Uranium exports: bonanza or bust?

Note: The usual sitewide ban on discussions of nuclear power is lifted, for this post only

Queensland’s ban on uranium mining was lifted last year, and a committee is due to report soon on the conditions under which mining might be restarted. As recently as a year ago, the prospects for uranium exports looked bright, despite the Fukushima disaster. In March last year, the Bureau of Resource and Energy Economics predicted “prices close to $100 a pound between now and 2015, rising to $124 in 2016 and $141.6 in 2017, in constant 2011-12 Australian dollars.”

In reality, however, the price has fallen to $US43/pound in early 2013 and looks set to decline further. Looking ahead, the future of nuclear power looks bleaker than at any time since the industry began. That’s bad news for the global climate – cheap and safe nuclear power would be the ideal replacement for coal if it could be delivered – but there is no benefit in denying reality

It’s now clear that the “nuclear renaissance” is dead in the US. There are four plants currently under construction, behind time and over budget as usual. No more are planned, and with two plants already closing, it seems clear that nuclear power capacity is going to decline. It’s fashionable to blame cheap gas for this, but that hasn’t stopped huge growth in wind and solar, neither of which is as heavily subsidized as nuclear. It’s even more silly to blame the opponents of nuclear power, who have been both quiet and politically marginal in the US, as is evidence by the bipartisan support for nuclear loan guarantees.[1]

The situation in Europe, and of course in Japan, is even worse. Again, and despite the absence of cheap gas, the economics simply don’t stack up. George Monbiot, who famously became an advocate of nuclear power *after* Fukushima, has reluctantly concluded that “for now, the facts are against me”.

The great hope for the future of nuclear power is, of course, China[2]. Given its rapid growth, China is in a position to place a bet on every horse in the energy race, including nuclear. But, while its plans for renewables have been steadily upgraded, China’s nuclear plans were scaled back substantially after Fukushima.

It seems likely that, with higher safety standards, the Chinese nuclear program (until now characterized by on-time and on-budget delivery, but probably with compromised safety) will start to experience construction costs and delays comparable to those that have been the uniform experience of the developed world. If not, there is still a chance for nuclear power in the future. But the establishment of a track record of safe construction and operation in China will take at least a decade, which means that any global renaissance won’t start delivering benefits until after 2030.

Most of these negative outcomes could have been, and were, predicted on the basis of 20th century experience with nuclear power. In this context, it’s striking that rightwingers who want to excuse anti-science attitudes on their side so often point to the anti-nuclear stance of many (not all) on the left as an example of leftwing anti-science.

The opponents of nuclear power have been proved right on the big question of whether cheap, safe and clean nuclear power can be delivered in developed countries. Perhaps some were right for the wrong reasons. But on this issue, as on so many others, the clearest examples of magical (and therefore anti-scientific) thinking are found among those rightwingers who continue to insist, against all the evidence, that nuclear power represents an obvious solution to our problems, and that the only obstacle to its success is the unreasonable opposition of environmentalist.

Coming back to the original quesiont, the price of uranium boomed in the early 2000s, after supplies derived from nuclear stockpiles were exhausted. But the current decline looks set to continue for a long time. Unless new mines are profitable at prices of $40/tonne or less, they will probably be uneconomic.

fn1. Of course, news like this doesn’t help (H/T David Adamson).

fn2. BREE also mentions India and Russia. But given the long history of lax construction standards in both countries (a problem China is at least addressing), it seems unlikely that either of these countries will serve as a model, or that they can manage a rapid expansion without another disaster, perhaps not on the scale of Chernobyl or Fukushima, but enough to derail the whole process.

173 thoughts on “Uranium exports: bonanza or bust?

  1. quokka, I think what Prof Q is getting at is that right-wingers have consistently used nuclear as cover for doing nothing about climate change.

  2. @John Quiggin

    It’s fashionable to blame cheap gas for this, but that hasn’t stopped huge growth in wind and solar, neither of which is as heavily subsidized as nuclear.

    The US Congressional Budget Office does not agree with you about subsidies in it’s March 2012 report “Federal Financial Support for the Development and Production of Fuels and Energy Technologies”

    Figure 1 shows the recipients of tax preference support by technology since 1977. Prior to around 2007, fossil fuels dominated, and after about 2007, renewables dominated. In comparison nuclear has, for decades, received almost nothing. In terms of subsidy per unit of energy produced, it sure looks like nuclear drew the short straw.

    In terms of direct DOE support for R&D etc, a paper from the US Congressional Research Service titled “Renewable Energy R&D Funding History: A Comparison with Funding for Nuclear Energy, Fossil Energy, and Energy Efficiency R&D” gives the following figures in 2012 dollars for the period 1978-2012

    Nuclear Energy 46.8 billion
    Fossil Energy 32.2 billion
    Renewable Energy 20.9
    Energy Efficiency 18.6

    Yes, nuclear has received the most, but far less per unit energy produced than renewables and just $1.3 billion average per year over the last 35 years. That is a pittance compared to current renewables subsidies which in 2011 according to the first reference were about $15 billion in 2011 alone in tax preferences.

    The claims about huge nuclear subsidies look more than a little shaky and more like a meme than fact.

  3. David Irving (no relation) :
    quokka, I think what Prof Q is getting at is that right-wingers have consistently used nuclear as cover for doing nothing about climate change.

    I dunno about that. The real loonies deny the existence of the problems of climate change, so they don’t need nuclear or anything else to “solve” it.

  4. While thorium is cheaper than uranium, fuel is only a tiny portion of the current cost of nuclear power and is likely to reduce further due to lack of demand. The cost of electricity from thorium reactors is going to be about the same as from uranium reactors, but this will only be after the very large development costs for thorium reactors are paid.

    Ronald – thorium is more abundant to uranium but this isn’t the prime selling point of a molten salt thorium reactor. The perceived advantage is a huge reduction in construction cost. For example the containment building is around 1000th the size of the containment building on a light water reactor. That’s a lot of concrete that does not need to be paid for during construction. And there are many other savings to be had.

  5. I think it is more true to say that sections of the right use nuclear power as a stalking horse the talking point goes something like this:

    “If you climate alarmists were sincere in your desire to save the world from the alleged (though apocryphal) effects of AGW then you would be all unfavourable of using cheap, renewable, non-polluting nuclear power. But you don’t, you pack of latte sucking phoney pseudos. If NASCAR wasn’t on Foxtel in my Home Theatre, I’d drive to Brunswick in my SUV with my beloved Bushmaster …”

  6. OK, I left a loophole and TerjeP exploited it. By “commercial” I meant coverage against the costs of foreseeable consequences of failure. It is notorious that the foreseeable costs of consequences of the failure of a nuclear facility are so huge that these costs are not covered by commercial insurance companies and are in the US indemnified by the provisions of the Price Anderson Act (1957).

    I’m not here to defend against the Price Anderson act. However the reality is that no industry can insure agains all foreseeable consequences.

  7. And no industry apart from nuclear power generation has a foreseeable consequences of failure as immediately and catastrophically damaging to the assets and interests of the neighbours of a plant. Indeed, the concept of neighbour has to expand almost to the scale of tautology in the case of nuclear plants.

    The framers of the Price Anderson Act understood this perfectly. And the largest US insurance companies concurred in this assessment when they explained to the Eisenhower Administration why they refused to take on the risk.

  8. John’s right – well-designed and well-managed reactors are very safe but very expensive, and the only way they can be made less expensive is Soviet attitudes to design and management. True, different technological apporoaches just might change that, but I wouldn’t put money on it. The proof a a technology’s viability is in the commercial pudding. Most of these newer technologies (eg thorium) have been kicked around for a long while now yet no-one has yet managed to commercialise them.

    Thank goodness market mechanisms usually eventually work – lo and behold, once natural gas started to get expensive it was a mere couple of decades until someone worked out a way to get lots more cheaply, and luckily in a relatively environmentally friendly way too (certainly compared with open cut coal and with tar sands). Given that natural gas is a direct and versatile substitute for both coal and oil and its emission intensity is much less, this is probably a bigger boon for climate control than either nuclear power or cheaper solar panels will ever be.

    It gives more support for the idea that far the most effective way in the long run to limit carbon emissions is just to price them properly and let the market do the rest.

  9. Katz :
    And no industry apart from nuclear power generation has a foreseeable consequences of failure as immediately and catastrophically damaging to the assets and interests of the neighbours of a plant. Indeed, the concept of neighbour has to expand almost to the scale of tautology in the case of nuclear plants.

    Sorry, just not true. Ever heard of Bhopal, thousands dead and many thousands with permanent damage to their health. Or Banqiao dam disaster with deaths estimated at 171,000. Or ever so clean and safe gas in the San Juanico disaster with at least 500 dead and ten times that many badly burned.

    Number killed by the Fukushima nuclear accident: zero. Number who received medical treatment for radiation dose: two or three workers who were not wearing the correct protective boots while working in a turbine hall flooded with radioactive water. Symptoms – similar to severe sunburn with no long term adverse effects expected.

    Want to get into a debate about the ethics of inconvenience and possible hardship of evacuation rather than death?

    By the way, it is estimated than 40-80 million people have been forced from their homes over the history of hydro power. Many received little or no recompense.

    As for geographical boundaries on possible harm, the only boundaries to the harm of carbon pollution are planetary.

  10. The question of indemnity for major accidents is a bit like guaranteed loan defaults .. the leading example is not nuclear. In Australia the biggest get-of-jail card will be for oil major Chevron after they have sequestered 120 Mt of CO2 in brine aquifers under Barrow Island WA. That CO2 will be from unburnt natural gas, separated by zeolite sieve. If that CO2 rushes up to the surface a la Lake Nyos, Cameroon the combined WA and Australian governments will pay all damages.

    If all the CO2 escapes to the surface the carbon tax would be 120m X $23 = $2.76 bn. I’d say a precedent has been set for an Australian version of Price Anderson. That other contingent liability of reactor site decommissioning is seldom discussed these days perhaps because it is under control. Electricite de France for example has $52 bn set aside for this purpose.

  11. Tell it to State Farm, Quokka. By your figuring, insurance companies are denying themselves a mountain of profits.

    As I said, one of my major objections to nukes would dissipate if only those insurance companies grew a set.

  12. Terjp, a molten salt thorium reactor and a molten salt uranium reactor is basically the same thing. And both have the drawback of not exisiting. If you want to invest your money in building a prototype of either sort, and if that works out then build a commercial reactor prototype, and if that works out then a commercial reactor, go right ahead. But I think I’d rather keep my money in my pants.

  13. Katz :
    Tell it to State Farm, Quokka. By your figuring, insurance companies are denying themselves a mountain of profits.
    As I said, one of my major objections to nukes would dissipate if only those insurance companies grew a set.

    You really have no sense of proportion do you? The state is always and without exception the insurer of last resort. There is absolutely nothing wrong with that in principle if the social benefits outweigh the potential, though mostly not actual, cost. Deny that and you might as well join the tea party types.

    Jeez, the state effectively provides health insurance in Australia. What is the problem with that?

  14. Well, there we have it. Statists and libertarians locked in a lustful embrace indulging in mutual nuclear frottage.

    Who wants pick of the litter?

  15. Ronald Brak :
    Terjp, a molten salt thorium reactor and a molten salt uranium reactor is basically the same thing. And both have the drawback of not exisiting. If you want to invest your money in building a prototype of either sort, and if that works out then build a commercial reactor prototype, and if that works out then a commercial reactor, go right ahead. But I think I’d rather keep my money in my pants.

    No real argument with that. Although such a reactor did operate for several years at the end of the sixties it was never commercialised. The Chinese now have a major team working on developing such a reactor for commercial use and several private interests are also working on it. But yes the proof is in the pudding. My main concern would be that the state remove perverse barriers such as some of the inapplicable licensing issues, and that potential investors be at least aware of the technological possibility.

    Given an MSR the virtue of thorium over uranium is I accept more marginal. But thorium still seems to make more sense given the reduced refinement requirements.

  16. Quokka appears to be incapable of making an intelligent distinction between indemnifying/underwriting nuclear power and nationalised health care.

    It’s simple Quokka. Private health insurers would be happy to offer insurance to all for a price. Private nuclear insurers don’t exist because they don’t know how to cost their product.

    That radical difference shouldn’t be too difficult to understand.

  17. @derrida derider
    I don’t know why you think cheap solar won’t contribute meaningfully to carbon abatement. Right now it doesn’t, because it’s not clearly cheaper than alternative sources of electricity. Once the price drops sufficiently though, everyone who’s legally allowed to is going to install a rooftop system. Once that happens, central generators won’t make any money during the day.

  18. Katz :
    Well, there we have it. Statists and libertarians locked in a lustful embrace indulging in mutual nuclear frottage.
    Who wants pick of the litter?

    I am a leftist if you don’t mind. The use of the term “statist” is a device use by extreme right wing anarchists (otherwise known as libertarians) in an attempt to remove the “political” from political economy, to remove class from society in the dominant ideology.

    If you want to go along with that, do so, but put your cards on the table. If you do not want to go along with that then adopt a principled approach to the climate/energy problem and not getting into bed with all and sundry in the crude against the nuclear “evil”.

  19. @quokka

    Whatever the merits of the Decc paper, and IIRC they have been disputed, there are a couple of points that demand to be brought forward.

    From an investor’s point of view, an investment in nuclear must surmount a higher hurdle rate of return than other energy investments because it is at greater risk of delays of unknowable length.

    Decc may or may not have taken this into account in their LCOE estimates, but there is a further factor which Decc almost certainly has not priced in. When demand is flat and expected to fall, the hurdle rate must rise further still for “lumpy”, long lead-time, long-lived investments such as nuclear and coal.

    When demand is growing, a potential investor can be assured that the plant will produce at capacity sooner or later, and do so for most of its life, thus earning back the investment.

    When demand is shrinking, this assurance can no longer be given – a period of high prices may accelerate efficiency investment by consumers. The rate of efficiency improvement is anyway quite variable, and it may accelerate of its own accord during the life of the plant. Either way, the profitability of the investment is more doubtful than when demand is rising.

    (Since we have had continuous population growth for eight generations, and energy demand growth for almost as long, we have forgotten that we have had this rising tide under our boats. It’s just taken for granted, part of the invisible background of investment decisions. Now the tide is on the ebb in the west, but I don’t think many have noticed. By 2030, it will be ebbing in China also.)

    I doubt that many countries will foster nuclear if the industry tries to force “take or pay” agreements on them. Especially democratic countries.

  20. @Greg vP

    This whole argument about reduced electricity (as distinct from energy) demand falls rather flat on it’s face if one considers electricity demand in the context of getting rid of fossil fuels in heating and transport. And yes, they’ve ultimately got to go if there is to be a good chance of a safe climate. Forward thinking planners will be considering this rather than just touting the magic of the market.

    I doubt that many countries will foster nuclear if the industry tries to force “take or pay” agreements on them. Especially democratic countries.

    Unlike renewables of course. Oh wait…..

    Any capital intensive generation technology is subject to the economic risk of not running at it’s full possible load factor for whatever reason. Renewables just as much as nuclear and possibly more so. This particular argument leads to gas.

  21. It’s simple Quokka. Private health insurers would be happy to offer insurance to all for a price. Private nuclear insurers don’t exist because they don’t know how to cost their product.

    It’s been a while since I looked at my private health insurance but from memory nearly every type of claim I could make had a defined limit. So yes most people can get health insurance but it isn’t unlimited health insurance.

    As for pricing nuclear insurance the claim that it can’t be done is fanciful because it is done. But like health insurance there are limitations on how much can be claimed for any incident.

  22. 1. The government doesn’t underwrite the gap between the agreed limit on your medical insurance and what you pay. You pay the rest. the taxpayer is excused from paying your gap.

    2. Should you wish, you are at liberty to negotiate with your insurance company any level of coverage you may desire. The government does not set an upper limit on what your medical insurance may pay. As a consumer of medical insurance, you decide whether the coverage is worth paying. Otherwise you can self insure. I’m surprised that a self-proclaimed libertarian cannot perceive the difference between a commercial agreement entered into by two parties and a government-imposed limit that vitiates remedies at law in the event of a catastrophe.

    I recommend JR’s cited article as an accurate statement of the effects of the Price Anderson Act.

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