Nuclear Power Investing
The Return of Nuclear Power!
300 tons a day.
That's how much radiated water has been flowing into the Pacific Ocean for two and half years now. And last week, we found out that there's another leak coming from a storage tank at Fukushima.
Alternative media sources actually picked up on this one weeks ago, but only recently has Tokyo Electric Power (TEPCO) come clean. So now the mainstream media is playing catch-up.
In any event, there's no doubt the Fukushima disaster has put the kibosh on nuclear power expansion in certain countries, like Germany and Switzerland, and has forced regulators to take more aggressive action against safety shortcomings.
You may remember just two months ago, when investigators seized documents and hard drives from the main headquarters of Korea Hydro & Nuclear Power Company...
According to prosecutors who ordered the raid, officials snagged documents that were connected to wrongdoings in supply components for nuclear power plants operating in the city of Busan. This is actually where the largest cluster of nuclear power plants can be found in South Korea. Apparently, the cables in question failed to meet the stringent standards required to withstand voltage and pressure changes. And it is suspected that management at Korea Hydro & Nuclear were involved.
Here in the U.S., to this day we still have nearly half of our fleet of nuclear reactors operating while being in full violation of fire safety regulations. And according to the Nuclear Regulatory Commission, the risk of reactor meltdown due to fire is estimated at about 50%.
Folks, this ain't reassuring. But this is something we must deal with when we choose to rely on nuclear power to keep the lights on.
Of course, this doesn't mean nuclear is necessarily unsafe.
No form of power production is environmentally benign. Although, as we've seen in Fukushima, the health concerns and environmental destruction resulting from nuclear meltdowns are much more severe than those from natural gas explosions or falling wind turbines.
But Fukushima was not a nuclear crisis because the process of nuclear power generation is inherently unsafe...
It was a crisis because of human error. Lax policies, sub-par safety procedures, and poor logistical planning were to blame, not the splitting of isotopes.
And the truth is because of the Fukushima disaster, we could soon be looking at some new opportunities in next-generation nuclear technologies.
In fact, according to the most recent issue of MIT's Technology Review, a new type of reactor in development could not only be safer than existing reactors and reduce nuclear waste by 80%, but it could also cut the cost of nuclear power by as much as 40%.
This is a pretty big deal, considering nuclear simply can't compete with natural gas (at current levels). But according to the Energy Information Administration, if the cost of nuclear-based electricity can be cut by 40%, new nuclear plants would be economically competitive with natural gas.
This is good news for nuclear power advocates — and great news for a company called General Atomics.
Smaller, Safer, Better
General Atomics is in everything from nuclear fuel cycle technologies to aircraft surveillance systems. But it's the company's new nuclear reactor design that's getting a lot of attention right now from the Department of Energy, which is rumored to be considering giving General Atomics a few million bucks for development costs, as the design offers the potential of a much higher level of safety compared to what's in use today.
MIT analyst Kevin Bullis explains:
In the case of a power failure, it is designed to shut down and cool off without the need to continuously pump in coolant. This is accomplished in part by using ceramics that can withstand very high temperatures without melting.
Bullis goes on to write:
To reduce costs, General Atomics is making the reactor smaller than conventional ones. Several other manufacturers are taking the same approach, but this design goes further by substantially increasing the efficiency of the power plant. Using helium as a coolant instead of water allows the plant to operate at higher temperatures, and the reactor also incorporates a new gas turbine for producing electricity.
Thanks to these changes, the technology can generate more power from a given amount of heat produced in the reactor core. While conventional reactors convert 32% of the energy in heat to electricity, this one is expected to convert 53%.
Of course, there are still hurdles. After all, helium-cooled reactors aren't actually new, and early models showed to have serious technical issues. But it's still worth keeping an eye on.
In the meantime, nuclear power in the United States continues to pose absolutely no threat to the country's natural gas boom. And investors would be wise to focus on that instead of new nuclear designs that, in the most optimistic cases, are still more than a decade away.
I remain bullish on natural gas infrastructure plays, like Kinder Morgan (NYSE: KMP) and Spectra Energy Corp. (NYSE: SE). And of course, anything coming out of the Bakken is worth a serious look.
Also, pay close attention to any new developments in the Monterey Shale...
Although environmentalists continue to fight tirelessly against the fracking of this massive shale formation, the payoff for California's economy may be too great for lawmakers to ignore. After all, we're talking about the potential of nearly $25 billion in state and local taxes by 2020 — and about two million jobs.
Bottom line: This is a massive opportunity for producers. The Monterey Shale holds more than 15 billion barrels of recoverable crude. That's about two-thirds of the nation's shale reserves.
My friends, that stuff is not going to remain untouched much longer, and you would be wise to get in on the ground floor and stake your claim to the Monterey Shale today.
Mark my words: This is going to happen. And if you get in early, you could make an absolute fortune.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor''s page.