(This post comes courtesy of the author’s site)
Obama officially went nuclear with his announcement of $8.8 billion in loan guarantees for Atlanta based Southern Company to build two nuclear power reactors. The President has been hinting he was moving in this direction since the early days of his campaign, and now he is putting his money where his mouth is, no doubt egged on by Energy Secretary Steven Chu. Furthermore, Obama has included more nuclear loan guarantees in his 2011 budget.
The genie is clearly out of the bottle. The nuclear industry has been in hibernation since the accident at Three Mile Island in 1979. There is absolutely no way we can deal with our energy crunch without a huge expansion of our nuclear capacity, which sits at a lowly 20% of our power generation. France has already achieved 85%, followed by Sweden at 60% and Belgium at 54%. Unless you’re a nuclear engineer, you are probably unaware how far the technology has moved ahead in the last 30 years.
The first generation produced the ageing behemoths we now see on coasts and rivers, which used high grade fuel that would melt down if someone forgot to flip a switch. Think Chernobyl. Generations two and three never got off the drawing board. Generation four is known as a pebble reactor, which relies on a new form of fuel embedded in graphite tennis balls that is just hot enough to generate electricity, but too weak to allow a disaster.
There are new modular designs, like those found in nuclear submarines, and new fuels, like thorium. Low grade waste can be stored on site, not shipped to Nevada or France. The permitting process is being shortened from 15 years to four by confining new construction to existing facilities instead of green fields, urged on by a less fearful public and even some CO2 conscious environmentalists.
At least 30 new reactors are expected to start construction in the US over the next five years, and over 100 in China. There is a great equity play here, and I would use any substantial dip in the market to scale in. The Market Vectors Nuclear Energy ETF (NLR), which has jumped an impressive 78% to $25 since March, is the easiest way in. You can also buy its largest components, like Cameco (CCJ), the world’s largest uranium producer, which saw its stock clock a nice double last year.