Daily on Energy: Highest uranium prices in over a decade show demand for nuclear

With the spot price of uranium set at $74 per pound as of yesterday’s close, according to nuclear data provider UxC, strong demand from utilities is coinciding with low inventories and threats to supply, creating a price hike that hasn’t been seen in more than 12 years. Political turmoil in Niger, a large uranium-producing country, and disruption from Russia-supplied sources are feeding into the price hike.

“I think it’s fundamental supply-demand [dynamics],” Nima Ashkeboussi, a senior director of fuel and radiation safety at the Nuclear Energy Institute, told the Washington Examiner. “Demand has gone higher. Supply has kind of been steady or decreasing due to a prolonged down market. And adding on top of that, some of the geopolitical issues going on right now has led to where we are with the price.”

Where demand is coming from: Countries are now expressing a renewed global interest in nuclear energy, with several states reversing premature decisions to shut down nuclear power plants, including Europe and the United States. Earlier this year, U.S. federal regulators granted an exemption that will keep the California Diablo Canyon nuclear power plant reactors operating until November 2024 and August 2025 — and an application for a license extension is expected.

China has 22 nuclear reactors under construction, with an expected generating capacity of approximately 22.7 gigawatts. Japan has also made notable moves in the nuclear space, approving a law that will allow nuclear power plants to operate beyond 60 years and resuming operations at the Takahama Nuclear Power Plant after a 12-year hiatus.

Where supply is threatened: This renewed demand is coinciding with threats to global supply stemming from the coup in Niger, where generals ousted President Mohamed Bazoum in July and since then have upped their attacks against counterterrorism efforts from Western nations. There are also concerns circulating around how the market could be affected if the U.S. were to ban Russian uranium imports, following its bar on oil and gas imports.

“There are ongoing concerns about the potential for various supplies, especially those of enriched uranium from Russia, to be removed from the market due to trade actions (e.g., a ban on Russian imports by the U.S.),” UxC President Jonathan Hinze said in a statement to the Washington Examiner. 

Canadian uranium major Cameco has also reduced its production forecast for this year, citing challenges at its Cigar Lake Mine and Key Lake mill due to equipment reliability and maintenance issues.

A throwback into history: The last time prices were this high was in 2007-2008 and 2011 — years that all represent different market conditions resulting in uranium price hikes.

While uranium prices have fluctuated over the last 15 years or so, prices reached an all-time high in 2007, marking peaks of nearly $140 a pound. This was during a period of exponential growth for the mineral (otherwise known as the uranium bubble of 2007) that followed an upward trend that began in 2003 — prompting increases in mining activity.

The 2008 global recession saw a downturn in prices, resulting in a “much lower demand for electricity,” according to Ashkeboussi. Other sources of energy, such as natural gas and fracking, came online to lower the price of energy.

In 2011, a 9.1 magnitude earthquake and resulting tsunami struck Japan, causing four of the six reactors at the Fukushima Daiichi site to be written off due to damage from the disaster. Later, the entire 54 nuclear reactor fleet was shut down following the accident.

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SENIOR INTERIOR OFFICIAL TAPPED AS ACTING DEPUTY SECRETARY: President Joe Biden is expected to name senior Interior Department official Laura Daniel-Davis as the agency’s acting deputy secretary, following the departure of Tommy Beaudreau, who stepped down from his position late last week.

Daniel-Davis has served during the Obama and the Biden administrations and is currently the agency’s principal deputy assistant secretary for Land and Minerals Management. She was tapped by Biden twice to serve as deputy secretary — first, in 2021, when members of the Senate Energy and Natural Resources Committee deadlocked on her confirmation, and again in March, when Sen. Joe Manchin joined Republicans in opposing her nomination, citing what he described as her “dangerous” prioritizing of partisan politics over energy security.

The politics of the role: Beaudreau, who was seen as the more centrist choice for deputy, also earned his fair share of criticism during his tenure and struggled to appease both environmental groups and industry voices. As the Washington Post reports, it was Beaudreau who signed off on Willow, the North Slope oil drilling project that incensed climate groups and sparked at least two major lawsuits. But Beaudreau was also critical in drafting Interior’s five-year plan that called for the lowest number of offshore lease sales in the history of the program and enraged oil and gas groups.

His tenure illustrates the many issues the Biden administration is juggling as it seeks to balance its climate priorities and issues of energy security.

As Daniel-Davis makes the transition to Interior’s No. 2, it is unclear whether she is being considered to permanently serve as deputy. Interior did not respond to the Washington Examiner’s request for comment.

BP SEES SLUGGISH THIRD-QUARTER GROWTH: BP posted third-quarter profits of just $3.3 billion today — a sharp drop in earnings compared to the same period last year and one that comes amid weaker refining margins, a less volatile gas market, and higher company expenditures in the U.S. offshore wind space.

The earnings fell short of analysts’ projections of more than $4 billion for the quarter and sent BP shares falling by more than 5% mid-morning.

The profits are a slight increase from Q2, when BP posted $2.59 billion. But they’re also a sharp drop from the same period in 2022, when BP raked in roughly $8.15 billion — more than doubling its current earnings in the wake of Russia’s invasion of Ukraine and sustained-high global demand for fossil fuels.

BP’s interim CEO, Murray Auchincloss, blamed weaker gas trading and “lack of volatility” in the market as the primary driver for the company’s lower earnings. “Gas prices were really flat as stocks build up in the U.S. and Europe … trading organizations make money on volatility,” he told Reuters.

The somewhat anemic earnings report comes just days after BP competitors Chevron and Exxon Mobil also posted sharp year-on-year declines for the third quarter. Shell will report its Q3 profits Thursday.

…the role of offshore wind: BP also reported impairments of $540 million on U.S. offshore wind projects, after officials in New York rejected its request to renegotiate an offshore wind contract in order to reflect higher project costs.

BP officials said the higher offshore costs were primarily due to inflationary pressures and permitting delays, which have created new hurdles for U.S. developers and forced some to amend or completely scrap their planned projects. (BP’s co-developer on the offshore wind project, Equinor, booked a $300 million impairment last week.)

Still, Auchincloss reiterated BP’s commitment to the U.S. projects: “New York put out a 10-point plan, which would help move these projects forward. … We’ll be looking at that with our partner Equinor and deciding what we do moving forward,” Auchincloss told Reuters.

“We remain committed to offshore wind, in particular here in the UK and in Germany,” he added.

DOE ANNOUNCES $1.3 BILLION TO SUPPORT NEW TRANSMISSION LINES: The Department of Energy announced $1.3 billion in funds yesterday to help accelerate the build-out of three long-range transmission power lines across six U.S. states.

The funds are part of the 2021 Bipartisan Infrastructure Law and come as the U.S. seeks to bolster the reliability of its power grids and “weatherize” the grid system in order to protect against capacity shortages or blackouts during extreme weather events or other periods of high demand.

Combined, DOE said, the projects selected yesterday are expected to add 3.5 GW of grid capacity across the U.S.

How it works: Rather than funding individual power line construction, the program allows DOE to pre-purchase a “capacity contract” for a certain amount of power from the companies themselves — helping “de-risk” projects and allowing companies to begin or accelerate transmission line construction, as Energy Secretary Jennifer Granholm explained.

The program is “basically a revolving fund that allows for the Department of Energy to be sort of an anchor tenant on these lines,” Granholm said of the funds, which she praised as a “historic effort” that will help drive down costs for U.S. consumers and deliver on the administration’s clean energy targets.

DOE’s chosen projects include the 214-mile Cross Tie transmission line in Utah and Nevada, the 175-mile Southline project running from New Mexico to Arizona, and the Twin States Clean Energy Link running between Canada and New England. Read more on the effort here.

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