The Death of Nuclear Power: The Five Global Energy Moves to Make Now

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Nuclear power was gaining a lot of momentum prior to the terrible disaster at Japan's Fukushima powerplant in March.


But since then, atomic energy has come under increased scrutiny and once again drawn the ire of environmentalists who were just warming up to its carbon-free emissions.

The German government's decision to close all of its existing nuclear reactors by 2022 shows that this shift in sentiment is gaining traction. And it increases the likelihood that the nuclear-powerplant building boom that had seemed at hand will be set back.

Without a doubt, this new reality will lead to global energy shortages and much-higher energy costs.

But for us as investors, the real issue is this: Which sectors will step up to alleviate the shortfall resulting from the inevitable disappearance of nuclear power?


Nuclear Power Political Considerations

As the recent development in Germany so clearly illustrates, one key difficulty about major energy decisions is that far too many are political in nature.

Too often, rational scientific analysis and cost-benefit analyses are ignored as hard-line environmentalists push their own agendas. Many of the environmentalists' objections are valid – at least as far as they go. But more and more, those objections seem to include every source of energy that actually works.

Windmills are objectionable because they look ugly and kill birds. Geothermal energy is objectionable because it causes earthquakes. Even solar energy is objectionable because of the vast acreages of land required to house the solar panels.

In a rational world, since the environmentalists raise loud and politically salient objections to everything (except technologies that are truly economically non-viable), they would be ignored. But in the world we live in, every government has an environment minister and many of the world's legislators depend on the environmental movement for financing and manpower.

In the case of nuclear power, the Fukushima disaster has strengthened the naysayers' credibility – if for no other reason than it exposed some of the industry's long-standing, but misguided beliefs about nuclear plants. That means we, as investors, must figure out which sources of energy will take up the slack as the use of nuclear power declines.

Replacing Nuclear Power

Figuring out which energy sources will offset the decline in nuclear power output requires three calculations:

  • First, a calculation of the cost of an energy source – as it now exists – in its economically most practicable uses. However, much as we may like solar power, we are not about to get solar-powered automobiles; likewise, oil-fueled power stations are inefficient on many grounds.
  • Second, a calculation that demonstrates whether the cost of that energy source is likely to increase or decline. With oil and hydro-electric power, for instance, the cost is likely to increase: The richest oil wells have been tapped and the best rivers have been dammed. With solar, on the other hand, the cost could decline, given how quickly the technology is advancing.
  • And third, an estimate that includes our best guess as to whether hard-line environmentalists will win or lose in their attempt to prevent its use.

On nuclear energy, the environmentalists appear to have won – at least for the time being. Their victory probably extends to fusion power, if that ever becomes economical.

Conversely, their battles against wind and solar power are futile, as there are no scary disaster scenarios involved.

I regard the German decision to abandon nuclear power as foolish, and it should make us very cautious when investing in large-scale German manufacturers, which may be made uncompetitive by excessive power costs. But as an investor, I think it opens up a number of profit opportunities.

After all, we have to get power from somewhere.

Actions To Take: Environmental concerns have chased investment away from nuclear energy – at least for the time being. For that reason the nuclear build-out that was just starting to gain momentum now is likely to stumble.

As investors, we must look for energy sources that will most likely replace lost nuclear power output. They include:

  • Shale gas.
  • Tar sands.
  • And solar energy.

Let's look at each of the three – and identify the best ways to play them.

Shale Gas: Potential damage to the environment caused by "fracking," which is the process by which shale gas is extracted, has not impeded this industry's growth. Natural gas has grown increasingly popular, as it is relatively cheap and clean, and readily abundant in the United States.

A recent study by the Massachusetts Institute of Technology (MIT) suggests that natural gas will provide 40% of U.S. energy needs in the future, up from 20% today. You might look at Chesapeake Energy Corp. (NYSE:CHK), the largest leaseholder in Pennsylvania's Marcellus Shale, which is trading at a reasonable 9.5 times projected 2012 earnings.

Tar Sands: The Athabasca tar sands in Canada contain more oil than the Middle East. And at an oil price of $100 per barrel, it is highly profitable to extract. Of course, extraction makes a huge mess of the local environment, but environmentalists seem to have lost that battle – reasonably enough, in view of the "energy security" implications of dependence on the Middle East. A play I like here is Cenovus Energy Inc. (NYSE: CVE). It's a purer Athabasca play than Suncor Energy Inc. (NYSE: SU), but it's currently pricey at 16.5 times projected 2012 earnings. Suncor's cheaper at only 11 times projected 2012 earnings – so take your pick.

Solar Energy: Of the many new energy sources that have received so much taxpayer money in the last five years, solar is the one with real potential. Unlike with wind farms, where there is almost no opportunity for massive technological improvement or cost reduction, there is great potential upside with solar power: The technology and economics of solar panels and their manufacture is improving steadily.

Indeed, solar power seems likely to be competitive as a source of electricity without subsidy sometime around 2016-2020, if energy prices stay high.

There are a number of ways to play this. You can select a solar-panel manufacturer like the Chinese JA Solar Holdings Co. Ltd. (Nasdaq ADR: JASO), or a rectifier producer like Power-One Inc. (Nasdaq: PWER). JA Solar is trading at a startling forward Price/Earnings (P/E) ratio of less than 5.0, mostly likely because of the Chinese accounting scandals, whereas Power-One is also cheap at less than seven times forward earnings and is U.S.-domiciled. Again, take your pick, depending on which risks you are comfortable with.

[Editor's Note: We'd like to share a secret with you.

Although it was Germany's coalition government that decided to phase out all nuclear power by 2022, it's no secret at all that the current global anti-nuclear movement was kicked off by the March 11 disaster in Japan.

But this is a secret.

You see, Japan is what investment experts like to refer to as an "inflection-point catalyst" - a force that can help turn the financial markets upside down.

Perhaps that doesn't surprise you.

But this will.

You see, there are six other "inflection-point catalysts" at work right now.

And they are going to turn the global markets ... upside down.

To have so many forces all pulling in one direction at one time is a real rarity. But it's happening now.

Investors who see and understand the forces at work have a chance to make, well, buckets of money (pardon our crassness). But what really concerns us is that investors who don't stand the chance of being slaughtered by global market forces that they may not even know exist.

Money Morning was created to serve, and to protect - to help our readers identify the best profit opportunities, while avoiding the buzzsaw-like risks that abound in our increasingly complex global financial markets. For that reason, we want to share our secret with you - in a free report called "Lambs to the Slaughter: What to do as These Seven Inflection Points Turn the Markets Upside Down." Just click here to get it - and then take the time to read it.

What you don't know can hurt you.]

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  1. Sam Rai | June 7, 2011

    I have read your above article,and very much surprised,you have not mentioned about power source from Thorium. I have read about Thorium and it would appear.it is readily available around the world. It is not that radioactive,only about 2%,compared to uranium,one ton of thorium would generate same energy as 3 tons of uranium and 3500 tons of coal.
    Atomic bombs cannot be produced from Thorium. I am not an expert on this matter,have picked up this information from internet.
    I would welcome your comments on this matter.

  2. marcel thevoz | June 7, 2011

    re nuclear power alternatives

    a nuclear power plant is nothing else than one of the most expensive steam
    engine there is ! why not focus on another way to generate steam ? as a
    way to replace old nuclear plants whose design (like the faulty GE design in the
    Fukishama plant system)

    why not generate steam from sea tides ? that would be an alternative
    to shale and tar sources which have their environmental drawbacks (connected
    to the impact on ground water for shale and the incredible use of water for tar)

    so lets unleash the power of engineering creativity and use the tides !

    I would also suggest to look into thermal energy down to 5000 feet if we use
    the appropriate transfer medium other than water.

    So what strikes me is to limit the alternatives to only shale tar and solar energy as if
    we cannot jump into the technologies of the future. If we could land on the moon
    we can certainly go a step further in that list.

  3. Dr. Conrad A. Lohutko | June 7, 2011

    REVOLUTION IN ELECTRIC POWER GENERATION

    Oil production has peaked. Nuclear power is dangerous. The age of fossil fuels is over, but companies and nations don’t want to admit it. So, what’s next?
    You are probably not aware that one of the greatest scientific transformations of all time is taking place in the field of production of electricity. Basically, it is now possible to produce more electricity from an advanced turbine generation system than is consumed in the process of electricity generation. I am the owner of the companies involved in this revolution. Many other countries, especially the US, Russia and China, are aware of these developments and have shown some interest because they have not been able to replicate the technology. However, they have dragged out negotiations for too long a period. OPEC, many Arab nations, oil companies, and the nuclear power industry are extremely determined to block this transformational technology and maintain the status quo.
    I had two billionaire American investors who were very interested in investing, Because of intensive lobbying efforts by the energy industry and Arab leaders, who are determined to stop technological progress, they decided against investing. One billionaire even had all of his debt notes called by Arab investors.
    The stakes are very high for the US and the rest of the world because without energy independence, the US and all other nations will continue to bleed money. Natural gas represents a partial alternative but will always be more expensive than the advanced power system.
    Incidentally, the engineering estimates for the production costs per KWH are only .0125 cents. This makes the new technology and its system the lowest cost producer. There is currently only a test system, number 14. It has proven the concept, but a production quality system still needs to be produced. A production quality system needs to be built with money from investors. The system is initially for the production of electricity, but may be adapted and eventually down-sized to power cars, trains, and boats. It is also a zero emission system, 100% clean, and non-polluting.
    As far as the issue of job creation is concerned, at the very worst there would be no negative impact in numbers. The new jobs would most likely involve higher level and paying skills.
    The concept for the system and the initial design work were from my father, Floryan A. Lohutko, who just happened to create the silicon wafer chip at Xerox and the pulse engine for secret US aircraft.
    This new technology is very real and has taken 30 years to develop. Can you see the need for a new Manhattan type program or a world-wide consortium? It would mean energy independence for all nations. Without energy independence, we will continue to be at the mercy of oil producing nations or dangerous nuclear power. Just count the cost.

    Conrad A. Lohutko, Ph.D.
    President,
    Sterling Enterprises, Inc.
    Agile Logistics Technology, LLC

  4. Alexander Treutler | June 7, 2011

    From the mid 20th century on, almost everything in America was built on the cheap.

    Cutting corners became the mantra, from nuclear power structures to the Boston tunnel.

    Battery acid and carcinogens were known deadly pathogens but GE dumped them all in the Hudson River because it was legal. The health dangers of asbestos were well known but nevertheless asbestos was used in the World Trade Center simply because it wasn’t banned at the time.

    This is the type of philosophy that destroys confidence; and rightfully invites the inevitable “blowback” which allows us to refocus, rather than to follow blindly.

    The nuclear industry, with all its dangers, cannot exist without government subsidies, from guarantees and tax breaks to waste storage. The evil government, so hated by right wing trolls has become essential – how bizarre.

    The vast acreage of land the author bemoans is a silly argument: have you ever criss-crossed thousands of miles of American deserts? There is nothing there, not even jobs. Solar would provide many thousands upon thousands of safe, permanent maintenance jobs that could not be shipped to China.

    The time has come to move on.

  5. Bill | June 7, 2011

    What are you thinking? No energy source for generating the electricity needed for growing energy needs is lower cost than nuclear. The current feelings about nuclear power plants will fade as soon as the projected increases in the cost of generating our energy from other sources become known. The location of the Japanese power plants was ill advised and shows again what happens when we let politicians make engineering decisions.

    Most nuclear plants were sited with earthquake fault zones taken into consideration. Most nuclear plants are not in areas where tsunamis are a possibility. Our aging nuclear power plants are nearing the end of extended life spans. We not only need new power plants to generate energy for increasing needs ( are we going to turn off our lights so we can charge our battery powered cars?) but we also need to look forward to replacing the existing fossil fuel plants.

    Solar and wind are nice, but they are part time. When the sun shines and the wind blows they are fine. Besides supplying power to users, they have to supply the energy to charge the batteries needed for when the sun don't shine and the wind doesn't blow.

    Nuclear is needed if we are to continue to enjoy the 24/7 electricity we in the United States are used to. The biggest problem that I see is the strong need for a solution to the spent radioactive materials generated. I know people want to just bury it under a mountain, but what is really needed is a secondary use, a way to recycle it. Then we would be home free.

  6. Robert Spoley | June 7, 2011

    Woops! Define nuclear. I think what you are refering to is radiation derived from either a uranium or plutonium source. Is it dangerous? Absolutely! Now try thorium. Without a neutron source the stuff is harmless and the reaction stops. It can' be made into a weapon of fission. Daughter elements have a very short half life. It is capable of generating a lot of heat to turn water to steam to run turbine/generator sets. Is this nuclear? Absolutely! Is it dangerous? Not to my knowledge. Why aren't we using it? From what I understand, the uranium/plutonium road was choosen during WWII so it could be "weaponized" vs. thorium which can't. We already have a huge amount of this stuff mined. It's cheap! Possibly usable in existing reactors. Please! Please! Please correct me where and if I am wrong!

  7. Peter Attwood | June 7, 2011

    The last comment on thorium reactors makes sense. Thorium can be used in molten salt reactors, which are quite safe, and which can even be used to eat up some high-level waste from the usual light water reactors now mostly in use. The technology is proven and has been around for over 50 years. Thallium-208 is generated along the way, which ruins their bomb-making potential – the main reason they haven't caught on, but to my mind that too is a plus.

  8. LoboSolo | June 7, 2011

    @Robert … It'll be a long time before the NRC approves a thorium reactor. If there is a reason that costs have spiraled out of control for building a nuclear plant in the US, it is the NRC.

  9. harold segelstad | June 7, 2011

    Back in 1976 I originated and directed Pacific Gas & Electric Co. Renewable Energy Program. The results were that solar THERMAL power plants were the most cost effective,quantitatively significant,dispatchable, and safe, of all renewable possibilities.If one were to deploy these plants on a 90 by 90 mile piece of Nevada desert one could generate all the electricity the nation needs at about 8 cents/kwhr. This is not a suggested plan,but an illustration of quantitative potential.
    Nuclear has not been and never will be economically attractive. Externalities costs or life cycle costing from uranium mining to raioactive waste disposal shows actual societal cost to be twice that claimed by industry.This is the valid issue,rather than safety. Government subsidies have greatly distorted actual costs.
    P.S. Your reccomendations of JASO and PWER are excellent. Harold Segelstad

  10. Di | June 7, 2011

    We are all thinking it is the 1900,s……….. Ever heard of TESLA .I am amazed that with all the technology and brilliant minds out there……besides those that work for NASA or the Government that this is a no brainer,these agencies have been experimenting AND using the technology for decades. Lets face it ….it is going to be very hard to make the government or energy companys want to move away from the current situation, mostly because the consumer is at the mercy of the oil companies, and the deep gouging that they have been permitted by our governments.Tesla invented free energy decades ago with the intent of having FREE energy for everyone.If we could turn greed into a power (Huh)…there would be tons of free energy to go around.Thanks

  11. Robert | June 7, 2011

    Solar power is responsible for all energy used on the planet, except for the minor contribution of conventional nuclear power. After more than six decades of development conventional nuclear has shown that it is not sustainable without huge subsidies, witness the limited liability insurance for accidents. When the fossil-fuel and nuclear power industries give up all of their subsidies, we will see that any number of solar-powered source will be more than competitive. Our children will look back, shake their heads and say "What were they thinking?!"

  12. Pieter | June 7, 2011

    Hi, I think that although there may be a lot of money to win on fossile energies we should not engage anymore in them as we define our own and our children's fate to the consequences of giving these old-aged forms of generating energy the green light to continue operating. Just like nuclear power has been proved to be a too risky energy source, fossile energy sources will finally worsen things at larger time scale.
    I would bet on solar energy – the sun keeps on shining the whole day, so it would be possible to chain solar factories across countries and continents so that electric power is always available, anywhere. This is an awesome concept and would require countries to work together and not fight wars to keep the energy flowing like nowadays.

  13. B Aware | June 7, 2011

    Google "Andrea Rossi Energy Catalyzer".

  14. Joyce Weis | June 8, 2011

    I have subscribed to MoneyMap Report and would like the article on Warrior Antibodies. There is no mention of that Maryland company in the latest June report. As a subscriber,
    should I be getting these articles? I hope so.

    Please send me a copy of the report so I can read more about PCD and the success ofthe
    small Maryland company.

    Thank you
    Joyce Weis

  15. Dr Gonzo Belchfire | June 9, 2011

    As for investments in forms of energy which will dethrone oil, I would look to the Chinese for investors. Certainly not the US. Status quo gotta go.

  16. fireofenergy | June 10, 2011

    Search LFTR which is a variant of the molten salt reactor.
    The liquid fluoride thorium reactor.
    Its benefits include no pressure and water at the core, will not meltdown (even if solar flares knock out the grid for months), is plenty available, spits out only 1% of the wastes which decay back down to safe as lead levels in ONLY 300 years, was demonstrated AND proven at ORNL and thus only needs a little bit of design issues to make it THE long term unlimited, cheap and clean energy solution!

  17. fallingman | June 12, 2011

    Death of nuclear power? Oh really? Tell it to the Chinese and the Indians.

  18. don koplen | June 12, 2011

    why hasn't the public heard discussions about Thorium reactors?

  19. jr | June 12, 2011

    My comments on the article and some of the reader comments are:

    1. Nothing has really been discussed about a supplementary technology needed for most of the alternative energy resources: batteries. One reader mentioned a novel idea for solar power by staging the solar collectors geographically around the world to follow the sun, or perhaps switch to collectors where the sun is shining and not covered with clouds. That might eliminate the need for batteries to store the energy, but it would require political decisions among countries to cooperate with one another. Would take time and maybe never happen…so…

    battery technology remains important and must be addressed also, with a lot of research to develop higher energy density batteries that can store more charge. Also, the new batteries must be safely and cheaply recyclable. To attempt to switch to solar, or wind technology immediately to replace fossil and nuclear is simply not doable without the battery technology to support it. When the cost/KW AND the equipment volume (Cu meters/KW) becomes affordable, then these technologies will emerge…but it will take more years of research.

    2. Tidal power will become very important as an alternative energy source, but is not discussed much yet. One of the readers commented before about using the tides to generate steam for power. I don't know how that would be done, but tidal power is very adaptable to turning underwater turbines that could generate electricity directly, much as a steam turbine does today. It requires the design of underwater turbines that would be highly reliable and requiring minimum maintenance. The tides move in and out 4-5 times a day, so strategic placement of these turbines along most any coastline could be a game changer for a long term energy resource. However, batteries would still be needed because at high tide and low tide, the tidal current is zero with maximum tidal current occurring halfway between high and low tides…hence the need for batteries to store energy to meet demands during low tidal current periods.

    I hope tidal power research becomes a higher priority because much of the technology to support that already exists, except for the batteries – as mentioned above. Tidal power is the ultimate "hydroelectric" power technology.

    3. The article makes the assumption that fusion energy would be rejected by environmentalists on the same grounds as nuclear (fission) energy. I can't agree. There is no radioactive waste created with fusion energy. What's not to like about that? Of course, it's not easy or it would have already been done, but we shouldn't reject that technology out of hand as this article has done.

    Thank you,
    jr

  20. George | June 13, 2011

    We have the biggest and safest nuclear reactor hanging above our heads untapped for the last 4.5 billion years that could 10,000 times cover the planet's needs, only 3-4 years away from grid price parity and we are still debating about what exactly?

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