I’m OK, Uranium’s OK: The EU may have just made nuclear power a green giant
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On Wednesday the European Union backed labelling fossil fuel gas and nuclear projects as ‘green’, paving the way for hundreds of billions of euros in cheap loans and state subsidies.
According to Reuters, out of a total 639 lawmakers, 328 opposed a motion that sought to block the EU gas and nuclear proposals, meaning these new rules will add gas and nuclear power plants to the EU taxonomy rulebook from 2023.
The EU ‘taxonomy’ is a policy, or classification system, that is meant to put a handbrake on greenwashing, however critics say to tag fossil fuel projects as ‘green’ is exactly that and even worse, it has completely white-anted Europe’s global climate leadership.
But before we delve too far into the negatives, we should first consider the positives, which in this case is the massive endorsement this move has made for nuclear power at a time when the EU grapples with spiralling gas costs, an energy crisis, and a desperate need for the bloc’s economies to improve energy security.
Bannerman Resources’ (ASX:BMN) Brandan Munro is both a resources executive with more than 20 years’ experience and a prominent thought leader in the uranium sector, having served as co-chair of the World Nuclear Association’s Fuel Demand working group.
As an expert contributor on uranium to the UN Economic Commission for Europe, Munro says this green finance approval will allow several positive decisions which have been made over the last six months to crystallise.
“What I mean by that is the renewed focus on a nuclear future for France but also recent decisions by Belgium to retain its nuclear fleet and even The Netherlands to build new nuclear reactors,” Munro told Stockhead.
“This move also has a broader significance and this is because other regions around the world are compiling their own green finance taxonomy and will now look to Europe to follow a lead on including nuclear in green finance.”
These regions include the UK, who are finalising their green finance taxonomy as we speak, in conjunction with an ambitious new nuclear build spearheaded by the Rolls Royce SMR Project, as well as Russia and China – who have already included nuclear in their green taxonomy.
While we need to wait and see what develops in other parts of Asia and South America, Munro said for many ASX investors, this will remind them of the crucial role nuclear power must play in the world energy mix going forward.
“Many ASX investors have an Australian-centric view on global acceptance of nuclear power – in other words, it is illegal in Australia so most assume that the rest of the world also opposes nuclear power and that is not the case,” he says.
“Nuclear power and uranium are green and therefore, are on the beneficial side of the enormous ESG impetus in contrast to, for example, coal.
“This move will also hopefully reassure investors distracted by the prospects of a global recession and who might be thinking more defensively about their investments.”
Uranium is driven by a supply shortage and the existing fleet of nuclear power stations around the world will continue to run regardless of what world industrial demand is doing. But according to Munro, this news further supports the demand case for nuclear power.
“Any increases in demand simply put the deficit under increasing pressure,” he says.
According to Stockhead’s deputy editor Christian Edwards, this nuclear supply shortage is really going to start heating up in 2024 and by 2030, it is highly likely there won’t be enough uranium production to meet demand, even if every single idled mine and planned project goes into production.
Uranium companies set to benefit from this news are, of course, the usual crowd of companies aiming to kick off production in the next few years.
But as Valor Resources’ (ASX:VAL) executive chairman George Bauk points out, this move also speaks volumes for ASX uranium explorers.
“It is a signal to investors that uranium is part of the energy solution in the long term,” he says.
“Depending on each company’s situation, if they are in the process of restarting or building a new plant then these funds will be available.
“The EU is quite stringent in the way it goes about lawmaking so for them to come out and say they have now classified uranium as green – it’s a great endorsement.”
For an up-to-date list on near term players and explorers, read our Uranium Stocks Guide.
But while Wednesday’s vote has sent nuclear nuts off running around like headless chooks about the possibility of the current global nuclear renaissance heading into overdrive, others are not so impressed.
Especially on the gas front.
Jack Colreavy, corporate finance associate at Barclay Pearce says ‘natural gas’ has been a marketing ploy from the beginning, with fossil fuel lobby groups and gas companies making it sound like a good thing by adding the word ‘natural’ in the name.
“It completely dumbfounds me that they’re labelling gas as green,” he says.
“Natural gas is methane and methane traps 25 times more heat in the atmosphere than CO2.
“The fact that the EU is on the verge of labelling this as ‘green’ just demonstrates the power that the gas industry has in lobbying political officials.
“And I can understand the argument for nuclear, but the radioactive waste that is produced as a by-product of the process is extremely damaging to the environment.”
At the end of the day, he says the move isn’t going to change anything in a material way – “no investor who thinks gas or nuclear is bad for the environment is suddenly going to change their tune because the EU puts a ‘green’ sticker on it”.
“And it doesn’t change the economics of these power sources.”
While nuclear is not a bad option as base-load power for countries that lack natural renewable energy, it is the most expensive form of generation.
Nuclear accounts for about 10% of the world’s energy production and if that were to double or triple then you’re looking at an enormous spike in the price of uranium and an increasing waste storage problem.
Also, building a nuclear power plant is no easy feat – the estimated time frame is at least 20 years with costs up around the $20-$30bn mark.
Energy market analyst Tim Buckley says the extension of nuclear power in a country that already has nuclear power operating is one thing, but in Australia it is totally different.
“The EU has the engineering, regulatory framework, back-up capacity and approvals – nuclear is well established and operating, which is very different to Australia where we have none of that in place.
“We have an energy crisis and more importantly, a climate crisis, suggesting nuclear is not a solution that is in any way going to deliver on our 2030 or 2040 targets.”