Energy Resources – Uranium and Nuclear Power
As you know, I spent a considerable amount of time working in the
alternative energy industry as an investment banker. I had the opportunity to look at and analyze projects and look at new technologies that were so early stage that most experts had never heard of them. I also had the opportunity to learn and discuss many different opinions from
industry experts, academics, and some of the leading CEOs in the field.
All of this exposure not only taught me a great deal about the markets,
the industry and new technology, but it also shaped my views on the
energy industry as a whole. For better or worse I am biased towards
alternative energy. I have seen the pollution and damage first hand that a
fossil fuel based infrastructure can cause. The good thing is that I
truly believe that eventually, in my lifetime, we will see a new energy
infrastructure based on hydrogen, which will be much more
environmentally friendly and most importantly economic.
In my years in banking I learned that many little things the experts
take for granted about the industry, most of the investing public has no
knowledge about. One of the most interesting data points I learned was
that where we stand today, hydrogen can be used in a similar form to
gasoline. The energy from its combustion can be used to power an
automobile, with some slight modification. Granted, the modification needed is expensive now, but no doubt it will come down in price in the
future. Clearly this is a natural stepping stone to a hydrogen driven
economy.
Fuel cells, those great miracles of energy production, are hugely
inefficient, expensive, and extremely fragile. It will be many years before
they become widespread enough to materially impact the energy economy,
but it is starting to happen. Now I know many of the environmentalists are standing up and cheering . . . sit down. While I love the
environment, I think that a hydrogen economy makes sense – Economic Sense. This is economic because with the price of Oil where it is – above $80, and the incidental costs (but not insignificant – think the cost of the
War in Iraq) of securing our oil supply will force new technologies
into the market.
So what’s the problem? Well, how do we make all of the hydrogen we
will eventually need? Again, another thing most people don’t realize,
hydrogen is currently made in mass quantities by using natural gas and
oil. Amazing isn’t it? The one thing we want to rely upon less, oil and
gas, is precisely the substance we need to convert to hydrogen to get
away from oil and gas. So much for eliminating the influence of the
Middle East!
There is a solution which is being adopted by many emerging growth
countries who are themselves afraid of Middle East oil dependency. They
are turning to nuclear energy, which is a relatively clean form of
energy production, and one that several people are considering the next
“green” energy supply. Now I know nuclear has become a four letter word
here in the US, especially after the Three-Mile Island incident, and
Chernobyl. However, I believe that the future of alternative energy, and
global energy independence lies in the use of uranium for power.
Globally, the demands on the power infrastructure are expected to
double over the next few decades. As we stand today, 31 new reactors are
under construction, and many more are being considered. Currently,
nuclear energy supplies some 15% of the world’s electric demands . . . and
while other alternative sources like solar and wind are growing, nothing
can deliver the same bang for the buck.
New emerging world economies are being set up to run on nuclear, and it
is being embraced by not only the governments but the people of these
countries. It is a steady supply of cheap inexhaustible energy that
will drive their economies over the next several decades.
Only four companies in the world supply new nuclear facilities, and
only a handful of countries have the uranium deposits needed to run these
reactors. The price of Uranium recently peaked on the world market,
and is still trading near record highs. The nuclear revolution is coming
. . . will you profit from it?
Category: Commodities
