Is this the energy play of the decade?
Clean and abundant energy is possible
Folks, nothing is sweeter than making a buck while contributing to the greater good.
The narrative right now is about getting the planet into a state of carbon neutrality. At the same time, we need to improve energy access for more humans and continue economic growth.
This is the perfect storm brewing.
As the planet races towards decarbonization, emerging markets - mainly Asian economies of China and India - are on-ramping more people and industries to a power grid fueled by coal and fossil fuels.
It’s placing a bright spotlight on these two carbon-heavy energy sources.
Our conundrum is that we need development and improvement in people’s lives, but this time with efficient and clean energy.
We’ve made strides in harnessing the sun, wind, geothermal activity, and other natural sources for our energy needs.
Yet, there’s one standout resource whose potential remains untapped: Uranium and its use in producing nuclear energy.
Nuclear energy has a bad rep.
It brings back memories of the disasters at Chernobyl and Fukushima, but take a closer look, and you will find a source of energy that is cleaner, safer, and more efficient than any of the alternatives currently in use.
As mainstream dialog around it slowly turns positive, now could be the time to explore the investment potential of uranium, the commodity and chemical element that fuels nuclear power plants.
Nuclear’s notoriety
Let’s address the elephant in the room: Chernobyl and Fukushima.
There’s no denying the magnitude of these tragic events.
What’s also true is that when you look at the numbers, fossil fuels kill millions annually, dwarfing the death toll of all nuclear disasters combined.
Here’s some insight from OurWorldinData:
”Nuclear energy results in 99.9% fewer deaths than brown coal; 99.8% fewer than coal; 99.7% fewer than oil; and 97.6% fewer than gas. Wind and solar are just as safe.”
We can’t imagine nuclear energy without envisioning toxic sludge, radioactive frankenfish, and Homer Simpson’s disaster waiting to happen.
Today's improved “dry casks” for storing spent radioactive waste can withstand substantial impacts, earthquakes, tornadoes, etc. There have been no accidents (or deaths) with these storage mechanisms.
It’s important to note that all forms of electricity produce waste - carbon released into the atmosphere. Nuclear energy’s residuals are effectively “bottled up” and stored away without coming into contact with the environment.
Expensive to build, cheap to run
Building a nuclear power plant is expensive and very complex.
Most upfront capital costs arise from the thousands of laborers required, materials (primarily steel and concrete), and the components and systems needed for the plant's cooling, ventilation, and other controls.
The economics of operating the plant, in relation to the amount of energy produced, make nuclear energy a very attractive solution - especially in comparison to the ongoing costs of coal and gas-firing plants. The fuel, operations, and maintenance (including managing spent uranium) are relatively low, making this an economically attractive energy source.
Momentum in the markets
Uranium, the critical resource for producing nuclear energy, is showing signs of emerging from a 10-year bear market. The price has risen nearly 50% since the beginning of 2023. Demand for it, driven by its increased use in nuclear reactors, is expected to rise 28% by 2030.
This is where the uranium is going:
China has earmarked $440 billion to build 150 reactors by 2035. For context, there are 440 reactors currently operational worldwide.
Europe included nuclear energy as part of its sustainable investment taxonomy, prioritizing its role in the continent’s future
Japan will be reopening its nuclear reactors after seeing rising energy prices since the Fukushima incident
India plans to more than triple its nuclear energy production, fulfilling 9% of their power consumption by 2047
Lastly, geopolitical factors have become influential on the price of uranium. The US, Russia, and China tug-of-war alongside localized risks in uranium-producing countries like Niger will contribute to supply stressors.
Potential headwinds
There is still a lot to overcome in terms of public perception and regulatory hurdles for nuclear to play a substantial role in the planet’s energy mix.
Other pressures include the advancements in using alternative energies that could prove more cost-effective, like the global race to mine Helium-3 from the moon’s surface to produce nuclear energy.
Regardless, it’s hard to see a world that doesn’t significantly increase its nuclear energy capacity, driving up demand for uranium as a critical energy source to fuel the planet’s new phase of carbon-friendly growth.
How to invest
Investors can participate in this energy trend by buying into mining companies, physical uranium or nuclear energy producers. The most straightforward approach for U.S. investors would be to participate in any of these ETFs exposed to uranium:
Global X uranium ETF (URA)
Sprott Uranium Miners ETF (URNM)
VanEck Uranium+Nucleur Energy ETF (NLR)
Did I miss something? What’s your take on nuclear energy? Do you plan on making uranium a part of your investment portfolio? Leave me a comment or hit reply if you’re reading this from your inbox - I would love to hear from you!
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