top of page
  • Writer's pictureRealFacts Editorial Team

The Future of Nuclear Energy: Investment Potential and Challenges Ahead


Nuclear power plant

As the global energy landscape evolves, the debate around sustainable and reliable energy sources intensifies, especially sensitive to the topic of climate change. With the urgent need to address climate change and ensure energy security, nuclear energy is increasingly being reconsidered as a viable solution. Despite its potential, nuclear power has faced significant hurdles, including public perception, high initial costs, and political challenges. Surprisingly it should be noted that it is one of the far cleaner sources of energy despite its image, as what the media puts into perspective its worst possible outcome. This article explores the current state of nuclear energy, the factors influencing its resurgence, and the investment opportunities it presents. 


Nuclear energy was once hailed as the future of power generation. During the 1950s, 60s, and 70s, many countries embraced nuclear technology, building numerous reactors. However, accidents at Three Mile Island (1979) and Chernobyl (1986) severely impacted public confidence and halted new nuclear projects for decades. The industry recovered in the early 2000s when oil was becoming too expensive to import at $120 a barrel and the surge in progression was disrupted by the Fukushima disaster in 2011, where an earthquake and tsunami damaged and compromised 11 nuclear reactors off the shore of Japan. 


The global energy crisis triggered by Russia’s invasion of Ukraine has reignited discussions about “energy independence” and the role of nuclear power. The instability in energy supply chains and rising fossil fuel prices have underscored the need for reliable and domestic energy sources. As a result, nuclear energy is being reconsidered, with a notable increase in uranium prices indicating changing investor sentiment. Demand is high and thus prices have risen within this commodity, due to the difficulty to increase supply the price has also increased. Several factors have led to ramp up in production of supply recently and fulfill the deficit.


Uranium price graph

Uranium, the fuel for nuclear reactors, has experienced significant price fluctuations over the past decades. Currently, uranium prices are reflecting renewed interest with Investors taking their money from other renewables and putting it into uranium. Investors are betting on the future of nuclear energy, as indicated by the top-performing status of uranium among commodities over the last 12 months, as the spot price (the blue line) is higher than the long term price (the green line). 


Global uranium supply is concentrated in a few countries, with Australia, Kazakhstan, Canada, Russia, and Namibia holding the largest reserves, and the USA with the most reactors with 93 as of May 2023. Geopolitical tensions and regulatory restrictions in these regions can impact supply chains. For instance, the US Senate’s recent legislation to ban Russian uranium imports which lowered supply highlights the geopolitical risks affecting supply.


graph of uranium construction by country

Despite the challenges in building new reactors, there is a growing recognition of nuclear energy's role in achieving net-zero carbon targets. The US Department of Energy’s $500 million commitment to domestic uranium supply and the UK's plans to increase nuclear production to 24 gigawatts by 2050 reflect this renewed focus. There is a large deficit. There are currently several reactors being built by country respectively. 


● China - 21 

● India - 8 

● Turkey - 4 

● Egypt, South Korea, Russia - 3

● Bangladesh, Japan, UK, Ukraine - 2 

● And many others including the US have 1 under construction 


Uranium shortage graph

Nuclear power plants are known for their long lifespan which can operate for an average of 80 years, they also have very low operating costs during those years compared to other sources of energy. However, the upfront capital costs and long construction times are significant barriers. From the start of nuclear power plants from 1950-2020 a project takes around 4-18 years to construct (that doesn't include the years of preparation). Projects are often completed over budget and behind schedule, when they already are the most expensive initial investment. This has deterred investors for years.


Cost of energy sources graph

Despite the large sum of capital given up in the early stages we can see that the investment pays itself off quite well, and has a long average span of 80 years to produce energy with little operational and maintenance costs (O&M), and fuel costs. Much lower than the age old natural gas and coal, and are also more efficient as capturing energy then renewables like wind and solar, with a staggering 92.5% capacity, 2x the capacity of coal (40.2%) and wind (35.4%) and 3x the amount of solar (24.9%).


Cost of investments per energy source graph

SMRs are emerging as a potential solution to these cost and time constraints. SMRs or Small Modular Reactors are smaller realtors that produce about a ⅓ of the energy of a typical reactor, however are much cheaper and can potentially be built in a factory lowering construction times and costs. Currently, only 2 SMRs are operational, with 4 being constructed, however over 70 new designs are being developed, to better this solution. Companies like NuScale Power (Ticker: SMR) and the luxury car brand Rolls-Royce (Ticker: RR) are leading this innovation. 


These SMRs have had some setbacks. NuScale was constructing 12 SMRs in Utah, USA. It started in 2015 with an expected cost of $3 billion and generate 600 MW, in 2023 costs drastically went over budget to $9.3 billion in 2023 and only produced 462 MW, and took 64% longer than expected. This wasn't the first time a SMR project has gone over budget and over time, for example Flamanville Nuclear Power Plant in France.


SMRs purpose is to achieve economies of scale and to be able to produce reactors in a factory if they can't get to that point or if something changes to reduce cost and time problems. We see this investment as speculative and advise waiting for further development. 


Since 1950 we have been producing nuclear energy through nuclear fission, or the process you may know of as the splitting of an atom and as a result a large amount of energy is given off. A new type of nuclear energy has been discovered, which is fusion, which is defined as “the process by which two light atomic nuclei combine to form a single heavier one while releasing massive amounts of energy.” To understand this concept you can watch this video from Helion, a pioneer in this technology, Helion's approach to fusion: How it works (youtube.com). 


Fusion is considered the holy grail of energy technology, and has several investors and governments backing it. Despite being in the experimental stage for decades, recent advancements have renewed interest in fusion. There are over 60 startups looking to become the leaders in this space with rising investments in the space reaching $6.2 billion last year, those that you should watch are Helion Energy and Commonwealth Fusion Systems, raising a total of 2.3 billion last year. 


These startups have ambitious goals, with power delivery to the grid projected by 2028 and 2030, respectively. In the past year, successful experiments have produced net energy gains, sparking optimism in investors and other companies. While direct investment in fusion startups is limited, as they are not publicly traded, companies like Cenovus Energy and Babcock International which are publicly traded, have invested in fusion technology. Monitoring these developments can provide insights into the future potential of fusion energy. 

Investment Opportunities in Nuclear Energy 


1. Uranium Producers and ETFs 

Investors can gain exposure to the nuclear sector by investing in uranium producers or ETFs that hold physical uranium. Investing in this opportunity can give good exposure to those leading the charge in filling supply and demand deficits. The Sprott Physical Uranium Trust Fund and the Global X Uranium ETF are notable examples. Leading uranium miners include Centrus Energy, Cameco Corporation, and Denison Mines. 


2. Utilities and Energy Producers

Diversified utilities that operate nuclear reactors offer another investment avenue. Companies like Enel, NextEra Energy, and Duke Energy Corporation have significant nuclear assets in their portfolios. These investments provide exposure to nuclear energy while benefiting from a broader energy mix. 


3. Equipment Manufacturers and Service Providers 

Companies that supply equipment and services to nuclear plants also present investment opportunities. GE Vernova, a spin-off from General Electric, includes GE Hitachi Nuclear Energy, a leading reactor supplier. Other notable companies in this space are Centrus Energy Corp. and BWX Technologies, Inc. 


Nuclear energy, despite its challenges, is poised for a resurgence as the world seeks sustainable and reliable energy sources. The high initial costs, regulatory hurdles, and public perception issues continue to pose significant barriers. However, the potential for long-term gains, driven by advancements in technology and shifting geopolitical landscapes, makes nuclear energy an attractive investment opportunity. 


Public perception remains a significant hurdle for nuclear energy. Safety concerns, fueled by past accidents, continue to influence public opinion and policy decisions. Additionally, the fossil fuel industry has lobbied against nuclear power, further complicating its adoption. 


Investors have several options to consider, from uranium producers and utilities to equipment manufacturers and fusion startups. As the energy sector evolves, staying informed and strategically investing in nuclear energy could yield substantial returns. The journey towards a nuclear-powered future may be fraught with challenges, but the potential rewards make it a path worth exploring.

0 views0 comments

Comments


bottom of page