Nuclear Hurdles & Profitable Leaps

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We need to encourage American innovation. . .And no area is more ripe for such innovation than energy. . .And that means building a new generation of safe, clean nuclear power plants in this country. –2010 State of the Union Address

We need to encourage American innovation. . .And no area is more ripe for such innovation than energy. . .And that means building a new generation of safe, clean nuclear power plants in this country. –2010 State of the Union Address
Those words, even during a time of intense partisanship, brought both sides of the aisle to their feet during last week's presidential address. And they stood for a litany of reasons. . .

For starters, total electricity consumption will grow from 3,873 billion kWh in 2008 to 5,021 billion kWh in 2035—an increase of 30%—according to the U.S. Energy Information Administration's (EIA) most recent Annual Energy Outlook.

But on a global scale, demand will surge much higher thanks to the coming-of-age of developing countries. A 100% increase in global electricity demand is expected in the next two decades.

And coal, while expected to remain the dominant fuel for electricity, isn't expected to expand all that much. According to the same EIA report: "The mix of investments in new power plants includes fewer coal-fired plants than other fuel technologies" because of "concerns about GHG emissions continue to slow the expansion of coal-fired capacity. . .even under current laws and policies."

Some areas have already banned the building of new coal plants altogether.

But nuclear is in for a bump, from 100.6 gigawatts (GW) currently to 112.9 GW in 2035. Some of that growth will come from new plants and some will come from upgrades to existing plants. What's more, there are no planned plant retirements in the next 25 years.

In fact, the EIA says "plant owners will apply for, and be granted, license extensions beyond the current 20-year extensions of operating licenses."

And that's just in the U.S. Plenty of other countries are pursuing ambitious nuclear plans, as well. Globally, the World Nuclear Association is projecting a 203% increase in capacity by 2060, from a current base of 373 gigawatts.

So those are the predictions.

But how are we to get there?

Nuclear Hurdles & Profitable Leaps

Of course, nuclear still has its fair share of issues to deal with. And solving these issues is turning into a billion-dollar business as the world races to secure energy for the 9 billion people that will be here by 2035.

Safety is at the top of the list.

As my colleague Keith Kohl touched on last week, Chernobyl still comes to mind for many when nuclear is mentioned. But a new generation of reactors is ready to change all that.

GE (NYSE: GE), Areva, Westinghouse, and Korea Electric Power (NYSE: KEP) are each offering reactors with new technologies that make safety a top priority. These reactors use proven concepts—like gravity and heat circulation—to ensure safety, rather than relying on pumps and valves that can fail.

The new reactors will add to a nuclear safety record that has been blemish-free for two decades, as operating experience increased from 4,000 reactor-years to more than 13,000.

Waste is also a key issue, especially with the fate of Yucca Mountain unclear. But looking to the international community can provide some answers.

In Sweden, where 45% of the electricity comes from nuclear, a small town recently struck a deal to create one of the world's first-ever long-term storage facilities for nuclear waste. The site will commence construction in 2016 and will be able to store nuclear waste for 100,000 years.

What's interesting is that several Swedish towns were actually competing to host the facility for its revenue and job prospects. . .

Finland and France are also pursuing this type of long-term storage. (For investment purposes, the Swedish Nuclear Fuel and Waste Management Companies is owned 36% by Vattenfall, 30% Forsmark, 22% OKG, and 12% E.ON Sweden.)

But the biggest advancement that will push nuclear forward—both as an energy source and an investment vehicle—is going to come from the fuel itself.

Nuclear Plays the Metal Game

Top universities have been toying with the idea of adding various metals to uranium to form a kind of nuclear superfuel that could solve many of the industry's problems. Metal oxides are already used as reflectors in nuclear warheads and reactors, but they're about to be added to the fuel, too.

Researchers have found that combining metal oxides with uranium oxides results in a fuel that is able to withstand much higher temperatures, greatly increasing the efficiency and safety of nuclear power plants.

And they've found that one metal, in particular, outperforms all others.

The company funding this research is about to enter the last of three test phases before the new fuel can be made available. And they're already in $100 million supply talks with major nuclear fuel suppliers.

What's more, the company owns the technology from soup to nuts. They own the process to make the fuel additive. . .and they own enough reserves of the rare metal to power the nuclear industry for 100 years.

The full report on this company—just out today—explains the process, the metal, and how the tiny company behind it is about to make a fortune.

Call it like you see it,
Nick

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