Can Renewables Integration Costs and Externalities Leave Room for Nuclear in Decarbonized Power Systems?

This paper examines whether the integration costs and externalities associated with variable renewable energy sources (VREs) can justify new investments in nuclear power in future low-carbon electricity systems. An analytical model is developed to compare the marginal system-levelized cost of electricity (LCOE) of VREs and nuclear power across a range of renewable penetration levels. Results indicate that nuclear remains economically relevant only when assuming relatively low overnight construction costs (below €5,000/kW) and favorable financing conditions (discount rates under 3%). Under these conditions, nuclear's optimal share reaches up to 18% of total generation. Conversely, recent Western projects, with costs exceeding €8,000/kW, lie well outside this viability region, even when accounting for VRE integration costs at high penetration levels. Sensitivity analysis further shows that construction costs and discount rates exert similar elasticities (-2.1) on nuclear's equilibrium share, implying that improvements in both cost control and financing conditions are jointly required. Overall, while VRE integration costs can open a narrow economic window for nuclear, sustained declines in storage and renewable costs may close it again, underscoring the fragility of nuclear's competitiveness in future power systems.