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Why are so many firms investing in new uranium fuel projects?

With so many nuclear reactor plants closing, the question is, where’s the market?

nuclear fuel cycle

Is the nuclear fuel cycle an attractive market for investors?

Consider the following news items. This week alone there have been three major developments in this area. As will be discussed below, these firms are placing financial bets on uranium fuels, but their perspectives are more on global markets than the U.S.

The Associated Press reports that the Trump administration is reportedly considering an import quota that would require U.S. uranium mining firms to provide a quarter of the domestic market.

The Commerce Department began exploring the idea last year, citing national security concerns. However, critics of the proposal point out that much of the country’s uranium is supplied by close U.S. allies: Canada and Australia. The Nuclear Energy Institute warns that a 25 percent quota on domestic uranium would send prices soaring and force nuclear even more plants offline.

World Nuclear News reports Urenco USA has announced a new program covering the production of high-assay low enriched uranium (HALEU), and is considering the construction of a dedicated HALEU unit at its US uranium enrichment facility. HALEU will be required to fuel many advanced reactor designs currently under development, including the U-Battery micro small modular reactor concept which was initiated in 2008 by Urenco. It is being developed by the UK’s Universities of Manchester Dalton Institute and the Technology University of Delft in the Netherlands. The single-unit gas-cooled reactor design has an output of 4MWe (10MWt) and uses TRISO (tristructural isotropic) fuel.

According to a press statement, the Department of Energy’s (DOE) Office of Nuclear Energy (NE) has allocated $111.2 million to three industry entities with the overarching goal of developing Accident Tolerant Fuels (ATF).

General Electric (GE), Westinghouse (WEC) and Framatome received the funding allotment in late 2018 with FY18 and FY19 funding. The performance period goes through Jan. 31, 2021, with DOE and NE planning additional funding of $55.6 million in FY20 and $30 million in FY21.

World Nuclear News reports Australian technology company Silex Systems Limited and Canadian company Cameco Corporation have signed a term sheet on their proposed joint purchase of GE-Hitachi Nuclear Energy’s (GEH) share of GLE, the exclusive licensee for SILEX laser uranium enrichment technology. Laser enrichment technologies – which can be atomic or molecular – potentially offer lower energy inputs, lower capital costs and lower tails assays, and hence significant economic advantages over current commercial centrifuge enrichment technology. Despite low prices for enriched uranium, Silex says it will pursue a “reduced but focused” commercialisation effort will continue at the Wilmington test loop facility, together with a parallel effort continuing at Silex’s facility at Lucas Heights in Sydney.

Uranium Projects are Going Up, but U.S. Reactors are Shutting Down

closed plants

U.S. nuclear reactors that have closed or which will close in next few years

Think tanks who follow the the industry point out that the U.S. is slowly but surely degrading its nuclear reactor fleet. An inability to compete with the low price of natural gas is a one of the key reasons. Several plans have closed due to mechanical issues, and the rest are being pushed to close or are closed because of state government policies. Here’s the list

It is painful to even mention the incompetence that led to the cancellation of the V C Summer project in South Carolina. The result is a loss for the U.S. supply chain firms, the people who worked for them, and the people who are working for the closed or closing plants who may not be able to find jobs in the industry at the remaining plants.

The problem is that most of the U.S. fleet is older, more prone to having costly maintenance issues, and all of them face daunting public perceptions that aren’t supportive of new investments in nuclear energy.

The so-called Green New Deal, co-chaired by anti-nuclear arch druid Rep. Ed Markey (D-MA), is hardly a bright light toward the industry’s future. The problem for the backers of the initiative is that the text of the “deal” seems to be fluid. It started with a pledge to close all nuclear plants within a decade and later morphed into a statement of inclusion that referred to in the same context as other CO2 emission free energy sources. Bear in mind the “deal” is more of a manifesto than a policy and only future congressional action will determine how its principles are translated into funding for energy projects.

The Future of Market Growth for Nuclear Fuel is Global

With all of the grim news about nuclear energy, why are the investments in HALEU and other forms of uranium fuel for nuclear reactors taking place. There can be only one conclusion about these investments in uranium fuels. It comes in several parts.

  • First, producers of nuclear fuel for nuclear reactors can assume the U.S. market, as a share of their revenue, is going down.
  • Second, nations like France, UK, India, China, and South Korea, as well as Spain, see nuclear energy as a key to energy security which means their markets for uranium fuels are stable or going up.
  • Third, China is expected to be the big winner in Trump’s ill-advised plan for quotas on U.s. uranium imports. It will make uranium cheaper for the rest of the global nuclear industry.
  • Fourth, these nations plan for it at the highest levels of their governments along with other key elements of maintaining national sovereignty.

U.S. Policy Makers Still Have Their Heads in the Sand

What does the U.S. do? It has placed people who deny the science of climate change in key elected and appointed positions in the government. Congress has authorized the Department of Energy to hand out peanuts, compared to what’s needed financially, to jump start the next generation of small modular reactors and advanced fast reactors.

When Bill Gates came to DC offering to match his billions to an equal stake from the government, the most polite way to describe the response is “don’t let the screen door hit you on the way back home.” Gates, who was investing his own money in TerraPower’s collaboration with Chinese state owned enterprises, got the door slammed in his face by Trump’s ill-advised trade war with China.

Future of Nuclear Energy is Tied to Sovereign Stability

Among European nations, France now understands that to replace its nuclear fleet in the 2030s it must keep its supply chain alive in 2020s. In eastern Europe efforts are underway to start new nuclear reactor projects in Poland, Czech Republic, Romania, Hungary, and Bulgaria. What these nations need are two things – first and foremost, they need financing mechanisms that can handle the risk of multi-billion projects. Second, they need a European grid that will allow for regional compacts to wheel electricity across national borders.

It should be mentioned that among these countries in eastern Europe, none of them have been able, from a government perspective, to come up with rate guarantees, and a viable long-term promise of political stability, that would bring nuclear vendors to the table.

For smaller nations, a two-reactor, $10 billion project, is just too big a problem to knock down to size. It may be that an entirely new approach, based on less expensive small modular reactors (SMRs) will be the answer to their energy needs.

It follows that the success of nuclear energy depends as much on political, institutional, and financial change as it does on technological excellence. Maybe the people investing in these uranium projects know something about that. Investors at this level of financial commitments don’t make decisions to proceed on whims. Will SMRs be in the mix?

Comments are welcome and will be kept open for two weeks from today or Feb 24th.

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