THE SQUEEZE IS ON, page-4

Sorry guys,had another brain fart! Apologies for the missing spaces, it happens when youcopy from Word to Hotcopper.

SMR’s! Thecoming revolution? And what might it mean for U demand?

As we allknow many people and investors are quite exited about the potential for SMR’s(and MMR’s) and the impact they might have on the future energy landscape ofthe globe. News about investments in this technology both from Industry andGovernments keeps coming and there are currently dozens new designs in progressin 19 countries. There are also more and more specific plans for large projectsusing SMR’s to replace coal power plants around the world.

This on theface of it is quite curious since there is currently not a single commerciallybuild SMR functional anywhere. So why the excitement and apparent confidencethese Small Modular Reactors will deliver? Well there have actually been SMR’sactive for many decades…Just not commercial ones but military ones. In 1955 theUS launched the USS Nautilus, the first Nuclear power submarine and in 1961 theUSS Enterprise was the first Nuclear powered aircraft carries on the high seas!Several other countries have since build nuclear power military vessels. SMRtechnology works and it has a successful track record of over 60 years of saveand reliable operation.

So what arethe benefits of SMR’s and MMR’s over the current full scale Nuclear reactors?There are several. I will go into a couple of the most important ones below.

1: Muchshorter build times and much lower unit cost.

Its hard tooverstate the importance of this benefit over full scale reactors. Buildingfull scale 1GW reactors requires huge upfront costs (Minimal about $5 BillionUSD but can go over $10 Billion USD in certain Western countries) and buildingtimes vary from an absolute minimum of 5 years to over 15years but averagingabout 10 years. There are big down sides to this.

From apolitical point it require long term thinking (Vision if you will) to ask yourpeople to make a huge investment now to only see the benefits a decade in thefuture. In democratic countries with elections every 4 or 5 years this meansany government making such investment won’t see the benefits of these decisions(and the political capital that comes with it) unless they reelected at leasttwice! This a major reason many countries haven’t gone this way.

The longbuild times also exposes these projects to major economical and politicalrisks. Like today we are seeing significant inflation blowing out projectedcosts on many projects. When you project takes a decade that is a big risk! Alsointerested rates (or lost return on capital) are quite significant over adecade. Many Nuclear reactors went into construction only to be mothballed whenan anti Nuclear government was voted into power. Basically billion were wasted!

SMR’scurrently under development have estimated build times of around 2 years. Andbecause they are smaller they may only cost a couple of billion. An newlyelected government can now order and SMR and see the benefits of this by theend of their term! And at much lower risk. The lower initial investment andlower risk also opens up Nuclear power to smaller and poorer countries or evento big companies or organizations that might not be able to come up withbillions but can afford to buy a smaller and cheaper SMR.

2: Smallersize

SMR’s willrange from about 50 MW to 400MW and below that they are called MMR’s whichcould even be smaller then 1 MW.

Thissmaller size means many towns, cities or islands and or projects that couldnever consider building a full scale reactor because it would provide way morepower then required, can now actually consider an SMR. This literally opens upthousands or locations and projects for Nuclear power!

Full scalereactors also pump out so much electricity that it requires a very robust grid.When these are build new it usually require quiet a bit of upgrading of thegrid which obviously is b extra cost and inconvenience. SMR’s on the other canbe ordered to size and can be made perfectly compatible with any local grid….Toreplace a coal power plant as an example! This saves loads of money and makesthe transition to Nuclear very smooth. Plug in the SMR and turn of the coalpower plant. No more pollution and zero inconvenience to your population. Bob’syour uncle!

3: Poweroutput flexibility, compatible with Wind and Solar.

Full scalereactors are like ocean steamers…Once they get going they are hard to slowdown. They are designed to put out a constant stream of power 24/7. Which greatuntil you add lots of very variable Wind and Solar. Now you are essentiallyproducing way to much power on a sunny and windy day which is just wasted and may even overload the grid!

SMR’s inmany cases will be able to cycle up and down its power output with peakperformance often well above its intended output (a 300 MW reactor might beable to produce 500MW for say 6 hours without issue) and very little outputwhen it isn’t needed. This makes them very compatible with grids that have lotsof Wind and Solar….When these are performing the SMR is in rest mode and when it’s a wind still evening and everyone is running their Aircon it can pick up the slack.

4: mobility

You can’tship or drive around a 1 GW nuclear reactor. They are build and stay there tillthe end. But SMR’s can be build on barges or even be small enough to be put ona truck. This is already being designed. This again opens up new markets forNuclear power previously not accessible. Countries or energy companies can haveseveral of these on standby and use them when needed for emergencies or forflexible purposes. Just imagine the possibilities…Say you have coastal dessert area’s that at times require desalination water but at other they don’t. You could simply ship around floating Nuclear power desalination plants to paces where they are needed. And there are many such possibilities. Ukraine could have done with some mobile SMR’s over the last year.

These aresome of the reasons why SMR’s are quite possibly going to be huge.

But itsearly days and it’s next to impossible to predict the uptake of thistechnology. So I will run 3 different scenario’s as examples of what mighthappened and what this would mean for demand.

I am goingto assume that 1 GW of power from SMR’s will consume about the same amount ofUranium as a regular full scale reactor which is about 450.000 lbs per annum.

Most of theSMR’s currently being designed will be fueled by Haleu which is about 20% U235vs regular fuel which is 5% U235. This means SMR fuel contains much more energyand some SMR’ may run 15 or 20 years without requiring a refuel…. Nuclearsubmarines are build with a reactor that lasts the life of the submarine! Forour example we are going to assume an average refuel time of 10 years. Thismeans that when the SMR starts it requires 10 year worth or uranium!

We assumeSMR’s start to become a factor in 2030 and we go all the way out to 2049(20years). I all scenarios we assume a start of 1 GW in 2030 and a ramp up till2039. Then it levels off with a constant addition till 2049.

Please note:The demand I am referring to will be as actual fuel. Uranium demand is inreality much earlier. Probably at least 5 years earlier (longer fuel cycle, somefuel reserve held by utilities). So 2030 fuel demand is actually 2025 Uraniumdemand!

Scenario 1limited uptake of SMR’s: Year 1: 1GW, Year 10: 5GW and Year 11 through 20 5 GW added per annum! (Detailed added per year 1 through to year 10 (2030 through to end 2039). 1, 1, 1.5, 1.5, 2, 2.5, 3, 3.5, 4, 4.5, 5)

Demand year1: 4.5million lb

Demand year10: 22.5million lb

Demand year20: 45million lb

Totalinstalled capacity at the start of 2050 is 79.5 GW

Scenario 2reasonable uptake of SMR’s (base case): Year 1: 1GW, Year 10: 10GW and 10GWadded per annum through year 11 to 20. (detailed: 1, 1.5, 2, 3, 4, 5, 6, 7,8.5, 10)

Demand year1: 4.5million lb

Demand year10: 45million lb

Demand year20: 90million lb

Totalinstalled capacity at the start of 2050 is 148.5 GW

Scenario 2wide uptake (bull case): Year 1: 1 GW, Year 10: 25GW and 25GW added per annumthrough year 11 to 20. (detailed: 1, 2, 4, 6, 9, 12, 15, 18, 21, 25)

Demand year1: 4.5million lb

Demand year10: 112.5million lb

Demand year20: 225million lb

Totalinstalled capacity at the start of 2050 is 361 GW

To put someperspective on these numbers.

Currentglobal nuclear output is approx. 395 GW. This is just over 10% or global energyneeds (10.3%). Energy needs by 2050 are expected to be 50% higher than today. Sojust under 6000 GW. Even in the most bullish scenario SMR’s would only providejust over 6% of global energy by 2050.

The USestimates it requires 550 to 770 GW of new and clean power to complement thedeployment of variable renewables with the current aim to add 200 GW of Nuclearpower by 2050. And the US has been focusing mainly on new advanced Nucleartechnology. There appears to be little talk about adding new full scalereactors nor do there appear to be any in an advanced stage of planning. Thereis however talk about replacing more than 500 coal power plants with SMR’s. Soa large portion or even nearly all of the added capacity may come from SMR’s.So the potential of nearly 200GW of SMR’s to be deployed in the US ALONE!

Even in thebase case (Scenario 2) do we need 1/3 of current global Uranium production by2035 just to supply SMR’s! First demand is highly likely by 2025 (possiblyearlier!) and this demand will come on top of many other forms of demand wehave gone into previously.

Consideringthe benefits of SMR and that there are now so many new designs being developedwith large sums of money flowing into the space and what appears to be greatinterest in deploying these SMR by many large countries I don’t think scenario3 is particularly unlikely.

Thepotential impact from SMR’s and MMR is rapidly growing and has the potential toadd to Uranium demand very significantly and from as early as 1 or 2 years inthe future. It is currently not or hardly factored in in most projections.

As a noteof caution: Despite all the brilliant news its still early days in the SMR andMMR space. Many things can still happen in energy in general, world economicconditions or in SMR design that could impact Uranium demand also on a per GWbasis. This is just to be taken as an early stage projection.

Thanks forreading and apologies for the long winded piece!