EXCLUSIVE TO SIGHTLINE U3O8 – With major uranium producers committing to supply cuts in response to record low U3O8 prices, the industry is poised for a strong price trend reversal. As producers take steps to drive U3O8 prices upward, examining the demand side of the U equation becomes critical.
Many headlines would suggest that Uranium demand is slowing down or even shrinking with countries ending or planning to end their nuclear programs. For example:
Japan’s Nuclear Fuel Cycle Policy Suffers Another Setback
South Korea to cut number of nuclear reactors from 24 to 14 by 2038
Nuclear Reactor to Shut Down Amid Germany’s Atomic Phase-Out
France to Reduce Share of Nuclear in Power Mix “ASAP”
When we look beyond the headlines, however, the situation is not so simple.
While some journalists / analysts write about reactor shutdowns and planned nuclear closures, a closer inspection of the numbers paints a different story entirely. In an environment where analysts remain divided on future uranium demand, we really must take a step back and consider; will nuclear power play a major role in global energy supplies over the next 10-15 years?
Hint: it will…..and it’s huge..
The Geographic Shift in Nuclear Demand
Since Fukushima, developed countries such as the US, France, Germany, and Japan (who represent 45% of the world’s nuclear power production) have publicly announced that they will be, or already are, implementing reductions in their nuclear programs; and these statements inundate the news.
As of January 2018, reactors under construction for these nuclear giants are few to none. In isolation, this fact points to a dire future for uranium demand.
Taking a more global perspective, however, there are 58 reactors currently being built representing a 16% increase in nuclear capacity. There are over 157 reactors planned for full operation by 2030 (representing an additional 42% in current nuclear capacity) and this is happening largely in emerging economies like China, India, South Korea, and Russia.
Nuclear energy is alive and thriving, just not in the countries we are used to watching.
What is Driving Nuclear Growth
In the last year, nuclear electricity generation has surpassed it’s pre-Fukushima levels, sitting at a little over 2,600,000 GW.h per year.
On a global scale, energy requirements from all sources are expected to increase ~30% between now and 2040 with the growth rate peaking circa 2030. In terms of composition, electrical energy (including the energy generated from nuclear sources) is projected to grow at twice that rate (60%), meeting an increasing portion of future energy demand.
Coincidentally, this projected energy growth is primarily concentrated in emerging economies with large population growth and an emerging middle class driving the increase. Countries like China and India are already building and planning to build nuclear reactors to meet these future requirements.
With emission levels a hot topic, countries with high projected growth are already taking steps to make emission friendly, nuclear energy a bigger portion of their future energy delivery mix. The data shows growth in nuclear energy is positively correlated with the growth in electricity demand
Countries with high population growth and high electricity demands are driving record high reactor constructions which will very likely continue to drive nuclear demand for at least the next 10-15 years.
How Easy is Switching Out of Nuclear, Really?
For countries that want to reduce nuclear reliance, there is a need to replace any reactors phased out with an alternative source. Simply not meeting energy demands is not an option.
Think of alternative energy as coming from two sources: fossil fuels (coal, gas, etc.) or renewable energy (wind, solar, arguably hydro). The viability of these alternatives is a critical determinant for the rate at which nuclear power can be phased out.
History has proven that quickly replacing nuclear energy with another low emission fuel is impossible.
A perfect example is Japan, where nuclear energy reliance dropped from 29.2% to ~2% in the span of 2 years (2010-2012). When Japan began shutting down nuclear reactors seven years ago, it replaced that energy with fossil fuels not renewable energy. Even with emissions rising rapidly, Japan has continued to burn fossil fuel while their reactors sit on standby.
Switching out of one fuel type into another, especially in the face of rising energy and emission requirements, is like changing the tires on a moving car. Renewable energy is simply not at a stage where it can replace more consistent energy sources (nuclear/ fossil fuels) in the short term and excessive fossil fuel use derails emissions objectives.
You Won’t Be Seeing Mass Nuclear Shut Downs
Given the difficulty of a quick shift from uranium energy for countries already heavily invested in nuclear power, it is worthwhile to revisit the nuclear positions of countries promising nuclear phase-out.
When you read that countries are planning to lessen their dependence on nuclear energy by a certain date, it is important to remember that electricity requirements are usually rising during the same time.
Nuclear growth at a lower rate than overall energy growth would certainly accomplish the goal of lessened reliance on uranium, especially on a global scale.
Nuclear share of electricity for countries touting phase-outs such as France, South Korea and the US has barely moved in the last 10 years. Couple this with low investments in new reactors and one can certainly make the argument for the investment in alternate energy to meet any rising demand rather than mass decommissioning and replacement of existing nuclear reactors.
The US for example has only had a 5% reduction in the total number of operable reactors since 2008. France has only taken one reactor offline in that time. Contrary to what media headlines and politicians might suggest, there will be no mass closing of existing nuclear reactors.
Global Nuclear Demand Won’t Fall, It Will Rise
The world’s demand for energy is growing and projected to grow for at least another 20 years. This growth is concentrated in emerging markets and it is these countries that are taking steps to meet energy requirements with nuclear sources.
As population growth slows in developed economies, more funding is allocated towards alternate energies. However, this certainly does not mean the mass decommissioning of existing reactors in developed states.
Globally, both reactors planned and reactors under construction are at an all time high. Nuclear energy creation is projected to continue its strong growth, with more reactors being built now than ever before.
To offset the nuclear growth in emerging economies the world would have to shut down and replace 70 reactors by 2021 and 253 reactors by 2030. That’s more operable reactors than France, Germany, US, UK, South Korea, and Japan have combined.
It’s just not going to happen.