Can nuclear power fit in a sustainable portfolio?

Nuclear operators in the U.S. have strong safety records and help utilities lower their carbon emissions, but the risk of a catastrophic accident remains.

Jon Hale 23 August, 2017 | 5:00PM
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Most discussion of how utilities generate electricity revolves around fossil fuels and renewables. Nuclear power, it often seems, is the odd source out. Yet nuclear remains a key component of the electricity generation mix in the United States, powering about 20% of it.

Investors traditionally have viewed nuclear power in largely black-and-white terms. It remains a commonly used exclusion among intentional environmental, social, and governance funds. But short of excluding utilities that use nuclear power, how should investors view a utility's nuclear exposure, particularly against the backdrop of climate change? That's the topic of research recently completed by Morningstar utilities analysts and Sustainalytics.

The research argues that nuclear energy's main advantage relative to other sources of electricity is its ultralow carbon intensity, comparable to that of renewables and, perhaps this will come as a surprise to some, its safety record. On the other hand, nuclear energy has clear--and familiar--disadvantages, including the threat of deadly radiation exposure that could come if a major accident were ever to occur, the lack of a long-term storage solution for radioactive waste, and intensive water usage. Against that backdrop, investors evaluating utilities with nuclear exposure should consider their carbon intensity, their waste-management policies and procedures, and their operational safety record.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Entergy Corp112.35 USD-0.48Rating
Evergy Inc64.70 USD-0.12Rating
Exelon Corp50.24 USD-1.21Rating
PG&E Corp9.51 USD-3.55Rating
Xcel Energy Inc65.12 USD-0.50Rating

About Author

Jon Hale

Jon Hale  Jon Hale, Ph.D., CFA, is the head of sustainability research for Morningstar.

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