🔋Nuclear Tomorrow - Pt. 2
While Russia/China have the largest influence in the uranium/nuclear powerplant space, the US is hoping that small module reactors can reinvigorate its dominance.
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Nuclear energy is being found more in the news lately whether it be due to Russia, Germany, or something else. Even since starting this newsletter a little over a year ago the sentiment toward nuclear politically has been changing more positively. This change is echoed by polls and the type of news headlines on mainstream publications as well. Last week I wrote how the US and UK have made an agreement regarding nuclear energy and this comes at a time where these countries are lacking influence in the sector. I showed how even though the US has the most operating reactors, it is lagging behind other countries in terms of uranium mining, enrichment, reactor construction, and foreign influence.
Uranium
As part of the uranium fuel cycle, mined uranium oxide (U3O8) is converted into UF6 and enriched from ~0.7% to 3.5-5% for commercial reactors, 20% for HALEU, and 90+% for naval reactors. Abbreviating the process, it is then turned into fuel rods for consumption by the reactor.
To hammer home that the US is behind the ball, well over 90% of mined uranium oxide is imported to the US. Of that, only 41% is actually enriched in the US and the rest is in Russia, Germany, UK, and Netherlands. The US has only one commercial conversion and enrichment site respectively. Also, the only commercially available HALEU comes from Russia which has delayed TerraPower’s advanced nuclear reactor in Wyoming for example.
It is hard to talk about the uranium fuel cycle without mentioning Russia. In this sense the US has found itself in a similar position with uranium and Russia that is has with batteries and China. Much of the story is traced back to the cold war with countries duking it out in technology. Russia developed a more economic uranium enrichment process than the US and ended up with large stockpiles of high enriched uranium. Over the years through nuclear de-escalation agreements the US bought this weapons grade uranium, downgraded it, and used in in powerplants. This undercut domestic enrichment in the US and is cause for the lower domestic enrichment capacity, the shutdown of facilities like Piketon, and such a dependence on Russia.
This is important because the Department of Energy has classified uranium as near critical with a high importance to energy with some supply risk over the medium term. This roughly falls somewhere between copper and lithium in criticality for the future of US energy which are topics I’ve covered previously [1,2].
With Russia’s invasion of Ukraine, the supply chain of uranium is perhaps more shaky than it has ever been. On top of other sanctions, many US politicians are trying to get uranium imports from Russia banned since it is an important commodity for the country similar to oil and gas. While the supply risk is a 2 out of 4, a continued expression of this distaste for uranium from Russia and similar jurisdictions means US uranium supply could need federal investment to domestic and friendly regions similar to what was seen in the Inflation Reduction Act to keep things going smoothly. Due to the growing geopolitical bifurcation, foreign agreements undermining US interests have become more common, one example is the Kazakhstan uranium agreements with Russia and China I discussed last week.
One way these issues can be resolved is through market forces and prices. Globally, even Russia and China are bidding for Kazakhstan’s uranium let alone the rest of the world. Naturally increasing demand increases uranium prices. This will incentivize uranium miners and enrichers across the country to go into production profitably thus easing the burden and moderating prices. The other option I expect is with unfriendly jurisdictions out of the question, the US could put big money into more Canadian and Australian mines since it is unlikely that mines will get permitted under the current political administration. We have seen this behavior already with battery metals. In the same concept, uranium conversion and enrichment facilities could end up with federal funding under the same vein of energy and national security.
Unless the US restarts domestic uranium oxide mining and rekindles a friendship with Russia, both seemingly unlikely, our nuclear outlook into the future should bear in mind the new environment we are in. So how does this story end? Will China/Russia continue to dominate the nuclear story just like we are seeing in the battery market?
United States
The US is heavily focused on small module reactor (SMR) technology while neglecting current light and pressurized water reactors. Even though one of these traditional reactors came online in Georgia this year, there are no others planned or in construction, meaning it will be a few years before the next generation of SMRs can develop and be constructed. This ultimately is the gap the US is in right now, with no more old and the new still not quite here. Some SMRs are struggling with the HALEU supply issues while some others are able to leverage traditional supply chains and operate with lower levels of enrichment.
One of the biggest reasons for the lack of new reactor construction is due to regulations. The Nuclear Regulatory Commission is responsible for oversight in the US and has stunted the industry at every step. Regardless of this anti-nuclear action in traditional nuclear power, SMRs look to be supported more broadly. The Inflation Reduction act offers tax incentives for advanced nuclear and funding to help create a domestic supply of HALEU. Both the Infrastructure Bill and Inflation Reduction Act offer incentives for current nuclear plants to remain operational as well.
The US is extending is influence globally with agreements to help bring SMRs to places like Romania through NuScale (also considering Kazakhstan, Poland, and more). Canada, Indonesia, Ghana, South Korea, Thailand, and Japan are also beneficiaries of US SMR projects abroad.
Europe
Europe is a mixed bag in terms of nuclear power. Renewables have captivated the eyes of politicians around Europe with nuclear phase outs, importing liquified natural gas, biomass, and building out wind and solar the most popular choices. Renewable targets have caused many countries to alter their energy usage and construction. Even France for a while was actively neglecting its nuclear fleet for renewables even though they have some of the cleanest energy on the globe. With nothing against renewable energy, the movement at large was objectively harmful to nuclear energy industry in the region in recent history.
Recently, France has changed its tune and is again in support of nuclear energy. They have even petitioned to get nuclear considered renewable in the new EU renewables targets in a last minute petition which was successful. This is in addition to the nuclear alliance that was recently formed in support of nuclear power led by France with members including Bulgaria, Croatia, Finland, Hungary, Italy, Netherlands, Poland, Czech Republic, Romania, Slovakia, Slovenia, and Sweden. France has influence over the region not only politically, but also with the expertise on building new reactors, which is evident by their agreements with Poland for multiple new reactors for example (at the dismay of Germany).
Some countries phasing out nuclear like Germany and Belgium. Germany has since seen and increased usage of coal and Belgium has changed its mind on nuclear after its phase-outs. Spain is another generally anti-nuclear country even with a sizable operating capacity. Denmark, one of the countries with the most wind power is now open minded to nuclear according to the prime minister. A Danish company is also working with Indonesia to bring SMRs to the country. The UK is broadly positive toward nuclear and looking to increase exposure to the industry.
Asia/Rest of World
Russia influence extends past uranium with 70% of new reactor construction with much of that foreign exports. Russia has projects in Bangladesh, Belarus, China, Egypt, India, Iran, Slovakia, and Turkey with others already completed abroad. In addition, some EU countries may not be happy that Hungary has moved forward with two new Russian reactors as well. The influence Russia has can be summarized well in the figure below.
China’s Belt and Road initiative extends past things like rare earths and battery metals to nuclear as well. As I mentioned in the last piece, China has the most nuclear plants under construction with many being abroad. Their influence over the rest of the world is growing in nuclear energy. Even in places like South Korea who are aligned democratically to the US are having intellectual property disputes and may even damage South Korea’s foreign plans to China’s benefit. China faces issues scaling exports of nuclear power plants due to lack of used fuel infrastructure and Russia’s dominance in the area, however they remain a large player in the space. They have been in talks to build/finance reactors in Pakistan, Romania, Argentina, UK, Iran, Turkey, South Africa, Kenya, Egypt, Sudan, Armenia, and Kazakhstan.
Conclusion
While the current supply chain for uranium poses challenges to the nuclear industry, we may see similar behavior from the US as we have seen with battery metals to generate a more secure supply. Further, political interest in Russian sanctions may spur dialogue on a reinvigorated uranium enrichment industry which is so vital to Russia and the nuclear industry in the grand scheme.
China and Russia dominate the construction of reactors especially abroad and the uranium fuel cycle is more often than not linked to Russia. Due to these facts the rest of world faces quite the challenge to overcome the influence these players have in the future. What the US has going for it is the jumpstart on SMR technology which will likely be the future of nuclear energy. While US influence has faltered, it may be reinvigorated in years to come with new technologies. It also has the willpower to throw large amounts of money at things as seen by the Inflation Reduction Act. The US could return to a major player in the uranium and nuclear industry if it wants to. Until next week,
-Grayson
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