Megatons to Megawatts – For the Moment

Because of the upcoming (possible) legislative debate over the fate of Vermont Yankee nuclear power plant (VY), I’d like to discuss the issue of nuclear fuel. I hear a lot of discussion about operational safety and waste disposal, both of which are vital issues. Nevertheless, before we get to either of these issues somebody has to make some fuel rods out of Low Enriched Uranium (LEU) and get the nuclear reaction going. It could be a problem in the near future.

The worldwide nuclear power industry uses roughly 65,000 tonnes (funny spelling = metric tons) of uranium oxide annually. The problem lies in the fact that not all of this uranium is actually dug out of the ground on a year-to-year basis. About 13% of it comes from recycled nuclear weapons.

Back in 1993 the United States and Russia agreed to take the leftover Highly Enriched Uranium (HEU) from the downsizing of their nuclear arsenals and blend it down to LEU for use in nuclear power plants. The HEU, between 10% and 90% U-235, is mixed with depleted uranium or minimally enriched uranium to reach a concentration of 4-5%. The U.S. and Russia each contracted a reprocessing company to do the job and the uranium market was soon glutted with the stuff. Uranium prices were held below $20/lb till 2004.  New exploration for uranium came to a near halt.

Just for a sense of scale, the word from the World Nuclear Association is that “the blending down of 500 tonnes of Russian weapons HEU will result in about 15,000 tonnes of LEU over 20 years. This is equivalent to about 152,000 tonnes of natural U, or just over twice annual world demand.”

So, here we are approaching 2013, which happens to be the end date for that treaty. It raises several problems, including a possible interim shortfall due to a lag in resource development, a possible price spike, and issues with country of origin.

The first problem is the interregnum in the development of new mines and some glitches in the operation of existing ones. From 1985 to 2004, there was nearly zero mine development. Since the uranium price spike of 2007, nearly $140/lb., there has been more activity, but not sufficient to make up the loss of HEU-sourced fuel. Meanwhile, a flood in a major Canadian mine and a fire in an Australian mine have cut production and forced a larger drawdown of stockpiles.

The loss of the surplus military contribution to worldwide uranium supplies would undoubtedly cause another price spike. I wouldn’t presume to even ballpark the magnitude right now, what with the jumble of political and economic factors. I should note that fuel cost is only 9% of the cost of nuclear plant operation, but balance that with the fact that the price of uranium shot up by a factor of ten from 2003 to 2007. It has settled back to the $40-$55 range for the past couple of years.

So where does uranium come from? Right now, Canada and Australia each account for about a quarter of world production, with Kazakhstan coming third at about 15%. The U.S. share is about 3%. As stated above, 13% comes from the U.S./Russian weapns recycling. Canada’s production has been declining since 2001 and the U.S. peaked in 1980. Australia has restrictive laws on uranium mine development and may or may not decide to expand its largest mine in 2010. The real player in the longer term looks to be Kazakhstan. Do we really want to be dependent on Kazakhstan for our power prices? Kazakh President-for-life Nazarbayev would like that.

At the moment the U.S. uses just under 19,000 tonnes of uranium a year and produces 2,000 tonnes. We are the world’s biggest consumer of nuclear fuel. Of the next six top consumers (France, Japan, Russia, Germany, South Korea, and the U.K.) only Russia produces more than it consumes. The rest produce no uranium, or almost none in the case of Germany. In the international market, China and India are competing for long term contracts as they plan the expansion of their nuclear power industries. It’s looking to get messy when the military supply dries up. Even the World Nuclear Association, which one would assume to take an optimistic position, predicts a dropoff in world uranium production after 2015. The most optimistic rational scenario I have seen puts peak uranium in the year 2020.

This brings me back to Vermont Yankee. If the legislature approves a relicensing in 2012, how many years of operation would we get out of it before uranium prices make it uneconomical? Two? Three? Eight? Geology is inexorable. It just doesn’t care what we want, and it disappoints us more often than not. All safety considerations aside (and that’s a long distance aside) the fuel supply issue seems like a bad gamble.