A technology-neutral discussion paper issued by Industry Super Australia (ISA), a body which represents union-backed industry superannuation funds, says nuclear must be part of the country's future energy mix.

Modernising Electricity Sectors - a guide to long-run investment decisions highlights some of the challenges facing Australia's energy network, and makes the case for industry fund intervention. Industry superannuation funds stand ready to work with the federal government to drive productivity and help solve the nation's energy crisis, the ISA said.

"While the climate debate rages on, Australia's aging energy infrastructure continues to fall further and further behind the rest of the world. Much of the heavy industry has already gone, costing jobs and driving power costs up even further," Industry Super Australia Chief Economist Stephen Anthony said.

Australia is faced with the trilemma of balancing the generation of cheap energy that is also reliable and low emission, the report notes, but the lack of a "genuine long-term technology neutral energy policy" is undermining fund investment.

"It is difficult to see how these problems can be resolved without some nuclear in the mix and the principles of optimality, fairness and merit would suggest it should not be discounted," it notes.

"Industry superannuation funds stand ready to allocate capital towards the electricity sector but need to see governments put in place a comprehensive energy policy framework that deals with reliability, competitiveness and emissions reduction aspects. This is vital to provide the necessary certainty for investors," it says.

The ISA's analysis is underpinned by the assertion that the best public policy outcomes come from laying down basic principles to think through the "relative merits" of alternative approaches. The report considers all major technologies including nuclear.

"To be clear, failure to exclude nuclear does not mean we are pro-nuclear any more than failing to exclude solar means we are pro-solar. We are just pro-the principle of optimisation," it notes.

Industry superannuation funds should attempt to "nudge" the sector towards a long-term solution that anticipates future government decisions, making strategic investments to fill gaps in networks and replacing existing fossil fuel generation with alternative technologies. The limitations of wind and solar technologies mean it is "doubtful whether they are the best means of providing all electricity at current levels of demand", it says.

The report also notes that Australia is "one of the few first world economies without nuclear power and experience in managing a nuclear plant," which it says is "undesirable" and "pre-empts the ability to make decisions between all major options for emission reduction." By not having the ability to incorporate nuclear energy into its mix, Australia carries a "much higher level of risk" than other "first world" countries with that option.

Australia is home to almost a third of the world's known uranium resources but is dependent on coal for almost two-thirds of its electricity production, making it more heavily dependent on coal for electricity than any other developed country.