Is There a Nuclear Energy Premium? Evidence from Electricity Generation Markets

Sammanfattning

Electricity generation is a capital-intensive sector where financing conditions influence investment decisions and the trajectory of the energy transition. Among generation technologies, nuclear power features exceptionally high upfront costs and long investment horizons. It is also a low- carbon and reliable energy source, central to many decarbonization models. Yet, nuclear has a contested risk profile: investors often avoid it due to concerns related to accident risk and waste management, while climate finance taxonomies are ambiguous about its classification. These features may limit its investor base and increase its perceived risk. However, it remains unclear how such factors are reflected in capital markets, and whether they suggest a risk profile closer to the expanding yet policy-dependent renewables, or to the declining yet system-critical fossil technologies. This study aims to answer this question by testing how nuclear exposure is priced in required returns relative to renewable and fossil exposure, and whether this relationship is moderated by generators' revenue model. For this purpose, a panel of 92 publicly listed electricity generators in OECD countries with nuclear on the power grid across 2010-2024 is collected and analyzed using two measures of required returns: Implied Cost of Equity and CAPM-adjusted Risk Premia. The results reveal no evidence of a distinct, unconditional pricing of nuclear exposure relative to fossil and renewable technologies. However, when revenue model is considered, a different pattern emerges. Under low merchant exposure, nuclear generation is associated with higher required returns than both fossil and renewable technologies; this premium disappears as merchant exposure increases. These findings suggest that the pricing of electricity generators is influenced by the interaction between technology and revenue model, indicating that their cost of equity depends more on how risks are allocated rather than on technology alone. These results have implications for asset pricing in electricity markets, policy design, and project development.