In today’s Exponential Investor:
- What is nuclear energy really about?
- Should you be thinking about investing in nuclear?
- How do you go about investing in nuclear stocks?
Clearing up confusion on what is “nuclear”
The word “nuclear” is enough to make alarm bells (or sirens) go off in the minds of the general public.
For decades, the nuclear energy industry has been clouded by myths and negative connotations. It is arguably the most misunderstood area of the energy market.
We know that when the sun shines, we collect solar energy. And when the wind blows, wind turbines rotate and we collect energy.
Nuclear energy is more mysterious. The great unknown also comes with archaic perceptions of danger and disaster that has hindered mass adoption… until now.
What nuclear energy “actually is” is far different from what most people “think it is.”
A common misconception is nuclear energy is dangerous.
These perceptions are a hangover from nuclear disasters such as Chernobyl and Fukushima. In particular, the Chernobyl disaster of 1986 indirectly killed around 4,000 people.
These fears are understandable. Nuclear disasters (albeit extremely rare) are catastrophic, as we’ve seen from past events.
However, Chernobyl and Fukushima are outliers. They are the only two incidents to occur in 18,500 cumulative reactor years.
What a lot of people don’t realise either is there are currently around 440 operational nuclear power plants around the world. In the UK there are eight already operational with more coming online.
Nuclear energy is a reliable source of energy. It is capable of producing larger energy output than fossil fuels, whilst being sustainable and cheaper for the end consumer.
For example, the amount of energy released from a nuclear reaction is ten million times greater than the amount released when burning a similar amount of fossil fuels.
Public perception of danger and disaster towards nuclear, rather than reality, has fuelled political policy for years and prevented greater adoption.
The power of public perception is significant.
For example, the probability of being killed in a plane crash is 1 in 11 million. The chances of dying in a car accident, however, is about 1 in 5000.
Yet more people are afraid of flying than driving. The perception of danger is more visceral and powerful.
Nuclear energy has faced a similar problem. The perception of danger is visceral and the misconceptions of nuclear energy only fuel those perceptions.
However, these outdated views are starting to change.
A nuclear renaissance is afoot.
This is because soaring energy bills seem to overpower these old perceptions. When the reality of decades of poor energy policy smack you in the face and in the wallet, it’s amazing how fast the tide can turn.
Nuclear is no longer a dirty word.
And governments around the world as fast realising it’s their “energy ace” up the sleeve.
For example, the UK is hoping to generate upwards of 25% of its electricity supply from nuclear energy sources by 2050. Currently, nuclear resources account for 16% of the UK’s energy demand.
In the United States, the recently passed “Inflation Reduction Act” is set to open up the nuclear industry in that country even further. It involves the direction of US$369 billion at climate and energy investment with multiple provisions for new and existing nuclear energy support.
Should you invest in nuclear energy?
There’s no doubt nuclear energy is back on the agenda.
It therefore makes perfect sense for investors to be looking closely at ways to invest in this sector.
It’s clear the world will not meet renewable energy targets without nuclear energy.
For example, according to International Energy Agency, world nuclear output, which is currently at 413GW, would need to roughly double to 812GW by 2050 to meet carbon neutrality goals. Crucially, this would limit global warming to the 1.5 degrees Celsius benchmark.
According to the Wall Street Journal, other renewable energy sources such as wind and solar power will simply not be enough to help countries meet emissions targets.
Like the UK, the United States is adopting nuclear energy at pace. Currently, the United States gets around 20% of its electricity from nuclear energy resources. The US is seeking to double nuclear energy production by 2050.
After years on the back burner, the nuclear energy industry is at the birth of a new era.
How to invest in nuclear stocks
There are several ways to look at the industry if you’re thinking about investing.
Firstly, producers of uranium are a good way to gain exposure to the industry. As stated, uranium is the main ingredient in the generation of nuclear energy.
Energy producing giants Cameco and Kazatomprom are examples of producers of uranium. Kazatomprom for example produces around one quarter of the world’s uranium.
Then, there’s nuclear energy providers. These are the energy giants that operate nuclear plants and provide energy to the grid.
EDF Energy is an example here. EDF is one of the largest nuclear providers in the world. Over three quarters of the electricity it produces comes from nuclear power plants. Globally, EDF operates 73 nuclear reactors.
EDF operates conventional nuclear reactors. These are the larger nuclear reactor sites that can take years to build.
There are also companies that build the nuclear reactors and develop nuclear reactor technology.
Examples of these kinds of companies would be Rolls-Royce Holdings and NuScale Power. Yes, Rolls-Royce, the diversified UK-based industrial giant, is even involved in nuclear energy!
Finally, many investors also turn to exchange-traded funds (ETFs). An ETF can give you exposure to a whole basket of companies involved in the nuclear industry.
There are a number of uranium or nuclear-based ETFs that you can find on the London Stock Exchange and overseas on the US markets as well.
A great resource is etf.com where you can search for specific investment ideas (like nuclear energy or uranium) and the ETFs globally that are available.
In short, nuclear energy is back. And in our view is going to be one of the biggest energy stories of the decade. From our view, if you’re thinking about investing in this sector, now is the time to move.
Editor, Exponential Investor