In an era of increasing climate awareness and a need for low-impact or renewable power sources, cleantech power is growing in adoption and day-to-day visibility. Electric vehicles (EVs) are rapidly gaining popularity, as is consumer rooftop solar. The push to “electrify everything,” e.g. replace gas heaters and furnaces with electric heat pumps, replace gas-powered vehicles with electric, has presented a viable consumer-driven pathway to significantly reduce global CO2 emissions.
The primary concern with renewables is reliability and storage; solar can create plenty of power but only when the sun is out, and battery storage systems remain expensive (at least as compared to the cost of grid-provided electricity). Nuclear power largely solves both those issues. It both avoids the fickleness of many renewables and doesn’t require short-term storage for times when a wind turbine is inoperable or the sun has set. Yet you hardly hear anyone talk about nuclear energy stocks.
This is a bit odd given that nuclear power is virtually emissions-free energy, takes up very little land, consumes very little fuel, contributes to fuel diversification and the stability of the grid, creates skilled, well-paid jobs, and produces very little waste. It‘s the technology that solves both energy poverty and climate change. If you are concerned about climate change, you should be a supporter of increasing nuclear power.
Then there is the important issue of reliability. Nuclear power plants on average operate at full power 336 out of 365 days per year. Hydroelectric systems deliver power on average 138 days per year, wind turbines 127 days per year and solar electricity only 92 days per year. Even plants powered with coal or natural gas only generate electricity about half the time for various reasons. Nuclear power is a clear leader in reliability.
The Problem with Nuclear
In the public’s perception, there are two issues with nuclear power: the risk of accidents, and the question of disposal of nuclear waste. There have been three large-scale accidents involving nuclear power reactors since the onset of commercial nuclear power in the mid-1950s: Three-Mile Island in Pennsylvania, Chernobyl in Ukraine, and Fukushima in Japan. It is important to highlight that these incidents all represent old technology.
Nuclear waste disposal, although a continuing political problem in the U.S., is not any longer a technological problem. More than 90% of spent fuel could be recycled to extend nuclear power production by hundreds of years, and can be stored safely in impenetrable concrete-and-steel dry casks on the grounds of operating reactors, its radiation slowly declining. Price and performance are the key factors and advanced nuclear energy is cheaper than coal and more dependable than solar or wind.
The United States has long led the world in developing nuclear energy technologies but over the last decade American commercial nuclear development has slowed markedly. If this continues, we could face a world where China and Russia become preeminent in nuclear science and technology. Both of these countries have well-financed programs to develop the next generation of advanced, non-light water reactor concepts, many of which were first demonstrated decades ago in American national laboratories. Dominance in new technologies means control of the rules and export markets.
Throughout most of the 2000s, American nuclear power plants not only provided about 20% of U.S. electricity, they were highly profitable since their capital costs had been largely amortized over previous decades and their production costs were low compared to the relatively high cost of fossil and renewable alternatives. The situation changed around 2007, when inexpensive shale natural gas became available and the global financial crisis led to lower electricity demand and prices. Since then, nuclear power plants in the United States have become less profitable and the industry has experienced a series of plant closures.
The U.S. Navy has a long and impressive history with nuclear technology and the future of the nuclear Navy is secure. It has its own design and research laboratories, supports its own extensive computing capabilities, and trains its own operators. While any expansion of nuclear technology in America should be commercially led, the Navy could support the development of human capital in the nuclear field by expanded cooperation with universities and industry.
Wyoming Governor Mark Gordon announced in June 2021 that a next-generation nuclear power plant would be built at a soon-to-be-retired coal-fired plant. The project is a joint initiative of PacifiCorp and Bill Gates’s TerraPower.
3 Nuclear Energy Stocks and ETFs
American companies such as BWX Technologies (BWXT), Westinghouse, X-energy, and UltraSafe Nuclear are all working on new concepts, such as the advanced small modular reactor (SMR) design being marketed by NuScale, a sodium fast reactor, and a modular high temperature gas-cooled reactor. For example, NuScale is developing a small reactor that is capable of generating 77 megawatts of electricity and is in the midst of the U.S. Nuclear Regulatory Commission’s licensing process. The first customer for the NuScale design is Utah Associated Municipal Power Systems, which has plans to commission a plant in Idaho by 2027.
With the exception of BWX Technologies, most of these companies are privately held. Two other nuclear plays are the Market Vectors Nuclear Energy ETF (NLR) and Korea Electric Power (KEP), better known as Kepco, which is a state-controlled utility and is known as a ferocious low-price bidder fully backed by the South Korean government.
Those three nuclear energy stocks and ETFs are up an average of 13% in the past year – a very respectable return given that nuclear energy has been out of favor. But with the need for nuclear energy not going away anytime soon, especially as the demand for emissions-free energy sources continues to accelerate, chances are these three nuclear energy plays will have even better years going forward.
Do you own any nuclear energy stocks in your portfolio?