What's Really Standing in the Way of a Nuclear Renaissance?

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1:22Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. Tracy, you know, we recently did that episode down in Austin with Jigar Shah of the Department of Energy. And he said a bunch of interesting things about nuclear. I mean, we talked about a lot of stuff related to electrification, decarbonization. But I think both of us found like the nuclear comments to be particularly interesting. Well, absolutely. So there were a couple things to pull out there. On the one hand, he sounded positive in the sense that maybe nuclear is getting more traction than it has previously.

1:57You have these new types of, was it smaller? Small modular reactors. SMRs. Which he described as neither small nor modular. So I have questions about that. And, you know, and sort of groundswell potentially of support for cleaner energy technology in which nuclear, you know, theoretically could fall. But on the other hand, he also described these long-running structural roadblocks to nuclear, at least in the U.S. So this idea that there isn't really a nuclear industry. There are utilities that might own nuclear plants, but no one's really pushing for it. And then also, if you're a utility CEO, you're probably not going to be that incentivized to build a massive nuclear plant.

2:46because historically it's been a massive risk and responsible for a number of bankruptcies in the sector. Right. And so I think this was really like the key thing to me too. It's like, well, why did the US stop building nuclear? And in my mind, and I think probably in the minds of a lot of, or at least the rhetoric, of a lot of advocates of nuclear power, it is a clean carbon-free source of energy that has a bad reputation and environmentalists stymie it because of outdated views. Are you going to say the three-eyed fish in the citizens again? The three-eyed fish on the Simpsons. His view is like, actually, that's not the story that, as you say, that because of historical cost overruns, there is real financial risk in financing these.

3:26And that part of the reason these cost overruns happen is that there's really no domestic nuclear construction industry or nuclear industry until no one is good at building plants. And that's why you have these cost overruns. And that ultimately, these are the stumbling blocks, the impediments towards this nuclear renaissance that many people would like to see. Yeah, it's kind of this like muscle memory effect. For some reason, it reminds me of like the lumber industry post 2007, 2008, where no one wanted to have overcapacity anymore. So they just became incredibly lean. And then when we did need more lumber in 2020, we didn't have enough capacity.

4:04So it kind of feels like that. Like it feels like everyone's been so scarred by the experience in the 70s, the 80s, the 90s, that it's hard to kind of get people within the industry excited about it again. Absolutely. So we wanted to follow up and actually like explore some of these themes. So I'm very excited. We have the perfect guest to do so. We are going to be speaking with Mark Nelson. He is a founder and managing director at Radiant Energy Group, which does energy analytics. He is an advocate, I believe, for nuclear, and he is going to talk us through as he sees some of these issues that Jigar raised.

4:41So, Mark, thank you so much for coming on Odd Lots. Good to be here, Tracy. You are an advocate for nuclear energy. I said I believe, but, you know. Yes, definitely. What is Radiant Energy Group? What do you do? Why should we listen to you? Why are you here? Well, I didn't start out as a consultant. I started out as an energy analytics expert working for a nonprofit out in California that was attempting to figure out why nuclear plants were closing around the world and how to stop it. So I was working with Michael Schellenberger at Environmental Progress where there had been a sudden growth in environmentalists turning towards nuclear in the Bay Area of California, practically where they first turned against nuclear energy back in the 60s.

5:25And the thinking was, on one hand, if you developed an academic basis and scientific basis for understanding nuclear energy properly, people and other environmentalists would come around. On the other hand, there was a crisis. There was a fire in the house, which was nuclear reactors were being closed around the world. We're not talking about nuclear reactors that people were proposing and needing to find financing for. These were nuclear reactors where the hard part was already done. They were constructed. They were making super cheap, reliable, carbon-free electricity, and they were being shut down all over the world.

6:02So at Environmental Progress, we needed to figure out how to stop that. And the first step was figuring out what was going on. And so I came in as a nuclear engineer to do that. I'll take the bait. What was going on? Why were all these reactors shutting down? Because I imagine on the one hand, maybe you had environmental pushback, but on the other hand, we have heard a lot of stuff about how difficult some of these are to finance, to maintain, things like that. The broadest possible thing I could say is there was not enough appreciation for nuclear reactors. If we needed to break it up though, some places in the world, like the United States, had extremely cheap natural gas and had installed governing systems for electricity that used extremely temporary cheap fossil fuels as an excuse to shut down nuclear reactors that could last for another 30, 40, 50, 60 years.

6:52And that's really stupid. Those electricity markets are some of the worst things we've ever done to our infrastructure, but they were in place and they were leading to a wave of retirements. Do you mean that the competition from even cheaper electricity was like that electricity from fossil fuels was even easier and cheaper compared to nuclear. And so the preference was for that at the time. It's simply wrong to say that it was cheaper electricity. It was one aspect of the total electricity system that was cheaper on the margin at that moment at those times and sometimes wasn't even cheaper. You just had natural gas folks that were willing to take a temporary loss to drive nuclear plants out of business.

7:36Oh, so like a market share fight. Yeah, yeah, basically. There was a market share fight. There wasn't as much growth for electricity demand. There was extremely cheap natural gas, making losses for the natural gas producers and needing to find more markets. And people arranged ways to build new natural gas plants so close to nuclear plants or near enough in location on the grid to drive them out of business. And then that's not like the cost savings would be passed on consumers. No, no, no, no. You drive the nuclear plant out and then you get the surplus. Then you raise the prices. Well, you can't really raise it.

8:14The prices go up once the nuclear is gone. Right. But then the nuclear is gone. And as we've discussed in the intro, it's hard to build. So you had a one-way ratcheting effect. I want to jump in very quickly to the hard to build, but just this dynamic. Because the follow-up I was going to ask is like, you said like electricity markets have just been this damaging phenomenon. And I think generally people think markets are good things and markets produce abundance and et cetera. What is it about electricity that in your view, either markets or at least markets as they're currently structured, have this pernicious effect?

8:50Well, first of all, electricity is not a commodity. And the analogy that the economists use to think about electricity and setting up these markets was that electricity is a commodity. It has commodity-like properties that are close enough that you can sort of squint and say it's a standardized unit, one megawatt hour, one kilowatt hour. And so they came up with a system to break apart the carrying of electricity with the building of power plants. And they said there's all these different parts of making electricity. And if we divide it up, disaggregate it, we can come up with competition and maybe start with the power plants.

9:28But then we can move to other aspects like competition and bundling up electricity contracts to sell to consumers with different packaging. And it just turns out that to cut a very long story short, that could be its own series of episodes. Yeah, it doesn't really work. And it leads to either enormous risk taking that ends with massive market failure, like we saw briefly in Texas, and we're seeing in other places that have instituted markets, or the market manager, the market system ends up taking on both the attributes and many of the criticisms of the old utility system that it was supposed to break up.

10:05I can tell this is already going to be one of those episodes that leads to like five other episodes. But just going back to something you said, I think you mentioned nuclear is hard to build. And Jigar Shah might very politely disagree with you, because in our conversation with him, he was talking about how there is this perception that like, oh, it's so difficult to build these things. But actually, his point was, we've built them before. You know, we've done it. A lot of our technology has been exported to other places in the world where they're building them. Is it that hard to build a nuclear plant?

10:43Yes. So I visit construction sites and nuclear plants around the world. I mean, this is something that I thought was going to be the main problem. We just don't know how to build nuclear plants. And sure enough, it is quite hard. Here's what I'd say about nuclear plants. They're premium energy, and they take your best people to build, and they take your best effort, and they need to be done right because they are that difficult. I mean, I've been to nuclear sites. So, for example, the biggest construction site in Europe is a massive two-reactor nuclear plant on the west coast of southern England.

11:20And that site, you cannot possibly go there and think nuclear is easy. No, some of the best people in the country, the best contractors, the best engineers, the best managers are over there and they're going to be working for a decade on that massive nuclear plant. And then it's going to provide the best electricity service in the country. Like it's going to be extraordinary. Okay. But it is really hard to build. The argument maybe he was making was what compared to the immense factories that go into the supply blockchain for solar and wind, it's not that hard. But actually what we're seeing is say offshore wind is extremely hard too.

12:01So is this a comparison question or is this a contrast? It's funny you say that, but we got to do an offshore wind episode at some point too, because every article I read just looks like that industry on many levels is a total mess. But setting that aside, I wonder if maybe like the question of like hard or difficult, to your point, a semiconductor fab is clearly a complicated, difficult thing. There are not many entities around the world that can build a seven nanometer or five nanometer semiconductor manufacturing facility, but some people are good at it and some people become practiced at it.

12:39And so I guess the question is how much of the constraint in the US or in places where you would like to see nuclear expand, an inherent difficulty or maybe just out of practice? Out of practice is it we can build nuclear again. I mean, look, we did it a bunch like 50 years ago, right? The cost estimates that we're seeing for offshore wind, Joe, are about the same as the extreme blowout over budget catastrophe that is Vogel in Georgia. So think about this, the wind that supposedly we're going to build and it's going to go well, and it's going to be on time and on budget. If that happens, it will be at a cost per delivered megawatt hour that is about the same as Vogel in Georgia, depending on what you assume with interest rates and assuming they build the wind on time.

13:29But Vogel wasn't supposed to be that expensive. And it provides an electricity, a constant electricity supply that makes the rest of the electricity system work even better, which is not quite the case for the offshore wind. So the offshore wind, even being expensive, even after you pay for it, is going to be part of a more expensive electricity service overall. So I guess the question I ask is, Vogel was very hard to do. It continues to be difficult to finish. It will be extremely valuable. It will be valuable for 100 years or more. Was it? Should we not do it again because it was hard? I think we have to admit that nuclear is hard.

14:10But unlike many hard things, this is worth doing.

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16:12I take the point that it's hard. And, you know, the knowledge gap was sort of what I was getting at when I said that we have a history of doing this. So, like, the knowledge is clearly there. But talk to us, like, exactly what the impediments actually are. Like, what is it about building? It sounds funny when I say it. Building a massive nuclear power plant with dangerous radioactive material. What's so difficult about that? Why can't we all just do it in our backyards? No, I'm being facetious now. But like, what are the actual impediments to building these things? And why does there seem to be, you mentioned Vogel, why does there seem to be so many cost overruns in these projects as well?

16:53In the 60s, 70s and 80s, it's kind of astonishing that we, if you look at the interest rate charts back in the day like most of u.s nuclear plants were built and completed at interest rates from five to ten percent and above so that's quite kind of astonishing and they were and they happened during a time when the environmental movement was getting immense elite support all over and that popular media turned against nuclear energy also so in a way i you know it's kind of astonishing we did that yeah so they overcame those hurdles in the 1970s yes and they had to overcome the hurdles of the earliest plants that were built quickly and cheaply did not apparently make money for the builders that's a problem if you're going to keep building in other words it had the call it the offshore wind problem where the projects seem to be excellent from a sort of technological perspective or from an administrator's eye view but if the people building them are burning through capital and not making profit in order to make these cheap things, that's not sustainable.

18:00Right. This is kind of the CEO point where like a bunch of CEOs have surveyed previous nuclear projects, seen that they've been massive like financial drains on finances, I guess, and then thought maybe not. But Tracy, that brings us to possibly the central paradox of this episode of Odd Lots, which is there is nothing more valuable in the energy world than an existing already built nuclear plant of traditional design. So as an example of one that I heard recently, let's take Tennessee Valley Authority had one of the all-time messes on their hands with finished nuclear plants when their Browns Ferry plant had one of the most famous fires that we have to learn about in not just nuclear engineering school, but all engineers or many engineers I know learn about the Browns Ferry fire as an example of all sorts of things not to do.

18:56So this is three large reactors that are finally working well after decades of tinkering. And together they make about, let's say, 5 million people's, 5 to 6 million people's worth of electricity at$15 a megawatt hour. and they're going to be able to stay down near 15 to 20 dollars a megawatt hour cost. That's the cost to TVA of generating electricity over the course of a year divided by the amount of power, right? Okay. $15 a megawatt hour. And they're going to be able to do that decade after decade after decade. At this point, it's not clear what would actually cause these reactors to shut down.

19:39And so you have this situation where can you survive as a CEO proposing building what after built is incomparable in what it can do for society in any kind of carbon constrained environment or to heck with the carbon constraints. Nothing beats this power plant even without carbon having a prize. I mean, the cheapest, most advanced, lowest cost coal plants on planet Earth would struggle to get near that cost. One of the things that I like talking about, one of the reasons that I think we've had good conversations with Jigar in the past is he understands the role of finance. And incentives. Yeah, finance and incentives.

20:23And that just like we can talk about construction, we can talk about, you know,$15 megawatt hours for decade after decade after decade. But that, you know, we need to solve the financing problem. And as he sees it, a big issue is with new construction is that nuclear projects have been a major contributor to utility bankruptcies. Is that true? I mean, is that all? Yeah, of course. I think he's right there. So it sounds like then, you know, like the follow on from that is that if we want this sort of decade after decade after decade of stable, marginally inexpensive electricity, that somehow the public balance sheet needs to be involved or that we at least don't have these sort of like undermining markets where the cheaper natural gas plants can like situate near you and like price you out of business.

21:10How do you see the financing constraint playing out? Well, let me dance overseas for just a second and say that we have an interesting comparison in countries that either, like China, are building a bunch of nuclear at a low cost, or like France, have decided they need to, but are doing it very expensively and are having a ton of struggles doing almost anything in nuclear. But in both cases, it's considered vital to state interest that nuclear be strong and effective. Now, it wasn't that way in France only a few years ago. France had an anti-nuclear ruling elite for a number of years, and that's part of the immense trouble that they got into during the energy crisis when they should have been bailing out Europe.

21:56Instead, they had to be bailed out by Germany sometimes because of their own problems making nuclear. But they've decided it is of vital state importance. One of the first decisions they had to take was to repeal anti-nuclear laws. And then they had to decide to, say, re-nationalize EDF. It was sort of basically owned by the nation. But they needed to take on the rest of the responsibility and just understand, as many countries do, nuclear is so important. It's a vital state interest. And it must be done right. and at some point it starts uniting the various political interests in a country and just starts moving forward.

22:39We're big and strong. We're America. Do we have to do nuclear well? I think that maybe even brings us in to this cultural moment, which is if people of great talent, great energy, and great financial backing want nuclear more badly than they want anything else, is that going to be something that on in my opinion unveils the path i think the answer is yes there's there is a cultural moment there's a genuine cultural moment where almost anybody i meet wants to have a conversation about nuclear with me whereas before i had very poor taste in conversation it would be me forcing it on other people nowadays nowadays since i work and talking about nuclear and thinking about nuclear and writing about nuclear and advising about nuclear, I am totally fine to talk about every other subject when I meet people, but they want to talk about nuclear.

23:41I like this, the idea of you just like walking down the street going, have you heard about molten salt reactors? Have you heard the good news? But that moment of evangelism, that's why I got into nuclear. A gentleman out in Calgary, who just was a big fan of molten salt reactors and thorium made a video channel. I was trying to figure out what to study in grad school. I wanted to do an engineering grad degree. I started in aerospace and mechanical engineering and it was, you know, space flight and big machines and stuff like that. And I just saw a few minutes of a video at exactly the right time in my life.

24:18And everything just clicked. It hadn't clicked when I'd worked at Los Alamos as an engineering intern. It hadn't clicked when I'd been to either the Chernobyl Memorial Museum in Kiev or the Hiroshima Peace Museum in Japan. I hadn't been scared of nuclear. I hadn't connected it to the future of the world. Let's put it that way. I'd had many opportunities to be involved with nuclear that I just missed or not noticed along the way. And when I saw a, have you heard the good news video, like the guy shouting in the street, I saw that within a few minutes, I knew I was going to be involved in nuclear engineering or nuclear energy in some way for the rest of my life.

24:56Well, since we're talking about things that might be changing, I take the point from a cultural and political perspective. But can you talk also about the technology side? And we already mentioned the small modular reactors, which Jigar Shah says are neither small nor modular. So I would love to know exactly what they are and how they work and whether or not they do, in fact, provide a possible solution to some of the obstacles we've been describing. For instance, the idea that CEOs of utility companies, having watched a bunch of bankruptcies, a bunch of cost overruns on these huge nuclear projects, maybe they don't want to do something massive, but maybe SMRs, these smaller reactors, are a sort of middle ground.

25:41Is it okay to make haters on this? Yeah, please. Yeah, go for it. Get controversial. Okay. Let your haters be your waiters at the table of success is what our mayor says. So, yes, go for it. Well, let's start it this way. I hate the word advanced. I detest the Gen 4 versus Gen 3. It's complete bullshit. Sorry. I don't know if I can say that on Oddbots. Wait, advanced nuclear reactor? Is that what you mean? Yeah. Yeah, I mean, like people use that to mean anything going forward, not stuff going backwards. What's advanced, it means we haven't done it. I mean, so the number of people I meet that know what the state is of things that we call advanced in this country that are actually deployed and working in other countries, people have so little knowledge.

26:24So, for example, the Russians have several different lines of advanced programs already in production. They know how much they cost compared to the, quote, traditional reactors. They also play the Gen 3 game because they're selling to some of the same countries that the West would like to sell to. And they can build the traditional reactors quite well, reasonably on time, reasonably on budget, and they provide the financing. It's amazing, right? They can do that. But they also can do the so-called advanced and at least the advanced lines that they have. That's not what their customers around the world are asking for.

27:00Turkey didn't ask for advanced. Egypt didn't want advanced. People just want the basic, well-functioning, reliable model. Because when they see the numbers, Tracy, from a company that can do it all, it just makes sense to do the ones that if we hadn't invented, we would call it advanced today, right? Our reactors are extraordinary performers. You wouldn't be able to know in advance that these things are going to last 80 years or 100 years, but they turn out to last 80 to 100 years. the utilities that built these nuclear plants in the u.s were hoping to get 75 uptime they're getting 95 uptime out of their nuclear that's part of our paradox the performance is out of this world for existing nuclear it's outlandish but can we get there again so the russians have a sodium fast reactor program their sodium fast reactors are decent rumors from the Russians just chat on the internet says that it's about 20 % more per kilowatt hour to produce electricity than their traditional ones.

28:08What's the advantage? Oh, well, I mean, they're still tinkering. They're going to try a few versions going forward over the next few decades if they don't have other issues. But it's okay. It's not bad. And by the way, guys, none of this means we won't have genuine engineering breakthroughs or development success with other types of reactors. But let me just summarize in this joke. What do you guys call a Gen 4 reactor we're building the first version of? A Gen 1? Yeah, there we go. You stole my punchline, Tracy. Sorry. Okay. I want to ask, get back to like a Vogel, some of the questions around the point of like, we don't have a construction industry.