The energy shock offers a nuclear energy renaissance

The current energy crisis is causing governments to rethink energy security. With the move to decarbonisation, arguments around clean energy are further supporting the search for real energy alternatives. Nuclear energy might not be the shiniest and newest answer, but it is technology the world knows well, and it comes with excellent sustainability credentials. Ausbil’s Global Resources team shares their views on this compelling opportunity.


Nuclear power is a carbon free, reliable source of base load energy that is both clean and affordable. Energy is a necessity for everyday human existence, essential for both improved human welfare and sustainable economic growth. Historically, energy has been produced through the burning of fossil fuels (coal, oil, and gas), however since the 2000’s we have seen a push towards renewable energy sources (solar, wind, hydro and thermal) in an effort to reduce the production of carbon dioxide (CO2).

Significant UN-led climate action meetings have occurred in Kyoto, Paris and most recently Glasgow to form a consensus on potential ways to reduce CO2 emissions. Clearly, the key solution is renewables, however these intermittent energy sources all have a requirement to be supported by reliable baseload power generation, which is where nuclear comes to the fore. This shift in dynamics is providing an opportunity within Uranium, and more broadly across the energy and natural resources complex from an investment perspective.

Uranium (U308) is the essential fuel source required for nuclear energy. Also known as yellowcake, uranium is delivered in distinctive 40 gallon drums. In terms of actual undergroud resource, uranium deposits can be found all around the world; Australia accounts for the largest resource at around 28%, Kazakhstan 15%, Canada 9% and Russia 8%. In terms of actual production, the majority of uranium mining occurs in Kazakhstan which makes up some 40% of supply, with Canada the second largest producer at 13%. Once mined, uranium is converted and then enriched into fuel pellets (Uranium Oxide). These pellets are stacked in fuel rods which are then utilised to produce energy within a reactor core. As a relevant aside, the bulk of uranium enrichment currently occurs in Russia.


Why is Nuclear becoming more of a focus?

As an alternative baseload energy

The term ‘baseload energy’ is bandied around when talking about electricity production, but in simple terms it refers to the minimum amount of electric power needed to supply the grid at any point in time. Of course, across the day and night the load demand from energy users fluctuates. Fossil fuels, hydroelectric, hydrogen and nuclear can all be engaged at any time to power baseload requirements. However, renewables like solar and wind power are intermittent in their output for obvious reasons, so the sum total of baseload necessarily needs power that can be delivered regardless of whether the sun is shining or the wind is blowing. Solar technology works by converting sunlight (solar thermal energy) into electrical energy through photovoltaic panels. Wind technology, both onshore and offshore, uses wind turbines to propel generators that send electricity to the grid. Nuclear is of significant benefit in the energy mix because it can deliver baseload power relatively free of carbon, at any time of the day or night as illustrated in Chart 1.


A low carbon power generation technology

On a comparative per gigawatt-hour basis, nuclear is a significantly cleaner source of energy, ranking at the top of the advanced energy mix. The daily operations involved in producing nuclear power are relatively carbon free, with the carbon usage outlined in the chart below originating in the manufacturing of the cooling towers (the concrete utilised in the cooling towers requires a large outlay of CO2), rather than in the actual generation of energy.


Chart 1: Nuclear has the best record on greenhouse gas emissions



Increased energy density and hence efficiency Compared to alternatives, nuclear fuel is extremely energy dense, making the amount of energy contained in each pellet unrivalled in the energy complex. Figure 1 illustrates the magnitude of power that can be generated from a single pellet of uranium. One pellet the size of a paperclip produces an equivalent amount of energy as 17,000 cubic feet of gas, 120 gallons of oil or 1 ton of coal. When you think of the damage from burning each ton of coal, it’s possible to consider the realistic risks with nuclear, and that given the number of reactors worldwide there has been relatively few accidents with this power source.


Figure 1: What energy density looks like across different fuels



Nuclear is only getting better and safer

The acceptance of nuclear power has experienced setbacks over its life, with both waste disposal and safety being the two defining issues. However, safety standards and energy efficiencies in reactor technologies have continued to advance and should provide enough evidence to justify giving nuclear another shot.

The generation of nuclear energy has had legacy issues surrounding reactor failures like Chernobyl (1986) and Fukushima (2011) that has endangered lives and changed the environmental landscape. The reactor failure events were ultimately caused by design and engineering failures (the Fukushima reactor was built in 1971 and Chernobyl in 1977). Suffice to say, there have been significant technological advances in the past 40 years to increase safety in nuclear power generation.

One of the main arguments against the use of nuclear power as a source of energy is the production of waste material. Nuclear waste is produced from spent fuel pellets and is typically stored in a controlled facility to ensure safe and regulated disposal. To put the quantum of waste in perspective, a typical 1,000-megawatt nuclear power station that would supply power to more than 1 million people produces only 3 cubic meters of high-level waste per year. Compare the amount of waste produced to that of a coal-fired power station and there is substantial difference. On average, a coal fired station produces 240,000 tons of toxic waste each year.


Better and safer scale: Small Modular Reactors (SMRs) offer new opportunities

SMRs are nuclear reactors that are less than 300MW equivalent, designed using modular factory fabrication processes. SMRs allow for short construction times of 3-5 years and reduced initial economic outlay (US$1-3 billion compared to US$6-12 billion for a typical large water reactor). There has been a move away from infield construction to serial assembly-line manufacturing of standardised plants. Modular construction of reactors in factories will play a major role in the production of new power plants. Liken this to car manufacturing, the standardisation of parts will make the final product safer, cheaper to produce, and easier to fix. New plants can also benefit from several other advances, such as improvements in materials (like concrete and steel) as well as seismic isolation technology.


Figure 2: SMA technology is bringing production-line quality and assurance to reactors

Source: ANSTO


New SMRs will be largely resilient to human error in customisation (the cause of the Chernobyl disaster). This is largely because SMRs need little to no external intervention if things go awry as they have inherent safety features. New ‘’walk-away safe protocol’ technology is available in SMRs which effectively and automatically shuts down facilities that are malfunctioning with no human intervention. New reactors do not require emergency cooling, they simply shut-off automatically. Additionally, facilities can be constructed with materials that have high heat capacity (which means they can absorb a lot of heat before their temperature increases), and high physical and chemical stability (which means they will not warp or explode). Furthermore, these added safety features allow for a smaller emergency planning zone which is a minimum safety buffer area around a plant. With the buffer area being reduced from 16km to 2km, it means these facilities can be situated closer to population centres, better located to optimise energy provision. Additionally, as emergency planning zones are now 2km and the plants physical size has decreased, SMRs are able to slot cleanly into brownfield coal-fired power plants.


A brighter outlook: Nuclear as a power generation source

As reactor technologies advance, nuclear has been given another opportunity by the global community. The European Union recently pushed nuclear into the spotlight in July after voting in favour of nuclear energy being included in its Green Taxonomy (defined as a sustainable source of energy). As a result, nuclear utilities are now defined as ‘sustainable investments’. This allows for future ESG investment flows to target these activities.

There are approximately 450 commercial nuclear reactors worldwide, with several countries having made commitments to increase their nuclear capacity in line with global emission guidelines. China is leading the way having proposed to construct 150 new reactors in the next 15 years. France’s prime minister Emmanuel Macron is aiming for 70% of power to originate from nuclear with 14 reactors in their pipeline of construction. Furthermore, Japan looks to reignite their nuclear industry with the reopening of several plants that are under care and maintenance (increasing the portion of nuclear in their energy mix from 5% to 22%). Chart 2 highlights the impact on Uranium demand.


Chart 2: Projected demand for uranium

Source: Macquarie


With renewed interest given the current energy shock, uranium spot pricing has rebounded dramatically from US$20lbs to around US$50lbs as nuclear regains popularity amongst institutional and retail investors. An investment trust known as Sprott Physical Uranium Trust (SPUT) triggered these moves as it entered the opaque uranium market and began purchasing and drawing out spare capacity in anticipation of a boom in demand. The trust has dominated buying activity, with its capacity in the market highlighting the significant underinvestment in uranium production since Fukushima, with prices rising on limited supply. As in most markets, given the supportive environment for reconsidering uranium, we expect existing operations to ramp-up production and new producers to establish operations, both on the lure of higher prices and higher demand, similarly to what we have seen in lithium in the last few years. In other words, uranium is becoming an opportunity-rich market that is being driven by increasingly supportive policy, an energy user more open to accepting the idea of nuclear power, and real demand for alternative energy driven by the world’s move towards decarbonisation.

The underinvestment in fossil fuels over the last decade, and the need to support renewables with baseload power has added significant pricing pressure to energy markets. Compounding this underinvestment is the Russian war in Ukraine. As crucial gas supplies from Russia’s Nord Stream pipeline have been halted energy costs have soared. Global economies are frantically attempting to address these pricing issues and supply shortfalls to maintain power for consumers and industry, and with a renewed geopolitical urgency on the security of energy supply. The dramatic price rises for gas, oil and coal have led countries to want to internalise their energy production. Again, the use of renewables to fill this supply gap is not a complete solution, hence the prospect of nuclear power as the reliable alternative, one that will support net zero carbon goals whilst bringing a greater amount of electricity to a greater portion of the population, with less waste and less complication.


Uranium exposure within Ausbil Global Resources Fund

This shift in nuclear-related dynamics is providing a compelling opportunity in uranium. Our core exposure to uranium within the Ausbil Global Resources Fund is Boss Energy (ASX: BOE). Boss Energy’s Honeymoon mine is a fully funded, technically proven brownfield asset that will re-enter production within the next 12-months, making it the first Australian producer to do so. Boss is located in the tier-1 mining jurisdiction of Australia, fully permitted to export 3.3mlbs of Uranium. This makes it one of four permitted Uranium mines in Australia. The company is seeking to reduce potential volatility after acquiring an inventory of 1.25mlbs (acquired at US$30.15) to smooth potential ramp-up hurdles, with the ability to deliver into contracts from existing inventory held on balance sheet. We believe Boss will benefit from upward pressure on the uranium price from rising demand, and the new socialisation of uranium we are seeing worldwide which is expected to see new investment, new facilities to displace fossil fuels, and the re-starting of existing facilities.


Appendix 1: How nuclear power is created

Diagram showing nuclear reaction illustration


  • A nuclear reaction is triggered in the reactor (known as the core). This occurs when particles (neutrons) are fired at the uranium atoms causing them to split, releasing more neutrons with further chain reactions occurring in perpetuity (a huge amount of energy is produced in this process).
  • The heat energy created from the atoms splitting dissipates into the surrounding water at temperatures around 300 degrees.
  • The now heated water is circulated, and steam is created. The hot pressurised water flows through thousands of looped pipes whilst a second stream of water flows around the exterior of the pipes. This secondary water is what’s turned into steam.
  • Heat energy is converted to mechanical/electrical energy as the turbine rotates at 3000 revs per minute.
  • Electrical energy is inserted into the national grid from which it is sent through power lines to homes. 10% of the worlds’ electricity is produced from nuclear energy.
  • The steam is cooled and recycled back to the generator, or it is discharged out of the cooling tower. When people think nuclear power, they picture large cooling towers (image above). Commonly people form the misconception that the reaction of splitting atoms occurs here, as opposed to the actual location in a separate containment structure.


Source: Ausbil