Not So Energy-Independent After All

 | Nov 23, 2012 | 1:15 PM EST  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

shaw

,

so

,

scg

The nation's electric-power system is not completely energy-independent. According to the Energy Information Administration (EIA), 99% of all electricity produced in the U.S. is oil-free, including electric power produced for Alaska and Hawaii. But the fact that the nation's power is oil-free doesn't mean the U.S. hasn't needed to import other fuels.

The villain is the nuclear-power industry, as it's the only power producer that's dependent on foreign fuels. According to EIA, 91% of nuclear fuels delivered to commercial nuclear power plants have originated from foreign sources.

I was wrong when I argued U.S. electricity is virtually energy-independent. It is not. In 2011, nuclear power accounted for 19.3% of the nation's electric-power production. If 91% of the fuel has come from foreign sources, then U.S. power is 82% energy independent -- not 99%, as I previously suggested.

Imported nuclear fuels originate from diverse sources. According to EIA's 2011 Uranium Marketing Annual Report (PDF), 40% of all nuclear fuel delivered in 2011 originated from Kazakhstan, Russia or Uzbekistan. Approximately 31% originated from Australia or Canada. Some 20% originated from Brazil, China, Malawi, Namibia, Niger, South Africa or Ukraine. The remainder originated from domestic sources.

In 2011, purchases of uranium from foreign sources totaled 54 million pounds with a weighted-average price of $54 per pound. At the same time, domestic suppliers sold 17 million pounds of uranium to foreign sources at a weighted-average price of $49.05 per pound.

It's not just nuclear fuel. It's also nuclear components. Most large forgings associated with new reactor vessels, and related equipment, originates from Japan.

Shaw (SHAW) is currently constructing four nuclear power plants for Southern (SO) and SCANA (SCG), and these use Westinghouse Electric Company's AP1000 technology. Westinghouse's majority owner is Toshiba. Westinghouse's minority owners, among others, are Ishikawajima-Harima Heavy Industries and Kazatomprom, Kazakhstan's national uranium company.

Of course, a large domestic component is associated with the new nuclear plants under construction in South Carolina and Georgia. Skilled labor is needed to build structures and to assemble components -- and, altogether, that labor will likely constitute a significant percentage of the facility's total capital costs. Even after the units are built, utilities will employ hundreds of highly skilled labor to operate and maintain each facility for the next 50 years.

It is surprising there is so little discussion about the U.S.'s dependence on foreign nuclear fuel and nuclear components. Even within the industry, few are aware their plants are so highly dependent on countries such as Russia, Ukraine, Kazakhstan, Uzbekistan, Malawi, Namibia, Niger, South Africa, China and Japan. Folks just don't talk about it. Further, EIA does not centralize its fuel data for domestic power plants.

To be fair, the Nuclear Energy Institute (NEI) does publish sourcing data for nuclear fuels on its website. It's not up-to-date, but the general idea of energy dependence is there. It also provides some interesting context.

NEI reports that the U.S. uranium-production industry is working to increase domestic supplies. For example, U.S. expenditures for uranium exploration and mine development rose 673% between 2004 and 2008.

NEI also describes the federal program called "Megatons to Megawatts," which implements a 1993 agreement calling for Russia to recycle 500 tons of weapons-grade uranium from dismantled warheads. USEC reports that, as of 2010, the program had recycled 412 metric tons of highly enriched uranium into 111,905 metric tons of low-enriched uranium -- equivalent to eliminating 16,494 warheads.

Unlike with crude oil, the nuclear-power industry's dependence on foreign sources does not represent a significant threat to the nation's energy security -- and the reason is energy density. Smalls amounts of fuel contain enormous amounts of energy. According to NEI, a single uranium fuel pellet the size of a fingertip can contain as much energy as held within 17,000 cubic feet of natural gas, 1,780 pounds of coal or 149 gallons of oil. 

Nuclear fuel's high energy density allows for stockpiling of small amounts of fuel, which protects the nation and the industry from most global threats. In addition, because the industry has a diversity of supply, no single region can cause a serious threat.

Nevertheless, while everyone's attention has been focused on oil, the nuclear-power industry remains highly dependent on foreign sources for their fuel. The sector also relies on foreign countries for critical components to help make their power plants operate. There is surprisingly little domestic content in the nation's nuclear power industry.

Columnist Conversations

Let's look at Biotechnology, Pharmas and Healthcare Technology firms with the following peer group: * North Am...
Conclusion Let's find the companies with the greatest revenue growth and highest gross margins in the mega cap...
Market has strengthened since mid-day. Energy sector is one of the strongest of the day as WTI has moved up s...
October puts on both Royal Caribbean and Carnival Cruise (CCL) are seeing interest Tuesday. RCL is up 58 cents...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.