Investing in the nuclear power renaissance

In March of 1979, a movie was released warning of potential catastrophe from nuclear power plant accidents. “The China Syndrome,” titled after the misguided notion that a melted reactor core could penetrate its container, scared the willikers out of audiences already concerned about public safety risks from nuclear generation.

Twelve days later, an accident occurred at the Three Mile Island nuclear plant near Harrisburg, Pennsylvania. Hyper-focused media coverage brought public paranoia. The decades-long no-nukes movement ensued, stifling nuclear power development in the U.S. and around the world.

Though experts have deemed public safety risks from the TMI event insignificant — a tiny amount of radiation was released and there were no injuries nor any real risk of a serious outcome — what happened in Ukraine in 1989 was quite the opposite.

At a Soviet generation plant in Chernobyl, a two-hour drive north of Kyiv, a reactor exploded in 1989, spewing radiation into European air currents for weeks before it was detected in Sweden, thwarting Soviet officials’ attempt to keep the accident a secret.

Like a huge dirty bomb, the crippled reactor released substantial amounts of radiation that polluted land and water for miles around, sickened plant workers, and caused immediate fatalities and early deaths, from related cancers. The accident
hardened already fearful public views of the risks of nuclear power generation, stifling global industry’s development.

Soviet Incompetence

However, Chernobyl is now widely recognized as being more a demonstration of the Soviet Union’s industrial incompetence and recklessness than a warning of the risks of nuclear generation. In “Midnight in Chernobyl,” a 2019 account based on recently declassified records of the incident, author Adam Higginbotham establishes that a disaster at Chernobyl was inevitable because of the plant’s incompetent design, construction and operation.

Fast forward to the present. As they did in 1989 (the world didn’t listen then), experts today say that nuclear power plants done right are another matter entirely, with manageable risks and negligible chances of serious accidents. Advancing this view are new, safer plant designs that reduce or eliminate the potential for malfunctions from operator error.

Decades after Chernobyl, public opinion about nuclear generation has reversed. Various U.S. and global surveys show a marked decrease in public opposition to nuclear power over the past 10 years, according to the World Nuclear Association. In one survey in 2023, about 70% of respondents strongly favored nuclear generation.

Now that its public image as disastrous is in the rearview mirror, nuclear power generation is undergoing something of a global renaissance, with about 60 generation plants operating on American soil. Currently, about 20 applications for reactor permits are pending with the federal Nuclear Regulatory Commission.

The European Union, intent on diversifying power sources to lessen dependence on Russia for fossil fuels, has plans for new nuke plants that are proceeding apace, coming in addition to the dozens of plants currently operating on the Continent.

As demand increases significantly in the U.S., power generated from natural gas, coal and renewables (wind and solar) is being gobbled up at an increasing rate by power-thirsty data centers running artificial intelligence applications. And consumer demand is rising from overall economic growth, electric vehicles and a consumer culture centered on rechargeable items to do just about anything.

Investable Now

Despite the long lead times for nuclear plant siting, permitting and construction — permit approvals alone can take years — the industry is highly investable today in a market keen on nuclear plant and tech investment.

Through initiatives including the Department of Energy’s Gen III + SMR (small modular reactor) Program, the federal government is fostering nuclear plant innovation and supporting advanced plant designs with new passive safety features and modular reactors that fit on trucks. These initiatives have come as public attitudes toward nuclear generation have grown more approving over the last several years.

Such federal initiatives are fostering new technologies and spurring start-ups, including one backed by Bill Gates (TerraPower). Other new ventures directly or indirectly involve established, larger companies, including GEHitachi, a joint venture involving General Electric spinoff GE Vernona and Hitachi, which is working on SMRs; and Holtec International (which has plans to go public).

More pertinent to individual investors are the various public companies developing a toehold in the burgeoning nuclear generation industry. Some have elevated valuations, as they’re probably ahead of the market, while others are quite profitable from conventional generation that generates cash for investment in nuclear. Yet other companies in this space are profitable.

Public companies wholly or partially into nuclear power include: Cameco Corp., a uranium supplier that’s starting to benefit from restrictions on Russian imports; GE Vernova, a top performer in general utility stock funds in recent years; and Constellation Energy, another nuke/conventional power company that has gone great guns in recent years, but had substantially priced downward in recent months, as of early February.

Image Rehab

Three Mile Island, once a poster site for public nuke paranoia, is now a sort of symbol of nuclear power’s rehabilitated public image. In a deal to provide power to Microsoft, Constellation has taken over the long-mothballed Three Mile Island plant, with a restart scheduled for next year. This private generation arrangement is one of several involving behemoth tech companies seeking lots of power for data centers and other uses without the PR complications of using public utilities as household power bills rise.

Most, if not all, of the nation’s major power companies are into or getting into nuclear generation. These include some good dividend payers. Duke Energy, which generates 30% of its total power from nuclear, has an annual dividend yield of 3.8%; NextEra Energy, 20% of whose power comes from nuclear, pays a dividend yield of 3.2%; and Dominion Energy, with 26% of its power from nuclear, paying a whopping dividend of 4.8%. So, these mixed-generation companies are paying investors good income while they wait for shares to rise.

Investors can get exposure to the broad nuclear industry, with reduced risk from diversification, from exchange-traded funds (ETFs), including:

VanEck Uranium + Nuclear Energy ETF (NLR). This fund tracks uranium miners, nuclear fuels, nuclear plant component manufacturers, nuclear plant development firms, nuclear engineering services and conventional generation companies getting into nuclear. NLR’s share price increased more than 28% in the six months ended Jan. 30.

Range Nuclear Renaissance (NUKZ). This fund’s holdings are similar to those of NLR, but its industry exposure is a bit broader, as it also tracks pick-and-shovel plant component manufacturers and related aerospace companies. NUKZ has a six-month gain of nearly 16%.

The U.S. demand-supply scenario is so tenuous that opposition to nuclear is highly unlikely to resurge. Severe strain on existing sources and the grid their electrons travel on is so severe that there’s been talk of the prospect of planned, rotating outages in some regions, reminiscent of the limited power supplies in developing nations.

This scenario would of course be anathema in America, where everyone takes it for granted that flipping a switch will produce light, 24/7. Even a remote prospect of planned outages supports the case for increased capacity via nuclear power.

Fusion Down the Road

Currently, nuclear power is generated from fission, established technology that produces power by splitting uranium atoms, which hold massive amounts of inherent power compared with other elements. Fission is the process that most people think of regarding nuclear energy. (The atomic bombs dropped on Hiroshima and Nagasaki in 1945 were fission devices.)

In the distant future, a completely different kind of reactor may be commonplace—those that generate power from nuclear fusion. Fusion releases massive amounts of energy when the nuclei of two atoms are joined (or fused) together. This is the kind of energy released by stars, including our Sun.

Fusion is regarded as a much cleaner process, creating far less waste than fission and, theoretically, no carbon emissions. Various startups are working to develop fusion technologies, and plans are under way for the first fusion plants, including one sited in Virginia.

But so far, direct investment in this technology is basically limited to institutions and elite individuals with access to private equity. While fusion power is down the road, fission is here now.

Some of the older individuals investing in it today probably never would have thought this likely decades ago, when attending no-nukes concerts and protesting nuclear plants as tools of the evil “establishment.”

Dave Sheaff Gilreath, CFP,^® is a Partner Advisor at Sheaff Brock Investment Advisors, powered by Allworth Financial LP, an investment advisory firm registered with the SEC. Investments mentioned in this article may be held by Allworth Financial, affiliates or related persons.