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As a general rule, the most successful man in life is the man who has
the best information
Concerns about climate change, carbon footprints, energy security and
the rising cost of fossil fuels spurred a revival of interest in nuclear
power generation. In early 2010 we saw the start of a of
a global nuclear renaissance. It was derailed when the unfortunate
Fukushima-Daiichi nuclear power plant accident paused
the renaissance for reactor safety inspections.
Why was there a bull market in uranium developing, can it survive and
overcome the negative fallout from Fukushima-Daiichi? A quick review of
nuclear powers fundamentals are in order:
- Coal and natural gas plants emit carbon dioxide
emissions and natural gas needs an incredible amount of investment in
pipelines and supporting infrastructure
- Operating a 1,000-MW coal plant, for one year,
produces 30,000 truckloads of ash that contains large amounts of
carcinogens and toxins. Every second, up the smokestack, goes 600 pounds
of carbon dioxide and ten pounds of sulfur dioxide
- Extensive use of hydrogen is not practical due
to its volatile nature and lack of infrastructure
- Solar, wind and geothermal are all niche
suppliers and are untried on a large scale. Geothermal seems to be
limited to a few parts of any country and all three alternative means of
generating electricity need massive investment in power transmission
lines to get the power to where it’s needed. All three of these
technologies are extremely important and each will successfully
contribute, in a small way, to energy independence. But
none are, today, capable of supplying base load power
- A 1,000-MW solar plant would cover 129 to 259
square kilometers and use a thousand times the material needed to
construct a nuclear plant of the same capacity.
- To equal the output of South Korea’s Yongwangs six one-thousand-megawatt nuclear
reactors, wind generators would require an area 245 kilometers wide
extending from San Francisco to Los Angeles. Solar would require roughly
52 square kilometers of collector area.
- High emissions, a negative energy return and
severe environmental costs are associated with ethanol and make its use
impractical
- Hydro - going to clean eco-friendly energy
isn’t accomplished by damming what free-flowing rivers are left
The World Health Organization and other sources attribute about 1 million deaths/year to coal air pollution.
2009 sources of CO2 emissions EPA
The primary greenhouse gas emitted by human activities in the United
States is CO2 - 83 percent of total greenhouse gas emissions. Fossil fuel
combustion is the largest source of U.S. greenhouse gas emissions and has
accounted for approximately 78 percent of emissions since 1990.
2009 sources of Methane CH4 emissions EPA
Methane is more than 20 times as effective as CO2 at trapping heat in
the atmosphere. Natural gas systems were the largest anthropogenic (refers to
greenhouse gas emissions that are a direct result of human activities or are
the result of natural processes that have been affected by human activities)
source of methane emissions in the United States in 2009.
In the US electricity generators rely on coal for over half of their
total fuel. The Chinese rely on coal for about two-thirds of their total
energy production. In the International Energy Outlook 2010 Reference case,
world coal consumption increases by 56 percent from 2007 to 2035.
The report "Economic Analysis of Various Options of Electricity
Generation - Taking into Account Health and Environmental Effects" by
Nils Starfelt Carl and Erik Wikdahl
is based on data from the EU ExternE project
published in 1999.
This report describes the health risks associated with electricity
production - expressed in terms of number of deaths per trillion watt hours (TWh) - and came to some interesting conclusions regarding
the human cost of electricity produced in the European Union:
- Coal, lignite and oil produce more extensive
health risks than do other forms of energy
- Hydro power and nuclear power produce health
risks that are two orders of magnitude less than those resulting from
coal and oil
Reasons to Use Nuclear Energy:
- One pound of yellowcake (U3O8 - the final
product of the uranium milling process) has the energy equivalence of 35
barrels of oil. One 7 gram uranium fuel pellet has an energy to
electricity equivalent of 17,000 cubic feet of natural gas, 564 liters
of oil or 1,780 pounds of coal
- Nuclear power's life-cycle emissions range from
2 to 59 gram-equivalents of carbon dioxide per kilowatt-hour. Only
hydropower's range ranked lower at 2 to 48 grams of carbon
dioxide-equivalents per kilowatt-hour. Wind came in at 7 to 124 grams
and solar photovoltaic at 13 to 731 grams. Emissions from natural gas
fired plants ranged from 389 to 511 grams. Coal produces 790 to 1,182
grams of carbon dioxide equivalents per kilowatt hour. International
Energy Agency
- Nuclear energy is the only proven technology
that can deliver baseload electricity on a large
scale, 24 hours a day, 7 days a week, regardless-of-the-weather, without
producing carbon dioxide emissions. Nuclear power plants emit no carbon
pollution—no carbon monoxide, no sulfur oxides and no nitrogen
oxides to the atmosphere.
- Natural gas accounts for 80% of the cost to
produce power from an NG power plant. Uranium accounts for 5%–10%
of the price of nuclear energy
- Power production cost results when comparing
nuclear/gas, nuclear/coal or nuclear/hydro – only coal is cheaper
- Nuclear energy is reliable. Nuclear power
plants do not depend on weather conditions to produce electricity nor do
they need costly electricity storage options
- One ton of uranium produces more energy than
several million tons of coal and oil. Fuel transportation costs are less
and there is less impact on our environment from mining or fracking shale gas
- Nuclear power plants require very little space
and can be situated close to where their power output is needed
Qulliq Energy Corp. (QEC) operates 27 diesel
plants throughout Canada’s Nunavut Territory. According to a 2010 QEC
report energy costs have risen to about $1 per
kilowatt hour in remote communities like Kimmirut and close to 50 cents per
kWh in the capital of Nunavut versus an average of 8.5 cents per kWh in cities
further south like Calgary and Toronto.
While traditional nuclear plants produce upwards of 1,000 megawatts of
electrical power, smaller designs could power everything from remote work
camps to larger, off the grid towns:
- Built in the 1970s by Atomic Energy of Canada
Ltd. (AECL), the shoebox-sized SLOWPOKE reactors are only powerful
enough to heat a bathtub full of water (20 KW)
- Toshiba has been developing a 10-megawatt
reactor called the 4S. Experts say they are not only economical, but
also much safer than conventional designs
"The smaller the reactors are, the easier it is to make them
inherently safe because your power densities are much lower and the cooling
temperatures involved are much lower, these are power plants you don't need a
nuclear PhD to run." said Dr. Jeremy Whitlock, a reactor physicist
at Chalk River Laboratories and former president of the Canadian Nuclear
Society.
In the interim report Japanese Earthquake and Tsunami:
Implications for the UK Nuclear Industrythe
UK’s Chief Inspector of Nuclear Installations, Dr. Mike Weightman, says the magnitude 9 earthquake and resulting
tsunami that hit Japan on March 11, 2011, are "far beyond the most
extreme natural events that the U.K. would be expected to experience. The
extreme natural events that preceded the accident at Fukushima - the
magnitude-9 earthquake and subsequent huge tsunami - are not credible in the
UK. We are 1,000 miles from the nearest fault line and we have safeguards in
place that protect against even very remote hazards. Our operating and
proposed future reactor designs and technology are different to the type at
the Fukushima plant.”
The Committee on Climate Change (CCC) was set up in 2008 to advise the
UK government on climate change issues. Their very first report, recently
delivered, stated “It would be possible to decarbonise
electricity generation with very significant nuclear deployment…
Nuclear generation in particular appears likely to be the most cost-effective
form of low-carbon power generation in the 2020s (i.e. before costs of other
technologies have fallen), justifying significant investment if safety
concerns can be addressed.”
Kiev is moving ahead with plans to build two new reactors at the Khmelnytsky power plant. “I believe there is no
possible alternative to the use of nuclear energy and only rich countries can
afford to discuss the possibility of closing nuclear plants.”
Ukrainian Prime Minister Mykola Azarov
"Regulators should press ahead with approving construction
licenses for new nuclear power plants despite Japan's nuclear crisis."
U.S. Energy Secretary Steven Chu, March 15 2011
Uranium Supply and Demand
If the use of fast-breeder reactors becomes widespread more energy could
be harvested by reprocessing spent fuel. Thorium reactors are being developed
and thorium is many times more plentiful in the earth’s crust than
uranium. But it will be several decades before these technologies can be
adopted in sufficient quantity to impact uranium demand. Also the large
upfront capital costs of the pressurized water reactors we’ve already
built means we’re committed to the once through uranium fuel cycle for
the next 30-40 years.
In March German Chancellor Angela Merkel ordered the country’s
seven oldest reactors temporarily shut down removing more than 25 percent of
its 20,700 megawatts of capacity.
"Germany's recently announced decision to phase out nuclear
power (now 23% of electricity supplies) will likely prove costly and undermine
industrial competitiveness, as the country shifts to much higher-cost, less
reliable base-load electricity sources and becomes more dependent upon
imported energy.” Patricia Mohr Scotia Bank
Megatons to Megawatts
There is a shortage of mined uranium - our current mine supply deficit
is 25% of total yearly demand. We’ve been covering the deficit with
government stockpiles, utility stockpiles and the Megaton to Megawatts
Program.
Today utilities stockpiles are pretty much depleted.
Mine production is now primarily supplemented by ex-military material
- the Megatons to Megawatts program. The Highly Enriched Uranium (HEU)
Purchase Agreement to convert 500 tonnes of HEU to
low enriched uranium (LEU) with Russia will expire in 2013 - Russia has said
they will not renew it.
RBC Capital Markets analysts Adam Schatzker
and H. Fraser Phillips predicted that uranium prices would start to recover
in the second half of 2011:
"The fallout from Japan’s nuclear crisis will hit global
demand for uranium, but it will also negatively affect future supply of the
mineral, and the uranium market will remain in deficit from 2011 until
2020…As a result we expect that, at some point in the next 12 to 18
months, utilities will begin to see an increasingly tight long-term contract
market to the point where there is all but no supply availability.”
Japan has 55 nuclear reactors using 21.3 million pounds (mlbs) of uranium - 12-13% of annual global uranium
demand. Japan has shut down 20% - 24% of their reactor fleet which equates to
global uranium demand lessening by 4-5mlbs on an annualized basis. According
to Bloomberg even if Japan only develops half of its proposed 19 gigawatts of nuclear power this decade, the country,
together with China, India, Russia and South Korea, will add a combined 160 gigawatts by 2020.
The four major growth markets for nuclear power are:
- China
- India
- Russia
- South
Korea
All four countries are expected to continue with previously announced
nuclear energy expansion plans.
Out of the 62 reactors currently under construction, 48 – or 77%
of the total – are being built in these four markets, another 82
reactors are planned and 210 are proposed for these four markets.
China
“Nuclear is the only energy source that can be used on a mass
scale to achieve the nation's goal of developing cleaner, low carbon energy.”
China's vice-president of the China Nuclear Energy Association, Zhao Chengkun
Currently China has 13 nuclear reactor units in use and another 28
units are under construction. The World Nuclear Association (WNA) says China is
planning to construct an additional 187 nuclear reactors. The China Nuclear
Energy Association said, May 12th 2010, it will boost atomic capacity as much
as eight times by 2020.
Statistics from the WNA show China's annual consumption of uranium
will reach 20,000 tons by 2020 - about one third of global output in 2009.
“China would face its most severe electricity shortage since 2004, there could be a national shortage of 30 million
kilowatt hours this summer, which would equate to the consumption of three Chongqings (southern city of 31 million).” Xue Jing of the China Electricity Council
The southern province of Guangdong – the most industrialised province in China – has issued
warnings about the regions power supply, saying the shortfall could reach 4m
kW per hour during May, June and July.
China has banned exports of diesel and the price of thermal coal
– which fuels 70 per cent of China’s power plants – has
risen by nearly one fifth since last year. Hydropower generated electricity
has fallen after a dry winter in southern China.
Russia
Nuclear power currently accounts for 16 per cent of Russia's
electricity generation, and the nation has set a target to raise its share to
one-quarter by 2030. Vladimir Putin, Russia’s Prime Minister, said his
government won't revise its program of building new nuclear reactors
following Japan's Fukushima nuclear reactor accident.
“It is impossible to speak about a global energy balance
without the nuclear power industry.” Mr. Putin said at a meeting of
the intergovernmental council of the Eurasian Economic Community (EurAsEC).
Russia would have to build a total of 40 new reactors to fulfill the
goal of 25% nuclear supplied electricity– 54 reactors are currently either: under construction (10), planned
(14) or proposed (30). The latest Federal Target Program (FTP) envisages a
25-30% nuclear share in electricity supply by 2030, 45-50% in 2050 and 70-80%
by the end of the century.
Belarus, Ukraine, Armenia and Turkey have all recently purchased
Russian made nuclear power stations. Russia and Hungary also opened talks on
the possible participation of Russian companies in a project to modernize
Hungary's Paks nuclear power plant. Russia has also
signed a new deal to build a nuclear power plant in Bangladesh.
India
India's shortage of fossil fuels (coal provides 68% of the electricity
at present, but reserves are limited, gas provides 8%, hydro 14%) is the
driving force behind the nuclear investment for electricity - 25% nuclear
contribution is foreseen by 2050, when 1094 GWe of
base-load capacity is expected to be required.
India's nuclear power generation capacity is currently at 4.7 GW and
set to rise to 7.3 GW by the end of March 2012. By 2020, the country hopes to
have over 20 GW (20,000 MWe) of nuclear power
generating capacity and 63,000 MWe by 2032.
The country has signed a nuclear power deal with the United States and
opened up its estimated $150 billion nuclear power market to private reactor
builders such as GE and Areva.
India has a 12 percent peak hour power shortfall and roughly 500
million people in India are without electricity. Electricity demand in India
is increasing rapidly with 830 billion kilowatt hours (kWh) produced in 2008
- 700 kWh per capita for the year but when transmission losses are counted it
resulted in 591 kWh consumption per capita. India’s per capita
electricity consumption figure is expected to double by 2020 - 6.3% annual
growth - and reach 5000-6000 kWh by 2050.
"Our requirement of adding electricity is very high. Over 40
percent of our people still don't have access to electricity." Srikumar Banerjee, chief of India's atomic regulatory
body.
India’s Atomic Energy Commission said it will increase
production 13-fold by 2030, all of the increase fuelled by imported uranium.
The Atomic Energy Commission envisages some 600-700 GWe
online by 2050.
South Korea
After winning a $20 billion contract to supply four nuclear reactors
to the United Arab Emirates (UAE) South Korea is set
to become a world leader in exporting nuclear technology.
Nuclear energy is a strategic priority for South Korea and capacity is
planned to increase by 56% to 27.3 GWe by 2020, and
then to 35 GWe by 2030.
Today 21 reactors provide almost 40% of South Korea's electricity - 11
more South Korean reactors are under construction, on order or planned. South
Korea plans to complete 18 nuclear power plants by 2030.
Generation capacity of 72.5 GWe in 2008 is
expected to grow to 88 GWe total in 2017 - 26.6 GWe (30%) of this will be nuclear supplying 47% of demand
(214 TWh).
After its sale of four reactors to the UAE, the South Korean Ministry
of Knowledge Economy said, in January 2010, that it aimed to achieve exports
of 80 nuclear power reactors by 2030. South Korea’s goal is to achieve
a 20% share of the world market – third behind the USA and
France/Russia.
Following the UAE sale Korea is marketing to Turkey, Jordan, Romania
and Ukraine, as well as South East Asian countries. In addition to exporting
reactors, Korea has also entered the $78 billion market for the operation,
maintenance and repair of reactors.
Others
Nuclear power is still under serious consideration in over 45
countries which do not currently have it:
- Europe: Italy, Albania, Serbia, Croatia,
Portugal, Norway, Poland, Belarus, Estonia, Latvia, Ireland, Turkey
- Middle East and North Africa: Iran, Gulf states
including UAE, Saudi Arabia, Qatar & Kuwait, Yemen, Israel, Syria,
Jordan, Egypt, Tunisia, Libya, Algeria, Morocco, Sudan - water
desalination requirements may be the chief driver for nuclear energy for
many in this area
- West, central and southern Africa: Nigeria,
Ghana, Senegal, Kenya, Uganda, Namibia.
- South
America: Chile, Ecuador,
Venezuela
- Central and southern Asia: Azerbaijan, Georgia,
Kazakhstan, Mongolia, Bangladesh, Sri Lanka
- SE Asia: Indonesia, Philippines, Vietnam,
Thailand, Malaysia, Singapore, Australia, New Zealand
- East
Asia: North Korea
South Africa plans to start the process for its nuclear build program
next year. The country’s first new reactor is expected to come on line
by 2023, producing 9,600 MW over the next twenty years.
Conclusion
According to the International Energy Agency global electricity
consumption will rise 75 percent to 35,300 terawatt-hours by 2035 from
2008’s 20,183 terawatt-hours.
If we shut down all the reactors under construction - if we never put
another nuclear reactor online - we would still need 25% more uranium than is
being mined. But emerging markets are driving growth in nuclear power and a
major building boom is underway for nuclear capacity.
Each GWe of increased capacity (enough
electricity to power one million homes) will require about 200 tU/yr of extra mine production
and each reactor about 400-600 tU for the first
fuel load.
The World Nuclear Association (WNA) predicted a 33% increase in
uranium demand between 2010 and 2020 – that’s a minimum 58% (25%
current mined deficit + 33% demand increase) increase needed in mined uranium
by 2020.
The U.S. produces 27 percent of the world’s nuclear power, has
104 operating nuclear reactors and needs about 50-55 million pounds (Mlb) of uranium per year. But the country produces only 4
Mlb of uranium. The U.S. Nuclear Regulatory
Commission, on April 21, renewed the operating licenses for the Palo Verde
Nuclear Generating Station in Arizona - the US’s largest atomic plant -
for an additional 20 years.
The U.S. Department of Energy dedicated a new research facility on May
3, 2011, that will accelerate the advancement of nuclear reactor technology.
The Consortium for Advanced Simulation of Light Water Reactors (CASL) will
use supercomputers to “study the performance of light water reactors
and to develop highly sophisticated modeling that will help accelerate
upgrades at existing U.S. nuclear plants.”
"Nuclear energy is our nation's largest source of carbon-free
power and is an important part of our energy mix moving forward. Work done at
this facility will help make our fleet of reactors even safer and more efficient
while creating jobs, fueling the economy and saving consumers money on their
utility bills." U.S. Secretary of Energy Steven Chu
It seems to this author that uranium supplies are going to get very
tight and there will be fierce competition for available material in both the
spot and long term markets. Uranium focused juniors, with money in the
treasury and the ability to raise more money as necessary to advance their
projects (in what is admittedly a harsh climate for raising uranium money)
should be on every investors radar screen. Are they on yours?
If not maybe they should be.
Richard Mills
Aheadoftheherd.com
If you're interested
in learning more about the junior resource market please come and visit
Richard at www.aheadoftheherd.com. Membership is free, no credit card or personal
information is asked for.
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