20th September 2012
One potential new energy source that is receiving an increasing amount of attention is the radioactive element thorium. To date there has been little to challenge the dominance of uranium as the primary nuclear fuel. However, following the disaster at the Fukushima Daiichi nuclear plant last year public faith in nuclear power has been dealt a serious blow.
It may be a surprise then to see a newfound enthusiasm surrounding the sector. Supporters claim that, compared to the uranium-plutonium fuel cycle, a thorium reactor would produce significantly less harmful by-products. Indeed in a comprehensive report from 2010, the UK National Nuclear Laboratory (NNL) explains:
"The thorium fuel cycle is claimed to be advantageous in several respects, one of which is that it generates very low quantities of transuranic materials, including plutonium. This decreases the long term radiotoxicity burden after fission products have decayed. In particular, only very small quantities of plutonium are produced, which is often cited as a benefit in terms of increased proliferation resistance."
This suggestion, combined with traditional environmental arguments in favour of nuclear power versus coal or oil, has prompted a number of supportive articles on energy blogs. For example on the QFinance blog Anthony Harrington claims that thorium offers a solution not only to securing future energy supplies but also to the Iran nuclear issue as "thorium reactors are extremely bad at breeding weapons grade uranium".
His enthusiasm is understandable. If it can deliver environmentally safe, reliable energy then a bridge can be formed between the pro- and anti-nuclear lobbies. Unfortunately for cheerleaders of thorium questions over its environmental impact and its economic benefits remain very much open.
As Edward Guinness, energy expert at Guinness Asset Management, comments:
"For nuclear power plants with an unproven technology the level of investment required to get it to market is likely to run into the billions. That's best done by governments and large businesses. If the benefits are as described and if the costs are not prohibitive then you're probably talking about it having an impact in 20-25 years' time."
In order for the material to be used in the foreseeable future (defined by the NNL as the next 20 years) existing reactors will have to be repurposed to take the fuel. This could mean that it is used "to augment the useful energy output produced per tonne of uranium ore" rather than as a primary source. Yet under the augmentation scenario the by-product of the reaction, U-233, may only offer a modest reduction in radiotoxicity risk.
Furthermore although the NNL concedes that a full thorium cycle could provide a "substantial reduction" in toxicity levels, building new types of reactor that can use the fuel to its full potential could take up to 40 years.
None of this rules thorium out as a potentially major player in future energy markets. What it highlights is the importance of focusing on proven technologies that can deliver benefits now while these new concepts are under development.
Noah Smith, an assistant professor of finance at Stony Brook University, suggests policymakers look to natural gas as a "bridge" fuel while alternatives are developed or become more cost effective:
"US carbon emissions are decreasing rapidly. We're down over 10% from our emissions peak in 2007. Furthermore, the drop isn't just a function of the Great Recession. Since 2010 our economy has been growing, but emissions have kept on falling. The reason? Natural gas. With the advent of "fracking" technology, the price of gas has plummeted far below that of coal, and as a result, essentially no new coal plants are being built."
As Smith's example demonstrates, ultimately cost is the primary driver of shifts in energy markets. He believes that the future of cheap renewable energy may be solar power, which is undergoing a precipitous fall in the cost of production. In that he finds support from Tim Guinness, founder of Guinness Asset Management, who writes on his Mindful Money blog:
"Anyone who suggests that solar is dead is completely missing the point. In volume terms solar's growth is still strong. The price of modules has come down by 75% but that has been matched by an even higher fall in polysilicon (the main raw material) prices and dramatic improvements in processing costs that mean modules can still be produced profitably. The price of best-in-class solar is competitive in a huge range of countries today without subsidies and the market is only now beginning to realise this. It is still high priced in the US as installers learn how to make installations as efficiently as they do in Germany, but we expect that there will be an explosion in demand that will accelerate the learning curve in the US and drive the costs down dramatically."
Further down the line the mainstream use of what are today considered alternative energy sources could just as easily include thorium. Investors should be alert to these possibilities but given the time scale involved it may be prudent to remain cautious of jumping the gun.
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