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Everything Investors Need To Know About The Nuclear Energy Industry

Ryan McQueeney

Electricity is one of the most taken-for-granted resources on the planet. Think about it. Do you really know where your electric power comes from? Just pay the monthly bill, flick a switch, and the lights come on, right? Well, not quite.

In fact, the electricity industry is one of the most intricate and important businesses in the world. Power plants have become an everyday sight for billions of people, millions of others are involved in the production and delivery of the resource, and this type of energy not only lights the planet, but also has serious implications for the environment.

The Silent Source of Clean Power

Over the past decade or so, public attention to global climate change and greenhouse gases has drastically increased, which has ushered in a new age of renewable electricity captured from natural sources like wind, solar, and water. However, President-elect Donald Trump’s deregulation promises have helped bring coal back to the forefront of the electricity business.

Wherever you fall in the debate between coal and renewables, one thing no one seems to be talking about is nuclear energy, even though we are using a ton of nuclear power. In fact, about one in five homes and businesses in the U.S. are powered by nuclear energy.

Nuclear power is also a viable non-polluting energy option. Compared to “renewables” as a whole, the production and use of nuclear energy actually releases fewer greenhouse gases into the air. Indeed, nuclear power is currently responsible for about three-quarters of the country’s clean-air energy.

So why doesn’t anyone seem to bring up nuclear energy when discussing environmentally friendly energy? How does nuclear power even work? How can investors get involved with nuclear power? Let’s see if we can answer a few of these questions.

How it Works

If you are anything like me, you either forgot the day that we went over how nuclear power works in school, or our schools never covered it. I will admit, I was not always the best student, but something tells me this was just one of those things they glossed over in science class. Alas, do not worry, we will review.

The vast majority of nuclear energy production taking place today is a result of nuclear fission, which is a process in which the atoms of elements are split into smaller pieces. This reaction generates nuclear energy that is typically used to heat up water. Really hot water creates steam, steam spins turbines that are hooked up to electrical generators, and boom—electricity.

If this still is not making a ton of sense, check out this handy diagram from the U.S. Nuclear Regulatory Commission:

See? Totally simple.

Bad Reputation

The biggest issue surrounding nuclear energy is the stigma surrounding its safety. Interestingly enough, it seems that, although people are not well versed on the production of nuclear power, basically everyone has heard of the major accidents in the industry.

In a way, this makes sense. Besides “power” and “energy,” the other word that typically follows “nuclear” is “weapon,” and it is pretty clear that nuclear reactions have the potential to be extremely powerful. We also know that exposure to excess amounts of radiation can be extremely dangerous and is known to cause cancer and bodily defects.

But what if I told you that nuclear energy is actually one of the safest sources of electricity? I’m not lying; it really is true. Just look at the International Nuclear Event Scale. This is a measurement of the severity of nuclear accidents—from 0 to 7—that seeks to inform people about possible damages and risks.

Level 7 incidents are defined as “major accidents” that will require planned and executed countermeasures and will result in widespread health and environmental effects. To date, there have only been two Level 7 events: Chernobyl in 1986 and Fukushima in 2011.

Nevertheless, the cleanup efforts from these incidents can be lengthy and costly. Also, the storage and disposal of nuclear waste remains expensive and complicated. The waste issue is actually the biggest problem in this admittedly imperfect industry.

Stocks to Watch

Of course, we are all investors here, and we need some stocks to keep our eyes on. If you are interested in the nuclear energy industry, first check out the VanEck Vectors Uranium & Nuclear Energy ETF NLR. This ETF seeks to track an index that follows the performance of companies around the world that generate a large portion of their revenue from either uranium mining or nuclear energy generation.

Some of the biggest components of this index are Dominion Resources D, Duke Energy DUK, Pacific Gas and Electric Company PCG, Exelon EXC, and Public Service Enterprise Group PEG.

For more U.S.-based uranium mining companies, check out Ur-Energy URG, Uranium Energy Corp. UEC, and Uranium Resources URRE. Other nuclear power generation companies include General Electric’s GE GE Hitachi Nuclear Energy subsidiary, SCANA Corporation SCG, Toshiba’s TOSYY Westinghouse Electric Company, and NRG Energy NRG.

Bottom Line

According to projections, the total amount of nuclear energy produced globally is expected to grow at an annual rate of 1.4% to 4.3% through 2030. That not only highlights the changing nature of the energy sector, but also proves that investors should be keeping an eye on this industry. Nuclear energy could very well be the best option for a clean-air future.

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EXELON CORP (EXC): Free Stock Analysis Report
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NRG ENERGY INC (NRG): Free Stock Analysis Report
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UR-ENERGY INC (URG): Free Stock Analysis Report
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URANIUM ENERGY (UEC): Free Stock Analysis Report
VANECK-URNM+NUC (NLR): ETF Research Reports
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