Will Nuclear Help U.S. Energy Independence?

Nuclear has often been touted as the holy grail of U.S. energy independence. But the fuel may not be as different from Arab oil as we like to think – here's why.

Got uranium?
Nuclear energy has the advantage of being produced anywhere. Build a plant, ship in some uranium, and it's "lights on" for the local municipality, state, or even region. With 104 reactors spread across 31 states, nuclear provides America with 20% of its total electricity supply . Those numbers are growing, too. Southern Company (NYSE: SO  ) recently shattered a 30-year stagnation in 2012 when it received construction approval for two new units scheduled to come online by 2017 .

Source: EIA.gov 

The United States generates more nuclear power than any other country in the world, clocking in at almost 800 billion kilowatt-hours in 2011.

Source: EIA.gov 

But therein lies the problem. Although the idea of nuclear is awfully nice (who doesn't love baseload power plopped down wherever it's most demanded?), the energy still needs one key ingredient to make it move: uranium.

And unfortunately for the United States, uranium isn't always American. A new report published by the Energy Information Administration shows that just 17% of the uranium purchased by U.S. nuclear owners and operators came from within our own borders. Canada's contribution clocks in at 24%, but things get trickier from there. If you think nuclear spells energy independence, try spelling Russia, Kazakhstan, Namibia, Uzbekistan, and Niger .

Source: EIA.gov 

Nuclear generation is necessarily concentrated, and Exelon (NYSE: EXC  ) alone is responsible for 20% of our nation's nuclear energy. Its 19,000 MW fleet is literally responsible for 4% of our total electricity supply .

 If that sounds crazy, taking uranium to its sources means that Russia is responsible for 2.6% of our nation's electricity, with Kazakhstan energizing another 2.2%. With 8,450 MW of nuclear to its name, Duke Energy (NYSE: DUK  ) produces less electricity (1.8% of total) than each of these two countries ultimately provide us in power-pulling uranium .

It ain't cheap, either
Not only is nuclear not the independent source many claim, it's also getting more expensive. U.S. uranium costs users $59.44 per pound, but foreign-sourced uranium is hardly a steal at $54.07. Prices skyrocketed in 2006 before tapering off during the Great Recession. As energy demand picks up again, uranium could cost an even prettier penny . In 2012 alone, rough calculations put Exelon's uranium expenditures at $638 million, Duke's at $282 million, and Southern's at $233 million .

Source: EIA.gov 

Uranium...or kryptonite?
The future of nuclear is unclear. Every energy investors knows that natural gas has taken a bite out of nuclear sales, but the real question remains: Can the U.S. afford to increase its energy dependence on uranium-rich countries? The recent conflict in Syria has frosted over already icy U.S.-Russia relations, and plenty of other countries offer less-than-amicable allies with less-than-intact governments. Nuclear is not the steadfast fuel most believe it to be, and investors will need to watch its future with a careful eye.

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Read/Post Comments (7) | Recommend This Article (3)

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  • Report this Comment On August 29, 2013, at 3:17 PM, donradcliffe wrote:

    Its OK to buy foreign uranium if you have a strategic reserve. The DOE's energy Information administration never discusses the mountain of uranium the DOE is sitting on in the form of warheads as a result of the Salt treaties.

  • Report this Comment On August 30, 2013, at 4:22 PM, WilliamWilgus wrote:

    You can't use weapons-grade uranium in a nuclear power plant. It's too 'rich'. We have no way to reprocess it.

  • Report this Comment On August 31, 2013, at 10:28 AM, grunnion wrote:

    This is a seriously flawed article on multiple points and the general thesis.

    First of all, the data cited specifically indicated that more than 50% of uranium used annually in the US is obtained from reliable sources. the remainder comes from a quite diversified range of countries.. It is highly unlikely that more than 2 of them will simultaneously cease sales to the US. Even more unlikely is the possibility that two will simultaneously cease production. So a hit to US nuclear power is not a serious concern.

    More important is the ramp up in global demand for uranium. That was a point that this article did not even mention. But even that will have a minimal impact as several mines will soon be dramatically increasing available uranium. Notable is the Cigar Lake mine in Canada which will start major production in 2014.

    Finally, even if the price of uranium doubles, the cost of the raw material fuel is a minor element of the cost of generated electricity and will add roughly 1/2 cent to the average price of retail electricity per kWh.

    If the price of uranium were to "skyrocket" to more than $200, uranium would quickly become limitless as processing from seawater becomes economically viable. (It is already technologically achievable.) At that point the US could be 100% self reliant for uranium. And, the impact on the retail price of electricity would be about 2 cents per kWh.

    In contrast, overreliance on natural gas does open consumers to the potential for more severe price increases. Remember the ability of Enron to manipulate the market for gas supply to California plants.

    The key take away should be that we should diversify energy sources not that we should worry about uranium availability.

    WRT the comment concerning usability of "weapons-grade uranium" for power generation: we can use it and have been using it for many years. The best example of this is the soon to expire "Megatons to MegaWatts" program.

  • Report this Comment On August 31, 2013, at 11:02 PM, grunnion wrote:

    Further underscoring the erroneous and misleading nature of this article, the graph of the price of Uranium does not extend to 2013. If it did we would see a dramatic collapse in the price of uranium to the $35 range.

  • Report this Comment On September 03, 2013, at 1:52 PM, LSuschena wrote:

    "If you're investing in energy dividend stocks, it's absolutely essential that you do what nuclear power companies cannot: diversity"

    This is pretty much a false statement.

    Nuclear is not a stand alone industry from all the other sources of power generation. Companies that operate nuclear plants also operate coal, gas or oil plants, with some renewables thrown the mix.

    Nuclear has always been a diversification option for utilities. There are no utilities that are strictly nuclear that I know of, unless they are under the umbrella of a large holding company.

  • Report this Comment On September 03, 2013, at 3:18 PM, samhobbs wrote:

    As noted to some extent in previous comments, reprocessing will extend the available power from uranium very substantially. Otherwise, a great deal of the potential energy that can be recovered from uranium is lost. Using breeder reactors, a technology that was abandoned due to fears over proliferation, provides a vast amount of additional energy that can be recovered. Further, with proliferation already well under way through many other nations, avoiding proliferation no longer seems like a good reason to avoid reprocessing.

  • Report this Comment On September 03, 2013, at 7:59 PM, broncoluvr wrote:

    A large reason we get uranium from the former soviet block countries is simple:

    Megatons to Megawatts.

    We forged a deal with Russia to convert a large part of its nuclear stockpile (weapons) to comercial fuel! That, is a win win situation for the US, and the world! We have plenty of uranium resources in the US.

    We also have a large amount of spent fuel

    (which can be reprocessed if needed), thorium, and Uranium 233. Throium and U-233 can be used as fuels, but we don't utilize them at this time. We have an established system using U-235 and U-238. However, it is not that hard to convert fuels if need be. For now, though, as a nuclear operator, I am perfectly happy burning eastern europes warheads!

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