In today’s Exponential Investor:

  • Japanese reactors are firing up
  • Germany’s Ja, bitte to Atomkraft
  • What’s fission and what’s fusion?

Editor’s note: Attitudes towards nuclear energy have been changing over the last few months – and very much for the better. My colleague James Early, the editor of Southbank Investment Daily, recently wrote an excellent and brief overview. It looks at the very basics of nuclear energy and identifies some of the opportunities. With James’ permission, his overview is reproduced below.

“I will always consider it absurd to shut down technologically safe nuclear power plants that don’t emit CO2.”

– Former physicist, quantum chemist, and German chancellor Angela Merkel in 2006

Well, maybe not always.

Five years later, following the March 2011 disaster at Japan’s Fukushima nuclear power plant – where earthquakes caused the plants to overheat – Merkel oversaw Germany’s nuclear phasedown.

Nuclear power always had a scary problem: what to do with the radioactive used fuel?

The other scary problem is accidents. Following, a partial meltdown at Pennsylvania’s Three Mile Island in 1979 – a level 5 out of 7 disaster on the International Nuclear Event Scale –  a worse meltdown (7 out of 7) in 1986 at Chernobyl in Ukraine, and especially after another “7” in 2011 at Fukushima, the world went into fear mode.

Germany, the United States, Japan, and even nuclear-loving France (see below) either stopped, phased down, or slowed their nuclear programmes.

Image: Wikipedia (public domain image)

Nuclear energy: suddenly cool again

Well, that was a decade ago, when people were thinking about meltdowns.

Now, a combination of record high summer temperatures and record high energy prices has people thinking that perhaps nuclear energy is not so bad after all.

With nuclear power, you’ve got meltdown risk and radioactive waste storage issues, but you’ve also got cheap base load power that doesn’t emit carbon dioxide.

Whether or not nuclear power is good or bad depends on your calculus.

And the global calculus is tilting.

In July, the UK approved a new nuclear plant at Sizewell, which France’s EDF will build. As Sam Volkering and Elliott Playle mentioned in Frontier Tech Investor recently, Britain hopes to go from 16% nuclear to 25% nuclear power by 2050.

United States Secretary of Energy Jennifer Granholm says that nuclear energy must be a part of the United States’ energy transition and the Inflation Reduction Act earmarked $30 billion in tax credits for existing US nuclear plants over the next decade.

Japan is firing up nine reactors by winter, thanks to a pro-nuclear energy chief and a roasting summer.

Even anti-nuclear Germans now almost begging for nuclear

And as Der Spiegel notes below, Germans, now faced with the choice of Russian gas, blackouts, or nuclear power, are quickly changing their tune to the latter.

Ok, so nuclear is coming, or coming back.

Let’s look at the two types of nuclear power theoretically* in existence (*more on theoretically later) and what each means for investors.

Nuclear fission vs. nuclear fusion

Nuclear fission

All usable nuclear power created thus far in the world has been generated by a process called nuclear fission.

Fission works like bowling, or, really, chain-reaction bowling, if such a thing were to exist: slam a really fast-moving neutron – the bowling ball – into an atom of uranium 235 (the “pins”, although it’s more accurate to picture a ball of 92 protons and 143 neutrons), and watch it break into two radioactive pieces (which are hot), as well as two or three excited neutrons (also hot).

These neutrons zip around to “bowl” into other uranium atoms inside a fuel rod, as well as zip out of the fuel rod and into the surrounding water.

Source: Wikimedia Commons

It’s a lot of zipping around and colliding. The underlying principle is that heat is created when a bit of the “binding” energy holding the uranium atom together is converted into kinetic energy, in accordance with Albert Einstein’s E = mc2 formula.

The heat boils water, which gets escorted around to a secondary loop (a bit like a car radiator) where the steam it creates spins a “propellor” to create energy.

Anyway, the industry tends to downplay the waste issue (see how the World Nuclear Association explains it below), but accidents aside, worries about nuclear waste causing problems to future generations has been nuclear’s speed bump.

Fission’s investing angle

If you’re a believer in the nuclear fission renaissance and want to play the investing angle – and this is just a logical train-of-thought-explanation per se, rather than a suggestion or recommendation to do this – you might invest in:

  1. The many public utility companies across the world that employ nuclear power
  2. Companies that make nuclear power equipment
  3. Uranium, perhaps via one of the many uranium-related ETFs.

Nuclear fusion: have we found the Holy Grail?

Nuclear fusion can create four times the energy of fission, generates virtually no long-term radioactive waste, relies on abundant hydrogen isotopes for fuel, and can potentially be done in a box small enough to have one for every household.

Great! Fusion sounds really great!

So why doesn’t the world just switch to fusion?

Because it doesn’t work yet, or at least the energy required to create the fusion reaction is greater than the energy that comes out of the reaction.

Wonky science: how nuclear fusion works

Stars, like our Sun, are basically big fusion reactors, using their immense gravity to “smoosh” atoms together – most typically isotopes of hydrogen which would normally repel each other; in the process, the hydrogen isotopes (deuterium and tritium) make helium and, separately, free up a newly-single and fast-moving neutron.

These pieces immediately blast away from each other.

At least in fusion reactors, only the neutron is able to escape an encircling electromagnetic field and go, say, into a metal buffer wall to create heat.

Heat, in turn, likely boils water, which likely creates steam, which likely spins a turbine of some sort to generate electricity.

Source: Wikimedia Commons

For the past 60 years, governments have been trying to create fusion – often teaming together because the costs are so high. For roughly the past decade, private companies have been hammering away at fusion concurrently. As you might expect, this has generated a mix of hype and progress.

The United States White House notes that of the $4 billion invested in private fusion companies (note: the White House doesn’t clarify if this is in the United States or globally), $2 billion came in 2021 alone. In other words, nuclear fusion investment seems to have gone parabolic.

What’s not clear is how soon – and if – fusion can become a workable energy reality.

Fusion’s investing angle

All the pure-play nuclear fusion companies at present are private, and fairly early-stage – at the venture capital level, generally. Translation: high-risk, high potential return. But definitely high risk.

  1. Here is a list of the major companies trying for fusion.
  2. Some larger energy conglomerates may or may soon have subsidiaries trying fusion, but the fusion angle would obviously be diluted.
  3. As well, although the most basic description of fusion mentions fusing hydrogen isotopes, lithium can potentially be used in fusion as well, so lithium – which is already in heavy demand for batteries – could be another investment candidate.

This image has an empty alt attribute; its file name is James-Early-Sig-350-black.png

James Early
Editor, Southbank Investment Research