Daily Update: Nuclear’s Role in Energy Security, Grid Decarbonization
Today is?Tuesday, November 29, 2022, and here’s your?curated selection of essential intelligence on financial markets and the global economy?from?S&P Global . Subscribe?to be notified of each new?Daily?Update.?
Nuclear power's potential to shore up energy supplies and smooth the transition to renewables has governments and utilities reconsidering their move away from the carbon-free power source.
Following the 2011 Fukushima disaster, Japan shuttered its nuclear generation fleet and Germany decided to phase out the power source. In other markets, an abundance of cheaper energy from renewables and natural gas removed most motivation to replace or add to aging nuclear infrastructure. Given the finite lifespan of nuclear facilities, it seemed the world was moving toward a future free of nuclear energy. However, recent geopolitical conflicts and initiatives to combat climate change have changed the calculus around plant shutdowns.
In Europe, governments have?delayed the closure of nuclear facilities ?as they scramble to make up energy shortages stemming from Russia's invasion of Ukraine. Three plants in Germany, due to close in 2022, will now operate into 2023, according to S&P Global Market Intelligence. Meanwhile, the Belgian government is working to keep two reactors online for 10 years past their expected shutdown dates.
In the U.S., long lead times to build and connect new renewable generation are prompting regulators and utilities to extend the life of plants that were slated for decommissioning. Faced with the aggressive greenhouse gas reduction goals in the Inflation Reduction Act, lawmakers in California worked with utility PG&E Corp. to forestall closure of the state's sole nuclear facility, the Diablo Canyon Plant, to ensure an adequate supply of carbon-free energy.
Capacity from the nuclear plants that remain in operation could also help decarbonize sectors outside of the power grid. Nuclear plants in the U.S. are exploring the economic feasibility of using electrolysis to?produce clean hydrogen , S&P Global Commodity Insights reported, and this could power industrial processes and transportation. This carbon-free "green hydrogen" could also be used as a store of energy, allowing utilities to fill the gaps left by intermittently producing renewable sources such as wind and solar.?
Uranium prices are increasing ?in response to nuclear's improved prospects, according to S&P Global Market Intelligence. Forecasters estimate that increased demand could drive the fuel's price up 25% by 2030. Nevertheless, uranium miners are holding off on making the costly investments necessary to expand production.
While conditions are ripe for a nuclear renaissance, governments or utilities seeking to build out capacity will need to contend with the?challenging economics of new plant construction . Construction on the U.K.'s Hinkley Point C Nuclear Plant, which began in 2017, is already two years behind schedule, and costs have ballooned 50% to ￡22 billion. In the U.S., the Alvin W. Vogtle nuclear plant expansion is similarly facing delays and budget overruns. It may be that the future of the industry lies in small modular reactors, which could provide most of the benefits of large-scale reactors without the risks of a massive construction project.
More than a decade after the Fukushima disaster, even Japan is cautiously restarting idled nuclear operations, which contributed 10% of the country's generating capacity as of May 2022. While the ultimate future of nuclear remains uncertain, its ability to bolster energy security and ease the world's transition to renewables has ensured it will remain part of the energy mix in the near term.
Today is?Tuesday, November 29, 2022, and here is today’s essential intelligence.
Written by Adam Rihner.
Economy
Economic Outlook Eurozone Q1 2023: Reality Check
Following the European economy's better resilience in the summer months, S&P Global Ratings revised its GDP growth forecast upward for 2022 to 3.3% from 3.1%. This improvement brings it back to the March vintage of its forecasts. Looking ahead, S&P Global Ratings continues to expect the European economy to contract around 1 percentage point of GDP over the next two quarters. This expectation is underpinned by its models, which now give a mean probability of recession of 70%, compared with 47% three months ago, after inversion of the forward yield curve and flattening of the spot yield curve.
—Read the report from?S&P Global Ratings
Capital Markets
Listen: Street Talk | Episode 103 — Investors Worry About Bank Liquidity, Earnings Drag From Underwater Bonds
A spike in interest rates has created large amounts of unrealized losses sitting in banks' bond portfolios and sparked liquidity concerns in the investment community, according to Brett Rabatin, director of research at Hovde Group. In the episode, Rabatin discussed the merits of investors' concerns and the impact that deeply underwater bonds have on banks' liquidity, earnings, valuations and potential regulatory constraints on capital returns.
—Listen and subscribe to Street Talk, a podcast from?S&P Global Market Intelligence
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Global Trade
Black Sea Watch: Grain Flows Edge Lower As Congestion, Delays Bite
Ukrainian grain flows eased considerably during the first full week of the renewed Black Sea safe passage agreement amid escalating congestion and inspection delays and despite initial optimism. According to analysis of data from the UN's Black Sea Grain Initiative Joint Coordination Centre S&P Global Commodity Insights, seaborne Ukrainian grain flows through the Black Sea during the period Nov. 21-27 tumbled 39% week on week to 601,486 mt, in below the weekly average so far and marking the eighth weakest weekly performance since the inception of the Black Sea Grain Initiative deal.
—Read the article from?S&P Global Commodity Insights
Sustainability
Middle East Oil And Gas Majors Striking A Balance Between Providing Low Carbon Intensity Energy Supply And Moving Towards Net-Zero Emissions
Following the UN Climate Conference, COP26, in Glasgow in 2021 and the subsequent COP27 event in Egypt this year, major Middle East E&P companies are performing a balancing act of producing sustainable low-carbon intensive energy, amid accelerated momentum towards net-zero emissions. Operators, however, are at the same time responding to a surge in demand for a secure and affordable energy source, as well as trying to fill the gap in the supply disruption, triggered by the current and ongoing conflict between Russia and Ukraine.
—Read the article from?S&P Global Commodity Insights
Energy & Commodities
Fuel For Thought: Russian Crudes Come Under Renewed Pressure As G7 Price Cap Nears
The value of Russia's key crude exports has come under renewed pressure as EU sanctions and the G7's price cap edge closer amid growing signs that the curbs pose little threat to Moscow's resilient output and oil revenues. The outright price for Russia's flagship crude Urals slumped to 22-month lows in the run-up to the Dec. 5 start for the mechanism as weak physical market fundamentals and anxiety around sanctions risk have spurred even steeper discounts.
—Read the article from?S&P Global Commodity Insights
Technology & Media
Artificial Intelligence Stocks Tumble As Economic Concerns Complicate Growth
Investors and analysts are starting to push beyond the hype about artificial intelligence and ask more questions about AI software companies' near-term growth prospects. Professional service and software providers including Palantir Technologies Inc., C3.ai Inc. and Veritone Inc. market themselves as AI companies with high growth potential, offering services to enhance enterprise analytical capabilities in sectors like cybersecurity and telecommunications. But amid a tech market downturn, these companies are struggling to convince Wall Street they can withstand the pressures of a weakened macroeconomic environment.
—Read the article from?S&P Global Market Intelligence