Investment Strategy: Nuclear Energy as a Bridging Technology

Initial Issue Date: 04/12/2023

Basis of the Idea:

The ongoing debate surrounding energy supply is driving a shift in perception regarding nuclear power. Nuclear energy could serve as a potential bridging technology over the next 30–50 years until nuclear fusion reaches market maturity.

While countries like Italy, France, and the Scandinavian nations appear to face few or no energy issues, Germany is confronting significant challenges: an outdated power grid burdened by electric vehicles, heat pumps, and balcony solar systems, along with the exit from affordable gas and oil imports from Russia.

This situation has led Germany to virtually give away electricity during peak production periods and to purchase expensive electricity during high-consumption times—often from countries utilizing nuclear power. The debate is intensifying on social media, highlighting that this is not merely a national issue, but a European or even global one.

The fact remains that, given rising energy demand driven by new technologies, clean nuclear power—with a defined waste disposal and recycling strategy—could serve as a critical transitional solution. This holds true until viable alternatives such as fusion energy become commercially available.

The Situation in Germany

Germany imports approximately 9–11% of its total electricity demand during peak times from abroad. If the current situation remains unchanged and energy demand continues to rise in supplying countries, Germany may face several serious consequences:

Rising Energy Prices

Due to its reliance on imports, demand in supplier countries could drive prices up. This would affect both industry and consumers and could contribute to higher inflation.

Supply Security

As energy demand rises in supplying countries, they may limit exports, potentially leading to supply shortages in Germany. This risk becomes especially critical during the winter months when heating requirements increase energy consumption.

Economic Consequences

An uncertain or expensive energy supply could weaken the competitiveness of the German economy. Companies may relocate or face insolvency, leading to job losses and social tensions.

Energy Dependence

Germany could become even more dependent on energy imports, which presents political and economic risks, especially regarding relationships with unstable regions.

Social Unrest

Rising energy costs may fuel public dissatisfaction, potentially resulting in protests or social unrest.

Infrastructure Challenges

Germany’s power grid could face additional strain due to rising imports and increased input from renewable energy sources.

Environmental Impact

Without a clear transition to cleaner energy sources, Germany may be forced to revert to less environmentally friendly options to cover short-term energy gaps—jeopardizing national climate goals.

It is therefore critical for Germany to pursue a strategic energy policy that ensures reliable, cost-effective, and sustainable energy supply while advancing the development and implementation of technologies like nuclear fusion.

Global Perspective:

Energy Demand and Nuclear Power

Global energy demand is rising continuously, and renewable energy alone cannot currently meet the total requirement. Nuclear power provides high energy output and relatively stable supply, positioning it as a bridging technology until renewables and advanced technologies like fusion energy are fully developed.

Environmental Aspects

One advantage of nuclear power is its lower or zero CO₂ emissions compared to fossil fuels (depending on interpretation). However, it also brings challenges such as radioactive waste and nuclear accident risks. These risks must be weighed against the benefits of reduced carbon emissions.

Technological Advancement

Progress in fusion energy is crucial. It promises a cleaner and safer energy source but remains in the experimental phase. The question is how long nuclear fission must serve as a bridge until fusion becomes viable.

Uranium Recycling and Reprocessing

When considering nuclear energy as a bridging technology, final disposal and recycling of spent fuel are central aspects. Below are some internationally recognized approaches:

Reprocessing of Spent Fuel

Spent fuel can be reprocessed to recover uranium for reuse. This reduces the need for fresh uranium ore and minimizes high-level radioactive waste.

Efficiency Gains

Reprocessing and recycling uranium increase the overall efficiency of nuclear energy use. Modern technologies can extract more energy from the same amount of uranium, improving economic viability.

Plutonium Production

A by-product of reprocessing is plutonium, which can also be used as nuclear fuel. However, this presents safety and nonproliferation challenges.

Disposal and Long-Term Storage

Long-Term Safety

Disposing of radioactive waste—especially high-level waste—requires long-term secure solutions. Repositories must be geologically stable and protect humans and the environment for tens of thousands of years.

Repository Sites

The search for suitable repositories is often politically and socially controversial. Extensive scientific research is required to identify viable sites.

Geological Repositories

Some countries, such as Finland and Sweden, are advanced in developing deep geological repositories. Finland is constructing the Onkalo repository, intended to store high-level radioactive waste safely for up to 100,000 years.

Interim Storage

Germany has no permanent repositories but uses interim storage facilities to safely store radioactive waste for several decades until a permanent solution is found.

Reprocessing

Countries like France reprocess spent nuclear fuel, separating remaining uranium and plutonium from waste to manufacture new fuel elements, thereby reducing the need for newly mined uranium.

Transmutation

This advanced method converts long-lived radioactive elements into less harmful ones. Although still under development, it could significantly reduce the half-life of high-level waste.

Dry Storage

In the U.S. and other countries, spent fuel rods are stored in sealed steel containers placed in concrete modules. This method is considered safe for storage over several decades.

Countries Implementing Final Storage and Recycling Solutions

• France, Japan, Germany, Belgium, and Russia

  These countries use plutonium recycling to generate electricity and reduce the radiological footprint of nuclear waste.

• Deep Geological Storage

  Countries like Argentina, Australia, Belgium, Canada, Czech Republic, Finland, France, Japan, the Netherlands, South Korea, Russia, Spain, Sweden, Switzerland, the UK, and the USA prefer deep geological repositories for managing nuclear waste.

• Finland

  Currently the only country building a permanent nuclear waste repository. Most others are still developing or implementing waste management strategies.

• Reprocessing of Spent Nuclear Fuel

  Long-standing practice for extracting fissile material for recycling and reducing high-level waste volume. New reprocessing technologies are being developed to work with fast neutron reactors to burn long-lived actinides.

• European Collaboration

  ERDO (European Repository Development Organization) was recently founded in the Netherlands, including members from Denmark, Norway, and the Netherlands—demonstrating a proactive approach through storage and recycling.

Costs and Responsibility

The costs of final disposal are high and often borne by the state. There is also an ethical responsibility not to leave unresolved storage issues to future generations.

Implications for Uranium as an Investment

Sustainability and Regulations

Stricter sustainability and regulatory standards could impact the cost of uranium mining and processing—affecting nuclear energy’s profitability and uranium demand.

Technological Progress

Improvements in reprocessing technology could increase efficiency and lower costs, making uranium more attractive as an investment.

Long-Term Perspectives

Final disposal solutions are essential for the long-term viability of nuclear energy. Uncertainties in this area may lead to volatility in the uranium market.

Core Ideas for Investing in the Uranium Sector

The investment thesis is based on several key considerations:

• Global access to electricity is increasing.

• The global population continues to grow, driving higher energy demand.

• More everyday applications rely on electric power.

• Mobility trends favor electric transportation (e-cars, e-bikes, e-scooters).

• Technologies (e.g. AI servers, cryptocurrencies) consume increasing energy.

• According to the World Nuclear Industry Status Report (WNISR), 53 nuclear reactors are currently under construction worldwide:

  
  

  • 21 in China

  • 8 in India

  • 3 in Russia

  • 3 in South Korea

  • 3 in Turkey

  • EU: 1 in France, 2 in Slovakia, 2 in the UK

  
  

France plans to build 14 new reactors to replace aging plants.

Japan is expanding its nuclear fleet despite Fukushima. The Biden administration emphasizes maintaining current U.S. nuclear capacity.

Uranium prices are likely to rise, benefiting companies specializing in fuel production. Global production has declined since 2016 but increased again in 2022—potentially confirming a new trend.

To benefit long-term and reinforce the sustainability factor, consider investments in companies specializing in reprocessing, recycling, and final disposal of nuclear fuel.

Further Fundamental Arguments for Investing in Uranium

• Growing Demand for Nuclear Energy: Expansion of nuclear programs, especially in China and India, signals increased uranium demand.

• Energy Security and Low-Carbon Power: Countries aiming to reduce CO₂ emissions and improve supply security may rely more on nuclear power.

• Technological Advancements: Efficient reactor designs and fuel reprocessing may enhance nuclear viability and boost uranium demand.

• Limited Uranium Resources: Supply constraints may lead to higher prices if demand continues to rise.

• Geopolitical Factors: Uneven global uranium distribution creates strategic opportunities for producers.

• Long-Term Growth Potential: The longevity of nuclear plants and the bridging role of fission support long-term uranium demand.

• Portfolio Diversification: Uranium offers uncorrelated exposure compared to traditional commodities like oil or gold.

• Policy Support: Government backing and subsidies in some countries support sector stability and uranium demand.

Companies: Where to Consider Investing

The market is relatively concentrated. The five most relevant companies in uranium production and recycling:

Company: Cameco Corporation

Ticker: CCO.TO / CCJ

• One of the world’s largest uranium producers

• Industry leader with strong global influence

• Listed on TSX and NYSE

• Offers stability and reliability in a volatile market

Company: Kazatomprom

Ticker: KAP

• State-owned Kazakh company with strong political backing

• Global uranium market leader

• Listed on the stock exchange

• Provides geographic diversification through Central Asia exposure

Company: Denison Mines Corp.

Ticker: DML.TO / DNN

• Focuses on uranium exploration and development

• Canadian-based with strong regulatory framework

• Higher risk/reward due to exploration orientation

• TSX and NYSE listing ensures global investor access

Company: Uranium Energy Corp. (UEC)

Ticker: UEC

• U.S.-based with focus on uranium resource development

• Strong legal and political stability

• Could benefit from U.S. energy independence policy shifts

Company: Energy Fuels Inc.

Ticker: UUUU / EFR

• Specializes in yellowcake production and nuclear fuels

• Dual-listed in NYSE and TSX

• Operates in a stable U.S. regulatory environment

• Offers internal diversification within the nuclear fuel segment

Risks of Investing in the Uranium Sector

• Market Volatility: Price swings due to political decisions or global events

• Regulatory Risks: Policy shifts may reduce nuclear demand

• Environmental Risks: Accidents and waste issues may turn public and political sentiment

• Technological Risks: Renewables and fusion may disrupt demand

• Operational Risks: Mining, regulatory, and cost challenges

• High Capital Costs: Long development cycles and cost overruns

• Geopolitical Risk: Resource access dependent on political stability

• Long-Term Contracts: Revenue may be affected by fixed contract terms

Overall Conclusion

Nuclear Energy as a Bridging Technology

Nuclear energy is essential for meeting global energy demand while transitioning to advanced technologies like fusion. It offers high output with low carbon emissions.

Environmental and Safety Challenges

Waste disposal and accident risks remain concerns. Advances in recycling and reprocessing can address some issues but raise others.

Uranium Investment Outlook

The uranium market presents compelling opportunities driven by rising nuclear demand. Leading producers and developers across the value chain offer different exposure levels.

Risk Consideration

Investments come with significant risks—political, regulatory, environmental, and operational. A thorough risk assessment is crucial.

Final Thought

The future of nuclear energy and uranium investment is tightly linked to technological, political, and environmental developments. Investors should maintain a dynamic perspective and base decisions on deep analysis and long-term vision.