Lead-Lag Live

Mark Nelson on Nuclear Fuel Economics, Germany's Energy Crisis, and Global Nuclear Trends

• Michael A. Gayed, CFA

Share episode

Ever wondered what makes nuclear power an attractive option despite widespread misconceptions? Join us as we uncover this with nuclear energy expert Mark Nelson. Mark sheds light on the surprisingly low fuel costs of nuclear plants and shares his mission to prevent plant closures. He also opens up about his journey in the industry, revealing the intriguing story behind his signature mustache and its significance to his identity.

We then turn our attention to Germany's energy challenges, exploring the fascinating dynamics between nuclear power and lignite coal under carbon tax regulations. Mark provides a detailed analysis of the recent shutdown of Germany’s nuclear plants and its impact on electricity prices—a true eye-opener for understanding the economic pressures on German industries. For comparison, we glance at France’s ongoing reliance on nuclear energy and China's strategic nuclear developments, offering a comprehensive look at global energy policies. 

Our discussion takes a broader scope as we navigate through the nuclear strategies of various countries. From Russia's assertive nuclear expansion and Eastern Europe's growing pro-nuclear stance to the energy needs of tech giants like Facebook and Apple, Mark's insights are both enlightening and thought-provoking. We also delve into the potential of nuclear power to meet the rising demands of AI computing, emphasizing the importance of stable and predictable energy sources. Tune in for a captivating episode that not only educates but also challenges conventional wisdom about nuclear energy.

The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.

 Sign up to The Lead-Lag Report on Substack and get 30% off the annual subscription today by visiting http://theleadlag.report/leadlaglive.


Foodies unite…with HowUdish!

It’s social media with a secret sauce: FOOD! The world’s first network for food enthusiasts. HowUdish connects foodies across the world!

Share kitchen tips and recipe hacks. Discover hidden gem food joints and street food. Find foodies like you, connect, chat and organize meet-ups!

HowUdish makes it simple to connect through food anywhere in the world.

So, how do YOU dish? Download HowUdish on the Apple App Store today: Support the show

Speaker 1:

The fuel cost of a nuclear plant is about a quarter, 25% of which natural uranium tends to be less than half. Those are very conservative in the sense that those are big numbers. I would say in many cases that I've seen, the natural uranium cost of fuel in a nuclear plant is going to be something like 3%, 4% or 5% of the total production cost at the nuclear plant and in terms of the sales price of the nuclear it's going to be extremely small 1% or 5% of the total production cost at the nuclear plant and in terms of the sales price of the nuclear it's going to be extremely small 1% or 2% of the price of the sold nuclear power, depending on which country we're talking about and the nuclear system in question.

Speaker 2:

I know there's a hardcore uranium and nuclear audience that I hope sees this, reposts it and likes it and, of course, checks out Lead Lag Live for the edited conversation after we are live here. My name is Michael Guyatt, publisher of the Lead Lag Report. Joining me for the rough hour is Mr Mark Nelson, who I've had on Spaces before. First time he and I are doing this face-to-face, at least through a platform like this. Mark, for those who are not familiar with you, introduce yourself. Who are you, what's your background, what have you done throughout your career and how long did it take for you to grow that stash?

Speaker 1:

Great set of questions ask them. I'm based here in Chicago. I own and manage a small consultancy, radiant Energy Group. If I have to describe our work, I would say we're a boutique consulting group that works on energy transition issues. Most of us are engineers, but we have experience in a wide array of industries and on a lot of subjects. Because I speak most publicly about nuclear energy, because I've worked on nuclear energy for most of my career. Most of our clients end up coming to us for nuclear energy related issues and we help solve them On a sort of personal project level, which definitely interacts with our work.

Speaker 1:

I try to save nuclear plants from being closed around the world and try to get nuclear plants added around the world. I see this as being important. Whether you care about climate change or prosperity or, fortunately, as more and more people do both at the same time think nuclear is great for that, and I think that, unlike other energy sources that have either a lot of success and are moving really well, we have a lot of issues in nuclear energy. To get it up to speed, one of which is public acceptance. Many of the issues are actually within the industry structure. We're not currently set up well to add a bunch of nuclear power now that a bunch of the public is asking for it.

Speaker 1:

In terms of my mustache, you know what? I started it as a joke back in grad school. I was at Cambridge University and I was just feeling the spirit of, like the RAF pilots and I don't know. I'm from Oklahoma, from an oil family, so I'm thinking sort of there will be blood Daniel Day-Lewis character in there, just feeling it a little bit.

Speaker 1:

So I started growing a beard and it was really ugly, it was really weird, it was patchy, it was like reddish, like when the light came through you could see glinting red hairs. So I guess I don't know Scottish background or something. I was going on a training trip with all the lads, like all the track guys were going to Tenerife and off the coast of Africa to do some hardcore training and other activities and I decided it'd be funny if I got rid of everything here and just had this wispy little stash. And I'll tell you, michael, I got so much abuse for it that I was like hell with all you guys. I'm keeping it, I'm doubling down, I'm tripling down on the mustache and I just kept it. And by the time I became known in the public for talking about nuclear. It was so much a part of my brand that I can't quite get rid of it yet you went nuclear on the haters.

Speaker 2:

Okay, so hold on. So this whole point about saving plans from being closed what does that actually mean in practice? What are some of the things that you're actually doing? How do you save a plant from being closed?

Speaker 1:

So I don't lobby. So what people think it might mean is that there's somebody who's like a skilled political operator, knows all the different legislators in a democracy or all the different minions in a dictatorship or whatever, and that you pay them money and they go execute on what you want done. I'm not that. What I do is that, because I'm well known for talking about nuclear, people come to me in the direct messages by email. They reach out and they say, hey, my nuclear plant's closing. I'm really worried about it. What can I do? And I said if you're serious, there are things you can start doing today. First, you're going to need allies, and to have allies, you're going to need a way to bring people in. To bring people in, you're going to need to use a communications platform. Is that a Facebook group? Is that a WhatsApp group? Is that going to be a Discord? Whatever it is, you need a way that, when you find at least one or two other people in your country or your state or your region who want to save a nuclear plant, how do you onboard them and stay in touch? Next, you're going to need to collect the facts. Why is your nuclear plant closing? Does it have to close. Is your nuclear plant closing? Does it have to close? Is it actually old? Is it actually worn up? How much does it cost to operate? How much does it cost to have it as part of the energy system? Is it true that you don't need it because you're getting another energy source? Get all the facts in one place, write it up as a team and edit it as a team. That will form a core group of volunteers who know what they're talking about and are credible when talking to reporters.

Speaker 1:

One of the most crucial things about saving nuclear plants is you're often going against the wishes of the nuclear industry locally. The global nuclear industry may want your nuclear plants to stay in operation it's part of the club but locally your utilities may be getting a ton of money from the government to shut down the nuclear plant, even if it crashes the grid. They've been assured we're going to screw you and kill your nuclear plant, so you better play ball with us. So management at these nuclear plants are often conflicted because they know that their country needs the nuclear plant, but they know that they have to do what they're being told by their chairman and by their board, and that's a group that's going to be responding to many other needs other than keeping the society's energy going. So once you have a sort of an FAQ or an understanding of what is going on with your nuclear plant, why it's important, then you need to get that in front of reporters and you need to have some kind of public event where you get the word out and you start gathering a public movement. Once you have a public movement, you start developing as leaders.

Speaker 1:

These early advocates start developing as leaders. Many years down the line you're trusted as experts who put your own ass on the line before it was cool, before it was popular and before anyone gave you permission. So that's what we do. It's not exactly a profit-making enterprise, let me tell you that, because again, you're going up against the local nuclear industry. One of the funniest things I experienced when people call me a lobbyist, when, specifically, the problem is that the lobbyists get paid by the nuclear industry to not object to the closures, like to work on getting the biggest payoff for shutting down the nuclear plant, not for keeping it. Now I will say that from the crisis years when I was doing this as part of an environmental nonprofit, it was the main work of Michael Schellenberger and my crew over at Environmental Progress. Well, that was the early years.

Speaker 1:

A bunch of the countries that we think of as leaders in nuclear power, like France or South Korea, were not leaders. There was a reputation from a long time ago and France and South Korea were both trying to destroy their entire nuclear systems as recently as 2020. And people forget that because we just know of them as the great leaders in nuclear right. But we had to work on movements in those countries. People stood up locally and said we will fight these closures. People stood up and said we will go against what our industry says. Now it's very difficult to do that, so organizing help and strategic advice from abroad has been useful there. But in the end, saving nuclear plants is about people who care enough to act locally and therefore are subject to the pressures and the attacks locally. I get to float around and be just an international I'm just Mark, you know. But people who put skin in the game, I'll do whatever I can with strategic advice helping write up that set of facts, helping find information, helping get it to the right people to support your move.

Speaker 2:

Is there a sense of sort of how much prices change for electricity post shutdown versus before shutdown? What are we looking at as far as the actual impact.

Speaker 1:

So it's a very complicated system. One of the trickiest things I do is that I try to find answers to these that are not confirmable, but they're as close as we can get as an understanding without going into extremely expensive modeling. That itself has a bunch of contentious inputs and outputs and you're struggling. Let me say this electricity is very complicated. It is not like any other system engineered or financially. It's just not like other things. A lot of trouble we get into in electricity is people coming from outside electricity thinking, oh, I understand economics, so I'm going to be able to understand the electricity market. No, it doesn't work like that. There's an irreducible complexity to the engineering and management of the grid. We just layer a bunch of misunderstandings on top of it. So you're coming and asking me what sounds like a simple question how much do electricity prices change when you turn off nuclear? That is such a difficult thing it's been one of the most difficult challenges in all the countries we've operated to try to make a prediction. Let me just give you an example of where I can sort of find a pathway to an answer. Okay, can sort of find a pathway to an answer.

Speaker 1:

Okay, in Germany, the cost of operating the German nuclear plants long term was something like 20 to 30 euros per megawatt hour. That doesn't mean that's what the utilities wanted to sell the nuclear electricity for. They would have wanted as high a price as they can get, but the cost of generating that nuclear electricity was 20 to 30 euros per megawatt hour. That's dealing with the waste, that's hiring new workers, that's doing upgrades, safety checks, buying the fuel. It's everything right 20 to 30 euros a megawatt hour.

Speaker 1:

The only baseload or controllable always-on electricity that compares to that in Germany is lignite coal. Lignite coal is coming out of these giant pits and it costs very roughly 20, 25, 30 years a megawatt hour to produce that coal. What that means is that coal costed about the same as nuclear. Now in electricity it matters where you are. Just because you can make cheap electricity up in the north doesn't mean you can get it to a factory in the south. So in general the lignite mines and the nuclear plants were positioned well. The lignite mines have to be where the lignite is, but industry grew up close to the regions that had a lot of lignite power and they also later grew up or were supported by nuclear plants that were positioned well to feed power into the grid. So there is issues just assuming it's interchangeable, because it's not.

Speaker 1:

But here's the key thing Europe has been passing carbon taxes. When you put a carbon tax at prevailing rates on that lignite electricity, the price, the cost to the producer, you can say the cost to society of the lignite at 20 to 30 euros a megawatt hour plus the carbon taxes, puts it up near 80, 90, 100 euros per megawatt versus the cost of nuclear down at 20 to 30. What this means is that's the wholesale electricity cost for bulk electricity. So if you're a large factory trying to decide whether to stay in Germany or leave Germany and you are facing down needing to get a one or two year electricity contract and the cheapest cost of generating electricity from any unit not even the profit for the utility, but the cheapest cost of generating power is 100 euros versus the 20 to 30 for nuclear. It means you just cannot get cheap industrial electricity in Germany unless it is specifically subsidized by the government. Now there's already some subsidies in Germany. They take a bunch of money off your bill if you're a large electricity consumer, to protect you from the cost of the transmission upgrades that are required to switch over to renewable sources located in the wrong locations for the factories.

Speaker 1:

But what we think we've seen is the shutdown of the final 5%, 6%, 7%, 8% of nuclear seems to be bumping up wholesale electricity prices in Germany by. This is very approximate. I'm worried about being crucified, but I wanted to give you an answer. 20 to 30%. What that means is you cannot get industrial electricity in Germany at the cost that you can get it in France, and France has some of the most expensive nuclear power on planet Earth. They mismanage their nuclear system in every way they can find to do it to give an advantage to the non-nuclear parts of the grid. I don't know, it's just a weird thing because a lot of French bureaucrats are anti-nuclear and a lot of Brussels politics was anti-nuclear French people going and hanging out with anti-nuclear European Commission people and being anti-nuclear together. So they've done everything they can to make nuclear expensive in France. It's still significantly cheaper to get an industrial electricity contract in France, especially a long-term one that relies on long-term predictable prices from the nuclear system. Very difficult to get long-term contracts or cheaper contracts in Germany, and it's a result of losing the final nuclear plants. What's interesting and what gives us some evidence here? Michael, I know this answer is a bit long, but this is stuff that I just haven't talked about in other places and I think people might find interesting.

Speaker 1:

The nuclear operators secretly offered to the government to sell their electricity over the long term like 15 years at 60 euros per megawatt hour, maybe adjusted for inflation, I don't know the details. But this secret offer of 60 euros per megawatt hour was rejected by the German government and the German government then went and said that if we can't find a way to get tax subsidies onto people's electricity bills to make industrial electricity at 60 euros, we're going to lose all our industry. That gives you an idea of this cost, and this is not the same thing as the final cost. This is the wholesale cost. This is the price to produce giant batches of electricity and just dump it on the grid. It's not the cost to deliver it or to maintain the grid or to do any of that energy transition stuff.

Speaker 1:

So very approximately you can bet that a European country that loses nuclear but doesn't have backup is going to have a wholesale price jump that could be anywhere from 20% to 30%. My good friend and colleague, bjorn Peters, over in Germany, says that he studied this specific issue of electricity prices in Germany of losing the last six units, and if he can comment on the chat, I'd love to hear the headline number what his analysis was. The difference was for industrial wholesale prices. Hopefully that's getting some answer in what is an incredibly complicated question. That was a little too simple to ask for you.

Speaker 2:

No, no, no. I love that. I'm glad you went into that deep. What parts of the world are most friendly towards nuclear and least friendly towards nuclear? I mean, I think China right Probably most friendly, just because they're popping up reactors everywhere seemingly.

Speaker 1:

Careful. China is extremely good at building nuclear, which makes up for what seems to be a conservative and nuclear suspicious stance by the government. This is not what you probably expected to hear. I would say Russia is most nuclear friendly. They are the cowboy nuclear country. They're willing to attack and take nuclear plants in war as prizes. They are willing to run nuclear plants within a few tens of kilometers of the front line of nuclear Like we're talking a situation where Russia is. They are very comfortable in a nuclear world. They're comfortable talking about nuclear, threatening with nuclear, offering nuclear to everybody.

Speaker 1:

Russia builds a good nuclear plant. Russia has done something unusual. When they're selling a nuclear plant to Turkey, they've hired one of the best architects available to design the appearance and the lighting quality of the nuclear plant so it looks beautiful. Russia had the best nuclear marketing. Russia was most open to novel approaches to communication. Russia signed the most nuclear deals. Russia is the most nuclear friendly place on Earth.

Speaker 1:

Now, depending on how you interpret the question, it's arguably not friendly to nuclear to capture nuclear plant in a war. I don't think if Rose Adam had a choice they would have enjoyed being drug along on that adventure, but they are stuck in it. Part of Russia's ability to do a lot of nuclear is that their leader believes in it and supports Rose Adam or makes Rose Adam do a lot of stuff. It's hard to separate that from the craziness of capturing a nuclear planet if the same leader goes to war. So Russia's most friendly to nuclear.

Speaker 1:

Now, as a reaction to Russia, perhaps or maybe just because it works, the former Soviet influenced world, the countries bordering Russia and two or three countries in that's Eastern Europe and Northeastern Europe, extremely friendly to nuclear. So Finland nuclear is life and death for Finland. They have and the polling data that I've done I haven't pulled all the small nuclear friendly countries, but Finland has extremely high internal polling that they've done about acceptance to nuclear. We're talking 92, 93% of Finns are at least nuclear positive in some way, with a bunch of those being very much pro-nuclear. So Finland is hugely pro-nuclear and they're right on the border. Sweden was far enough away that they got caught up into the anti-nuclear frenzy and they started trying to destroy their nuclear plants. They have experienced extreme cost rises with energy and they've learned their lesson and now a pro-nuclear government's been elected and they're doing as much as they can to save existing nuclear plants life, extend, operate and add new nuclear plants. They really regret having lost the nuclear reactors that got shut down under the previous, less serious government. So then, if you trace down from Finland and Sweden, you're going to hit a big string of pro-nuclear countries that actually have nuclear reactors.

Speaker 1:

Ukraine. Nuclear is life or death. They will defend their nuclear plants as they're getting shot at with missiles and stuff hitting the. It's not clear that Russia is directly attacking the nuclear units themselves. So there seems to be some kind of balancing act to be played there. But the Russians are attacking the grid in ways that are going to threaten the operation of the nuclear plants in Ukraine. At the moment Ukraine is something like 70, 75, 80% nuclear power, which is at the edge of healthy. It's more that they've lost a bunch of demand because of the war and gotten a bunch of their power plants destroyed. But in a life or death scenario, ukraine is going more towards nuclear rather than further away.

Speaker 1:

Czech Republic for nuclear, hungary radically pro-nuclear, bulgaria's turning back towards nuclear. They shut down some units as they joined the EU and now, as they got part of the European economic area, they had anti-nuclear politicians sort of obey European strictures to move away from the old Soviet nuclear plants. Shouldn't have done it, but they did. Slovakia, radically pro-nuclear, slovenia, pro-nuclear, and all of these plants, all of these countries with nuclear plants and wanting to add more Eastern Europe it's almost a reaction in the Russia-Europe split, all the way down, very pro-nuclear. Now Turkey, a pivotal country in the future of the world, has become extremely pro-nuclear and has added a Russian nuclear plant that's being constructed. They're looking to see who's going to get the next deal. Is it going to be Russia again, or are they going to hedge their bets and get a Western nuclear plant or a Chinese nuclear plant? That's happening.

Speaker 1:

China is building the most nuclear but is nuclear hesitant at the highest levels. As far as I can tell. The way you can see it is that China has not allowed any nuclear plant to be built off the coastline and although a couple hundred million Chinese citizens live pretty close to the coast, you are limited in your ability to add nuclear to your economy. If your country stretches as far across as China does a few thousand kilometers and yet you don't allow nuclear plants away from the coast. That's going to limit their otherwise outstanding ability to add nuclear plants. Let's see. South America is still struggling to figure out their position there. Argentina and Brazil are the two countries with nuclear programs. Brazil is one of the most anti-nuclear countries in the world and they don't know what to think about it, and they're hosting COP30 next.

Speaker 1:

It's an issue to work on Africa's turning pro-nuclear. A bunch of countries in Africa really like nuclear for development. African leaders have to thread a narrow line between appearing to be positive members of the global community and getting development and investment and all this other stuff. But a lot of the development investment has been tied towards crippling their own economies by not having fossil fuels. I'm not saying you can only develop with fossil fuels. Very difficult to see how you don't develop with fossil fuels.

Speaker 1:

The country's claiming that Africa can develop without fossil fuels, themselves developed with fossil fuels. One of the narrow ways through is as international organizations become nuclear curious or even nuclear positive. African leaders are finding that pitching nuclear wins on both sides. It's like the clean energy thing but also the serious about development to their own population. So Southeast Asia is slowly getting more and more pro-nuclear. That's good. Australia is anti-nuclear but we're working on it and in a lot of these cases I'm painting with a broad brush. We're seeing like casting seeds over a garden plot. We're seeing pro-nuclear sentiment rise in a lot of places. It's just a long way to go between that and a working nuclear plant.

Speaker 2:

I want to get to some of the audience who's watching this live as we're chatting. So price sensitivity of demand for fuel in natural gas versus price sensitivity of demand for fuel in nuclear. If a US utility were to wind down a reactor and build a natty gas electrostation, how would that impact natty gas prices? By the way, the word natty every time I hear that word, I'm going back to being a natural bodybuilder because that's like yeah.

Speaker 1:

So if you went to college in rural America, that's natty light. So natural light, one of the worst beers available for students breaking age limits. But yeah, natty Gas, all right. So here's the big way to think of natural gas. This is rule of thumb stuff. This is just like you're thinking about it in your head and trying to stick in new information.

Speaker 1:

What is your baseline assumption? Your baseline assumption is that the fuel cost of a nuclear plant is about a quarter, 25%, of which natural uranium tends to be less than half. Those are very conservative in the sense that those are big numbers. I would say in many cases that I've seen, the natural uranium cost of fuel in a nuclear plant is going to be something like 3%, 4% or 5% of the total production cost of the nuclear plant and in terms of the sales price of the nuclear, it's going to be extremely small 1% or 2% of the price of the sold nuclear power, depending on which country we're talking about and the nuclear system in question. For natural gas, we're going to assume that the sales cost of the electricity is often dominated by the natural gas price, the reason why, if natural gas gets expensive and electricity demand isn't high, you turn down or turn off the natural gas plant. So there's a kind of a natural balance there. When we're looking at levelized cost of electricity or the total cost for the whole power plant system natural gas or nuclear for the life of the system, we tend to say sort of rules of thumb two-thirds of the total lifetime cost of investing in building and operating and decommissioning a natural gas plant is going to be the natural gas sales, like just the natural gas product brought into the plant and burned. We say about two-thirds of the levelized cost of electricity from a natural gas power plant choice, if you're comparing options is going to be from the natural gas. Of the levelized cost of electricity. The cost of building a nuclear plant operating God forbid, decommissioning shouldn't need to do the uranium cost of that is going to be again a few percentage points. What does this mean? It means that when utilities often who are disincentivized by their regulators from trying to gamble and trying to make more profit by taking on risk, a lot of times they pass on the risk of natural gas price rises to the consumer and that way they say it's not our fault, you said we could do it, we're just going to pass it along, make our 10% on capital invested and call it a day.

Speaker 1:

The question is really kind of complicated and it depends on the region. There are regions, like in New York, where they turned off a nuclear plant but they haven't expanded gas pipeline capacity, meaning it squeezes everything. They're limited on what they can get through a pipeline of a given diameter pressure delivery schedule. They're limited even if they switched to natural gas. For their natural gas plants they may have to operate consistently at a much higher price than expected. If you're just looking at sales price of natural gas in another region.

Speaker 1:

Here's what I would say we don't know when natural gas is going to get expensive and cheap. If you know that, go get rich right. America beat all rational predictions of what would happen with natural gas supply in our country. I come from a background where my family's involved and saw the up and downs of that. The basic truth is we don't know, with these quick to jump, quick to decline production curves on natural gas wells, what is the long-term outlook for natural gas in the US If we keep managing to innovate and drill new wells and get more gas out of existing wells and we are able to keep that supply of natural gas increasing, then you could increase consumption with a new natural gas plant or shutting down a nuclear and replacing it.

Speaker 1:

You could sort of, in a broad sense, keep it's not going to necessarily impact.

Speaker 1:

What I don't like and if I can get to my response to the question, I don't like the idea that you leverage something as crucial as electricity, that's important for running everything else, that you have that tightly leveraged to such a volatile commodity price as natural gas, when you can instead have it connected to a super slow changing, or let's just say uranium.

Speaker 1:

It's not that it changes slow and may all you uranium investors do great, god be with you. But if the uranium price goes up it doesn't significantly impact the production price, the production cost of nuclear electricity. So I think that that's a lot more consumer safe, a lot more friendly to the people and nations where electricity matters as a cost and not just for rich homeowners where it doesn't really matter. You can just use as much or as little as you want, it doesn't really matter for your budget. I think that controlling those costs by transferring nuclear capacity or natural gas capacity eventually to nuclear is very important. That's beyond any climate imperatives. That's just. It's safer to have electricity coming from commodities that change the final production price much more slowly than natural gas.

Speaker 2:

Let's get another question from YouTube and this sounds like it's very detailed, so I wanted you to kind of explain it like we're five-year-olds, mark. I heard that a couple of months ago the BN-800 was loaded with MOX fuel with minor actinides, I'm assuming I'm pronouncing it right. Another argument in the nuclear waste debate. What is the nuclear waste debate?

Speaker 1:

to begin with, Okay, first of all, bn-800 is the B-street neutron fast neutron reactor. So fast reactor, 800 megawatt, which is a continuation of the longest continuously running and successful advanced nuclear program in the world. I would argue that's the Russian former Soviet but now Russian nuclear program in the world. I would argue that's the Russian former Soviet but now Russian nuclear program to make a fast reactor, which means that you intentionally let your neutrons go super, super fast and they smash into the atoms and they do a different set of reactions, of different probabilities than in most reactors we have today. It does not mean they run at a hotter temperature, it just means you're using a different physics. You're using a different operation regime on the inside of the reactor. What it means is you can split apart and get energy out of substances that you might not be able to in a normal reactor. You can get more energy smashing neutrons into the natural uranium-238 that's normally difficult to get energy out of in our normal reactors. You have to enrich the uranium-238 that's normally difficult to get energy out of in our normal reactors. You have to enrich the uranium-238 to have more uranium-235 that's more unstable and wants to split easier. In a fast reactor it's like smashing the atoms harder so you can split more of your fuel In the long run. The idea behind fast reactors is that you would convert way more of the Earth's precious uranium, and eventually thorium, into energy compared to what you can do in a thermal reactor, the traditional reactors we mostly use. So other features come along with this, with the fact that liquid metal, liquid metal sodium, is used to cool off the reactors, which has different advantages and disadvantages, but you can't really use liquid sodium well in our traditional reactors. Okay, so that's the Russian program and they're working on it.

Speaker 1:

The argument about nuclear waste is that we are making incredibly toxic, dangerous substances that last for a very long period and you can't trust people, you can't trust institutions, can't trust society. Eventually it will leak out and poison everybody. That's the emotional side of the argument. I suppose we're making bad things that are uniquely bad and then they're going to be uniquely hard to handle and we are going to lose control of them in a thousand years, 10,000 years and they're going to leak out and hurt the ability of the planet to host life. That's the argument. In truth, there's almost no waste. It doesn't leak, it's contained and it's extremely easy to store and monitor over arbitrary time periods. I'm willing to say that industry won't, because I think they're cowards on this subject. But nuclear waste is not a physical problem. It is one of the strongest remaining spiritual or cultural problems. But we shouldn't be responding to spiritual or cultural issues through engineering like Yucca Mountain, where you spend $100 billion to ship all the nuclear waste out to people who don't want it and put it down deep in a hole. Not acceptable to me.

Speaker 1:

To me, what this is is that the communities that are getting rich on nuclear energy, they don't have a problem with nuclear waste. And the people who first signed up to the nuclear plants or had the nuclear plants put in their village or their district may have thought well, you better get that waste out of here because we hate it. Well, now the villages, the districts are filled up with people who work at the nuclear plant, sometimes multiple generations. They themselves are turning into the nuclear advocates who are saying nuclear waste isn't an issue. So my solution is very simple you need to make the nuclear waste publicly accessible. I have a new baby at home. I'm able to join you on this call courtesy of my dear mother who's taking care of the child's day. I think that if working dads like me can visit nuclear plants and show people that you can go into the nuclear waste, we're going to break down those fear barriers.

Speaker 1:

Do I appreciate the Russians developing a nuclear system where they can take parts of the nuclear waste, put it in the fuel, put it in the reactor and actually get energy out of it? Yeah, I think that's unbelievably cool and I think the future of humanity's energy supply is in that direction. But it's misleading to say we have to do that or we don't solve the nuclear waste. Let me say one more idea that I've been developing, michael, and I think that this is an answer to the question too If there's a place that recycles nuclear waste, like Russia or France, that serves as an argument that we can control nuclear waste without having to actually build an expensive $10 billion reprocessing center ourselves. If there are places like Finland where they built the holes in the ground that's their version of Yucca Mountain. They built the hole in the ground. They're ready to take in nuclear waste. That shows we can, which should remove the urgency to demand it, in other words, people who say there's no solution for nuclear waste. Once you have some solutions, you solve the issue of people saying there's no solutions and waste. Once you have some solutions, you solve the issue of people saying there's no solutions, and if they don't agree, then in that case they just wanted to stop nuclear energy in the first place.

Speaker 1:

Rounding up my answer to this question the strategy used in the 1970s and 80s by anti-nuclear groups to destroy nuclear power was called clog the toilet. The idea was this you pass laws requiring a legal, engineered solution to nuclear waste before you allow more nuclear plants or the continued operation of the current ones. Then you put all your resources into blocking and stopping any implementation of waste solution. That way it's like a pincher move. It's like you're ambushing from both directions. The whole point is that you hate nuclear energy and want it gone, because either you hate energy or you think that it's somehow going to make nuclear war, or you're just a foreign agent. One of those three right. So you want to stop nuclear energy. So you put into place reasonable sounding laws that say nuclear waste is just so bad, no one knows how to do it. Let's make a law that says you have to figure it out, nuclear industry. And then on the other end you say, hey, nuclear industry, we're going to block anything you do to make a nuclear waste location, so that closes nuclear plants in some cases.

Speaker 1:

One place where this is being particularly effective, with world shaking implications, is Taiwan. Taiwan's grid rides on the brink. Every summer they barely have enough power and the tiniest little mistake can lead to blackouts across the island. All right, they're closing their nuclear plants because of an ideological obsession among the parties that have been winning elections lately, right. So they're closing these nuclear plants. They're threatening the grid. One of the problems that's closing the nuclear plants they're threatening the grid.

Speaker 1:

One of the problems that's closing the nuclear plants is that local leaders have put in laws that you are not allowed to store nuclear waste outside of the spent fuel pool. That's a swimming pool of water that carefully protects the nuclear waste radiation. It can't go very far. Water blocks it until the nuclear waste is cool enough to put enough of them in a canister that you could only need a few canisters next to your nuclear plants. Well, what they do is they block the moving of the waste and then the nuclear waste pond fills up and then it shuts off the reactor.

Speaker 1:

So that's a way of controlling, through local anti-waste politics, the operation of nuclear in a way that could lead to a collapse of Taiwan's grid and changing the world geopolitical situation, if we can put it like that. So this nuclear waste thing does matter. It is an issue. It's not a physical or engineering issue, it's a spiritual and marketing issue. The BN-800 is fascinating for reasons beyond. So the fast neutron reactor program is fascinating for reasons beyond just the waste, and we aren't guaranteed to need to build one to respond to waste issues. If they've done it, it doesn't mean we don't build fast reactors. It means we should build them based on wanting to explore the energy implications, rather than using it as an excuse to continue this untruth that there's a problem with nuclear waste that only machinery can solve.

Speaker 2:

So, as you were talking, I went to chat GPT and asked how do you solve nuclear waste? And that gets into a discussion around AI and nuclear. Is it possible to be bullish on AI and not be bullish on nuclear? It seems like this is the only way to actually power these massive servers.

Speaker 1:

I think we should unpack this. I've seen a radical change in big tech and its approach to nuclear in the last 18 months. This is the biggest thing happening in nuclear. This is the number one issue. It's this In order to lead on AI, you need the maximum amount of computing. To make the maximum amount of computing, you need to with a limited number of staff and with limited time and focus, and the need to make multi-billion dollar investment decisions in physical infrastructure. You have to decide where you put your massive supercomputers. Where is it going to be? You need the cheapest cost of compute which comes from the most number of the most efficient chips all stacked up in the same place, computing as much as possible in one location, and a big data center. That are just. They're 10Xing every couple of years. That's the data center, the AI computer craze at the moment.

Speaker 1:

In order to make a single building that uses now a million people's worth or 5 million people's worth of electricity to push forward in AI, it means you can't just say, oh, the grid will handle it, I'll just put a million, I'll ask for the same as, like a metropolitan area, I'll just ask for that from the grid. The grid is a physical system that must physically deliver you massive amounts of power. So what you do is you, instead of saying I'm going to be out in nature by a giant wind farm, no, because you'd need gigawatts of power streaming back to the wind farm whenever the wind turned off. Or you need to build a massive natural gas or a backup generator structure out by the wind farm in order to. Or you might say, no, there's a wind farm on the other side of the country. Well, you can't be at both of them unless you're splitting your. So it's centralized computing that's requiring the most powerful centralized power.

Speaker 1:

Tiny little anecdote when I was an environmentalist out in Berkeley, california, trying to save nuclear energy, we would have very strange characters come into Environmental Progress Office and either say we love what you're doing for nuclear energy, or they said we hate you. You guys are the devil. We had a guy come in once and he's like tell me about this nuclear energy. And I'm like trying to explain his little crust punk, you know, like white guy with dreads and all. Anyway, eventually slams the door in my face saying nuclear centralized. We anarchists can never support it. All right, there you have it. Nuclear is centralized. Well, guess what. Nothing is as centralized as the grid. If you're talking giant amounts of power, the whole point is to centralize power generation, power transmission and power usage so you can efficiently use a lot of power.

Speaker 1:

Ai is the biggest centralized point source demand of electricity we've had come along in a long time. A lot of the original electricity infrastructure was pushed forward by the original ultra users, call them the OG hyperscalers. Like aluminum foundries, aluminum got put next to one of the biggest power plants ever built at the time back in the 1800s at Niagara Falls. Then, once Niagara Falls had enough capacity, it wasn't just local industry, they had the line, the transmission line come down and power New York City. Same thing happened in California. You had power up here worth building an infrastructure to when you had big enough demand. Ai is doing that again. It's like seeing a groove in a wooden table taking a big old knife and going back down through that groove over and over.

Speaker 1:

Centralized demand like AI is tripling down on centralized power like nuclear. But there's a danger here for a lot of our cities that are run by people who don't know about or don't like nuclear power but have been benefiting from centralized nuclear power to power their cities for decades. I'm thinking of Chicago. I'm located in Chicago. We're almost 100% nuclear power here in Chicago, but the city doesn't really understand or know about it. It just knows that somehow things are cheap and it's fine. It just doesn't think about it. Every other problem comes up, just not power.

Speaker 1:

Well, michael, we've got 11 gigawatts of nuclear plants serving Northern Illinois. We have five gigawatts of AI compute being talked about by, announced and in the process of permitting for in our areas. If five gigawatts comes out and takes a giant chunk five gigawatt chunk out of 11 gigawatts of nuclear power in Northern Illinois, chicago's, I don't know what's going to happen to us. You can't just magically make new power plants. It means that Chicago will desperately going and trying to buy up the remaining operation hours of the coal and the gas and we're going to have to sand up diesel generators. We are going to be at the bad end of a whip with the handle, starting from AI data centers setting up shop next to existing nuclear plants. The only way out that I see other than tripling down on a giant expansion of natural gas and just hoping that the pipelines and the gas fields all keep up, the only way out of it that I see is building large new nuclear with proven technology to hold us over as we work to see whether we can scale up smaller reactors.

Speaker 2:

Yeah, and the smaller reactors have been getting more and more attention, right, the small modular reactors which I think we've talked about in spaces before Any kind of more interesting leasing developments there that are accelerating things.

Speaker 1:

Well, before I get to there, I'm noticing we have a question from one of our listeners saying is it possible, is it responsible, to piggyback on the AI hype just because irresponsible, not responsible? I've talked to hyperscalers who say if we could buy 20 gigawatts today, we'd do it. 20 gigawatts that would represent 20% of the American nuclear fleet that they would buy in one spot if they could just wave a wand and take it all and they can pay prices beyond almost any other industrial consumer, and then the public just would have to pay it or just have to be left in the lurch. I don't know what would happen. So the demand is immense. They are going to demand that power no matter what.

Speaker 1:

So, whether it's responsible to piggyback or not, Zuck never had to worry about electricity before. He had an entire legal team and consultants and all these kiddies that come out of the elite climate law programs at all the universities saying let's just claim to consumers that we're 100% renewable. We'll buy certificates saying that your data load in Southern California at nighttime is coming from a Minnesota wind farm. It'll be amazing. They'll totally buy it and they did buy it. The public bought it. Apple claims to be 100% renewable power since 2013. They're full of shit. It's totally false. But it worked for the reporters and therefore it worked for the consumers to the extent that the consumers cared. What's happening to Apple, what's happening to Zok, what's happening to Microsoft? What's happening to them all now is they cannot physically get the power they need anymore. They cannot get it. Lying to the consumer only helps you with PR. It does not get you electrons.

Speaker 1:

So whether AI should be piggybacked on or whatever, the truth is that people who need immense amount of energy have the means to pay for it and are suddenly learning that they cannot really get it for the costs that have been claimed for alternatives are flooding into nuclear.

Speaker 1:

They still do not. They don't want to go to their board and their shareholders and say, hey, Facebook is a social networking, computing AI and now we're going to be a power plant developer. That would be a mission drift in the extreme. I don't think they're going to do that, unless there's an absolute extreme emergency. So we need a middle ground between the nuclear industry, which has not been able to put together these deals. Maybe it's not their fault, Maybe there just hasn't been demand. We've got to be able to put them together with utilities who move very cautiously and slowly, and the end energy users, like the hyperscalers and if you call that piggybacking, fine, In my world. We're just trying to meet energy demand using the tool that even the energy users themselves, like Zach, know has to be a major player in it the nuclear plants.

Speaker 2:

So let's go back to the small module reactor now point, because I think that's been the big game changer right as far as adoption.

Speaker 1:

It's been an extraordinary way to get people interested in nuclear and I think that the amount of talent that's coming in that's going to make a shot at starting a nuclear design company and a reactor builder. I truly honestly disagree with some of the worst pessimists within the nuclear industry. I think that someone's going to make this work. The issue that we're struggling with is you know I spent what? 10 minutes talking about uranium economics in the start of your show. The smaller your reactor, the worse, the less true that is. You start to escalate the cost of the fuel to where you're getting uncomfortably close to how much it costs to get fuel for a natural gas plant, and it makes me sweat a little. Where a lot of the enthusiasm towards nuclear is. Thinking that we get this cheap small amount of fuel drives an enormous amount of energy. The smaller your reactor, the more difficult that is. The more you have to spend on the fuel, the processing, the enrichment, the exotic fuel shape if that's what the argument is for making a safe small reactor, that you're making a unusual new fuel material that works really well. Until you scale up that system and confirm that it can be cheap, it's going to be extremely expensive to fuel the small nuclear reactors. That's not a reason not to pursue it.

Speaker 1:

Let me give an example and, by the way, I will full disclosure. I am an investor and advisor to at least one of these small reactor companies because I believe in the sector and I really believe in the founders that put this team together. So I'm like something will come out. My bet is on these guys. I get accused of hating on the SMRs but also being too positive about them at the same time. Not saying that proves that I'm on the right path. But I'm not putting all my eggs into the traditional or the novel nuclear baskets. I think that we need an approach towards everything.

Speaker 1:

So on the small reactors, the idea is a small reactor means well-heeled customers can say I want it as a product. Just give me that thing, get it to site, plug it in, I'll pay top dollar. I just got to have the power and I don't want to do it with diesel generators. Who's the traditional folks that say that the military First of all? Diesel generators on a submarine doesn't really go. You don't really have the same submarine force if it's not powered by nuclear.

Speaker 1:

We've had the small modular reactors in submarines for a long time Now we've had a very large, outstanding, cheap labor force of incredible young men and women working for very low hourly pay under a military command. Can we make the model work outside of that system? Maybe we also have centralized, giant, expensive batch orders for these naval reactors. We also have extremely high enrichment levels, so a lot of the spicy stuff, the active ingredient in the reactor core. So are we going to allow that on land? Are we going to permit that? I don't know. It's a complicated problem and also the submarine reactors are required to do a lot of things that we probably wouldn't need the on-land reactors to, in terms of like operate for 15 years and be able to go full power on year 15 if you got to escape a pursuing ship or chase somebody out. That's a very difficult technical problem and we pay a lot and lavish attention and effort on these naval reactors in order to execute that. Per unit of energy generated they're not a great deal. So it's not going to solve our economics on land per se to just say let's have the Navy do on land energy like we do offshore energy Traditionally, when countries made a submarine reactor and wanted to use that as the start of their expertise to bring it on land.

Speaker 1:

The first thing they did was scale it up as much as possible. At the moment, the chinese are leaders in so many areas. They claim that just making a small version of their large reactors is not financially sustainable. So it means that there's likely going to be advanced features or key breakthroughs that they can't do or haven't done, that our entrepreneurial founders are able to get through. It's just a tricky problem environmentalists, young engineers like me to find our way into the nuclear sector. Without that infusion of talent, without that enthusiasm, I don't see any kind of nuclear renaissance, even if it's going to come from the traditional reactors.

Speaker 2:

Mark, for this one. I want to track more of your thoughts, more of your work. I mean, obviously you're incredibly knowledgeable, as anybody watching this can tell, and we haven't even gotten to the big developments. But we're coming up short on time here. But where can people find more of your stuff?

Speaker 1:

You can find me on Twitter, mainly at EnergyBants, e-n-e-r-g-y-b-a-n-t-s, and I guess you can also keep track of some of the companies I'm working with and the initiatives I'm working on. So I'm working with World Nuclear Association on the Net Zero Nuclear Program and that's trying to unlock the things preventing us from just having a nuclear renaissance, and a lot of that is coming from inside the industry. It's not look as the old environmentalists die off or convert to nuclear. We have new people coming up that are very interested. In the USA there's an incredible demand for nuclear. We've got to be able to deliver it. So, following that line, I'm working with a company called the Nuclear Company. The Nuclear Company intends to be a developer of large-scale nuclear projects standardized across the United States. Design Once, build Many is going to be the tagline effectively. So follow the Nuclear Company for more updates there.

Speaker 1:

I'm heavily involved in an effort called Stand Up for Nuclear. That helps promote people saving their nuclear plants and getting more nuclear added. If a country or a state wants that, stand Up for Nuclear is very near and dear to my heart. Please take a look and see if that's of interest to you. And then finally, yeah, when there's a crisis, come to Twitter, I'll be gathering up the best information I can handle and giving it my own quick judgment as a nuclear engineer and then getting it out to the public, and if I get it wrong I take it on the chin. But I'm sort of trying to balance caution to get the details right, while also being ready for a crisis where people are scared or worried about what it means that a nuclear plant is having an accident or under attack.

Speaker 2:

Everybody. Please make sure you follow Mr Mark Nelson. Great conversation, Very educational, certainly from my perspective. Please, folks, make sure you share this good word around Lead Leg Live and I'll see you, hopefully tomorrow for more of these episodes. Thank you, Mark, Appreciate it. Thanks for having me, Michael Cheers everybody. Thank you.

People on this episode

Head Shot

Michael A. Gayed, CFA

Host