Almost 18 years ago, I presented a paper at the World Nuclear Association’s Annual Symposium entitled “Fueling the Future: A New Paradigm – Assuring Uranium Supplies in an Abnormal Market.”  Here is the introductory paragraph:

We are at an exciting, but challenging phase for our industry. On the one hand, new nuclear reactors are being ordered, efforts are being made to pave the way for other orders, and there is a greater appreciation on the part of governments and individuals for the role that nuclear power can play in meeting both energy and environmental needs. On the other hand, nuclear fuel supply is in a very fragile state, and any greater demands associated with a growth in nuclear power threaten to further expose the deficiencies in the industry’s supply base. If nuclear power is to be an important part of the energy solution for the future, and I believe it is, then the issue of fuel availability needs to be addressed.

This paragraph could well describe the environment in which we currently find ourselves.  The  primary issue back then was that that market prices were not capturing the relative scarcity of uranium production needed to meet future demand, potentially presaging a large shock to uranium prices.  The issue today relates to reliance on enrichment and other fuel supplies from Russia in the aftermath of the Ukraine invasion, and the price shocks have already begun.

The abnormal nature of the market discussed in the 2004 paper related to how the market developed, particularly the major role that governments played.  Governments were necessarily involved due to their role in developing and deploying enrichment technology, initially for military purposes.  Additionally, a major aspect of government involvement was the HEU deal, which was a tremendous nonproliferation success and helped Russia make large inroads in the enrichment market.  Part of this deal involved the Ukrainian HEU that was returned to Russia.

The paper talked about “market failure,” as it was apparent to us that the spot prices published at that time were not stimulating enough uranium production to meet future demand.  While this argument may have resonated with some people, others were skeptical.  In many ways, it is easier to make the market failure argument when it comes to enrichment as the enrichment industry is extremely hard to enter, meaning that it difficult to stimulate additional supplies if there is a major perturbation in supply, no matter the price level.

This market failure could be debilitating to the future of nuclear power and, beyond this, could have serious proliferation ramifications.  If enrichment supplies are not readily forthcoming, countries may rethink their commitment to nuclear power, or they may embark on their own enrichment programs to supply their needs domestically.  It is questionable whether these internal programs would be economical or even technically feasible but pursuing them would undoubtedly delay the expansion of nuclear power.

The price upheaval mentioned in that earlier paper came, and UxC endeavored to bring more price information to the market, first by helping to create a futures market for uranium, then by publishing forward prices, and more recently by reporting daily prices.  There is no similar fix to the pricing infrastructure that will address the problem before us today.

Even though it was not its primary focus, the 2004 WNA paper highlighted the key role of enrichment, as it was clear that having adequate, economical enrichment supplies is one of the keys to fueling future reactors and underpinning nuclear power growth.  In addition, over the years we have written numerous articles, essays, and even more academic treatments stressing enrichment’s importance.  Enrichment is a resource hedge, and a healthy enrichment market can serve as a proliferation hedge.  Making the investments and ensuring the structure for this to occur was and is of paramount importance.

In the past, massive investments in enrichment were made by governments to create nuclear weapons.  Today, these investments must be made to ensure the future of peaceful nuclear energy.  Given the extra-market considerations such as energy security and nonproliferation, governments must play a key role in helping to secure future enrichment supplies.  This is especially true when it comes to newer-generation reactors which require higher-assay enriched fuel.  It does not make any sense for governments to finance new reactor designs without also making sure the enriched uranium is available to fuel them.

One of the most beneficial aspects of nuclear energy is the fuel.  Historically, it has been plentiful and dependable, it promotes energy security by its long residence in reactors, and it has even been made from nuclear weapons, making the world safer in the process.   Perhaps the greatest irony is that today nuclear power now finds itself in a situation where fuel supplies are an issue like the fuels for other energy sources, and thus the concern of fueling the future is still with us.

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Jeff Combs is founder, owner, and Chairman of UxC, LLC (UxC) and is a leading expert in the nuclear fuel market, with over 45 years of experience providing economic analysis and forecasting for the front-end of the nuclear fuel cycle. He has extensive and varied expertise, overseeing UxC market reports, providing strategic consulting to major commercial companies in the nuclear fuel industry, and advising governments and international organizations on market and policy issues. Under his management, UxC has grown to become the world’s pre-eminent nuclear fuel market information and analysis company, issuing reports and publishing prices for all front-end nuclear fuel markets. In 2007, UxC teamed with CME/NYMEX to introduce the world’s first uranium futures contract. That same year UxC began reporting on the backend of the fuel cycle. In 2018, Mr. Combs created the website to advance understanding of peaceful uses of the atom in today’s world. During his career, Mr. Combs has presented papers at a variety of nuclear industry and energy economics conferences throughout the world. In addition, he has had his work published in academic and public policy journals. Mr. Combs earned a bachelor's degree in Economics at the University of Virginia, where he also completed his doctoral course work in economics. He is a charter member of the International Association of Energy Economics and is a member of the American Nuclear Society.