Editor’s Note: Nuclear power is becoming a popular option for emerging economies, particularly in Asia. As the sector starts to attract more interest, learn the facts so you can make informative investment decisions.

In the Global ETF Profits  advisory that I co-edit with Benjamin Shepherd, we have exposure to the sector through the best available ETF. Here are Ben’s macro thoughts on nuclear power, as well as a recommendation.

Even after rapid expansion in the 1970s and ’80s, the great hopes of nuclear power were dashed in the wake of high-profile incidents at Chernobyl and Three Mile Island.

But nukes are back. They’ve returned to vogue in both the developing and developed world; not only is nuclear power relatively affordable, but it doesn’t emit carbon dioxide (CO2). Concerns about climate change have renewed interest in nuclear energy.

The consensus among environmental scientists is that by 2050 at least 50 percent of greenhouse gas emissions must be cut to limit the average global temperature increase to 2 or 3 degrees Celsius.

Changing the global energy production mix is generally regarded as the most efficient way to address the awesome task of reducing CO2 emissions. In an increasingly connected world, electricity demand continues to grow exponentially–and this trend will accelerate as standards of living rise. The Organization for Economic Cooperation and Development (OECD) forecasts that electricity generation in Asia will nearly triple by 2030.

Many environmentalists point to alternative energy sources such as biomass, wind and solar as environmentally friendly sources of energy, but that’s a Pollyannaish appraisal. Although few would argue that energy generated from fossil fuels is by far the most carbon intensive, you might be surprised to learn that biomass, wind and solar power are hardly carbon neutral.

Building out solar power capacity, from the mining of silicon for the fabrication of photovoltaic cells to the construction of the facility itself, results in the equivalent of between 30 tons of CO2 emissions per gigawatt hour of energy in the best case to 100 tons in the worst. Wind power installations produce 10 to 20 tons of CO2 emissions, while biomass power generates 10 to 50 tons of CO2 emissions.

By contrast, a nuclear reactor can generate from zero to 30 tons of CO2 emissions, depending on how the uranium is mined. Accordingly, the OECD estimates that nuclear reactors could supply around 25 percent of the world’s electricity with almost zero carbon emissions.

Space is also an issue when it comes to alternative energy. It takes a 200 square mile wind farm to generate the same amount of power as one nuclear reactor and thousands of acres of agricultural land to produce the inputs for a biomass facility. In terms of CO2 emissions and overall efficiency, nuclear power is the best game in town.

Energy generation is expected to go almost parabolic in non-OECD countries because of the energy intensity of their economies; the developing world requires the equivalent of 3.4 barrels of oil to produce USD1,000 worth of gross domestic product (GDP). By comparison, developed economies need the equivalent of 1.1 barrels of oil to generate the same economic growth.

Imagine the growth potential in the developing world if the overall cost of energy could be lowered. Although nuclear power plants involve substantial investment in construction and infrastructure on the front end, the longevity of these facilities make them a low-cost generator.

Western environmentalists often malign China as one of the world’s worst polluters. As the nation has industrialized over the past thirty years, low-cost facilities and fuel trumped other concerns; the Middle Kingdom generates roughly 70 percent of its electricity from coal-fired plants.

More recently, China has changed course, allocating USD110 billion annually toward efforts to generate 15 percent of its electricity from clean energy sources by 2020. If the nation meets this lofty goal, the country’s energy intensity would go down 20 percent in five years.

Nuclear power is a big part of this program. China plans to construct roughly 10 nuclear reactors each year, expanding its current generation capacity from 8,600 megawatts to 20,000 megawatts by 2013 and 70,000 megawatts by 2020. At that rate, China will build three times as many reactors as the rest of the world over the next decade and become the global leader in nuclear power capacity.

At present, India generates 4,000 megawatts of electricity from 17 nuclear reactors but plans to ramp up its generation capacity to 200,0000 megawatts in 20 years.

Although the US generates about 20 percent of its electricity from 104 nuclear power plants, the country hasn’t constructed a new commercial reactor in over 30 years. But that could soon change. President Obama proposed tripling public financing of nuclear power in January–and that’s just the latest positive development.

The Energy Policy Act of 2005 provided financial incentives for the construction of advanced nuclear plants, including a 2.1 cents/kilowatt hour tax credit for the first 6,000 megawatt equivalent of capacity in the first eight years of operation. It also authorized federal loan guarantees for the project cost. After the program went into effect in 2008, the US Dept of Energy received 19 applications for 14 plants and a total of 21 reactors. Applicants have requested a total of $122 billion in guarantees, but the program only authorizes $18.5 billion. Heavy interest from the power industry motivated President Obama to expand the program.

Today, there are plans for almost 100 new reactors worldwide–and that number should soar in the coming years. The chain of industries that will benefit from this trend is long.

There are the uranium miners, companies that own and operate the facilities to enrich uranium for use as nuclear fuel, transport outfits that move the fuel to the reactors, the engineering and construction companies that design and build the reactors, and the utilities that operate these facilities. The number of positions that would be required to capture the full benefit of the nuclear renaissance makes exchange-traded funds (ETF) the most attractive way to profit from this trend.

Investors can choose from three exchange-traded funds (ETF) focused on nuclear power: PowerShares Global Nuclear Energy (NYSE: PKN), iShares S&P Global Nuclear Energy Index (NSDQ: NUCL), and Market Vectors Nuclear Energy (NYSE: NLR). Of these three offerings, Market Vectors Nuclear Energy (NYSE: NLR) has gained the most traction in the market–the ETF launched eight months prior to the other two.

Market Vectors Nuclear Energy tracks the 40 stocks that make up the DAX Global Nuclear Energy Index. The fund’s portfolio holdings generate at least half of their revenues from the nuclear power business and include a number of smaller companies that other indexes overlook. Accordingly, the ETF acts as an excellent proxy for the global nuclear industry as a whole.

Although the fund offers broad exposure to a nuclear power renaissance, its largest holdings hail from the mining, generation and infrastructure industries. Of the three ETFs, Market Vectors Nuclear Energy also has the lowest exposure to US markets. At 0.61 percent, the fund’s expense ratio is in the middle of the road, but it boasts superior liquidity, the tightest spreads and the largest asset base in this niche.

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