24 Jan 2023
As the world transitions away from carbon, nuclear energy has emerged as a compelling complement to sustainable, but less reliable, sources of energy like wind and solar.
As the world transitions away from carbon, nuclear power has emerged as a compelling complement to sustainable, but less reliable, sources of energy like wind and solar. Nuclear power can be divisive. Many people do not want to live near nuclear facilities because the accidents at Three Mile Island, Chernobyl and Fukushima loom large in popular memory. Despite these events, nuclear power is an incredibly safe and efficient form of power generation – one that has become the second largest source of low carbon power in the world (1).
Nuclear power is a growing industry “intrinsically tied to National Security” according to the U.S. Department of Energy, making it a force in global economics, politics and beyond (2). In recent decades, the U.S. has ceded its competitive advantage in nuclear energy to China and Russia— something that politicians and industry leaders alike seem motivated to rectify (3). That’s a big deal considering that the global market for nuclear power could triple by 2050 (4). Much of this growth is anticipated to come from increased demand from emerging markets.
Engaging emerging markets with exported nuclear energy opens both financial opportunities and long-term strategic relationships. This is no surprise when you consider that the construction, operation and decommissioning of a nuclear facility can take years. If the U.S. can take a leading role in developing these markets, it can support national security and remain a leader in the global energy marketplace.
Russia and China are both vying for the same position, increasing their nuclear energy production, and developing relationships around the world. China, for example, has added 21 reactors in the past 5 years, with 19 more in the works. China also recently revealed its first domestically developed nuclear reactor (5). According to the China National Nuclear Corporation, the reactor can generate 10 billion kilowatt-hours of electricity each year and cut carbon emissions by 8.16 million tons (6).
To understand the importance of nuclear power, let’s start with how the power is generated. In the most basic sense, nuclear reactors heat water to create steam which spin turbines to create electricity. The process of heating the water is where things get exciting – literally the nucleus of the atom gets excited. Reactors use a process called fission to split the atoms of uranium (one of the heaviest elements) to generate the energy that heats the water. In addition to creating heat, this process also creates radiation, which can cause cancer and death in high enough doses (7).
Currently, interim storage facilities are used to manage nuclear waste until its radioactivity is decreased such that it can be disposed of. Storage containers, age, however, and when they do, they can leak toxic materials. New technology is offering better storage solutions. Specifically, storage of waste in deep geological repositories is more secure and environmentally friendly. In Finland, the world’s first ever deep geological repository for spent fuel is under construction. The repository, named Onkalo, “is a game changer for the long-term sustainability of nuclear energy,” according to Director General Rafael Mariano Grossi (8).
Nuclear power faces opposition from environmentalists specifically because of the challenges associated with disposing of radioactive waste – the byproduct of nuclear fission. No process of creating energy is completely devoid of risk or environmental damage – coal burns fossil fuels that warm the environment; hydropower disrupts ecosystems; and even difficult-to-recycle solar panels will end up in landfills at the end of their 30 – 35 year useful life. By the year 2050, “78 million metric tons of solar panels will have reached the end of their life, and that the world will be generating about 6 million metric tons of new solar e-waste annually” (9).
While nuclear power has opponents and downsides, switching from coal to nuclear power is a critical part of a low-carbon future. In fact, the only greenhouse gases released in the production of nuclear power are those associated with the “construction, mining, fuel processing, maintenance, and decommissioning” of a plant. Another perk of nuclear power plants is that they offer a much higher capacity (that is, a greater percentage of time that the power plant spends producing energy) than both renewable energy sources and fossil fuels.
Consider that in the United States in 2016, “nuclear power plants, which generated almost 20 percent of U.S. electricity, had an average capacity factor of 92.3 percent, meaning they operated at full power on 336 out of 365 days per year” (10). This is much different than other power sources including U.S. hydroelectric systems, which delivered power only 38.2 percent of the time (138 days per year); wind turbines, which delivered power only 34.5 percent of the time (127 days per year); and solar electricity, which delivered power only 25.1 percent of the time (92 days per year) (11). Coal and natural gas plants generally only generate power about 50 percent of the time.
Despite all of the upsides, nuclear power isn't a perfect or easy energy solution. Building a new nuclear reactor is expensive, with high upfront costs before the project generates any revenue. The industry is also highly dependent on the uranium supply chain and the United States produces on 5% of the uranium purchased by domestic nuclear power producers (12). 95% of all uranium used by nuclear power plants must be imported – largely from Kazakhstan, Canada, Australia and Russia.
Investors should know that even in a politically divided America, both “congressional Republicans and Democrats have shown their support for a robust domestic reactor fleet and for a strong civil nuclear export program,” according to EnergySource (13). As the U.S. ramps up its efforts to meet climate change goals, investors have the assurances of a growing and evolving nuclear energy market.
Nuclear power will be a critical component of a low-carbon future. Investing in nuclear energy can mean investing in the utilities and companies that run the nuclear reactors and create power from nuclear energy or it could involve the nuclear energy supply chain - like uranium mining. Start your investment analysis with a search:
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