In 2017 I suggested that offshore wind would dominate the UK’s power system as nuclear power was unlikely to be fully replaced as its existing fleet became obsolete.
Recently I read a major report on the UK Government’s views on emissions reductions (Sixth Carbon Budget). I was struck by the statement that by 2035 UK electricity production will be zero carbon and that offshore wind will be the backbone of the entire UK energy system.
In 2017 I suggested that offshore wind would dominate the UK’s power system as nuclear power was unlikely to be fully replaced as its existing fleet became obsolete.
My comments on offshore wind making other forms of energy uncompetitive in 2017 have only become more clear in the past 3 years. Now the adoption of offshore wind is happening elsewhere around the world including in the US, Japan, South Korea, Taiwan, China, India. Here I review the current status of the UK nuclear power program because the UK nuclear sector is a key indicator for the status of nuclear power adoption in the West.
I conclude that, notwithstanding a lot of lobbying for SMR (Small Modular Reactor) technology, nuclear power is a fading force even though it produces zero carbon energy. This has particular relevance for investors interested in SMR technology.
The UK nuclear program
The UK has 7 nuclear reactor sites (15 reactors) which produce 16% of UK electricity. Six of these sites are due to be retired by 2030, with the 7th (Sizewell B) due for decommissioning in 2035.
As indicated below there is controversy about the cost and process of the clean-ups. Crunch time is coming for the UK nuclear industry and the indications are that the Johnson Government has little appetite for new large reactors after the difficulty getting the Hinkley Point C facility, which is currently under construction, funded. A pessimistic summary of the future of the nuclear industry makes for depressing reading for a nuclear investor.
Three years ago it looked as if China’s General Nuclear Power (GNP) might almost single handedly save the modernisation of the UK nuclear industry, after it took a 33.5% stake to underwrite financing the struggling Hinkley Point C project.
This was to be a precursor of further investment by GNP as a window on China’s export plans for its Gen III reactor program; the next step was a Chinese reactor at Bradwell B in Essex, with EDF (OTCPK:OTCPK:ECIFF) a minority partner. Further GNP had a 20% stake in an EDF project at Sizewell C in Suffolk to clone the Hinkley Point C facility.
Fast forward to 2021, the prospect of having a Chinese Government owned company in control of a significant slice of the UK power industry seems fanciful. And other possible players Toshiba (OTCPK:OTCPK:TOSBF) and Hitachi (OTCPK:OTCPK:HTHIY) have essentially disappeared from the scene.
To give a little context about the high level action in the UK, it is worth looking at the kinds of discussions happening about nuclear power in the UK from within the expert nuclear community. It is clear that the currently implemented Gen III reactors are in trouble, with huge cost blowouts, construction delays and political considerations, with only China having appetite for big projects.
With abandoned programs in the US (see below) and doubts about further Gen III reactor projects in the UK, it seems doubtful that the future for nuclear power rests in the Gen III designs.
The UK re-joined the Generation IV International Forum (GIF) in 2019, which is the international forum for exploring Gen IV nuclear reactors involving 13 countries (including Argentina, Australia, Brazil, Canada, China, France, Korea, Russia, South Africa, Switzerland, UK, USA) and Euratom representing 28 European members.
The problem is that the technology underpinning Gen IV reactors is not even defined, with the discussions about technology approaches being the major preoccupation currently. Six reactor technologies have been selected for further R&D, from 130 reactor concepts.
I think it is especially valuable to pay attention to the timelines that the experts are working with. More surreal is bringing clean hydrogen into the discussion with a seemingly serious proposal to employ nuclear-based hydrogen production to replace the oil industry! And this is coming at a time when the replacement of the existing UK nuclear fleet for power production is in question.
It is good to be visionary, but in the next 30 years reality has to intrude. I’ve indicated elsewhere that hydrogen has lost the race to decarbonise transport in favour of electrification with BEV (Battery Electric Vehicles).
My conclusion on the future role of nuclear power is that while SMR technology might be implemented at least in pilot form in the early-mid 2030’s, the timeline for Gen IV reactor implementation on a commercial scale seems to be post-2050.
There does seem some hope for a demonstrator Gen IV reactor to be built in the early 2030’s, but it isn’t clear what this hope is based upon. Both the 2030 and 2050 timelines are significant as if the world hasn’t achieved 50% reduction in emissions by 2030 and net zero emissions by 2050, there is consensus that humanity will be in big trouble from climate emergencies; some people living in Texas would argue that we are already in trouble.
In other words the (probably optimistic) timelines delivered by the experts for Gen IV are too late to impact on the looming crisis. Indeed there is now substantial support for the view that the world needs to be closing in on net zero emissions by 2030.
There might be some UK Government funds to keep the hope of the SMR programs alive, but as I indicate below, the costs and timelines for the SMR programs are also too far out to impact on UK needs to replace the power shortfall as the nuclear industry shuts down.
Indicating the desperate state of the UK nuclear industry, a new report from the Centre for Policy Studies “Bridging the gap: the case for new nuclear investment” concludes that at least one new nuclear plant needs to be built to support the Hinkley Point C development.
However it is acknowledged that this will not be possible with current financing. An interesting example of creative financing being considered is the Regulated Asset Base model which would allow developers to start charging consumers before the nuclear reactor commences power generation. It will be interesting to see how such a model of financing might be regarded.
The UK is crucial for sorting out whether nuclear programs in the Western world will have a future. With political issues swirling around Chinese interactions and inability to check price increases, the situation seems bleak at a time when there is a clear cheaper and implementable option, as offshore wind is booming.
Other nuclear programs
After falling by ~4% in 2020, the IEA projected that nuclear generated electricity will increase by 2.5% in 2021 due to increases in France and Japan from existing facilities (rebounding from the fall in 2020) and new capacity from China and the United Arab Emirates.
One needs some caution in concluding that this projected increase in nuclear power in 2021 indicates a reversal of the declining fortunes for nuclear power, as renewables generation (all new capacity) will increase by 6% in 2021, following an increase of ~7% in 2020. I suspect the increase in nuclear power (if it occurs) will be largely illusory.
The International Atomic Energy Agency has produced a slightly surreal and very optimistic view of the nuclear industry, which it calls the long road back after Fukushima. There is much to question in this report.
Below are brief comments about nuclear developments in key global markets.
Nuclear in Japan
Immediately prior to the earthquake and Fukushima tsunami in 2011, nuclear power provided 25% of Japanese power and renewables 9.5%. Fast forward to 2020 and the nuclear contribution in Japan (from restarts of nuclear reactors) was 6.2% in 2020, while renewables provided 18% of Japan’s power.
There seems no appetite for new nuclear reactor construction in Japan and there is controversy about restarting reactors closed down after Fukushima. This inevitably means the wind down of the Japanese nuclear industry, while at the same time massive expansion of offshore wind power is beginning. This is a big deal as Japan commits to zero net emissions by 2050.
The context for Japan is that this week it was the 10th anniversary of the Fukushima disaster, where reactors No 1, 2, and 3 melted down, while the remaining 3 reactors (which were offline at the time of the disaster) survived. Fast forward 10 years and it is still unclear how the ~900 tons of melted nuclear fuel will be removed from inside of the damaged reactors.
Officials indicate it will require a further 30-40 years to resolve the problem, but critics are less optimistic. Spent fuel in cooling pools and large quantities (500,000 tons) of contaminated debris, soil and water (1.37 million tons) remain on site, with discussions about some release to the ocean being controversial.
Because there are so many unknowns, the final cost of the Fukushima disaster isn’t yet clear with the Japan Center for Economic Research estimating $470-660 billion and a recent view suggesting that it will approach $US 1 trillion.
The above information gives some guidance as to why the Fukushima disaster spells the end of the nuclear industry, not only in Japan.
Nuclear in India
Prior to Fukushima, India seemed to be getting ready for a bright future in development of its nuclear power industry. However since 2011 the pace of engagement has slowed and today India’s nuclear production from 22 power plants is 6.7 GW, significantly below the 20 GW originally planned for 2020 and far from the goal of 48 GW by 2030.
There are many reasons beyond Fukushima for the disengagement from nuclear, but the dramatic reductions in cost of renewable energy and the speed of renewables implementation in India (with 175 GW wind and solar PV expected by 2022 and a goal of 450 GW by 2030) means that nuclear power is very much a poor cousin.
Indeed India’s Power Minister RK Singh has recently claimed that 175 GW by 2022 is a conservative target and that India can achieve 200 GW by 2022. Moreover the latest on the 450 GW target for 2030 is that the new target is 500 GW of renewable capacity (including 350 GW solar PV and 140 GW wind) by 2028. These are astonishing developments and help explain why the nuclear developments are stalling.
An internet search produces plans to build six Westinghouse designed AP1000 reactors in India, but contractual arrangements are still not finalised. The Westinghouse website mentions involvement with new AP1000 reactors in Korea, China and the US, but there is no mention of India.
Nuclear in China
China is the bright spot for nuclear developments and recently its first Hualong One Gen III reactor commenced operations. The plan is to not only make a number of these reactors in China, but also to sell these reactors around the world. Recent political tensions concerning China might make sale of Hualong Gen III reactors in global markets problematic.
Nuclear in the US
Two much delayed AP1000 Gen III reactors are opening this year at the Vogtle nuclear facility in Georgia. The confronting news is that they are 5 years behind schedule, the Federal Government had to provide $12 billion loan guarantees to get them finished, and the cost doubled to $28 billion. Earlier, with the bankruptcy of Westinghouse, two AP1000 reactors planned for South Carolina were cancelled due to delays and spiralling costs.
Five nuclear reactors in the US will close in 2021. In Buchanan NY a 60 year old nuclear facility is closing 4 years early, and the other 4 reactors are located at two sites in Illinois. Two of the Illinois reactors are licensed for 20 more years of operation.
A report from 2020 indicates that 30% of the aging US nuclear fleet is no longer profitable, with renewable energy becoming very competitive on power provision.
The stresses in the nuclear fleet are no better highlighted than a recent scandal in Ohio which included plans for an additional customer charge of ~$150 million annually until 2027 to keep a nuclear plant operating.
Small Modular Reactors (SMR)
The momentum seems to be shifting from large reactors, that have a bad track record for late completion and cost overruns, towards SMR technology. Here it seems that enthusiasm is getting ahead of reality.
The World Nuclear Association has produced an excellent up to date (Dec 2020) summary of small nuclear power reactors. Various technologies are discussed and a number of Government supported programs outlined.
As far as I can determine, none of these programs have succeeded in initial goals. For anyone thinking that SMRs are a well established and implemented technology the review makes confronting reading.
In a nutshell in the US despite a wide variety of programs, and some 70 different designs, the pace is still slow. After many failed programs, in May 2020 the DOE (US Department of Energy) launched the Advanced Reactor Demonstration Project (ARDP) with $160 million funding available on a cost share basis for reactors to be available within 7 years. The goal is plants that are affordable to build and operate.
Today the potential for this program is for reactors to be available in the mid 2030’s (which by my arithmetic means plants available not within 7 years, but probably twice that).
The long history of failures to perform is not encouraging. The World Nuclear Association article indicates that the SMR reactors will be suitable for locating at the sites of coal power plants that are being retired. I question whether there will be any sites left in 15 years as already solar PV plus storage projects are replacing old coal plants.
The essence of the SMR argument is that it will be more cost effective to build SMRs in a factory for delivery on site. Rolls Royce (OTCPK:OTCPK:RYCEY) is a serious contender in the race to develop a Small Modular Reactor and it is proposing to build not one, but 16 of these plants with a capacity of 440 MW at a cost of 2 billion pounds each.
The Rolls Royce strategy is that by building multiple SMRs it will get good at it and the cost might go down. The reality behind this proposal is that it seems pretty ambitious to set out to build 16 plants before one has been successfully constructed. Time seems against this concept as the UK will have largely exited nuclear power by 2030.
Others developing competing SMR technology include GE’s (NYSE:GE) GE-Hitachi BWRX-300, NuScale’s SMR and the Westinghouse SMR. Reading Westinghouse’s website gives the impression that the Westinghouse SMR (300 MW) is quite well established technology, yet it remains waiting for a customer.
NuScale is privately held with an impressive list of investors, with Fluor Corp (NYSE:FLR) its majority and strategic investor. It is a front runner in the US SMR programs.
While there are backers still talking up the SMR story, when it comes to the crunch, the gap between talk and build is still very large. Two key issues seem to be that regulations for an SMR are likely to be similar to those for a large nuclear reactor, and the only possible way that SMRs can be financially viable is if they can be manufactured at scale.
For a large reactor, the regulatory path is big, but it is (or was) manageable to get a plant built. For a small reactor the regulations alone may make financing a project impossible. A possible solution is to get batchwise approvals for multiple plants, but first one plant needs to be approved. As yet no modern SMR has been approved and none seems ready to reaching that milestone.
The World Nuclear Association does specify five small reactors in operation (ranging in size from 11 MWe through 300 mWe). They are located in Pakistan (or China?), India, Russia (2) and Siberia (soon to close). Two further small reactors are under construction (in Argentina and China) and 16 (6 in the US, 3 in Russia, 2 in Canada, China and Korea, and 1 Denmark) have development well advanced, but see my comment above about getting approval in Europe and the US.
Rolls Royce to build multiple SMRs as proof of concept?
Rolls Royce’s approach is to head a consortium that seeks to build 16 SMRs (each 440 MW) in a batch. The UK Government is investing 215 million pounds towards the project costs of the UK SMR which is a consortium of 9 companies (including Rolls Royce). At least some of these companies are Research Institutes.
UK SMR has already received 18 million pounds to start the design efforts. The hope is that each SMR reactor will cost 2 billion pounds once the learning curve has been established.
I presume that the initial reactors will cost more. This cost structure for a 440 MW plant seems quite out of line with what 2 billion pounds will buy for a solar or wind facility with storage. Rolls Royce claims that its SMR will be able to deliver power at a cost in the same ball park as power delivery from solar PV or wind. This seems unlikely.
A more conservative approach is that of Canadian company Ontario Power Generation which has announced plans to recommence activities towards building three prototype SMRs at its existing Darlington Nuclear Generating Station which houses 4 nuclear reactors with a total capacity of 3.5 GW.
The existing reactors are approaching 30 years of operation. The recent step involves renewing its licence for developing SMRs. Ontario Power Generation operates Canada’s largest nuclear fleet.
Cost of nuclear power
The CSIRO in Australia publishes cost comparison of nuclear power with other power sources annually. It is clear that the capital cost of nuclear is substantially more (fives times) than solar PV or wind power and even when these renewable sources are (through batteries) made dispatchable, the cost for nuclear power is more than double.
The above consideration does not include the cost of cleanup. The UK is facing up to cleanup of its 17 earliest sites as they are retired. There is controversy about the process but it seems that a first pass is a cost of 131 billion pounds over 120 years (ie approx. 1 billion pound each year for 120 years).
In reality official government figures suggest that that the cost could blow out to 232 billion pounds. In fact current costs of the decommissioning program are ~3 billion pounds annually.
Another view of the cost of nuclear power comes from Lazard annual estimates. Lazard’s October 2020 Levelized Cost of Energy (LCOE) and levelized cost of storage makes it very hard to suggest that nuclear power is cheap.
Lazard has the unsubsidized cost of nuclear power at $129-198 but this does not include decommissioning costs, ongoing maintenance related capital expenditures or impacts of Federal loan guarantees.
The midpoint marginal LCOE of a fully depreciated nuclear plant which includes decommissioning cost is $29. Utility scale solar PV LCOE is in the range $29-42 and wind LCOE is $26-54, with offshore wind $86 (and falling). Hence running cost plus decommissioning of a nuclear plant is similar to the full LCOE for solar PV and wind.
Between 2009 and 2020 unsubsidized wind LCOE fell 71% and unsubsidized solar PV LCOE decreased 90%. And the cost reductions continue. It is not surprising that Compound Annual Growth Rates (CAGR) between 2009 and 2020 for wind power was 11% and solar PV 19%. Over that period the Fukushima disaster made nuclear power substantially more expensive.
Cost of nuclear construction is a very complex issue because invariably it seems that costs spiral once construction starts. A recent paper from the MIT addresses some of these issues in relation to US nuclear plant constructions. Increasing focus on safety issues post-Fukushima is one issue, but there are many others. It seems that last-minute design changes is a major issue, especially in relation to site specific factors.
There is discussion about offsite construction to standardise manufacturing issues and this is a big point of discussion in relation to SMR (Small Modular Reactors). A big issue is that any standardisation needs to be tested before being adopted and this makes reduced cost through standardisation a long into the future goal, perhaps well beyond the life of the nuclear industry as we envisage it today.
Currently the only large nuclear power development in the UK is the Hinkley Point C complex which has been financed by a 35 year indexed strike price of 92.50 UK pounds/MWh.
This deal has been widely criticised as the strike price is dramatically higher than renewable power generation now (eg recent offshore wind power strike price 39.65 UK pounds/MWh) and the price of renewable power continues to fall dramatically.
A 2017 UK National Audit Office report was highly critical of the deal with the following commentary “the deal struck has locked consumers into a risky and expensive project with uncertain strategic and economic benefits”. UK Energy Minister Richard Harrington has indicated that the Hinkley model is unlikely to be used again for funding new nuclear power.
The nuclear industry favours a Regulated Asset Base (RAB) model and the UK Government has shown some interest in it. Basically the RAB model allows to charge users before any power is delivered.
Call me crazy, but how is a politician going to embrace such a model when seeking re-election when other more transparent opportunities are available for renewable energy plus storage options? This is especially a problem for large nuclear construction that seems to go with long delays and big cost blowouts.
A report from conservative think tank Centre for Policy Studies “Bridging the gap. The case for new nuclear investment”, covers issues surrounding what to do about UK’s nuclear industry pending close down and how to keep it alive.
The report details 5 broad policy options, four of which (1, simplified and standardised carbon pricing; 2, Streamlined decarbonisation policies; 3) Rewards for Green R&D and pro-innovation environment; 4) Form power capacity auctions) seem not necessarily relevant or exclusive to nuclear power, while the fifth is a nuclear recommendation (5, Facilitation of next generation reactor designs). The core argument about point 5 is that the UK was the home of the first full scale nuclear power facility and that the Government should not shy away from being involved in the next phase of nuclear power.
The above begs the question as to whether there is a need for nuclear power going forward. My take is that it is going to be hard to fund another big nuclear facility after Hinkley Point C, and indeed it will be interesting to see how its excessive cost structure will play out.
This leaves the push for SMR technology, although the timelines for this seem to argue against success as renewables are on an ever cheaper path, and storage mechanisms (e.g. batteries and specifically the batteries in a fully electrified transport fleet) look like they will overcome many of the current criticisms of renewable energy.
Summary for nuclear power: too little, too late, too expensive
The challenge for nuclear power satisfying the world needs for low carbon energy is that dramatic contribution needs to be made in this decade. It is hard to see more than proof of concept for SMR technology being available and operating in the coming decade. The cost structure that Rolls Royce is projecting is ~$77/MWh which is dramatically more expensive that wind and solar power today.
A 2011 study for UK nuclear power replacement makes confronting reading today. To replace the existing fleet had commencement dates between 2020 and 2026….
The IEA view on nuclear is contradictory
A commentary from the IEA “The Covid-19 crisis is undermining nuclear power’s important role in clean energy transitions” seems to foreshadow significant decrease in the role for nuclear power in the energy transition.
This makes sense in the light of the above and also IEA’s own findings that as much as two thirds of global nuclear power capacity will disappear by 2040 if the life of existing reactors is not extended.
Indeed 25% of existing nuclear capacity is expected to shut down by 2025. The latest report indicates that not only are reactor lives not being extended, but permanent closures are happening (13 plants in advanced economies closed over the past year with just one new plant under development), and Spain and Sweden are shutting down reactors well before their 60 year lifetime.
And renewable energy is making new nuclear plants uneconomic. Nuclear power was down 3.5% in Q1 2020. The drop in nuclear contribution is the biggest seen apart from due to Fukushima. The curious thing is that in the IEA world energy report 2019, nuclear energy is still expected to be a substantial contributor in 2040.
Note that there is no breakdown where the nuclear energy is expected to be produced through 2040. The way it is projected on at least one graph is to flatline 2020 production through 2040. This isn’t what is happening on the ground.
The IEA commentary is a continuation of a long tradition of talking down renewable energy, with outdated figures (2018) on the cost of nuclear (and coal and gas) compared with renewables. Basically the report is a plea to stop closing down nuclear plants, which is unlikely to be considered.
Offshore wind is booming
The UK is the world’s biggest offshore wind producer at 20GW, with plans to expand to 30 GW by 2030. It could be that this will grow even faster as replacements for ailing nuclear capacity become urgent.
An alternative low carbon solution: Virtual power plants
A familiar theme by anti-renewables investors is “what happens when the wind doesn’t blow and the sun doesn’t shine?” There are now lots of answers to this straw man, with demand management and smart power management in the spotlight.
The recent announcement by major Norwegian renewable energy company Statkraft to establish a virtual power plant which manages 1GW (ugrading to 2GW later this year) of wind and solar power, battery storage and flexible gas generators to ensure reliable power delivery to the UK power system. This brings to the UK knowledge and implementation based on managing interconnection of 12GW of wind and solar power generation in Germany.
Conclusion
A number issues are converging to make this decade and indeed specifically 2021 a time of rapid and dramatic change. The climate crisis is biting and international appetite for emissions reductions via decarbonizing power and transport is evident.
President Biden plans to invest $2 trillion in renewable energy over the next 4 years and he has a climate summit planned for April in New York, which looks like it will be substantial.
Global events around the Paris Agreement are planned throughout 2021, culminating in a major meeting to get serious about containing global temperature rise to 1.5C (although this is a very difficult target). This means accelerated action to exit fossil fuels and replace them with net zero carbon solutions.
Here I’ve shown that nuclear power, while a zero carbon technology, is unlikely to be expanded and indeed the overall contribution by nuclear power is decreasing.
This means that other technologies must step up to enable emissions reductions required (50% reduction by 2030 and net zero emissions by 2050). Fortunately there have been dramatic innovations and cost reductions in both power generation through solar PV and wind power and also new storage technologies.
And information technology advances are allowing smarter management of power through time shifting of power use and demand management. It is an amazing time to be an investor because it is possible to get in close to ground level of a whole spectrum of new technologies.
To make it an even more remarkable time to invest, in the past month there has been a substantial pullback after a year of excellent returns from the new technology areas.
In the solar sector year on year returns have virtually all been above 100% and with the pullback of the past month falls of ~20% have been common : Invesco Solar ETF (NYSEARCH:TAN) yoy up 219%, 1mth down 19%; Canadian Solar (NASDAQ:CSIQ) yoy up 162%, 1 mth down 23%; First Solar (NASDAQ:FSLR) yoy up 118%, 1mth down 19%; JinkoSolar (NASDAQ:JKS) yoy up 164%, 1mth down 23%; SunPower (NASDAQ:SPWR) yoy up 477%, 1mth down 28%; Enphase (NASDAQ:ENPH) yoy up 296%, 1 mth down 17%.
In almost every case the solar stocks are rebounding. This looks like a good entry point for solar investors.
In the wind sector the returns have been excellent : Vestas Wind Systems (OTCPK:OTCPK:VWDRY) yoy up 103%, 1mth down 14%; Orsted (OTCPK:OTCPK:DNNGY) yoy up 62%, 1mth down 10%; General Electric (NYSE:GE) yoy up 49%, 1 mth down 7%; RWE Aktiengesellschaft (OTCPK:OTCPK:RWEOY) yoy up 25%, 1 mth down 7%. The pattern of outstanding year on year performance with pullback in the past month has, like the solar sector, shown signs of recent recovery.
Companies with especial expertise in floating turbines (very relevant for Japan) include Equinor (NYSE:EQNR) yoy up 83%, 1mth up 14%; Mitsubishi Heavy Industries (OTCPK:OTCPK:MHVYF) yoy up 4%, 1 mth up 5%.
There is no doubt that nuclear energy could contribute substantially to achieving net zero emissions. The reasons why I do not think that nuclear energy will be a significant player comes back to two boring realities.
Firstly, the timelines are too long for nuclear to make a significant contribution when it needs to be made. Secondly, nuclear is losing badly in not being cost competitive with other low emissions technologies (solar PV and wind) even as their cost profiles decrease rapidly.
The nuclear sector has two components.
Firstly the UK and Japan are facing dramatic nuclear shutdowns due to end of useful life (UK) and public resistance to restarting reactors closed after Fukushima (Japan).
In both of these countries offshore wind is likely to substantially replace the nuclear closures. A similar story is emerging in the US and France. Clearly the wind power companies mentioned above are relevant investment opportunities for investors to participate as nuclear exits the system.
Secondly there are many countries in the Asian region embarking on major energy development. Nuclear power has been seen to be a likely contributor to this massive power build in China and India and indeed in both countries new reactors have been/are being constructed. However wind, solar and storage are outcompeting nuclear, especially in India.
Here the effect on nuclear is what doesn’t happen, but conversely it means dramatic expansion of renewables and opportunity for investors. Solar PV is a huge part of this in India, China and many other countries in the region. Investors might note my comments above about solar investment opportunities. Wind (especially offshore) is also a huge opportunity.
Wind and solar PV are intermittent energy sources and so storage, time shifting of power use and demand management are all booming. This is another story which I intend to address soon, but battery companies (e.g. Tesla (NASDAQ:TSLA) yoy up 451%, Fluence ((OTCPK:OTCPK:SIEGY) yoy up 82%/AES (NYSE:AES) yoy up 99%), LG Chem (OTCPK:OTCPK:LGCLF) (soon to spin off LG Energy Solution with likely Korean IPO) have offered outstanding returns year on year.
The above indicates my investment focus and I am an investor in many of the solar and wind companies mentioned above. However, some readers might wish to explore possible nuclear investments.
Regarding Gen III manufacturers, other than China most of the major nuclear participants have significant headwinds (e.g. Electricite de France (OTCPK:OTCPK:ECIFF) yoy down 12%, 1mth down 20%), or have pulled back (e.g. Toshiba, which is still involved with the nuclear industry, notably in the cleanup of Fukushima and work on nuclear fusion, and Hitachi, which is involved with GE in SMR developments.
China has two major nuclear companies China National Nuclear Power Co (SHA:601985) and China General Nuclear Power Group (OTC:CGNWF). Given that these companies are driving China’s plans to increase its nuclear capacity from 2% in 2019 to 7% in 2040, they are clearly active but it isn’t easy to get details about these companies.
I remain cautious about whether China will maintain expansion of nuclear or switch some of that planned development to additional solar PV and wind.
In terms of investment, if the SMR programs eventually look like getting traction, then Rolls Royce would be worth watching for investment, as that company has a significant commitment to the program.
To gain exposure to the NuScale SMR developments one might investigate investment in Fluor Corp (NYSE:FLR) (yoy up 197%, 1mth up 19%) although Fluor is a lot more than the majority shareholder of NuScale, being a major engineering and construction firm that services the oil & gas industry, infrastructure and power sectors.
Originally published at Seeking alpha