In early 2011 a devastating earthquake and subsequent tsunami wreaked havoc on much of Japan, putting the country in something of a bind. One area that was particularly affected by the quake was the Fukushima nuclear power plant. Fukushima had taken hefty damages during the incident and began leaking radiation into the surrounding environment shortly thereafter. The result yielded not only devastating effects for Japan, but for nuclear power as a whole, as the global community lashed out at the seemingly unsafe energy source. The incident was enough to prompt Germany to abandon nuclear power within the next decade and has a number of other countries considering the same action.
While many were rightfully spooked by the tragedy, others brushed off the concerns, recognizing that the odds of a quake of that magnitude hitting a nuclear plant are extremely minimal at best. But the proponents for nuclear had mostly been individual experts or smaller organizations. That is until the International Energy Agency rode to the rescue. In a recent 659 page report, this administration outlined the need for nuclear power, as well as the devastating affects that would come from eliminating this power source.
The Case For Nuclear
According to the IEA, the ideal world temperature clocks in at about 2 degrees Celsius. Without nuclear power, it will cost the world an extra $1.5 trillion to maintain this temperature through 2035. Faith Birol, chief economist for the agency, commented that abandoning nuclear power “would definitely be bad news for energy security, for climate change and also for the economics of electricity price." The current energy outlook is dismal without nuclear. Crude prices are predicted to climb to a steady $120/barrel by 2035 with demand surging. However, if the spending necessary to maintain enough oil for demand is not in place ( a very possible outcome considering the world’s biggest producers are emerging markets), crude could jump to $150/barrel without breaking a sweat.
While any form of alternative energy will help to alleviate these issues, the IEA was specific in backing nuclear given the recent pressure it has faced. No matter which way you look at global growth in the next few decades, energy demand will only increase, “but this continued heavy reliance on fossil fuels puts the health of the climate in jeopardy,” said IEA Executive Director Maria van der Hoeven.
Ways To Play
With backing from one of the most respected agencies in the world along with robust energy demand growth, a nuclear investment presents itself as a strong opportunity in today’s markets.
- Cameco Corp. (CCJ) - This company is one of the largest uranium producers in the world. With uranium being a key element in nuclear production, this mining stock will align very closely with the nuclear industry.
- S&P Global Nuclear Energy Index Fund (NUCL) - This ETF tracks companies in the nuclear energy business, featuring top holdings like JGC, First Energy and NextEra Energy.
- Uranium ETF (URA) – This ETF focuses on uranium miners, so while it is not a direct play on nuclear, its underlying companies will be heavily impacted by the industry.
- Uranium Futures (UX) - Offered on the CME Group, these futures represent 250 pounds of U308 and are quoted in U.S. dollars and cents per pound.
Disclosure: No positions at time of writing.
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