Main Image Credit Strained supply: the mining of raw materials for the nuclear industry is concentrated in only a few countries. Image: rich lasalle / Alamy
With growing geopolitical competition over the uranium cycle, the UK must take action now to ensure its stability of supply.
Since the end of the Second World War, the UK’s electricity generation and infrastructure has been built around fossil fuels. This system has faced two energy crises: in the 1970s, when the Arab oil-producing countries sought to embargo oil supplies; and the oil price shock of 1990 in response to the Iraqi invasion of Kuwait. In both cases, the UK failed to diversify its fossil fuel supply away from unstable countries. In contrast, France embarked on a large reactor build programme from the 1970s and, as a result, largely decarbonised its energy industry in the process, laying the foundations for its current energy independence.
The full-scale Russian invasion of Ukraine in 2022 has precipitated a third major energy crisis. This time, however, the nature of the crisis is different. Russia’s efforts to deploy energy as a weapon are taking place as the international community is aiming to replace fossil fuels as the primary source of power generation to counter climate change. Currently, 60% of worldwide electricity production is derived from fossil fuels. With the shift to renewable supplies, electricity demand is forecast to double by 2050. Thus, not only are fossil fuels being replaced with the generation of electricity, but electricity is becoming one of our primary energy sources. To achieve these goals, nuclear power represents the only affordable, reliable, sustainable and green solution, but a UK shift to nuclear power faces major challenges.
The Need to Boost Uranium Supplies
Uranium is a silvery-grey metallic element that is widely used to fuel the nuclear reactors which currently generate 10% of global electricity. As countries around the world seek to transition towards more sustainable energy systems that rely on electricity, the demand for nuclear energy is expected to double by 2040.
The graph below shows there are plenty of uranium projects to fill the demand gap, but there need to be higher prices to incentivise the necessary investment and development. Creating the right conditions to increase supplies is, however, threatened by the growing geopolitical competition over the uranium cycle.
The Geopolitics of Nuclear Energy Supply Chains
As the UK looks to rebuild its nuclear industry, it faces critical challenges as a result of the growing international confrontation and competition over energy issues.
The mining of yellowcake, the raw material for the nuclear industry, is concentrated in only a few countries. With demand expected to almost double by 2035 according to modelling by Curzon Uranium, the importance of these countries for energy supply chains is increasing significantly.
Kazakhstan is currently the world’s largest producer and delivers about 40% of global supplies. A significant proportion of this production is held in joint ventures with Russian and Chinese interests. Recently, Russia’s Rosatom purchased the Budennovskoye project – the largest new deposit in Kazakhstan – representing about 7% of world supply, or 15Mlbs per annum. In 2022, the Chinese firm China General Nuclear bought another Kazakh project, Ortalyk.
The dependence on Russia for nuclear fuel is causing widespread concern about strategic vulnerabilities, and points to the urgent need to diversify away from supplies controlled by hostile states
The concentration under the control of Moscow and Beijing of high-quality assets in the key supplier states represents a substantial threat to the West’s ability to ensure its supplies. While several other suppliers exist, notably Namibia and Niger, they have proven to be unreliable in the past and do not represent free tonnes due to the domination of foreign state companies.
The Tightening Supply Crunch
Historically, the mined uranium concentrate Yellowcake (U308) has only met two thirds of nuclear fuel demand. This chronic undersupply has been masked by the constant supply from existing inventories. These reserve sources are finite, however, and are predicted to decline drastically over the next decade just as there is a significant deficit of primary supply.
The limited supplies and dwindling reserves are having an important impact on markets. In the last couple of years, the price of Yellowcake has roughly doubled, and the war in Ukraine has only exacerbated the supply issue. These developments further underline the need to secure a sustainable Western-focused supply chain.
The West Does Not Control Uranium Processing
The conversion, enrichment and fuel production of uranium is dominated by Russian and Chinese companies. Russia especially uses its power and influence in a geo-strategic way by helping other countries to build and supply a full-service power system.
Russian firms currently play a vital role in the nuclear energy programmes of Slovakia, Bulgaria, Hungary and Finland. They continue to supply vital fuel to these EU member states even as the war in Ukraine goes on. But the EU is not alone. More than 20% of the supply of enriched material to the US comes from Russia.
Since the war started, the price of enriched material has risen fourfold as a premium for the risk of being reliant on Russia. Reflecting the dependencies and the difficulties of supply, during the war, enriched uranium has regularly been flown to Slovakia, Bulgaria, Hungary and Finland. It is notable that the dependence on Moscow means that despite the war, there are no sanctions on Russian nuclear fuel. This situation is causing widespread concern about strategic vulnerabilities and points to the urgent need to diversify away from supplies controlled by hostile states.
Although the sums earned by Russia from the nuclear business are not significant in comparison to oil, Moscow’s global role in nuclear power is important to understand. Russia is currently building nuclear power plants in India, Turkey, Egypt, China and Bangladesh, and has many more projects in the pipeline. When Rosatom designs, finances, operates and delivers nuclear power plants to various developing countries around the world, it clearly raises questions about the political and security influence that may accrue from such dependencies. Because nuclear power plants can operate for up to 80 years, this strategy is likely buying Russia long-term influence, just as has become apparent with the way Moscow has sought to manipulate gas supplies to Germany for political purposes.
The move away from nuclear power at this key moment is short-sighted and is creating a major strategic vulnerability in Western energy systems
China is currently constructing 22 large reactors. It has plans to build up to 150, increasingly the share of electricity generated by nuclear sources from 4% currently to 18% by 2060. China is structurally short on Yellowcake and has been investing in mines in Africa and Canada, as well as trying to increase its production in Kazakhstan. In the last 10 years, it has been a major buyer in the market, aiming to significantly increase its strategic stockpiles of uranium. The reality is that China is forging ahead with building power stations, upgrading its grid, investing in mines and stocks, and building fuel delivery. China’s domination in this area is a similar situation to other strategic sectors, such as battery metals and rare earths.
Europe, with the exception of France, is failing to keep up and falling behind just as nuclear is likely to become more important. Germany has closed its last nuclear plant and is importing French nuclear-generated power. To ensure its electricity supply, it is forced to burn highly pollutive lignite coal. Scotland has decided not to build its nuclear capacity, and will no doubt import from the UK. Spain has vetoed uranium mining. The move away from nuclear power at this key moment is short-sighted and is creating a major strategic vulnerability in Western energy systems.
The UK Needs a Comprehensive Nuclear Supply Chain Strategy
As the tide drops, those unprepared will find themselves marooned on the global undersupply of uranium. The UK risks finding itself vulnerable to these changes unless it takes urgent action. The US, which is dependent on external sources for 90% of its supplies, is promoting the development of domestic mining and building up a national strategic reserve.
China has always taken a long-term, strategic approach to controlling the supply chain and ensuring energy self-sufficiency. In the UK, in contrast, the focus continues to be on championing free markets as the basis for energy security. In the shifting geopolitical and geo-economic environment around uranium supply, such an approach is no longer viable for ensuring the delivery of such an important pillar of the national electricity supply. Vulnerabilities in this sector are even further amplified when the ownership of the UK’s critical utilities is dominated by state capitalist firms, whether French, Chinese or Russian.
We need to start by taking a page out of the China and Russia playbook in realising that energy self-sufficiency is the backbone of a stable government and a strong economy. The UK should promote, in partnership with its allies, a concerted effort to build political will and funding to regain control of the fuel cycle. There is an important opportunity to assert a leading position in the development and construction of small modular reactors. Alongside these steps, the stockpiling of nuclear fuel is a matter of urgency. Further, we need to build our domestic conversion and enrichment capacity.
With intensifying competition for control of the uranium cycle, we cannot rely on others for our national energy security and should use this opportunity to promote our expertise to influence and do business abroad. The UK has a lost history of nuclear excellence that needs support. We should see this challenge as an opportunity to reinforce a vital component of our stability.
The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.
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Senior Associate Fellow; Founder and Chairman of the Curzon group of companies