Investors should buy into the nuclear power renaissance – Merryn Somerset Webb

There is a lot going on this year. So much so that you might not have noticed one of the biggest game-changers out there: the nuclear-power renaissance. Until recently, most net-zero absolutists were convinced their dream could be achieved with renewables. Spend enough on wind and solar, and in a decade or two, you would have a “clean” grid delivering cheap electricity everywhere. No dirty fossil fuels and no dangerous nuclear plants either.

It hasn’t worked – and it is increasingly clear that it won’t (intermittency, distance, expense). That’s a problem when, thanks to electric cars, heat pumps and, crucially, artificial intelligence (AI), demand for electricity is rising very fast indeed. Demand from data centres is expected to double or even triple by 2030. Note that an AI query uses ten times the energy of an old-fashioned Google search. Today data centres use 2%-3% of total US electricity. By 2030 that is forecast to be near 9%. Overall global power demand is expected to grow by 3%-4% over the next five years – three times faster than it has over the last ten.

The good news is that there is another solution – and a really good one: nuclear. For the past few decades we have shied away from it on the basis that it’s dangerous. Turns out it isn’t. The accidents at Three Mile Island (1979) and Chernobyl (1986) left a legacy of what Dr Tim Gregory, author of Going Nuclear: How the Atom Will Save the Worldcalls “radiophobia”. But no one died at Three Mile Island (America’s biggest ever nuclear disaster); and the death toll at Chernobyl “likely falls in the region of a few hundred”, Gregory told The Telegraph. Worry less about radiation, says Gregory, and more about air pollution – something that kills millions of people and which nuclear power can make go away. But being clean is only the start of the brilliance of nuclear. It is also constant (something our grid needs – ask the Spanish); reliable, low emission and potentially cost-effective (this is a choice for regulators and planners). Build it out in the form of small nuclear reactors (SMRs) and you can construct modular units in factories and deploy them reasonably quickly and cheaply wherever energy is needed. If that all sounds good it is because it is – something pretty much everyone now seems to grasp.

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In May, Donald Trump signed four executive orders with a view to quadrupling US nuclear capacity by 2050. He is after new-builds, restarts of retired plants and fast capacity upgrades of existing reactors. At the same time, he expects US uranium supply chains to be rebuilt – the US nuclear industry is currently more than 80% dependent on imports – with too much coming from hostile states. US tech firms are on board: the likes of Google, Microsoft and Meta have all signed their own nuclear-power purchase agreements with utility companies. China is all over nuclear, too. Since 2010 it has installed some 50% of new capacity, is nearing the US in terms of overall capacity and is a world leader in securing constantly cheaper reactor technology, to say nothing of speed of installation. Europe is backing away from its nuclear phase-outs as fast as possible.

The rate of change is accelerating. Nuclear delivers roughly 10% of global electricity, down from 17% in the mid-1980s, but there are still 441 plants in operation globally, with 65 more under construction and another 400-plus planned. Capacity should at least triple by 2050 – at least, that was the pledge at the COP20 climate summit. You’ll be wondering if there is enough uranium for all this. In the long term, there is. According to Gregory, the known reserves of uranium and thorium (which could also be used in the longer term) plus recyclable fuel could keep us all going for 900 years, while that dissolved in the ocean could do us for another quarter of a million. More than enough to tide us over. But it’s a different story in the short term. At the moment things may look fine, according to investment bank Jefferies. Newly mined supply is forecast to come in a bit below reactor requirements this year. For now that’s not a problem – the gap is plugged by secondary supplies (inventory drawdowns and recycling). Soon it will be a problem: these secondary supplies will fall short and the market will “face a structural reset by 2028”.

Think of it as a new pricing phase, says Nick Lawson of advisory firm Ocean Wall. The government legislature phase is complete. But next comes “buyer fear” – when everyone knows everyone will need uranium, everyone knows there isn’t quite enough and everyone also knows everyone else isn’t price-sensitive (uranium is a tiny part of the cost of generating nuclear energy). This is a worry for the long term, as it takes a while to build plants, but there’s a reason prices rose 5.5% in May and the uranium miners by rather more.

There are plenty of ways into the uranium market. In Canada there is Sprott Physical Uranium Trust (Toronto: UU) – which holds exactly what it says. In the UK, you can look at a couple of trusts: Yellowcake (AIM: YCA) and Geiger Counter (LSE: GCL). Yellowcake holds physical uranium oxide concentrate, while Geiger Counter invests in exploration, development and production companies in the uranium sector.