How to Invest in Nuclear Energy and the Uranium That Powers It
More than 50 nuclear power plants are operational in 28 states, but environmental and health concerns are holding back construction of new plants.
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What is nuclear energy?
Nuclear energy is energy produced by a fission or fusion reaction of atoms. These reactions generate heat, which is then used to generate electricity. While nuclear energy is a clean source of energy, it is not renewable like solar or wind.
The US is the largest producer of electricity from nuclear power, which accounts for about a third of the world’s electricity, and requires large amounts of uranium to fuel reactors across the country.
As of 2021, there were 93 commercial nuclear reactors at 55 nuclear power plants in 28 states, and the average age of the reactors was about 40 years, according to the Energy Information Administration. At this age, the conventional wisdom is that new reactors should be built to replace them, but their actual operational lifetimes are unknown.
A nuclear power plant can take about five to seven years to build and cost billions of dollars, compared to a natural gas-fired plant, which would take about a third of the time and a fraction of the price.
In the US, nuclear power accounted for about a fifth of the total 4,116 billion kilowatt hours produced in 2021, according to EIA data.
RRenewable energies include solar and wind power, and both are dwarfed by nuclear power in electricity generation.
Energy Information Management, Canva
What is the source of nuclear energy?
Uranium and plutonium are the main minerals used in generating a nuclear reaction as they are considered easier to control, although uranium is more commonly used. In order for uranium to be used as a fuel, it must go through a process. After the ore is mined, the uranium is ground and refined, making it what is known as yellow cake. This yellow cake is then mixed with fluoride and then goes through an enrichment process and the enriched uranium can be used to make weapons or to make fuel to power reactors. After the uranium fuel is used up, it can either be reprocessed or stored permanently.
How does nuclear energy generate electricity?
A nuclear reactor works in the same way as a concentrated solar array using mirrors or a coal-fired power plant to generate electricity. Uranium is typically placed in metal rods – which are replaced every 12 to 24 months – and these control rods are manipulated to slow or speed up the reaction. Atoms of uranium are split, creating heat, and that heat is used to boil water, creating steam that drives turbines to create electricity.
Nuclear Fusion vs Nuclear Fission: What’s the Difference?
Nuclear fission occurs when a neutron splits an atom, releasing tremendous energy. Atoms are split and neutrons are also released, which then split other atoms, creating what is called a chain reaction.
Nuclear fusion occurs when two atoms combine to form a heavier atom. The energy released by fusion is greater than that generated by fission. However, fusion reactions are more difficult to sustain over long periods of time because it requires enormous amounts of pressure and temperature to bind atoms together.
Which countries produce the most uranium?
According to the World Nuclear Association, Kazakhstan was by far the largest uranium producer in 2021 with 21,819 tons, followed by Namibia (5,753 tons), Canada (4,693 tons) and Australia (4,192 tons). A total of nearly 57,000 tonnes were produced that year, down from a peak of about 74,400 tonnes in 2016.
The US lags far behind internationally in uranium production.
World Nuclear Association, Canva
How dependent is the US on uranium imports?
Uranium production in the US is insufficient to meet the needs of the country’s nuclear power plants. Almost all of the 46.74 million pounds of uranium purchased by nuclear power plant owners and operators in the US in 2021 was imported, with just 5 percent coming from the US, based on World Nuclear Association data. Important imports came from Kazakhstan (35 percent), Canada (15 percent), Australia (14 percent), Russia (14 percent) and Namibia (7 percent).
How to invest in nuclear energy
One way to invest in nuclear power is to focus on which companies produce electricity from nuclear power. Another option is to invest in companies involved in mining and processing uranium, similar to investing in lithium.
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Companies mining in the countries that export the most uranium – Kazakhstan, Canada and Australia – might be worth keeping an eye on, while those operating in countries with increasing production are also worth watching as the total annual production is declining. Below is a chart of spot and long-term prices from 2000 to 2022, compiled by the World Nuclear Association, showing that prices have stabilized in 2022 after peaking in 2007-2008.
Uranium prices peaked in 2007-2008 but have fallen sharply since then.
Screenshot via the World Nuclear Association
While spot prices for uranium are not readily available on the open market, investors can monitor uranium through stock indices, ETFs, and individual stocks.
indices
The WNA Nuclear Energy Index tracks publicly traded companies worldwide involved in the reactor, utility, construction, technology, equipment, services and fuel sectors. The index has a large weighting of companies in the US, particularly utilities that generate electricity from nuclear power.
The MVIS Global Uranium & Nuclear Energy Index has represented companies active in the uranium and nuclear energy industry since 2006. The Index’s weighting is more biased towards utilities and less towards uranium mining companies.
ETFs
ETF holdings are generally focused on companies that operate nuclear power plants. For example, PNM Resources (NYSE: PNM), a New Mexico-based public utility, operates the US’s largest nuclear reactor near Phoenix.
The VanEck Uranium+Nuclear Energy ETF, for example, holds shares in PNM Resources, but also in many utilities based in other countries, such as Electricite de France and Korea Electric Power Corporation. American depository receipts for most of these utilities are available for trading on US exchanges.
Stocks
Power producers like Duke Energy (NYSE: DUK) rank nuclear power as the largest zero-carbon or low-carbon source of electricity generation. But some companies, like Constellation Energy (Nasdaq: CEG), have plans to shut down nuclear reactors, indicating a reliance on renewable and fossil fuels for power generation.
To bet purely on uranium, the nation’s largest producers of the radioactive material are outside the US, and consequently some of the largest mining companies are likely to be based abroad. Few operate in the US. Additionally, there are a limited number of publicly traded companies as some of the largest uranium producing nations such as China and Russia tend to keep production under government control. China has taken stakes in uranium mining companies in other countries such as Kazakhstan.
Some companies involved in mining and processing uranium are:
- Canada-based Cameco Corporation (NYSE:CCJ), which operates the world’s second largest high-grade uranium deposit in northern Saskatchewan;
- BHP (NYSE: BHP), which is primarily known for mining precious and base metals in Australia but has uranium mining assets in remote areas; and,
- Texas-based Uranium Energy (NYSE: UEC) has a processing facility in the state and mining projects in the United States, Canada and Paraguay.
What are the disadvantages of nuclear energy?
Nuclear power is considered a clean source of energy due to its low carbon emissions, but generating nuclear power – particularly when building new reactors – poses challenges due to environmental and health risks from radiation exposure. There has been opposition to building new reactors, and some of the older ones are being shut down with no plans for replacement.
Nuclear meltdowns at Three Mile Island in 1979, Chernobyl in 1986, and Fukushima in 2011, as well as the disposal of nuclear waste, have raised public concerns about the safety of nuclear power plants and contributed to an unwilling or reluctant Americans to speak up to embark on nuclear energy.
What is the end result of investing in nuclear energy?
Despite a slowdown in new nuclear power plant construction in the US, global demand for uranium continues to grow and uranium prices have stabilized in recent years.
While there aren’t many new reactors planned for construction in the US, some countries have plans to build up their nuclear energy infrastructure and there may be opportunities for investment in companies that build turbines and reactor plants. Some companies in countries like Thailand and India make nuclear reactor parts for shipment overseas, but that’s a niche market. Some entrepreneurs are planning light commercial use of nuclear reactors for small facilities such as hospitals.
Nuclear power has proven to be a carbon-free source of energy and could help the US and other countries meet their climate change goals, but widespread safety concerns are somewhat clouding the future of nuclear power investment.