Nuclear Fuel Risk

International sentiment is bullish for nuclear power, but the Russian fuel vulnerability must be addressed.

The first nuclear renaissance started just prior to World War II with the discovery of atomic fission. That period transformed into the Manhattan Project and the development of the atomic weapon. It progressed to the second renaissance after the war when the victors focused their attention on harnessing fission for (naval) nuclear propulsion and power generation (in addition to refining weapons design and mass production), supported greatly by the U.S.-backed Atoms for Peace initiative. The first nuclear power reactors came online in the late 1950s and early 1960s. True commercial deployment of nuclear reactors took off in the 1970s and 1980s — see the figure below for timing of U.S. nuclear power reactor deployment.

The third nuclear renaissance could see significantly greater global growth in nuclear power (and industrial heat) capacity — and it could be just over the horizon. But there are risks, and we’ve experienced similar hopeful times in the past which did not develop into reality.

Nuclear power is gaining broad international political acceptance from its Fukushima-induced purgatory combined with the weakening influence of climate alarmist’s hatred for it. An example of this growing political commitment is the COP28 announcement in December 2023 from more than 25 countries to triple global nuclear power generation capacity by 2050 and, more importantly, to encourage the inclusion of nuclear energy projects in the lending policies of international financial institutions — most importantly at the World Bank — which currently excludes nuclear power projects.

Another example is nearly 40 governments and hundreds of industry and NGO representatives met in Brussels in early March for the first nuclear energy summit at the head of state level. Neither of these have resulted in nuclear projects reaching final investment decision, but these developments are not meaningless in the international energy (and climate) policy world.

At the least this growing political support shows that many governments — but not all — are coming to terms with the reality that expensive intermittent renewable power combined with a yet-to-be-developed commercially viable long duration energy storage technology isn’t a realistic option for an affordable, secure, and reliable electricity system. The massive growth in reliable, baseload power demand from the growing digital/AI sector is also providing strong support for nuclear power.

With that said, the current supportive political environment for nuclear power is tenuous. It is akin to the same optimistic environment for nuclear power which preceded the Fukushima accident in 2011. Before Fukushima there was talk of a global nuclear renaissance. After the accident, some governments (primarily in Europe) decided to prematurely shut down operating nuclear reactors, many other planned reactors were cancelled, and the industry (outside of China and Russia) fell back on hard times. The nuclear industry faces similar risks if a terrible incident were to occur at one of Ukraine’s nuclear power plants (or, really, at any reactor in the world). Things can still go sideways, in a hurry.

We need more than just political statements and heads of state events — we need checks written (in some instances by governments) to fill the order book and get projects built (like in Poland). We need a streamlined, reformed regulatory process that maintains strict safety and environmental standards but does away with frivolous lawsuits and objectionable legal pathways that significantly delay projects, increase costs, and deter investment. We need a strong, sustained commitment to nuclear energy in place of the current commitment to renewables. And we need it straight away.

Nuclear Power Today

According to the World Nuclear Association there are about 440 nuclear power reactors operating in 33 countries. There are currently 60 nuclear reactors under construction in 16 countries. China is building the preponderance of them with 27 reactors, India 7, Russia 4, and Egypt 4. The United States recently completed two large scale reactors at Vogtle in the state of Georgia. France is building three plants (one in France, and two (most likely) in the UK).

Globally, large scale nuclear power plants are getting built and new ones are planned — but most of them are in Asia and outside of the climate catastrophe-griped West. The West and its allies are nuclear laggards, despite growing political support, due in large part to insanely time and money-intensive regulations; terrible incentives that promote more renewables and the retirement of perfectly functioning thermal power plants; awful climate and energy policy; and, the unwillingness of governments to put up a large chunk of money to get the order book going. Capital needs a welcoming environment to invest. Otherwise, it’s just wishful thinking and performative.

New nuclear builds over the last two decades have essentially offset retirements of old reactors (107 retired, 100 built). The growing global electricity demand combined with relatively flat nuclear output resulted in the share of nuclear power in total global electricity falling from 17% in 2000 to about 10% in 2022. Nuclear power generation makes up about one-quarter of the world’s carbon free power supply.

Most of the operating reactors in the world were built decades ago and were originally licensed for 40 years. Within the last decade-plus regulators have provided 60-year life extensions, and in some cases are now approving 80-year operating licenses. This is a great move, but it does not solve the problem. Even with 80-year operating lifespans, nearly all of the current reactors in the United States will be shut down around the middle of the century.

According to the U.S. Department of Energy, the United States needs to build at least 200 gigawatts of new nuclear power by 2050 for it to meet its net zero ambitions. The U.S. nuclear power output capacity today is 95 gigawatts across 93 reactors — the largest nuclear power fleet in the world. 200 gigawatts — more than double what the U.S. built in the 1970s and 1980s — is a lot to build over the next two-and-a-half decades. Given the current difficult environment to license, finance, and construct nuclear reactors, the U.S. needs to start building right away if they hope to get anywhere near that target. The same goes for other countries committed to nuclear energy development.

Nuclear Power Tomorrow

The next phase of significant nuclear power deployment will include a different form than the massive, gigawatt-scale reactors that take 5-10 years to build and tens of billions of dollars. Small modular reactors (SMR), defined as a reactor below 300 megawatts in output, and advanced reactors which have varying types of reactor fuel and cooling mechanisms are the hottest thing out there (pun intended for advanced reactors). The United States is leading the charge in this space, having spent billions of federal dollars over the last decade-plus supporting the design, licensing, and eventual demonstration of these new reactors. There are multiple U.S. companies with their own designs that have also received significant private investment.

SMRs are meant to be modular and therefore easier and more efficient (and therefore cheaper) to construct and they have additional safety features and a smaller footprint (energy density wins again!). Advanced reactors have similar qualities and allow for more flexible operations to better support intermittent renewable electricity supply and more uses beyond power generation — such as heat for industrial applications. On paper, SMRs and advanced reactors sound like the perfect solution to our current energy dilemma.

But to date, only China has successfully completed a SMR. SMR projects in the United States have faced challenging economic environments. Europe is a mess and doesn’t have a reliable domestic design to compete with the United States. Russia is out of the market due to its geopolitical isolation. This isn’t to say all is lost — just that we are early in the deployment phase and the industry needs a push. There are positive prospects for projects in Canada, Romania, Poland, and elsewhere, but shovels are not yet in the ground beginning construction. There are a number of risks — so let’s take a look at one of the most pressing ones, the fuel supply.

Fuel Supply Risks

Doomberg

’s recent ‘stack titled Prime Time provides a solid intro into the nuclear vulnerabilities U.S. and allies face from an overreliance on Russian fuel supplies and services, both for conventional large-scale reactors and the newer SMR and advanced reactor designs which developers hope to come online early next decade. There are three main steps in producing enriched uranium fuel for nuclear power reactors (the fourth step — fuel fabrication — doesn’t involve risks from Russia as they only provide fabricated fuel for Russian-designed and built reactors).

First, the mining/extraction of natural uranium. The below figure captures the make up of global uranium producers in 2022. Russian entities own roughly 25% of Kazakh uranium mining and the vast majority of exported Kazakh uranium (Russian owned or not) transits Russia and exits to markets through St. Petersburg. As an example of the risk in this phase of the fuel process - in 2022, United States utilities sourced over half of its uranium from Kazakhstan, Russia, and Uzbekistan.

The second phase of the nuclear fuel process is converting natural uranium (oxide) into uranium hexafluoride. The conversion phase is dominated by five countries: China, France, Canada, Russia, and the United States. 2022 saw a market shortage of conversion capacity globally, but fortunately this shortage was covered by existing stockpiles. If Russian conversion capacity is removed from the market for an extended period, there would be risk to global nuclear fuel markets in the near term. Which obviously has knock on effects for nuclear power operations.

The final phase is uranium enrichment to the fissionable uranium-235 (U-235). Most conventional nuclear reactors need low enriched uranium (roughly 5% U-235), but some of the advanced reactors can use high assay low enriched uranium (HALEU — up to 20% U-235). Whatever the fuel type, enrichment services are needed for nuclear reactors.

The enrichment phase holds the greatest risk to nuclear fuel supply given Russia’s 44% global market share which it captured through heavy state subsidization and overcapacity coming out of the end of the Cold War. This in turn allows Russia to provide enrichment services at far cheaper prices than elsewhere. The United States relies on Russia for roughly 20% of its enrichment needs.

Risk Reduction Efforts

In December 2023, the United States, France, the UK, Canada, and Japan agreed to invest $4.2 billion in enrichment and conversion capabilities that would come online by 2027. The Sapporo 5, as the countries are known, are the only countries outside of Russia and China that have enrichment and conversion capabilities. To date, France, the United States, and the UK have announced actual funding to meet the $4.2 billion target. Canada and Japan are still considering their options (note that the Canadian reactors don’t need LEU given their unique design).

Government funding is not the only necessary step to replace Russian enriched uranium. As stated, Russian enrichment services are much cheaper than other sources of enrichment in places such as France, the UK, and the United States. An overcapacity of enrichment services globally means there is little appetite for major new investments without a ban on Russian supplies for the foreseeable future. Why invest in new capacity if, say in two years, the war is over and Russia is allowed back into the enriched uranium market? As a result, the $2.72 billion in recently announced U.S. funding for enrichment capabilities is tied to a U.S. restriction on Russian enriched uranium. The U.S. Congress has not enacted legislation to do so, yet. While Congress is the preferred route, the President can also take executive action as a last resort and ban Russian enriched uranium.

If a ban on Russian enriched uranium is enacted, exceptions would likely be granted on a large scale to ensure the necessary flow of fuel into Western markets until their domestic supplies come online later this decade. The wild card is whether Russia would continue to provide their services in the interim, or if they’d unilaterally shut off their exports if threatened with a ban. If Russia were to stop supplying enrichment and conversion services all at once, it would cause serious challenges for Western nuclear plant operators in the U.S. and Europe.

Success will rely on a combination of sufficient investment, policy coordination, and necessary market incentives to ensure a rebuilding of enrichment services outside of Russia. If this doesn’t happen, current nuclear power plant operators face an uncertain future.

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