Nuclear Energy Of The Future

By Arthur Pinkasovitch | July 27, 2010 AAA

With less than 450 worldwide nuclear reactors producing energy and increasing concerns about greenhouse gasses and other pollutants, recent discussion has focused on expanding the nuclear energy capabilities within the United States. However, memories of Chernobyl and Three Mile Island have hindered the process of expanding the nuclear energy sector.
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Nuclear Growth
According to the World Nuclear Association, the 21st Century will experience a fundamental shift toward nuclear energy. Brazil, for example, which only had two major nuclear programs in 2008, is expected to have over 40 by 2060 and possibly even 330 by 2100. China is forecasted to show a similar trend, expanding their nuclear facilities from nine in 2008 to over 500 by 2100. France, the current world leader in nuclear energy has 63 running programs and is expected to show minor growth, with approximately an additional 10 by 2030. North America will also be moving forward with nuclear goals in an attempt to reduce their carbon footprint and foreign oil dependency. (For additional stock analysis, see Lights Out On Solar, Go Nuclear.)

Nuclear energy, despite significant uranium processing, enrichment and fabrication costs, remains cost competitive with common energy sources such as coal and oil. Initial capital to build a nuclear facility is significantly higher than that required for a coal plants because additional sophisticated safety equipment is required. However, following the initial outlay, nuclear electricity cost production is less than from alternative sources. The Department of Energy Estimates nuclear energy, factoring in the present value of building and operating a appropriate facilities, is approximately 20%, 38%, 70% and 1% cheaper than onshore wind, offshore wind, solar photovoltaic and hydro energy respectively.

The Consensus
Following 2001, when 46% of Americans were in favor of and 48% opposed nuclear power, supporters now have a 62% position, while the number of opponents has dropped to 33%. Both, Democrats and Republicans are majority supporters of nuclear energy, although Republicans are more united on the matter. Nuclear energy investments should be viewed as a long term play since growth in the sector is expected over a multi decade time horizon. Cameco (NYSE:CCJ), Uranium Participation Corp (TSE:U.TO), First Uranium Corporation (TSE:FIU.TO) and Mega Uranium (TSE:MGA.TO) and are some of the Canadian miners in this space which could benefit as global demand and uranium prices increases. China is expected to double its consumption this year as Uranium prices are expected to escalate to $55 a pound according to RBC.

Investors wishing to diversify their uranium holdings beyond the Canadian miners have several ETF choice alternatives including Market Vector Nuclear Energy (NYSE:NLR) and PowerShares Global Nuclear Energy (NYSE:PKN). NLR holds a diverse mix of nuclear energy value chain firms ranging from uranium miners such as Cameco and power plant companies like Exelon Corporation (NYSE:EXC) to fuel transport corporations. The exchange traded fund has an expense ratio of 0.62% and is heavily focused on growth companies.

The Bottom Line
High start up costs and a negative stigma have associated with nuclear reactors have hindered the proliferation of nuclear energy. Excluding France and Japan, most nations avoided growing their nuclear industry. However, the pattern is slowly changing due to the low cost and low emissions of the energy source. On July 27, 2010 Jordan received a $70 million loan for their first nuclear reactor; others nations will soon follow.

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