Solar vs. Nuclear: Win for Renewable Energy?

The global energy landscape is shifting as nations march towards decarbonizing their economies and address climate change. Famous X (formerly Twitter) contenders in this race for clean energy are solar and nuclear power. Both power sources offer distinct advantages and disadvantages, prompting intense debate about their roles in a future energy mix. 

This article will explore the economics, technological advancements, and social and political considerations of solar and nuclear power. We also analyze some recent developments in these sectors, including emerging technologies, corporate investment, and global events impacting the energy transition.

Energy needs in 2024

The World Energy Outlook reported that global demand increased to over 6,700 gigawatts. The rise in artificial intelligence (AI) needs combined with growing internet needs from the continued growth of developed and developing economies internet capabilities. This increasing energy need cannot be just met by renewables such as wind or solar.

Here is the United States demand for power, which amounted to over 93,590 trillion Btus of demand. Broken down by sector for 2023, the industrial sector required approximately 24% of total power, with 34% required for electric power; 5% by commercial sector; 7% residential and the rest attributable to the transportations needs of power which also accounts for 30% of our energy demands. 

Developments that make solar an attractive renewable:

• The inflation reduction Act offers solar energy providers with numerous financial tax breaks and other benefits to rapidly increase the manufacturing and usage of solar cells within the US. The act in question will cost about $385B of taxpayer dollars in which some will fund subsidies that accelerate production by reducing manufacturing costs and easing certain tax liabilities for US companies.

Reasons that help increase nuclear power consumption:

• The ongoing Russian-Ukraine conflict created certain fears over a potential energy crisis that made energy-related assets like nuclear gain interest. Although the crisis may ease up or otherwise improve depending upon what may happen in coming days within Ukraine, this fear was enough to increase uranium stocks prices, potentially for the rest of the fiscal year. 

The “zero-emissions” ambition, while noble, may prove overly optimistic given current rate of progress.

Technological Overview

Solar Power

• A photovoltaic (“PV”) solar system comprises components such as modules, racks, wiring, inverter, batteries and other items, and provides many environmental benefits relative to its non-renewable counterparts.

• These benefits are the reasons why the Biden-Harris Administration, since day 1, has placed a great focus on the advancement of solar energy including increasing research and development and incentivizing its usage by providing large financial subsidies.

• These initiatives have spurred demand which now include multiple solar technology projects such as solar tiles for homes or other new developments. These subsidies also help promote manufacturing such that by 2028 it is estimated that approximately half of US-based manufactured silicon solar cell or other similar component will come directly from an US production.

A major disadvantage with solar energy is the source itself: sunlight. If solar cells have limited sun time for storage then solar has limited usability to meet increasing energy demands, making it a less efficient form of renewable energy compared to wind or hydro energy.

Emerging technology:

• The efficiency of energy generation will be important, not only from a technological perspective, but for pricing.  Perovskites is a growing family of new silicon-based technology compounds that will allow solar module manufacturers to increase solar efficiency and energy harvest to provide a viable alternative energy generation asset.

• These silicon-based PV modules could eventually potentially allow for solar energy generation of approximately 70-80%, well above even fossil-fueled power plants (most hover around the 60% range). In a future like that, one could consider utilizing other renewable-generating technologies (like hydrogen technology which I’ve done a write-up on that can be found on) only as necessary.

Nuclear Power

• Nuclear fission reactors date back to the ‘50s for power plants, in which an atomic reactor is filled with radioactive material such as uranium combined with cooling devices that lower the chance for meltdown as part of energy generation.

• It is also a controversial source due to the environmental problems and disasters that are caused by radioactive and non-radioactive nuclear materials stemming from radiation waste, the most notable incidents such as Chernobyl disaster of 1986 and Three Mile Island Nuclear Generating Station incident of 1979.

• However, it is now recognized as an industry at its ‘tipping point’. The U.S. and numerous other G7 members have reoriented their focus onto nuclear power, and there has been an influx in capital due to: a decline in energy usage from fossil fuel sources; Russia’s threats to halt or otherwise reduce the volume of certain gas reserves sent over to Europe which are relied upon, including during prior natural gas crises in Europe where a natural gas reserve shortage caused price inflation to multiple times its historic rate. These and other additional factors mentioned previously combined to reignite the prospects for nuclear as a potential leading edge power source for coming years.  

A disadvantage of using nuclear power is the safety issue that accompanies all high voltage facilities, and there's an ethical element as nuclear generates highly lethal power (e.g., atomic weaponry) for mass destruction which causes social concerns as well.

Emerging technology:

• Small Modular Reactors (SMRs) could be a key step in enabling this energy source’s expansion to larger-scale production. With higher degrees of regulation governing conventional industrial sized reactors that were initially created during prior technology waves in which safety was much less of a focus as costs, unlike other nuclear plant operating markets like Japan where construction time typically amounts to one year for conventional reactor construction, as evidenced in Japan's energy consumption post-2010 following its earthquake-caused disaster at Fukushima, thereby requiring nearly 5x the number of years of time and nearly double or more the amounts of cost than other conventional electricity generating facilities, it can greatly inhibit the widespread expansion or upgrade of U.S. facilities in its energy capacity as shown in the EIA's analysis.

• Thus, the lower costs of production with SMR's combined with new technologies aimed at mitigating the risks and dangers for its workforce, could accelerate nuclear electricity production within coming years.

Financial Performance

Solar: The solar industry is currently experiencing robust growth, fueled by government support and increasing demand. Companies like First Solar, with its strong ROIC of 11% (double the industry average), are demonstrating significant potential. However, sustaining this momentum will depend on managing costs, scaling efficiently, and navigating the uncertainties of a rapidly evolving market. As seen with other fast-growing sectors, maintaining discipline and focus is essential for long-term success.

Nuclear: The nuclear sector is experiencing renewed interest, but it faces financial challenges related to the high costs of new reactor construction. NuScale's SMR technology, with its potential to reduce costs and enhance safety, represents a significant opportunity. NextEra's recent acquisition of New Hampshire Electric Coop, with its plan to integrate NuScale’s SMR units, is a promising development. However, nuclear’s reliance on government support and its inherent regulatory complexities create substantial uncertainties. This mirrors the challenges faced by other capital-intensive industries

Next 20-30 years:

From McKinsey Global Energy Perspective 2024 report.

Accelerating Growth in Electricity Consumption

• In slower energy transition scenarios: More than double (100%+ increase)

• In faster transition scenarios: Nearly triple (close to 200% increase)

This compares to a projected total energy consumption growth of up to 21% over the same period. By 2050, electricity is expected to become the largest source of energy across all scenarios.

Renewable Energy Dominance in Power Generation

• Current share (2023): 32%

• Projected share by 2050: 65-80% (depending on the scenario)

Solar power stands out with particularly strong growth projections, while hydrogen growth forecasts to 2050 have been revised downward by 10-25% compared to previous estimates due to higher cost projections.

Fossil Fuel Demand Projections

• Oil demand is projected to peak in the late 2020s or early 2030s across scenarios

• Natural gas demand is expected to peak in the mid-2030s to early 2040s

• Coal demand has likely already peaked and is projected to decline in all scenarios

Temperature Increase Projections

• Sustainable Transformation scenario: Around 1.8°C increase

• Continued Momentum scenario: Around 2.2°C increase

• Slow Evolution scenario: Around 2.6°C increase

Key Takeaways

The nuclear energy industry is extremely complex. It is needs to be driven by science, scaled down in size, improved in public eyes.

The solar energy is extremely competitive. It needs open borders, scaled up in size and improvement in battery storage.

It is a complex interplay of technological advancements, economic realities, and political decisions.