Growing demand for nuclear power, but challenges persist
In the wake of the COP28 conference, the First Global Stocktake has called for an acceleration of low-carbon technologies, including nuclear energy. This renewed focus on nuclear power is not without reason, as various governments and agencies worldwide recognize its potential role in stabilizing the energy sector and achieving real-world decarbonization.
The International Energy Agency (IEA) is among the advocates for nuclear energy, believing that it can contribute to making the energy sector's journey away from unabated fossil fuels faster and more secure. The IEA's assertion is backed by their 2022 report, which states that nuclear energy is well-placed to help decarbonize electricity supply.
However, the question remains: Are asset owners turning their heads towards this energy source? While there seems to be a resurgence in interest in nuclear energy, the appetite remains relatively low. For instance, the UK master trust Nest has nuclear energy within its "investable universe", but has no current plans to invest in the infrastructure. Similarly, the Universities Superannuation Scheme (USS), the largest pension fund in the UK, has not made any decisions in respect of investing in new nuclear.
On the other hand, the Universities Superannuation Scheme (USS) has shown potential interest, with Gjermund Grimsby, chief advisor for climate change at KLP, acknowledging the importance of nuclear going into the future. However, he emphasizes the need for governments to develop the regulatory framework and cost efficiency for pension funds like KLP to commit to the energy source.
Meanwhile, the uranium spot price, a measure of investor interest in nuclear power, has seen a significant rise since March 2020. From $24.66 per pound, it has risen to $71.64 as of April 2024, indicating a growing interest among investors.
The shift in sentiment towards nuclear energy is not only due to the global push towards net zero but also the geopolitical events such as the war in Ukraine. The need for energy security has highlighted the potential role of nuclear energy in providing a stable and low-carbon energy source.
In Germany, potential investors in the nuclear energy sector include institutional investors participating in state investment programs with subsidies, low-interest loans, or guarantees. However, major energy companies like EnBW and RWE have opposed returning to nuclear power and focus on renewables instead. Industrial chambers such as the DIHK provide frameworks and information that could interest investors considering nuclear technology development, including nuclear fusion. Political and regulatory support aiming to reduce bureaucratic hurdles may attract new investors, especially in light of global trends toward nuclear energy expansion.
As we strive for a less carbon-intensive world, investors expect an uptick of investment in nuclear energy. Hortense Bioy, head of sustainable investing research at Morningstar, states that the opinion of many investors towards nuclear has "changed" in recent years. However, concerns about safety and waste management remain, as evidenced by the Fukushima Daiichi nuclear power disaster in March 2011, which led to a significant decrease in investment interest in clean nuclear energy.
In conclusion, while nuclear energy is experiencing a resurgence in interest, it is clear that asset owners are cautiously approaching this energy source. With the right regulatory framework, cost efficiency, and safety measures in place, nuclear energy could play a significant role in our quest for a sustainable future.
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