The energy crisis is prompting a growing number of countries to restart or accelerate the adoption of nuclear energy. In particular, the United States will encourage, with the Inflation Reduction Act, the construction of new plants and China, over the next twenty years, will build about 150 new reactors. For this reason, second Rohan Reddyresearch analyst at Global X, “uranium appears to be one of the potentially most interesting commodities of the coming years”.
The use of nuclear power will have to double in the next two decades
The debate on nuclear energy as a tool for tackling climate change is increasingly intense. According to theInternational Energy Agency, the report reads, to achieve the goal of net-zero emissions, the nuclear sector needs to double in the next two decades. Some government interventions are already moving in this direction, such as theInflation Reduction Act in the United States, which is expected to increase investment in the uranium sector, strengthening nuclear energy as a climate solution.
In Europe, nuclear technologies are “transitional assets” in the EU green taxonomy, a rating that should boost investor confidence. The research, development and deployment of state-of-the-art technologies that reduce nuclear waste and increase safety, in particular Generation IV reactors, are among the nuclear-related actions included in the taxonomy.
According to Reddy, potential sanctions on Russian uranium, which accounts for 6% of global supply, will likely affect the broader market, making it even tighter than it already is. According to European Atomic Energy Community, uranium originating outside the EU-27 accounts for 95% of total EU domestic consumption and Russia is the second largest source of uranium for EU member states after Niger. Russia has about 43% of the global enrichment capacity, Europe 33%, China 16% (but is expanding it fast) and the US 7%. Some spare capacity is found both in the United States and in Europe.
Asia will play a crucial role in the expansion of nuclear power
In Asia Pacific, the report reads, nuclear energy today it represents only 4% of the market: However, this area will be crucial for the expansion of the nuclear industry, because most countries, including Japan, China, India and South Korea, have a nuclear program under development. For example, in South Korea’s energy strategy, nuclear power will account for about a third of the country’s energy mix by 2030, in order to increase energy security and meet climate goals. In Japan, Prime Minister Fumio Kishida aims to re-establish Japan as a nuclear-powered nation for the first time since the Fukushima disaster.
Finally, Reddy points out, the Chinese nuclear industry said it was confident it could accelerate expansion plans. There China Nuclear Energy Association believes 6-8 new reactors a year until 2025 is a reasonable target, with the possibility of 10. China therefore has the most ambitious nuclear programme, with plans to build about 150 new reactors in less than two decades. If done, China would become the world‘s largest nuclear power producer.
Attitudes towards nuclear power are changing
According to Reddy, the ongoing crisis and the need for energy security have led the world to reevaluate the entire energy supply chain and critical raw materials. The energy produced by nuclear fission is hundreds of times higher than that produced by combustion the same amount of fossil fuels, and significantly cleaner. Attitudes towards nuclear energy are changing: the need to decarbonise, be able to rely on reliable electricity and meet the growing demand for energy will make nuclear an increasingly important part of the world‘s energy mix.
For this reason, the Global X research analyst believes that the uranium sector deserves particular attention from investors. However, uranium has low trading volume on futures platforms and is subject to ownership restrictions, making it more complex as an investment than other commodities. A ETFs with exposure to the uranium sector (such as the Global X Uranium UCITS ETF USD), therefore, according to Reddy, it may be the most suitable choice for most investors.