Nuclear Energy Financing

Nuclear energy financing has a more complex and multi-layered structure compared to other energy production technologies. The main reasons for this include high initial capital requirements, lengthy construction and commissioning phases, the need for advanced technological infrastructure, and unpredictable political and regulatory risks from an investor’s perspective. The planning, construction, and commissioning processes of a nuclear power plant can last several decades, making the management of capital costs and financial planning critical.

The financial instruments used in this process vary widely. Government guarantees, long-term loans provided by international financial institutions, direct or joint investments by the private sector, public-private partnership models, and insurance mechanisms are the most commonly used sources of financing for nuclear energy investments. In recent years, innovative financial models that facilitate risk-sharing in the energy sector have also become more prominent in nuclear energy financing.

The economic advantages of nuclear energy constitute an important incentive for investors. The high efficiency of power plants, relatively low fuel costs, and long operational lifespans reduce long-term production costs despite high initial investment expenses. Thanks to these characteristics, nuclear energy has been preferred by many countries as an energy source for decades.

Today, global energy transition, climate change mitigation policies, and efforts to ensure energy supply security have brought nuclear energy financing back to the center of the international agenda. In line with carbon-free energy production targets, the role of nuclear energy is being discussed more frequently, and efforts to diversify financial models in this field are increasing. As a result, nuclear energy investments are being shaped not only at the national level but also through international cooperation and multilateral financing mechanisms.

Historical Development and Financing Challenges

Nuclear energy financing dynamics have been significantly influenced by structural changes in energy markets over time. In the early periods when the electricity sector operated as a regulated monopoly, financing nuclear energy investments was relatively easier. During this period, consumers functioned as an indirect guarantee mechanism; when construction costs exceeded projections or plant performance fell below expected levels, utilities could recover losses by raising electricity prices. This gave financiers additional assurance that the investment would yield returns over the long term.

However, from the late 1970s onward, significant changes occurred in energy markets and regulatory approaches. Regulatory authorities increasingly resisted directly passing cost increases on to consumers, which shifted greater risk management responsibility onto electricity companies. In this new environment, where unexpected expenses had to be absorbed directly by corporate profits, nuclear energy projects became riskier for investors. As a result, there was a marked decline in new investment orders, and some existing projects were canceled.

One of the most prominent features of nuclear energy projects is the frequent occurrence of schedule and cost overruns. This issue stands out as one of the most critical factors undermining investor confidence. The Olkiluoto-3 reactor under construction in Finland exemplifies this problem. Shortly after construction began, a 24-month delay occurred, and total costs rose from an initial estimate of $4.7 billion to $6.9 billion. Similarly, international financial advisory firms such as Moody’s forecast that construction costs for nuclear energy projects could reach $5,000 to $6,000 per kilowatt-electric (kWe).

Due to such high costs and long-term risks, multilateral financial institutions such as the World Bank and the Asian Development Bank have historically classified nuclear energy projects as high-risk investments and generally avoided providing direct financing. A comprehensive 2003 study by the Massachusetts Institute of Technology (MIT) supports this view. The study concluded that new nuclear energy investments could only compete with coal and natural gas plants if accompanied by high carbon taxes or comprehensive government financial incentives. This finding demonstrates that the economic viability of nuclear energy projects is largely dependent on regulatory policies and state support.

Current Developments and International Commitments

In recent years, there has been a marked shift in international attitudes toward nuclear energy. Particularly driven by climate change mitigation, energy supply security, and the transition to low-carbon economies, renewed interest in nuclear energy has emerged. This trend has been institutionalized through international meetings and intergovernmental agreements.

One of the most notable developments in this context occurred at the 28th United Nations Climate Change Conference (COP28) held in Dubai in 2023. Twenty-five countries, including the United States, the United Kingdom, France, and numerous countries from Central and Southeastern Europe, committed to tripling global nuclear energy capacity by 2050. This target, which aims to increase capacity from the current level of approximately 390 gigawatts (GW) to 1,200 GW, has reinforced the role of nuclear energy in decarbonization strategies and energy supply security.

This internationally adopted approach has led to concrete changes in nuclear energy financing policies. The World Bank, which for many years avoided providing credit for nuclear energy projects, has decided to lift its financing ban on nuclear energy that has been in effect since 2013. This decision aims to make nuclear energy investments more accessible not only in developed countries but also in developing regions with high energy deficits.

At the same time, a new collaboration has emerged between the World Bank and the International Atomic Energy Agency (IAEA). The two institutions have agreed to sign a memorandum of understanding to support the safe development and financing of nuclear energy in developing countries. This agreement covers not only support for new projects but also the safe extension of the operational life of existing facilities and the development of small modular reactors (SMRs). SMR technologies are considered a suitable option for developing countries due to their lower initial costs and flexible deployment capabilities.

Expert analyses indicate that large-scale investments in nuclear energy financing will be unavoidable over the next thirty years. Global investment in nuclear energy is projected to exceed $5 to $10 trillion by 2050 to achieve net-zero emissions targets. In the European Union alone, an estimated €241 billion in financing will be required to meet projected capacity increases by 2050. These figures demonstrate that the global transformation of nuclear energy necessitates not only technological but also substantial financial restructuring.

Financing Models and Government Support

Nuclear energy investments are characterized by very high capital requirements and long construction and commissioning periods compared to other energy investments. As a result, payback periods typically span decades, posing significant risks for investors. Therefore, the combined use of government support, international credit, private sector investments, and innovative financing models is a fundamental requirement. In addition to ensuring compliance with international safety standards and environmental regulations, government guarantees play a critical role in securing investor confidence.

Government Support and Loans

Many countries directly support nuclear energy investments through public funds or provide subsidized loans to private companies. For example, France has committed to covering at least half the cost of six new reactor constructions by its energy company EDF through subsidized credit. Similarly, Poland has adopted a hybrid model for financing its first nuclear power plant, planning to cover approximately 30% of the investment from the state budget and finance the remaining 70% through long-term loans provided by U.S. institutions. However, such high-value state support may require approval from international regulatory authorities such as the European Union.

Vendor Financing

Another frequently used model in nuclear energy projects involves the direct participation of companies supplying reactor technology in the financing process. Under this model, vendor firms not only provide technological infrastructure and engineering support but also offer financial instruments such as credit, payment flexibility, or long-term repayment plans. Russia’s state-owned company Rosatom, for instance, offers financing packages as part of its nuclear construction contracts to customers. Such practices serve to alleviate the financing burden, particularly for developing countries.

Credit Guarantees

Governments can provide credit guarantees to enable projects to secure loans from commercial banks under more favorable terms. This method reduces risk for investors and allows banks to offer loans at lower interest rates. An example of this model is the $1.52 billion credit guarantee provided by the U.S. Department of Energy to support the restart of the Palisades Nuclear Generating Station.

Equity and Private Sector Investments

Recent interest in nuclear energy has also encouraged private sector investments. The Czech energy company ČEZ’s 20% equity stake in the British company Rolls-Royce, which is developing small modular reactors (SMRs), exemplifies this type of capital investment. Additionally, large technology companies requiring uninterrupted and clean energy are increasingly turning to nuclear energy, particularly SMR technologies, creating new dynamics in financing. Experts emphasize that innovative financing models used in other high-tech sectors, such as aerospace, should be借鉴 in nuclear energy financing.

Public-Private Partnerships (PPPs)

In nuclear energy financing, public-private collaboration is gaining increasing importance for risk-sharing. Public-Private Partnership (PPP) models allow the state to maintain its regulatory and guarantee role while integrating private sector contributions in financing, operation, and technology. The European Commission recommends the more effective use of PPP models in nuclear projects and the development of new financial instruments to reduce investment risks.

Cost Analysis and Competitiveness

The cost structure of nuclear energy is one of the most critical factors determining its position in global energy markets. The cost factor at the center of financing debates has a dual character. On one hand, there are very high construction costs, long construction timelines, and complex regulatory processes. On the other hand, low operating expenses, high capacity factors, and fuel efficiency offer significant long-term economic advantages. In terms of fuel costs, nuclear energy demonstrates a clear advantage over fossil fuels.

For example, a cost analysis conducted in Kazakhstan shows that the market cost of producing energy from one kilogram of uranium is approximately $65, whereas the cost of coal to produce the same amount of energy is about $151,900 and that of natural gas reaches $1,120,000. This comparison highlights the much higher energy density and economic efficiency of uranium compared to fossil fuels. The low share of fuel costs in total production costs of nuclear energy investments also provides investors with advantages in terms of price stability over the long term.

However, the initial investment costs of nuclear energy projects are very high. Reactor construction, infrastructure development, project management, compliance with safety standards, insurance costs, and licensing procedures directly affect the total investment amount. Moreover, the typical construction period of 7 to 10 years increases capital costs and extends the payback period. This factor is considered a major constraint on the competitiveness of nuclear energy financing, especially in liberalized energy markets.

The economic competitiveness of nuclear energy is not limited to technical cost calculations. Carbon pricing mechanisms, government incentives, subsidies, credit guarantees, and international financing support also directly affect the cost structure. When carbon emissions are priced, nuclear energy’s relative advantage as a low-emission energy source increases. In addition, when system costs associated with integrating renewable energy sources—such as energy storage investments or grid flexibility requirements—are taken into account, nuclear energy contributes to energy supply security through its continuous generation capacity and plays a significant role in the overall cost equation.

Regional Investments and Projects

Investment trends in nuclear energy have rapidly expanded in recent years, not only in developed economies but also in developing countries. This trend is viewed as a consequence of efforts to combat climate change and ensure energy supply security. Globally, Russia and China are leading actors in nuclear energy investments. China holds a leading position in reactor construction within its own national boundaries, while Russia plays a more dominant role in the international nuclear energy market through reactor exports and financing models. Experts predict that developing economies will drive growth in this sector and that China will become the world’s largest nuclear energy capacity holder by the 2030s.

In Europe, nuclear energy financing shows diverse trends. France continues to view nuclear energy as a strategic element in its energy portfolio and is introducing state-supported financing mechanisms for new reactor projects. Poland is developing hybrid financing models to launch its first nuclear energy investment, while the Czech Republic, Romania, and Bulgaria are prioritizing public-private partnerships and international credit support in their projects to expand existing capacity. Across the European Union, while the role of nuclear energy in the low-carbon transition remains controversial, many countries evaluate its financing as a guarantee of long-term energy supply security.

In Asia, nuclear energy investments have also gained significant momentum. India has announced a target to increase its nuclear capacity to 100 gigawatts by 2047, with a particular focus on small modular reactor (SMR) technologies, and is seeking support from international credit institutions alongside national budget allocations. South Korea is developing new projects based on its traditionally strong reactor engineering capabilities, while Japan is reviving its nuclear program, which stalled after the 2011 Fukushima disaster, to both increase capacity and update its financing strategies.

In the United States, significant funding has been allocated at the federal level for nuclear energy financing. Under the Infrastructure Investment and Jobs Act enacted in 2021, multi-billion-dollar financing packages have been established to support the continued operation of existing plants and promote the development of next-generation reactor technologies. In this framework, particular emphasis is placed on small modular reactors and advanced reactor designs.

The Central and Eastern Europe and Central Asia (CECA) region is also assuming an increasingly strategic role in the nuclear energy sector. Both the modernization of existing nuclear assets and new investments are on the agenda. In terms of financing, countries in this region are turning to various mechanisms such as government support, multilateral development banks, and vendor financing to meet rising energy demand and reduce dependence on fossil fuels. Ultimately, although nuclear energy financing varies regionally, the overall trend demonstrates that this technology plays a critical role in the long-term energy strategies of both developed and developing economies.