Some governments support nuclear expansion more than others. China
and South Korea have among the most supportive policies on nuclear
energy, with significant new nuclear construction programs under way in
both countries. Japan has been supportive of restarting some of the
country's nuclear reactors, despite public opposition since the 2011
Fukushima nuclear accident. However, with the gradual phase-out of its
reactors, Germany is taking an aggressive stance against nuclear power.
Low natural gas prices in the US and the push toward renewable energy in Europe are stalling nuclear expansion in these regions. In the US, low natural gas prices resulting from shale gas drilling are stalling growth in nuclear generation. In parts of Europe, low electricity prices and subsidized renewable energy sources have severely limited new nuclear development. In some of the major Asian countries, such as China and South Korea, where natural gas prices are relatively high, new nuclear generation is being pursued to a significant degree against a backdrop of strong demand for electricity.
For most utilities, operating a nuclear plant is usually credit positive. Although expensive to build, once in operation, nuclear plants typically provide large-scale and reliable sources of electricity generation and profits in many energy markets. Nuclear plants act as base-load generating units, operate around the clock and are usually economical from a marginal cost-of-power standpoint.
But competitive and political factors can have negative credit implications. In the US, the two largest nuclear generation companies operate plants in competitive, wholesale power markets where low power prices have severely hurt margins and caused them to consider the permanent retirement of some plants. In Germany, the mandated shutdown of all nuclear power plants following the Fukushima disaster and a nuclear fuel tax have hurt utility profit margins, cash flows and financial metrics.
Building a new nuclear plant raises business and operating risks. The scale, scope and complexity of new nuclear projects can lead to a high degree of uncertainty about both the ultimate costs and potential rate increases necessary to recover these costs. In addition, the multiyear term of a nuclear plant's construction cycle exposes the utility to long-term changes in technology, market conditions, regulatory and political viewpoints, or other factors that could alter the economics of building a new nuclear plant.
Nuclear Prospects Grow in Asia but Are Limited Elsewhere
The prospects for nuclear power depend heavily on government support and incentives, the price of competing energy sources in a given market, and public opinion.
Despite government support for nuclear generation in most major economies, low prices for natural gas have put nuclear power in a less competitive position. As a result, nuclear generation is growing only in a few major markets, notably China and South Korea. In the US, the UK and France, there is little to no growth in nuclear power generation. Germany is shutting down all of its nuclear reactors. This report examines the prospects for nuclear generation in seven markets—China, South Korea, Japan, the US, the UK, France and Germany—and the effect of nuclear generation on the credit quality of the utilities operating within them.
Most of these countries, with the exception of Germany, support nuclear energy. Government policies to promote nuclear power can include financial incentives, tax breaks and other measures that encourage and support nuclear generation. Governments can also impose strict limitations, prohibitions or outright moratoriums on nuclear generation. Our view of each country's level of supportiveness is based on their nuclear expansion plans.
Low natural gas prices in the US and the push toward renewable energy in Europe are stalling nuclear expansion in these regions. In the US, low natural gas prices resulting from shale gas drilling are stalling growth in nuclear generation. In parts of Europe, low electricity prices and subsidized renewable energy sources have severely limited new nuclear development. In some of the major Asian countries, such as China and South Korea, where natural gas prices are relatively high, new nuclear generation is being pursued to a significant degree against a backdrop of strong demand for electricity.
For most utilities, operating a nuclear plant is usually credit positive. Although expensive to build, once in operation, nuclear plants typically provide large-scale and reliable sources of electricity generation and profits in many energy markets. Nuclear plants act as base-load generating units, operate around the clock and are usually economical from a marginal cost-of-power standpoint.
But competitive and political factors can have negative credit implications. In the US, the two largest nuclear generation companies operate plants in competitive, wholesale power markets where low power prices have severely hurt margins and caused them to consider the permanent retirement of some plants. In Germany, the mandated shutdown of all nuclear power plants following the Fukushima disaster and a nuclear fuel tax have hurt utility profit margins, cash flows and financial metrics.
Building a new nuclear plant raises business and operating risks. The scale, scope and complexity of new nuclear projects can lead to a high degree of uncertainty about both the ultimate costs and potential rate increases necessary to recover these costs. In addition, the multiyear term of a nuclear plant's construction cycle exposes the utility to long-term changes in technology, market conditions, regulatory and political viewpoints, or other factors that could alter the economics of building a new nuclear plant.
Nuclear Prospects Grow in Asia but Are Limited Elsewhere
The prospects for nuclear power depend heavily on government support and incentives, the price of competing energy sources in a given market, and public opinion.
Despite government support for nuclear generation in most major economies, low prices for natural gas have put nuclear power in a less competitive position. As a result, nuclear generation is growing only in a few major markets, notably China and South Korea. In the US, the UK and France, there is little to no growth in nuclear power generation. Germany is shutting down all of its nuclear reactors. This report examines the prospects for nuclear generation in seven markets—China, South Korea, Japan, the US, the UK, France and Germany—and the effect of nuclear generation on the credit quality of the utilities operating within them.
Most of these countries, with the exception of Germany, support nuclear energy. Government policies to promote nuclear power can include financial incentives, tax breaks and other measures that encourage and support nuclear generation. Governments can also impose strict limitations, prohibitions or outright moratoriums on nuclear generation. Our view of each country's level of supportiveness is based on their nuclear expansion plans.
