Nuclear energy set for a boost after reforms to pension funds

Pension fund reforms will help spark a wave of nuclear investment, according to leading industry sources.

The chancellor, Kwasi Kwarteng, announced a plan Friday to release billions of pounds of cash to pour into major infrastructure programs and innovative companies.

The government is making efforts to get energy projects off the ground after the Russian invasion of Ukraine.

The war has soared energy bills and exacerbated the cost of living crisis. Ministers want to avoid setting up new fossil fuel factories and instead turn to low-carbon technologies such as nuclear and wind.

Boris Johnson gave the green light to the £20 billion Sizewell C nuclear power plant in Suffolk before stepping down as prime minister. It can 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 secured the backing of the British government. But the project has yet to bring in billions of pounds in private investment.

Kwarteng’s plan will ease the rules so fund managers can invest in assets that may take a long time to recoup.

The details of the changes are likely to be closely monitored by regulators and pension activists.

Tom Greatrex, chief executive of the Nuclear Industry Association, said retirement money “will boost the prospect of building new nuclear power plants to solve our energy security crisis,” adding: “The first major infrastructure project where this will have an impact could be Sizewell C.’

He said it was a “very important step” in addition to two other major changes that have shaken 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 major projects.

The second is a planned rebrand – expected later this year – of nuclear as a green energy, which it is hoped will attract lenders who are currently banned from investing in the sector.

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

Each small modular reactor (SMR) would be about the size of two football fields – about a tenth the size of a normal factory – and could power a million households.

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

A Rolls-Royce spokesperson said: ‘This expands the pool for vital UK infrastructure financing. SMRs are perfectly sized for retirement investments due to the lower project costs of around £2 billion.

“Rolls-Royce has spoken with a number of potential investors, including in the pension market, who could support our transition from development to implementation.”