New Strategies for New Nuclear: New nuclear power business approaches for new commercial entrants

Financing, licensing, and stakeholder management become crucial for newcomers confronting legacy competitors and a highly-regulated industry. Here, we delve into various considerations for nuclear new entrants.

April 21, 2024

As demand for reliable and sustainable energy solutions intensifies, the same can be said about the pace at which new  stakeholders are entering the commercial nuclear power market to develop new business solutions developing advanced nuclear reactors. Financing, licensing, and stakeholder management become crucial for newcomers confronting legacy competitors and a highly-regulated industry. Here, we delve into various considerations for nuclear new entrants.

Today’s energy market is in crisis

The current landscape of the energy market clearly illustrates a commoditization trend, with industry incumbents and newcomers alike facing multifaceted challenges that influence their operational and strategic decisions. The drive for profitability and increased share price often takes precedence, shaping the economic considerations that dictate these decisions. Industry players grapple with a host of issues: the imperative of climate action, the need for robust transmission systems, unprecedented load growth, the transition to renewable energy sources, retirement of coal assets, and the reliance on economically favorable natural gas as a stopgap solution.

Amidst these challenges, short-term earnings are prioritized over long-term benefits. This current reality makes long-range planning particularly difficult, especially when it requires substantial capital investments. Consequently, utilities and other energy companies often adopt a short-term strategy focused on minimizing risk and preserving near-term earnings. This approach typically involves extending the life of existing coal plants, expanding natural gas facilities, incrementally integrating solar and wind projects, and navigating the complex process of permitting new transmission lines.

This strategy, while currently prevalent, does not offer a sustainable solution for maintaining the resilience and advancement of the power grid. Furthermore, it poses a significant risk of shifting the demand for reliable and firm energy generation to other regions of the world where such resources can be developed more rapidly and with fewer constraints. In the United States, the quick solutions often revolve around deploying more natural gas facilities, which, although expedient, may not align with the longer-term energy sustainability goals.

Nuclear will play a critical role in meeting energy demand

As the current power providers struggle to sustain the long-term viability of the power grid and meet evolving market demands, the stage is set for transformative solutions in energy production.

The sector is experiencing a massive surge in electricity demand due to electrification, reshoring of manufacturing, data center growth, and more. The last such growth phase occurred after the invention of air conditioning, an event not within the living memory of current energy ecosystem stakeholders. This new demand is accompanied by requirements such as constant power supply, high reliability, renewable content, and new locations. Meeting these conditions can be challenging, leading the industry to consider a return to nuclear power, and creating space in the market for new entrants.

With the expanded use cases of nuclear generation coupled with the smaller-sized reactors, ownership and operation of these new designs is expected to broaden beyond the traditional large utilities to now include the commercial & industrial (C&I) sector and others. This shift presents both opportunities and challenges for entities looking to enter the nuclear space, emphasizing the need for a nuanced understanding of the regulatory landscape and strategic operational planning.

We’re on the cusp of industry transformation

The traditional nuclear power industry, long dominated by utility companies with extensive resources and specific regulatory experience, is on the cusp of a significant transformation. As global energy demands evolve and the push for sustainable solutions intensifies, a diverse array of new players are poised to enter the nuclear field.

Entities in the oil and gas sectors, for example, who are confronted with stringent environmental regulations and the urgent need for sustainable energy sources are increasingly viewing nuclear energy as a strategic alternative. This shift is driven by several factors: the need to diversify energy sources, the potential for nuclear to provide stable and large-scale energy production, and advancements in nuclear technology that reduce previous barriers such as safety concerns and high capital costs. Particularly, the development of small modular reactors offers scalable solutions that are more feasible for companies outside of traditional utilities.

The diversification of industry participants in nuclear power is poised to foster a more competitive and innovative market. This expansion can lead to improvements in reactor design, efficiency, and safety, driven by fresh investments and new technological insights. Moreover, the broader acceptance and support of nuclear energy as a clean and reliable source can significantly enhance its role in the global transition to a low-carbon economy.

Navigating licensing for newcomers

Nuclear operating licenses are strictly regulated by the Nuclear Regulatory Commission (NRC). The NRC has extensive requirements related to both the financial and technical qualifications of a licensee.

At present, there are only a few entity categories with full or partial licenses:

  • Utilities who own and operate the current fleet of commercial reactors;
  • Decommissioning companies who do not have operating licenses, but own licenses related to the latter part of a nuclear plant life cycle; and
  • University, medical, and other research facilities.

The NRC differentiates between the owner of a commercial nuclear facility and the operator of the facility. Many reactors in the current fleet are owned by one or more entities; however, a single entity, often a special purpose operating company, is designated as the licensee. The fundamental obligation of the operating company is to establish and execute the policies, programs, and procedures needed to operate the facility. These policies, programs, and procedures are often referred to as the “management model.” The functional areas covered by the management model range from procuring components and services to the actual operation of the plant. For the smaller, advanced nuclear designs being developed currently, the operating procedures will be heavily informed by the deliverables provided by the technology design companies.

The NRC licensing process can be broadly divided into two main types of licenses: construction permits and operating licenses. For new reactors, the NRC typically issues a Combined License (COL), which authorizes both the construction and operation of a nuclear power plant. The licensing process involves several stages, including the submission of detailed application documents that cover the reactor design, safety analysis, environmental impact, and plans for waste management, among other factors. The NRC then conducts a thorough review, which includes public meetings, safety evaluations, and environmental impact statements. This review process is meticulous and can take several years, depending on the complexity of the project and the efficiency of the documentation provided. Historically, securing a COL can take up to 5 years or more, reflecting the rigorous scrutiny required to ensure that all safety and environmental standards are met. For new entrants in the nuclear market, understanding and navigating this process is critical, as delays or oversights can significantly impact project timelines and costs.

Industry newcomers will need to leverage new approaches

C&I entities might pursue a variety of paths to secure their license, each with differing implications for long-term business strategy and regulatory compliance. The options below are presented in order of most to least involvement of the C&I entity in the day-to-day operation of the nuclear facility. This gradation reflects varying levels of investment, risk, and control, providing a framework for entities to assess their best fit within the nuclear sector.

Go it Alone

Under this scenario, the C&I entity would need to create its own operating company to become a first-time nuclear licensee. This option affords the C&I entity the most autonomy; however, it would require the development of a new capability and is the most challenging from a regulatory perspective. The C&I entity would need to recruit experienced personnel from the industry to staff the operating company and would need to develop its own management model. Each of these areas would need to withstand NRC review and approval.

Contract Support

This option preserves the C&I entity as having overall leadership of the operating company but relies on contracted support for development of the management model and staffing of the organization. The contracted support can come from the reactor technology developer or existing operating companies. Many technology developers are planning to provide services such as procedure development and training. In addition, a few existing operators such as Constellation and First Energy have expressed interest in offering contracted support to new owners.

Outsource Operations

Under this scenario, the C&I entity does not establish its own operating company but rather contracts with another entity to operate the facility. Some technology developers such as Oklo plan to offer this option. There may also be some existing operators who are interested in being the licensed operator on behalf of another owner. This option is not as challenging as the first option from a regulatory perspective but does present some nuances in the full separation between the owner and operator.

New entrants may challenge traditional nuclear financing approaches

Historically, financing for nuclear power projects has been heavily reliant on public utility models, where the capital expenditures are recuperated through rate recovery from consumers. This method aligns with the inherently cautious, stage-gate process used by utilities, which ensures rigorous scrutiny and incremental progression at each phase of a project. However, the entry of new corporate players into the nuclear power market is set to revolutionize this traditional financing landscape.

Unlike utilities that depend on rate recovery, new entrants from corporate sectors are likely to adopt more dynamic and flexible financing approaches. These may include corporate investments, private equity, and other forms of private capital that are not tied to consumer rates. This shift allows for a potentially faster pace of construction and deployment, as these entities are not bound by the same regulatory and financial constraints as public utilities.

With the entry of C&I applications, customer financing options are creating new opportunities. Equinix's $25 million investment in Oklo, accompanied by a letter of intent, exemplifies this shift. Navigating this new terrain requires significantly more nuance and specialized expertise than traditional financing models: The marriage of next-generation technology with innovative funding strategies introduces numerous risks and considerations, underscoring the fundamental differences between legacy approaches and future models.

Corporate financing – whether by customers, private investment, or bond markets – can introduce a more aggressive and entrepreneurial approach to nuclear projects. With access to private capital, new entrants can bypass the lengthy approval processes required for rate increases, enabling quicker decision-making and project commencement. This agility can be crucial, especially for deploying innovative technologies such as small modular reactors, where speed to market is a significant competitive advantage.

Traditional utilities may find themselves at a crossroads due to these evolving financing models. To compete effectively and maintain their foothold in the industry, utilities will need to innovate and possibly iterate their project development processes. This might involve adopting some of the agile financing strategies of their corporate counterparts or lobbying for regulatory changes that allow for more flexible financing and recovery models.

New entrants will need to look beyond FOAK development

An essential consideration for power producers exploring nuclear energy solutions is the need to look beyond the 'first of a kind' and contemplate economies of scale. For instance, discussions around configurations like a four-reactor site at the Clinch River Site in Tennessee or a 'six-pack' arrangement as discussed by Dow and X-Energy highlight the long-term cost benefits of scaling up operations. The Tennessee Valley Authority has articulated a strategy of not just acquiring a single reactor, but potentially purchasing 20 to 30 units once they are proven ready for deployment. This fleet approach underscores the importance of planning for large-scale adoption early in the project lifecycle, which can significantly influence the economic viability and sustainability of nuclear power projects. Such strategies are pivotal in transitioning from prototype discussions to realistic, large-scale deployments that can lead to cost reductions and enhanced project feasibility.

The commercialization of small modular reactors and other advanced technologies is beginning to gain traction but is still hampered by what is often termed the “No one wants to be first” syndrome. These technologies offer promising options, yet potential asset owners hesitate to commit to FOAK projects due to the associated risks. As an example of a successful model, we should look to international progress, such as in Canada where an SMR project in Ontario is being advanced with municipal utility support and federal funding. This case points to the vital role government backing plays in the initial stages of such pioneering projects in the U.S., helping to de-risk delivery and encouraging further investment.

Challenges in construction and delivery of nuclear assets loom

One of the most daunting hurdles for newcomers in the nuclear energy sector is the actual delivery and construction of the asset. Despite meticulous planning and adherence to the outlined requirements, the construction phase introduces a substantial risk, exemplified by high-profile cases such as the Vogtle project, which faced delays of seven years and cost overruns totaling $17 billion. Such instances vividly demonstrate why new nuclear projects are not eagerly pursued through loan programs in Washington D.C.

The capability to undertake large infrastructure projects has significantly deteriorated in the United States, marking a stark contrast to countries that have sustained continuous development, such as China, India, Russia, and South Korea. These countries collectively host about 60 reactors currently under construction, highlighting a robust and ongoing commitment to expanding their nuclear capabilities. Conversely, the U.S. faces a discontinuity in construction practices for new nuclear facilities, a gap that extends back decades.

The contracting methodologies employed also play a crucial role in the execution of such large-scale projects. Newcomers often seek to mitigate their exposure by shifting risks onto constructors, a strategy that more often leads to disputes and failures than successful project delivery. A more balanced approach could be found in adopting contracting frameworks such as the NEC4 Engineering and Construction Contract, widely utilized in the UK, which offers a more equitable risk allocation and has been shown to support more harmonious project outcomes.

Moreover, the nuclear industry in the U.S. seems reticent on these issues, often focusing on the signing of future-looking Letters of Intent (LOIs) and discussing lofty strategies rather than addressing the tangible challenges of project execution. The reality of constructing nuclear infrastructure is perhaps one of the most significant barriers to the future deployment of nuclear technology.

Furthermore, the availability of skilled trades necessary for constructing nuclear facilities is another critical concern. With many tradespeople gravitating towards high-paying projects like semiconductor plants, the nuclear sector faces additional competition for essential skills. 

These stark realities underscore the necessity for newcomers to have a comprehensive understanding of the industry landscape. The reluctance to be the first to initiate new nuclear projects isn't unfounded but a reflection of the significant challenges encountered in the field.

The critical role of economic development relationships

Successfully deploying new nuclear technologies in commercial and industrial sectors hinges on securing local economic development funding and forming strategic partnerships. These factors not only underpin financial viability but also enhance community engagement and collaboration, essential for the effective execution of large-scale projects. Incorporating local stakeholders early in the planning process aligns project goals with community interests, simplifying regulatory hurdles and bolstering public and political support, which in turn increases project longevity.

Financial incentives such as tax abatements, special bond financing, and investment tax credits play crucial roles. These conversations should be started early as incentives may impact the profitability of different site locations: A more distressed area, for example, may offer greater incentives to bring in new jobs. Some incentives may mitigate initial costs such as employee training, site preparation, and property expenses. Local communities may offer discounted property rates, and utilities might provide additional incentives.

Accessing these incentives requires a clear understanding of which areas are more receptive to nuclear projects – in addition to understanding zoning laws and building codes and other relevant limitations. Building strong relationships and understanding local regulations can facilitate negotiations for concessions, making it easier to navigate the complex landscape of approvals needed for project deployment.

No customer, big problem

As we’ve seen in the case of Nuscale, if there is no identified customer, nothing else matters: They had secured a coveted NRC construction license, but construction was nonetheless halted when their customer pulled out, and now the industry is unsure of when construction will resume.

But, even once a customer is identified, companies will need to identify CapEx funding, a path to NRC licensing and a way to build requisite stakeholder relationships – and doing them all can be tricky, which brings us back to our discussion around best path to market: It may be wise for new nuclear companies to partner with incumbents to help access critical resources and relationships.

Strategic risk dispersion in new nuclear ventures

The dilution of risk is a pivotal strategy for new nuclear power plant projects, where the immense capital requirements and long-term commitments can deter individual investors and utilities. Combining forces among multiple utilities to undertake a series of initial projects presents a viable method to dilute the inherent risks associated with such large-scale endeavors. Currently operating nuclear plants, these utilities are well-versed in managing nuclear power risks and have demonstrated their capabilities as some of the world's most proficient nuclear operators.

However, the overshadowing challenges exemplified by projects like Vogtle – which experienced significant delays and budget overruns – continue to inject caution into the sector. This caution underscores the necessity for innovative approaches not only in operational partnerships but also in financing strategies. For instance, creating a fund supported by several financial institutions specifically for nuclear power projects could distribute the financial risk, making individual project failures less catastrophic for any single financier.

Such de-risking strategies are essential for moving forward, yet there remains a noticeable lack of motivation among utilities to proactively develop and implement these strategies. While the technical and operational expertise exists, the financial and organizational drive to initiate such collaborative risk-sharing frameworks needs cultivation. Encouraging a shift from traditional solitary project financing to collaborative investment models could significantly alter the landscape, providing the needed assurance and stability to advance new nuclear projects in an economically feasible manner.

For new players entering the nuclear market, understanding and potentially spearheading these collaborative risk dispersion frameworks could prove crucial. By advocating for and participating in multi-utility and multi-financier approaches, new entrants can help drive the nuclear industry toward a more sustainable and economically viable future, while also positioning themselves as key players in the evolving energy sector.

Key considerations for nuclear new entrants

As C&I entities ponder their entry into the nuclear power market, they must critically assess several strategic and operational questions to align their capabilities and business goals with the realities of nuclear operations. These considerations are crucial in shaping a viable and sustainable entry strategy into this highly regulated industry.

Questions to consider

In determining which path to pursue, there are several questions that a newcomer might find value in reflecting on:

  • How do our culture and capabilities align with the chosen path? Risk-driven companies might prefer controlling the process, while serial acquirers may favor the M&A route.
  • How important is technology choice, and which one best suits our processes? What are the maturity, technical, and commercial risks of the chosen technology?
  • What is our timeline, and how does it align with the expected duration of different pathways?
  • How can we build the required capabilities? Which resources are scarce and need to be brought in-house, and which can be found in the marketplace?
  • How can we create an agile program around our pathway?
  • What are our financing options and how might those impact our approach?
  • What partnerships and alliances are essential for gaining market entry and operational success?

By carefully considering these questions, new entrants can strategically choose an operational approach that aligns with their capabilities and objectives.

Summing it all up

As the commercial and industrial sectors face unprecedented growth and the associated surge in electricity demands, the case for expanding into nuclear energy becomes compelling. This paper has outlined the complexities of entering the market, revealing the intricate balance required between meeting regulatory requirements and managing operational demands.

For commercial and industrial entities contemplating nuclear power, the journey involves thorough preparation, strategic planning, and steadfast adherence to safety and regulatory standards. The potential for reliable, sustainable, and efficient power generation makes this challenging journey worthwhile, promising significant returns on investment through long-term operational success. As the industry evolves, staying informed and agile will be crucial in navigating the future landscape of nuclear energy.


Brooke Morrison

Jay Brister
Executive Consultant
Chris Barton
Executive Consultant

Steve Jones
Executive Assistant
Juliann Edwards
Board Advisor

Amelia DeSorrento
Executive Consultant
Carol Peterson
Board Advisor

Michael Graham
Executive Consultant
Marilyn Kray
Executive Consultant

Patty Bubar
Executive Consultant