Why the World Bank embraced nuclear energy — and what comes next

Hello and welcome to Energy Source, coming to you from Washington, where the chief executives of some of the largest energy companies in the world met on Monday to discuss how the west can win the artificial intelligence race.

ExxonMobil’s Darren Woods, BP’s Murray Auchincloss and Occidental Petroleum’s Vicki Hollub discussed their plans to build the energy infrastructure required to power data centres. Chris Wright, the US secretary of energy, and representatives from Big Tech companies also attended, amid concerns the US risks falling behind China due to a shortage of energy.

The event, which was organised by Sultan Al Jaber, chief executive of Abu Dhabi’s national oil company Adnoc, was a rallying call for co-ordinated action to ensure the world can deliver on forecasts of tripling of data centre capacity in the next five years. A third of these centres will be built in the US, requiring up to 150GW of additional capacity — the equivalent of 10 cities the size of New York.

“The world is rushing into the age of AI with a 20th century grid, 19th century permitting systems and 18th century policies,” said Al Jaber, who called for an integrated response from policymakers and industry.

Most of the discussions were held under Chatham House rules, which means we can’t quote executives by name. But Energy Source grabbed Chris Lehane, OpenAI’s chief global affairs officer, in the corridors who sounded the alarm about the risks of falling behind on energy and AI.

“There are two countries that can build this at scale right now, the US and the People’s Republic of China . . . whoever wins this race wins the competition, succeeds, wins the world,” he said.

China does not have the same capital constraints as the US, said Lehane, adding that it had developed 10 nuclear power plants last year alone.

Meanwhile, the FT’s network of reporters are covering Israel’s conflict with Iran, providing valuable insights on military strategy, geopolitics and the impact on oil and gas markets. (See our full coverage here.)

“It is an escalatory ladder, and it is not clear where and how it stops,” Richard Bronze, head of geopolitical analysis at Energy Aspects, told my colleague Malcolm Moore, in his article on Israel’s targeting of energy infrastructure in Iran.

Our main item today takes a look at last week’s decision by the World Bank to scrap its decades-long ban on funding nuclear power.

Thanks for reading, Jamie

The World Bank’s ‘momentous shift’ on nuclear energy

In 1959 the World Bank issued a $40mn loan to co-fund a nuclear power plant on the Garigliano river in Campania, southern Italy. It was the multilateral lender’s first and last investment in atomic energy.

In the decades that followed the bank determined it did not have the skills to assess safety risks associated with nuclear energy or concerns around proliferation of nuclear weapons. Accidents at Chornobyl and Fukushima cemented opposition to the industry, with Germany, a crucial shareholder at the World Bank, opposing the use of its funds for atomic energy projects.

But that is about to change following a decision last week by the World Bank board to lift its ban on funding nuclear projects, citing the need to meet the developing world’s surging appetite for electricity while keeping a lid on carbon emissions. The annual cost of building the generation capacity, grid and storage equipment required to service an anticipated doubling of electricity demand in these countries by 2035 would rise to $630bn, up from $280bn today, according to the bank’s calculations.

“What’s new is that, for the first time in decades, the World Bank Group will begin to re-enter the nuclear energy space,” Ajay Banga, World Bank president, told staff in a memo welcomed by industry and regulators.

The World Nuclear Association described the decision to lift the ban on funding nuclear as “a momentous shift for international energy policy”, noting that access to financing is critical to extending the benefits of clean and sustainable atomic energy to the world.

The International Atomic Energy Agency said accelerated deployment of nuclear was needed to achieve “deep and rapid decarbonisation”. “This is another sign of the recent return to realism concerning nuclear power,” Rafael Grossi, IAEA director-general, told Energy Source.

The policy shift provides a clear signal to governments, other multilateral lenders and private investors that nuclear has a central role to play in the future energy mix. Just days after the announcement, the Asian Development Bank told the Financial Times it would review its own prohibition on funding atomic energy projects and is talking to key stakeholders about “expanding engagement on nuclear energy”.  

Other lenders, such as the African Development Bank and the Asian Infrastructure Investment Bank, could follow.

Development banks are important for emerging technologies because they can access low-cost capital, which helps to mobilise private investors and advance complex projects. Last year the World Bank made $117.5bn in loans, grants, equity investments and guarantees to partner companies and private businesses. The ADB committed $24.3bn to projects.

But industry should not expect the World Bank or ADB to rush to commit funds. Banga is plotting a cautious return to nuclear projects, which does not appear to include co-funding large-scale nuclear reactors, at least in the short term. At a Council on Foreign Relations event last Thursday, the World Bank president said his first priority was to sign a partnership with the IAEA, the Vienna-based UN nuclear watchdog which monitors the risk of proliferation of nuclear weapons.

Some experts worry that facilitating access to atomic energy in developing countries increases these states’ technical capabilities to build nuclear weapons and could result in sensitive materials being stolen by criminals or terrorist groups. To ensure this does not happen the World Bank is going to work closely with the IAEA to build its own expertise, safety culture and safeguards policies, a process that could take some time.

Banga said the bank would initially focus on projects to extend the lifespan of existing nuclear reactors and would in the future aim to accelerate the deployment of small modular reactors, a new type of reactor design that generates about a third or less power capacity of standard units.

“We won’t be doing work in France or the US. But Brazil and Romania and India and anybody else who could need it. And clearly, the economics of extending the life of these nuclear power projects is now far more preferential to building a new one,” he told the CFR event.

Banga said the bank could provide support that helps to bring some standardisation to SMR designs and scale the technology. There are currently more than 80 designs and concepts globally, of which less than a dozen are likely to emerge as a commercial success, say analysts.

Advocacy by the US, the bank’s largest shareholder, and a change of government in Germany, which has softened its opposition to nuclear energy, were crucial factors that helped bring about the bank’s policy U-turn.

There is bipartisan consensus among Republicans and Democrats in support of nuclear energy, which is viewed as a key source of baseload power that can help power the artificial intelligence revolution. But the drive in Washington over recent years to persuade the World Bank to change its policy on supporting nuclear also reflects a strategic objective: competing with Russia and China.

Russia’s state-owned nuclear giant Rosatom is building nuclear plants in Turkey, Bangladesh, China, India and Iran. Such long-term contracts with foreign governments hand Moscow a potent soft power tool. It also raises concerns about nuclear weapon proliferation in authoritarian states.

Todd Moss, executive-director at the Energy for Growth Hub, a think-tank that has advocated for western development banks to invest in nuclear energy, told the FT there were clear strategic reasons to remove funding bans.

“The status quo of backroom nuclear deals only helps Russia and China,” he said. (Jamie Smyth)

Power Points

• Iran and Israel are at war — why is the oil price not surging? FT’s Unhedged explains.

• How the Israel-Iran war may develop: if Tehran is losing the conflict it could switch to unconventional means of retaliation.

• A consortium led by Abu Dhabi’s national oil company has made a $19bn bid to take over Australia’s Santos.

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Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Kristina Shevory, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.