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MZConsulting New Year’s Message 2017

By Milt Caplan
President
MZConsulting Inc.

Originally posted at http://mzconsultinginc.com/.

2016 was another tumultuous year for nuclear power. Decisions to close units in the USA early due to economic pressures in deregulated markets and the slow pace of restarting nuclear units in Japan continue to negatively impact the uranium market. However, the tide has now turned as the benefits to the environment and system reliability are being more broadly accepted with both New York and Illinois having taken decisions to keep marginal plants running.

Uranium producers continue to struggle due to low prices

The stock prices of Cameco in Canada, Energy Fuels and Ur-Energy in the US and Paladin in Namibia, along with uranium holder Uranium Participation are once again in negative territory in 2016. That is symptomatic of a current supply-anddemand imbalance. However, some Juniors such as Forsys, Mega and UEX, with highly prospective properties not in production, have done better in 2016. This is perhaps indicative that, while the immediate problem is falling uranium prices, the market recognized that new supply will be required in the longer term.

The spot price of uranium continued to fall throughout 2016 going as low as $18/lb in November before ending the year at $20.25/lb. Has the price finally hit bottom? Probably yes. The long-term price, only at around $30/lb, is finally in a place where even the low-cost producers are slowing production as they focus on cost cutting to remain viable. While more positive trends for the longer term continue, prices are likely to stay soft in the short to medium term until demand recovers.

Production in 2015 shows that of 19 producing countries, Kazakhstan (39%) is by far the largest uranium producer followed by Canada (22%) and Australia (9%). These three countries produce over two-thirds of the world’s uranium. Cameco’s McArthur River (12%) and Cigar Lake (7%) in Saskatchewan are the two largest uranium mines in the world, supplying some 19% of world production while eleven companies marketed 89% of the world’s uranium production with Cameco ranking second behind KazAtomProm.

Crisis creates clarity in the role of nuclear power

Economic pressures in dysfunctional US electricity markets as a result of very low gas prices and subsidized renewables, have put some 15 to 20 nuclear plants at risk of early closure. This has forced reluctant law makers to address the issue with many coming out in support of maintaining the nuclear fleet as an essential part of the mix based on nuclear’s low carbon footprint and its contribution to system reliability.

The result was an agreement in New York and in Illinois to keep struggling nuclear plants afloat. That being said, there is still more work to be done to solve the larger problem of markets that need reform. It was a pivotal year in the US, as the country’s first new nuclear plant in more than two decades, Watts Bar 2, came into service. Four more units are under construction, and NuScale has recently submitted the first application for design certification for an SMR. While support for nuclear is expected to continue, uncertainty remains as the new administration shows little interest in climate change and embraces fossil fuel development.

In Switzerland, the early closure for their nuclear plants was strongly rejected in a referendum while in Britain, there was a final commitment to the Hinkley Point C project with more new units to follow.

On the other hand, as another plant closed in Germany its carbon emissions continued to rise in 2016 as this plant was replaced with a combination of coal and gas. This was in spite of another 10% increase in new wind capacity and 2.5% of new solar capacity; and shows that trying to manage carbon while removing nuclear from the mix is extremely challenging.

Supply is finally responding to prices

One of the biggest issues facing the uranium market actually stems from the 2011 tsunami that resulted in the Fukushima reactor meltdown in Japan. That event caused Japan to shut all of its nuclear power plants and led Germany to accelerate its plan to shift away from the nuclear option. The swift shutdown of so many units pushed supply and demand way out of balance.

While it remains Japan’s intention to restart many of its shuttered nuclear facilities, progress continues to be very slow so that demand will be impacted for some time to come.

As a result, major producers like Cameco have been directing their efforts to cost-cutting and refocusing around its best mines. For example, the company reduced its capital spending projections for 2016 by around 10% and plans to cut operating costs further in 2017. Despite the downturn, it has continued to invest in its Cigar Lake mine because it’s relatively low cost to operate. The recent opening of that mine helped to cut Cameco’s cash costs of producing uranium by more than 20% through the first nine months of 2016.

Kazakhstan, the world’s largest producer, has been continuing to increase production year over year but now has announced it will cut production by 10% in 2017.

However, China will be entering the big leagues in uranium supply this year as the Husab mine in Namibia ramps up production. This elephant is expected to add about 15 million lbs to the market each year once it reaches full production. With mining costs above the current uranium prices and the world in oversupply, it will be interesting to see how China chooses to move forward.

Nuclear sector growth

In spite of all this apparent gloom and doom, the nuclear industry remains strong. 10 new units were completed in 2016, while three were closed. Of interest, only half of these completions were in China with the other half coming from Korea, India, Pakistan, Russia and the USA. With 60 reactors under construction world-wide; led by China, this is the largest nuclear new build construction in more than a quarter century. As China continues to meet their stated objective of 58GW by 2020, this period of weak uranium prices presents an opportunity to further build strong inventories for the future.

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Want to minimize radiation from power generation – build more nuclear

By Milt Caplan
President
MZConsulting Inc.

Originally posted at http://mzconsultinginc.com/.

Yes, you read that right.  For years, there have been efforts to demonstrate that people who live near nuclear plants or work at nuclear plants are getting sick from all that darn radiation they are receiving.  Over the years these stories have been debunked as study after study has shown that there is no impact from radiation from living near or working at a nuclear plant.

But now a study has been done that shows that of most of the options to generate electricity, nuclear actually releases the least amount of radiation.  This is documented in UNSCEAR’s, the United Nations Scientific Committee on the Effects of Atomic Radiation, most recent report to the United Nations General Assembly, on its study to consider the amount of radiation released from the life cycle of different types of electricity generation.

The Committee conducted the comparative study by investigating sources of exposure related to radiation discharges from electricity-generating technologies based on nuclear power; the combustion of coal, natural gas, oil and biofuels; and geothermal, wind and solar power. The results may surprise some, especially those that strongly believe that nuclear pollutes the earth with radiation, coal with a range of air pollutants and carbon, and that solar and wind are environmentally wonderful.solar-panels-and-wind-turbines

Coal generation resulted in the highest collective doses to the public, both in total and per unit energy.  Coal radiation emissions result from coal mining, combustion of coal at power plants and coal ash deposits.  The study also considered occupational doses to workers.  Here is the biggest surprise.  As stated “With regard to the construction phase of the electricity-generating technologies, by far the largest collective dose to workers per unit of electricity generated was found in the solar power cycle, followed by the wind power cycle. The reason for this is that these technologies require large amounts of rare earth metals, and the mining of low-grade ore exposes workers to natural radionuclides during mining.”  It is important to note that in all cases these levels of exposure are relatively low and have little impact to public health.

This study only addresses normal discharges during the lifecycle of the station.  Possible larger releases as a result of nuclear accidents are not considered and we recognize that many will argue it is accidents and their consequences that create the largest fear of nuclear power.

So why talk about this?  The reality is that this information is not likely to change even one single mind on whether someone supports nuclear power or fears it.  We live in a world where facts no longer matter – the only truth is the one that any one person believes.  Well, we believe that scientific study remains the best way forward to establish truth and that studies such as these are part of the path forward.  No one electricity generation technology is perfect.  Coal is cost effective and technically strong, but is also a strong emitter of a range of pollutants (including radiation); renewables such as solar and wind are clean but their resource is intermittent and they have issues with both their front end (mining of rare earths) and disposal at the end of their life cycle.

Nuclear power continues to have a good story to tell, with respect to its economics, reliability, environmental attributes and the many good jobs it creates for local economies.  Concerns about nuclear relate mostly to one major issue – fear of radiation.  And fear is a strong emotion that is not easily changed.  But at least what we have here is another study to show that radiation emissions from normal operations of the nuclear fuel cycle is not something to fear – and in fact if you really want to minimize the collective dose to the public, nuclear power remains the option of choice.

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Young People with Passion – That is the Future of Nuclear Power

By Milt Caplan
President
MZConsulting Inc.

Originally posted at http://mzconsultinginc.com/.

We talk a lot about the merits of nuclear power in this blog. From economics and reliability to environment, we focus on why nuclear is now and should be an essential part of our future energy mix. But how do we get there? Again, we often talk about the challenges associated with public acceptance and how we can better position nuclear as the energy solution we all know it is.

But today we want to focus on something different. People. We have been privileged to work in this industry for more than 35 years. Often it’s hard to believe that this much time has passed since we were so excited to start our first jobs as a young engineers working on nuclear safety. Over the years there have been many challenges as the industry slowed, in part due to the accident at Chernobyl, in part due to the slowdown in energy demand growth in many industrialized countries, to the challenges of building capital intensive large projects into deregulated markets. But one thing has not changed; our passion for the industry – our passion for making the world a better place with clean reliable economic nuclear power. And we are not alone.

At a recent industry event, I spoke to many of our colleagues, many of whom have come out of retirement again and again simply because their passion for nuclear power as a solution to meeting our ever growing energy needs is simply impossible to extinguish. Some are well into their 70s and their enthusiasm is as strong as when they were in their 30s.

With nuclear power growing once again, it is time to ensure its continuity by instilling this passion into a new generation of young people. It is the fuel that will ensure the industry continues to be innovative and reaches its full potential going forward. That being said it is important to focus on what is important to this new generation of engineers and scientists; what will keep them enthused and committed. It is hard to imagine millennials thinking of utilities or large industrial companies as the growth companies of the future. Rather they think of companies like Google, Facebook and Uber when it comes to large innovative exciting companies – or they believe in being entrepreneurs and starting their own tech start-up. This ad campaign by GE (one example below) is a brilliant one as it tries to show young people that it can indeed be exciting to be in this large industrial company – that not everyone has to be coding and developing the next app that puts hats on cats – but that to truly change the world, it is the future of things like transportation and energy that really matters.

I love it (There are a series of these ads, just go to YouTube and you can see more).

In the nuclear industry we have the problem of a gap in age. There are many people in their 50s through to retirement age that have been in the industry for decades, and then there is a new cohort of young people who have joined the industry in the last 10 years or less. This new young cohort has different work expectations than the older group. They expect to be able to find a place and make a meaningful contribution in a relatively short time. They are impatient and expect to change jobs many times in their career. They do not expect to join one company and stay there until they retire.

Yet we are an industry that believes that it takes years to learn and become an expert. We need people with 10 years plus experience and we need experts who continue to grow as they gain the experience needed to make a difference.

Therefore, as industry leaders we need to understand and address the desires and concerns of those just starting out. We need to remember that 30 years ago when we were younger we quickly developed into experts as new techniques were established and we did not have the benefit of people like us to show us the ropes. We were at the leading edge and we loved working in this exciting young industry. We learned on the job. We were excited with every opportunity and put our best into developing a product that we strongly believed in. These are the conditions we need to replicate for this next generation. We need to ensure they are actively engaged, play a strong role in new projects and in innovating as the industry moves forward. We need to provide them with the opportunities they crave to develop their passion for this exciting industry. Competition for these people will be fierce and we need to show that the nuclear industry is where they can truly make a difference in the world.

Sometimes as conservative engineers, or as some of the anti-nuclear activists may state – that it is not fair to leave problems for future generations to solve; we need to push back. As one quite learned colleague once said, why solve every issue – we need to leave some things for the bright young people following us to solve – because they will be smarter than we are and bring new thinking to old issues.

While many think the future of nuclear power depends on public acceptance, or solving the waste issue, or improving nuclear safety; it actually depends on building a passionate next generation of young people to take it in directions that none of us has even thought of yet. Life is about passion – so let’s all work to bring out the passion in a new generation of nuclear people. The future is open to us – but only if we can attract the best and brightest people needed to make it happen.

If you are under 40 and have read this post – please comment explaining why you are passionate about working in the nuclear industry.