Nuclear power can play an important role in countries’ efforts to decarbonise their energy systems, and as such the demand for uranium is likely to continue to increase. This can be read in an analysis of Alexander RollAssociate Investment Strategist at Global X, on the case for investing in uranium in the context of growing interest in nuclear energy.
Several countries have recently announced plans to expand their nuclear capacity, including the United States, the United Kingdom, China and India. L’International Energy Agency (IEA) predicts that, as part of its net-zero emissions goal for 2050, global nuclear power capacity will need to more than double, from 413GW in 2021 to 871GW in 2050. In a report published by Clifford and Chance LLP in February 2023, the World Energy Organization also predicts that 60% of new power plants will be built in China. This means that China’s nuclear fleet could overtake the United States as the world‘s largest in the next 10 years.
In recent years, China has increased the number of nuclear permits and approved 10 new reactors in 2022 alone, generally larger than one gigawatt. The chairman of China General Nuclear Power Group, Yang Changli, said China’s nuclear fleet will grow to 400 GW, or seven times current capacity, by 2050 and account for 18 percent of the country’s electricity generation. China is spearheading a nuclear renaissance, which sees nations like the UK turning to the technology again in a bid to meet climate goals while meeting energy needs. Yang’s prediction would require a dramatic step forward in the country’s already ambitious building program, with more than nine gigawatts of additional nuclear capacity annually through 2060.
Also modular reactors (Small modular reactors or SMRs) are gaining popularity, due to their flexibility and potential use in hard to reach areas. With a power capacity of up to 300 MW(e), SMRs can fluctuate their output based on demand and can be built in a fraction of the time it takes to build a traditional reactor. Mostly prefabricated, SMRs can be fully operational in 2-3 years, much less than the 7-9 years required for a traditional reactor.
In this scenario, according to Alexander Roll, theinvestment in uranium ETFs (such as the Global X Uranium UCITS ETF USD) offers an efficient and cost-effective method to access a diversified basket of companies involved in uranium mining activities, while mitigating some of the risks associated with individual uranium miners.