Nuclear: why now?
When the European Parliament recently voted to classify nuclear power as a “green” technology, it marked an important moment for the global energy mix. This decision confirms that the transition to carbon-free energy cannot take place without considerably increasing the use of nuclear energy.
At the same time, the energy crisis caused by Russia’s invasion of Ukraine has forced policymakers to focus on energy security, especially those heavily dependent on imported energy. One of the main advantages of nuclear energy is the fact that nuclear energy comes from a domestic site.
A number of individual countries have also recently shown a similar reversal in long-standing negative sentiment towards nuclear power, which had been influenced by incidents such as the 2011 Fukushima disaster in Japan.
For example, in France, the government moved to fully nationalize electricity supplier EDF, currently Europe’s largest nuclear power operator, in an apparent attempt to address its reactor problems.
Meanwhile, the British government has announced plans to invest in nuclear power, which could also extend the life of existing nuclear reactors. The question has even arisen in Germany – which is in the process of closing its nuclear reactors – due to the energy pressure induced by the country’s dependence on Russian gas. Beyond Europe, Japan has also announced measures to restart a number of its nuclear reactors.
Call for investors
Nuclear power offers the advantages of predictability and capacity over harnessing the power of the sun or wind. Despite the long-term nature of power plant planning, we believe its appeal to investors is strong, particularly when energy prices are high and when renewable energy storage is still at an early stage of development. development.
Nuclear companies are also beginning to invest in innovation, investigating new technologies, such as potentially reducing the impact of radioactive spent fuel, which is currently disposed of through an expensive and highly specialized process known as vitrification.
In addition to the challenges associated with waste disposal, nuclear power plants have a number of other important safety requirements. However, we believe that with the changes looming on the horizon from the EU and governments, it is likely that removing the necessary regulatory hurdles will become easier.
All of these factors are beginning to influence the direction of investments; where previously nuclear was not an option for fund managers, this is starting to change.
As part of Canada Life Asset Management’s global equities team, we believe that nuclear energy is a transitional fuel of choice, allowing countries to meet their energy needs while meeting environmental objectives.
Over the past year, we have expanded our nuclear power investment theme, through investments in Cameco, BWX Technologies and, most recently, NuScale.
- Cameco, a Canadian company, is one of the world’s largest operators of uranium, an essential input to the operation of a nuclear power plant. Growth in nuclear power is fueling long-term demand for the ore, which is mined primarily in Canada and Kazakhstan. As part of the Western uranium supply chain, a secure source of uranium is crucial, especially in light of current energy supply chain issues.
- belonging to the United States BWX Technologies powers US Navy submarines and aircraft carriers using nuclear reactor propulsion, providing both the strategic and environmental benefits of less frequent refueling. It has a strong commercial position as the only company in North America with a commercial license to process highly enriched uranium, as well as long-term contracts with the United States Navy as part of its fleet modernization, a strategic priority. The company is also working in the area of medical isotopes by helping to better produce molybdenum-99 for use in diagnostic imaging.
- NuScaleName, another American company, is a pioneer in the use of small modular reactors (SMR), whose reduced size compared to existing nuclear power plants allows faster construction (about three years instead of seven) and smaller sites. They also have security systems that allow them to operate off-grid which makes them more resilient to shutdowns.
For countries to have any hope of meeting their environmental goals and achieving energy security, nuclear power must make up a much larger share of the global energy mix – and that is now clearly the direction to go.
It seems surprising that the sustainable finance community often uses negative screens to prevent investments in nuclear energy when it appears to us to be the only zero-carbon fuel capable of reliably providing base load capacity. The measures taken by the European Parliament should help asset managers to invest in this once controversial sector
Bimal Patel is Senior Fund Manager at Canada Life Asset Management