Uranium and Nuclear Energy: Friend or Foe?
Did you know more than 10% of the world’s energy production comes from uranium and nuclear power?1 Nuclear energy adoption is growing around the globe and the investment opportunity is developing alongside it. However, uranium and nuclear energy can be a tricky topic to navigate from an environmental and social impact perspective, so it pays to know the answer to a few key questions before you start investing.
1. What is Uranium and Nuclear Energy?
Uranium is a dense, radioactive metal, making it a potent source of concentrated energy for generating electricity. Nuclear power, as a low carbon energy, is the biggest source of uranium demand globally.2 Nuclear power emits far less carbon dioxide than traditional fossil fuels, with emissions of just 12 grams of CO2 per kW/h – the same as offshore wind energy – compared to coal at 820 grams of CO2 per kW/h.3
To put this into perspective, a typical nuclear reactor produces around one gigawatt of power which is the same as 100 million LED lightbulbs, 431 utility-scale wind turbines or 3.125 million PV panels.4 Nuclear is a highly dependable source of energy as it operates at full capacity more than 90% of the time, making it almost three times more reliable than wind and solar plants.5
2. What is the Investment Opportunity?
Global nuclear energy capacity is growing every year as nuclear fulfils the role of a transition resource toward a cleaner future. Nuclear accounted for approximately one-third of the world’s low-carbon electricity in 2020, and projections anticipate an increases of 17% over current levels to 456 GWI by 2035, and a further 71.5% to 669 GWI by 2050.6 Tellingly, last year, for a second year in a row, the International Atomic Energy Agency (IAEA) revised up its projections of the potential growth of nuclear power capacity for electricity generation in the coming decades.
Highlighting some of the key investments and policy changes from governments across the world:
- More than 70 countries, covering 75% of the world’s greenhouse gas emissions, have pledged to cut emissions to net-zero. The UK, France, China, Poland and India have all recently announced energy strategies that include substantial investments in nuclear power. In particular small modular reactors (SMRs), generally defined as ‘advanced nuclear reactors’, have garnered strong political and institutional support in the US, Canada, France and the UK.7
- According to the IEA, emerging and developing economies now account for more than 90% of global growth, with China set to become the leading nuclear power producer before 2030. Advanced economies have also collectively seen a 10% increase in nuclear, as retiring plants are offset by new developments.8
- As of April 2023, the G7 are reportedly in agreement that they must collaborate to support the stable supply of fuels and “achieve reduced dependence on Russian supply chains” as Russia represents more than 6% of global raw uranium output and nearly 40% and 50% of uranium refinement and enrichment facilities respectively, this marks a significant gap for investment in the global uranium supply chain.9
3. Addressing Investor Concerns About Uranium and Nuclear Energy
Despite the upside potential of nuclear power, there are risks to keep in mind for investing. In the past, nuclear technologies have caused a number of political, environmental and societal issues. The Chernobyl and Fukushima nuclear disasters brought the safety of nuclear into question. And while technological advancements have increased the scalability and safety of nuclear power, negative perceptions linger around uranium’s use in weaponry – particularly in relation to geopolitical tensions such as the Russia-Ukraine War.
In 2017, the United Nations Treaty on the Prohibition of Nuclear Weapons (TPNW) was enacted to ban nuclear weapon activities. As a result of the treaty, the nuclear weapon industry saw investment inflows drop by US$63 billion in 2021 when compared to 2019, according to a study by the International Campaign to Abolish Nuclear Weapons (ICAN) and PAX50.10
Additionally, Uranium mining can have adverse effects on the environment and people’s health. Mine site and miner health and safety is of particular concern as uranium miners are more likely to succumb to “multifactorial health hazards” including lung and other forms of cancer. Other concerns also include global health and environmental effects of increased background radiation and water contamination.
When investing in uranium it is important to weigh up these potential concerns because it is not as simple as other commodities like oil and coal. Purchasing an Uranium ETF can help alleviate some of these concerns. For instance, funds such as the Global X Uranium ETF (ATOM) have index filters which seek to limit investor exposure to controversial weapons programs or unregulated, potentially illegal company operations. Accessing the industry through a broad basket of uranium mining stocks globally can also help mitigate individual company risk, while investing in uranium futures can be subject to negative returns associated with contango, which occurs when the spot price of a commodity trades below its future price, along with thin liquidity.
Despite the negative sentiment that tends to linger around uranium and nuclear technologies, it is undeniable that nuclear power can play a positive and significant role in the world’s transition toward clean energy. As developments in the industry, both regulatory and technological, continue to make advances in safety and control, nuclear energy may just be what we need to power our next step toward net-zero.
ATOM: For those wishing to invest in uranium and the nuclear power value chain, the Global X Uranium ETF (ATOM) provides a way to do so.
ATOM tracks the Solactive Global Uranium & Nuclear Components Total Return Index. The Solactive Global Uranium & Nuclear Components Total Return Index tracks the price movements in shares of companies which are (or are expected to be in the near future) active in the uranium industry. This particularly includes uranium mining, exploration, uranium investments and technologies related to the uranium industry. The Index will include a minimum of 20 components at every rebalancing. ATOM does not have any holdings in EDF Energy, Korea Electric Power, Kore Hydro & Nuclear Power, PGE SA, ZE PAK SA and NTPC Ltd.