As nuclear’s star brightens, will investors step up?

Inside Infra 2 June

As nuclear’s star brightens, will investors step up?

A confluence of factors including net zero targets, and the Ukraine war’s impact on fuel supplies has sparked a resurgence of interest in nuclear power across Europe. Whether investors will play given nuclear’s significant costs, however, remains to be seen.

Momentum is growing in Europe to use nuclear power to replace short-in-supply fossil fuels and help achieve the continent’s net zero goals, according to several sources.

But impediments including the costs of building proper waste storage and disposal and adhering to the strict regulations governing the industry call into question the willingness of private investors — and lenders — to participate in financing nuclear, the sources said.

Across the European Union, attitudes to nuclear power differ between countries very much in favour, such as France, and those opposed, such as Germany — which this year switched off its last reactors.

But Russia’s invasion of Ukraine and the EU’s looming net zero targets have cast fresh light on the important role that nuclear power could play going forward.

Indeed, public opinion has shifted toward nuclear just within the past two years:

Driving this change may be the energy trilemma between lowering energy prices, ensuring energy security and achieving net zero carbon emissions.

The impact of nuclear on carbon emissions is clear. In 2022, France, which that year got 46% of its electricity from nuclear, emitted only 90g of CO2 per kWh, whereas Germany, which gets 6% from nuclear, emitted 520g per kWh.

This convergence of goals and growing focus on reducing greenhouse gas emissions appears to be dropping fresh fuel pellets into the EU’s nuclear strategy.


On 16 May, 16 European countries founded the Nuclear Alliance, which is designed to help the countries cooperate on their nuclear development plans and get the continent closer to its net zero targets, according to a published joint statement.

Members include Belgium, Bulgaria, Croatia, the Czech Republic, Estonia, Finland, France, Hungary, the Netherlands, Poland, Romania, Slovenia, Sweden, Slovakia and the UK. Italy joined, but as an observer.

The growing support is likely to help nuclear power expand across the continent — and the development of a supportive regulatory framework, according to nuclear expert Luca Romano, a board member at science research platform CBRN Gate. The nuclear alliance is an important step in “streamlin[ing] the certification processes … which [is] a big part of getting new nuclear online.”

French nuclear operators will play an important role, Romano said. France is sending experts into other markets to set up industrial frameworks and transfer skills, knowledge and resources.

For instance, in March, Italian energy corporation Ansaldo announced a new collaboration with France’s EDF to pursue “industrial cooperation in the nuclear field.” Romano thinks that the Italian government may quietly incentivise Ansaldo to put money into new nuclear projects — albeit not in Italy, which has a history of opposing nuclear, particularly since the 2011 Fukushima disaster in Japan. Sources agree, however, that as the country seeks to move away from its dependence on North African oil and gas, it will start to open up to nuclear again.

Elsewhere, the signs of nuclear progress are more overt. Finland switched on Europe’s largest reactor earlier this year, and the UK will bring Hinkley Point C online later this decade — with Poland also expected to follow with a raft of new projects, Romano said.

EU view

The EU could help the nuclear industry with incentives such as tax breaks and credits, which are needed to build nuclear capacity in large volumes, according to a US-based energy advisor.

David Haverbeke, an energy lawyer heading the energy regulatory practice with Fieldfisher, doesn’t think nuclear currently is a huge priority for the EU considering its Green Deal, which focuses primarily on the role of renewables. Haverbeke argues that the nuclear industry needs to be more vocal on its carbon-neutral aspects to generate political leverage.

Robert Armour, a lawyer specialising in nuclear with law firm Gowling WLG, agrees that the EU is more likely to incentivise other areas of the power industry, such as green hydrogen, in part to compete with the United States’ 2022 Inflation Reduction Act and its focus on renewables. Incentives would also be fiercely fought by those who oppose nuclear, he said.

The EU’s challenge is balancing incentivising those who want nuclear while not generating significant opposition from those that do not, Armour said. This challenge is affected by broader debates about the Russia-Ukraine conflict and energy security and the rise of China.

How these debates play out will dictate whether the EU will be more aggressive in pushing for nuclear, and how much “political cover” there is for decision makers to push sector incentives and government support mechanisms, he said.

In one positive step for the nuclear industry, the EU in July 2022 recognized nuclear as “green,” and constituting an important part of the energy transition.

Although not directly incentivising nuclear, the recognition may encourage investors to consider nuclear investments as aligned with sustainable financing goals.

Still, the green designation has not been universally recognised. Austria last year raised a legal challenge to the EU decision.

Financing challenges

Canada generated headlines last year when energy firm Bruce Power issued a green bond for the renovation of one of its nuclear plants — a first. The bond was six times oversubscribed.

Green bonds could be issued by nuclear operators in Europe, but there is an important distinction between financing renovations of existing nuclear sites and financing a new nuclear project, the advisor said.

Romano thinks there will be slow and steady acceptance of nuclear as an investment proposition, and that its acceptance will grow as more countries adopt nuclear.

However, regardless of the EU government’s views, financiers still need convincing, Haverbeke said. Despite progress on both fronts, the challenges of nuclear waste disposal and storage have long been a cloud over the industry. Political parties including Germany’s vocal Greens party use the potential environmental destruction that could result from improper storage to argue against the technology.

Negative press dissuades lenders, but perhaps more important in determining nuclear power’s bankability is the expense of building proper storage. Until this issue is demonstrably solved, some investors and lenders will probably prefer renewables, Armour said.

Romano also argued that strict regulations — including excessive checks on the composition of water and steam discharged from plants, as well as innumerable quality control checks on technical equipment and plant structural integrity — turn off investors and financiers.

“It’s a very hard subject to bring up,” he said. “No other industry is regulated this much.”

Trimming nuclear red tape “could make things easier” for financiers, he said.

Thinking ahead

One lever that could be used to propel nuclear forward would be selling it as a potential carbon-free means of powering hydrogen generation. So-called ‘pink’ hydrogen would be cheaper to produce than hydrogen produced using solar PV, according to the Nuclear Energy Agency:

While much of the focus regarding hydrogen has been on ‘green’ versions of the fuel produced entirely with renewable energy, a real 24/7 hydrogen economy that generates hydrogen in large volumes cannot run on renewables alone, the advisor said.

Small modular reactors, or SMRs, could also move nuclear forward — as could nuclear fusion. Investors are financing research in both areas, but they are not yet putting their money into projects, the advisor said.

Investors make long-term investment decisions based on existing technology, he said. But large governments such as the EU can take a much longer-term view, the advisor said.

One step the EU could take to encourage nuclear fusion investing would be to update the EURATOM treaty, which was first established in 1957 to facilitate research into the nuclear industry, to include provisions for new types of nuclear technology, Haverbeke said.

Small modular reactors are perhaps more promising. They are a proposed class of nuclear fission reactors that are smaller than conventional nuclear reactors — with capacities up to several hundreds of megawatts. Momentum for them is growing across many European markets, Romano said.

These smaller reactors would be similar in capacity to gas-fired or coal-fired plants and could be plugged into existing grids.

SMRs would be easier to finance because they would have a shorter construction period and would be online generating energy and returns much earlier than larger plants, Romano said. This shorter return time would encourage lower interest rates, he said.

SMRs could feed heat directly to industries that need it, such as ceramic manufacturing, steelmaking or glass making. Some industrial firms in Poland are showing interest in using SMRs as off-grid “tailored” nuclear solutions that let them generate their own power. They are more suitable for industrial parks than a large giga-scale reactor, the advisor said.

SMRs are a “great new source of interest that we want to encourage and again deliver,” the advisor said.

Of course — as with renewables — the bankability of such a project depends on the creditworthiness of the offtaker, Armour said. If a factory goes bust, officials may have to determine how to connect such a “stranded” SMR to the grid.

There may be a “bubble” in the SMR sector with about 65 start-ups dedicated to the technology — most of which are destined to fail, Romano said. Only two have received regulatory clearance, as doing so takes years, he said.

“Right now, finance and science are not on the same page,” regarding nuclear power, which is “a major issue,” Romano said. Of course, if investors want short-term returns then nuclear is not the best investment, he said.

Many may prefer to stick to what they know, investing in bankable infrastructure projects such as bread-and-butter gas plants which have high predictability and certainty around deliverability.

But once the returns come, they will generate a steady flow of income for decades, Romano said.

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