News just broke that Obama is going to appoint MIT physicist, Ernest Moniz, as new energy secretary. He’s always been a nuclear bull, due to his global warming beliefs. Here is an article he wrote, post-Fukushima–still a flagrant, arch fiend, nuke joneser.
This essay is quite different from what I would have written pre-Fukushima but it’s pretty hard at the moment to think about anything nuclear from a different reference point. Fukushima has reopened the global discussion about the future of nuclear power. Several factors had led many countries to consider expanding their nuclear capacity, reversing phaseouts or initiating new nuclear programs. These include a very good safety and reliability record for the last decades, increasing concern about the risks of climate change and a concomitant recognition that enormous amounts of additional electric generating capacity will be needed without increasing greenhouse gas and other polluting emissions. Exactly how the new debate will end will remain unclear for some time, as the events and responses in Japan are investigated and understood fully, and as safety systems, operating procedures, regulatory oversight, emergency response plans and spent fuel management are reexamined for currently operating reactors.
Nevertheless, some outcomes are a good bet: the cost of doing business at nuclear reactors will go up; and the expected relicensing of forty-year-old nuclear plants for another twenty years of operation will be given a hard look. Indeed even the license extensions already granted for the majority of the 104 plants operating in the U.S. might be revisited. These plants, like those at Fukushima, rely to a large extent on active safety systems in case of accidents or natural disasters.
The consequences of such outcomes could be great. New nuclear power plant construction is already challenged by high capital costs, and increased capital and operating costs could be the last straw for many projects. If the anticipated life extensions are not realized to any appreciable degree, we will be faced with replacing tens of thousands of Megawatts of non-emitting generation. For the U.S., this is not an immediate problem since the end of the original forty-year reactor operating periods will not be reached for most plants for a while, and we have both substantially underutilized natural gas generation and lots of natural gas. Natural gas does have emissions, but far less than coal, and will serve as a bridge to a very low emissions future. However, the challenge of developing and demonstrating “no-emissions” options for 2020 and beyond is an immediate challenge, given the significant timeline from R&D to regulatory approval to market. Next generation nuclear plants with advanced passive safety systems are among those options, including small modular reactors (SMRs).
SMRs come in a variety of proposed forms, some based on the same underlying light water reactor (LWR) technology that is used in almost all nuclear plants today, while others are based on gas or metal cooled designs. They range in size from ten to three hundred megawatts. None have been through a licensing procedure at the Nuclear Regulatory Commission, and this is a time consuming process for any new nuclear technology — especially those that are farther away from the NRC’s established experience and procedures.
A major advantage of SMRs is that their small size compared with LWRs (whose size is typically 1,000 Megawatts and now going up to 1,600 Megawatts) means that the total capital cost is more in the billion dollar range rather than a significant multiple of that. Capacity can be built up with smaller bites, and this may lead to more favorable financing terms — a major consideration for high capital cost projects that take years to license and build. Still, the SMR must come in with a cost that is also competitive with LWRs on a unit basis; that is, the cost per installed Megawatt must be comparable or less. The LWRs have been driven to larger and larger size in order to realize economies of scale. The SMRs may be able to defeat this logic by having factory construction of the SMR or at least of its major components, presumably with economies of manufacturing, the ability to train and retain a skilled workforce at manufacturing locations, quality assurance, continuous improvement and only fairly simple construction on-site. The catch-22 is that the economies of manufacture will presumably be realizable only if there is a sufficiently reliable stream of orders to keep the manufacturing lines busy, and this in turn is unlikely unless the large number of designs is winnowed down fairly early in the game.
A 2020 SMR option will be available only if we start now, and even then it will be tight. Prior to Fukushima, the Obama administration submitted to the Congress a proposed 2012 budget that would greatly enhance the level of activity in bringing SMRs to market. LWR-based technology options would be advanced towards licensing, and other SMR technologies would be supported for the remaining R&D needed to have them follow in the licensing queue. The program is modest but sensible. Obviously the Federal budget deficit makes it difficult to start any new programs, but a hiatus in creating new clean energy options — be it nuclear SMRs or renewables or advanced batteries — will have us looking back in ten years lamenting the lack of a technology portfolio needed to meet our energy and environmental needs economically or to compete in the global market. Let’s get on with it.
Nuclear stocks of note are CCJ, DNN, LTBR, NLR (etf), USU, URZ, URRE, URG, URA (etf), UEC, ES, GVP, PESI.
If solar stocks can triple in price, I see no reason why uranium, nu-ku-lar, can’t have a brainless run on some positive sentiment. Hell, the coal country rejoiced over Romney poll data for a solid 6 months.
21 Responses to Rumored New Energy Secretary, Ernest Moniz, is a Nuclear Bull
cain – still prefer ccj? what’s your thesis on it? and any thoughts on valuation vs. peers?
very unfamiliar with that space…
When I looked through the space, CCJ appeared to be the only investable uranium company. All others are small, very little cash to maintain operations, and plenty of them don’t even have production yet.
CCJ is 20%+ of global production. It’s a Canadian company. They have clean filings. And they definitely do not have lingering questions about whether or not they’ll be in business next year.
UEC is also doing well the last I checked (but that needs to be confirmed). They just began actual production, but they’re very small.
Jane Fonda killed off the Nuke Industry. It ain’t coming back. Long Live Coal, or as 0bama puts it “clean burning coal, solar, hydro, wind and biofuel are our future”.
Fly every year I look at the worst performing ETF’s around November. This year I jumped into the TAN/URA combo. Its been working it so far. FSLR is fixing to explode!
Good luck with that.
Indeud. Don’t forget, the execs over at EXC were among Obama’s top fund raisers during his Senate and 08 elections. By the way, Exelon leads the nation in nuclear energy production.
anyone from stockpickr (RIP) will remember how much CCJ i was holding without a stoploss while on an early morning international flight the night after the Japan tsunami, earthquake nuke power plant meltdown. Worst hit i’ve ever taken in the market. Thank the gods for the VIX. Still holding a decent bit of that sh**. Hope your right, love to sell some, best I can say for CCJ is they never killed the divy (ala BP). But too many other opps for anyone to pour money into uranium. As you said, we won’t know how world powers will react for some time, so at best, in my opinion, it’s dead money. Has been for 2 years now. Don’t see that changing. Mark Fisher picked either CCJ or uranium (one or the other) as his top pick for 2012 – it’s been sideways since then.
Fly, any more thoughts on industries ripe for longer term reversals? I was hoping to hear your thoughts on that last Sunday but either I missed it or maybe you got busy on something else.
Ill do a post about it tomorrow.
The div yield on NLR is interesting… a built-in hedge.
A break much above $15.00 is a buy.
If CCJ can break and hold above $23.00 it’s a buy.
For the rest, just book a flight to Vegas… at least the ride will be fun.
Sounds reasonable. Drones and nukes or gays and birth control for free. Scary looking thing or dude. Gotta love the new normal.
At some point the revenge of the nerds gets a little weird.
MUNCH, hooker knows new place
I threw in a few other ideas for your nuclear industry list. These center more on parts used in reactor construction/maintenance than anything.
Check the CCJ thread in the PPT
There are strong resistance at the $22 level on $CCJ. I’ll look to buy back at low $21 if not lower.
It is also a good idea to pay attention to the uranium spot price:
The HIGHEST grade Uranium Deposits in the USA are in Breccia Pipes in AZ. One junior that owns the Largest Number of Claims on the Pipes is Liberty Star Uranium and Metals (LBSR). They have 417 Claims and looking for Joint Venture Partners. Good Opportunity!!
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