Investors are turning bullish on nuclear
After years of disinterest, investors are buying into the nuclear industry.
Markets soured on nuclear following the Fukushima Daiichi nuclear power disaster in March 2011, but the push toward net zero, rising global energy insecurity, and growing appetite for next generation reactor technology is restoking interest.
Uranium spot prices, up end-Oct by more than 55% from end-2022, are rising sharply and serve as a barometer for investor interest in nuclear power.
Prices fell steadily following the Fukushima disaster in 2011 but have begun a gradual trun around from a low in 2016 and currently hover at the highest point since end-January 2008, according to data by Cameco, the world’s largest publicly traded uranium company.
Uranium spot prices stood at $74.38 per pound at the end of October, according to Cameco using month-end prices published by nuclear research companies UxC and TradeTech, up from just $18 end-of-October 2016 and from $47.68 at the end of 2022.
“Ongoing geopolitical events coupled with the global focus on the climate crisis have created what we believe are transformative tailwinds for the nuclear power industry, from both a demand and supply perspective,” Cameco says on their website.
The Bank of America’s monthly RIC Report in May focused on what the bank called ‘The Nuclear Necessity’ and said that it forecast a 20-40% upside on uranium and nuclear power after a decade of underinvestment.
"From the raw matter to the end user, BofA global analysts are bullish," the report says after declaring a third bull market for uranium.
A rise in global demand, with 60 new reactors being built, 100 more approved, and plans for old reactors to be refurbished, adds to the positive investor sentiment, the bank said.
Resource nationalism, energy security, war, and inflation echo the nuclear build-out of the 1970s and ‘80s, it said.
“Every analyst I spoke to was bullish on prospects for nuclear power as a technology that's clean and meets the kinds of goals that so many policymakers are eager to hit in terms of reducing emissions," says Bank of America Investment and ETF Strategist Jared Woodard.
"But with plentiful and readily available raw material in theory, which is nevertheless tight in terms of supply."
The nuclear industry includes something for both sides of the political spectrum, Woodard notes, with environmentally conscious progressives drawn to the low emissions capacity of nuclear while conservatives liked national and resource security aspect.
Global policymakers who were less focused on nuclear as an option just 10 years ago are changing their attitudes, especially since the start of the Russian invasion of Ukraine, he says.
“They are now starting to include the prospect of nuclear power as one of the workhorse providers in their forecasts for the future if they're going to achieve any of the kinds of goals that they're so focused on and … because other sources won't be feasible to hit those goals.”
The Bank of America report also hails some of the more mature nuclear technology developers such as BWX Technologies, Vistra, Constellation Energy, as well as nuclear exchange-traded funds (ETFs) such as URA and Global X Uranium ETF, and miners, such as Cameco.
While it steers clear of some of the new, advanced reactor companies, Woodard says those startups are being watched and analysts have been especially impressed by the participation of big names from other industries, such as Bill Gates and CEO of OpenAI Sam Altman.
Still, new advanced nuclear remains an investment for a longer timeframe, he says.
“To get up to a production stage it still requires some risky capital to be committed so that's something you have to be thoughtful about,” he says.
Nuclear is cost effective especially on an 'all-in basis'...
LCOE & LFSCOE calculations by energy sources
(Click to enlarge)
...and has the highest energy ROI
Energy returned on energy invested, by source
(Click to enlarge)
Source: Bank of America Research Investment Committee, Idel 2022; D. Weißbach, G. Ruprecht, A. Huke, K. Czerski, S. Gottlie, A. Hussein; Red signals EROI below economically viable threshold
Investors excited by nuclear power in general are cautious of what advanced, generation IV reactors can bring to the table as the untested technology seeks regulatory approval and real-world demonstrations.
However, as investor interest grows, much of the upcoming technology could reach commercialization more quickly than many anticipate.
Many new advanced reactors are, mostly, based on old technological designs that have been built and operated in the past but not made it out of the national laboratories, according to Christine King, Director of Gateway for Advanced Innovation in Nuclear (GAIN).
Once those new iterations are closer to being commercially deployed, investor interest will follow.
“Checking the boxes, meeting the commitments, and getting projects done is going to start to convert some of the risk averseness into real dollars and investment in projects,” says King.
In the United States, demonstration projects materializing and individual states signing up to for nuclear power – today, 13 states are conducting feasibility studies – are very positive signs for the industry, King says.
The Bank of America study is just another example of a changing attitude toward nuclear.
“The (BofA) article is seen as a good example of the market opportunity around nuclear energy and people are thinking about what the opportunities are here and whether they want to position themselves as an early adopter,” she says.
The changing attitude from within the investment community could be a major turnaround for a technology that has struggled in the past to raise funds at a reasonable rate of return amid consumer resistance and uncertain legislation.
“You see this grassroots energy, from not just the innovators but from the investors as well,” says Bo Feng, the Argonne National Laboratory Group Manager for Reactor and Fuel Cycle Analysis.
“They understand that something like this doesn't pay off until it produces electricity, but there is a market for this, and so it's really an exciting time to be in nuclear.”
By Paul Day