Faced with the most serious energy crisis since the 1970s, the world is turning back to one of the biggest beneficiaries of the 1973 oil embargo: nuclear power.
That is good news, but we should take care. This solution to energy security problems risks creating its own energy security headache down the road.
That is because uranium’s supply chain is as susceptible to geopolitical manipulation as those for natural gas, cobalt and rare earths. If developed countries want to count on atomic energy as a reliable source of zero-carbon power in the 2030s and 2040s, they are going to need to start locking down the mineral resources now.
Nearly three-quarters of nuclear generation happens in Europe, North America and developed parts of Asia. However, rich nations and their allies provide just 19 percent of the 75,000 tonnes of uranium oxide needed to fuel those reactors each year. China, the former Soviet Union, Iran and Pakistan together accounted for 62 percent of mined production last year. India and traditionally non-aligned countries in Africa produce the remainder.
The situation results from the wrenching shifts the world’s uranium market suffered in recent decades. In the late 2000s, it was widely believed that solar and wind would remain too costly to compete with conventional generation well into the 2030s. That drove expectations of a boom in nuclear energy as the only viable large-scale source of zero-carbon power. This in turn sparked a rush of development in Kazakhstan, blessed with vast deposits of uranium close to the surface that can be cheaply extracted by pumping fluids underground in a process similar to fracking.
The 2011 Fukushima Dai-ichi nuclear power plant disaster killed off those prospects, reducing nuclear generation by 11 percent over two years and bringing growth in atomic power to a halt for the first time since the 1960s. With new Kazakh supplies just coming onstream, the market entered a deep glut. Until uranium oxide prices started to creep back above US$30 a pound (454g) last year, most miners outside central Asia were operating at a loss.
Kazakhstan alone now provides more than 40 percent of the world’s uranium. The government in Nur-Sultan has an often testy relationship with its former colonist, especially since the invasion of Ukraine underlined Moscow’s desire to keep former Soviet states under its thumb. Still, it remains dependent on the goodwill of neighbors to export its nuclear materials, which are normally transported over land. If a Ukraine-style situation unfolded that saw developed democracies pitched against authoritarian rivals and control of energy supplies used as a weapon of war, even air freight might not be enough to keep Western reactors fueled, since Kazakhstan is almost entirely surrounded by Russian, Chinese, Iranian and Pakistani airspace.
There are alternative sources out there. More than one-quarter of the world’s uranium resources are in Australia, with another 9 percent in Canada. BHP Group’s Olympic Dam northwest of Adelaide remains one of the world’s largest deposits. Its vast uranium reserves could be produced at close to zero cost since the mine’s main products would be copper and precious metals — but for nearly two decades, executives have shied away from the immense capital spending needed to unlock this resource.
At the Nolans rare earths project near Alice Springs, a uranium resource measured at 6 million kilograms in 2008 — enough to power a fleet of 20 reactors for 10 years — is now treated as waste material, a cost to be managed in running the mine rather than a revenue stream to be exploited.
“We’ve got a long way to go before uranium becomes something that people will talk about here in Australia,” said Gavin Lockyer, managing director of Arafura Resources Ltd, which is developing the site.
Pre-Fukushima, flowsheets describing the processing of the Nolans ore listed uranium as a product, but it is now so rarely thought about that he does not know the price at which exploiting it would become viable.
In theory, those early processing plans could be revived to tap one of the world’s larger uranium resources, but “it’s not on the agenda” at the moment, he said.
This overdependence on one low-cost, unreliable supplier is not so different to the situations we have seen in other critical commodities in recent decades. Europe always had alternatives to buying piped gas from Russia. Electric battery-makers could have worked harder to reduce their dependence on cobalt, and source more of it from countries other than the Democratic Republic of the Congo. Consumers of rare-earth metals might have looked at China’s growing dominance of that supply chain and sought to diversify at an earlier stage. In each case, though, developed democracies took the approach of seeking the lowest-cost resources, and hoped for the best.
That looks like happening again. Much of the post-Ukraine nuclear renaissance consists of plans to extend the life of existing reactors in Germany, Belgium, South Korea and the US. Among developed countries, only France, the UK and Japan have committed to building significant numbers of new plants.
That scale of growth is unlikely to encourage investors that funding marginal uranium mines is a good use of their money — and unless that changes, the world’s dependence on the former Soviet Union would only grow more entrenched. European governments that have watched the cost of electricity increase 10-fold over the past year, as Moscow turned off the gas taps are getting a taste of what the world looks like when you take your energy security for granted. There is no time like the present to make sure we do not make the same mistake again.
David Fickling is a Bloomberg Opinion columnist covering energy and commodities. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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