Originally published at: Clean and reliable: rethinking uranium and nuclear power – InvestEngine Insights
Nuclear power is a clean, efficient, and essential source of electricity used to meet the world’s growing energy demands. It holds the potential to produce electricity at a greater scale while minimising greenhouse gas emissions.
Understanding uranium
Behind nuclear power is uranium fuel, which enables power plants to generate electricity. A single uranium pellet, slightly larger than a pencil eraser, contains the energy equivalent of one ton of coal, three barrels of oil, or 17,000 cubic feet of natural gas.¹ Global nuclear power output primarily drives the demand for this commodity.
As a heavy, dense, and radioactive metal, uranium is a potent source of energy. Found in most rocks in concentrations of two to four parts per million, it appears as commonly in the earth’s crust as several other metals, such as tin and tungsten.²
Uranium can be found in many parts of the world, but is fairly top-heavy in where the reserves are concentrated. Countries such as Australia, Kazakhstan, and Canada often lead the uranium production charge.
Advantages of nuclear power
Nuclear remains one of the few sources of electricity that combines large-scale power output and low greenhouse gas emissions, with costs comparable to those of traditional fossil fuel power stations.³ Nuclear fission produces thousands of times more energy than that released through the process of burning similar amounts of fossil fuels, making nuclear a very efficient method of generating utility-scale power.⁴ Additionally, the ongoing fuel costs for nuclear power plants tend to remain quite low, due to the minimal amount of material needed to run the plant.
On top of the power density advantage of uranium, nuclear power also ranks among the cleanest methods of producing electricity, as measured by greenhouse gas emissions. The U.S. Environmental Protection Agency estimates that 25% of global greenhouse gas emissions derive from electricity and heating alone, giving nuclear adequate room to assist in meeting net zero goals.⁵
Nuclear power contributes approximately 10.4% of the world’s total energy supply and serves as a major source of energy in developed markets.⁶ ⁷ ⁸ Globally, the 55 reactors currently under construction represent a 12.5% increase in nuclear capacity, with an additional 54 reactors planned.⁹ Increased demand primarily derives from countries with large populations contending with the dual issues of substantial electricity requirements and escalating air pollution problems.
Looking ahead
In February 2022, the European Commission ruled to label nuclear as a sustainable source of energy, with the announcement
aimed to help raise private capital to meet the E.U. climate change targets.¹⁰ Such initiatives to expand nuclear energy production and use, delineate the vital role that uranium plays in decarbonisation efforts and are influencing its demand. Nuclear is a crucial energy source in filling energy production gaps associated with this energy transition. The importance of securing stable energy sources beyond natural gas in Europe has also become more urgent in light of ongoing conflicts in the region.
Production cuts in early 2019 supported uranium prices, but the investment case has turned even more positive on the demand side post-pandemic. The focus on keeping operating margins high and costs lean should mitigate large spikes in supply, as miners slowly increase production based on contracted utility demand.
The Global X Uranium UCITS ETF (URNG-LN) provides investors access to a broad range of companies involved in uranium mining and the production of nuclear components, including those in extraction, refining, exploration, or manufacturing of equipment for the uranium and nuclear industries.
¹ GE Hitachi Nuclear Energy. (n.d.) Nuclear power basics. General Electric. Accessed on April 19, 2022.
² World Nuclear Association. (2022, February). What is uranium? How does it work?
³ World Nuclear Association. (2021, September). Economics of nuclear power.
⁴ World Nuclear Association. (2021, September). Economics of nuclear power.
⁵ United States Environmental Protection Agency. (2022, February 25). Global greenhouse gas emissions data.
⁶ Krikorian, S. (2020, January 1). Preliminary nuclear power facts and figures for 2019. International Atomic Energy Agency.
⁷ World Nuclear Association. (2022, March). Nuclear power in the European Union.
⁸ International Atomic Energy Agency. (2021). Nuclear power reactors in the world: 2021 edition. Reference Data Series No, 2, Vienna.
⁹ International Atomic Energy Agency. (2021). Nuclear power reactors in the world: 2021 edition. Reference Data Series No, 2, Vienna.
¹⁰ Abnet, K. (2022, February 2). EU proposes rules to label some gas and nuclear investments as green. Reuters.
Capital at risk. The value of an investment in ETFs may go down as well as up. Prospectuses and Key Investor Information Documents (KIIDs) for this ETF is available in English at https://globalxetfs.eu/funds/urnu.