2023-07-26 - CITI - Future of Nuclear Energy

Citi GPS: Global Perspectives & Solutions
FUTURE OF NUCLEAR ENERGY IN A LOW-

CARBON ENVIRONMENT
Fission and Fusion Advanced Reactors to Prevail
Advanced fission, including small modular reactors (SMRs) and advanced reactors (ARs), as well as fusion, are set to
shape the future of nuclear energy, sealing its role in the Energy Transition era as a dispatchable, low-carbon source of
electricity. With an overwhelming number of positive developments in the nuclear energy industry in the last five years,
we expect advanced fission reactors to be commercialized soon around the world. Meanwhile, reactors based on
fusion energy will most likely be commercialized in the middle to end of the next decade, with a number of successful
private firms navigating the space.
July 2023
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Citi GPS: Global Perspectives & Solutions July 2023
Citi Global Strategy & Macro Group
Arkady Gevorkyan Edward L Morse

Global Commodity Strategist Global Head of Commodities Strategy
Citi Research Citi Research
+1-212-723-1051 | arkady.gevorkyan@citi.com +1-212-723-3871 | ed.morse@citi.com
Anthony Yuen
Head of Pan-Asia Commodities Strategy
Citi Research
+852-2501-2731 | anthony.yuen@citi.com
Citi Banking, Capital Markets & Advisory (BCMA)

Keith Tuffley Serge Tismen
Vice-Chairman, Global Co-Head, Global Co-Head of Clean Energy Transition
Sustainability & Corporate Transitions Citi BCMA
Citi BCMA
+1-212-816-9603 | serge.tismen@citi.com
keith.tuffley@citi.com
Ryan Nielson
Clean Energy Transition
Citi BCMA
+1-713-821-4789 | ryan.nielson@citi.com
Expert Authors
Ian Chapman David Gann

CEO Pro-Vice-Chancellor, Development and
UK Atomic Energy Authority External Affairs
Oxford University
Ernest J. Moniz
President and CEO
Energy Futures Initiative
ADVANCED THE GLOBAL MARKET FOR SMALL
MODULAR REACTORS (SMRS)
NUCLEAR ENERGY Is expected to see

active
COULD BE WORTH
WHAT IS ADVANCED NUCLEAR?

FISSION FUSION
global buildout
& adoption per year by 2040
$300bn
Definition
Heavy nucleus split into 2
smaller nuclei
2 nuclei fuse together to
form a heavier nucleus AFTER 2028 Source: World Economic Forum
Raw Material/ Uranium, plutonium,

Hydrogen, helium, boron
Fuel thorium
Energy ADVANTAGES OF SMALL MODULAR
Relatively little energy Lots of energy
requirement REACTORS (SMRS)
Energy 1,000,000x greater than
3-4x greater than fission
released other energy sources
Long-lived radioactive
Nuclear waste Few radioactive particles
particles
Lower power Relatively Inherently

output + mobile safer
NUCLEAR AND NET ZERO TARGETS smaller design
= Increased
Energy-related CO2 Potential CO2 emissions
efficiency
emissions in 2021 savings from nuclear
energy by 2050
BY 2100 FUSION COULD:

36.3 Up to
gigatonnes ~63
gigatonnes
Meet Meet
Source: IEA 10% 40%
of global if capital
energy costs were
ADVANCED NUCLEAR (FISSION AND FUSION) demand 30%
cheaper
IN A DECARBONIZED WORLD BY 2050:
Constrained Source: Based on estimates from Cabal et al. (2016)

scenario: Nominal
60 gigawatt scenario:
increase 336
gigawatt PRIVATE SECTOR INVESTMENT IN FUSION
increase ENERGY
$3,000
Source: Vibrant Clean Energy
The Paris Agreement $2,500
was signed
A 924 MEGAWATTS OF ELECTRICITY (MWE)
$2,000
COAL-TO-NUCLEAR CONVERSION COULD
RESULT IN:
Billion
$1,000
$520
$388
$302 $302
$275mn 650 $0
$16 $87
$158
$19 $73 $16
$138
Pre-2004
2004-2008
2009-2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
increase in regional new jobs

economic activity
Source: U.S. Department of Energy Source: Citi GPS, BNEF
© 2023 Citigroup
4 Citi GPS: Global Perspectives & Solutions July 2023
Contents
A Conversation With Ernest J. Moniz, President and CEO of Energy
Futures Initiative ............................................................................................ 5
Future of Nuclear Energy in the Low-Carbon Economy 8
Fission and Fusion Advanced Reactors to Prevail ................................. 8
Fission vs. Fusion ....................................................................................... 11
Small Modular and Advanced Reactors: The Near Future of Nuclear
Energy ......................................................................................................... 13
Most Common AR/SMR Designs ......................................................... 13
Challenges for AR/SMRs...................................................................... 16
AR/SMRs Set to Play a Key Role in the Future of Nuclear .................. 17
Fusion Energy: A Long Shot for Unlimited Energy ..................................... 19
Advancements in Fusion Energy Makes It Look Like This Time Is
Different ................................................................................................ 20
Approaches Exploring Fusion Energy .................................................. 20
Public Funding and International Projects for Fusion Energy .............. 24
Private Companies Are Flourishing and Bringing More Hope to “Next
Generation” Nuclear Energy ....................................................................... 27
Regulatory Developments for “Next Generation” Nuclear Energy .............. 30
Challenges Remain, But the Future Is Bright… .......................................... 33
Financing Nuclear ....................................................................................... 34
Fusion Energy May Still Have Hurdles to Overcome, But It Will Be Worth
the Effort ...................................................................................................... 37
© 2023 Citigroup
July 2023 Citi GPS: Global Perspectives & Solutions 5
A Conversation With Ernest J. Moniz,

President and CEO of Energy Futures Initiative
Q: What do you think the commercial impacts could be of the new plans in the
U.S. Department of Energy (DOE) and U.S. Department of Defense (DOD) to
support the buildout of small nuclear fission reactors?
Secretary Moniz: The commercial impacts could be transformative for the climate-
driven clean energy transition and for resiliency of national security assets, but only
if significant challenges to large-scale deployment are met successfully. The list of
challenges includes the unit cost of the new technologies, the financeability of first-
of-a-kind (FOAK) and next-of-a-kind (NxOAK) plants, the licensability of new
designs, the disposition of irradiated fuel, and more.
It is worth providing a taxonomy for the classes of technology available or under

development. While an incomplete list, three classes gather most of the attention:
(1) continued deployment of gigawatt (GWe) scale light water reactors (LWRs); (2)
development and deployment of small modular reactors (SMRs), typically in the
Ernest J. Moniz 100-to-300 megawatt (MWe) scale; and (3) development and deployment of
President & CEO microreactors, typically with thermal outputs less than about 20 megawatts (MW).
Energy Futures Initiative The microreactors are typically sealed units with lifetime fuel supply, appropriate for
13th U.S. Energy Secretary military and/or remote industrial or community applications. The GWe reactors and
SMRs have sufficient scale for utility applications. Considerable focus today is on
SMRs, both Generation III+ (LWRs with designs derived from today’s GWe
reactors) and Generation IV (alternatives such as high-temperature gas reactors,
molten salt reactors, and sodium-based reactors).
The commercial attraction of SMRs lies principally in four areas:
1. A scale that allows considerable flexibility for meeting utility needs with less
capital expenditure than GWe scale reactors require, including replacing fossil-
fuel thermal power plants with a carbon-free alternative.
2. The possibility of providing industrial process heat, especially with Generation

IV designs that have appreciably higher operating temperatures than do LWRs.
3. The promise of nuclear fission designs with passive operating safety.
4. The potential of reasonable unit capital cost relative to GWe scale due to new
construction paradigms.
All of these factors are in play in the considerable public and private efforts to
advance SMRs as carbon-free sources of firm power and as pathways to industrial
process decarbonization.
Cost control for SMRs, which has often proved elusive for GWe-scale LWRs built on
site, may rest with opportunities for factory construction of the core nuclear module
or other new models of construction, enabled by a combination of smaller scale, a
design that enhances manufacturability, and continuity in the skilled workforce.
However, attracting adequate private sector capital investments in a manufacturing
enterprise likely needs sufficient demonstration and a robust order book for any
particular design. This is one example of needed public-private partnership to
address the financeability challenge.
© 2023 Citigroup
Q: Does the scale of these reactors make it easier to deal with the not-in-my-
backyard (NIMBY) objections to developing nuclear power?
Secretary Moniz: There will be some NIMBY advantages for SMRs, such as
passive safety designs and substitution for existing thermal power plants whose
closure would threaten job loss and community disruptions (e.g., from loss of
significant tax revenues). However, a core issue remains public acceptance of the
safety profile, despite the excellent record of the U.S. nuclear fleet in terms of any
public health impacts. Nuclear Regulatory Commission (NRC) requirements
consistent with passive safety design would be a major plus; the question is
whether NRC endorsement of this concept would be sufficient for all regions and
state regulatory bodies. This remains to be seen. In any event, the intensity of
NIMBY issues is likely to continue to vary greatly by U.S. region and in different
countries.
In some states, a pathway to permanent irradiated fuel disposal, or at least to

moving the irradiated fuel from the nuclear plant site to a long-term storage facility,
is essential for public acceptance of new nuclear reactor development. The U.S.
DOE is again elevating its efforts to establish consent-based siting of storage and
disposal facilities, a principle that was advanced strongly by the Hamilton-Scowcroft
Blue Ribbon Commission more than a decade ago. The challenge of irradiated fuel
management is there for SMRs as well as for today’s GWe-scale LWRs.
Q: How might small reactor additions facilitate greater efficiency of grid

utilization and industrial carbonization?
Secretary Moniz: SMR deployment will support reliable and resilient grid operation.
First, nuclear reactors have shown the capability of routine operations at very high-
capacity factors — well over 90% — which is much greater than the capacity factors
of other operating electricity generation sources. As variable renewables, such as
wind and solar, gain much greater market share of electricity production over the
next decade because of climate considerations and very low marginal costs, the
premium for complementary firm power in the grid system will increase (even with
the expansion of battery storage for a few hours). The need for firm power has been
recognized increasingly over the last years, and the reality is that there are not
many options for carbon-free firm power.
The size of SMRs is well suited to replace a number of today’s thermal power
plants, utilizing existing electricity transmission infrastructure. Such substitutions
can also support workers and communities through the clean energy transition.
SMRs, especially Generation IV designs with higher operating temperatures, can

satisfy more than half of industrial process heat requirements without carbon
emissions. Clean electricity from SMRs can also supply green hydrogen, both
through dedicated operation and in situations where it is economically competitive
to supply a mix of electricity, heat, and green hydrogen.
© 2023 Citigroup
Q: To what degree can breakthroughs in fusion technology accelerate the

coming age of fusion? Or does the age of fusion perpetually remain 30 to 40
years away?
Secretary Moniz: Progress in multiple innovative fusion technologies has been

very significant in the last few years, and this has been recognized and endorsed by
an infusion of about $5 billion of private capital. This is a remarkable story that has
been belatedly recognized and is coming into the broader climate discussion only
recently. It is quite credible that the scientific conditions needed for a fusion power
plant will be physically demonstrated in this decade. This would be followed by
design and construction of a commercial plant, serving as a demonstration of the
costs of fusion-generated electricity on the grid. Success in this endeavor would be
a major gamechanger, providing the opportunity for carbon-free firm power with a
small physical footprint and without major nuclear waste challenges, nuclear
weapon proliferation risks, or public health concerns. These features should
eliminate today’s NIMBY issues and allow flexibility in siting close to load centers
and optimization of the grid system. These major benefits, together with the
considerable technical advances counterbalanced by the time still required to reach
commercial feasibility, provide a risk/opportunity challenge to the investment
paradigms of today’s large equity investors in diverse clean energy portfolios.
One thing is for sure: The old joke about fusion always being 30-40 years away is
indeed old.
Q: Do you believe that there will be increased private sector interest in

funding large-scale development of SMRs or of fusion systems?
Secretary Moniz: The case for funding carbon-free firm electricity supply is
compelling given the climate challenge and the increasing role of electricity in
multiple sectors. The federal government, on a bipartisan basis, is supporting
nuclear power and specifically SMR development and demonstration, which
provides a degree of investment risk mitigation for investors and financial
institutions. Whether this is sufficient for unlocking considerably more private capital
remains to be seen, and additional public-private partnerships may be essential.
Several factors come into play. Investors would clearly prefer public support beyond
the FOAK in order to gain more confidence in the cost structure. For SMRs,
implementation of the manufacturing paradigm or other novel approaches to cost
control of nuclear plant construction is likely material to unit cost reduction, but this
would require a significant order book for a specific SMR design in order to warrant
up-front capital investment and expenditures. Regulatory structures in a world of
major renewable deployment will need to provide confidence that the nuclear plants
will dispatch at high capacity factors (or receive very large capacity payments
consistent with sound operating requirements). These are a few examples where
public-private partnership will be central to sufficient risk mitigation for major private
investment.
The fusion situation is different in that proof of principle is still required but the
payoff for success is enormous. This dynamic has been manifested by the large
amount of private equity capital already available to privately held companies. Cost-
effective fusion demonstration would likely open up even greater flows of private
capital for deployment given its transformational potential for clean electricity in a
low-carbon future and associated significant and rapid market penetration.
© 2023 Citigroup
Future of Nuclear Energy in the Low-

Carbon Economy
Fission and Fusion Advanced Reactors to Prevail
Arkady Gevorkyan Nuclear energy, one of the largest low-carbon sources of electricity, is set to
Global Commodity Strategist grow exponentially in different parts of the world and as varying designs are
Citi Research prioritized and developed. A variety of factors contribute to this growth driven by
potential acceleration of new technologies becoming scalable and commercialized.
Edward L. Morse The fight against climate change and the importance of low-carbon sources of
Global Head of Commodities Strategy power should inevitably secure a market share for nuclear in the broader energy
Citi Research mix. 2022 was a landmark year in the history of nuclear energy, as it gained public
appreciation for the first time since the Fukushima Daiichi accident in 2011.
Anthony Yuen Specifically, it appears more obvious that — even though the large-scale buildout of
Head of Pan-Asian Commodities Strategy conventional nuclear plants will still occur in certain parts of the world — there could
Citi Research be more next generation-type reactors built in the next decade and after. Advanced
fission, including small modular reactors (SMRs) and advanced reactors (ARs), as
well as fusion, are set to shape the future of nuclear, sealing its role in the energy
transition era and the broader mix as being a dispatchable low-carbon source of
electricity.
There has been an overwhelming number of positive developments in the

nuclear energy industry in the last five years. Regulatory policies have been
shifting back to support existing nuclear capacity and investment in new and
advanced projects, including in the U.S. as a result of the Bipartisan Infrastructure
Law and the Inflation Reduction Act; in the EU with regulatory initiatives like the EU
Green Deal Industrial Plan; and in other countries such as the UK, China, Japan,
and Canada. Such regulatory advancements can unleash public spending while
also having a multiplicative effect that stimulates private funding — a trend currently
observed in both advanced fission and fusion nuclear energy. Improving public
sentiment around nuclear energy — likely due in part to the unreliability of
renewable energy and the volatility of the fossil fuel commodities used for power
generation in the last two to three years — is serving as another positive
development for the energy source. In the energy transition era, the role of nuclear
energy has also been changing as the rising penetration of renewables potentially
brings more intermittency to the grid. Load balancing and frequency regulation
become increasingly vital given the importance of the power stack having either
low-emitting dispatchable generation or battery storage to keep the grid balanced.
Nuclear power plants have some of the lowest land requirements of all low-
carbon energy sources. Per 1,000 megawatts of electricity (MWe) per year, power
plants require one to three square miles at most, while solar and wind farms require
a much larger footprint. With technological advancements and the development of
SMRs, the land footprint of power plants can be reduced much further, with a
majority of SMRs being stored underground or on the water. The disruptive nature
of SMRs to nuclear energy is explicit, but it will be a matter of years before the
technology becomes scalable across the world. The scalability and
commercialization of fusion energy is also far away, but the emergence of an active
private sector, the energy transition agenda, and technological and regulatory
advancements could bring it about earlier than anticipated.
© 2023 Citigroup
The path will likely be different for nuclear energy this time. Research has been
underway since the 1930s on determining how fusion energy could be
commercialized and how to make the fission process fit a smaller core. The path for
the latter is becoming more and more obvious, with demonstration projects taking
place later this decade and potentially connecting the first SMR to the grid early in
the next decade in the Western countries. Developments in fusion energy —
although quite promising at this stage — could still take some time to develop. But
opportunistic investors are flowing into this space, while multinational projects (e.g.,
The International Thermonuclear Experimental Reactor, ITER) will likely be
successful in both generating fusion energy as well as stimulating
commercialization of this energy in the long run.
2022 was a year of significant and swift changes in the broader energy sector
in response to mounting geopolitical risks. Countries in the EU, Asia, and North
America had to adapt to a quickly changing environment in the wake of the Russia-
Ukraine conflict. Germany, Belgium, the U.S., Japan, and others either extended the
lifecycle of their existing nuclear fleets or, in some cases (e.g., Poland, the Czech
Republic, and Romania), even considered a new build of “next generation” nuclear
energy. The tectonic shifts observed in 2022 are likely be a new norm, with
deepening bifurcation of global energy.
Figure 1. Nuclear Electricity Generation Doubles by 2050 in the IEA’s Figure 2. … While Its Share of Total Electricity Supply Falls
Net-Zero Emissions by 2050 Scenario …
Source: IEA Source: IEA
© 2023 Citigroup
Both advanced fission as well as fusion nuclear energy are set to contribute
to net-zero commitments globally. Specifically, the U.S. Department of Energy
estimates that by 2050, the U.S. has the potential to add 200 gigawatts (GW) of
new advanced nuclear, which requires about $700 billion from private and
public sources combined.1 The International Energy Association (IEA) in its
scenario analysis does not differentiate between advanced and conventional
nuclear, while projecting a solid 8%-10% share of nuclear energy in the global
energy mix.2 Meanwhile, the organization Vibrant Clean Energy (VCE) developed
its own U.S. scenarios for the decarbonized world by 2050, and according to the
“Constrained” scenario, VCE estimates that advanced nuclear would increase by 60
GW, while in the “Nominal” scenario, advanced nuclear would increase by 336 GW.3
Obviously, all these projections are mathematical simulations, the results of which
should be interpreted cautiously given the significant challenges that remain on the
ground, including a shortage of trained workers, slow regulatory approvals, and
access to appropriate funding.
Overall, we anticipate that SMRs and advanced fission reactors will be

commercialized sooner around the world (excluding Russia and China) than
fusion energy. Russia and China have already commercialized fission
AR/SMR concepts. Meanwhile, reactors based on fusion energy most likely
will be commercialized in the middle to end of the next decade, with a number
of successful private firms navigating the space.
1 U.S. Department of Energy, Pathways to Commercial Liftoff: Advanced Nuclear, March

2023.
2 International Energy Association (IEA), “Nuclear Power Can Play a Major Role in
Enabling Secure Transitions to Low Emissions Energy Systems,” June 30, 2022.
3 Vibrant Clean Energy, Role of Electricity Produced by Advanced Nuclear Technologies
in Decarbonizing the U.S. Energy System, June 2022.
© 2023 Citigroup
Fission vs. Fusion

Technological advancements, regulatory changes, and energy transition
trends, in response to the increasing threat from climate change, have
intensified the development and capital accumulation potential of “next
generation” nuclear energy. The energy contained in the nucleus of an atom can
be harnessed by either fission or fusion processes. Nuclear fission is when the
nucleus of an atom splits into two or more smaller nuclei, releasing energy. In
contrast, nuclear fusion occurs when two light atomic nuclei combine to form a
single heavier new nucleus, releasing massive amounts of energy.
Both concepts (fission and fusion) are low-carbon emission sources of

energy and are dispatchable (i.e., not dependent on the weather or other
variable factors). Fission energy has been around for more than a half century and
is actively utilized by current nuclear plants to generate energy, while fusion energy
is still in the development stage. Additionally, the two concepts differ in fuel type.
The main fuel for fission is uranium, plutonium, or thorium, while fusion relies on
hydrogen deuterium and tritium, as well as helium or boron. Nuclear waste and its
storage are a significant concern for nuclear energy in its current state, in which
unstable nuclei that are generated can be radioactive for millions of years. Nuclear
fusion, on the other hand, generate helium — an inert gas — and does not generate
any long-lived radioactive nuclear waste. Another advantage of fusion versus fission
nuclear energy is that fusion generates three to four times more energy than fission
while boasting inherent safety and a very low probability of a nuclear accident.
Figure 3. Nuclear Fission vs. Fusion Energy
Source: International Atomic Energy Agency
© 2023 Citigroup
The smaller core of either fission or fusion reactors would allow reactors to
be built anywhere (e.g., the U.S., the UK, Canada, and South Korea) and then
exported to the desired destination (e.g., Poland, Lithuania, and Czech
Republic). That, by itself, could be a game changer for nuclear energy. Challenges,
either in training the local workforce or in dealing with multiple domestic suppliers,
would subside, allowing construction to be completed on a timely basis and with
pre-declared cost structures. The exportability feature of “next generation” reactors
will certainly make them attractive in the longer term, especially in the Western
world.
The roadmap to potential commercialization is on course for “next

generation” fission as well as fusion energy and has intensifyed
tremendously in the recent decade amid heightened concerns about climate
change, especially after the 2015 Paris Agreement for decarbonizing the
world. Private companies or state-owned organizations (depending on the region)
have been working on developing “next generation” fission reactors, while large-
scale international projects are also contributing to the development of nuclear
fusion energy.
Figure 4. Nuclear Fission and Fusion Energy Comparison

Fission Fusion
Definition Heavy nucleus broken up into two smaller nuclei Two nuclei fuse together to form a heavier nucleus
Raw Materials / Fuel Uranium, plutonium, thorium Deuterium from seawater, tritium, helium, boron
Catalyst High-speed, bombarding neutrons High temperature and pressure
Energy Requirement Relative little energy Expensive - Lots of energy required to bring nuclei together
Energy Released 1 million times greater than other energy sources 3-4 times greater than fission
Nuclear Waste Long-lived radioactive particles Few radioactive particles
Relatively easier to control, but harder to slow down the Difficult to control, but easy to stop once energy is
Controllability
process once energy is generated generated
Source: Citi GPS
© 2023 Citigroup
Small Modular and Advanced Reactors: The

Near Future of Nuclear Energy
Small modular reactors (SMRs) are nuclear reactors with power outputs
below 300 megawatts of electricity (MWe). Typical present-day reactor power
output ranges from 1,000 MWe to 1,600 MWe. Underlying technology for SMRs
could vary and may include Gen III/Gen III+ type reactors — including light water
reactors (LWR) — and Gen IV type reactors, such as fast neutron reactors,
graphite-moderated high temperature reactors, molten salt reactors, and others that
are considered to have higher efficiency for decarbonized energy production and
industrial heat cogeneration. SMRs can be deployed for both on-grid applications
and off-grid remote sites and have significant flexibility in being able to operate with
various intermittent renewable energy-generation systems.
One advantage of SMRs is reactor design: Smaller cores enable an integrated

structure that incorporates all components of the nuclear steam supply
system into one piece. Another key feature is their inherent safety versus
conventional nuclear fission energy. SMRs lower overall power output and smaller
size makes their passive safety systems more efficient, both under normal and
extreme conditions. SMRs also have lower core inventories (resulting in a lower
probability of accidents and lower levels of radiation), and they are relatively mobile,
enabling easy transportation from a construction site to an end-use location. Some
SMR concepts could be added incrementally to large grids to match the growth in
electricity demand and provide energy services other than electricity. These include,
but are not limited to, desalination, hydrogen processing, and district heating. Last,
once SMRs are commercialized, their buildout can be accomplished in less than a
decade (depending on the given country’s regulatory framework), versus multiple
decades for some of the larger plants.
Most Common AR/SMR Designs

In 2021, the Nuclear Energy Agency (NEA) provided a broad classification of
SMRs based on their underlying technology:4
 Single-Unit LWR-SMRs: These are advanced reactors representing Generation

II and Generation III/III+ technology, where the reactor is moderated and cooled
by ordinary water. This is the most mature technology used and has the highest
technological readiness level for SMRs. A number of SMR projects using this
technology are currently under construction (e.g., the NuScale project in the U.S.
and ACPR50S in China), and two of them are in commercial operation already —
KLT-405 in Russia and CAREM in Argentina. LWRs typically operate in the 300°C
to 400°C range and are constrained by pressure limitations.
 Multi-Module LWR-SMRs: Using LWR technology, these can be operated as a

replacement for mid-size baseload capacity or in a distributed generation
framework.
4Nuclear Energy Agency, Small Modular Reactors: Challenges and Opportunities,

2021.
© 2023 Citigroup
 Micro Modular Reactors: These reactors generate less than 10 MWe of power
output. They are fueled by tristructural isotropic (TRISO), which consists of three
coatings of carbon- and ceramic-based material applied to spherical uranium fuel
particles. TRISO fuel maintains its structural integrity, even in extreme conditions,
due to its spherical shape. Temperatures for the operation vary from 650°C to
800°C.
 Mobile/Transportation SMRs: These reactors typically use LWR technology and

are intended to travel easily from one location to another by truck or barge.
Floating reactors are included in this definition. The reactors’ design allows them
to be lighter and smaller so they can be easily lifted and transported.
 Generation IV (Gen IV) SMRs: Gen IV reactors are advanced (non-LWR)

technologies that have been explored and developed in recent years and vary in
their specifications. Gen IV technologies typically use alternative coolants, such
as liquid metals, and molten salt or gas. Although not exhaustive, we outline
some examples below of several Generation IV technologies with use cases in
modular reactors:
– Fast Neutron Reactors: These have no moderator, operate with higher

neutron flux, and are cooled by liquid metal (sodium, lead, or lead-bismuth).
These reactors are generally smaller and simpler than LWRs, have better fuel
performance (using the full energy of uranium rather than 1% of it), and have
up to 20 years of refueling intervals (versus 3-5 for LWR types). Russia
operates the only commercial-scale fast reactors (i.e., BN-600 and BN-800)
while continuing to invest in similar projects. Research is also ongoing in the
U.S., South Korea, China, India, Japan, and Europe. This technology is
considered the most mature of Generation IV designs.
– High Temperature Reactors: This technology uses graphite as a moderator

and can use helium, carbon dioxide, or nitrogen as a primary coolant. High
temperature gas-cooled reactors will be able to deliver high temperature
helium of 700°C to 1,000°C, which can be directed to industrial applications or
to make steam conventionally in a secondary circuit via a steam generator.
The Energy Multiplier Module (EM2) uses helium cooling with gas-cooled fast
reactors.
– Molten Salt Reactors: For primary cooling, these reactors use molten fluoride
salts at low pressure. Conceptually, any reactor requires its fuel to be
dissolved in the coolant as fuel salt to ultimately be reprocessed online. Molten
salt reactors typically operate at much higher temperatures (around 600°C to
700°C) compared to LWR types. China is currently leading global research on
molten salt reactor development.
© 2023 Citigroup
Figure 5. Generation IV System
Source: Citi GPS, Nuclear Energy Agency
© 2023 Citigroup
Figure 6. Generation III New Builds: Installed Capacity and Cumulative Figure 7. Ranges of Sizes and Temperatures for Heat Applications for
Emissions Avoided (2020-50) SMRs
Source: Citi GPS, Nuclear Energy Agency (2022) Source: Citi GPS, International Atomic Energy Agency (2020)
ARs and SMRs could potentially also reduce the levelized cost of electricity
(LCOE) significantly versus conventional nuclear fission power plants as the
technology becomes scalable and commercialized. One of the benefits of SMRs
is that they are expected to ease supply chain constraints and allow for the best
construction practices while leveraging factory-build economics, enabling
standardization. As economies of scale become fully developed for these types of
reactors, the cost of adding new nuclear capacity could decrease significantly in the
near and longer term, which would make nuclear energy more competitive with
other low-carbon intensive energy sources.
Challenges for AR/SMRs

Regulation continues to be the largest obstacle to commercializing SMR
technology faster across the world. The U.S. Nuclear Regulatory Commission
(NRC) has a very comprehensive and lengthy approval process that prioritizes
security of operations. The approval granted to NuScale in 2022 for its 50 MWe
reactor design was a big milestone for the industry, with more reviews and
approvals to come as the company is now uprating its design to 77 MWe. In
addition, funding support has been provided by the U.S. Department of Energy
(DOE) for research and development efforts in this space.
Sustainable procurement of fuel for advanced reactors could also be at risk,

with U.S. supplies exclusively coming from Russia. The U.S. Inflation Reduction
Act (IRA) identifies such dependency and allocates $700 million to the Energy
Department’s effort to develop an alternative source for the fuel.
Other countries, including the UK, Canada, South Korea, Argentina, China,
Russia, Poland, and Romania, are working on either updating their existing
regulatory requirements, using their existing regulatory frameworks, or
introducing new regulations to commercialize SMRs. China, Russia, and
Argentina have managed to adapt their current regulatory requirements and hence
connect different SMR designs (HTR-PM, Akademik Lomonosov, and CAREM-25,
respectively) to the grid in recent years. Further adaptation and streamlining of
licensing and regulatory frameworks to product SMRs are essential to developing a
global market.
© 2023 Citigroup
There are a few other key barriers to widespread SMR adoption, including
public attitudes — although public sentiment has been improving recently,
some skepticism of the technology is still warranted. The nuclear industry also
has a history of projects costing more than the initial guidance and taking longer
than expected, given their complexity. Finally, the outlook for nuclear does not
involve the energy source in isolation — competing forms of power generation are
also innovating and looking to drive their costs lower.
Overall, active buildout and adoption of SMR technology will likely be on a

larger scale globally after 2028 (see Figure 8), as design concepts need to
receive regulatory acceptance and prove they are safe and secure, including
assembly line construction. While regulatory scrutiny may be more flexible in
some countries than others, adoption of SMRs globally will likely take place after
2030. Nevertheless, the picture is not that of one-sided optimism, as there are still
obstacles to wide-scale AR/SMR deployment globally. These obstacles relate to
internal hurdles — usage in commercial settings and economic feasibility, as well as
external headwinds — as well as broader trends, global macroeconomics, and the
overall policy environment.
Figure 8. UxC High Case Forecast for New AR/SMR Builds to 2040
Source: Citi GPS, UxC
AR/SMRs Set to Play a Key Role in the Future of Nuclear

In its 2022 report Nuclear Power and Energy Transitions, the IEA investigates
how energy and climate crises today can be alleviated by the broader
introduction of energy security.5 The IEA’s outlook for nuclear energy is based on
achieving the net-zero goal by 2050 and, in our opinion, is overly optimistic.
However, more broadly, we agree with the tone of the report and on nuclear
energy’s future role in the energy mix of different countries. Energy-related CO₂
emissions grew to record highs to 36.3 gigatonnes (Gt) in 2021, while, according to
IEA calculations, nuclear energy can save about 63 Gt of CO₂ emissions by 2050 in
the optimistic scenario.
5 IEA, Nuclear Power and Secure Energy Transitions, June 2022.
© 2023 Citigroup
The report also emphasizes the role of SMRs and ARs in the outlook for
nuclear energy. However, the agency does not explicitly project SMRs’ role in the
net-zero emissions scenario and does not identify when the next wave of ARs will
be technologically ready for commercialization. The agency also argues that
challenges such as cost competitiveness, policy, regulatory support, and the
deployment pace between demonstration projects need to be overcome before
broader scalability is possible.
In September 2022, the U.S. Department of Energy published a report on the

feasibility of a coal-to-nuclear plant swap with about 80% of retired and
operating coal power plant sites potentially hosting an advanced nuclear
reactor.6 A 924 MWe coal-to-nuclear conversion could increase regional economic
activity by $275 million, adding 650 new, high-paying, permanent jobs to the region
— many of which are traditional coal jobs that could transition to roles at an
advanced reactor, according to the report. While there are an overwhelming number
of reasons to support such a “transition,” we remain skeptical on the
implementation. A key challenge that needs to be addressed is the alignment of
dates between the retirement the coal power plant and the SMR operation in order
to maintain both the workforce and the generation of power. U.S. Nuclear
Regulatory Commission (NRC) licensing and the ability to get the new technology
up and running in time could be another obstacle. Even if such a “swap” could occur
quickly, it would still require extensive labor force re-training and an updating of the
existing infrastructure along with state-level policies on permitting nuclear energy.
Overall, leaders in this space — the U.S., the UK, Canada, France, Russia,
South Korea, Japan, and China — are continuing to invest in and provide
direct as well as indirect support for the development of SMRs domestically.
Other countries either have agreements with SMR producers or are actively
considering obtaining this technology in the near future, including countries in
Europe (Poland, Bulgaria, Romania, Czech Republic, Estonia, Lithuania, Ukraine,
Finland, and Sweden) and the Middle East (Saudi Arabia and the UAE). With further
bifurcation of the world and increased geopolitical risk premia, we believe that within
a decade, there will be at least two to four different prototypes of energy-providing
modern reactors that will be scalable after 2030.
6U.S. Department of Energy, Investigating Benefits and Challenges of Converting

Retiring Coal Plants into Nuclear Plants: Nuclear Fuel Cycle and Supply Chain,
September 2022.
© 2023 Citigroup
Fusion Energy: A Long Shot for Unlimited

Energy
Fusion energy has long been considered a distant source of energy and is
viewed more as a theoretical concept than a commercially scalable project in
the near term. This view has started to change recently, mainly attributable to
increasing computing power and technological developments. Additionally, the
emergence of private, smaller players has been a huge step forward in harnessing
this source of energy, while individual country initiatives and multinational projects
have been serving as the structural backbone for private money. Private
investments have also increased significantly in the last five years, signaling rising
investor interest in this energy source.
Fusion energy was theoretically enhanced in the 1930s, and scientists began
drafting projects for a self-sustaining fusion engine in the 1950s, though
financing of nuclear fusion experiments flourished only in the aftermath of the
1973-74 oil price shock. Financing has waned due to failure to get anywhere close
to a threshold in which more energy is unleashed than is used. It also dissipated
with the belief that the world did not need to confront a resource supply gap in an
age of hydrocarbon abundance. Now, concerns about an oil supply peak have been
replaced by a focus on a demand peak and a desire to replace carbon-intensive
fuels with carbon-free fuels. This has resulted in a revival of interest in fusion energy
and has coincided with critical technological advancements.
Fusion occurs when two light atomic nuclei combine to form a new single,
heavier nucleus while releasing massive amounts of energy. In space, the
sun, along with other stars, is powered by fusion reaction. Inside the sun,
nuclei need to collide with each other at very high temperatures (15.5 million °C) to
provide enough energy to overcome their mutual electrical repulsion. Once brought
together, the nuclear force between them outweighs the electrical repulsion and,
with the extreme pressure produced by the sun’s gravity, fusion energy is
generated. This process has long been hailed as a source of unlimited energy,
unlike fossil fuels, and relies on a virtually infinite supply of hydrogen isotopes.
Developing fusion energy for civil needs requires a controlled environment to

achieve “ignition,” which would produce more energy than was initially put in.
Fusion energy relies on the reaction that is most readily feasible between the nuclei
of two isotopes of hydrogen — deuterium and tritium — and releases three to four
times as much energy as uranium fission. Such a reaction could also be achieved
with extremely high temperatures (>100 million °C). While deuterium is abundant in
seawater, tritium is found in trace quantities and is radioactive. Tritium can
potentially be produced from the reaction of fusion-generated neutrons with lithium.
Some supplementary source or an alternative to tritium could be employed for
fusion energy, such as complementary energy from the fission reactor. A potential
hurdle in the commercialization of this energy could be a lack of lithium enrichment
facilities, which are needed for tritium breeding applications.
© 2023 Citigroup
Advancements in Fusion Energy Makes It Look Like This

Time Is Different
One of the main struggles for scientists has been the ability to control the
plasma inside of the reactor. Plasma consists of a gas of ions and free electrons,
the flow of which can be controlled with electric and magnetic fields. It has been
extremely challenging to get enough plasma to stay at extreme heat temperatures
long enough to fuse nuclei. The temperature for two nuclei to be able to fuse needs
to be hotter than the inside of the sun, due to the controlled process in the reactor
and gravitational forces.
Scientists are increasingly optimistic about having more control over plasma
than ever before. This optimism is due to technological advancements that are
allowing scientists to better research the underlying process, specifically:
 The development of supercomputers has allowed scientists to process

simulation codes for fusion reaction much faster, producing more reliable
results. This enables scientists to run different scenarios for plasma simulation
and optimize the design of fusion reactors without conducting large-scale
experiments.
 The flexibility of 3-D printing technology has enabled the production of

parts with complex geometrical shapes that are needed for fusion
machines to be reproduced iteratively at low cost. Such technology has been
reducing the time and cost of manufacturing different components.
 The evolution to smaller, more compact, and stronger magnets that are
crucial for magnetic confinement is leading the developments in magnet
technology. Such breakthroughs are allowing smaller companies to develop mini
versions of large-scale plant reactors.
 Other technological advancements in the digital control and development

of advanced materials allow parts to sustain the harsh environment within
the reactor. Digital controls allow faster identification and determination of
potential leaks, while different rare earth metals (e.g., beryllium) are
strengthening the walls of the reactors.
Approaches Exploring Fusion Energy

Magnetic and inertial confinement are two designs that dominate the
development of fusion energy, with other designs under consideration.
Magnetic confinement is a more developed approach and is likely to be used first
for the commercialization of fusion energy, though the inertial confinement approach
had already recorded “ignition” — producing more energy than was originally put in.
In the U.S., 1.5x energy has been produced with the inertial confinement approach;
however, there is still a long way to go to commercialize it. The Fusion Industry
Association has identified five general approaches that private companies can
undertake in their fusion energy development, and while some approaches are
more advanced than others, none of them is close to enabling commercialization
and scalability of fusion energy. That leaves development of these approaches as a
viable opportunity for scientists, developers, and investors at the same level.
© 2023 Citigroup
Figure 9. General Approaches Currently Taken by Private Fusion Companies
1
2
Magnetic Confinement
7 Inertial Confinement
15
Magneto-Intertial
Electrostatic Hybrid
Muon-Catalyzed Fusion
8
Source: Fusion Industry Association, Citi GPS
Magnetic confinement uses strong magnetic fields to contain hot plasma. The
most effective magnetic configuration is a toroidal, or doughnut-shaped,
arrangement in which the magnetic field is curved around to form a closed loop. It
was originally developed by Russian scientists in 1951, providing better control over
the deuterium-tritium plasma. There are several types of toroidal confinement,
including but not limited to tokamaks, stellarators, and reversed field pinch devices.
The tokamak (“toroidalnya kamera ee magnetnaya katushka,” or torus-shaped

magnetic chamber) is probably one of the most researched and most
promising designs for harnessing fusion energy under consideration across
the world. The tokamak’s reaction chamber is a hollow torus that contains the
plasma. This torus has a set of toroidal electromagnetic coils wrapped around it,
paired poloidal coils above and below it, and a solenoid running through the middle.
Magnets are very important for this design and can, in combination, control the
behavior of plasma by containing and heating electrically-charged particles of
plasma so that the fusion process can be sustainable, which is critical to its
commerciality.
© 2023 Citigroup
Figure 10. Schematic Representation of a Fusion Power Core of Figure 11. Fusion Reaction Inside the Tokamak
Tokamak
Source: Citi GPS, IAEA Source: ITER
The UK-based Joint European Torus (JET) laboratory was able to set a record
in 2021 by producing 59 megajoules (MJ) for five seconds, the longest
sustained period of fusion energy. Even though the generated energy and
amount of time the plasma was contained still point to the infancy stages of fusion
energy, the gradual increase in the number of breakthroughs and the potential
expansion on these achievements are making the magnetic confinement approach
more viable in the near term for energy production than the alternatives under
development.
Inertial fusion is an alternative approach that is also gaining traction,

especially after “ignition” that was recorded late last year in the U.S. This
approach relies on using laser or ion beams that are focused on a small capsule of
deuterium-trillium fuel. Such pressure (an external shock), once applied, would
likely compress the core, leading to conditions in which fusion reaction could occur.
The U.S. National Ignition Facility (NIF) has the largest lasers in the world, with 192
powerful laser beams pointing unto a small target. Several private companies are
also following the NIF approach, including Focused Energy and Xcimer Energy in
the U.S., First Light Fusion in the UK, and Marvel Fusion in Germany.
Magnetized target fusion (MTF) and hybrid fusion are other common
approaches explored mainly by the private sector. MTF is a pulsed approach
that combines the compressional heating of inertial confinement fusion with the
magnetically reduced thermal transport and magnetically enhanced alpha heating of
magnetic confinement fusion. For plasma to fuse, right after the fuel has been
inserted into the cavity inside the cylinder, pneumatic pistons will start pushing the
metal inward and collapsing it into a small sphere. Companies like Helion Energy
are at the forefront of developing this approach. Once a fusion reaction is combined
with the fission process, it is commonly referred to as hybrid fusion. The fusion
reaction acts as a source of neutrons for the surrounding blanket where these
neutrons are captured, resulting in fission reactions taking place. These fission
reactions also produce more neutrons, thereby assisting further fission reactions in
the blanket.
© 2023 Citigroup
Figure 12. Some Prominent Designs of Fusion Reactors
Source: Citi GPS
Electricity generation and supplying baseload energy on the grid seems to be

the main potential use of fusion energy for most private companies, though
other areas are also being considered. Based on a survey conducted by the
Fusion Industry Association, a number of companies are looking to develop the
technology with a potential application of staying off the grid and generating energy
in autonomous or hard-to-reach areas.7 Another use for this energy is supporting
hydrogen or clean fuel generation — a baseload type of energy. Industrial heat,
space/marine propulsion, and the medical field are other potential venues for fusion
energy.
7 Fusion Industry Association, The Global Fusion Industry in 2022, 2022.
© 2023 Citigroup
Public Funding and International Projects for Fusion

Energy
Rarely do countries with confrontational political rhetoric cooperate, but
fusion energy is an exception. Countries across the world are not only
collaborating on fusion energy, but also working on developing domestic
capabilities. Below, we discuss some of the most prominent initiatives that have
been taking place in the international arena.
The International Thermonuclear Experimental Reactor (ITER) is an exemplary

project of cooperation among scientists from the U.S., the UK, China, Russia,
India, the EU, South Korea, and Japan. Such cooperation has continued, even
during the ongoing Russia-Ukraine conflict, due to the reliance of the project
on parts manufactured in Russia. The idea, originally developed in the 1980s, is
that countries with an advanced knowledge base in nuclear energy could pull
resources together and build an electricity-producing demonstration fusion power
plant (DEMO) to show that fusion energy is possible on a commercial scale. This
allows scientists across the world to leverage such expertise and enhance domestic
capabilities in fusion energy. For a number of reasons, the project was delayed, but
construction finally started in 2007 in the south of France. The International Atomic
Energy Association (IAEA) is overseeing the construction and progress of the
project.
ITER’s budget is estimated to be in the range of $25 billion to $45 billion and
likely will increase in the coming years due to with growing supply chain
issues. The “first plasma” — molten mass of electrically-charged gas inside the
core — for this project is scheduled for 2025, while fusion energy should generate
electricity by 2035. ITER is planning to harness fusion energy using a giant
tokamak, which is believed to have better control over plasma and generate close to
500 MW continuously for at least 400 seconds. ITER would also test the availability
and integration of technologies essential for a fusion reactor and the validity of
tritium breeding module concepts that would lead to future reactor tritium self-
sufficiency.
The construction of ITER is now well underway and is growing in response to

the burgeoning private sector, though it has faced delays as well as
skepticism concerning its viability and efficiency. While international projects on
such a scale are not likely to lead directly to the commercialization or scalability of
fusion energy, it will stimulate development by sharing knowledge and leveraging
lessons learned.
The JET device and recently finalized design of the Spherical Tokamak for
Fusion Energy (STEP) are both housed in the Culham Centre for Fusion
Energy and are supported by the UK Atomic Energy Authority. JET is the
world’s largest magnetic fusion reactor, which has been contributing to
developments at ITER, and is also designed to help develop fusion power plants.
One of the “next generation” reactors in fusion energy is the spherical tokamak,
from which the STEP project is planning to generate fusion energy by 2040 and
which is designed to be commercially viable.
In the U.S., there are several initiatives in fusion energy development where
the Department of Energy provides funding to research centers or works in
consortium with the private sector on developing audacious projects. The
Princeton Plasma Physics Laboratory and the Lawrence Livermore National
Laboratory are other leading centers researching fusion energy with several private
start-up fusion companies.
© 2023 Citigroup
Generally, public funding in the U.S. has been provided with cooperation
promoted between institutional centers, laboratories, and the private sector.
Such synergies in operation and approach are believed to increase
effectiveness and enable faster results. Through the Advanced Research
Projects Agency-Energy (ARPA-E), the U.S. DOE focuses on supporting applied
research that can overcome long-term, high-risk technology challenges and lead to
commercialization. The DOE is funding research at a variety of fusion start-ups,
universities, and national laboratories. The Fusion Energy Sciences Advisory
Committee (FESAC) advises the office of Fusion Energy Sciences (FES) within the
U.S. DOE to identify and prioritize research to develop a fusion energy source.
Additionally, in the U.S., research is underway at the University of Wisconsin-
Madison; University of Texas at Austin; Oak Ridge National Laboratory; University of
Illinois; General Atomics; University of California (UC), San Diego; UC, Los Angeles;
and UC, Irvine.
Figure 13. Construction of ITER in France Figure 14. JET's Tokamak in the UK
Source: ITER Source: UKAEA

Figure 15. The STEP Project in the U.K. Figure 16. Lawrence Livermore National Laboratory Laser Fusion in
the U.S.
Source: UKAEA Source: Lawrence Livermore National Laboratory
© 2023 Citigroup
China’s Southwestern Institute of Physics of the China National Nuclear

Corporation (CNNC) is also at the forefront of development, with a recent
breakthrough of plasma current exceeding one million amperes.8 China, which
has three fusion reactors feeding results into ITER, plans a China Fusion
Engineering Test Reactor (CFETR) in the 2030s. In Japan, the Nuclear Energy
Subcommittee of the Advisory Committee for Natural Resources and Energy put
forward a technology roadmap for developing advanced reactors, as well as
releasing a draft toward the commercial use of nuclear fusion and fast reactors.9
There are five institutions in Russia that are researching fusion energy. Most
recently, the Budker Institute of Nuclear Physics successfully increased plasma
density by 1.5x with the SMOLA fusion facility.10 Scientists were also able to slow
down plasma outflow by 10 times. SMOLA is an open magnetic trap approach with
a spiral magnetic plasma confinement that can achieve a high ratio of plasma
pressure to magnetic field pressure. The Russian National Research Center
Kurchatov Institute and the Ioffe Institute are also leveraging tokamak designs.
8 People’s Daily Online SA, “China Makes New Progress in Research on ‘Artificial Sun,’”
IOL, November 2, 2022.
9 Nagai Kenta, “Japanese Government Presents New Strategy for Commercializing
Nuclear Fusion and Fast Reactors,” Japan Atomic Industrial Forum, September 26,
2022.
10 Nuclear Engineering International, “Fusion Progress in Russia,” February 8, 2023.
© 2023 Citigroup
Private Companies Are Flourishing and

Bringing More Hope to “Next Generation”
Nuclear Energy
Companies involved in developing advanced fission and fusion nuclear
reactors are at the forefront of innovation and have tremendous opportunities
in contributing to overall net-zero commitments. Private sector companies
involved in the development of small modular and/or advanced reactors are typically
better established than peers that work on fusion energy, which attracts larger
capital in public and private funding. However, in recent years, the advancements
outlined earlier are allowing private companies to work on their prototypes and
designs for fusion energy and attract substantial funding from private investors.
The U.S. and Canada are leading the development of SMRs that are LWRs and
are either fast, high temperature gas cooled (HTGR), molten salt, or
microreactor designs. Western developers of SMRs include General Electric,
Hitachi, Holtec, and NuScale. Advanced reactors are being built by ARC Clean
Technology, Kairos, Moltex, TerraPower, and Terrestrial Energy. The advanced
reactor (HTR-RM), based on high temperature gas technology, has been connected
to the grid by China Huaneng with a total output of 200 MW. The SMR built by
Rosatom (Russia) is operating off-grid and providing electricity and heat to hard-to-
reach areas.
With the global market for SMRs expected to be worth up to $300 billion a
year by 2040, tens of billions of dollars have been raised by the private sector
through various channels that include public and private investment.11 This
trend is likely to continue as companies mature and international agreements on
reactor deliveries are made.
Investments from a variety of institutions into private companies working on

fusion energy have grown tremendously in the last five years, totaling close
to $5 billion. Over 90% of these flows are private money, while the public sector is
investing heavily into either international projects, like ITER and JET, or state-led
initiatives. Opportunistic investments are likely to continue as the number and scale
of breakthroughs of various types increase. Flows into this industry are mainly
driven by philanthropists, sovereign wealth funds, energy companies, industrials,
and venture capital and private equity firms. Developers of fusion energy include
Commonwealth Fusion Systems, CTFusion, First Light Fusion, HB11, Helion
Energy, Hyperjet Fusion, TAE Technologies, Tokamak Energy, and Zap Energy,
among others.
11
Jason Deign, “Nuclear: These Countries Are Investing in Small Modular Reactors,”
World Economic Forum, January 13, 2021.
© 2023 Citigroup
Figure 17. Share of Private vs. Public Funding for Fusion Companies Figure 18. Number of Private and Public Fusion Reactors Globally
2% 20 19 20
100% Tokamaks
18 17 Stellarators and heliotrons 18
90%
16 Inertial and laser fusion 16
80% Experimental alternative designs
14 14
70%
12 12
60% 10
10 10
50% 98% 8 7 8
40% 6 6 6 6
6 6
30% 4 4
33 3
22 2 2
20% 2 1 1 111 1 1 1 2
10%
1 114 1
1
0 0
United Japan Russian China France United Germany Others
0% States of Federation Kingdom
America
Private Public
Source: Citi GPS, Fusion Industry Association Note: Each bar represents total number of fusion reactors by design. Lighter base of
each bar is associated with the number of private companies working on a specific
design.
Source: Citi GPS, IAEA
Figure 19. Private Sector Investment in Fusion Energy Figure 20. Number of Private Fusion Companies Founded Globally
(bln) The Paris Agreement 35
$3,000 was signed
$2,500 30
$2,500
25
$2,000
20
$1,500
15
$1,000
10
$520
$500 $388
$302 $302
$158 5
$138
$16 $87 $19 $73 $16
$0
0
Source: Citi GPS, BNEF Source: Citi GPS, Fusion Industry Association
© 2023 Citigroup
As one of the forward-looking indicators, the green patent score put together
by MSCI also points to a more mature market for advanced fission reactors
versus fusion. To interpret such a score, per MSCI, a higher relative patent score
corresponds with a higher value.12 While countries like South Korea, Canada, and
France have some of the highest patent scores for fission nuclear energy, Japan
and the U.S. are leading the ranks on fusion energy patent scores globally.
Figure 21. MSCI Green Patent for Fission and Fusion

20,000
18,000,000 16,296,000 45
18,000 40
38
16,000 35
14,000 12,800 31
30
12,000
25
10,000 9,200
20
8,000
6,141
15
6,000
4,000 10
2,000 830 5
1 1 3 2
0 1 0
KR CA FR US JP DE NL GB
Green patent score for fission nuclear Green patent score for fusion nuclear (RHS)
Source: MSCI, Citi GPS
12 According to MSCI: “The value attached to a patent is without a unit and takes for
a minimum value 0, has no maximum value cap and the higher the value associated
with a patent the better. In terms of how to interpret a patent score, each individual
component is computed as the relative score versus the average score of patents
inside the same technology classification (CPC system), geography and year. This
means that a score above 1 means that a patent is above the average score
relative to its peers and thus has more value. A score below 1 means that a patent
is below the average score of its peers and has less value. At the company level,
this means that a company with a patent portfolio with a score above 1 has more
value compared to its peers and is better placed today to produce more high value
patents in the future.”
© 2023 Citigroup
Regulatory Developments for “Next

Generation” Nuclear Energy
The U.S., Canada, UK, EU, South Korea, Japan, China, and Russia are all
leading efforts, in various degrees, to develop an accommodative regulatory
framework for advanced nuclear energy along with allocating additional
funding for companies in the industry. It appears to us that, while the U.S., the
UK, Canada, and South Korea could potentially have the most incentives and
allocated funds for R&D for private firms, other countries could explore funding into
labs or state-owned ventures. Such differences in approach between countries point
to the development stage of the advanced nuclear energy industry, with potentially
more milestones to come.
In the U.S., the Inflation Reduction Act (IRA) adopted in the summer of 2022
could potentially be one of the largest legislative initiatives for U.S. nuclear
energy. The package includes funding for not only conventional (i.e., large-scale
and existing) nuclear plants but also for advanced nuclear energy. The bill includes
a new tax credit for U.S. nuclear plants, which could be as much as $15 per
megawatt-hour (MWh) of generation per year. For a nuclear plant to receive the full
tax credit of $15/MWh, annual gross revenue of the plant must be below $25/MWh
(with partial credit available if revenue is below $29/MWh) and the plant must meet
specific labor requirements. The legislation aims to provide an economic cushion
with new provisions for nuclear energy in the long run with new legislation starting in
2024 and extending credit to December 2032. Additionally, given the production tax
credits (PTCs) for both hydrogen and nuclear, utilities could potentially benefit from
both incentives when producing “pink” hydrogen — i.e., energy generated through
electrolysis powered by nuclear energy. Constellation Energy and Duke Energy are
reportedly strongly considering expansion of their capacity for “pink” hydrogen
production.13
In addition to direct funding of $369 billion, the bill also introduces a $250
billion loan guarantee program that will be available for the DOE and extended
until 2030. This program would be available for companies with innovative clean
energy technologies currently in development. At the moment, according to Energy
Intelligence, the DOE oversees more than $40 billion in debt financing available to
125 active, eligible clean energy applicants, of which around $8.9 billion is
dedicated to nuclear power facilities including SMRs, uprates (i.e., increases in
power output) of operating reactors, upgrades at both non-operating and operating
reactors, and nuclear-generated hydrogen production. Another $2 billion is available
for the "front-end" fuel cycle.14 Additional financing allowed the DOE to select
TerraPower’s 345 MWe Natrium plant and a competing 80 MWe pebble-bed unit —
both SMR designs that are due to be fully operational by 2029 — and awarded
$160 million in initial funding to test, license, and build prototypes.
Besides the IRA, the Bipartisan Infrastructure Law (BIL) and the CHIPS and
Science Act (H.R. 4346) introduce significant new funding opportunities for
advanced nuclear energy, allocating over $11 billion for research,
development, and demonstration. The BIL is also allocating $2.5 billion in funding
to the U.S. Advanced Reactor Demonstration Program (ARDP).
13 Jessica Sondgeroth and Luke Johnson, “United States: Tax Credits Incentivize
Nuclear Uprates, ‘Pink’ Hydrogen,” Energy Intelligence, February 24, 2023.
14 Jessica Sondgeroth, “Interview: DOE’s Jigar Shah on Lending to Nuclear Projects,”
Energy Intelligence, January 27, 2023.
© 2023 Citigroup
In addition, the Nuclear Regulatory Commission is currently working on

developing rules that would shape the future review and license of advanced
reactors and SMRs.15 Such rules allow vendors to choose from two regulatory
pathways:
 An innovative approach, based on probabilistic risk assessments.
 A traditional, deterministic approach aligning with international guidance.
Also, the Nuclear Regulatory Commission, the DOE, and the private fusion
industry, during a meeting late in 2022, agreed that the regulation of fusion
energy should be separated from the regulation of nuclear fission. This step
could potentially shorten the regulatory review of fusion companies and facilitate the
deployment of this energy. Reportedly, the DOE announced $2.3 million in funding
in January 2023 for 10 fusion energy projects that would allow private companies to
work with national laboratories on addressing certain challenges in fusion energy
development.16
In the EU, the European Green Deal Industrial Plan (“the Plan”) and the Net
Zero Industry Act (“the Act”) are both recognizing nuclear energy as a clean
energy that could contribute to the energy transition.17 Specifically, the act
defines “net-zero technologies” as including “advanced technologies to produce
energy from nuclear processes with minimal waste from the fuel cycle.” SMRs are
part of this list of technologies making a “significant contribution to decarbonization.”
Yet, the legislation lacks concrete funding plans that would be available for
advanced nuclear technologies, unlike regulation in the U.S. Adding advanced
nuclear to the green taxonomy should also provide additional funding for low carbon
sectors in the EU. France, as the country with the largest share of nuclear energy in
its energy mix, is allocating over $57 billion in investments to construct up to 14
new-generation reactors and a fleet of smaller nuclear plants.18
In South Korea, the government will spend KRW400 billion ($306 million) per
year on developing SMRs.19 The government will streamline licensing and
permitting and in 2024 plans to spend more than KRW1 trillion on improving its
competitiveness in nuclear technology, investing in new facilities, and providing
financial support to businesses. South Korea would also prioritize enormous nuclear
energy exports.20
15 Jessica Sondgeroth, “United States: How to Review Advanced Reactors Designs?”

Energy Intelligence, March 17, 2023.
16 NuclearNewswire, “DOE Awards Cost-Shared Fusion Energy Research Funds to
Seven Companies,” January 19, 2023.

17 European Commission, “A European Green Deal,” accessed June 27, 2023; European
Commission, “Net Zero Industry Act,” accessed June 27, 2023.

18 Liz Alderman, “France Announces Major Nuclear Power Buildup,” New York Times,
February 10, 2022.

19 Currency conversions are as of June 28, 2023.
20 Ministry of Trade, Industry and Energy of South Korea website (Korean language).
© 2023 Citigroup
In the UK, the Advanced Nuclear Fund was established with £385 million
($487 million). This funding is part of the Ten Point Plan for a Green Industrial
Revolution.21 Other programs in the UK are also supportive of new fission and
fusion energy and are administered by the UK Atomic Energy Authority to bring
private and public efforts together.22
In Canada, the SMR Action Plan is a roadmap for the country’s development,
demonstration, and deployment of SMRs.23 The government is committing over
C$970 million ($732 million) in financing to develop a grid-scale SMR.24
In general, while regulation is being enhanced and made more

accommodative for SMRs (specifically the LWR type), we do not observe the
same scale of support for fusion reactors yet. This is likely to change in the
coming years as the technology matures with more successful designs.
21 UK Government, “Advanced Nuclear Technologies,” updated January 4, 2023.

22 UK Government, “UK Backs New Small Nuclear Technology With £210 Million,”
November 9, 2021.
23 SMR Roadmap Technology Working Group, Canadian SMR Roadmap, October 26,
2018.
24 Ismail Shakil, “Canada Commits C$970 Million to New Nuclear Power Technology,”
Reuters, October 25, 2022.
© 2023 Citigroup
Challenges Remain, But the Future Is Bright…

There has been significant progress in the development of AR/SMR projects
over the last decade. These technologies will likely dictate the outlook of nuclear
energy production and distribution. However, the picture is not all one-sided
optimism, as there are still obstacles to wide-scale AR/SMR deployment across the
globe. These obstacles relate to internal hurdles such as the usage of these new
reactors in commercial settings and economic feasibility, as well as external
headwinds including broader trends, global macroeconomics, and the overall policy
environment.
Additional challenges with broader adoption of advanced nuclear energy

include the technology choice of final designs, the current global
licensing/regulatory framework, supply chain hurdles, and fuel cycle issues,
among others. Public perception and engagement also remain obstacles, although
not as significant as for larger-scale conventional nuclear plants. Some areas still
exhibit a “Not in My Back Yard” (NIMBY) attitude without recognizing the enhanced
safety that a smaller reactor core provides.
Another obstacle to wider adoption and scalability of advanced nuclear

energy is the availability of a highly trained labor force able to maintain
tomorrow’s reactors as well as support and lead the development of new
fission and fusion reactors.
Overall, leaders in this space — the U.S., the U.K., the EU, South Korea,
Japan, Russia, and China — are continuing to invest in and provide (in)direct
support for the development of AR/SMRs domestically. With the further
bifurcation of the world and increased geopolitical risk premia, we believe
that in a decade, there will be at least two to four different prototypes of
energy-providing modern reactors. On the other hand, reactors based on
fusion energy will most likely be commercialized in the middle to end of the
next decade, with a number of successful private firms navigating the space.
© 2023 Citigroup
Financing Nuclear
Keith Tuffley Nuclear power plants are large infrastructure investments with high upfront
Vice-Chairman, Global Co-Head, costs and long construction periods. This investment profile means that the
Sustainability & Corporate Transitions cost of financing is a key determinant of the cost of electricity generated.
Citi Banking, Capital Markets & Advisory There are several significant challenges that need to be addressed to unlock
deployment at scale:
Serge Tismen
Global Co-Head of Clean Energy Transition Nuclear projects, including SMRs, require a significant upfront investment.
Citi Banking, Capital Markets & Advisory The cost of building a nuclear power plant is high due to the complexity of the
technology, stringent safety requirements, and the need for specialized materials
Ryan Nielson and skilled labor. The DOE currently estimates the first-of-a-kind (FOAK) cost of a
Clean Energy Transition well-executed nuclear construction project is ~$6,200 per kW, but recent nuclear
Citi Banking, Capital Markets & Advisory construction projects in the U.S. have had overnight capital costs over $10,000 per
kW. Subsequent deployments are expected to benefit from technology learning,
supply chain maturity, and manufacturing improvements that could drive Nth-of-a-
kind (NOAK) advanced nuclear overnight capital costs to ~$3,600 per kW and
unlock deployment at scale.25 This is still a relatively high “overnight capital cost,”
which is a term frequently used in discussions of the power generating industry. The
term is a quick and hypothetical reference to evaluating costs associated with
building a plant as if it were built instantaneously, without taking into account the
cost of capital (including interest rates over the period of construction), the actual
construction costs, or any comparison to the return of capital in alternative
industries. The life span of the power plant and capacity utilization are also not
included in the definition. It is simply the cost if the plant were built overnight (e.g.,
right away) on the basis of current labor and material prices. For comparison, a gas-
fired plant or co-generation power plant would have overnight capital costs between
$800/kW and $2,000/kW. However, such a linear comparison does not depict the
full picture and would lack accounting for other public goods that NOAK SMRs
would carry.
The history of cost overruns in nuclear projects presents a significant

challenge in securing financing. Investors and financial institutions are often
concerned about the financial risks associated with nuclear projects due to the
industry's track record of costs exceeding initial estimates by a significant margin.
Complex, specialized, and degraded international supply chains; relatively few
recent nuclear construction projects; and exposure to construction commodity
volatility make it challenging to estimate project costs. Transition from large
monolithic infrastructure projects to modular projects may alleviate some
uncertainty. Current overnight capital costs of large nuclear plants vary but typically
are less than $10,000/kW. However, a recent example of cost overruns was the
Vogtle nuclear power plant in Atlanta, where initial costs were estimated (in 2008) at
a bit over $14 billion and are now exceeding $30 billion. SMRs are still in the
building-out process with efficiencies of greater manufacturing scale expected, but
overnight capital costs have risen from $5.3 billion to $9.3 billion, resulting in a cost
of 20,139/kW. This cost is equivalent to two Vogtle reactors, while producing much
less energy. As SMR NOAK construction accelerates, with the increasing
economies of scale and potential state subsidies at the initial stages, it is estimated
that the cost of building SMRs could be half of a large-scale nuclear plant.
25
U.S. Department of Energy, Pathways to Commercial Liftoff: Advanced Nuclear,
March 2023.
© 2023 Citigroup
The return on investment for nuclear projects is often long-term, which can
deter potential investors. It takes multiple years, even decades, for a nuclear
power plant to become profitable due to the construction time and the need to
recover high initial costs. Service life extensions beyond the initial 30 to 40 year
plant life have become a cost-competitive alternative to new builds. SMRs and
micro-reactors also have the potential to reduce capital intensity and delivery timing
due to their smaller scale and ease of manufacturing.
The complexity of nuclear technology itself is a significant challenge that

extends through the lifecycle of the project, from initial design and construction to
operation, maintenance, and eventual decommissioning. Technology deployment
requires sophisticated owners and operators with experience managing nuclear
assets. Next-generation reactors focus on simplified sub-systems, fewer
components, remote operations, and flexible end-use.
The nuclear industry is heavily regulated, and changes in policy or regulatory

requirements can significantly impact project costs and timelines. Long,
expensive, and changeable permitting and licensing regimes makes it difficult for
companies to secure financing. Although enhanced safety profiles of newer designs
may streamline review, the overall licensing process still requires several years for
each project.
Some of the strategies being employed to finance nuclear and SMR projects
include:
 Governments and private companies can collaborate to share the financial

burden of nuclear and SMR projects via Public-Private Partnerships (PPPs).
The government can provide initial funding or guarantees to reduce the financial
risk for private investors. For example, the U.S. Department of Energy has
provided funding to several SMR projects through its Advanced Reactor
Demonstration Program and Carbon Free Power Project.
 Governments can reduce perceived risk for investors by providing cost

overrun insurance and financial assistance, as well as by acting as an owner or
off-taker. Other mechanisms include contracts guaranteeing future revenues
such as Power Purchase Agreements (PPAs) and Contracts for Difference (CfDs)
that provide long-term stability of electricity prices or financial assistance in the
form of guarantees, or using a regulated asset base (RAB) model, all of which
can decrease the component of total costs related to finance. Lastly,
governments can guarantee supply of enriched fuel, as considered under the
U.S. High-Assay Low-Enriched Uranium (HALEU) Availability Program.
 Export Credit Agencies (ECAs) can provide loans, guarantees, or insurance

to domestic companies for overseas projects. This can help companies
secure the necessary financing for SMR projects in foreign markets. For
instance, the Export-Import Bank of the United States has supported several
nuclear projects abroad, including letters of interest for SMRs.
 As the demand for low-carbon energy sources grows, SMRs could potentially
be financed through green bonds or other climate financing instruments.
For example, the Department of Energy Loan Program Office can finance
advanced nuclear through the Innovative Clean Energy Loan Guarantee
Program or Energy Infrastructure Reinvestment Program. These tools are
designed to fund projects that have environmental benefits, and they could be a
good fit for SMRs given their low greenhouse gas emissions.
© 2023 Citigroup
 Multilateral development banks like the International Development Finance

Corporation, or the Asian Development Bank can provide loans or
guarantees for SMR projects, particularly in developing countries. These
institutions have significant resources and a mandate to support sustainable
development, which could include SMR deployment.
© 2023 Citigroup
Fusion Energy May Still Have Hurdles to

Overcome, But It Will Be Worth the Effort
David Gann, CBE 2023 continues to demonstrate the harrowing manifestation of climate change
Pro-Vice-Chancellor, Development and that appeared to have accelerated in 2022: 33 million people were impacted by
External Affairs, Oxford University deadly flooding in Pakistan that covered a third of the country; a new record
Professor of Innovation & Entrepreneurship, temperature of 40.3° was registered in the UK as fires broke out around Europe;
Saïd Business School, Typhoon Nanmadol resulted in 4 million evacuations in Japan; and 100 people died
Fellow, Magdalen College in Florida due to Hurricane Ian, the worst in a century. These events are now a
regular part of our lives, not some conjectured dystopia.
Sir Ian Chapman
CEO In March 2023, the UN’s Intergovernmental Panel on Climate Change (IPCC)
UK Atomic Energy Authority released its sixth synthesis report, saying that we are now at the last chance
to make “deep, rapid, and sustained” cuts to greenhouse gas emissions.
Fusion has an important role to play in addressing climate change, not so
much in making “rapid” cuts to greenhouse emissions since it is unlikely to
contribute in a significant way for decades, but by ensuring the world has a long-
term abundant source of clean energy.
Fusion has the potential to provide a low-carbon, sustainable, inherently safe

and continuous source of power. It is the densest form of energy known,
taking up less space than any other form of energy production. It could be used
almost anywhere, and the sources of fuel — water and lithium — are readily
available and abundant, offering the potential to provide fusion energy for
thousands of years.
While technical challenges must be overcome on the quest to deliver fusion,

it will be worth the effort. Beyond electricity, fusion can also be a source of high-
grade heat, which will be especially important in the decarbonization of hard-to-
abate sectors, such as concrete production or various industrial processes.
So why is fusion not part of addressing low-carbon energy production today?

Put simply, because it is technically very challenging. To make fusion happen, a
gas of hydrogen fuel has to be heated to extreme temperatures (over a hundred
million degrees). Keeping this very hot gas (or “plasma”) well confined and stable
enough to sustain the conditions for fusion is hard. The most advanced ways of
making and confining this plasma are in facilities called tokamaks — where powerful
magnetic fields are used to hold the plasma in place in a ring-shaped container.
Fusion has been proven to work in large laboratory experiments, such as the
JET facility hosted by the UK Atomic Energy Authority (UKAEA).26 It is being
developed on an industrial scale with the international ITER project under
construction in the south of France by a consortium of over 30 countries.27
26 Culham Centre for Fusion Energy (CCFE), “JET Is the World’s Largest and Most
Advanced Tokamak,” accessed June 27, 2023.
27 ITER, “What Is ITER?” accessed June 27, 2023.
© 2023 Citigroup
(See the discussion in the “Public Funding and International Projects for Fusion
Energy” section.) Alongside the government-funded research programs is a growing
private-sector fusion industry with at least 35 fusion companies, who have together
attracted over $5 billion in investment and seek to accelerate commercial electricity
from fusion.
Numerous landmark results have been achieved by the fusion community in

the last two years, which has increased optimism. In the mid-1980s, Sir Walter
Marshall, the Chair of the UK’s Electricity Generating Board, famously said of
fusion: “There will come a time when we sustain a fusion reaction. Then we will get
as much energy from a fusion reactor as we put in. However, there will never come
a time when we get as much money out as we have put in.”
The fusion community has been ticking off these milestones: In 2021, the JET
device demonstrated the release of 59 megajoules (MJ) of fusion energy.28 While
the fusion reaction was only sustained for five seconds due to the limitation of the
copper coil magnets used in JET, this small quantity of energy is testament to the
early stage of fusion realization. The experiments matched predictions made in
advance, which gives confidence for the design of next generation devices. At the
same time, researchers in China demonstrated a 1,000 second-long fusion fuel
using super-conducting magnets, clearly showing the “sustainment of a fusion
reaction.”29 In December 2022, the Lawrence Livermore National Laboratory
demonstrated fusion ignition, whereby more energy from fusion was released than
the laser energy absorbed to drive fusion.30 While these results tick off the first two
of Marshall’s criteria, they are still some way from commercial demonstration of net
electricity production.
Delivering a viable fusion power plant is one of the holy grails of science and
engineering, but it represents an unprecedented technical challenge. Fusion
requires many diverse, interconnected systems and many different science,
technology, and engineering challenges to be met simultaneously:
1. Creation and sustainment of a controlled burning plasma over long timescales

with fusion-born alpha-particles dominating the plasma heating.
2. Controlled exhaust of heat and helium “ash” from the burning plasma core.
3. Development of structural materials for the tokamak structures that have to

sustain, for many years, large forces and pressures at high temperatures in the
presence of high magnetic fields and exceptionally intense neutron fluxes,
without generating unmanageable volumes of radioactive waste.
4. Development and design of components using these materials, notably

components used to make the fuel and plasma-facing components, which can
survive in the demanding conditions within a fusion powerplant.
5. Requisite high availability and efficiency of the machine and its systems to
produce a viable levelized cost of electricity.
28 UK Government, “Fusion Energy Record Demonstrates Powerplant Future,” February

9, 2022.
29 Yuntau Song et al., “Realization of Thousand-Second Improved Confinement Plasma
With Super I-Mode In Tokamak EAST,” Science Advances, Vol. 9, No. 1, January 6,
2023.
30 Breanna Bishop, “Lawrence Livermore National Laboratory Achieves Fusion Ignition,”
Lawrence Livermore National Laboratory, December 14, 2022.
© 2023 Citigroup
These and other constituent parts — such as the high field magnets, plasma
and plant control systems, buildings, and the systems to convert fusion
power to electricity — must be brought together in an integrated multi-
disciplinary design satisfying regulation and safety requirements. Fusion is
different from most other technologies in that a full test is only possible in a
complete device, and the cost and timescale of each step means that a succession
of small-increment full physical prototypes is unrealistic. This means that
comprehensive in-silico design, digital prototypes, and finally models of components
and systems are needed to support qualification of the solutions.
A number of nations are prepared to take on these challenges in the quest to

deliver the first fusion powerplants, with many governments publishing
ambitious strategies in the last two years. The most ambitious public programs
are the UK fusion strategy, which aims to build a compact prototype powerplant
called STEP; the White House decadal vision for fusion and subsequent public-
private partnership program; and the Chinese Fusion Engineering Test Reactor —
all of which aim for prototype plants commencing operations around 2040.31
As first prototypes, they are likely to be low duty cycle, low availability, low
electrical power, and high cost of electricity, and thus probably not
commercially viable. This ought not be surprising, as rarely do new concepts enter
the energy market and become cost-competitive from the prototype stage. The
penetration of fusion into the market is almost impossible to predict when looking
beyond the 2040 timescale, but one could explore whether it is possible to achieve
penetration as quickly as other comparable large technologies, such as early
adoption of oil & gas, or early adoption of conventional nuclear fission powerplants.
If it were valid to use such previous growth rates as a guide, fusion could
reach 10% of global energy demand by 2100 — equivalent to supplying all of
Europe — or as much as 40% if capital costs were 30% cheaper.32
Because the challenges to delivering fusion are so complex, it is worth

pursuing multiple different pathways to reaching the goal. From its birth in the
1950s, while classified and being pursued by only a few nations, fusion has become
one of the most collaborative fields of science, with ITER at the vanguard as the
largest scientific collaboration ever undertaken by humanity. There are also a
growing number of fusion companies pursuing a diverse range of approaches to
fusion, of which 93% are aiming to deliver a fusion prototype device during the
2030s. And many are making impressive progress.33
31 UK Government, “Towards Fusion Energy: The UK Fusion Strategy,” October 1, 2021;

UK Atomic Energy Authority (UKAEA), “Spherical Tokamak for Energy Production,”
accessed June 27, 2023; The White House, “Fact Sheet: Developing a Bold Vision for
Commercial Fusion Energy,” March 15, 2022; Scott C. Hsu, “U.S. Fusion Energy
Development via Public-Private Partnerships,” Journal of Fusion Energy, Vol. 42, No. 12,
May 5, 2023; Jiangang Li and Yuanxi Wan, “Present State of Chinese Magnetic Fusion
Development and Future Plans,” Journal of Fusion Energy, Vol. 38, February 15, 2019.
32 H. Cabal et al., “Exploration of Fusion Power Penetration Under Different Global
Energy Scenarios Using the EFDA Times Energy Optimisation Model,” 26th IAEA Fusion
Energy Conference, October 2016.
33 Fusion Industry Association, “The Global Fusion Industry in 2023,” July 2023.
© 2023 Citigroup
In 2021, Commonwealth Fusion Systems, a spin-out from MIT that has raised
$2 billion, demonstrated the world’s strongest large-bore magnet using novel
high-temperature super-conductors.34 Tokamak Energy, meanwhile, has
shown a novel protection approach for such high-temperature
superconducting magnets.35 Such advances in magnet technology offer the
potential for more compact, high-performance powerplants, considerably reducing
costs. Numerous other approaches to fusion are being championed in the private
sector too, with $1 billion in funding raised by both TAE Technologies to pursue
aneutronic fusion and Helion Energy, who signed a power purchase agreement to
provide fusion electricity to Microsoft by 2028.36
The past two years have been a watershed moment for fusion, which has
engendered excitement in the sector that has not been present for a lifetime
(literally since JET opened 40 years ago, itself driven by the high oil prices in the
late 1970s).37 The combination of clear national strategies, meeting major technical
landmarks, and escalating investment is driving the sector at a renewed pace.
Among many other factors, this must be combined with the establishment of supply
chain capability and proportionate regulation. There has also been substantial
progress in such enabling factors. In the U.S., the ARPA-E program has stimulated
substantial growth in the fusion market, while the UK Fusion Industry Programme is
investing $70 million in supply chain development, and in Japan, Kyoto
Fusioneering have recently secured $80 million as a fusion supplier.38 Meanwhile, a
number of countries are working toward the bespoke and proportionate regulatory
frameworks needed to enable fusion delivery. The UK is legislating to clarify that
fusion energy facilities will not be subject to nuclear site licensing requirements, and
therefore will not be regulated under the same regulatory regime as nuclear
fission.39 In addition, the U.S. Nuclear Regulatory Commission recently indicated a
similar approach.40
Fusion has many hurdles to overcome, but it offers such huge potential in
providing abundant, low-carbon, baseload energy — including high-grade
heat to address hard-to-abate sectors — that it is surely worth pursuing the
mastery of these challenges. One of the forefathers of fusion, Lev Artsimovich,
was asked in the 1970s when fusion would be delivered, to which he answered:
“Fusion will be ready when society needs it.” This prescient response is still as true
today, though there is renewed optimism that fusion can deliver on its promise.
34 Commonwealth Fusion Systems, “Commonwealth Fusion Systems Creates Viable

Path to Commercial Fusion Power With World’s Strongest Magnet,” September 8, 2021.
35 Jacqui Reid, “Next Generation Magnet Technology Paves the Way to Commercial
Fusion Power,” Tokamak Energy, September 22, 2021.

36 TAE Technologies website; Helion Energy website; Helion Energy, “Announcing
Helion’s Fusion Power Purchase Agreement With Microsoft,” accessed June 27, 2023.
37 UKAEA, “JET Is the World’s Largest and Most Advanced Tokamak,” accessed June
27, 2023.
38 ARPA-E, “Fusing for Further Advancement: Introducing the ARPA-E Fusion Capability
Teams,” October 6, 2021; UKAEA, “The Fusion Industry Programme (FIP) Is Stimulating
Growth of the UK Fusion Ecosystem and Preparing It for Future Global Fusion Power
Plant Market,” accessed June 27, 2023.
39 UK Government, “Energy Security Bill Factsheet: Fusion Regulation,” June 6, 2023.
40 NRC News, “NRC to Regulate Fusion Energy Systems Based on Existing Nuclear
Materials Licensing,” PDF, April 14, 2023.
© 2023 Citigroup
© 2023 Citigroup
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Citi GPS: Global Perspectives & Solutions

FUTURE OF NUCLEAR ENERGY IN A LOW-

Citi Global Strategy & Macro Group

Arkady Gevorkyan Edward L Morse

+1-212-723-1051 | arkady.gevorkyan@citi.com +1-212-723-3871 | ed.morse@citi.com

Citi Banking, Capital Markets & Advisory (BCMA)

Ian Chapman David Gann

NUCLEAR ENERGY Is expected to see

WHAT IS ADVANCED NUCLEAR?

Raw Material/ Uranium, plutonium,

Lower power Relatively Inherently

BY 2100 FUSION COULD:

Constrained Source: Based on estimates from Cabal et al. (2016)

increase in regional new jobs

A Conversation With Ernest J. Moniz,

It is worth providing a taxonomy for the classes of technology available or under

The commercial attraction of SMRs lies principally in four areas:

2. The possibility of providing industrial process heat, especially with Generation

3. The promise of nuclear fission designs with passive operating safety.

In some states, a pathway to permanent irradiated fuel disposal, or at least to

Q: How might small reactor additions facilitate greater efficiency of grid

SMRs, especially Generation IV designs with higher operating temperatures, can

Q: To what degree can breakthroughs in fusion technology accelerate the

Secretary Moniz: Progress in multiple innovative fusion technologies has been

Q: Do you believe that there will be increased private sector interest in

Future of Nuclear Energy in the Low-

There has been an overwhelming number of positive developments in the

Source: IEA Source: IEA

Overall, we anticipate that SMRs and advanced fission reactors will be

1 U.S. Department of Energy, Pathways to Commercial Liftoff: Advanced Nuclear, March

in Decarbonizing the U.S. Energy System, June 2022.

Fission vs. Fusion

Both concepts (fission and fusion) are low-carbon emission sources of

Figure 3. Nuclear Fission vs. Fusion Energy

Source: International Atomic Energy Agency

The roadmap to potential commercialization is on course for “next

Figure 4. Nuclear Fission and Fusion Energy Comparison

Catalyst High-speed, bombarding neutrons High temperature and pressure

Nuclear Waste Long-lived radioactive particles Few radioactive particles

Source: Citi GPS

Small Modular and Advanced Reactors: The

One advantage of SMRs is reactor design: Smaller cores enable an integrated

Most Common AR/SMR Designs

 Single-Unit LWR-SMRs: These are advanced reactors representing Generation

 Multi-Module LWR-SMRs: Using LWR technology, these can be operated as a

4Nuclear Energy Agency, Small Modular Reactors: Challenges and Opportunities,

 Mobile/Transportation SMRs: These reactors typically use LWR technology and

 Generation IV (Gen IV) SMRs: Gen IV reactors are advanced (non-LWR)

– Fast Neutron Reactors: These have no moderator, operate with higher

– High Temperature Reactors: This technology uses graphite as a moderator

Figure 5. Generation IV System

Source: Citi GPS, Nuclear Energy Agency

Challenges for AR/SMRs

Sustainable procurement of fuel for advanced reactors could also be at risk,

Overall, active buildout and adoption of SMR technology will likely be on a

Source: Citi GPS, UxC

AR/SMRs Set to Play a Key Role in the Future of Nuclear

5 IEA, Nuclear Power and Secure Energy Transitions, June 2022.