The nuclear renaissance: Understanding nuclear’s role in connected energy systems

International buy-in. Trillion-dollar investment. Pivotal policy shifts. Enter the next nuclear renaissance – a world where nuclear supports electricity, heat, and hydrogen markets to unlock decarbonisation, gain commercial advantage, drive down energy costs, and increase energy security.

In this series, our experts explore how to power this future world.

Investment in global nuclear energy is expected to hit $2.2 trillion by 2050, spurred by the promise of nuclear power to consolidate and strengthen energy markets, while addressing decarbonisation and demand challenges. Globally, emissions produced per unit of electricity-related economic activity fell by three percent in 2024, compared to one percent in 2023. But heat still contributes more than 40 percent of total energy-related CO2 emissions, and energy prices remain volatile due to market disruption, geopolitical factors, and intermittent renewable energy. And, demand from data centres is growing exponentially, adding fuel to the flames.

Governments recognise nuclear’s potential to create a more secure energy system. In 2023, more than 20 countries at the UN’s COP28 climate conference pledged to add 740 gigawatts of nuclear capacity by 2050. In the private sector, hyperscalers are partnering with nuclear providers to meet the hefty energy demands of AI and data centres. And safer, flexible, more efficient reactor designs are pushing the envelope.

In a connected energy system backed by reliable nuclear power, nuclear plants could produce electricity and heat for domestic and industrial uses, and support hydrogen production for low-carbon fuel. The result? Lower carbon emissions, a stronger investment case for clean energy, cheaper energy bills, and – crucially – grid stability. But there are technical, economic, and governance challenges to overcome – including incentivisation. What steps are needed to qualify and, importantly, quantify the value of advanced nuclear technology in connected energy systems?

The state of play

Despite globally aligned discourse on decarbonisation, net zero pledges risk being missed or diluted. The path forwards is foggy, especially in a tempestuous geopolitical climate. Nuclear offers a potential pathway to finding a solution – advanced modular reactors (AMRs) can generate both carbon-free electricity and heat, linking up the electricity, hydrogen, and heat markets. However, due to a lack of market integration and maturity, AMRs are difficult to integrate into multi-vector energy systems fraught with fragmentation, consumer resistance, and technological uncertainty.

In a chicken and egg scenario, achieving a connected energy system calls for collaboration between energy stakeholders. It means coupling nuclear with existing systems demands, generation sources, and storage solutions through coordinated planning, regulatory reform, and systems thinking.

Four phases are fundamental to realising the nuclear renaissance: looking ahead, pinning down costs versus benefits, incentivising the market, and showing that it works.

Look ahead, get prepared

Nurturing AMRs into a competitive option relies on collective actions from government and industry. So, it’s important to clarify who plays what role, and, as far as possible, to understand which actions will lead to which outcomes. Looking ahead with a structured, logical methodology informs the big bets for organisations to base their strategy around, accounting for different risk profiles and implications. From here, wargaming exercises can delve into specific scenarios and work out possible actions and implications.

For example, we’ve supported DEFRA to assess the market feasibility, safety, and potential effectiveness of high temperature gas reactors (HTGRs), consolidating existing literature to explore mainstream future scenarios. This helps to derisk the deployment of tech while providing transparency to the public that the government is carrying out appropriate pros and cons assessments. DEFRA’s nuclear justification ensures that new nuclear technologies deliver more societal and environmental benefits than harm, enabling safe innovation while supporting the UK’s clean energy and net zero goals. It’s a critical step in building public trust and regulatory confidence.

Pin down costs versus benefits

Unless AMRs stack up techno-economically, they will remain a paper exercise – or worse, confined to pilot projects that never scale. They also need to deliver a bankable solution, which means being cheaper to deploy than alternatives such as hydrogen production from offshore renewables.

Currently, renewables might appear to be more cost-effective than AMRs, but related costs – such as decommissioning, back-up generation, and materials waste – aren’t factored into the system. The costs of the whole system need to be assessed and understood, including grid balancing costs. Is the ROI worth it?

The task of pinning down costs versus benefits is further complicated by the various classes of AMR that span a number of different technologies. Currently, there’s no easy way to measure the value of the AMR outputs in megawatt terms, making it difficult to compare the value of use cases which are quantified in different ways across different energy markets – another clear incentive to connect the ecosystem.

Through techno-economic assessments, stakeholders can crystalise the credibility and make a stronger case for nuclear power purchasing agreements (PPAs) with users – such as a steel producer heating a furnace to melt steel.

When conducted independently, techno-economic assessments may skew towards favouring the specific organisation. An assessment conducted by an AMR provider, for example, may include bold claims and optimistic numbers that don’t necessarily reflect the reality. In this competitive environment, there’s a need for an honest broker to objectively pull data and provide unbiased analysis. A connected ecosystem approach to assessments will be far more accurate and valuable, offering a whole picture view of how AMRs fit into the future energy system, how they compare with other technologies, and how to close gaps to become more competitive.

Incentivise the market

Techno-economic assessments play a vital role in supporting the feasibility of nuclear-derived energy. If industrial energy users can see that the cost of nuclear-derived energy will, or could, be lower than other alternatives, they’ll be more likely to explore AMRs. They also need to know that energy will be reliable, and that there will be fail-safes in place to handle any outages if they do occur.

If the theory stacks up, adoption and integration are the next logical steps. But when it comes to actually plugging AMRs into the energy system, this practical stage brings a whole host of considerations and challenges concerning energy reliability, and, not least of all, public opinion.

The UK government has made significant moves to support nuclear development through policy commitments and new industry bodies like Great British Energy – Nuclear (GBE-N). The government can further incentivise adoption through revenue support mechanisms. Revenue support mechanisms such as Contracts for Difference and Regulated Asset Base models provide financial safety nets for renewable energy generators. The government can also help to gain the right backing for projects from investors, avoid sunk cost policy scenarios where past investments influence current policy decisions.

Show that it works

Getting to Nth-of-a-kind confidence means overcoming first-of-a-kind risks. The first journey into unchartered waters is the easiest to get wrong, and the most expensive to put right. But by the fourth, fifth, and sixth iterations, the risks will be ironed out, and the blueprint will be in place. At the very early stages, users need assurances that the units of energy generated will reliably serve their needs for the next 10 years and beyond. They need to know that the technology is mature and will provide significant benefits in terms of reduced carbon, reduced complexity, and reduced cost.

Of course, energy and heat markets differ in terms of outputs, infrastructure requirements, and regulatory frameworks. An electron generated in Scotland can power an electric kettle in London, but heat relies on strong local networks – or the ability to generate heat on-site. Small-scale versions of local heat generation hint at future possibilities: London’s Olympic Park housing is serviced by a combined heat and power plant, and in the Linen Quarter in Dunfermline, a new housing development is heated via a district heating system using heat recovered from landfill.

Despite these initiatives, the UK lacks a nationwide heat market with which to commercialise AMR technology for domestic and industrial users – such as a cement plant, hydrogen protection facility, or steel works. But it’s possible. In Central Eastern Europe, many cities have a heat distributed network that pumps hot water or steam through pipes connected to buildings and apartment blocks, with enough scale to power industrial and domestic heating needs.

Investment in small modular reactors (SMRs) hint at the future trajectory. In the summer of 2025, Rolls-Royce SMR was selected by Great British Energy to build the UK’s first SMRs. The company will also build six SMRs for the Czech Republic, and a potential three more SMRs in Sweden in partnership with Vattenfall. Although the concept of SMRs is decades-old, the growing number of SMR deployment projects with confident backing from industry, investors, and governments show a clear pathway from possibility to practice. Industry confidence is also demonstrated by the fact that most hyperscalers have signed agreements to build reactors, and some companies, such as Dow Chemical, are investing in direct heat and electricity supply from AMRs.

The UK has world-class assets in services, universities, and public infrastructure that could support a thriving, connected energy market. With a clear view of future scenarios, a compelling techno-economic case, and the right incentives, stakeholders can corral together to turn engineering and R&D translates into consistent commercial value.

From competition to integration

An overarching holistic energy market combines electricity, hydrogen, and heat to serve energy needs while meeting decarbonisation targets. But it takes a whole energy system view to understand connections, appreciate dependencies, and map a path forward. Unlocking multiple revenue streams would also help to make nuclear more investible, and potentially cheaper.

A connected ecosystem isn’t a non-competitive ecosystem. It’s one where different suppliers, such as CCS firms and nuclear firms, can pitch to a hydrogen producer, but all parties have more accurate, useful information to guide decisions. And this fusion will pave the way for even deeper, far-reaching nuclear innovation.

Originally posted on PA Consulting, see the article here. 

Written by PA nuclear experts, Connor Deehan and Adam Gait