Investing in Nuclear Energy Stocks and Companies
Nuclear power plants generate electricity using heat from the splitting of uranium atoms. This process is called fission, and it creates energy which is used to heat water to about 270 degrees Celsius. The heated water is then used to spin turbines that are connected to generators, producing electricity. Pretty basic stuff.
Nuclear Energy Outlook
Nuclear energy is nothing new. The first nuclear power plant started its operation in 1954 in Russia, and they’ve been building them ever since. Today, we’re in a stage of nuclear revival because nuclear energy can reduce carbon emissions and ratchet down the greenhouse effect from heat-trapping gases. While nuclear power is not renewable energy – enriched uranium is its required fuel – it certainly is clean energy. According to the World Nuclear Association, nuclear power provides about 10% of the world’s electricity, and 18% of electricity in OECD countries. In the 2020 edition of “Energy, Electricity and Nuclear Power Estimates for the Period up to 2050,” the International Atomic Energy Agency’s projection has global nuclear generating capacity increasing from 392 GWe in 2019 to 715 by 2050 – an 82% increase over 30 years. Sounds like real growth until you realize that an 82% increase over thirty years is a dismal 2% compound annual growth rate. Maybe some innovation can stimulate that growth.
Advanced Nuclear Technologies
This renewed momentum in nuclear expansion is partly fuelled by advanced nuclear technology, something of a catch-all term for nuclear energy solutions outside of the typical plants that exist today. Today’s nuclear plant uses massive light water reactors that cool uranium fission reactions with water. These are large-scale plants that require constant supervision and human intervention to shut down as needed.
Small Modular Reactors (SMR) – defined as anything less than 300 megawatts, about a quarter the size of a typical light water reactor – are a natural next step in nuclear development. Typically, these work the same way as light water reactors but have a reduced size and complexity, making them more versatile, cheaper, and faster to build. SMRs can also incorporate some of the advanced nuclear technologies in development today at a more modest scale, as well as be linked together like Legos.
One such advanced technology is the molten salt reactor that a handful of startups are slowly progressing towards. Molten salt reactors dissolve nuclear fuel in very hot fluoride or chloride salt, hence molten salt, rather than using solid forms common in most reactors. It acts like its own fuel and coolant.
Other advanced technologies focus on specific process steps. Startups are working on improved fuel cladding that can withstand temperatures more than twice that of metal cladding used in current reactor cores. Others are using 3D printing to develop nuclear components cheaper and faster, without sacrificing safety. Some produce specially coated uranium fuel and helium-cooled reactors to make power plants safer. All these technologies promise to make the next generation of nuclear reactors safer, cheaper, and have them produce less nuclear waste.
The Promise of Nuclear Fusion
A different batch of startups is developing an alternative technology called nuclear fusion. Fusion generates electricity by using heat from the process of atomic nuclei merging to form one heavier nucleus. This is what happens in the core of the sun and other stars. With fusion energy, one tablespoon of liquid hydrogen fuel could generate as much energy as 28 tons of coal with no radioactive waste.
It’s a very, very difficult technical problem, one of the most difficult technical problems that humanity will ever try to solve. But if we solve it, we will have “energy forever”.His Holiness Elon Musk
In order to achieve fusion, the reactor fuel needs to be heated until it becomes plasma in a so-called tokamak reactor. A tokamak is built in a way that magnetic field coils confine plasma particles to allow the plasma to achieve the conditions necessary for fusion. The catch? Current fusion reactors require more electricity to operate than what they produce. Fusion is currently a moonshot technology that always seems to be a decade away from commercialization. There are promising developments in the field like cold fusion, but so far the technology remains theoretical.
There is a silver lining for fusion though. This year may have seen a major step forward towards finally demonstrating that a fusion reactor can produce more energy than it consumes. Beginning June 2021, scientists plan to fire up the Joint European Torus (JET), an experiment designed to find the right mix of fuel for the International Thermonuclear Experimental Reactor (ITER) which has consumed more than $50 billion in investment dollars. Expected to come online as early as 2025, ITER would be the world’s largest tokamak. About 35 countries are involved in the effort, including the United States, China, and the European Union.
Can You Invest in Nuclear Energy Today?
While startups are developing the next generation of nuclear technologies, investors can look for opportunities with existing providers. And there aren’t many at all. A pick-and-shovel play on nuclear energy is the only manufacturer of large reactor components in North America. A new entrant, NuScale Power, plans to go public using a risky SPAC. Some Chinese nuclear energy utilities are also available on the international stock market. The growth story here is that China is projected to become one of the largest producers of nuclear-based electricity by 2030. Another investment thesis is to invest in fuel producers like Cameco Corp, something we covered in our piece on How to Invest in the Best Uranium Mining Stocks.
Investment opportunities in nuclear energy are sparse, and we currently see the theme as part of a broader green energy portfolio, just without the growth of solar and wind. When successful startups pioneering advanced nuclear technologies eventually become listed, the theme will be able to live on its own, but that seems to be some ways away.
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