Nuclear energy has a history on British soil, but what does its future hold?

The UK was the birthplace of commercial nuclear energy, but now generates only a small portion of its electricity from nuclear power. Major investments are underway to change this situation.

The country once had more nuclear power plants than the United States, the Soviet Union, and France combined. Although it was a world-class producer until 1970, it has not completed a new reactor since Sizewell B in 1995.

Today, the country is crowned not just for being a nuclear power leader, but for being the most expensive place in the world to build nuclear projects.

The latest data from the International Energy Agency shows that nuclear power will account for just 14% of the UK’s electricity supply in 2023, leaving it behind its European peers and far behind front-runner France’s 65%.

The ambition is to change this and ensure that a quarter of the UK’s electricity comes from nuclear power by 2050. Nuclear power is seen as an attractive gas, a low-carbon, constant energy source that can serve as a baseload to complement intermittent power sources such as renewables.

“We’re seeing very clear momentum,” Doreen Abeysandra, founder of consultancy Fresco Cleantech, told CNBC. This is partly due to geopolitical tensions that have pushed energy security and independence onto the public agenda.

But Britain’s Nuclear Regulation Taskforce called for urgent reform after identifying “systemic deficiencies” in the country’s nuclear framework. The report found that fragmented regulation, flawed laws and weak incentives are holding the UK back as a nuclear power. The government has committed to implementing the task force’s guidelines and plans to present its plan within three months.

Britain is widening its bets on large proven nuclear projects and smaller next-generation nuclear reactors known as small modular reactors (SMRs).

British company Rolls-Royce has been chosen as the country’s preferred partner for the SMR, which is essentially a containerized nuclear reactor designed to be manufactured in a factory. Many of them include passive cooling techniques, which proponents argue will be safer and cheaper.

Nuclear power has long been criticized by environmentalists because of its radioactive waste and disasters like Chernobyl. In fact, Windscale, Britain’s first commercial plant, melted down in 1957, making it the worst nuclear accident in history.

Most SMRs use light water reactor technology, recall the planned large-scale nuclear power plant Sizewell C. “It has just been scaled down,” Abeysundra said, and trials and tests are being carried out.

Other designs, known as “advanced” reactors, are more experimental. For example, they modify the cooling solutions and solvents typically used in the separation and purification process of nuclear materials.

The UK’s first SMR is due to be built in Wylfa, Wales, but a completion date has not been announced. The site will house three SMRs and will expand over time.

In September, the country signed an agreement with the United States that would strengthen trade ties on nuclear power and streamline licensing for companies wanting to build on the other side of the Atlantic.

But “first of all, at the moment there is not a single SMR that is actively producing electricity with four revenues. They will all be realized in the 30s at best,” Ludovico Capelli, portfolio manager for listed infrastructure at Van Ranschot Kempen, told CNBC.

He said SMRs are a “game changer” because of their ability to power individual factories and small towns, but the day of commercial operation is too far away. From an investment perspective, “it’s still a little scary,” he added.

Paul Jackson, EMEA global market strategist at Invesco, added: “We are still looking at large power plants” to ensure the large baseload needed to offset the intermittency of renewables.

Mr Jackson said there was “probably” a role for SMRs – “obviously we can be more agile” – but their rollout would take time, casting doubt on the UK’s ability to be a leader in nuclear power, with France and China already miles ahead.

British government agency Great British Energy Nuclear plans to identify sites for additional large-scale plants and has already acquired sites in Gloucestershire, western England, and Wales.

A spokesperson for the UK government’s Department for Energy Security and Net Zero told CNBC: “We are breaking the tradition of no new nuclear power being introduced to usher in a golden age of nuclear power, securing thousands of good, skilled jobs and billions of dollars in investment.”

“Sizewell C will provide clean electricity for at least 60 years, the equivalent of six million households today, and the UK’s first small modular reactor at Wylfa will provide the equivalent of three million homes and provide energy security,” they added.

Britain has a strong heritage to build on. It pioneered new financing mechanisms, such as the contract for difference used for Hinkley Point C, that made large nuclear projects viable to invest in, reducing reliance on direct government funding.

This mechanism guarantees a fixed price for the electricity generated over an extended period of time, reducing the risk of investing in an industry known for running over time and over budget. Hinkley Point C was originally estimated to cost £18 billion (more than $24 billion), but that figure has gradually risen.

“This fixes one part of the equation: price risk, but the second risk is construction delays,” Cappelli said of nuclear investment.

The Regulated Asset Base (RAB), first used for nuclear power at Sizewell C, attempts to redress this. Investors receive compensation from the day they write a check, not the day a nuclear project begins operations. Sizewell C is expected to cost £38bn.

Investors in the private market are increasingly interested in next-generation nuclear power as a way to offset the surge in energy demand driven by AI, and as a result many young companies are trying to build facilities. Perhaps the most famous is Oklo, a US company that went public through a special acquisition company (SPAC) founded by OpenAI’s Sam Altman.

Nucleo, Britain’s promising advanced modular nuclear reactor that uses lead for cooling, will move its headquarters from London to Paris in 2024. This is a strategic move to further expand our footprint in Europe. At the time, the company told World Nuclear News it planned to have a commercial nuclear reactor operating in the UK by 2033, but the company has since scaled back its efforts in the UK.

Meanwhile, Tokamak Energy and First Light Fusion are based in the UK. Both focus on nuclear fusion, the process of combining atoms to generate electricity, but this technology has not yet left the lab. All nuclear power today comes from nuclear fission, where atoms are spewed out. In June, Britain announced it would spend £2.5 billion on the world’s first fusion prototype.

The UK faces the challenge of accessing the right talent, which is critical to effectively scaling up projects. The country is known for its world-class universities and technological know-how, but “it’s just book knowledge,” says Van Ranschott Kempen’s Capelli.

“What we need is real-world expertise, and what we lack is simply because we probably haven’t done it in a long time,” he says.

For Abeysundra, there is one area where the UK stands out. That’s the idea. “There’s so much knowledge, innovation and that can-do attitude that you don’t see very often in other countries,” she said, pointing to Britain’s pioneering role in the industrial revolution and establishing offshore wind energy.

The UK government identified nuclear power as a key element of the future clean energy workforce in its Clean Energy Jobs Plan, published in October, while its National Roadmap for Nuclear Skills 2024 focuses on apprenticeships, PhDs and upskilling mid-career workers. Industry-led initiatives such as the Energy Skills Passport are also supporting oil and gas workers to develop green skills.

But perhaps the most difficult issue is the supply chain.

Uranium, the fuel for nuclear reactions, is controlled by just four countries, including Russia. Global uranium demand could rise by nearly a third by 2030 and more than double by 2040, according to the World Nuclear Association, further increasing dependence on some countries and increasing pressure on developers.

The UK government has earmarked funding to build supply chains and pledged to stop imports of nuclear fuel from Russia by 2028. Fuel for Sizewell C will come from Europe or “Western suppliers,” Cappelli noted.

But for him, it begs the question: How safe is nuclear energy really? “We have to build nuclear power plants, but we also have to build value chains,” Cappelli added.

Nuclear energy requires workers, expertise and funding, but the supply chain is also important, he said. Otherwise, “the same problems we had with gas” would arise, with the UK relying on just one supplier. Uranium is used instead of gas.