Uranium Market Revival: Nuclear Power as a Renewable Energy Source

In the reshaping of the global energy mix, will we come to see nuclear power as a renewable energy source?

For nearly half a century, nuclear power has been an important contributor to energy security in many countries and a key source of zero-emissions generation. Nuclear power is viewed by many as an essential part of the future global energy mix as the world turns away from fossil fuels and looks to alternatives such as solar, wind and other clean energy sources. New initiatives to advance innovative nuclear power technologies are underway, including those targeting the need for greater power systems flexibility given the rise of energy generation from renewable sources.

After the doldrums of the post-Fukushima era, the uranium market is making a comeback with more and more nuclear reactors coming online, under construction or in the planning stages. Today’s uranium fundamentals are showing the possibility of a coming supply shortage in the face of renewed demand. “Seven years of oversupply since the Fukushima incident finally resulted in production cuts from the world’s largest uranium miners in Kazakhstan and Canada,” said Mercenary Geologist Mickey Fulp. The “removal of excess mine supply from the market has resulted in a 40-percent jump in the spot price since April [2018].”

Nuclear power demand

As the world’s exponential population growth over the coming decades leads to widespread urbanization, the demand for energy is expected to rise at the same time that countries around the world are increasing efforts to reduce carbon dioxide emissions. The trend toward a greener, cleaner energy future means that the primary energy sources for the future global energy mix are set to change as the reliance on fossil fuels decreases in favor of low-carbon emitting sources. It stands to reason that as the demand for global energy increases, so too must the number of low-carbon emitting energy sources.

Nuclear power is one of the world’s most commonly used low carbon-emitting sources of electricity. “It is the second largest source of low-carbon electricity production globally (after hydropower), and provided over 30 percent of all low-carbon electricity generated in 2016,” according to the World Nuclear Association (WNA). “Almost all reports on future energy supply from major organizations suggest an increasing role for nuclear power as an environmentally benign way of producing reliable electricity on a large scale.”

Today, about 11 percent of global electricity is generated by about 453 nuclear power reactors, with about 60 more reactors now under construction. In 2017, nuclear power provided 2,487 terawatt hours (TWh) of electricity, up from 2,477 TWh in 2016. 2017 also represented the fifth consecutive year that global nuclear generation had risen since 2012.

Tomorrow, that number is destined to rise further, especially as rapidly urbanizing countries like China and India begin to overtake the United States as the world’s largest energy consumers. Nuclear power “is especially suitable for meeting large-scale, continuous electricity demand where reliability and predictability are vital – hence ideally matched to increasing urbanization worldwide,” notes the WNA. China is quickly bringing new nuclear power plants online in lieu of coal-fired plants in order to reduce carbon emissions and improve the country’s air quality. The WNA predicts that 25 percent of global energy supply will come from nuclear plants by 2050.

Uranium supply and demand

Nuclear power generation requires enriched uranium. Market watchers know that after reaching a high of US$135 per pound in 2007, the uranium market price has been in a nearly decade long slump since the early 2011 Fukushima disaster with spot prices dipping as low as US$18 per pound in December 2016.

However, renewed optimism in the future of nuclear power in the global energy mix and supply side disruptions from the largest uranium producers have pushed both spot and long-term contract prices up over the past year with more gains expected in 2019 and beyond. In 2017, uranium producer Kazatomprom cut its output by 2,000 tonnes and in early 2018 Cameco (TSX:CCO,NYSE:CCJ) suspended operations at its Saskatchewan-based McArthur River, the world’s largest uranium mine. Placing even further pressure on the market, when Cameco decided to close up shop at McArthur it also became one of the world’s largest uranium buyers, scooping up U3O8 on the spot market to fulfill its contracts.

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