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Opinion

The federal government steps up support for nuclear power

Constellation commits to adding 1.1 GW of nuclear power by 2028

8 minute read

David Brown

Director, Energy Transition Practice

David is a key author of our Energy Transition Outlook and Accelerated Energy Transition Scenarios.

View David Brown's full profile

It is always interesting to see what presidents do as lame ducks. They know their time in power is coming to a close so thoughts turn to their legacy and completing any unfinished business. So far, we’ve seen presidential pardons, Medal of Freedom ceremonies and even comedian and Biden impersonator Dana Carvey’s appearance at the White House for a roast. And yet President Joe Biden is still pursuing one of the key issues that has mattered most to his administration: accelerating zero-carbon energy in the US.

The federal government recently signed a US$840 million energy procurement contract with Constellation, the owner of the nation's largest nuclear fleet. The agreement outlines plans to supply electricity from nuclear power and other forms of energy to over 80 federal government facilities in the PJM Interconnection area from 2025 to 2035. It is the largest energy supply agreement in the history of the US General Services Administration (GSA), the agency that manages energy purchases for the federal government.

The announcement firmly cements nuclear power for decades to come. At a time of policy uncertainty around the Inflation Reduction Act (IRA), it will keep Constellation’s current nuclear fleet running, support incremental expansions to existing nuclear capacity and widen access to nuclear power among energy consumers. The agreement also provides strong tailwinds for future investments in nuclear on the eve of a transition of power as one of the few technologies with strong bipartisan support.

The US needs nuclear power more than ever

Today’s market conditions are lining up to support 24/7 zero-carbon power from nuclear.

In our base case outlook for US power, electricity demand growth expands rapidly. On average, across all major power regions, demand increases by 15% between 2025 and 2035. Data centres, advanced manufacturing and vehicle electrification are the primary load drivers.

Reduced public policy support for infrastructure reform and higher tariffs could slow down other forms of zero-carbon power. In our delayed transition scenario for the US, these power generation technologies are 135 GW lower than our base case by 2035.

Dispatchable capacity is becoming more valuable. Markets are paying a premium for reliability and the 10-year outlook for capacity prices is bullish. By 2035, we expect capacity prices in the Midcontinent Independent Service Operator (MISO) region to reach 122 US$/kW – more than 10x from today’s levels.

In these conditions, extending the operating licenses of the US nuclear fleet will be required. In 2024, nuclear supplied around 20% of total electricity generation in the US. The production tax credit (PTC) under the Inflation Reduction Act (IRA), bilateral contracts and bipartisan support for nuclear power are all reasons why we think operators will apply for extensions.

The only retirement we expect in our base case in the next 20 years is Diablo Canyon in California. Despite that, we expect around 96 GW of nuclear power generation in 2035, just 1.5% lower than today.

Implications for Constellation’s nuclear fleet

Constellation’s total operating fleet of nuclear power reactors is 20 GW, which is about 21% of total annual operating nuclear capacity in the US as of the end of 2024. To support its latest agreement with the GSA, Constellation will need to secure licensing extensions quickly. Typically, lifetime extension discussions take up to five years from the start of an application.

Based on disclosures from the company, around 3.2 GW of capacity will need licensing extensions by 2030. These projects include: Clinton, Illinois (1,080 MW), Dresden, Illinois (Unit 2, 950 MW), Nine Mile Point, NY (Unit 1, 620 MW) and R.E. Ginny, NY (576 MW). In total, these projects amount to around 15% of the company’s current fleet.

The Trump administration is likely to support license extension applications. The President-elect has voiced support for nuclear power. The nominee for Secretary of Energy, Chris Wright, studied nuclear fusion at the Massachusetts Institute of Technology, is on the record as supporting commercial nuclear and sits on the Oklo board, a small modular nuclear startup.

But plant extensions will not be enough. As part of its announcement with the GSA, Constellation disclosed that it will add around 1,100 MW of new nuclear power to the US by 2028. The vast majority of these additions will come from the 835-MW re-start of Three Mile Island, renamed the Crane Energy Center. The only way to bring the balance of 265 MW on fast enough is to increase the capacity of the current fleet. This process is known in the nuclear power industry as ‘uprates’.

There are a range of technical options for updates. Investments to steam turbines, pumps and motors, or transformers can increase power generation at a nuclear facility by up to 20%. Stretch power uprates and better measurement of feedwater have a smaller impact, increasing power output by up to 7%.

Constellation has not yet disclosed how it will uprate capacity of its current fleet. But, in aggregate for US nuclear power, uprates have been substantial. So far in the US, the total uprates to the nuclear fleet have added the equivalent of 8 GW of electric power, according to the US Nuclear Regulatory Commission (NRC).

For Wood Mackenzie’s Ryan Sweezy, Director of the North American Power Service, the Constellation announcement is in line with our base case expectations for nuclear power. “It supports our base case rationale that the existing fleet will seek licence extensions.

“Uprates will be targeted at the steam generators and rotors to help increase the power output of Constellation’s nuclear fleet,” Sweezy stated.

New commercial nuclear power capacity is over a decade away

Commercial-scale reactors, however, are a work in progress. New small modular reactors (SMR) projects, even with an FID in hand, face a decades-long permitting process. Licensing approvals from the US NRC and local construction permits will need to be secured. Technology readiness is a challenge, too. Molten salt reactors, such as TerraPower’s design, have a higher risk of corrosion compared to other reactor designs that use gas-based cooling. SMR developers will need to demonstrate credibility with building projects. Few have this so far.

To address these challenges, SMR developers are likely to build test reactors in the coming years. Kairos Power has started construction of a demonstration reactor. These should help build credibility in this emerging technology category.

Long-term developments in the US power market support our outlook for 14 GW of new nuclear SMRs by 2050. Zoe Sulmont, Research Associate with Wood Mackenzie’s Energy Transition Service, sees three key factors: “Our investment thesis on nuclear power reflects long-term load growth, the retirement of the US coal fleet and new policies to support the nuclear power sector overall.”

In brief

Wildfires continued in the greater Los Angeles area this week. The wildfires have expanded over the last seven days, with over 35,000 acres on fire across Los Angeles and Ventura counties. To put this in perspective, the total amount of burned areas is 60 square miles, an area larger than Paris, according to CNN. The Palisades Fire, the largest in Southern California, is only 19% contained at the time of writing. Over 55,000 people are without electricity, according to PowerOutage US.

Confirmation hearings for Trump’s energy team began this week:

  • Chris Wright, nominee for the Secretary of Energy. Wright’s opening statement mentioned three priorities: expanding energy supply, increasing innovation and reforming infrastructure. Wright mentioned expanding liquefied natural gas (LNG) specifically. President-elect Trump has pledged to support new approvals for LNG exports to countries that do not have a free trade agreement (FTA) with the US. In Wood Mackenzie’s analysis of the LNG market, securing non-FTA approvals will help several US projects but EPC costs, domestic legal challenges and global competition for off-takers are hurdles for US LNG.
  • Lee Zeldin, nominee to lead the Environmental Protection Agency (EPA). Zeldin will hold many keys to the energy transition if he is confirmed. The EPA could change tailpipe emissions rules, which, in turn, impact the production of electric vehicles. Asked by Massachusetts Senator Ed Markey if he would issue new rulemakings to amend emissions standards, Zeldin stated: “I cannot sit before you and announce the initiation of any new rules. I have no announcements to make of any new rules.” Despite Zeldin’s comments, it is possible that the upcoming administration will modify EPA guidelines. Our delayed transition scenario for the US quantifies the impact of looser EPA emission standards on electrification and oil demand. For upstream producers, we think more flexible methane emissions are likely and would help production on the margin.
  • Doug Burgum, nominee to lead the Department of Interior. Burgum, if confirmed, would be responsible for managing energy production on federal lands. Burgum called US natural resources “America’s balance sheet” and proposed a federal assessment of their value. Note, though, that the US Geological Survey has these assessments off the shelf. So perhaps Burgum is seeking a more detailed assessment. While Burgum is expected to support domestic oil and gas drilling, the former Governor of North Dakota is also a supporter of technologies that capture carbon. Burgum has also supported plans to limit wind power on federal lands. However, our analysis indicates that this may be harder than expected.

Large-scale nuclear takes a step back in the UK. France’s state auditor recently said that EDF, France’s state-owned nuclear powerhouse, should delay a final investment decision in the UK’s Sizewell C reactor until it reduces its financial exposure to Hinkley Point C. Expected costs for Hinkley Point C, also in the UK, have more than doubled since 2000 to over US$48 billion.
Wood Mackenzie’s Linsdey Entwistle, Senior Research Analyst for Emerging Technologies, sees European governments evaluating their plans for the future of nuclear. “Governments are fully aware that gigawatt-scale nuclear has not delivered on time and on budget.”

The challenges facing large-scale nuclear could open the door up to SMRs, she adds. “Nuclear remains crucial to supplying ever-greater power demand in Europe over the coming decades. While we see the potential for SMRs to expand, greater policy support will be required to see Europe step up investment in this emerging power sector.”

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