The Long-Term View
We remain confident in the long-term fundamentals of the nuclear industry, despite the near- to medium-term challenges. Our industry is driven by demand for energy, which continues to grow as a result of continued increases in world population and industrial development. The 2013 World Energy Outlook predicts that, by 2035, electricity consumption will have grown by about 70% from current levels. Most of this energy will be used by developing (non-OECD) countries as their populations and standards of living increase.
New reactor outlook
Within this context, most countries are pursuing a diversified approach to energy growth, with an emphasis on energy security and clean energy. Nuclear power can generate baseload electricity with no toxic air pollutants, carbon dioxide (CO2) or other greenhouse gas emissions. It has the capacity to produce enough electricity on a global scale to meet the world’s growing needs, and while it is not the only solution, it is an affordable and sustainable source of safe, clean and reliable energy. As a result, we expect nuclear energy to remain an important part of the energy mix.
In 2013, four reactors were connected to the grid (three in China and one in India), offset by the closures of four reactors in the United States. Construction commenced on 11 units during the year: four in the United States, four in China and one each in the UAE, South Korea and Belarus. Power uprates added about 645 megawatts of capacity to existing units.
Today, there are 433 operable reactors with a total generating capacity of 394 gigawatts. Over the next 10 years, we expect the number of reactors to grow to 526, with the startup of 144 units, offset by 51 closures. That represents generating capacity of about 514 gigawatts by 2023, which translates to an average annual growth of 3%.
Of this growth, approximately 70 reactors with 75 gigawatts of generating capacity are under construction today. This is a significant rate of growth in new reactor construction. At the end of 2013, China continued to lead the growth with 29 reactors under construction. India, Russia, South Korea and the United States are also progressing in the expansion of their nuclear fleets. Of the 70 reactors under construction today, if startups occur as planned, 50 of those units (53 gigawatts) will be online over the next three years.
In the UK, the government is maintaining its commitment to nuclear energy as a source of emissions-free energy. Critical milestones have been reached, allowing potential vendors to move forward with new build plans. In addition, several previously non-nuclear countries are moving ahead with their reactor construction programs or considering adding nuclear to their energy programs in the future. Construction work continues on two of four planned units in the UAE that will supply 5.6 gigawatts of nuclear capacity by 2020. Turkey is also moving forward with plans to build eight new reactors at two different sites. Belarus, Saudi Arabia, Vietnam, Bangladesh, Poland and Jordan are also moving forward with plans to proceed with nuclear power development.
Demand for uranium is growing
Not surprisingly, as the number of reactors grows, so too does the demand for uranium. Over the next decade, we expect world demand to grow at an average annual growth rate of about 4%, totaling approximately 2.2 billion pounds from 2014 – 2023. As a result of that growth, by 2023, we expect annual world consumption to be approximately 240 million pounds, plus about 20 million pounds per year for strategic inventory building, totaling 260 million pounds of world demand.
While demand is expected to increase over the next decade, many producers have announced delays and cancellations to their projects, which could have an effect on the longer term outlook for the uranium industry. Complicating the supply outlook further is the possibility of some projects, primarily driven by sovereign interests, moving forward in the near term despite market conditions.
We estimate roughly two-thirds of global uranium supply over the next 10 years to come from existing primary production—mines that are currently in commercial operation—and about 15% to come from existing secondary supply sources. However, most secondary sources are finite and will not meet long-term needs. One of the largest sources of secondary supply is uranium derived from the Russian HEU commercial agreement, which came to an end in 2013, removing about 24 million pounds per year from the market. This volume is more than our current total annual production.
The result is that we estimate about 20% of supply will need to come from new sources at a time when new projects are being delayed or cancelled because of current market conditions. The situation is exacerbated by barriers to entry and lead times for new uranium production being as long as 10 years or more, depending on the deposit type and location. As conditions continue to evolve, it is important to keep an eye on supply.