Canada wants to build up to 10 new nuclear plants. Will our pension funds
When Tim Hodgson, Canada’s natural resources minister, announced the federal government’s plan to dramatically expand the nuclear energy industry, he cited a project in the U.K. as a model.
That plant, Sizewell C on the Suffolk coast of England, is set to cost 38.2 billion pounds ($72.3 billion Cdn). But a key detail is that private investors are taking a 55 per cent stake in the project by sharing the construction costs.
Hodgson wants to emulate that model to achieve his government’s lofty target of building up to 10 new reactors in Canada.
The prospect isn’t far-fetched: one of Sizewell C’s investors is La Caisse, the public pension fund of Quebec, which has taken a 20 per cent stake in the reactor through an investment of $3.2 billion Cdn.
But attracting this kind of investment isn’t easy, especially for risk-averse pension funds.
Nuclear energy in Western countries has developed a reputation for going eye-wateringly over budget. Hinkley Point C, the newest nuclear plant in the U.K., began construction in 2017 with an initial budget of $34 billion. It is now estimated to cost more than $64 billion.
Another recent project, Olkiluoto 3 in Finland, began construction in 2005 and took until 2022 to complete. Its cost ballooned from $5.1 billion to $17.8 billion.
WATCH | New nuclear strategy to boost jobs, economy:
Announcing Canada’s new nuclear strategy on Monday, Energy Minister Tim Hodgson said the government believes its new national strategy for nuclear power — which aims to build up to 10 new reactors over the next 15 years — will double employment in the sector, ‘going from roughly 90,000 jobs today to 180,000-plus jobs in the coming decades.’
“There’s a reason why the nuclear industry has had really very flat growth over the last couple of decades. It’s not about governments deciding not to build nuclear; in fact, there’s been a ton of government support for nuclear projects,” said Adam Scott, executive director of Shift Action, a Canadian initiative to push financial institutions and pensions to align their investments with green energy and climate action.
“It’s that the projects have gone over budget and been incredibly expensive at such a scale that it has limited the ability to keep building these types of projects.”
Removing investment risk
“If you want to have private sector investors, they need some de-risking,” said Yrjo Koskinen, professor of sustainable finance at the University of Calgary.
That means that convincing private investors — such as pension funds, investment firms, energy and infrastructure companies — to invest in nuclear plants, they need some protection from the risks of huge cost overruns or long construction delays.
Koskinen says someone has to pay for covering that risk, and it will likely be taxpayers or electricity consumers.
Pension funds in particular need a reduction in risk, because of their duty to protect their…
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