Column: Paths to Promote Nuclear Energy Investments

In Finland, there is broad recognition of the important role that nuclear energy will also play in the future. There is a willingness to build new capacity, yet the profitability of investments has clearly weakened over the years. What different means could be considered to advance nuclear energy?

A key starting point for the energy policies in Prime Minister Petteri Orpo’s government program is a significant increase in clean electricity generation, including nuclear power. The government has, among other things, committed to approving any application for a decision-in-principle that meets all criteria, provided the applicant’s background is acceptable from a national security perspective.

Currently, Finland has five operating nuclear power units, with Olkiluoto 3 (commissioned in 2023) being the most recent. The share of nuclear power in Finland’s electricity production has risen to 40 percent. These existing units have operating licenses that extend well into the future. Two units that had received positive decisions-in-principle in 2011 – Hanhikivi and Olkiluoto 4 – were never built, for various reasons.

Changing outlook for the sector

Implementing traditional, large-scale nuclear power projects without state support has in recent years proved to be challenging. One reason is the cost-competitiveness of wind and solar power, also evident in the Finnish electricity market.

This competitive situation has brought modular plants and the benefits of serial production to the forefront. Small Modular Reactors (SMRs) have become the focus of extensive development efforts. There are few ready-made models at present, but in Finland, particularly, work is underway to develop reactors for heat production.

Society is becoming more electrified and needs more clean power. However, scenarios vary significantly: estimates place electricity consumption at between 110 and 160 terawatt-hours in 2035 (last year, consumption was 83 TWh). The ongoing construction of data centers is one major factor driving up demand; another is the target of attracting energy-intensive industrial investments. Growth in demand is crucial to spurring the development of new electricity production.

It is worth noting that nuclear power is not an effective solution to the price fluctuations and variability already present in wind and solar power production. Any new nuclear power would come online slowly, and its primary role is not to serve as balancing capacity. For ensuring adequate and continuous power output, it is already essential to invest in demand and supply flexibility and in various energy storage solutions. A “fossil-free flexibility” working group under the Ministry is currently mapping out quickly implementable solutions.

In the longer term, nuclear power would serve as a base load solution, although its construction takes 10–15 years. Of course, one should not forget that Teollisuuden Voima (TVO) is planning output increases at the Olkiluoto 1 and 2 units through additional investments.

SMRs would most likely be used for producing heat for cities or large industrial sites – or in combined heat and power (CHP) production – primarily for profitability reasons. Preliminary planning is underway in locations including Helsinki and Kuopio.

Profitability is key

New nuclear power plants based on traditional technology require subsidies even in countries where electricity prices are significantly higher than in the Nordic region, such as the United Kingdom and the Czech Republic. The situation is thus markedly different from decades past.

In Sweden, plans are underway to build additional nuclear power to replace decommissioned units and meet new electricity demand, supported substantially by the state. An appointed investigator has proposed subsidies both during the construction phase (interest-subsidized loans) and for the operating phase – 40 years – through a guaranteed price. The costs would run into tens of billions of euros. No actual draft law has yet been presented.

Developments in Sweden also highlight challenges for Finland. It appears that new, traditional nuclear power production is far from profitable on its own. Even enabling construction may require government guarantees or loans. The Finnish state already has significant guarantee liabilities – for instance, for the shipyard industry – amounting to around 70 billion euros in total.

The even bigger question is the guaranteed price or a two-way Contract for Difference (CfD) during operation, which could be very costly – potentially hundreds of millions of euros per year for decades, depending on how much lower the market price is compared to the guaranteed price. Although the guaranteed price mechanism works both ways—meaning that in periods of high prices, the company would be the payer—the net effect would very likely be along the lines described here.

Forecasting the future price of electricity is particularly difficult. The resulting costs would be passed on either to electricity consumers or taxpayers. Subsidies also affect all players in the electricity market, slow the emergence of market-based investments, and could increase the price of electricity for the consumer. The Nordic model has been successful, and the average price of electricity is low precisely because prices have been allowed to be determined by the market.

It would also be possible to grant subsidies in the form of investment support, which distorts the market less. However, this does not appear to be enough to jump-start a large nuclear investment. For SMRs, the situation may be different.

Subsidies are not the only tool—permitting will be streamlined

The Ministry of Economic Affairs and Employment (MEAE) is preparing a comprehensive reform of the Nuclear Energy Act. The aim is to streamline and accelerate nuclear facility permitting without compromising safety. The content of various permits is being reviewed to avoid overlapping administrative burdens. The role of decisions-in-principle for nuclear facilities will also be reassessed. For companies, the simultaneous reform of the Radiation and Nuclear Safety Authority’s (STUK) regulatory framework is extremely important.

This work takes into account SMRs, but the reform aims to clarify and improve regulatory procedures across the board. The intention is to submit the draft legislation for public consultation in the summer and present a final proposal to Parliament in about a year.

It is possible to direct and increase research and development funding for new nuclear energy technologies. Piloting is necessary to bring about commercial solutions in the 2030s. Current investment support for energy demonstration projects could also be considered for application to nuclear energy.

The evident financing risks of nuclear power can be shared among companies requiring large amounts of base load power through Finland’s widely used “Mankala model.” In this model, a power company (e.g. Teollisuuden Voima) supplies electricity to its owners at cost price. It will be interesting to see whether the model could attract new and different types of stakeholders. Tax policy solutions can also play a role in attracting investments to Finland.

Growing international interest in nuclear energy

Most new nuclear power plants are currently being built in Asia – China, India, etc. In the United States, construction is gradually picking up, and the Trump administration was assumed to support nuclear energy through large-scale research programs (fission and fusion).

Within the European Union, the shift toward a more favorable stance on nuclear energy is evident. Germany has phased out its last reactors, but countries like the Netherlands and Belgium are showing interest in building new ones. Still, cost and price issues raise concerns in Central Europe too, even though electricity prices there are significantly higher than in Finland.

The new European Commission is clearly more positive – or at least more neutral – toward nuclear energy than its predecessor. The Commission monitors state subsidies for nuclear power, among other things. There are no specific EU regulations on nuclear subsidies yet, so the stance has evolved through case law. Acceptability is increased by competitive bidding for subsidized projects and by focusing subsidies on innovative technologies.

Key global organizations in the sector include the International Atomic Energy Agency (IAEA) and the OECD Nuclear Energy Agency (NEA). Uniform regulatory principles and collaboration among regulatory authorities improve the licensing process and foster industrial-scale technological development.

It is widely acknowledged that new nuclear energy is needed as part of efforts to halt climate change. Financing projects is the key question. The NEA and the International Energy Agency (IEA) have analyzed different financing and risk-sharing models. The IEA’s clear view is that modular reactors can significantly reduce total investment costs and improve bankability.

Energy and climate strategy sets direction; benefits ultimately decide

This spring, under the coordination of the Ministry of Economic Affairs and Employment, Finland is preparing a new National Energy and Climate Strategy, which is an excellent opportunity to clarify the measures that will advance the use of nuclear power. Nor is it in any way too late – no project in Finland has yet reached a point where an investment decision is imminent. Fortum, for example, plans to present its preliminary nuclear energy plans in the coming months.

Ultimately, the question is what the state and Finnish society receive in return for investing in nuclear energy construction. This is by no means an easy discussion, given the current deficit in state finances and the unprecedented and hard-to-predict changes in electricity supply and demand in the coming years. For these reasons, the debate more easily leads to generally enabling measures rather than costly public interventions.

Riku Huttunen is the Director General of the Energy Department of the Ministry of Economic Affairs and Employment