More Nukes!

Reddit

William “Willie” Sutton (1901–1980) was a notorious American bank robber. According to FBI records, he stole over $2 million during a criminal career that spanned 40 years. To be sure, Sutton got caught on numerous occasions, and thus did he spend over half his adult life in prison.

But Willie Sutton was as intellectually honest as he was criminally dishonest. When a news reported asked Sutton, “Why do you rob banks?” Willie answered, “Because that’s where the money is.”

In his biography, Where the Money Was: The Memoirs of a Bank Robber, Willie Sutton expanded upon this perspective. He said, “Go where the money is… and go there often.” Similarly, as an investor, I pursue a similar philosophy: Go where the natural resources are…and go there often.

In a world with growing population, growing prosperity, increasing demand and decreasing availability of energy and mineral resources, there have to be great investment opportunities in these resources. Indeed, that’s where the money is. We should go there, and go there often.

In the energy sector, different fuel sources contain different amounts of energy per mass. That is, if you burn a block of wood, you’ll get a different amount of energy than if you burn a gallon of gasoline or diesel fuel or a pound of uranium. These differences influence the investment appeal of each fuel source.

The table below presents the energy density of various fuel sources in terms of megajoules of energy per kilogram. A megajoule — MJ — is 1 million joules, or approximately the kinetic energy of a 1-ton vehicle moving at 160 km/h (100 mph).

All Fired Up

The point is to show that if something has a high energy density, then less physical material will release the same amount of energy. You can see why, for example, old wood-burning locomotives and steam engines gave way to coal-burning equipment. And the coal-burners eventually yielded to diesel engines. You just get more energy from the same volume of material, which matters when you’re in the confined spaces of a moving piece of equipment.

It’s obvious, based on the raw numbers, that uranium — and by extension nuclear power — can supply energy with a density that’s orders of magnitude more than what you get from carbon-based fuels. With numbers so utterly lopsided like these, the world is going to find it impossible to support massive populations and deal with resource and energy demand without a global nuclear power industry.

The long and short of it is that the world is going to move toward nuclear power. That’s why I have recommended investments in long-term uranium players like Cameco (CCJ: NYSE), and Denison Mines (DNN: AMEX), as well as direct investments in uranium via Uranium Participation Corp. (U: TSX).

What about alternative energy sources, you ask? What about solar and windmills, for example? Every energy method has its uses and attractions. But the energy density of solar and wind is quite low. Sure, solar and wind have a place in many niche energy applications, but not for meeting the looming energy demands of billions of people.

For the next 30 or 40 years, the alternative energy methods will move toward the 5–7% range of overall world energy supply. But for the “big power,” you need to keep focused on nuclear energy.

Regards,

Byron King,
for The Daily Reckoning Australia

Byron King
Byron King currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University. Byron is also co-editor of Outstanding Investments.
Reddit

Comments

  1. Except at current usage rates known uranium reserves will be depleted in 80 years. Which i guess means it will get more expensive. It also means not that many businesses will be building reactors.

    Reply
  2. As an aside to the above, it’s worth noting that no business has ever really built and run reactors. They have ALL been government subsidised.

    Reply
  3. While it makes for an interesting comparison, I’m not sure if that’s the best way to compare energy sources. A more traditional method is to look at dollars required for each MW of generation capacity.

    If you have a look at the latest version of these figures, I think you’ll find, in Australia at least, that coal fired thermal energy is still the cheapest form of energy. Nuclear power is further up the scale and renewables like solar and wind are the most expensive. That’s not to say it will always be like that, as the technology matures the $/MW will decrease for the renewables.

    Nuclear looks great in the above table but the extra infrastructure required to install it pretty expensive. Food for thought…

    Reply
  4. Its true that coal looks cheapest now, but dare I mention the externality that currently (I believe) isn’t factored into that price?

    Reply
  5. Do you mean the rocket fuel required to ship a few million tonnes of waste to incinerate in the sun’s corona, Chris? A mere trifle.

    I suspect it’s included in QE2… .

    Reply

Leave a Reply

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au