Next-Generation Nuclear Power: Thomas Drolet
TICKERS: UAX; ATURF, CPT; CPL, FIS; FSSIF, PCY; PRPCF; 1P2, STM;
Source: Brian Sylvester of The Energy Report (3/22/12)
Can the nuclear industry sustain itself with a once-every-ten-years
accident frequency? Absolutely not, says Tom Drolet, principal of
energy consulting firm Drolet & Associates Energy Services Inc.
However, with new reactor technology underway, the industry has an
opportunity to show the public it can safely generate reliable,
affordable low-emissions energy. In this exclusive interview for
The Energy Report, Drolet outlines his vision for U.S. energy
policy and how next-generation nuclear energy figures into it.
Companies Mentioned: Athabasca Uranium Inc. - Coalspur Mines Ltd. -
Fission Energy Corp. - Prophecy Coal Corp. - Strathmore Minerals
The Energy Report: Tom, you recently gave speeches in Vancouver and
New York City on American energy policy. Please share with us your
view of nuclear energy and its role in American power
Thomas Drolet: My speeches at the January Cambridge House
International Resources Conference and the March Murdock Capital
Partners Conference sessions highlighted two major aspects of the
need to reorient U.S. energy policy. The first and foremost is to
prioritize baseload power (available around the clock) in the
electrical supply system. The U.S. currently has 104 reactors,
which only represent 10% of the installed base, but they generate
20% of the actual electricity consumed. All industrialized
manufacturing-intensive economies like the U.S., Canada, the EU and
Japan require constantly available baseload power. The only other
electricity generating methods that can meet that need are
hydroelectricity and geothermal power. All other sources are
employed as part-time or peaking power sources because they are not
built for full-time operational use, nor are their fuel supplies
Secondly, I highlighted the onset of the shale gas technology
revolution, meaning fracking and horizontal drilling, as well as
the need for the industry to be transparent in disclosing and
managing fracking fluids and the copious quantities of water the
process requires. I believe natural gas from shale formations will
be the major growth fuel for electricity and some forms of
transportation. Natural gas transmission and distribution systems
need to be massively extended to accommodate this burgeoning fuel
I also participated in a panel at the Murdock Conference on the
major new finds of natural gas and oil off the northwestern and
southeastern coastal zones of Africa. This is a very progressive,
transformational opportunity for the continent.
TER: How does nuclear energy fit into your policy vision? Uranium
provides tremendous baseload power and it is also one of the more
efficient means of power generation.
TD: That is correct. Efficiency can be measured in several ways, be
it in the small amount of uranium fuel and the lack of CO2
emissions or the increasing thermal cycle efficiencies of newer
plant designs. Output power is transmitted at very high voltages,
so line losses are quite low as long as power is not sent over
thousands of miles. All around, nuclear power is a very efficient,
productive and constant power system. However, nuclear power
entails very high initial capital costs to install the systems.
Many very clever engineers are working on reducing those capital
costs in the next generation of reactors that are now being
commissioned in China, India and many other nations. The operating
costs for nuclear reactors are, however, incredibly low.
TER: We are just past the one-year mark of the Fukushima nuclear
disaster in Japan. Has this catastrophe had any positive influence
on the industry through resulting upgrades to nuclear reactors and
better safety measures?
TD: It is certainly a real wake-up call to the industry. I was part
of a small Canadian group that was the first foreign group to go to
Russia after Chernobyl in 1986. I bring that up only to paint a
picture of the difference between Chernobyl and what it did to the
industry versus this recent event in Japan. Seeing that
catastrophic failure in Chernobyl and its affect on the development
of the industry was a very sobering experience.
My experience with Fukushima in advising some of its institutions
suggests that this too is going to have a short- to middle-term
effect in specific countries. Japan has 54 reactors installed that
were generating approximately 30% of its power. Now, one year after
Fukushima, only two reactors are operational. Industries are
importing massive amounts of diesel power generation capability.
Japan is going to have to make a major decision in the next few
months to either bring back some of those shut-down nuclear
stations, which are undergoing safety reviews, or be in major
trouble again this summer, a peak period from a power supply point
of view. Thank goodness that Japan is able to help itself, as it is
the most advanced country in the world in implementing
energy-efficient technologies and conservation techniques.
TER: Germany decided to shut down its nuclear reactors over the
next decade and similar decisions were made in other European
countries. Can we expect other governments to follow suit?
TD: I find it somewhat ironic that Germany, as it looks ahead
another decade to figure out how to replace some 23% of its power
facilities, is talking about importing nuclear power from France
and the UK. There are many combined cycle gas turbine manufacturers
and energy efficiency and conservation techniques that can offset
those shortages, but that would require Germany and Switzerland to
depend on shale gas drilling from Russia.
TER: Germany and Switzerland aside, the World Nuclear Association
says there will be 650 nuclear reactors operating by 2032. There
are currently just under 400 nuclear reactors in use. Which
countries are planning on building the bulk of those reactors?
TD: China is currently building 13 reactors with a further 18 under
design and site development. Over the subsequent 5-, 10- and
20-year terms, China will build upwards of another 80. Second on
the list is India, which has six reactors and is currently planning
20 more. Next would be South Korea. Saudi Arabia and the United
Arab Emirates have announced plans to build about 14 nuclear
reactors over the next decade. There are other nations planning to
develop their nuclear power programs, too. The U.S. itself has just
commissioned two in the southeast of the country with Southern
Power and Georgia Power. Those plants will employ
TER: Three Mile Island ocurred in 1978, Chernobyl in 1986 and
Fukushima in 2011. Can nuclear power sustain those types of hits to
its reputation and still see a 50% growth rate in reactor buildout
TD: Absolutely not. Nuclear power cannot remain a viable generation
technique if these accidents keep occurring at that frequency. The
industry needs to ensure that next-generation reactors are more
inherently safe in the event of a breakdown of any sort. New
reactor systems are available to address these very real
TER: Why should the public believe that new reactors are safer and
more resilient than current models?
TD: It is going to take a lot of discussion by the industry to
prove that to the public. They must come out of their shells and
openly debate the issues in a transparent fashion. It's up to them
to convince the public.
TER: In 2010, about 118 million pounds (Mlbs) of uranium were
produced, while 190 Mlbs were consumed. The difference was supplied
by uranium from recycled nuclear weapons, mostly from Russia, but
that program ends in 2013. Are you expecting a resulting price
TD: With Putin coming back into power, there is a slight chance
that program will be extended or a similar program will be
developed. I rate the chance of that at 20%. President Obama has
stated that he wants to reduce the number of nuclear weapons around
the world over time to much lower levels. So there is also the
potential for the U.S. weapons program to be further reduced.
However, if the "Megatons to Megawatts" program does end in 2013,
then many nations that are big on nuclear power and nuclear weapons
and that have strategic uranium reserves, such as the U.S., Russia,
France, England and China, could meet uranium shortfalls in a
TER: There is a strong possibility that most of the supply deficit
will come from mined sources. Which jurisdictions will primarily
meet the need?
TD: I want to highlight closer-to-home sources. Most of the supply
for our reactors in North America should come first and foremost
from the Athabasca Basin in Canada. The highest-grade uranium in
the world today is in Saskatchewan, Alberta and northeastern
Manitoba. Next, we have Wyoming in the U.S.—probably the nation's
most prolific future source of uranium. Then would come Utah,
Colorado, Arizona and New Mexico, namely the Lisbon Valley and
Uravan mineral belt.
TER: Should retail investors take equity positions in companies
operating in these specific areas now or should they wait until the
uranium price starts its run up as is expected?
TD: There is a critical time between the market price action of
uranium and these uranium development companies' stocks.
Personally, I would build an investment regime as the price builds
up. It is always a better investment strategy in these uncertain
times to hedge your risk and invest as the price goes up, which I
certainly believe it will over the next several years.
TER: Are there some promising projects in the Athabasca Basin in
Wyoming and the southwestern U.S.?
TD: And another company, Fission Energy Corp. (FIS:TSX.V; FSSIF:
OTCQX) has an excellent land package up in the central core of the
TER: Fission also has a joint venture with KEPCO and a consortium
of Korean companies led by KEPCO, right?
TD: That is correct. KEPCO has joined up with Fission Energy and
its strong management team. Certainly Fission Energy is getting
along on its drill program much faster and further than many other
juniors. Some of the results it is coming up with are of quite
TER: Any parting thoughts for us on the energy space?
TD: Fukushima was a major event for nuclear power, even more than
Chernobyl. Fukushima happened within one of the most densely
populated land masses on earth and, secondly, it happened in an
industrialized nation known for its competence in engineering,
construction and operations. In addition, the public was already
jaundiced and skeptical about nuclear power because of historical
events. This combination makes Fukushima a more noteworthy event,
and therefore there is a need for the nuclear industry and its
regulators to pause and really think through the nuclear power
systems they are building for the future. We need to ensure
next-generation reactors are not built in locations where nature's
events, like tsunamis and earthquakes, are likely. That said, I
would hope the public will give the industry a chance to prove
itself through more reasonably priced electricity and
demonstratively safe baseload electricity. It's up to the
collective nuclear industry to prove its future worth.
TER: Thanks so much.
TD: You are very welcome.