Feel the Rhythm

News of a race slowly trickled through the school corridors. Those were the days before Whatsapp groups and Instagram. Participants would be required to build their own go-karts and push them along a yet to be determined route. The four of us were inseparable, so we decided to build a bobsled – and yes, it would be painted black and yellow like the one in Cool Runnings. Engineering depth in the team was somewhat limited, but that was more than offset by connections we had at a trade school across town. We would procure our chassis from them. The brief? “Something long enough to seat four, with wheels” – and that is exactly what we got. A machinery trolley (a concrete slab with wheels), used to haul engines around their workshop.

Little attention was paid to re-evaluate our quarter-ton behemoth with its tiny wheels, despite newly emerging data of the route indicating that, contrary to our initial assumptions, most of the race would be taking place off-road. It’s as if American philosopher William James was observing us when he said, “The ignoring of data is, in fact, the easiest and most popular mode of obtaining unity in one's thought”. We had spent weeks working on our bobsled – most of the sweat went into cosmetic effects to ensure an unmistakable Jamaican entrance. Our goal transitioned from winning the race, to looking good. This is arguably where some countries find themselves on the energy transition path – looking good, losing the race. Data suggests that nuclear power will be a critical component of this transition, but it hasn’t been a popular position. That seems to be changing.

A quick scientific recap of nuclear power. Uranium is an extremely energy efficient element which is used as the fuel in nuclear reactors. It can be used to provide baseload power. The current alternative? Coal, which makes up a quarter of Germany’s energy production. How much more efficient is Uranium than coal? Twenty thousand times more. The downside being that after using uranium in producing energy, you are left with a small amount of radioactive waste. To however put this in perspective, the World Nuclear Association (WNA) states that, “The generation of electricity from a typical 1,000-megawatt nuclear power station, which would supply the needs of more than a million people, produces only three cubic metres of vitrified high-level waste per year, if the used fuel is recycled. In comparison, a 1,000-megawatt coal-fired power station produces approximately 300,000 tonnes of ash and more than 6 million tonnes of carbon dioxide, every year.”

The Great East Japan Earthquake struck 130km offshore at 14h46 on Friday, 11 March 2011. There were four nuclear power plants, housing eleven reactors, that were operational near that region. They all shut down automatically when seismic activity was detected. What caused Fukushima (Daiichi) to be seared into public memory as a modern-day nuclear disaster, wasn’t the earthquake - it was ignoring the data. Constructed in the 1960’s, scientists used the 1960 Chile tsunami to determine that the plant should be built 10m above sea level. In 1993 however, credible data emerged that, in a severe seismic event, the plant could be exposed to tsunami waves of up to 15.7m. Government regulators and the plant operator however did not make any changes. What led to the now infamous Fukushima disaster was 15m tsunami waves crashing into and flooding the plant.

Within just four months of the tsunami, Germany announced the complete phase out of all their nuclear power stations over the next decade. Most of these power plants are inland. This nuclear moratorium would be in effect for a few months longer than planned, due to German energy insecurity being exposed by Russia’s invasion of Ukraine. Despite this closure of nuclear power plants making headlines globally – demand for Uranium, since 2011, has been rising.

The world population currently grows at 73 million people per year. That’s the same as adding the combined populations of the United Kingdom and Singapore to earth, every twelve months. Most of that growth is taking place in the developing world, where energy usage is a fraction of that consumed in the developed world. Electricity use per capita increases exponentially as economies cross a threshold on the Human Development Index. In other words, global energy usage is forecast to increase significantly in the coming years as more people in South-East Asia, Africa and South America buy fridges and hairdryers.

Nuclear power has increasingly formed part of the strategic energy mix of these developing nations. WNA estimates are that 60 reactors are currently under construction with 110 more planned. This is more than the total built over the last 20 years. The developed world has also slowly warmed up to nuclear again. The European Commission, in 2022, classified nuclear energy as “sustainable” and at the end of 2023, countries at COP28 (including the US, Canada and the UK) pledged to triple nuclear power by 2050.

The oversupply of uranium between 2009 and 2017 had, according to our sources, nearly been depleted by 2023. Uranium prices that had also been falling since 2007 resulted in an underinvestment in mining operations. This constrained, inelastic supply, coupled with the meaningful growth in demand made us constructive on the outlook for uranium in 2022. Prices have jumped significantly over this period, making the opportunity somewhat less attractive. However, in the absence of another power plant or related disaster, nuclear energy does look to be experiencing tailwinds for the foreseeable future.

Changing your mind is a useful asset though.

We finished last in that race.