Analyst: Nuclear is uninvestable

New nuclear power is currently “uninvestable” for private companies due to the risks involved in undertaking such projects, a leading industry equity analyst has said.

During a break-out session at consultancy Aurora’s Spring Forum this week, Deepa Venkateswaran, head of utilities equity research at asset manager Bernstein, said investors are put off by the time scales and capital requirements that nuclear projects involve.

“At the moment, nuclear is uninvestable,” she said, pointing out that the most active developers in the market are Chinese and French companies, which have some form of state backing.

If a company presented either an offshore wind farm or a new nuclear reactor, investors would be likely to favour the former, she said:

“Investors don’t feel that the risk and rewards are commensurate.

“It’s not so much any ideological difference, it’s the immense amount of capital that will be needed in a single project. It’s a huge amount that can sink a company if things go wrong.”

Adding that there is “no certainty about timelines” for nuclear projects, Venkateswaran said: “These are very large risks which private companies just cannot bear.”

The scale of these risks means that new nuclear projects “should probably be financed by the government in some form” but that private investors could step in post construction when nuclear power stations are generating revenues that can last up to 60 years.

Declan Burke, director of nuclear projects & development at the Department for Business, Energy & Industrial Strategy (BEIS), told the same meeting that nuclear is too important for the UK’s wider energy transition to be abandoned.

Pointing out that the UK has “just three decades” to decarbonise, he said: “If you take nuclear out of the equation, it makes it much harder and risker to get to the finishing line.”

Burke said improved financing mechanisms for nuclear power, which the government is considering, could give the sector the “same chance” to cut costs as those achieved by offshore wind.

He also rejected the suggestion that carbon capture and storage (CCS) could supplant nuclear as the main option for low carbon, baseload power because it is a less proven technology.

Burke was backed up by Simone Rossi, chief executive at EDF Energy.

While expressing confidence that CCS will work, he said it is limited as an option by the capacity of reservoirs for storing the Co2 trapped by the process.

“It is a sensible solution for industrial clusters and will definitely happen but it has its own limits. We don’t want to put all eggs in one basket,” he said.

Rossi also said that the revenues from nuclear power stations could provide a good match for pension fund investors.