Security Fears Are Turbocharging Nuclear Power’s Resurgence

When Russia invaded Ukraine in 2022, it sparked a global energy crisis that reminded governments everywhere of the need for secure energy. Fast forward two years and nuclear power generation is set to expand quickly as plans are made for new reactors.

There has been a sea-change in global policymaking towards nuclear energy, both to bolster security and reduce emissions. At the COP 28 conference last December, more than 20 nations – including the US, France and UK – pledged to work to triple global nuclear energy capacity by 2050.

While new generators can take many years to plan and build, global nuclear power generation is poised to break new records as soon as 2025, according to the International Energy Agency’s (IEA) Electricity 2024 report. New reactors are set to come on stream in markets like China, India, Korea and Europe.

Uranium’s Fortunes Rise

Against that backdrop, it’s no surprise that the price of uranium oxide – the main fuel for nuclear reactors – is soaring. After coming under pressure in 2011 when the Japanese Fukushima accident battered demand, they came to life again in 2021 when disruptions caused by COVID lockdowns hit supplies and created shortages. Since then they have rocketed more than 250%.¹ Of course, this does not mean that price rises will continue.

That has lifted the fortunes and stock prices of the companies involved in the nuclear industry, as shown by the performance of the VanEck Uranium and Nuclear Technologies UCITS ETF (see chart below). From reactor manufacturers to uranium miners, industry shares have rallied sharply. Please note that this is not an indicator that share prices will continue to increase - they might fall back to previous levels or even drop lower. Investors should also take into account the sectoral concentration of the fund and risks of investing in the mining industry.

Rapid Renaissance

What happens now? The world badly needs reliable low-carbon electricity that can be switched on when the sun does not shine on solar panels and the wind does not turn turbines. As the world electrifies, so demand for electricity is increasing. Demand is also growing from data centers, artificial intelligence and cryptocurrencies. The IEA anticipates their electricity consumption alone will double by 2026. There is no guarantee that this forecast will materialize.

Nuclear is a main option available, which can also offer greater energy security for countries without their own oil and gas. Little wonder that Sweden has pledged another two reactors by 2035 and the equivalent of 10 more by 2045; Japan restarted three that had been mothballed in 2023; America recently connected its first new reactor in eight years. And then there is China, which plans a huge 150 reactors over the next decade.

New Technologies

The world’s new reactors will not be like those of the past, though, as technology is evolving. Existing technologies, like small modular reactors, will make a difference. These are compact and efficient, and some experts say they could transform the nuclear industry.

What’s more, the moonshot of nuclear fusion now seems somewhat closer, with research into commercializing it approaching a make-or-break moment. Unlike today’s nuclear fission reactors, fusion does not produce dangerous waste that needs to be disposed of.

If all this seems a little far off, think again. New nuclear fission reactors are already coming on stream across Asia, while the US and Europe are not far behind.

What the world wants from energy is changing. Governments are hastily making plans for more nuclear energy to guarantee a secure, low carbon future. As they do so, the nuclear industry seems back at the center of plans for power generation and potentially set to remain so.