allowed in a net-zero pathway, played a significant role in decarbonizing the power sector and providing heat for hydrogen production. Though we used a single cost assumption for advanced nuclear reactors in the Carbon-Free Europe scenarios, derived from the MIT Energy Initiative study “The Future of Nuclear Energy in a Carbon-Constrained World”, the future cost of new nuclear energy in Europe is highly uncertain. Because advanced nuclear reactor technologies have not yet been demonstrated at scale, it’s difficult to anticipate their eventual cost—and their cost can likely be influenced by continued investment in R&amp;D and early technology deployment. How much nuclear energy might be economically deployed in Europe if significant reactor cost reductions can be achieved through 2050? And what’s the potential for lower-cost nuclear reactors to reduce the total cost of meeting Europe’s climate targets?
This sensitivity analysis looks to answer those questions by evaluating how the cost of advanced nuclear reactors influences their economic deployment in Europe. We evaluated the various roles nuclear energy can play in a net-zero European energy system at different reactor cost levels. Our results indicate that under the assumptions used in Carbon-Free Europe’s Core scenario, there is an inflection point for nuclear reactor deployment when nuclear electricity costs reach €50/megawatt hour-electric (MWhe)1: at costs below this threshold, nuclear can economically provide a meaningful share of Europe’s total electricity generation and hydrogen production, reducing total annual energy system costs by billions of Euros in 2050. This potential upside warrants continued effort from the public and private sectors to drive down costs of advanced nuclear via technology improvements, economies of scale, and improved financing mechanisms.
<h2>Topline Takeaways</h2>
<ol class="boldList">
<li>
Deployment of nuclear energy increases significantly when reactor costs drop below €50 per megawatt hour-electric. Economic deployment of nuclear reactors increases dramatically in our model results when reactor costs drop below €2,000 per kilowatt-thermal (kWth), corresponding to €50/MWhe nuclear electricity production and €20/MWhth nuclear heat. The total capacity of advanced nuclear reactors deployed in the EU and UK in 2050 jumps from 50 gigawatts-thermal (GWth) to 225 GWth when reactor costs decline from €2,000/kWth to €1,665/kWth. Our modeling indicates very little economic deployment of nuclear if the levelized price of nuclear electricity exceeds €60/MWh.</li>
<li>
Even with higher reactor costs, nuclear remains competitive in direct heat applications. At reactor costs above €2,000/kWth, most nuclear energy is used in direct heat applications (primarily high-temperature hydrogen electrolysis), with a smaller portion used to produce electricity. The large step up in deployed reactor capacity when costs reach €1,665/kWth is largely driven by increased cost-competitiveness of nuclear electricity.</li>
<li>
At baseline reactor costs, all countries where nuclear is allowed deploy some nuclear capacity. At a reactor cost of €1,665/kWth, every country where our analysis allows new nuclear construction adds some advanced reactor capacity by 2050. The degree of nuclear deployment at the country level depends on competition with other sources of zero-carbon electricity: countries with higher-quality renewable resources deploy less nuclear energy than those with limited renewable energy endowment. </li>
<li>
Lower reactor costs result in significant energy system costs savings for both the EU and UK. Reducing the cost of nuclear reactors from €3,000/kWth to our baseline cost of €1,665/kWth reduces total EU and UK energy system costs by over €5B annually in 2050. Further reducing the cost to €1,000/kWth reduces 2050 system costs by over €18B. These annual cost savings can be weighed against the R&amp;D and early-stage deployment investments needed to achieve said reductions.</li>
<li>
Renewables build-out in Europe remains robust even in low nuclear cost scenarios. Some of the cost savings in the low nuclear cost scenario result from avoided renewable power investment. In our modelling, when nuclear reactors cost €1,000/kWth, total new renewable capacity needed in the EU and UK is reduced by 400 GW relative to the €3,000/kWth scenario. This reduction in renewable buildout doesn’t take effect until 2040, suggesting that even if advanced nuclear costs decline significantly, rapid buildout of renewable power in the 2020s and 2030s is still a no-regrets action in Europe.     </li>
<li>
In all reactor cost scenarios, nuclear energy plays a major role in Europe’s decarbonised energy system. In our analysis, nuclear reactors, including existing facilities, generate 17 to 28% of EU and UK electricity in 2050, relative to 25% today. High-temperature electrolysis with nuclear heat produces 20% to 60% of all hydrogen.</li>
<li>
Additional real-world constraints could increase the need for nuclear energy to meet climate goals. All the results presented here correspond to Carbon-Free Europe’s Core scenario, which is the least-constrained scenario we evaluated. Real-world policy and implementation constraints on the path to net-zero could further increase the value of nuclear energy.  </li>
</ol>
<h2>Introduction</h2>
Because advanced nuclear technologies have not yet been deployed at scale, but are expected to dominate new nuclear reactor deployment in the coming decades, long-term forecasts of nuclear reactor costs are highly uncertain. In contrast, renewable energy costs have dropped precipitously over the last decade after being deployed at scale. Comparing nuclear against renewable energy costs today can lead to the conclusion that nuclear energy is likely to be too expensive to compete with renewables in the long term, and that continued investment in nuclear technology advances is therefore a dead end. That conclusion may be premature for two reasons:
1) Non-intermittent electricity generating technologies become relatively more competitive as decarbonisation progresses. At the very high levels of renewable penetration necessary to meet deep decarbonisation targets, constraints—such as declining renewable resource quality, transmission availability, and curtailment— increase the cost and decrease the value of incremental renewable deployment.
2) Advanced nuclear technology and renewables do not necessarily serve the same function in a net-zero energy system. As a thermal energy source, nuclear provides electric reliability, storage and flexibility, as well as direct heat for industrial uses—services that can be difficult to provide entirely with renewable energy. 
In this analysis, we seek to inform the debate not with our own view of future costs, but with a better understanding of an energy system’s willingness-to-pay for the services offered by nuclear technology. We do so by evaluating economic deployment of advanced nuclear reactors at a wide range of costs. From these results, we can develop willingness-to-pay curves for individual countries and for Europe as a whole, which can inform economic targets for nuclear deployment. Our results showcase the broad role that nuclear energy could play in electricity generation, hydrogen production, and reducing overall costs in a net-zero energy system.
<h2>Nuclear Products: Heat and Electricity</h2>
To effectively capture the value that nuclear reactors can provide in a net-zero energy system, we model nuclear heat production separately from nuclear electricity generation. As shown in Figure 1 below, a nuclear reactor produces heat, which can then be converted to electricity in a steam turbine, stored via thermal storage for later use, or used in a direct heat application. Nuclear heat has many direct applications; we focus on hydrogen production and direct air capture (DAC) in our modelling, two important heat needs in net-zero energy systems.
<img src="//images.ctfassets.net/228txxvb8tt7/1dmSdP8QCBBPZFacGt5pNM/66db0f36c14efab5ab4de66f349230f7/NuclearCharts1_v2.jpg" width="1375" height="917">
Our analysis optimizes across three nuclear heat applications (electricity generation, electrolytic hydrogen production, and DAC) to determine the highest value use of nuclear heat in every hour. As a result of this approach, the optimal quantity of nuclear reactor capacity and nuclear electricity capacity constructed in our results are not necessarily equal. 
<h2>Nuclear Costs</h2>
Our analysis seeks to understand how nuclear reactor cost reductions could prompt broader economic deployment of nuclear energy through 2050. The all-in cost of nuclear energy depends on many input costs: upfront reactor costs, financing, fuel, operations and maintenance, waste disposal, and plant decommissioning.2 Forecasting any one of those costs in 2050 is subject to uncertainty. To simplify our analysis, we vary only reactor costs, but we evaluate such a wide range of reactor costs that we effectively capture uncertainty in other cost categories. We use a baseline reactor cost of €1,665/kWth,3 which we vary from €1,000/kWth to 3,000/kWth. We derive the levelized cost of a nuclear reactor’s delivered products—heat and electricity—from the reactor’s upfront cost, its operational profile,4 and O&amp;M and fuel costs.5Figure 2 shows the linear relationship between nuclear reactor cost and delivered nuclear heat and electricity costs under these assumptions.
<img src="//images.ctfassets.net/228txxvb8tt7/2334CuiOymB5mlv56oJZXv/0b9c91dfbed6429d243f28d11d23a795/NuclearCharts2.jpg" alt="" width="1375" height="948">
<h2>Results: Deployment</h2>
Figure 3 shows deployment of advanced nuclear reactors and nuclear electric generation across the spectrum of modelled reactor costs. Reactor deployment increases significantly when costs drop below €2,000/kWth, accelerating from 50 GWth to 225 GWth. At the low end of our modelled cost range, our optimization constructs almost 500 GWth of reactor capacity and 225 GWe of new electricity capacity.
<img src="//images.ctfassets.net/228txxvb8tt7/6Ghv0LsTtoELidA3Nf0eRQ/3a2d875475c4e6f5a2c4536cc16fbda2/NuclearCharts3_v6.jpg" width="1375" height="1173">
While both nuclear reactors and nuclear electric generators are deployed more widely as reactor costs decline, electricity generation capacity is more sensitive to reactor cost than direct heat applications. Figure 4 below further illustrates this trend: as reactor deployment accelerates at costs below €2,000/kWth, most of the incremental heat production is directed to electricity. In contrast, nuclear is a competitive source for direct heat used in hydrogen production and DAC even at relatively high reactor costs. Some nuclear electricity generation is also economical at high reactor costs, but the number of hours when nuclear electricity is cost-competitive grows substantially as reactor costs decline.
<img src="//images.ctfassets.net/228txxvb8tt7/7zT6pqAHbjnTjUWNacJ8DH/6bb6bb9cd7357090dbcf5ef60f9e5f18/NuclearCharts4.jpg" alt="" width="1375" height="1363">
<h2>Results: Country-Level Deployment</h2>
In our Carbon-Free Europe analysis, 14 of the 28 European countries we model are allowed to add new nuclear capacity, based on existing national nuclear policy. All 14 of those countries build some new nuclear reactor capacity under baseline cost assumptions (€1,665/kWth reactor cost), but country-level sensitivity to reactor cost depends on the domestic availability of other zero-carbon resources. Figure 5 shows the total and incremental capacity of nuclear reactors deployed in each country by 2050 under each reactor cost assumption.
<img src="//images.ctfassets.net/228txxvb8tt7/2IowUUu48PZDCsbcx2LjOL/568b7b7b92c5b643c38317b490ed5da8/NuclearCharts5.jpg" alt="" width="1375" height="1221">
In Northern Europe where high-quality offshore wind is abundant, nuclear heat is used primarily to produce hydrogen even at the lowest reactor costs modelled, so reactor deployment does not expand to start providing electricity in any of our scenarios. In Spain and France, where nuclear electricity competes with solar, onshore wind, and offshore wind, nuclear deployment does not accelerate greatly until reactor costs reach €1,000/kWth. In Eastern Europe, where renewables are less abundant, reactor deployment ramps up at €1,665/kWth. 
<h2>Results: System Costs</h2>
The impact of nuclear technology costs on total energy system costs depends on the extent of nuclear deployment as well as the magnitude of nuclear technology’s cost advantage over alternative solutions. In this case, nuclear technology primarily displaces renewable electricity (for electricity and hydrogen production), gas power plants (for reliability), battery storage, and low-temperature electrolysis. The cost advantage of nuclear technology at the examined reactor costs over these alternative solutions is shown in Figure 6 below.
<img src="//images.ctfassets.net/228txxvb8tt7/11DZfECmnrxAGmf07yxJZV/fc659c9817ae808c7227bf1fc4e2cd5a/NuclearCharts6_v3.jpg" width="1375" height="1165">
By 2050, reducing the cost of nuclear reactors from €3,000/kWth to our baseline cost of €1,665/kWth reduces total EU and UK energy system costs annually by over €5B. Further reducing the cost to €1,000/kWth reduces overall energy system costs annually by over €18B. These system cost reductions imply that investment in advanced nuclear R&amp;D and early-stage deployment is a high-value undertaking in Europe if it drives down the cost of nuclear reactors.
<h2>Results: Other System Impacts</h2>
One of the principal benefits of nuclear development is to provide a zero-carbon energy resource in areas that may face constraints to siting renewables. Our analysis shows that low-cost nuclear displaces a significant amount of otherwise-needed renewable power, reducing total new renewable capacity in 2050 by one-sixth (400 GW) compared to the highest cost scenario. This impact, however, isn’t realized until the 2040s, showing the continued need to develop renewables at unprecedented scales (while also maintaining Europe’s existing nuclear fleet).      
<img src="//images.ctfassets.net/228txxvb8tt7/6yWybjbJfqu0N8GDO1yvK7/b28d47d47d49535df595f7c2fe7f136a/NuclearCharts7.jpg" alt="" width="1375" height="1185">
The ultimate contribution that nuclear energy makes to electricity generation and hydrogen production in 2050 is shown below by cost scenario. Under the most optimistic cost projections, nuclear (including existing facilities) exceeds the overall share of electricity generation it makes up today (25% in 2020).6 Nuclear heat becomes critical to hydrogen production in many scenarios, with high-temperature electrolysis representing 60% of hydrogen production under the lowest reactor cost scenario.
<img src="//images.ctfassets.net/228txxvb8tt7/1nyeli7lbQSD0bX2Pd5JTb/562322a2056d9e130ede0e8d5ccb762f/NuclearCharts8.jpg" alt="" width="1375" height="1185">
<h2>Conclusions</h2>
With a breakthrough in costs (€1,000/kWth reactor costs, corresponding with €15/MWhth for heat and €42/MWhe for electricity), nuclear energy in 2050 exceeds the generation share seen in Europe today, reduces the necessary renewable build by 400 GWs, and is used to produce greater than 60% of Europe’s hydrogen. Costs below €1,665/kWth (€20/MWhth for heat or €50/MWhe for electricity) are necessary to see significant economic deployment. These costs can potentially be achieved through technology improvements, economies of scale, and improved financing mechanisms.
Carbon-Free Europe’s analysis evaluated five net-zero pathways: a relatively unconstrained Core pathway,7 and four additional pathways designed to explore how different policy and implementation constraints impact the route to carbon neutrality. This sensitivity analysis of nuclear reactor costs simulates economic deployment of nuclear only under the Core pathway assumptions. Even at higher costs, nuclear technology may be valuable to mitigate risks to decarbonisation represented in our other modelled pathways: the pace of demand transformation (Slow Demand Transformation), limited ability to construct new transmission lines and pipelines (Domestic Preference), or difficulty siting new renewable power (Limited Renewable Siting).

Carbon-Free Europe seeks to address many questions in regards to decarbonizing. One of them is scale. People often wonder what modeling data truly means from an implementation side.
This infographic depicts our estimate of how many solar panels and wind turbines the EU and UK really need to meet their ambitious climate goals, as well as the build rate and investment needs associated with this scale.
<img src="//images.ctfassets.net/228txxvb8tt7/66seaIxwV8cBu1yWxa6175/c7061d455396280d0d2edbcb5af8a74c/How_Much_Will_It_Take_V9.png" alt="" width="2550" height="3300">

How Much Will It Take? Exploring the Scale of Wind & Solar Required for the EU and UK to Reach Net-Zero Emissions

Publications

Topics

Team

Key Principles to Consider When Redesigning the EU’s Electricity Market

Deployment of Nuclear Energy in the EU and UK Under Different Reactor Cost Assumptions

How Much Will It Take? Exploring the Scale of Wind & Solar Required for the EU and UK to Reach Net-Zero Emissions