Ha! Amazing how things come together. On Tuesday I was reviewing one particular part of Tony Seba’s book, Clean Disruption of Energy and Transportation.
Tony does a stonking job of demolishing the argument for nuclear power. This book was written in 2014.
He shows quite clearly that nuclear plants are astonishingly expensive to build, have staggering costs to run and maintain, plus rely on government subsidies and ‘externalising’ their waste problem.
Seba mentions two nuclear power plants in the book that were given the go-ahead at the time. They were due to be finished in 2019. I went and looked them up. They’re still not finished now.
But an article in today’s Financial Times really makes me laugh. In Ohio the governor signed into a law, a bill that gives nuclear plants there $150 million a year in subsidies from surcharges on electricity customers.
A politician in Ohio is implicated in a $60 million lobbying fund to get the nuclear subsidies through the legislature. $400,000 apparently went to his ‘personal expenses’.
Why the shenanigans? Because these nuclear power plants face low-cost competition from cheap gas, plus wind and solar!
What a clear demonstration of how solar and wind are upending the traditional energy system. This is not just a climate issue. It’s an economic issue.
This is interesting in the context of the bull case for uranium stocks on the ASX. There’s plenty of momentum brewing here for this.
And it may be valid in the next 12 months or so — existing power plants do need to run.
Potential ASX Uranium Rally…
Sector rallies happen every year on the ASX. Uranium could be one for 2020. By all means ride it while it lasts.
But don’t delude yourself into thinking it’s a long-term proposition. Nuclear power is already technologically and economically redundant.
We also have to be very careful too when we see stats saying X number of plants will be built by X. Plans change.
There are also other absurdities that appear. Coal plants in China are another example. China is building quite a lot of them. This beefs the arguments of those that maintain coal is a long-term investment proposition.
But then you see articles like this from The Economist recently. See this quote…
‘Lately coal power plants have been able to sell less than half the electricity they are able to produce, down from 60% a decade ago. But local governments see any big construction projects as a potential boost to growth. Some also have coal mining industries to protect.’
You see? Rational capital allocation is not always driving these decisions. A lot are political — and therefore idiotic.
The great news is that renewable power and cheaper gas are bringing down costs for Aussie consumers and business.
The Australian Energy Market Operator said yesterday that wholesale electricity prices were down to the lowest level since 2015. It was more than a 50% drop in price!
That’s good news for Aussie consumers and business. Whether or not that’s going to be enough to offset all the other pressures elsewhere, remains to be seen. I doubt it.
But it will benefit individual companies like miners that are getting good prices for their output and having this lower their costs.
Also, check out something else. Nokia is partnering up with a couple of miners to use its 5G capabilities to help them automate deep underground mining.
We’re heading into a world where robots extract deep deposits. Future mines are highly likely to have renewable energy powering them too.
My colleague Shae Russell says these developments are turning mining into a new ‘tech play’. It certainly has the potential to make Australian gold miners even more staggeringly profitable than they are now.
Editor, Profit Watch
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