For decades, nuclear power has been seen as a problematic investment by investors, regulators, utilities and others along the value chain. We believe that this attitude has largely changed.
Nuclear is now presented as a 'solution' to the interlinked problems of electricity demand growth and climate change, while future projected electricity demand growth (along with ideally replacing existing fossil fuel generation) could be optimally met by low carbon solutions.
Energy security, in terms of replacing the need to import fossil fuels, is also a factor (although there are significant geopolitical risks in the uranium supply chain).
In connection with COP28, we have noted the importance of the announcement of a "global aspirational target of tripling nuclear power capacity by 2050" (albeit so far rather symbolic).
Nuclear power is a proven low-carbon energy source and can deliver large amounts of baseload power: 1 GW of nuclear power provides significantly more electricity than 1 GW of installed capacity from any other source, whereas renewables are intermittent, require grid investment/adaptation, have a lower utilization factor and typically require more land.
We see two theoretical catalysts that could significantly accelerate the development of nuclear capacity - large-scale, coordinated government support along the lines of what we are currently seeing in China; and perhaps in combination, the development of AI/data centers.
New nuclear capacity additions are forecast to range from approximately 58-86 GW by 2030, with more than half of these additions coming from China. By comparison, France's entire operational nuclear fleet is currently approximately 61 GW.
The potential of uranium in the era of the datacenter boom and AI: The future of nuclear power
Within our FUTURO portfolio, we focus on strategic investments in Centrus Energy and URNM (Sprott Uranium Miners ETF) because we believe in the huge potential of uranium as a key element of the future energy sector. The reasons for our optimism are rooted in the growing demand for electricity, driven by the explosive growth of data centers and artificial intelligence (AI). These two sectors are closely linked - AI algorithms require massive computing capacity, which is what data centres provide. And these centres have enormous energy demands that cannot be met in the long term by renewable sources alone.
This is where nuclear power comes in. While opinions on nuclear power may vary, it is clear to us that it is a reliable and efficient source of low-emission energy. Nuclear power provides stability and the ability to meet a large part of our energy needs, which is essential not only for data centres but also for the advanced technologies that will shape the future, including robotics and AI.
In addition to technological developments, it is also crucial to monitor geopolitical and economic signals. The United States is increasingly focused on supporting the domestic uranium mining and nuclear industries. This trend is supported not only by legislative action, but also by increased investment in infrastructure. Centrus Energy is one of those benefiting greatly from this policy, and other governments such as France and China are also moving to expand nuclear power.
While the world focuses on renewables, it is clear to us that nuclear energy remains a key element for a stable and reliable energy supply in the future. And given the rapid growth of AI and data centres, it is inevitable that demand for this stable form of energy will continue to rise.