Fundamental thesis
This article explores the critical role of electricity costs and nuclear innovation in shaping the future competitiveness of nations and corporations. It is predicated on the following thesis:
- In the near future much of current production and goods distribution will be automated – due to breakthroughs in AI and Robotics.
- As production becomes increasingly automated, pricing for physical goods will increasingly gravitate from a human labour basis to joules (electricity).
- Relative advantages in electricity costs will therefore have a huge impact on a nation’s and company’s competitive advantage.
Energy is the only universal currency.
Vaclav Smil
The Global Electricity Landscape
Currently, fossil fuels, mainly coal, account for approximately 60% of global electricity generation. Nuclear power, despite its potential for reliable and low-carbon energy, contributes only around 9% due to historical safety concerns and underinvestment.
Distribution of electricity generation worldwide in 2023, by Energy Source
Source: Statistica
Zooming in from the global picture to national levels, we see significant differences in the energy sources used by countries, shaped by regulations and resource availability. For instance, France has embraced nuclear power due to its lack of natural resources and past dependence on OPEC and Russia, particularly during the 1970s oil crisis. To ensure energy independence, the French government took a top-down approach, encouraging the state-owned utility company EDF to invest heavily in nuclear power. EDF is now the leading global developer of nuclear reactors.
Total energy supply for G20 countries by energy source, 2022
Source: iea.org
Global industrial electricity demand is set to accelerate
Estimates of growth in Electricity demand range from 40 – 100% between from 2024 to 2030. The three core drivers are:
- Emerging market catch-up in consumption
- AI and datacenter demand
- EV, Autonomous Vehicle and Robotics growth
Factor 1: Emerging market catch-up in electricity consumption
Huge national differences also exist in energy consumption per capita. A catch-up of developing nations to developed nation levels will be a key driver of growth in energy demand for years to come.
GJ/Capita primary energy consumption in 2023
Source: Vaclav Smil presentation
Factor 2: Acceleration in AI and data center demand
Data centers, with their massive electricity consumption, are emerging as a major driver of global industrial electricity demand. This is reflected in roughly half of their operating costs being energy-related.
Data Center operating expenses by nature
Source: KPMG in-market intelligence
Presently, data centers as a whole use a small percentage of the national electricity supply, around a 3.5% share in the US in 2024. But this is expected to triple to around 11.5% in the US by 2030.
US electricity demand from Datacenters – percentage of total
Source: KPMG estimates and in-market intelligence
This reflects accelerating demand from a number of data center use-cases – in particular AI and crypto – though cloud use also continues to grow at c. 20% CAGR.
Estimated global electricity demand by Datacenter Types, in Terawatt-hours (TWh)
Source: IEA.org
AI demand may be underestimated given the acceleration in AI Adoption 2023 and 2024, as shown from the trajectory of the AI adoption curve set out below.
Adoption curves of different technologies in the united states
Source: IEA.org
The new Gigawatt data centers (power use of up to 1,000 megawatts (MWe)) being built by big tech to meet AI training and inference needs require huge amounts of electricity. To understand the scale – ONE such data Gigawatt Data Center operating at 85% capacity would consume the same power as 1,800,000 people or 710,000 households in the US.
This growing electricity demand from data centers is straining both current electrical grid transmission capacity, leading to voltage fluctuations in areas where AI computing clusters concentrate. This is before the Gigawatt data centers come online.
Comparison of Energy consumption of ONE gigawatt data center to US retail use
Source: CNBC, estimated using 85% of peak demand
Factor 3: Age of the robot – Electric vehicles, autonomous vehicles and robotics growth
Global electric car stock, 2013-2023
Sources: IEA analysis based on country submissions, ACEA, EAFO, EV Volumes and Marklines. Notes: BEV = battery electric vehicle; PHEV = plug-in hybrid vehicle. Includes passenger cars only.
Industrial robot installations in 2022
Source: Industrial Federation of Robotics
How will we generate Electricity to meet this demand?
The broader energy picture
Declines in fossil fuel usage in Europe and the US have been offset by increases in India and China, meaning overall fossil fuel use in electricity generation have continued to (slowly) rise. Overall though, renewables are projected to overtake Coal as the largest source for electricity generation in 2025.
Global electricity generation by source, 2014-2025
Source: IEA.org; 2024 – 2025 are IEA forecasts
Pros and Cons of different types of energy source
When evaluating different energy sources the key factors are to ensure energy is reliable, abundant, and carbon-free. Nuclear would seem to be the only energy source that solves for all three as set out below.
Source: Table by me. LCOE sourced from Lazard LCOE June 2024
Renewables
While renewables – solar, wind, hydrogen have the lowest headline LCOE of all energy sources – they are not reliable for constant energy. Solar’s capacity factor, or roughly the % of the time it is producing electricity, is 17–28%. There is also significant variation in output, i.e. nothing at night or when there is no sun in the day. Wind’s capacity is about 32–47%.
One would need to add battery storage to provide reliability. Adding battery storage significant increases renwable’s real LCOE. For example the LCOE for solar goes from a range of USD 29 – 92 per MWh, to USD 60 – 210 per MWh when factoring battery storage.
Further, a grid of majority renewables with the battery and storage technology we currently have would fail to provide the supply of electricity the grid demands due to the intermittent nature of the generation. There is a clear correlation between countries with high percentages of renewables and higher energy prices
Average Electricity Prices and Percentage of Solar and Wind in Electricity (2024)
Source: IAE.org, Statistica
And what’s more… renewables aren’t necessarily “green” when you consider that solar panels, wind turbines, and lithium batteries have limited lifespans, and are only partly recyclable. Solar Panels, Wind Turbines and Batteries mostly end up being send to landfill within c. 20 years resulting in huge amounts of non-degradable waste.
Fossil fuels
The challenges with fossil fuels are well known and include: (a) price volatility due to geopolitical impacts, (b) energy security concerns, and (c) emissions.
Nuclear
Nuclear power offers several advantages, including low emissions, high efficiency, small land-use footprint, energy security, and baseload reliability.
The economics of nuclear power involve upfront capital investment costs, plant operating costs, and external costs to society, the latter of which are assumed to be zero except for rare instances.
The cost advantage of energy sources is typically measured via the Levelised Cost of Energy (LCOE). This essentially calculates the break-even price per unit of electricity (MWh etc), ensuring that the present value of total revenues equals the present value of total expenses (Capex, Opex, Decommissioning) over the plant’s lifetime.
Historically, high upfront costs and slow development have hindered broader nuclear power adoption.
Excitement in Nuclear has remerged due to the advent of small modular reactors (SMRs), which are just entering commercialisation.
NuScale Diagram showing the dimensions for their design of a SMR modular core
Source: www.nuscalepower.com
SMRs can produce capacity of up to 470 MWe compared to 1,100+ MWe for Generation III+ conventional reactors, but are:
- Significantly smaller: c. 4 Hectares for SMR v 336 Hectare conventional reactor space requirement, reducing capex
- Much faster to manufacture: SMRs take approximately 3-5 years to manufacture compared to 6-12 years for conventional reactors.
- Safer: Some SMRs require refueling only every 30 years, unlike Generation I and II large nuclear reactors that need refueling every 1-2 years.
- Modular: meaning they can be incrementally added to power plants to match load growth
Source: Decarbonisation Channel
Advantages of SMRs
While SMRs are generating considerable excitement for their future potential, they remain in early development stages and will require significant R&D and licensing work before achieving wide-scale adoption. By contrast, Generation III+ reactors such as Westinghouse’s AP1000 have demonstrated that advanced designs can succeed at large-scale commercial deployment. The AP1000 employs passive safety measures, advanced materials, and fewer overall components—reducing construction and maintenance costs—while delivering about 1,100 MWe of power (around 9–10 TWh per year) at a consistently high capacity factor. China and the US have 4 and 2 operational AP1000s as of January 2025.
Evolution in nuclear is leading to a rethink of the pros and cons of different energy sources.
China and India are rapidly accelerating nuclear construction. The US halted construction and now is revisiting this under the incoming Trump administration.
Nuclear in operation and under construction capacity by country (MWe)
Source: https://world-nuclear.org/
Private investment in nuclear
A need to have large amounts of reliable energy to power the new Gigawatt datacenters, has resulted in large Corporations – specifically the Hyperscalers – to begin looking to invest in SMR Nuclear. Google, Amazon,, Microsoft and Meta are among the names reported to be exploring or investing in nuclear power projects.
The involvement of private investment is relatively new – and signals a profound shift taking place from government-led and-funded nuclear R&D to that led by the private sector. As we’ve seen in other arenas which were historically government funded – such as space travel – private investment often considerably accelerates technological evolution and brings down cost.
Some 70 SMR designs are presently at different stages of development and deployment worldwide. As of December 2024, China and Russia are leading the field with the only SMRs in operation. The US and other major economies are at the design or licensing stage.
SMR designs in development
source: world-nuclear.org
Implications for National & Corporate Competitive Advantage
Electricity prices will be key to competitive advantage
More electricity means more automation, means more AI, means more things are being done for the for every person, that are being done in factories, that are being done by machines, and that unlocks, a new kind of level of living.
David Friedberg
If you believe that the future means accelerated automation, then electrical input costs will increasingly be the key basis for pricing. As such relative differences in electricity price will becomes extremely strategically important. For developing nations demographic advantages / low labour will bring less competitive advantage, and all nations with high electrical input prices will become uncompetitive.
There are presently huge disparities in industrial (and residential) electrical prices by country. In particular, Europe has a stark disadvantage when it comes to electricity costs.
2024 average electricity prices for industrial users (USD per KWh) by country
Source: IEA.org
The UK is over 5x (or 578%) more expensive than China. The US is more competitive, but still 56% more expensive than China.
The extremely high cost of electricity in the UK reflects:
- heavy investment in wind and solar energy, which only provide intermittent power
- leading to, high reliance on expensive natural gas-fired backup plants. However. natural gas and and fossil fuels are especially expensive in the UK due to high carbon taxes, and
- a low share of Nuclear – unlike France – which generates c. 70% of its electricity from Nuclear at relatively low costs (c. overall industrial electricity was c. 65% cheaper in France than the UK in 2024).
High electricity prices puts UK industry at a huge disadvantage, now and in the future. It’s for this reason that the initiator of the industrial revolution is now one of the world’s most deindustrialised nations.
Becoming electricity competitive
It seems obvious to me that meeting carbon reduction objectives while simultaneously producing more reliable and cheaper electricity, has to include investments in nuclear.
Nuclear power plants already produce more power from a smaller footprint, with fewer fatal accidents and less pollution than any other energy technology. The waste they produce is tiny in volume (per Matt Ridley, a Coke can per person per lifetime), easily stored and unlike every other toxin, it gets safer with time.
These advantages are accelerating with renewed R&D into nuclear. Better kinds of nuclear power are coming which should continue to lower cost and risk.
Countries Investing in nuclear energy, and other methods of generating cheaper electricity, are likely to see a number of competitive advantages:
- Economic Growth: Lower energy costs stimulate industrial growth.
- Technological Leadership: Abundant reliable energy enables advancements in AI and tech industries.
- Enhanced Productivity: Reduced costs lead to more automation and higher national productivity.
For corporations in energy intensive industries, location decisions should increasingly factor energy considerations as this may drive their competitive advantage. I.e.:
- Access to cheap energy
- Access to reliable power to meet current and future demand
- Being located in a region with a progressive policy and regulatory environment for nuclear
Conclusion
The transition to a “joule” economy is upon us. Governments and businesses that fail to adapt to this new reality risk being left behind. The future belongs to those who can harness the power of electricity to drive innovation, productivity, and economic growth.
Questions to consider
For Government Leaders:
- As production increasingly shifts from labour-intensive to electricity-intensive, how is your country leveraging its energy mix, including nuclear, to ensure access to low-cost and reliable power to maintain global competitiveness?What role should nuclear energy play in your strategy to attract energy-dependent industries?
- Given the shift towards electricity as the key input cost for production, what policies are you implementing to secure long-term energy affordability and resilience against supply disruptions? How are you ensuring infrastructure readiness to support automation-driven industries?
For Corporate Leaders:
- In an era where electricity becomes the primary input cost, how are you incorporating energy price projections into your location and operational strategies? Are you proactively identifying regions with favorable electricity pricing and infrastructure?
- How will your company adapt its investment strategies to optimize operations in locations with access to abundant, low-cost energy while staying resilient to potential energy price shocks? Are you considering partnerships or direct investments in energy generation to secure your supply?
