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A Resurgence of Nuclear Energy?

October 11, 2023

Read Time 4 MIN

The global energy landscape is undergoing a paradigm shift as nations ardently pursue a low-carbon future. Nuclear energy, a frequently overlooked component, is central to this transition.

The crucial role of nuclear energy

As of 2022, nuclear power was responsible for 9% of global electricity generation and nearly 25% of global, low-carbon electricity generation.1 Per the International Energy Agency (IEA), in the last 50 years, nuclear energy has averted over 60 gigatonnes of CO2 emissions—approximately equal to two years’ worth of total energy-related emissions worldwide.2 Nuclear energy’s consistent power output offers an efficient alternative to traditional fossil fuels and a solution to escalating energy demands, especially in rural regions where access to electricity remains sparse.

Moreover, nuclear plants, unlike intermittent renewables such as wind and solar, maintain nearly full capacity operations. This ensures power delivery even during extreme weather conditions — an increasing concern given that 2023 has been the hottest year on record since the 1890s.

Global Electricity Generation by Fuel (2022)

Low Carbon Based sources account for 39% of Electricity Generation

Source: Energy Institute. Data as of December 2022.

The price of moving away from nuclear

The world's nuclear infrastructure is aging, with many reactors nearing their design end-of-life. The premature decommissioning of these reactors might disrupt energy transition plans, potentially leading to an additional 4 billion tonnes of CO2 emissions, per the IEA.3 Substituting nuclear capacity with renewables like wind or solar would demand an unparalleled deployment pace. The decline in nuclear power could also require an extra $1.6 trillion in investments from advanced economies, translating to higher consumer electricity prices.4 Importantly, in many scenarios – on a levelized cost basis over several decades – prolonging a reactor's lifespan is estimated to be more economical than constructing new renewable energy infrastructures.5

Innovations in nuclear technologies

The nuclear sector is far from static; it's evolving. The spotlight on technology development in the space is currently on Small Modular Reactors (SMRs) which promise heightened efficiency, affordability, and flexibility. Their compact size and enhanced safety attributes make them highly adaptable, even holding the potential to replace older fossil fuel units. The market for SMRs, at present, is projected to grow to around $6.8 billion by 2030 (around a 2.3% compound annual growth rate), with companies like NuScale Power and BWXT Advanced Technologies at the forefront.6

Certain SMR designs have the capability to recycle existing nuclear waste as fuel. Additionally, nuclear fusion, the energy source of the sun and stars, is undergoing intensive research. Companies like Helion Energy and Nucor are collaborating to harness this immense power. And on the tech frontier, giants like Microsoft are exploring nuclear energy to power energy-intensive operations like artificial intelligence.

The current dynamics of uranium pricing

Uranium prices have seen considerable fluctuations recently. Factors like long lead times for mining projects, reduced capital expenditure on new sources, existing supply deficits, and geopolitical tensions, notably in Europe, have driven prices upward.7 These dynamics are influencing the broader industry. Utility companies are grappling with escalating costs, whereas uranium miners are poised to gain, attracting increased investor interest.

Uranium Exploration Budgets ($M)

Uranium exploration budgets have declined

Source: S&P Global Market Intelligence. Data as of October 2022.

Uranium Supply Surpluses and Deficits

Uranium supply deficits continue to decrease

Source: S&P Global Market Intelligence. Data as of October 2022.

The path forward

A glance at Japan provides a lens into the evolving nuclear narrative. After the Fukushima disaster, Japan curtailed its nuclear operations. However, faced with the global energy crisis and geopolitical tensions, such as the Russia-Ukraine war, Japan is reviving its nuclear reactors, marking a significant policy pivot. Other nations like Germany, Belgium, and India are also re-evaluating their nuclear strategies. As countries grapple with energy security and decarbonization, nuclear energy, with its promise of reliability and zero emissions, is regaining prominence.

Bottom line

The drive towards decarbonization, coupled with geopolitical shifts, has elevated nuclear energy's significance in the energy transition narrative. Despite the promising investment prospects, especially with advancements in nuclear technologies and energy policy reformation, the sector is not without its challenges, such as:

  • Uranium Price Volatility: Miners must navigate fluctuating uranium prices which directly impact revenues.
  • Developmental Hurdles: Utility companies could face unforeseen costs and delays in reactor projects.
  • Policy Shifts: Regulatory changes, particularly after major events or the emergence of alternative technologies, can transform the industry.

Given these challenges and the evident opportunities, particularly with nuclear technological advancements and policy transformations, investors should tread carefully, measuring potential rewards against the inherent risks.

VanEck Uranium+Nuclear Energy ETF (NLR)

VanEck Uranium+Nuclear Energy ETF (NLR) offers exposure to a pivotal segment of the clean energy sector, addressing the growing demands associated with combating climate change. This passively managed fund tracks the MVIS® Global Uranium & Nuclear Energy Index (MVNLRTR). It encompasses companies throughout the uranium and nuclear energy spectrum, from uranium mining to electricity production, as well as suppliers and service providers. By doing so, the Index balances the stability of utility companies with the dynamism of uranium mining entities.

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Important Disclosure

1 Energy Institute, Statistical Review of World Energy, 2022.

2 IEA, “Nuclear Power in a Clean Energy System”, May 2019.

3 Ibid.

4 Ibid.

5 Ibid.

6 Bloomberg (via MarketsandMarkets), June 2023.

7 S&P Global, “Nuclear Revival Buoys Uranium Sector”, October 2022.

VanEck only serves professional clients in countries where the funds are registered or where funds can be sold in accordance with local private placement rules.

An investment in the Fund may be subject to risks which include, but are not limited to, risks related to investments in nuclear energy companies, energy sector, utilities sector, special risk considerations of investing in Asian, Canadian and European issuers, foreign securities, foreign currency, depositary receipts, small- and medium-capitalization companies, cash transactions, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, issuer-specific changes, non-diversified, index-related concentration and high portfolio turnover risks, all of which may adversely affect the Fund. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates that may negatively impact the Fund's return. Small- and medium-capitalization companies may be subject to elevated risks.

MVIS Global Uranium & Nuclear Energy Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Securities Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Uranium+Nuclear Energy ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.

The S&P 500 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2023 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spglobal.com/spdji/en/. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

The S&P 500® Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sector; as an Index, it is unmanaged and is not a security in which investments can be made.

Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Certain indices may take into account withholding taxes. Investors can not invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com/etfs. Please read the prospectus and summary prospectus carefully before investing.

This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.

VanEck mutual funds and ETFs are distributed by Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.

666 Third Avenue | New York, NY 10017

© 2023 VanEck. VanEck®, VanEck Access the opportunities®, and the stylized VanEck design® are trademarks of Van Eck Associates Corporation.

Important Disclosure

1 Energy Institute, Statistical Review of World Energy, 2022.

2 IEA, “Nuclear Power in a Clean Energy System”, May 2019.

3 Ibid.

4 Ibid.

5 Ibid.

6 Bloomberg (via MarketsandMarkets), June 2023.

7 S&P Global, “Nuclear Revival Buoys Uranium Sector”, October 2022.

VanEck only serves professional clients in countries where the funds are registered or where funds can be sold in accordance with local private placement rules.

An investment in the Fund may be subject to risks which include, but are not limited to, risks related to investments in nuclear energy companies, energy sector, utilities sector, special risk considerations of investing in Asian, Canadian and European issuers, foreign securities, foreign currency, depositary receipts, small- and medium-capitalization companies, cash transactions, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, issuer-specific changes, non-diversified, index-related concentration and high portfolio turnover risks, all of which may adversely affect the Fund. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates that may negatively impact the Fund's return. Small- and medium-capitalization companies may be subject to elevated risks.

MVIS Global Uranium & Nuclear Energy Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Securities Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Uranium+Nuclear Energy ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.

The S&P 500 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2023 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spglobal.com/spdji/en/. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

The S&P 500® Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sector; as an Index, it is unmanaged and is not a security in which investments can be made.

Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Certain indices may take into account withholding taxes. Investors can not invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com/etfs. Please read the prospectus and summary prospectus carefully before investing.

This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.

VanEck mutual funds and ETFs are distributed by Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.

666 Third Avenue | New York, NY 10017

© 2023 VanEck. VanEck®, VanEck Access the opportunities®, and the stylized VanEck design® are trademarks of Van Eck Associates Corporation.