Nuclear revival: getting future projects right

Tailwinds for a new nuclear power revival mean that investors, utilities and service providers need a well-conceived execution strategy.

In brief

• Rigorous project management and imaginative risk mitigation are essential to scale the next era of nuclear power plant development.
• Better nuclear project delivery strategy can rethink planning, management, execution, control and risk and accelerate multi-plant construction economics.
• EY-Parthenon teams can help businesses in the utilities industry, manufacturing and engineering procurement and construction (EPC) overcome project challenges.

We have seen this cycle before. A nuclear revival and sector growth expectations typically start with great promise for the future with the belief that prior lessons learned have been studied and understood.

But these hopes have been consistently dashed by controllable and uncontrollable adverse circumstances similar to those in prior eras. Each time a nuclear renaissance looks possible, events arise to constrain its progress, rather than advance its momentum.

The next nuclear revival emerging today can and should be different, despite multiple headwinds. The breadth of tailwinds today, from federal policy, consumer sentiment, clean energy/decarbonization priorities, artificial intelligence (AI) technology advancements and power supply needs, including those from data centers, are shaping sector conditions more favorably than in any prior period.

Looking back at history, projects consistently exhibited failures in project management, design completion, construction performance and quality assurance, exacerbating uncertain project outcomes, whether it was Generation II (GenII) and GenIII (1965–1985) or GenIII+ (2006–2024+). The result drove nuclear power plants from “too cheap to meter” to “too expensive to undertake.”

At the center of any new nuclear plant construction model is the premise that an evolved prototype for future nuclear design and construction — the ecosystem — is a superior approach to any other mode to produce lower costs, faster commercial operation date (COD) completion, higher quality and sustained economies of scale.

Overcoming nuclear revival challenges

One early — and pivotal — factor regarding formation of the nuclear utilities industry in the 1960s was the existence of competitive reactor engineering firms offering multiple nuclear technologies. Choice turned out to be an albatross to the sector as too many designs emerged for a specialized technology, causing unnecessary costs to be incurred.

Poor nuclear sector performance from the late 1960s through the early 1980s and into the 2000s was not the result of a single failure. Rather, plant design standards were not rigorously imposed, and critical design and delivery processes that could fail did, sometimes spectacularly, and often in tandem with other uncontrollable factors. Even one of these shortcomings is a significant detriment to plant design and construction success. All of them in concert can be fatal. Compounding them with additional planning, execution and management weaknesses establishes too many infirm underpinnings for project success.

Early GenII and GenIII “big box” plant design and construction projects (1,000+ megawatts (MWs)) incurred cost overruns of two to three times planned levels, and construction durations — measured from construction permit through commercial operation date (COD) — extended 60 months to 200+ months. And projects expected to cost in the mid-hundreds of millions of dollars ballooned to several billions of dollars over the construction life cycle.¹

Unfortunately, initial cost estimates for recent GenIII+ first-of-a-kind (FOAK) plants continued these trends. Initial big box estimates for plants constructed since 2012 were between $3b and $24b but increased to $14b–$63b at completion, which are similar to cost overruns of two to three times estimates reached in prior eras.²  Current estimates for future big box plants run between $6,000 per kilowatt (/kW) and $10,000/kW for a “reasonably constructed plant,” which still implies $5b–$9b in financial commitment.³  And cost estimates for small modular reactors (<300 MWs), before a plant has broken ground range from $5,000/kW to $9,120/kW, reflecting the first-of-a-kind (FOAK) nature of this technology.⁴

The nuclear power industry needs to confront these affordability challenges as it seeks to build economic fleets of new nuclear plants. This means recognizing risks, embracing speed and embedding lessons learned to enable sustained economies of scale. But these will only materialize if dramatic performance outcomes are delivered at scale by thinking about delivering a growing fleet, not just one plant at a time, and getting from a FOAK to an “Nth-of-a-kind” (NOAK) plant as quickly as possible.

The path to a nuclear revival: NOAK

Moving from FOAK to NOAK for first generation small modular reactors (SMRs) needs to follow a rigorous path to quickly incorporate learnings to improve cost and schedule predictability — each plant needs to get 15%–20% better, rapidly, according to an EY-Parthenon team estimate. Learnings need to be defined at an activity level, e.g., design, fabrication, assembly, installation and construction of internal reactor systems and equipment, not just for full reactor containment or the delivered plant.

Comprehensive and detailed risk analyses — with commensurate identification of risk mitigation measures — are not commonplace, and it is often difficult to persuade owners to undertake them. Owners need to develop a much greater appreciation for risk assessment than in prior GenII, GenIII, and recent GenIII+ projects. This area — the lack of imagination and committed “what if” risk assessment — illustrates a critical element of industry hubris and a fundamental flaw in project management.

To reverse prior poor project outcomes, the nuclear industry needs to deliver on the promise of affordable nuclear energy, rethink how it plans and constructs plants, and stress test assumptions, roles, structures and techniques to identify where assumptions can be challenged and plant design and construction can be dramatically improved.

This means ensuring NOAK estimates fully incorporate standardization, simplification and optimization concepts. It requires breaking down learnings by element, allowing owners, OEMs and EPCs to focus on controllable activities that matter to plant success. These include comprehensive risk analytics, front-end concepts on mass production, multi-plant siting, building and equipment modularity, fabricator, OEM, supplier and contractor learnings, real-time quality assurance and owner ability to embed and improve plant design and construction.

This multi-point plan can drive 40%–60% reductions in total costs to get to the NOAK plant.⁵ The key principle underlying moving to NOAK is imagine the end state, then chart the path to get there. From top to bottom, everything about next-nuclear design and construction needs to be more standard and less bespoke.

But all involved parties, particularly owners within the utilities industry, should recognize potential larger problems on the horizon: there are far fewer experienced OEM, contractor, indirect and direct labor resources than in prior eras; the learning curve for FOAK SMR technology development and adoption is unknown; the funding models needed to jumpstart new plants are a challenge; owners are underfunded and under-resourced, and the risks related to new technologies are not fully vetted.

Evolving to NOAK outcomes demands a more imaginative approach to how next nuclear gets built — from longstanding stick-built models to more simplified reactor designs, modular techniques and a singularly distinct archetype for collaboration, coordination and colocation — an integrated “ecosystem.”

Reimagining the next nuclear model

The next nuclear revival requires an institutional and structural set of targeted solutions. The industry needs to prioritize fixing what hasn’t worked, revitalizing what is outdated, adopting what has evolved, and reimagining nuclear energy’s future to embed world-class project infrastructure, OEM and EPC capabilities, and an owner-management model to support full readiness to execute.

Evolving from reactors to projects and then to multiple regionally located ecosystems enables participants to rethink sector-wide design and construction. The industry can think big in concepts, e.g., leveraging consortia and nontraditional partners, and think at scale, i.e., a portfolio.

Next nuclear needs to advance beyond conventional approaches to a more tightly architected framework linking owner, OEM and EPC objectives. As previously stated, an evolved ecosystem approach to future nuclear design and construction can produce lower costs, faster COD completion, higher quality and sustained economies of scale.

An ecosystem of supporting parties can enhance the execution of multiple plants, i.e., a single site that enables a portfolio of big box and/or SMRs to accelerate and simplify the drive to NOAK. Several options exist for how to structure the consortium, e.g., unique plant ownership, sharing among partners, common fleet ownership across sponsors, or a blend of ownership or participation models depending on the scale and timing of plant design and construction.

However, a nuclear revival cannot occur without a combination of innovative funding mechanisms to avoid the pitfalls of past bailouts, subsidies and write-offs. Beyond traditional owner equity these include up-front government funding, multiple layers of investor equity, collaborative partnerships, market pricing models and cost overrun funding, all of which can mitigate downstream financial risks from the outset. All direct nuclear participants, including Congress and Wall Street, need to align around program and project integration focused on outcomes from conception and financing to delivery of next nuclear assets.

The primary objectives for future nuclear owners are two-fold: deliver the plants at cost and on schedule, and drive results to NOAK attainment as rapidly as possible. These have to be the North Star for the sector and the centerpiece of planning and execution. It may take a moonshot to accomplish this, but “next nuclear” depends on it.