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Uranium Primer

Nuclear Fuel
Nuclear power plants are fueled by processed uranium, through a series of steps called the nuclear fuel cycle. Unlike their fossil-fueled cousins, nuclear power plants are not continuously fueled during operation, but rather are shut down at specified intervals and refueled in batches, with only part of the nuclear plant’s fuel replaced at shutdown. The discharged or “spent” fuel contains uranium and plutonium, which can be recovered and recycled in subsequent refuelings or in other nuclear plants.

The world market for nuclear fuel and its processing services have always had a special set of circumstances, primarily due to the strategic (nuclear weapons) aspects of uranium. As such, the early years of the industry were dominated by purchases by the US government. In fact, in the USA, only the federal government was allowed to own uranium, creating a monopsony (only one buyer) situation. A few other governments were also buyers of lesser quantities in the world outside communist areas, while the Soviet government was the only buyer in the communist areas.

Uranium Production
A large worldwide production industry emerged in response to these military needs, but as military needs  subsided in the 1960s, commercial demand for nuclear power plants were still low, as the use of nuclear power was still in its infancy. As the use of nuclear power grew, the US Congress passed legislation in 1964 to permit the private ownership of nuclear fuel in the USA, starting in 1968. The US Government was still involved, however, as the US Atomic Energy Commission was the non-Communist world’s monopoly supplier of uranium enrichment services.

This private ownership required the development of market mechanisms, which have remained in place with little structural change since the 1970s. For the most part, utilities buy uranium and processing services separately directly from uranium producing and processing companies on a one-to-one basis under long-term (multiple-year) contracts. There is also an active “spot” market, traditionally used for the minority of the industry’s business.
 
Because of historical overproduction, technologies for recycling of nuclear fuel products, and the more recent programs in Russia and the USA to dispose of excess military stocks (including those from the dismantlement of nuclear warheads under the “Russian HEU Deal”), these “secondary sources” have become a major portion of the market’s supply and are expected to continue to be for some time.

Government Intervention
Government intervention has been another hallmark of nuclear fuel markets, from the government monopsony period of nuclear weapons development, through government ownership of uranium facilities and processing companies, to trade restrictions on imports or exports of uranium from targeted regions.

Uranium Price Terms in Contracts
Most uranium is delivered under long-term contracts, with pricing terms that are specified at the date of contract finalization (usually a base price at a specific date, escalated by any of various public economic indexes to the date of delivery) or pricing terms tied to the prevailing spot price as of the delivery date.

Key Facts
Sources: Nuclear Energy Institute & World Nuclear Association

  • Nuclear energy provides 16% of the world’s electricity.
  • Nuclear power can generate clean electricity with no carbon dioxide or other greenhouse gas emissions and air pollutants.
  • Nuclear energy reduces emissions of nitrogen oxides, sulfur dioxide, and carbon dioxide.
  • Two-thirds of the world’s population lives in countries with operating nuclear power plants. Over 30 countries have nuclear power plants in operation.
  • Half the world’s population lives in countries where new nuclear power reactors are under construction or planned.
  • At least five countries have plans to introduce nuclear power in their countries.
  • More than 15 countries depend on nuclear power for a minimum of 25% of their electricity. Europe and Japan rely on nuclear power for 30% of their electricity while the US depends on 20%.
  • Nuclear power plants are designed, built, and regulated to prevent radioactive emissions.
  • Nuclear energy is the only large-scale, clean-air electricity source that can be expanded extensively to produce large amounts of electricity.

For further readings, visit the Nuclear Energy Institute’s Nuclear Energy and the Environment and the World Nuclear Association’s Clean Nuclear Energy.