This is an audio transcript of the Behind the Money podcast episode: ‘Is this nuclear power’s moment?’
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Michela Tindera
In March 2011, the largest earthquake ever recorded in Japan shocked the country’s northeastern region. Massive tsunami waves followed. Those waves flooded the reactors at the Fukushima Daiichi nuclear power plant and led to a leak of radioactive materials. It was the world’s worst nuclear disaster in a quarter of a century. And afterward, it’s no surprise the demand for nuclear power collapsed.
Jamie Smyth
After Fukushima, there was just this huge downward turn across the whole sector. There wasn’t enough demand, so it really dented the industry.
Michela Tindera
That’s FT’s US energy editor Jamie Smyth.
Jamie Smyth
Japan immediately shut down its reactor fleet. Germany shut down some reactors and pledged to leave the industry entirely. Other nuclear plants were put on ice. And, of course, because a lot of the US companies were privately owned, depending on investment, it left them weakened and vulnerable.
Michela Tindera
After facing major controversies and tragedies around the world, from Three Mile Island to Chernobyl to Fukushima, the nuclear power industry is one that’s become known for its boom-and-bust cycles that have left anyone wanting to invest in nuclear power feeling quite skittish. But lately, nuclear power has been experiencing yet another revival, in part due to climate change.
Jamie Smyth
One of the big benefits with nuclear power is it doesn’t generate the type of greenhouse gases, carbon dioxide, that you get from burning oil and gas. So this means climate advocates in particular have really begun to sort of push ahead with this idea that nuclear can be part of the solution to climate change. Also, while there’s a lot of excitement for other renewable sources of energy, they’re not quite as reliable as nuclear. So if you think about solar or wind, if there’s no sun or wind, they end up not being as dependable as a source of electricity. Nuclear really provides a stable, steady source of energy that is not interrupted by weather events.
Michela Tindera
Jamie tells me that a new crop of start-ups in the US have been trying to seize on this moment. Thanks to recent technological and scientific advancements, a group of companies has been developing what advocates say are safer and cheaper ways to generate nuclear power.
Jamie Smyth
One of the really interesting things about the nuclear industry at the minute is that you literally have dozens of start-ups getting funding from venture capital groups, getting funding from rich tech gurus and the like. This is many more than we’ve traditionally seen in the past.
Michela Tindera
Established companies like Rolls-Royce, General Electric and Hitachi have poured money into the space. And even tech founders like Microsoft’s Bill Gates and OpenAI’s Sam Altman are involved. Here’s Altman touting nuclear’s benefits in a video published last year.
Sam Altman voice clip
Energy is so important in so many things that we all do every day, and if we can bring the amount of cheap, clean, safe energy that the world has access to to new heights, that’ll be a wonderful thing.
Michela Tindera
Some advocates of nuclear energy are calling this the dawn of a new nuclear renaissance. But at the same time, these companies are facing big challenges both domestic and abroad. And these challenges are threatening to yet again spoil nuclear power’s big moment.
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I’m Michela Tindera from the Financial Times. Today on Behind the Money: is the US on the precipice of a nuclear power renaissance? Or will it stall out before it even gets started?
Hi, Jamie. Welcome to the show.
Jamie Smyth
Hello.
Michela Tindera
Can you give me the lay of the land of nuclear power in the US as it exists right now?
Jamie Smyth
Well, I think it’s important to say that the US does have the largest nuclear power supply in the world. There are 93 reactors, and 20 per cent of US electric energy comes from nuclear power. But many of these reactors were built decades ago. There’s been a big slowdown in production of new facilities recently.
Michela Tindera
And why is that?
Jamie Smyth
Well, there are big hindrances to this industry, basically because they’re huge, complex megaprojects, these nuclear power plants. So they cost a lot of money. There’s a lot of specialised equipment that goes into them, and that makes it difficult for investors, you know, who have to raise the capital upfront to pay for a facility which will take years before it actually starts generating cash.
Michela Tindera
In the US, like in many other countries, the nuclear industry, while it’s been subsidised by the government at times, it’s a private industry. So of course, market forces are at play. Now, Jamie, after the Fukushima disaster in 2011, demand for nuclear power just disintegrated. But more recently, we’ve seen this upswing in interest, and that’s in part due to climate change. But there’s also been these new technological advancements. So can you tell me more about them? Right now, I have to say the image in my head of what a nuclear power plant looks like is pretty much where Homer works on The Simpsons.
Jamie Smyth
So one of the main types of new technology that people think could really change the game for nuclear energy is what’s called SMRs — small modular reactors. So, like they sound, they are a lot smaller than your standard nuclear reactor. They’re typically around a third of the size. Also, the smaller nature of these SMRs means that the components that go into them and the materials that you’re using to build them can often be made in factories. So rather than the custom-made style components that go into the larger nuclear power plants, these can be made much more cheaply and efficiently. And they can be moved then to the site where you’re gonna assemble your SMR.
Michela Tindera
Oh, interesting. Now this is where start-ups like Sam Altman’s come in. Since 2015, Altman has been the chairman of a company that’s developing this SMR technology. It’s called Oklo. And last year, Oklo announced that it was gonna go public via special purpose acquisition company, or Spac, to raise more money to put towards developing this technology.
Jamie Smyth
The merger was proposed at a valuation of $850mn, and it would provide Oklo with about $500mn to develop and commercialise its reactor design. So it says its designs are gonna be much more highly efficient and safer than standard reactors. And, it is confident that its Spac deal is gonna go live in the first quarter of 2024.
Michela Tindera
So they haven’t built any SMRs yet. And I should note that generally speaking, this technology is still quite unproven. The only SMRs that have been built and are operating today are in Russia and China, and they only opened quite recently. But as it turns out, even though things sound promising in a lot of ways, developing a new type of nuclear power plant isn’t so simple.
Jamie Smyth
So some of these new nuclear start-ups have really hit the skids over the past 12 to 18 months.
Michela Tindera
More on that after the break.
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Michela Tindera
So, Jamie, you said that some of these start-ups we were talking about have faced some issues more recently too. Why is that?
Jamie Smyth
We’ve seen these inflationary pressures, higher interest rates really hit home on more speculative investments, you know, more risky investments. And the nuclear sector has fallen victim to that. You’ve also seen some delays to big projects. And that has also dented investors’ confidence in the industry.
Michela Tindera
So like many of the slowdowns we’ve talked about recently on the show, it often goes back to interest rates. Jamie says that in this particular sector of start-ups, this has led to a few situations where major contracts have been cancelled and plans to go public have fallen through. But, you know, nuclear power is, to put it lightly, much more complicated than developing, say, a new social media app or ecommerce company. And there are much more complex problems at hand that go beyond the current interest rate environment. So what are some of the other challenges for these companies?
Jamie Smyth
One of the big issues facing the new generation of nuclear start-ups in the US is that SMRs rely on something called Haleu. This is a very powerful type of nuclear fuel. The uranium is enriched to a much higher level than the fuel used for standard nuclear reactors. And crucially, there’s only one supplier of this fuel in the whole world, and that is Tenex, a state-owned company in Russia.
Michela Tindera
And it goes beyond the SMRs too. Jamie tells me that more than a fifth of the fuel used by the US’s existing nuclear reactors is supplied through contracts with Russian suppliers. And since Russia invaded Ukraine, this part of the country’s supply chain has become a national security issue.
Jamie Smyth
So one of the interesting things about the energy sector is that when we had Russia’s invasion of Ukraine, the US immediately slapped sanctions on the oil and gas sector, but it didn’t touch the nuclear sector. And that’s because the US utilities and power companies are really reliant on Russian nuclear fuel. And so the Biden administration felt it couldn’t actually slap sanctions on Russian nuclear fuel at the time.
Michela Tindera
So this is a really tricky situation. How is the US planning to handle this? I mean, thinking about both the country’s existing fleet of reactors and then also these new SMRs that are in development.
Jamie Smyth
The US is doing a few things. First of all, it’s investing billions of dollars to help rebuild its own nuclear fuel supply chain, which fell apart after Fukushima. That means building up the section of the supply chain that’s in between mining the uranium ore and using the fuel in the plant. So it’s got grant programs out at the minute. It’s offering money to these SMR developers and also in the Inflation Reduction Act, offering incentives for nuclear energy companies. It’s also teaming up with other western nations as part of what people are calling a friendshoring strategy on nuclear fuel. The US, the UK, France, Canada and Japan agreed last year to invest almost $5bn to add new capacity to enrich uranium.
Michela Tindera
OK. Got it. So what’s the other part of this then?
Jamie Smyth
So the Biden administration believes that there’s no point in spending billions of dollars of taxpayers money building up its own industry if it doesn’t tackle the dominance of Russia’s nuclear fuel sector. Russia can provide this fuel cheaper than the US private companies. So the Biden administration is proposing to place a ban and pass legislation to actually stop imports of Russian fuel.
Michela Tindera
What’s the status of that right now?
Jamie Smyth
We’ve already had one bill passed the House of Representatives. That would lead to a ban on imports of Russian nuclear fuel. But it would give a couple of years of waivers and leeway so that utilities that still need some Russian fuel could apply to get it. And in the Senate there’s currently legislation being prepared, which most experts think it’ll probably get voted on this year unless the presidential election intervenes. And that would lead to a ban as soon as the president sign that order.
Michela Tindera
Is it likely that these plans would continue if Joe Biden is no longer the president?
Jamie Smyth
Experts say they think the bill will pass the Senate this year, because one of the key things about the nuclear sector is it actually retains bipartisan support in Congress. Republicans support boosting nuclear energy as well as the Democrats. So it’s one of those few areas in America where we seem to have some political agreement that nuclear is a good thing and a path forward. Now, if the bill doesn’t pass before the election and Donald Trump wins the presidency, then of course all bets are off. We’re not really sure what way it will go.
Michela Tindera
So what would you say needs to be done to move this SMR sector forward? You know, at this point.
Jamie Smyth
I suppose, you know, when money was cheap, investors were very keen to invest in the nuclear sector. But when money is difficult to come by, when it’s more expensive and they look at the risk of nuclear technologies, then it becomes a much tougher sell. To sustain a viable industry, you’ve got to generate a lot of money. And the nuclear industry hasn’t proved to be very profitable in the past. We’ve seen all these cost blowouts, we’ve seen all these delays. So for SMRs to take off, you’ve got to see some deployment and then deployment at scale. They only become profitable if you could actually build, you know, more than five or six of these. You want them to be like a factory production line. That’s the sort of business model that will make SMRs work.
Michela Tindera
So this all really comes down to what the government does then, right?
Jamie Smyth
It’s gonna depend a lot on, I think, the commitment of governments to really provide funding over the long term and retain political support for nuclear going forward for this strategy to survive. I think one of the key elements for the Biden administration is it sees its rivals, Russia and China, powering ahead. They have already deployed SMR reactors. It’s very unusual for America to fall behind in a technological race like this. So that is really providing the incentive to push ahead and give money and try and build up the sector.
Michela Tindera
Jamie, thanks for being here.
Jamie Smyth
Thank you very much.
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Michela Tindera
Behind the Money is hosted by me, Michela Tindera. Saffeya Ahmed is our producer. Topher Forhecz is our executive producer. Sound design and mixing by Sam Giovinco. Cheryl Brumley is the global head of audio. Thanks for listening. See you next week.
