Private Banking

The future of nuclear power

The decade to 2030 will play a critical role in the pathway to net zero global emissions by 2050. In order to get on track and limit warming to 1.75°C, emissions need to be cut to 30% below 2019 levels by 2030, according to BloombergNEF. This is equal to an annual reduction of 3.2%! The stakes are high, as are the efforts to be made!

Stopping coal-fired electricity generation and phasing out combustion engine vehicles in favor of electric ones, as well as oil and coal-fired boilers in buildings and industry, are essential steps. All sectors of activity will have to be involved. However, according to BloombergNEF, electricity suppliers will have to bear the brunt (nearly 80%) of the effort, with a 57% reduction in their emissions by 2030 - the equivalent of 55 gigatons of CO2 (GtCO2) - compared with their 2019 level. To achieve this, they will rely on the deployment of cost-effective technologies such as wind and solar farms and electric batteries. But over the next eight years, it will also be necessary to develop new technologies to achieve a deep decarbonization of our economies after 2030. These so-called "phase II" technologies include hydrogen, carbon capture and storage (CCS) and some early-stage technologies, notably in aviation and energy-intensive industries, as well as new, smaller, modular nuclear reactors (or “SMRs”).

 

Nuclear power can help fight climate change

As governments around the world draw up ambitious plans to move away from fossil fuels, there is now no doubt that closing down coal or natural gas-fired power plants could lead to electricity shortages. It is difficult to envisage an energy system based solely on renewable energy! Although solar, wind and hydro plants are booming, they cannot provide electricity all the time. California is a good example. Despite 320 days of sunshine a year and a third of electricity production coming from renewables, Californians live under the almost permanent threat of power cuts during heat waves. During these episodes, air conditioning needs can account for up to 70% of electricity demand.

Although considered suspect since the accidents at Fukushima, Chernobyl and Three Mile Island, nuclear power seems to be regaining its credentials. The International Energy Agency (IEA) estimates that over the past 50 years, nuclear power has saved two years of human-induced carbon dioxide emissions! In February, the European Commission went one step further and gave nuclear energy the "green" label. It now considers that this technology can "facilitate the transition to a future based primarily on renewable energy.” This makes it easier for private investors to inject funds into the sector.

If governments want to reduce their net CO2 emissions to zero, the IEA says the civil nuclear industry must double in size over the next two decades. At present, 441 reactors are in operation worldwide, the same number as ten years ago. And new reactor construction projects (51) are at their lowest level in 20 years! The slow progress of projects (less than 20 GW per year) is also worrying.


Number of nuclear reactors under construction (at year end)


Greening the electricity grid with mini nuclear reactors

The introduction of smaller reactors (some SMRs will be more than 90% lower than the current generation of large reactors; one of the prototypes can even fit into a single-family house) may help the nuclear industry experience a renaissance. Last year, several countries and companies announced initiatives or partnerships to develop this new generation of nuclear reactors.

What these new plants have in common is that they are designed to be faster and easier to build. Compared with current reactors, SMRs are also better suited to compete in future power systems dominated by wind and solar thanks to their ability to adjust output more quickly. They could also make nuclear power an affordable option in countries that do not need huge reactors. With energy prices soaring, their electricity production costs, estimated at between USD 40 and 70/MWh, are proving competitive, even though the cost of wind and solar power is between 45 and 50/MWh in most regions. Furthermore, SMRs need much less uranium than large conventional plants. This makes them safer, as it reduces the risk of radiation leakage. Another advantage is that these reactors can be built in factories, delivered by truck or train, and then assembled on site, saving time and money.

 

Uranium prices are coming back to life  

Investors are attracted to companies developing new technologies in civil nuclear power, as evidenced by the performance of the Solactive Global Uranium & Nuclear Components index, which is dedicated to them and to companies active in uranium mining and exploration? The benchmark has gained 280% (in euros) since its low point in March 2020, at the height of the Covid-19 crisis.

Investors are attracted by companies developing new technologies in civil nuclear power