Nuclear Power: a multi-decade
investment story!
The re-emergence of nuclear power as a long term investment theme and the looming uranium shortage is excellent news for nuclear reactor builders and young uranium explorers and mining companies, and their investors.
Why I like nuclear energy?
Let me give you some reasons why you may want to consider investments in nuclear energy and uranium mining:
- the world’s energy needs on the increase
- volatility in oil and gas exploration and prices likely to continue
- rising concerns over global warming remaining on the political forefront
Without question, nuclear power offers environmental advantages over fossil fuels and will play an increasingly important role in global energy supply.
Concerns about climate change have thrust nuclear energy, which relies on uranium as a fuel, back into the spotlight as a potential major source of emissions-free energy. Supporters also claim that nuclear energy plants don’t require huge amounts of land compared to on-shore wind farms or tropical forests destroying biofuel crop plantations.
Despite heavily subsidising renewable energy, the Government remains opposed to spending taxpayers money on equally low-carbon nuclear power. According to Matthew Farrow, head of energy planning at the CBI:
"Nuclear is actually inexpensive in comparison to offshore wind farms. In terms of power output and carbon saved, nuclear could be two to three times cheaper than offshore wind". "Because of this we think it should take its place alongside renewables and fossil fuels as part of a balanced energy mix."
Globally, according to the Nuclear Energy Agency (NEA), demand for electricity is expected to rise by 2.5 times over the next 40 years. It suggests that nuclear energy will play an increasingly important role in order to satisfy that demand.
How to invest in the uranium – nuclear energy theme?
Once you are convinced that uranium and nuclear energy is one of the most important investment themes of the next few decades then you would probably want to find ways to add investments in this area in your retirement portfolio. Once that decision has been made the next step should be to figure out the best way(s) in.
Obviously there are many companies out there involved with the various aspects of uranium mining till nuclear energy generation, including the design, construction and maintenance of nuclear power plants. Most of these companies, however, are not listed in the United Kingdom.
The decision then is, in order to secure coverage to the uranium and nuclear power multi-year investment theme, to decide whether to invest in:
- companies that track the uranium spot price:
- uranium mining and nuclear power related industry ETFs:
- URA, which tracks the Solactive Global Uranium Index
- URAX, which tracks the World Uranium Total Return Index
- NLR, which tracks the DAXglobal Nuclear Energy Index
- specialist uranium and nuclear power related investment funds
- emerging uranium miners
- nuclear power equipment producers
- electrical utilities that own nuclear plants
or, a combination of any of the above. A bewildering choice, perhaps . . .
What is driving this multi-decade investment theme?
Let's first consider in more detail some of the real driving forces of this multi-decade investment theme, including:
The emerging uranium fuel gap
There are already lots of reactors out there (441), and, a major building boom is underway with something like 400 more.
So, the key question is . . .
where will the world nuclear industry obtain the uranium fuel for all these new reactors?
For instance, the US’ annual uranium use for its nuclear energy industry is approaximately 55 million pounds. The US produces less than 4 million pounds of nuclear fuel – about 7 per cent – and imports the rest. A large amount of the nuclear fuel imported into the USA has come from decommissioned nuclear warheads from Russia.
However, as a result of Russia's diminishing secondary supplies of uranium from decommissioned nuclear weapons and increasing stocking up on uranium by utilities world-wide the price of uranium is trending upwards.
Both the uranium mining and purchasing communities agree that the world uranium mining industry currently lacks adequate capacity to meet increasing demand.
Mined uranium may become 'scarce' if no new mines are commissioned soon. Once the market realise this uranium prices will increase.
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