Nuclear energy set for a boost after reforms to pension funds

Pension fund reforms will help to unleash wave of investment in nuclear energy, according to senior industry sources

Pension fund reforms will help to unleash a wave of investment in nuclear energy, according to senior industry sources. 

The Chancellor, Kwasi Kwarteng, announced a plan on Friday to unlock billions of pounds of cash that could be poured into major infrastructure programmes and innovative businesses. 

The Government is scrambling to get energy projects off the ground following the Russian invasion of Ukraine. 

Green light: Former Prime Minister Boris Johnson approved Sizewell C

The war has sent energy bills soaring and worsened the cost-of-living crisis. Ministers want to avoid setting up new fossil fuel plants, turning instead to low-carbon technology such as nuclear and wind. 

Boris Johnson gave the go-ahead to the £20billion Sizewell C nuclear plant in Suffolk before he stepped down as Prime Minister. It could power six million homes and generate electricity for 60 years, although it will take between nine and 12 years to build. 

French state energy giant EDF is developing Sizewell C and has received UK Government backing. But the project still needs to drum up billions of pounds in private investment. 

Kwarteng’s plan will relax rules in order to allow fund managers to invest in assets that will potentially take a long time to make a return. 

Details of the changes are likely to be closely monitored by regulators and pension campaigners. 

Tom Greatrex, chief executive of the Nuclear Industry Association, said pension money ‘will be a boost to the prospect of getting new nuclear plants built to fix our energy security crisis’, adding: ‘The first big infrastructure project where this will have an effect could well be Sizewell C.’ 

He said it was a ‘very important step’ alongside two other major changes that are shaking up the industry. The first is a new financing model, called the ‘regulated asset base’, which allows investors to receive returns during the construction phase of big projects. 

The second is a planned rebranding – expected later this year – of nuclear as green energy, which it is hoped will attract backers that are currently barred from putting money into the sector. 

Kwarteng’s plan could also help spur funding for a fleet of mini nuclear reactors being developed by engine maker Rolls-Royce. 

Each small modular reactor (SMR) would be around the size of two football pitches – about a tenth of the size of a normal plant – and could power a million homes. 

They cost around £2billion each and are seen as quicker to build and more flexible than full-scale nuclear reactors. 

A spokesman for Rolls-Royce said: ‘This broadens the pool for vital UK infrastructure funding. SMRs are perfectly sized for pension investment owing to the lower project costs of around £2billion. 

‘Rolls-Royce has spoken to a number of potential investors, including in the pension market, who could support our move from development into deployment.’