Introduction
In the previous bulletin of our A Nascent Renaissance series on nuclear energy, we outlined the evolving role of nuclear energy as part of the solution to address climate change. In this second installment, we explore important nuclear fuel supply challenges facing Canada and other countries, including commercial, trade, regulatory, and geopolitical constraints. These challenges must be navigated while simultaneously cultivating political, public, and international support.
What is the Process for Making Nuclear Fuel?
In comparison to fossil fuels which can largely be delivered for use once extracted, the nuclear fuel supply cycle involves a number of complexities. First, uranium must undergo a number of processing steps prior to its use in a nuclear reactor, typically including mining, milling, conversion, enrichment and fuel fabrication. For certain stages - conversion, enrichment and fuel fabrication - there are only a select few specialists worldwide to provide these services. Only then can fabricated fuel assemblies be loaded into nuclear reactors for the production of electricity and other uses. After use, spent fuel assemblies once removed must be stored on site and in specially designated repositories.
International Dimensions of Nuclear Fuel Supply
Nuclear fuel supply cycle capacity is distributed globally and as a result it is not uncommon for uranium to be mined and milled in one country, converted into uranium hexafluoride in another country, enriched as necessary to increase the amount of fissile uranium isotope present in the fuel in a third country and fabricated in a fourth county before being delivered for ultimate use by a nuclear power plant in a fifth country.
As discussed in our first bulletin, in recent years, about 85% of uranium is mined and milled by only ten major producers, with more than 40% sourced in Kazakhstan and about 13% from Canada which constitutes the second largest mined source in the world. At present, the only uranium refining facility in Canada is Cameco's plant in Blind River, Ontario.
For the subsequent conversion step, almost half of the current global conversion capacity is in Russia or China. In Canada, Cameco operates the only conversion plant at Port Hope, Ontario which represented about 20% of global conversion capacity in recent years.
For the enrichment step, applicable to most reactor designs operating globally outside of Canada (as discussed further below), more than 45% of the current global uranium enrichment capacity is in Russia, with a further 10% in China.
Finally, fabrication of nuclear fuel into fuel assemblies are specific to each nuclear reactor design and global fuel fabrication capacity is more broadly distributed as compared to the earlier steps in the nuclear fuel supply cycle.
Energy Security and Global Supply Chain Challenges
Recent geopolitical developments highlight the importance of energy security and its challenges. Russia's invasion of Ukraine brought to light the dependence of many Western European countries on Russian natural gas.
Nuclear is subject to its own energy security tensions. More than two years into the ongoing Ukrainian invasion, many countries still depend on Russia and its nuclear energy sector for fuel conversion, enrichment and other services. Russian nuclear sector related parties remain largely exempt from sanctions. In addition, while Kazakhstan remains the largest global producer of uranium, its access to markets is significantly strained as the transport routes through Russia are no longer open.
Regulatory Considerations
There is significant regulatory oversight addressing all aspects of the nuclear fuel supply chain as well as the transportation and import and export of nuclear materials and technology. These are in place to ensure, among other things, that safety and non-proliferation objectives are met. Regulatory agencies involved include the Canadian Nuclear Safety Commission and the Trade Controls Bureau of Global Affairs Canada, certain governments and regulatory bodies in jurisdictions where uranium or partially processed fuel may be transported, and regional organizations such as by the EURATOM Supply Agency, and by the International Atomic Energy Agency.
Increasingly important is the expanding scope of domestic, foreign and international sanctions laws. Canada's sanctions laws apply to persons and companies in Canada and Canadians, even if such persons or companies are located outside of Canada. They prohibit dealing with sanctioned persons, or companies owned or controlled by such persons, and may also prohibit certain designated activities. In the nuclear energy sector, Canada has sanctioned some nuclear energy state controlled businesses or individuals acting as directors or senior officers of other nuclear energy state controlled businesses. If sanctions are expanded in the future to include additional Russian nuclear energy sector companies, this would most likely result in supply shortages, price increases and the need to re-evaluate supply chains to ensure safe and secure supply.
Canada's Current Unique Position is Changing
Historically, Canada has not needed enriched uranium. All nuclear power reactors operating in Canada at present are based on the CANDU reactor design which uses only natural uranium. Consequently, energy security and international supply chain disruptions are largely prevented for Canada's existing CANDU fleet.
With the adoption of new small modular reactor (SMR) designs, which typically use enriched uranium fuel, including those under construction or proposed in Ontario, Saskatchewan, Alberta, New Brunswick and elsewhere in Canada, this will change. Enrichment services for these SMRs will need to be sourced outside of Canada. For example, for its first SMR, Ontario Power Generation has announced it will source and convert uranium in Canada from Cameco, enrich it in the US and France, then fabricate it in the US before delivery back to Canada for use in its nuclear reactor.
Call to Action
Because Canada does not have any uranium enrichment plants, and limited fabrication facilities, it must prioritize innovation in these areas in order to get ahead of potential future constraints, as highlighted above. This could reduce Canada's dependencies on external actors and limit the impact of energy insecurity and rising geopolitical conflict.
There are challenges. Enrichment is very capital intensive and, by international treaty, Canada currently has committed not to enrich uranium. Changing this would mean greater international regulatory oversight.
Nuclear energy is seen as a clean alternative to fossil fuels. Canada's ongoing commitment will not only support energy needs within our borders, but even beyond for other countries struggling with energy insecurity. With ongoing investment and innovation in support of this commitment, Canada's nuclear sector can continue to play an important role in supporting the energy needs of other counties. All of this will require key stakeholder leadership, public support, and committed implementation of governmental policy.
Stay Tuned
Moving beyond the challenges surrounding uranium fuel supply, our next bulletin will discuss financing tools, including public sector financing, available to support nuclear power plants.
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You may be also interested in attending, virtually or in-person, our upcoming Fasken seminar "A Challenge for the Nascent Nuclear Energy Renaissance: Harnessing the Dynamics at Play in the Uranium Mining and Fuel Supply and Enrichment Sector" on March 4, 2024. For more details, and to register, click here:
https://www.fasken.com/en/faskeninstitute/2024/03/pdac-nuclear-energy-renaissance
Further Reading
A Nascent Renaissance: The Revival of Nuclear Energy
About The Authors
W. Ian Palm. Ian's practice focuses on corporate finance, mergers and acquisitions (M&A) and private equity. In addition, Ian has a deep understanding of the energy, technology and infrastructure sectors.
Dyna Zekaoui, JD and LLM-LE (Duke University). Dyna is co-chair of Fasken's Global Energy and Climate Group's Ontario practise and has a keen interest in a range of sustainability issues, including energy and governance.
Barbara Miller. Barbara's broad practice is focused on communications, mergers and acquisitions, agribusiness law, corporate governance and infrastructure projects. She actively advises on agreements for the manufacturing, supply, and licensing of goods and services, both domestically and cross-border. She has also represented participants in the Canadian nuclear industry for over a decade, including in relation to regulatory matters.
Special thanks to Adele Ambrose and Barbara Clark for their help with this article.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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