Industry
Mint Explainer: What’s behind the renewed interest in nuclear power?
Summary
- A full-blown power crisis in Europe after Russia’s invasion of Ukraine, the higher cost of fossil fuels, and the urgent need to reduce carbon emissions have all helped nuclear energy stage a comeback since the dark days of the Fukushima disaster.
Uranium spot prices have doubled over the past year to a 16-year high as owners of defunct mines in the US and several other countries are scrambling to restart operations amid renewed interest in nuclear power projects. The spot price breached $100 a pound in mid-January and while it is now off its peak of more than $106 a pound, it is holding above $90.
The inability of mines to keep up with rising demand since the pandemic is one of the factors driving uranium prices higher. Many mines were closed or scaled down after the 11 March 2011 disaster at the Fukushima Daiichi project. That accident, caused by a powerful earthquake and tsunami, caused Japan and many other countries to shut down nuclear power plants amid safety concerns. But there’s been a rethink in many countries since then, as demand for energy and concerns about carbon emissions are on the rise.
Mint explains why there’s renewed interest in nuclear power and what it means for uranium prices.
What’s led to the rise in demand for uranium?
A full-blown power crisis in Europe after Russia’s invasion of Ukraine, the higher cost of fossil fuels, and the urgent need to reduce carbon emissions have all helped nuclear energy stage a comeback. Europe was already facing a power crisis since 2021, when the post-pandemic recovery began and demand for power shot up. That crisis was aggravated by hostilities between Russia and the Western world after the invasion of Ukraine in February 2022. Russia is a major exporter of energy in the form of coal, gas and crude oil.
Hurt by the disruption in supplies after sanctions were imposed on Russia, European countries were forced to reconsider the closure of some of their nuclear power plants. France, which had decided to reduce its dependence on nuclear power following the Fukushima accident, announced plans to build new reactors, as did the UK.
Japan also announced plans to restart many of its nuclear plants that had been idling since the Fukushima disaster. Many plants have been restarted since June 2021.
Efforts to decarbonise by shifting away from fossil fuels has also helped increase the demand for nuclear power and therefore uranium. Nuclear power is considered to be almost as clean as wind power and produces just about one-third of the emissions per unit of electricity compared to solar.
How did climate commitments create demand for nuclear power?
To keep the average rise in temperature to 1.5 Celsius above pre-industrial levels, the world needs to curb its use of fossil fuels. Many nations have pledged to cut emissions by 2050, and India aims to achieve net-zero carbon emissions by 2070.
There is also recognition that renewable energy alone may not be enough to significantly reduce demand for fossil fuels. Several developed and developing countries committed to tripling nuclear capacity by 2050 in a declaration on 2 December 2023 during the COP28 talks in Dubai. These included the US, UK, Canada, Finland, France, Japan, South Korea, the United Arab Emirates, and several small nations in eastern Europe.
Does the world have enough uranium to triple nuclear capacity by 2050?
The International Atomic Energy Agency estimates that the world requires about 60,000 tonnes of uranium to fuel the more than 400 nuclear power reactors in operation. With countries increasingly looking to nuclear power to address climate change, energy security and sustainable development, demand could rise to as much as 100,000 tonnes by 2040.
The International Atomic Energy Agency (IAEA) estimates there are more than six million tonnes of uranium reserves underground, roughly equivalent to 100 years of current demand. Australia has the largest reserves, estimated at two million tonnes, followed by Kazakhstan, Canada, Russia and Namibia. However, Kazakhstan is the world’s largest miner of uranium, followed by Canada, Namibia and Australia.
If there are sufficient reserves of uranium, why is supply a concern?
Increasing mining capacity is a challenge. Earlier this year, Kazakhstan government-controlled Kazatomprom, the world’s largest uranium miner, warned of a supply shortfall in 2024 and 2025 due to its inability to source adequate quantities of sulphuric acid, used in uranium mining, thanks to supply-chain disruptions and rising demand from the fertiliser industry.
However, the restarting of defunct and closed mines will improve supply, and if uranium prices remain around $100 a pound, many more mines could be built.
Another challenge is developing the capacity to process uranium into a usable form. Mined uranium needs to be enriched and processed into pellets and rods before it can be used in nuclear power plants. Currently, nearly 45% of this enrichment happens in Russia – more than in the US, the UK, France, the Netherlands and Germany combined.
