Other Energy - Natural Gas, Coal, Nuclear (Uranium), and Renewables
Power Generation Costs (cents/kWh) and "Energy Return on Energy Invested" for Various Energy Sources in 2008
|Power Source||Fixed Costs||Variable Costs||Total Costs||EROEI|
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Natural gas is a lot like oil in gas form, but with some key differences. Both help power the world, be it through fueling transportation, electricity generation or residential/industrial heating. Both pollute the world, but natural gas is much cleaner - per unit of energy its combustion produces 30% less carbon dioxide than oil, and about 45% less carbon dioxide than coal. Natural gas is also more abundant: at constant levels of production, the worlds proven supply of natural gas will last 65 years, higher than oil's 41 years.
Like oil, however, most of that supply rests outside US borders (96.7% for natural gas). Until the middle of 2008, natural gas prices were skyrocketing, driven by high oil prices, stabilizing or declining gas reserves near high-consuming countries, (like the U.S.), concerns over greenhouse gas emissions, and a general run-up in fuel prices. The financial crisis of 2008 started a global economic slowdown and excessive Nat Gas supply that have resulted in prices crashing from almost $14 mid-2008 to under $2 as of the middle of April 2012.
Natural Gas futures contracts for North America are traded on the NYMEX under ticker symbol NG for delivery every month of the year.
What is Natural Gas
Natural gas is a combustible mixture of hydrocarbon gases. In its purest form, natural gas is almost 100% methane. Natural gas is colourless, shapeless, and odourless in its pure form. As a precautionary measure, mercaptan is added to natural gas before it is delivered to the end-user so that it can be smelled in case of leaks.
|Typical Composition of Natural Gas||Amount|
|Carbon Dioxide (CO2)||0-8%|
|Hydrogen Sulphide (H2S)||0-5%|
|Rare Gases||A, He, Ne, Xe (trace)|
Who Benefits from Rising Natural Gas Prices
The oil and gas majors all represent investments to play natural gas prices, including Exxon Mobil (NYSE: XOM), BP (NYSE: BP), Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP), Total S.A. (NYSE: TOT), and Royal Dutch Shell (NYSE: RDS.A). Other large oil and gas companies include Lukoil (OTC: LUKOY), ENI S.p.A (NYSE: E), Repsol YPF S.A. (OTC: REPYY)(OTC: REPYF), and SINOPEC Shangai Petrochemical Company (NYSE: SNP)(NYSE: SHI). Other companies that stand to gain from a rise in natural gas prices include:
- NiSource (NYSE: NI) owns the largest natural gas pipeline in the U.S. through a subsidiary, Columbia Gas Transmission. NiSource serves nearly 3 million customers along the Eastern corridor, and provides services across the natural gas value chain, including storage, transmission, distribution, and marketing.
- Dominion Resources (NYSE: D) also a large player in nuclear energy, owns North America's largest natural gas storage system.
- Sempra Energy (NYSE: SRE) offers an interesting play by combining a utility company, which provides natural gas to 20+ million customers in Central and Southern California, with a natural gas storage, marketing, and transportation business. Sempra also owns and operates a series of liquid natural gas assets and pipelines throughout North America.
- EnCana (NYSE: ECA)(TSX: ECA) has focused on unconventional natural gas and oil sands exploration and development. Unconventional resource plays show small recoverable reserves on initial assessments, but have the potential for huge returns if new extraction technologies can be successfully developed, and if prices are high enough to make the required investment worthwhile.
- Cabot Oil & Gas (NYSE: COG) owns both conventional and unconventional onshore natural gas properties in North America.
- Patterson-UTI Energy (NASDAQ: PTEN) provides natural gas companies with contract drilling services. As the price of natural gas increases, demand for PTEN's services also increases because the sale of natural gas becomes more profitable.
- Gazprom (OTC: GZPFY)(OTC: OGZPY) is the largest extractor of natural gas in the world. Gazprom owns more than 75% of Russian and most of eastern Europe's natural gas reserves.
Who Loses from Rising Natural Gas Prices
- Electric utilities who don't own their own sources of production are especially exposed to increased natural gas prices. As a result, where possible, electric utilities are vertically integrating, owning transmission assets at the very least, and often exploration and production assets as well. When prices are rising, utilities suffer from shrinking margins, as there is a delay between the time prices start to rise and the time regulators decide to raise rates. Gas utilities include Alliant Energy (NYSE: LNT), AGL Resources (NYSE: GAS), Atmos Energy (NYSE: ATO), Energen (NYSE: EGN), Equitable Resources (now called EQT)(NYSE: EQT), National Fuel Gas Company (NYSE: NFG), ONEOK (NYSE: OKE), Sempra Energy (NYSE: SRE), Southern Union Company (NYSE: SUG), and National Grid Transco (NYSE: NGG).
- Liquefied Natural Gas (LNG) is the big disruptor in this market, and could change the landscape of companies who benefit from natural gas. LNG is natural gas that has been liquefied, making it easy to store and transport. Those with large asset bases in Texas and Louisiana, notably Exxon Mobil (NYSE: XOM) and BP (NYSE: BP), would face increased competition from overseas competitors in Russia and the Middle East in the event that LNG technology becomes cheaper and/or achieves some economies of scale in the U.S. This would also reduce the value of pipeline assets owned by the likes of pure-play pipeline companies such as Kinder Morgan (NYSE: KMI). Companies with LNG terminals, or in the process of planning or constructing LNG terminals include: The Korea Gas Corporation (KOR: A036460), The Tokyo Electric Power Company (OTC: TKECF), Enagas S.A. (OTC: ENGGF), Chubu Electric Power Co. (OTC: CHUEF), Sonatrach, Royal Dutch Shell (NYSE: RDS.A), Osaka Gas Company (OTC: OSGSF), Qatar Petroleum, Petroliam Nasional Berhad, and Tokyo Gas Co. (OTC: TKGSF)(OTC: TKGSY), Sempra Energy (NYSE: SRE), Total S.A. (NYSE: TOT), El Paso (acquired by Kinder Morgan (KMI) May 2012)(NYSE: EP), Equitable Resources (now called EQT)(NYSE: EQT) and Southern Union Company (NYSE: SUG).
Economics of Natural Gas
Historically, the natural gas industry has looked a lot like the electricity industry - a natural monopoly (due to the high capital costs of transporting and difficulty in storing natural gas), heavily regulated at both the wholesale and retail levels. However, unlike the electricity industry, deregulation has been a boon to the natural gas industry, encouraging innovation and reliability of supply.
Natural gas raw fuel costs account for about 60% of final costs, while transmission and distribution costs account for the remaining 40%. The predominant method of transportation in North America is via natural gas pipelines. An increasingly popular method of transport, and one likely to continue to gain traction as the U.S. finds itself importing more natural gas from sources outside Canada, is Liquefied Natural Gas (LNG), which enables gas to be shipped overseas in tankers.
Gas storage also offers an opportunity to reduce costs. Natural gas prices are typically seasonal, peaking in the winter months and hitting lows in the summer months, when heating needs are least. Gas can be stored in depleted natural gas/oil fields or underground aquifers when abundant and prices are low, and withdrawn when scarce and prices are high.
Energy Equivalence and the Oil/Gas Ratio
A barrel of oil contains roughly 6 BTUs of energy equivalence. In theory, when the oil/gas ratio is above 6, there is an arbitrage opportunity available from purchasing gas and selling it when prices revert to the energy equivalence value. In practice, both commodities trade via future contracts and "time", plus everything from availability to environmental to geopolitical concerns, has an effect on prices that can remain skewed for long periods.
For example, in the summer of 2008 both oil and nat gas peaked on the NYMEX at around $147/barrel for WTI oil and $14/MMBtu for nat gas. This may have seemed like an arbitrage opportunity to Sell-Oil and Buy-Nat Gas as the energy equivalency ratio was high at 10.5. However, almost four years later as of June 18, 2012, oil is trading at $84/barrel with nat gas at only $2.47, a ratio of 34. Earlier in 2012 this ratio was even higher at over 55 as oil approached $110/barrel and nat gas prices briefly breached below the $2 mark.
Drivers of Natural Gas Pricing
Oil and natural gas are substitutes for many end-users, especially industrial and transport consumers. Typically, exploration and production of natural gas increases as oil prices rise. However, the US fulfills more than 65% of its oil needs from imports, triple that of natural gas, changing the supply/demand fundamentals between the two sources of energy.
Oil prices are more dependent on rising demand internationally, especially in countries like India and China, while natural gas prices are more dependent on rising domestic demand. This is why oil prices can remain high even as natural gas prices fall. The 2008 Financial Crisis has caused reductions in natural gas drilling and production, however, prices should bounce back rapidly once demand starts to increase, as there will be a lag between the time demand starts to rise and the time enough rigs are in place for supply to catch up.
Ethanol mandates around the world have driven up demand for corn-based fuel (cellulosic ethanol). Ethanol is distilled in refineries that use gas boilers, with a 50-million-gallon-per-year ethanol plant using 5 billion cubic feet of natural gas. The U.S. alone is set to build corn-based ethanol production to 15 billion gallons per year by 2022. It's ironic how ethanol demand partly drives nat gas demand!
Severe weather can affect nat gas prices, from extreme temperature spells that increase heating and air conditioning demand, to fears of bad hurricanes like Katrina in August 2005, that cause supply disruptions. The U.S. is particularly vulnerable, since approximately one third of domestic production of natural gas resides in Louisiana and Texas, where hurricanes are likely to land.
Is Nat Gas Our Energy Independence Solution, to Imported Oil and OPEC?
In late 2008 a major change occurred in the global energy industry when the previously informal association of countries in the GECF "Gas Exporting Countries Forum" transitioned to a more formal status by adopting a formal charter and opening offices in Doha, Qatar. The GECF is comprised of 15 member countries and control 75% of the world's natural gas reserves. Russia is the leading member and is the world's largest producer of natural gas, while other members include Iran and Qatar, which hold the world's third largest and fourth largest reserves respectively.
Energy industry and political analysts are probing the question of whether the GECF can or will function as a "cartel" for natural gas and thus significantly influence global energy markets. The GECF sounds a lot like another OPEC!
What about Fracking and Shale Gas?
Hydraulic fracturing is the propagation of fractures in a rock layer caused by the presence of a pressurized fluid. Some hydraulic fractures form naturally, as in the case of veins or dikes, and are a means by which gas and petroleum from source rocks may migrate to reservoir rocks. Induced hydraulic fracturing or hydrofracking, commonly known as fracking, is a technique used to release petroleum, natural gas (including shale gas, tight gas and coal seam gas), or other substances for extraction. This type of fracturing creates fractures from a wellbore drilled into reservoir rock formations.
The first use of hydraulic fracturing was in 1947, though the fracking technique which made the shale gas extraction economical was first used in 1997 in the Barnett Shale in Texas. The energy from the injection of a highly-pressurized fracking fluid creates new channels in the rock which can increase the extraction rates and ultimate recovery of fossil fuels.
In North America, shale reservoirs such as the Bakken, Barnett, Montney, Haynesville, Marcellus, and most recently the Eagle Ford, Niobrara and Utica shales are drilled, completed and fractured using horizontal wellbores. These completion techniques may allow for more than 30 stages to be pumped into the horizontal section of a single well if required, which is far more than would typically be pumped into a vertical well.
Schematic depiction of shale gas hydraulic fracturing, showing main possible environmental effects
Hydraulic fracturing has been seen as one key method of extracting unconventional oil and gas resources. According to the International Energy Agency, the remaining technically recoverable resources of shale gas are estimated to amount to 208 trillion cubic metres (7.3 quadrillion cubic feet), tight gas to 76 trillion cubic metres (2.7 quadrillion cubic feet), and coalbed methane to 47 trillion cubic metres (1.7 quadrillion cubic feet).
Proponents of fracking point to the vast amounts of formerly inaccessible hydrocarbons the process can extract. Detractors point to potential environmental impacts, including contamination of ground water, risks to air quality, the migration of gases and hydraulic fracturing chemicals to the surface, surface contamination from spills and flowback and the health effects of these. For these reasons hydraulic fracturing has come under scrutiny internationally, with some countries suspending or even banning it.
Coal is primarily burned for heat and is the largest fuel source (40% of worldwide energy) for the generation of electricity. World coal consumption was about 6.75 billion short tons in 2006 and is expected to increase 48% to 9.98 billion short tons by 2030. The USA consumes about 14% of the world total, using 90% of it for generation of electricity. 68.7% of China's electricity comes from coal.
The price of coal increased from around $30.00 per short ton in 2000 to around $150.00 per short ton as of September 2008. As of October 2008, the price had declined to $111.50, and by 2009 coal prices had crashed with the Financial Crisis to less than $50. Prices recovered to $80 in 2011 until S&P cut the US' AAA credit rating, followed by several European sovereign debt problems, including Greece, causing recession worries and lowered coal demand estimates. As of June 19, 2012 the closing price of coal was $54.27
Central Appalacian Coal futures contracts for North America are traded on the NYMEX under ticker symbol QL. The trading unit is 1,550 short tons (1,410 t) per contract, and is quoted in U.S. dollars and cents per ton.
Today's coal was formed millions of years ago as dead plant matter converted into peat, which in turn converted into lignite, then sub-bituminous coal, then bituminous coal, and lastly anthracite. Coal is composed primarily of fossilized carbon along with variable quantities of other elements, chiefly hydrogen, sulfur, oxygen, and nitrogen. Coal is extracted from the ground by mining, either underground by shaft mining through the seams or in open pit beds.
Graphite technically is the hardest and highest ranking coal, but it is difficult to ignite and is not commonly used as fuel; it is mostly used in pencils and, when powdered, as a lubricant. Graphite is an electrical conductor, a semimetal, and the most stable form of carbon. Natural graphite is mostly consumed for refractories, batteries, steelmaking, expanded graphite, brake linings, foundry facings and lubricants. Graphene, which occurs naturally in graphite, has unique physical properties and might be one of the strongest substances known; however, the process of separating it from graphite requires specialized technology to be economically feasible. Graphite & Graphene junior mining stocks became hot commodities themselves in 2011-2012.
The hard and brown top coal producers in 2010 & (2009) were (in millions of tons): China 3,162 (2,971), United States 997 (985), India 571 (571), Australia 420 (399), Indonesia 336 (301), Russia 324 (297), South Africa 255 (247), Poland 134 (135), Kazakhstan 111 (101), and Colombia 74 (73). China is by far the largest producer of coal in the world. China is also now the world's largest energy consumer, but relies on coal to supply about 70% of its energy needs. An estimated 5 million people work in China's coal-mining industry.
World Coal Reserves
The 948 billion short tons of recoverable coal reserves estimated by the Energy Information Administration are equal to about 4,196 BBOE (billion barrels of oil equivalent). The amount of coal burned during 2007 was estimated at 7.075 billion short tons, or 133.179 quadrillion BTU's. This is an average of 18.8 million BTU per short ton. In terms of heat content, this is about 57,000,000 barrels (9,100,000 m3) of oil equivalent per day. By comparison in 2007, natural gas provided 51,000,000 barrels (8,100,000 m3) of oil equivalent per day, while oil provided 85,800,000 barrels (13,640,000 m3) per day.
BP (NYSE: BP), in its 2007 report, estimated at 2006 end that there were 147 years reserves-to-production ratio based on proven coal reserves worldwide. Speculative projections predict that global peak coal production may occur sometime around 2025.
Continental United States Coal Regions
Of the three fossil fuels, coal has the most widely distributed reserves; coal is mined in over 100 countries, and on all continents except Antarctica. The largest reserves are found in the USA, Russia, China, India and Australia.
Is Coal Our Energy Independence Solution, to Imported Oil and OPEC?
The US has lots of it, but look at coal's very-low Energy Efficiency, or EROEI. For a coal power plant with a typical 40% efficiency, it takes 325 kg (714 lb) of coal to power a 100 W lightbulb for one year. One should also take into account transmission and distribution losses caused by resistance and heating in the power lines, which is in the order of 5-10%, depending on distance from the power station.
There are a number of adverse health and environmental effects of coal burning especially in power stations, older steel plants and coal mining. Coal is one of the largest worldwide anthropogenic sources of carbon dioxide releases. Gross carbon dioxide emissions from coal usage are slightly more than those from petroleum and about double the amount from natural gas.
Clean coal technology refers to new coal-burning processes that emit fewer pollutants into the atmosphere. According to a report by the Global Carbon Capture and Storage Institute, carbon capture and storage systems face significant engineering, environmental and financial challenges, which have the potential of delaying their mass construction until 2030.
Companies That Benefit From Rising Coal Prices:
- Peabody Energy (NYSE: BTU)
- Arch Coal (NYSE: ACI)
- Rio Tinto (NYSE: RIO)
- Consol Energy (NYSE: CNX)
- Foundation Coal Holdings - merged in 2009 with Alpha Natural Resources (NYSE: ANR)
- Massey Energy Company - merged in 2011 with Alpha Natural Resources (NYSE: ANR)
- Walter Energy (NYSE: WLT)
- James River Coal (NASDAQ: JRCC)
- Patriot Coal (NYSE: PCX)
Companies That Benefit From Falling Coal Prices:
The price of steel is, in part, determined by the cost of coking coal used to smelt the iron into steel. Like coal miners, steelmakers are vulnerable to changing contract prices. The Korean steelmaker Posco (NYSE: PKX) paid $285 per metric ton of coking coal while spot prices fell below $150.
- Providence and Worcester Railroad Company (NASDAQ: PWX)
- CSX Corp. (NYSE: CSX)
- Norfolk Southern Corp. (NYSE: NSC)
In the U.S., about half of the total tonnage shipped on trains is coal. So much coal is shipped on railroads that the U.S. Chamber of Commerce expects freight demand will increase 88% by 2033 due to growing need for low-cost transportation of coal and natural gas.
Electric Power Producers and End Users
- American Electric Power Company (NYSE: AEP)
- CenterPoint Energy Inc. (NYSE: CNP)
- Duke Energy Corp. (NYSE: DUK)
- Entergy (NYSE: ETR)
Similar to steel makers, electric power producers are vulnerable to volatile contract prices, which are passed onto end users.
Uranium is a silvery-white metallic element with atomic number 92 and the chemical symbol U. All 6 isotopes are unstable and uranium is weakly radioactive. Uranium is found in low concentrations of a few parts per million in soil, rock and water, and is commercially extracted from uranium-bearing minerals such as uraninite. Uranium has the second highest atomic weight of the naturally occurring elements, lighter only than plutonium Pu at 94. Both elements are primarily used as fuel in nuclear power reactors.
Nuclear Energy involves a controlled reaction to split atoms of nuclear fuel, typically uranium or plutonium, creating two new atoms. When accomplished on a reasonable scale, this reaction releases an incredible amount of heat, which can be used to heat water, producing steam and powering steam turbines, which can then be used to produce electricity.
Uranium futures contracts for North America are traded on the NYMEX under ticker symbol UX for delivery every month of the year.
Albert Einstein's classic "E = MC^2" formula describes the vast amount of energy that is released when an atom is split. To put this into perspective, the energy contained in one pound of enriched uranium, used as nuclear fuel, is equal to roughly one million gallons of gasoline. A typical U.S. power plant for a city of one million people needs this much fuel per day:
- 9,000 Tons of Coal; or
- 40,000 Barrels of Oil; or
- Less than 7 Pounds of Uranium (Nuclear Power)
As of May 30, 2012 at $90/barrel for oil, the daily oil fuel cost is $3,600,000. This would be only $360 at $52/lb for uranium, equal to 1/10,000th the oil fuel cost! Put another way, the average U.S. residential use of electricity for an entire year is equivalent to consuming:
- 5.5 Tons of Coal; or
- 800 Gallons of Oil; or
- 110,000 Cubic Feet of Natural Gas; or
- Less than 1 Ounce of Uranium!
Demand for Uranium Outstrips Supply
Every year since 1985, the world's consumption of uranium has been greater than its production. In 2008, uranium producers met only 66% of worldwide demand. To help meet this shortfall, reprocessed uranium and plutonium from the dismantling of Russian and U.S. nuclear weapons has been used. This significant source of uranium is limited and will eventually disappear, even if the "Megatons to Megawatts Program" is renewed, set expire in 2013. The World Nuclear Association estimates that uranium mining will need to increase by almost 300% in the next two decades
Resources and Reserves
It is estimated that 5.5 million tonnes of uranium ore reserves are economically viable at US$59/lb, while 35 million tonnes are classed as mineral resources (reasonable prospects for eventual economic extraction).
Australia has 31% of the world's uranium ore reserves and the world's largest single uranium deposit, located at the Olympic Dam Mine in South Australia. There is a significant reserve of uranium in Bakouma a sub-prefecture in Mbomou in Central African Republic.
An additional 4.6 billion tonnes may be in sea water, but the uranium is low yield due to carbonate in the water and not economical.
The ultimate available uranium is believed to be sufficient for at least the next 85 years, although some studies indicate under-investment in the late 20th century may produce supply problems in the 21st century.
Production and Mining
Yellowcake is a concentrated mixture of 75% uranium oxides that is further refined to extract pure uranium. The worldwide production of uranium in 2010 amounted to 53,663 tonnes, of which 17,803 t (33.2%) was mined in Kazakhstan. Other important uranium mining countries are Canada (9.783 t), Australia (5,900 t), Namibia (4,496 t), Niger (4,198 t) and Russia (3,562 t).
Uranium ore is mined in several ways: by open pit, underground, in-situ leaching, and borehole mining. Low-grade uranium ore mined typically contains 0.01 to 0.25% uranium oxides. Extensive measures must be employed to extract the metal from its ore. High-grade ores found in Athabasca Basin deposits in Saskatchewan, Canada can contain up to 23% uranium oxides on average.
Reprocessing nuclear by-products can potentially recover up to 95% of the remaining uranium and plutonium in spent nuclear fuel, putting it into new mixed oxide fuel. This reduces long term radioactivity in the remaining waste, and reduces its volume by over 90%.
Reprocessing of civilian fuel from power reactors is currently done on large scale in Britain, France and Russia, soon in China and India, and is expanding in Japan. The full potential requires breeder reactors, which are not yet commercially available. France recycles 28% (by mass) and is the most successful.
Reprocessing is not allowed in the U.S.; spent nuclear fuel is currently all treated as waste. One football field around four-feet high could hold all the nuclear waste we ever produced.
Nuclear power is much cleaner than burning coal or oil, and leaves almost no carbon footprint. Unlike fossil fuel power plants, the only substance leaving the cooling towers of nuclear power plants is water vapour, which does not pollute the air or cause global warming.
Is Nuclear Power Our Energy Independence Solution, to Imported Oil and OPEC?
The World Nuclear Association states that 433 nuclear reactors generate electricity globally. On top of this are 63 reactors under construction, 160 planned, and 329 proposed. The WNA also says that nuclear power safely produces 15% of the world's electricity and that more than 15 countries get 25% or more of their electricity from nuclear reactors. Nuclear energy provides about 20% of the United States' electricity from 104 operating reactors.
France's population is 61 million and gets almost 80% of its electrical power from nuclear reactors - France is also the world's largest net exporter of electricity. On the other hand, next door is Italy, also with 61 million people, but has absolutely no nuclear power - Italy is the world's largest importer of electricity. Facts like this are hard to ignore, and why more and more countries worldwide are planning to add nuclear power to meet their future energy needs.
However, when most people think of nuclear energy, they recall the 1979 Three Mile Island accident in Pennsylvania, the 1986 tragedy involving a Soviet era RBMK reactor at Chernobyl which became the worst nuclear power disaster ever, or the March 2011 Daiichi nuclear plant accident at Fukushima Japan that resulted from a record 9.0 earthquake and tsunami. This has dramatically impacted the public's perception of nuclear power safety, and fears of repeats of these accidents, safety concerns, disputes over storage of nuclear waste, and a web of government regulations has limited nuclear power plant developments over the past 25 years.
On February 9, 2012 the U.S. Nuclear Regulatory Commission (NRC) approved the building of two new nuclear reactors, the first new reactors built in the U.S. since 1978. After a seven-year approval process, a consortium of utilities led by Atlanta based Southern Company (NYSE: SO) can now build the two new reactors at their Vogtle nuclear power plant complex in Georgia, where two existing reactors already operate. The first new reactor should come online in 2016 and the second in 2017. At an expected cost of US$14 Billion ($8 billion from U.S. Government Loans), the new reactors will provide 2,200 megawatts that can power another million homes.
All energy solutions should be evaluated based on comprehensive costs relative to alternatives. This involves human, animal and environmental safety needs, whether the solution adequately meets society's energy demand needs, and monetary needs to keep capital and operating costs low as this determines end users metered power rates.
As shown, uranium is a highly efficient, low-cost and environmentally friendly fuel source. Nuclear power plants are inexpensive to operate, as higher uranium prices only marginally affect operating costs. The main issue with nuclear power is capital costs, now over $8 billion to construct a new nuclear plant, which is double the cost of a coal-fired plant and triple the cost of a natural gas plant. Nuclear power plants are 30-60 year investments, with interest rates having a greater effect on electricity costs than uranium prices.
The nuclear power and uranium industries' other issue is to convince the public that the perceived safety risks are exaggerated, and that past nuclear accidents could have been prevented with today's technology. For example, backup cooling systems on new generation nuclear reactors being built in China are gravity fed, instead of water being power pumped like the 40-year old technology that failed in Fukushima. Nuclear plant designs and safety procedures have been greatly improved, which may have prevented the Fukushima, Chernobyl and Three Mile Island accidents.
The Pro-Nuclear camp will also argue that oil and coal are just as harmful, pointing to coal fires and toxic sludge, to major oil spills in the Gulf of Mexico in 2010 and by the oil tanker Exxon Valdez in Alaska, as examples. Hindsight is 20/20 and both sides can debate what could have happened differently in the past; and what should change going forward. However, one certain fact is that burning fossil fuels as intended remains harmful to the environment and human safety.
Who Benefits From Rising Uranium Prices
- Uranium exploration companies like Uranerz Energy (AMEX: URZ)(TSX: URZ)(FF: U9E) (URZ' first uranium mine called the Nichols Ranch ISR Project in the Powder River Basin, Wyoming is expected to start production in 2012), Uranium Energy Corp (AMEX: UEC), Ur-Energy (AMEX: URG), Uranium Resources (NASDAQ: URRE), and Uracan Resources (TSXV: URC) benefit, as their finds become more valuable.
- Uranium production companies benefit the most from high uranium prices. In 2007, over 85% of the estimated world production of U3O8 uranium came from seven companies: Cameco (NYSE: CCJ)(TSX: CCO) (20%), Rio Tinto (NYSE: RIO) (17%), Areva (PARIS: AREVA) (15%), KazAtomProm (12% - Khazakstani), ARMZ (8%), BHP Billiton (NYSE: BHP) (8%), and NAVOI Mining Metallurgical Kombinat (6% - Uzbekistani). Other players include Cogema (see Areva), Energy Resources of Australia (OTC: EGRAF)(ASX: ERA), Uranium One (TSX: UUU), General Electric Company (NYSE: GE), and Priargunsky Industrial Mining and Chemical Enterprise (Russian).
- Other sources of fuel for electricity production like coal and natural gas, to even hybrid nuclear fuels like thorium may benefit.
- Utility companies with most of their electricity coming from coal, oil, or natural gas power plants like Alliant Energy (NYSE: LNT), Ameren (NYSE: AEE), AGL Resources (NYSE: GAS), Atmos Energy (NYSE: ATO), Dynegy (NYSE: DYN), Energen (NYSE: EGN), Equitable Resources (now called EQT)(NYSE: EQT), National Fuel Gas Company (NYSE: NFG), National Grid Transco (NYSE: NGG), ONEOK (NYSE: OKE), PPL Corp. (NYSE: PPL), Sempra Energy (NYSE: SRE), and Southern Union Company (NYSE: SUG) benefit when margins of their nuclear competitors begins to shrink.
- Nuclear energy accounts for 20% of the total electric energy consumption in the U.S., and higher energy prices means more demand for efficient, higher priced air conditioners. Carrier Corp., a subsidiary of United Technologies (NYSE: UTX), is the largest maker of air conditioners and refrigeration systems worldwide. Additionally, Emerson Electric (NYSE: EMR) is the world's largest manufacturer of energy efficient (heat pump) compressors for all major HVAC OEMs.
Who Loses From Rising Uranium Prices
- Exelon (NYSE: EXC), Dominion Resources (NYSE: D), Entergy (NYSE: ETR), Duke Energy Corp. (NYSE: DUK), Constellation Energy Group (NYSE: CEG), FPL Group (Nextera Energy)(NYSE: NEE), and Southern Company (NYSE: SO), operators of nuclear power plants in the U.S., would not benefit from rising fuel expenses, as regulators may take their time or not even decide to raise prices.
- Nuclear power plant manufacturers and maintenance companies Westinghouse Electric, Shaw Group (NYSE: SHAW), Fluor Corp. (NYSE: FLR), and Bechtel may see marginally smaller demand; however, changing oil, coal and nat gas prices actually affect these companies more than uranium prices, as these competing fuel sources have a much larger impact on their power plant operating costs, and as a result on the demand for new nuclear power plants.
Renewable Energy comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable (naturally replenished). About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from hydroelectricity. New renewables (small hydro, modern biomass, wind, solar, geothermal, and biofuels) accounted for another 3% and are growing very rapidly. The share of renewables in electricity generation is around 19%, with 16% of global electricity coming from hydroelectricity and 3% from new renewables.
Wind power is growing at over 20% annually, with a worldwide installed capacity of 238,000 megawatts (MW) at the end of 2011, and is widely used in Europe, Asia, and the United States. Since 2004, photovoltaics passed wind as the fastest growing energy source, and since 2007 has more than doubled every two years. At the end of 2011 the photovoltaic (PV) capacity worldwide was 67,000 MW, and PV power stations are popular in Germany and Italy. Solar thermal power stations operate in the USA and Spain, and the largest of these is the 354 MW SEGS power plant in the Mojave Desert.
The world's largest geothermal power installation is the Geysers in California, with a rated capacity of 750 MW. Brazil has one of the largest renewable energy programs in the world, involving production of ethanol fuel from sugarcane, and ethanol now provides 18% of the country's automotive fuel. Corn based ethanol fuel is widely available in the USA. Nuclear power is sometimes considered renewable energy when involving breeder reactors, which create more fissile isotopes than they consume during their operation.
While many renewable energy projects are large-scale, renewable technologies are also suited to rural and remote areas, as 1.3 billion people around the world don't have access to grid electricity. As of 2011, small solar PV systems provide electricity to a few million households. Over 44 million households use biogas made in household-scale digesters for lighting and/or cooking, and more than 166 million households rely on a new generation of more-efficient biomass cookstoves. This lifts the prosperity of the poorest nations such as Kenya, the world leader in the number of solar power systems installed per capita.
Climate change concerns, coupled with high oil prices, peak oil, and increasing government support, are driving increasing renewable energy legislation, incentives and commercialization. According to a 2011 projection by the International Energy Agency, solar power generators may produce most of the world's electricity within 50 years, dramatically reducing the emissions of greenhouse gases.
All forms of energy are expensive, but as time progresses, renewable energy generally gets cheaper, while fossil fuels generally get more expensive. A 2011 IEA report said: "A portfolio of renewable energy technologies is becoming cost-competitive in an increasingly broad range of circumstances, in some cases providing investment opportunities without the need for specific economic support."
Leading renewable energy companies include: First Solar (NASDAQ: FSLR), Gamesa (OTC: GCTAF), GE Energy, Q-Cells (FF: QCE), Sharp Solar, Siemens (NYSE: SI), SunOpta (NASDAQ: STKL), Suntech Power (NYSE: STP) and Vestas Wind (FF: VWS). Companies such as Iogen, POET, and Abengoa Bioenergy (OTC: ABGOF) are building refineries that can process biomass and turn it into ethanol, while companies such as Verenium (NASDAQ: VRNM), Novozymes (OTC: NVZMF), and Dyadic Intl. (OTC: DYAI) are producing enzymes which could enable a cellulosic ethanol future. The shift from food crop feedstocks to waste residues and native grasses offers significant opportunities for a range of players, from farmers to biotechnology firms, and from project developers to investors and companies like: Abengoa - Hugoton, KS (Wheat straw); BlueFire Renewables (OTCBB: BFRE) - Irvine, CA (Multiple sources); Gulf Coast Energy - Mossy Head, FL (Wood waste); Mascoma - Lansing, MI (Wood); POET - Emmetsburg, IA (Corn cobs); SunOpta - Little Falls, MN (Wood chips); Xethanol - Auburndale, FL (Citrus peels). Wave farm JV developments are planned in Scottish waters by E.ON (OTC: ENAKF), ScottishPower Renewables, SSE, Pelamis Wave Power, Aquamarine Power and Aegir Wave Power and Vattenfall.
100% Renewable Energy
The incentive to use 100% renewable energy is created by global warming and ecological as well as economic concerns, post peak oil. The first country to propose 100% renewable energy was Iceland, in 1998. Proposals have been made for Japan in 2003, and for Australia in 2011. Norway and some other countries already obtain all of their electricity from renewable sources. Iceland proposed using hydrogen for transportation and its fishing fleet. Australia proposed biofuel for those elements of transportation not easily converted to electricity. The road map for the United States, commitment by Denmark, and Vision 2050 for Europe set a 2050 timeline for converting to 100% renewable energy, later reduced to 2040 in 2011. Zero Carbon Britain 2030 proposes eliminating carbon emissions in Britain by 2030 by transitioning to renewable energy.
It is estimated that the world will spend an extra $8 trillion over the next 25 years to prolong the use of non-renewable resources, a cost that would be eliminated by transitioning instead to 100% renewable energy. A 2009 study suggests that converting the entire world to 100% renewable energy by 2030 is both possible and affordable, but requires political support. It would require building 4 million 5 MW wind turbines, 1.7 billion 3 kW roof-mounted photovoltaic systems, and 90,000 300 MW solar power plants. Other changes involve use of electric cars and the development of enhanced transmission grids and storage.
Are Renewables Our Energy Independence Solution, to Imported Oil and OPEC?
The obvious main advantages of renewable energy are low-cost fuels (free sunlight, wind etc.), that can inexhaustibly provide all of our power needs forever, and are not harmful to human safety or the environment. The main limitations are technological, capital costs, and the will to change.
Regardless if the fuel is free, wind farms, solar PV systems, hydroelectric dams and ethanol plants are expensive, as are the related infrastructure costs to adapt fuel distribution systems and electrical power grids. The technology has come a long way, but to fully develop to the desired point of displacing the burning of fossil fuels, capital and operating costs of renewable energy needs to become low enough to negate any remaining non-renewable cost advantages.
Unfortunately the vision and political will doesn't seem to be there. The oil industry is the world's biggest business and among the largest lobbyists and campaign contributors. In the 1970's after oil prices skyrocketed, with gas shortages at OPEC's whim, the oil tap could simply be opened long enough to crash oil prices to quiet protesters and kill any government renewable initiatives being debated at the time. Ronald Reagan removed Jimmy Carter's solar panels from the White House, which some believe was done for no apparent reason other than to clearly signal the renewable energy and oil industries where their loyalties lie.