September 30, 2024 • 45 mins
Earlier this month, we got the surprising headline that the shuttered nuclear reactor at Three Mile Island will be restarted. Of course, Three Mile Island was the site of a famous disaster in 1979 — one of the incidents that contributed to the US pulling back on the construction of new nuclear plants. This particular reactor was shuttered in 2019, when the economics of it no longer made sense. So why the restart? And why is there generally more interest and excitement about nuclear than there has been in years? On this episode of the podcast, we speak with Jigar Shah, the head of the Loan Programs Office at the Department of Energy. We talk about the big drivers both in terms of policy and economic conditions that have created this renaissance.
Read More:
Microsoft AI Needs So Much Power It's Tapping Site of US Nuclear Meltdown
Microsoft to Pay Hefty Price for Three Mile Island Clean Power
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Episode Transcript
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Speaker 1 (00:03):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:20):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:23):
I'm Joe Wisnal and I'm Tracy Alloway.
Speaker 2 (00:26):
Tracy, how about that reopening of a three Mile Island
nuclear facilit You.
Speaker 3 (00:31):
Know what, I saw that headline kind of float by
and it seemed like a big deal. So I think
Constellation signed a deal with Microsoft to reopen the three
Mile Island nuclear plant, which everyone remembers from the disaster
that happened there in the nineteen seventies. What I did
see was Constellation's share price just exploded higher, like up
(00:55):
thirty percent in a day. Maybe I shouldn't say exploded
in a context of three Mile melted up. That's right,
it melted up.
Speaker 2 (01:03):
You know a couple things about this, So one, I'm
kind of not surprised because we all know that the
big hyperscalar tech companies have all this demand for electricity,
they have a desire to not use further fossil fuels,
and nuclear is an obvious theoretical solution to how to
get more clean energy. You know, I will say one
(01:24):
thing about this deal, and it's very exciting, and I
don't want to diminish it in any way. But there's
one aspect of it. I didn't realize that one of
the reactors at Three Mile Island had only closed down
in twenty nineteen. So I only know there was like
something bad happened in the nineteen seventies and the probably
contributed to the US as general pulling back from nuclear.
But I hadn't realized that actually, you know, there was
(01:46):
still nuclear being produced at Three Mile Island up until
twenty nineteen. Does it make it a little less exciting,
But it's not like we're fully turning back the calendar
to nineteen seventies.
Speaker 3 (01:56):
Well, I think there's a nice narrative, full circle aspect
to this, right, which you just touched on. After the
Three Mile incident. I mean that really kicked off the
death of nuclear in some respects in the US, Like
there is a lot of hesitancy and fear really about
building new plants, and so in some ways, we're restarting
(02:19):
at least one of the reactors. Yeah, it's a nice story,
let's put it that way.
Speaker 2 (02:24):
So, okay, so this operation is going to get restarted,
And you mentioned the death of nuclear and how we
basically went forever without building new There was that Georgia plant.
I think it came online sometime last year, the Votal plant.
But it does raise the question of, like, how much
was the fact that we more or less stop building
nuclear a function of the fact that we got scared
of nuclear regulations, it became too cautious, et cetera, versus
(02:48):
the fact that we just had as multiple guests we
now have pointed out this sort of flatlining of load growth,
this sort of flat lining of overall demand, which is
something that's now changed in the last few years with
the reacceleration of demand for data centers. And to how
much is this a story of we got scared of
nuclear and we overregulated it versus how much did the
(03:11):
economics just not make sense when there was not growing
demand for lectures.
Speaker 3 (03:15):
Yeah, I think that's a good point. I mean, there's
another tailwind that's sort of behind the potential nuclear resurgence now,
which is there's a lot of government fundings floating around
the IRA and programs like that, and so that's another
thing that maybe is making maybe this time is different.
There have been a lot of predictions about a nuclear
(03:36):
renaissance over the years, but maybe maybe this is it.
Speaker 2 (03:39):
Let's learn why the stars have aligned the constellation, if
you will, why the stars have aligned you for this
seeming revival of nuclear in America with the restarting of
the Three Mile Island Reactor. We really do have the
perfect guest. We've had them on the podcast multiple times.
Truly one of our favorites in the fan. We're going
(04:00):
to be speaking with Jiggershaw. He is the director of
the Loan Program's Office at the Department of Energy, a
key player in all of the Inflation Reduction Act's efforts
to stimulate clean energy growth in the US. With the
Inflation Reduction Act, his office went from a lending authority
above forty billion to over two hundred billion. A big
(04:21):
advocate of nuclear and other sources. Jigger, thank you so
much for coming on at Lots and great to have
you in the studio. It's the first time we've talked
to you here in studio.
Speaker 4 (04:28):
It's so great to be in the studio. Thanks for
having me.
Speaker 2 (04:30):
Thank you so much. So I'm going to start off
with this question, which is, Okay, we went for a
long time basically without building new nuclear power plants. It's
starting to pick up again. How much is it because
something has changed policy wise with you know, subsidies and
tax credits, et cetera versus demand is back. Therefore the
(04:51):
economics of nuclear makes sense or would you say it's
not binary?
Speaker 4 (04:54):
Well, look, I think that when you think about what
happened through historical contacts teen seventies, we had high inflation, right,
and nuclear power was subject to high inflation, and so
you know, part of this is people were already worried
about building new nuclear plants before the incident occurred because
(05:15):
things were just getting more expensive, right. And when you
think about the utility bankruptcies that occurred right way back when,
it was because it had cost overruns on nuclear power, right.
And so so I think that in general, it goes
to when America stopped believing in itself and its ability
to do big things in infrastructure. And I think this
(05:36):
moment with load growth and with the President saying we
are going to build big things here like has gotten
people thinking again, Hey, what would it take to actually
figure this out this time around?
Speaker 3 (05:49):
This is actually exactly what I wanted to ask you
about because I was reading that the initial construction cost
for Unit one of three mile was about four hundred
million dollars, and I guess like today the cost of
building a nuclear plant would be like five billion, ten billion.
Obviously the four hundred million isn't, you know, adjusted for
(06:12):
nineteen sixties prices. But it does seem in general like
it's more expensive to build nuclear plants certainly since the
nineteen sixties. Where did that additional cost increase actually come from?
Speaker 4 (06:24):
So when you think about building things, like if you
were to build multi family housing, and you would build
one multi family housing building versus building twelve right throughout
the city, you can imagine if you're using the same design,
it would be cheaper, the workers would get better, you know,
the first one would cost more, the second would cost less,
the third would be even less.
Speaker 5 (06:44):
You get faster.
Speaker 4 (06:45):
I mean you see that when you go into like
a new home construction place. The first home takes it
seems a lot longer, and then suddenly, like the homes
start popping up every week. Right, this is the same
with nuclear power. We trained thirteen thousand people to build
the Vocal nuclear plant in Georgia, right, and then we
were done, And where did all those workers go?
Speaker 3 (07:06):
To?
Speaker 4 (07:06):
Other jobs? So, now if we wanted to build units
five and six. We wanted to rebuild you know, VC
Summer in South Carolina, which is like one hundred miles away, Right,
we'd have to go and find other thirteen thousand workers, right.
And so one of the things that we have to
figure out how to do is to figure out how
to build ten right and have those same workers that
(07:26):
we trained, all those same EPC contractors, all of those
same suppliers not have to stop and start, but we
you know, continue to like to do these one off things.
Speaker 2 (07:37):
This is why I recommend everyone should go read. Your
office puts out a series of reports called Pathways to
Commercial Liftoff, reports about what it takes to really commercialize
various types of energy, not just nuclear. And you always
talk about the importance of the order book going forward
so that people know that there's a second and a
third project and a fourth project out there. So I
want to get into that and also talk some more
(07:58):
about the workplace development, but just on this project a
little bit more. Tell us what happened. How did the
stars align such that Constellation thought it's worth taking on
the operational risk to get this going Again, Microsoft neat
thinking that yes, this is the best solution for their
clean energy needs, and what is the role of supply
(08:19):
and demand, and then the role of various tax credits
and such within the IRA that made this all happen.
Speaker 4 (08:26):
Yeah, I mean it's a juicy tail, right. I Mean,
when you think about the nuclear energy industry, there aren't
really any entrepreneurs, right. Constellation is a company that bought
up a lot of other people's nuclear plants. They are
the best operator of nuclear plants in the world, right,
and then they got spun out of Exelon right into
(08:48):
their own stockticker. But you know, I think we all
have to acknowledge that if it wasn't for the Palisades
Nuclear plant in Michigan that we announced a conditional commitment
for and that we're you know, closing the lon On here,
there's no way that the rest of these projects happen.
Right in Palisades is owned by hole Tech, which is
a genuine entrepreneur, Chris Singh right, private company, right, one
(09:09):
of the most successful entrepreneurs in the nuclear industry, right
and in the whole world. And it's one of those
weird things where he woke up one morning and said, well,
I've just got a contract to dismantle the Palisades Nuclear plant,
and you know, we went to him and said, would
you think about restarting and he said, do.
Speaker 3 (09:27):
You think about doing the complete opposite? Perhaps?
Speaker 4 (09:30):
Yeah, And he said, well sell me. And I was like, well,
here are the incentives out of the Inflation Reduction Act
you can get, you know, the forty eight E and
some of these other at tax credits.
Speaker 2 (09:39):
Walk us through the specific what are the what do
you get in there?
Speaker 4 (09:43):
So when you restart a nuclear plant, right, the nuclear
plant is viewed as new additional capacity, right because it
was shut down. And so as a result, this technology
agnostic credit that was created by you know, Senator Widen right,
because remember we always had the solar tax credit and
the wind tax credit and all these other things. So
over time, like the IRA moves us to a technology
(10:06):
neutral tax credit, so that everything that is clean gets
this technology neutral tax credit. It's you know, it's a
pretty lucrative tax credit, depends on the technology. But let's
say three cents a killo what hour? And so now
you're in this place where you actually have a bonus
production credit. Now you separately can choose to get an
(10:26):
investment tax credit. Right. But it happens to be that
the production tax cred is more lucrative for these restarts
of nuclear plants. But if you decide to do the
investment tax credit, then you get the thirty percent tax credit.
Then there's bonus tax cred So if it's part of
an energy community, you get an extra ten percent, right.
If you have a lot of domestic content, you get
another ten percent.
Speaker 5 (10:44):
Right.
Speaker 4 (10:44):
So you could imagine that some of the folks you're
building brand new nuclear plants might go that direction. But
as a result of these incentives, nuclear power is now
very cost effective. Then the question becomes like who actually
wants to buy this power? Right, because wholesale market prices
have been low, and so then the question becomes who
(11:05):
was to buy it? And it happened to be that
two different utility groups in Michigan competed over wanting to
buy all the output out of the Palisades restart, and
so he you know, picked one of the groups to
buy that power, and then that led to you know,
the project becoming financiable, right, and so once that succeeded,
(11:26):
then you know, Constellation was like, hell, maybe we could
do this.
Speaker 3 (11:30):
So when you say with the tax credits and those
other changes. It suddenly becomes cost effective or it becomes financiable.
Walk us through the actual math, like what is changing here?
Is it the discount rate or the future projection of revenue?
Like what is it exactly that changes in the equation.
Speaker 4 (11:50):
So for a restart, you generally choose a production tax credit,
not the investment tax credit. And that's because the cost
of restarting a reactor is a lot lower than the
cost of building a brand new reactor. Right, so you
make more money by getting that extra three cents of
kill what hour for the next you know, twenty years.
So the math there is you put up, it depends
(12:13):
on you know, where the final costs runs outpu let's
call it one to two billion dollars to do the restart,
And then you get this three cents kill what hour
multiplied by the number of kill what hours that that
plant creates. And remember a nuclear power plant runs on
average in the state's ninety two percent of the time,
So that's a lot of killo what hours that comes
out of that plant, whereas with a solar farm you
(12:35):
might get twenty five percent of the time production right
with a tracking system. And so so the math means
that you could get almost all of your money back
on the one to two billion dollars from the tax credits, right,
and then you've got the sale of the power right
that you're signing a long term contract for, and you
know that's where you make your return, right, Which is
(12:57):
why I think Constellations stock price jumped so much because
they have so many existing sites where a lot of
those nuclear sites have one reactor and they were made
for four reactors or five reactors, but we never built
the rest and so while this one was the easiest
way to get in right because it was a restart,
(13:20):
there's all these other sites where you could build new reactors.
And now that Microsoft has come in and said we
want to buy all that output because we are taking
seriously the commitments we made to twenty four x seven
clean power by twenty thirty, then you now have the
makings of an equation. And if you heard but like
Meta came out right after that and said, we are
(13:42):
also all in on nuclear power and meeting that twenty
four x seven requirement.
Speaker 2 (13:46):
So we have a lot of physical capacity or just
space capacity right now to add more reactors. And so
that's sort of the exciting aspect walks through a little
bit more of the math with the three mile Island deal. Specifically,
for consolation, it's going to cost them one point six billion,
I think, is what I've seen reported to get this
(14:07):
reactor back up and running. And then Microsoft makes some
sort of commitment where they're going to be a buyer
over I don't know, X many years, like talk to
us a little bit about more about this particular deal.
Speaker 4 (14:19):
Yeah, So I don't know what the final cost of
the Constellation restart will be, just because I think they
still need to do more engineering work to figure out
exactly what needs to be fixed. But there's some massmates
floating around. The way that Microsoft and others sign these
contracts is they don't actually buy the power. What they
do is this thing called the contract for differences, okay,
and so power generally gets sold into the open market
(14:42):
to look into the PGM, and Microsoft says, depending on
what happens with this power, we will make you hole
on the payment. Right. So if we said that we're
going to pay you know, nine cents coed hour, and
you end up getting seven cents of code hour, we'll
pay that two cent difference. And that includes not just
the kill a what our price, but also includes the
(15:02):
capacity payment.
Speaker 5 (15:03):
Right, So you may have.
Speaker 4 (15:04):
Heard that the PGAM had a very large increase in
the price that the capacity payment cleared. And the capacity
payment is essential because it convinces the coal plants or
the natural gas plants or others who are sort of
at the end of life to make investments to last
a little longer because they got paid a capacity payment
to stay open. So the pieces that come here are
(15:27):
both the capacity payment and the energy payment. And Microsoft
is saying that we get all the attributes, so we
get to call our usage green, but separately like, if
for whatever reason, the wholesale market value for what the
nuclear power plant is creating is less than the strike
price that we agreed to, then we will.
Speaker 5 (15:45):
Make you hold.
Speaker 3 (16:02):
So you mentioned the idea that there are some nuclear
sites out there already that have spare capacity that could
either be restarted or with new reactors or units built.
So I guess I have two questions based on that.
But one, if you have space in your nuclear facility,
is that space specifically designed for one type of reactor already? Like,
(16:26):
are you wetted to a particular model that you have
to follow? And then secondly, what's the actual process to
build a new reactor? Like I can't imagine you open
up the nuclear reactor catalog and you know, you go like, ah,
I'll take this one. How does it work?
Speaker 5 (16:44):
Well?
Speaker 4 (16:44):
So, just to start with your last question, first, it
used to be that you did have a nuclear power catalog.
Oh and that's the problem, right, that's why we have
ninety you know plus reactors and only four of them
are exactly the same. And so it used to be
that used to be able to customize your and that
led to a lot of inefficiencies. And so I hope
and pray that this time around, when people build new
(17:05):
nuclear they build the exact same cookie cutter thing every
single time and we get our costs down. But to
answer your question, so the Department of Energy commissioned to
study to look at all of the fifty four sites
that we have with nuclear plants. Some of them have
one reactor, some of them have to, a couple have three,
and then only one. The Vogel Nuclear Plant has four.
And we can build any type of reactor on those
(17:27):
empty sites because really it's just land that's behind a
security perimeter, right, and that's what you care about is
a security perimeter. And so we have about sixty five
thousand megawatts of capacity at the existing nuclear sites, which
is massive. If we use small modular reactors, right, which
are the ones that are sort of in that three
to six billion dollar range, and if we use AP
(17:50):
one thousands, which is what we built at the Vogel,
then you could build almost ninety five thousand megawats at
those same sites. But those are more like ten to
four fourteen billion dollars each, right, And so you have
to decide whether you want to spend that much money.
Speaker 3 (18:05):
Are you limited at all? Or does space maybe become
a factor in the sense that the hyperscalers want to
be co located close to the plants.
Speaker 4 (18:15):
So they're not going to be within the security perimeter.
They be outside of the security member. And most of
these nuclear plants are in fairly the middle of location.
These are somewheres I grew up near a New time side,
but you know, but they're going to be well, let's
say five to seven miles away, and so you don't
need to use a transmission infrastructure and tax it. You
can create your own line directly from the nuclear plant
(18:37):
to the data center. And so that saves a lot
of cost because now you don't have to pay for
the transmission. And so that's why a lot of this
colocation makes us sense. It also disrupts the grid the least.
And then the other thing that is so great about
this colocation idea is that the people who live around
a nuclear power plant love nuclear power plants. The public
(18:58):
perception of nuclear is that ninety plus percent around a
nuclear power plant. And so you know, instead of going
to a brand new spot where you might have a
mixed reviews, it's easier publicly to use existing sites.
Speaker 2 (19:11):
It's good to know. Yeah, here's a random question. I've
been one of those things that wanted to ask someone.
I probably could have just tweeted it years ago. Sometimes
I see these things it's like, oh, there's like a
three year wait to like plug some new production of
any sorts of energy into the grid. And I'm always like,
is this just like someone like like go out and
plug a line into the wall or something. What's that
(19:32):
all about? And like why does it have to be
that long?
Speaker 4 (19:35):
It's it really is an extraordinary thing, right. I think
that you know, most people view electricity like water, right,
so you just put a bigger pump in, you put
in more pipe, it gets to your house.
Speaker 5 (19:47):
You got hot water.
Speaker 4 (19:47):
That's great. It's not like that at all. There is
this complex physics equation that you have to solve.
Speaker 2 (19:53):
For because the greatest to be in perfect balance all
the time.
Speaker 3 (19:56):
Right.
Speaker 4 (19:57):
Well, so there's the there's the perfect balance between supply
and demand, but then there's also figuring out, you know,
what the constraints are of each individual segment on the
transmission line.
Speaker 3 (20:08):
Right.
Speaker 4 (20:08):
So if you're using power in New York City and
you're creating a lot of extra power in out of
the nuclear plants in Illinois, right then that power has
to go via Indiana and Ohio and then through Pennsylvania
to New York City, and they may or may not
be able to carry that much, right, And so they
have to do these studies. So every time you try
(20:29):
to add something to the grid, they have to do
a study, and they have to figure out whether that
capacity is there, how often it's there, whether it would
continue to be balanced, or whether it be imbalanced. And
so the big fight there is that. So in Texas,
what they do is they just look at the safety
part of it, but they don't look at the capacity
part of it. They just say, you like, connect at
(20:50):
your own risk, and if we're clogged, we're just going
to tell you to shut down, and that's on you, right.
So that's why they're proving people super fast, whereas with
a PGM and others they're saying, not only we're going
to do a safety study, we're also going to do
a capacity study, and we're not going to let you
connect until this other generator shuts down and frees up
(21:11):
capacity for your generator. And so that then makes the
wait time much longer.
Speaker 3 (21:18):
Since you mentioned safety, just then, I got the impression
that the other thing that's been holding nuclear back is
I guess licensing barriers and regulation and things like that.
Has anything changed on that front recently? I saw there
was a bill over the summer called, I think the
Advance Act or something like that that I think made
some progress. But is that starting to evolve too?
Speaker 4 (21:41):
Yeah, So, I mean there's definitely been a lot of
people giving their unsolicited advice to the NRC, saying we
want to beat you up because we don't think you're
moving fast enough. But when you think about it, it's
only the vocal units three and four that they've had
to process right, And ultimately what the people who built
Vogel did was said, we are going to tell you
(22:03):
exactly how we're going to build it, and then you
hold us accountable to building it that exact way, and
then you license it at the end, right, And so
so that's what the NRC did. The alternative pathway is
they can go in and say, we're just going to
build this thing, like you're going to like preapprove that
the fact that the license for the reactor is pretty
safe and it's fine, but you're just going to like
(22:25):
approve the as built drawings at the end right. Now,
Like when you do that, well then it's a lot
easier to get away with things being one inch off
here and there, which is fine. But like if you
give them as builts and say we're going to choose
a licensing path where you hold us responsible to no changes,
well then when they come in and inspect it, it's
(22:47):
one inch off, they're like, you got to redo that
and do it to exactly the specs you told us.
So now all of the different reactor companies are deciding
to go with this new pathway because it would be
a lot cheaper. But you know, like then you have
to wait till the end for them to say that
something you did wasn't like a safety concern, and so
(23:09):
it could cause you a lot more cost, which is
why people generally don't do that, right. And so my
thing with the NRC is that they have a job
to do, not unlike the fed's dual mandate, right, Like
the NRC now has a dual mandate.
Speaker 1 (23:22):
Right.
Speaker 4 (23:22):
So with the Advance Act, it used to be that
they just were safety minded. Now they're safety minded and
they have to support the building of new nuclear right.
And so the way this kind of stuff works is
you got to flood the zone.
Speaker 5 (23:34):
Right.
Speaker 4 (23:34):
So if you actually build ten reactors, it'll be amazing
how efficient the NRC will become. But if you have
all these people working there and you only do one reactor, well,
then a lot of people are like, well, we have
a lot of time on our hands and we're going
to like study your application a lot more, right, And
so the efficiency comes from people using the NRC more
and actually like pushing a lot more reactors through.
Speaker 3 (23:57):
Joe, I can't wait for the Phillips curve of your
incidents versus capacity built.
Speaker 2 (24:02):
Out Whenever the day that that is a debate. You
can be sure that we are going to cover it.
We talked a little bit in the beginning about the
market's reaction to Constellation. So the market likes the deal,
and as you mentioned, the market likes the sort of
possibility that this has opened up of maybe the Constellation
isn't just going to be in the business of running
(24:22):
nuclear but actually building nuclear. You know, talk to us
a little bit more about the prospect. And it gets
also back to your point about how for this to
actually work. It can't just be one offs. There has
to be a series. It's like that thirteen thousand people
that build Vogel, then they go onto the next project,
and they go on to the next project. Where are
we on the sort of I don't know, second derivative
(24:44):
question of whether we have the sort of momentum in
the industry to actually learn from the previous project and
redeploy talented work and all these things that we need
to get the cost curve bent down.
Speaker 4 (24:58):
So I think the first piece is right, yeah, And
I think the why part of this is, as you suggested,
there are three aspects to load growth.
Speaker 5 (25:07):
Right.
Speaker 4 (25:07):
One is data centers and frankly, AI is not really
a big part of it. It's mostly just clouds, an
expansion of cloud But then there's some AI sprinkled in
that's at least twenty five thousand megawatts of new load
by the end of the decade.
Speaker 5 (25:20):
Right.
Speaker 4 (25:21):
Then you've got all this success we've had with you know,
the president's agenda around on shoring and reshoring, and so
there's a bunch of five inner kilowatt and two megawatt
and four megawatt manufacturing facilities that are popping up everywhere.
Eight hundred new manufacturing facilities that have been announced, right
and that are under construction or expanding. And then the
third piece is you have this electrify Everything movement where
a lot of people are buying electric vehicles and they're
(25:42):
doing heat bumps and they're doing all these things. And
so so you've got all three of these, and you know,
then the question becomes like, how do you want to
meet the load growth? And for a lot of the
electric utility companies, remember, you know, they haven't had load
growth in thirty years, right for sure for twenty years,
and then very slow load growth in the nineties, and
(26:03):
so they're now saying, can we do this with the
tools that we have in front of us, and it
looks like it's going to be really hard for them
to do it with the tools that there are used
to using. And so they're saying, we're going to need
to figure out this nuclear thing, but also we're gonna
have to figure out how to use geothermal, expanded hydro,
et cetera. And so then the question becomes, you know,
(26:26):
how does one wrap their brain around doing this right?
Because the electric utility companies are filled with people who
run them who generally, we're running a dividend yield stock, right,
Like these are shareholders who are like, we want no volatility,
we just want our dividends.
Speaker 5 (26:42):
Right.
Speaker 4 (26:43):
And now you see like JP Morgan's Infrastructure Fund in
others that are taking some of these utilities private and saying,
we think you're a growth stock and we don't think
that we could actually do this in the public market,
so we're going to take you private and give you
all the tools you need to become a growth stock. Right.
And so they're some of those dynamics going on, and
you've got a lot of governors who are yelling at
(27:05):
the utilities saying, I spent so much time attracting all
these manufacturers to our territory, and now you're giving them
a three or four year timeline to interconnect.
Speaker 5 (27:16):
What the heck, right?
Speaker 4 (27:17):
Like, we want to create family sustaining jobs for all
these people who want just to have a high school
education and not go to college.
Speaker 5 (27:24):
Right.
Speaker 4 (27:25):
And so the pressure on the electric utility companies is
getting real, right. And so now you're in this situation
where the question becomes, Okay, if we're going to do this,
how do we do it right? And so we have
been facilitating those conversations with the Nuclear Liftoff Report, with
lots of conversations around what new tools might you want
(27:46):
for risk mitigation from the federal government, how do you
want to do this stuff? In Constellation, for instance, has said,
we're amazing at running utility scale nuclear plans, but we
don't know how to build nuclear plans, so we don't
want to build them. We want other people to use
our sites and we want them to build them and
then we'll operate it right, because we're really good at operations.
Speaker 5 (28:07):
Right.
Speaker 4 (28:07):
And so you're starting to see a bifurcation of the
market where there's some people who are doing development work
and developing these sites and figuring out how to negotiate
with the hyperskilled data center companies, etc. And then there
are other people who are trying to figure out how
do I construct these things and how do I build
the workforce, etc. To do ten or twelve of these things.
And then you've got others like Constellation who are saying,
(28:29):
we have an interesting financial model, right, because they have
to do subsequent license renewals of their plants that are
reaching sixty years old to extend the life to eighty years, right,
And so a lot of folks are saying, well, you
know that's also a risky bet. That's probably going to
be ten billion dollars of capex to do that. Well,
if I had off take agreements from the hyperskilled data
(28:50):
center companies, that would be a safer way for me
to make that bet, right, because they're really risk averse.
I mean even like I would say, up to like
two weeks before this announcement around the restarting of the
Crane Clean Energy Center, a lot of folks were like,
I don't know, like how the stock markets can react
to us, right, right, So they were really nervous, right,
(29:12):
And now they've got the validation. I think that it
gives them even more of an incentive to figure it
to make more. But also the electric utilities, right, it's
it gives electric utilities and an incentive to say, like,
why are we being so risk averse? Like our shareholders
will probably reward us for becoming a growth stock.
Speaker 3 (29:48):
You explained it very well just then. But in light
of a lot of utilities starting to look like growth
stocks AI adjacent growth stocks rather than like boring old
divis in plays, are there new sources of financing that
are potentially interested in the sector, Like have you seen
the actual mix of funding, either the investors or the
(30:10):
structure start to change?
Speaker 4 (30:13):
Well, I mean, you know, the reason why we're in
the middle of this is because the Loan Program's Office
has this expanded authority, and we are in the middle
of all these conversations because everybody wants to figure out
whether they can use the money out of the Energy
Infrastructure Reinvestment program that we were given out of the
Inflation Reduction Act or our traditional innovative clean energy program
where we've got you know, probably one hundred and fifty
(30:35):
billion dollars between the two of those programs of loan authority.
And then you saw the big announcement from all the
big banks this week saying that they are now pro nuclear.
I don't exactly know what that means.
Speaker 2 (30:45):
Yeah, I was going to ask you so, by the way,
just for those curious recording this September twenty fourth, but yeah,
keep going with it.
Speaker 4 (30:52):
And so, you know, I think in general, those big
banks like to do balance sheet related investments, and so
in some ways, I think they're signaling to the electric
utility companies, where you know, a lot of these big
banks own the debt for a lot of these companies
that say, hey, you know, we're going to be pro
you guys doing nuclear power. So I think that's good.
I don't quite know exactly what they're going to do differently,
(31:14):
but it used to be that they, you know, like
a lot of the utility companies thought that their stock
would be downgraded if they announced a new nuclear plant, right.
So I mean, at the very least, I think everyone's
sending a signal that we're not going to downgrade you.
We actually want you to do this stuff. We want
you to promote economic growth in the United States of America,
and we're actually going to like, you know, give you
(31:34):
tailwinds and so I think that message is being sent.
Speaker 2 (31:38):
Since we're talking about funding sources if we step away
from nuclear for a second. I think it was last
week I saw this report. There's this geothermal company called Fervo.
There's always a lot of excitement about and I think
they've raised some VC money, et cetera. Anyway, the report
asserted that the problem for them, and I guess maybe
you can explain it better, but I think geothermal is
you stick a pipe in the ground and there's heat
(31:59):
in the earth and it comes to and then the
heat comes out, and that's energy that the vcs are
maybe excited. But then project financing is a charge, whether
it's the lending to actually like Okay, here's the funding
that it's going to be for this site specific I
don't know much about this. Who've never done a geothermal episode?
From where you sit? Is that a real constraint either
on geothermal specifically or other forms of energy? Which is
(32:23):
that Yeah, maybe some investors like the idea of equity
in some of these companies, but like the project financing
component of whatever we're talking about is still not a
mature market.
Speaker 4 (32:33):
Yeah, so geothermal is a very interesting technology, you know,
as you may know. The traditional geothermal is you basically
have to find a liquid that like sits under the earth,
like sort of near a hot pocket, and then you
basically like tap into it and then you let the
liquid go up and down and then you know, and
that's sort of how you do geothermal. This new enhanced
geothermal allows you to create your own pockets and so
(32:56):
use use modern hydraulic fracturing technologies. You drill you know,
mile down or wherever it is, wherever you think that
heat pocket is, and then you fracture the rock there
and you put pipe in there, and then you basically
allow the working flow to go down there. It gets
super hot and it comes back up and now can
turn a turbine right, And so as a result, you
can do it anywhere. You can do it in New
York State, you can do it in North Carolina, you
(33:16):
can do it in Nevada. You can really do it anywhere.
Now it's only really cost effective today in six states
in the West, but once we get really good at that,
then it should propagate across the United States because it's
super cost effective. Again, though the first units are going
to cost more, right, and so Fervo got a clean
transition tariff signed with Nevada Energy, so Nevada Energy is
(33:40):
buying their power, and then Google is buying it from
Nevada Energy, so that Nevada Energy isn't taking this premium
power and spreading it across all of their repairs, but
Google will buy it. Right. And then they made another
announcement recently that they had done more drilling tests and
everything went far faster, far cheaper than they thought it would,
and so they're getting closer to the oil and gas
(34:03):
speed rates than the geothermal speed rates. Right, and Haliburton
and SLB have said, Wow, this stuff is ridiculously easy.
We like are happy to do all this drilling because
this is child's play compared to what we do regularly
for the oil and gas sector. Now, to answer your question,
the problem is what the solar and wind industry are
(34:23):
used to doing is getting money directly from large pension
funds and pushing all the risk off to the contractors
who do the work. And the contractors say, don't worry,
we'll take cost over on risk. We'll do everything else
because this stuff is crazy easy, and so now low
cost infrastructure funds can invest in it. Right when you
go into geothermal. Haliburton SLB say, we don't take any risk.
(34:45):
You pay us as a drilling company, and sometimes we
hit gold, and every once in a while we don't
hit gold, but we're not guaranteeing you gold. You pay
us for the drilling, you give us the subservice data.
We'll do exactly what you tell us to do, and
it works, it doesn't work. So then a lot of
this low cost so and win money is saying that
seems strange. You're saying, I could like have a cost
(35:07):
overrun because you don't fail per se and enhance U thermal,
it might just be able to build another hot pocket,
like instead of five, you build six or seven, right,
and so then costs a little bit more. I don't
want to take that risk. I think someone else should
take that risk. And after you've certified with inspector that
you've done everything correctly, then will buy the project because
(35:27):
we don't want to take that risk, right, And so
they're going through this pathway where they need to find
money from people who actually like taking that risk. And
so that's why it was important to see that Fervo
raise money from Devon Energy, which is clearly an expert
at managing this kind of risk for fracking, and so
they are not afraid of this risk at all. Right,
(35:47):
but their cost of capital is clearly higher than super
low costs, so or and win money. But they're willing
to go faster because they are very comfortable with these risks.
And so this whole thought process, how we're thinking this
through is something that I had to do when I
started son Edison back in two thousand and three and
got all the big financial firms who thought solar was
(36:09):
too risky to come in to the market. And so
now we have to promote this exact kind of thinking
across geothermal, long duration energy storage, nuclear hydro, like all
these technologies that we've been researching for twenty or thirty years,
and like it's ready for primetime.
Speaker 5 (36:24):
People are like, wait a.
Speaker 4 (36:25):
Second, that looks a little different than what I did yesterday.
Speaker 3 (36:28):
Right, Yeah, it feels like the proof of concept is there.
For instance, I really like geothermal just on a sort
of individual housing basis, and it would work for my
property in Connecticut. But the constraint for putting in geothermal
in an old house in Connecticut is that you would
have to tear everything up and put in the duct
work to actually make it work. So on that note,
(36:51):
are there other restraining factors on a lot of this
new technology? I mean, that's kind of what we've been discussing.
But setting aside the fine nancaying we have proof of
concept for a lot of these what's holding back the growth?
Are there physical realities perhaps or you know, shortages for
instance of HVAC workers going back to the housing analogy
(37:14):
that maybe are restraining growth.
Speaker 4 (37:16):
Well, we definitely have a huge problem with trained craftsmen, right,
and so you know, I think that we're probably between
five hundred thousand and a million people short, depending on
your assumptions for how fast folks are going to retire
from the craft And so it's an extraordinary thing, right,
I mean, you could start at sixteen years old, become
a union craftsman, be making six figures by the time
(37:38):
you're thirty, and you know, have a family sustaining job. So, like,
I think there's a lot of people who thought for
a long time that their kids going into the trades
was probably like not what they wanted to brag about
at cocktail parties. But it's great to see that. Like
in the last year, I've seen people start to brag
about their kids going and becoming an electrician or a plumber,
and so some of that stigma's going away, which is
(37:58):
great because a lot of people need to go into
the trades, and frankly, a lot of people don't want
to take on the college debt, et cetera. I think
the other constraints though, are really around the grid, which
we talked about before, which is that no matter how
much stuff we do to build new HVDC you know,
high voltage DC lines or like grid enhancing technologies reconductoring
(38:19):
existing lines to put new materials in there that can
carry twice as much power, like, we're still going to
be grid constrained. Right, So then the question becomes how
efficiently are we using the grid. Geothermal and nuclear operate
at like between seventy five and ninety two percent of
the time, and so it's pumping electrons into the grid
at that rate. Solar, you know, if you add two
(38:40):
hours four hours of battery storage might get from twenty
five percent to maybe thirty five percent, right, But so
you're inefficiently using the grid. So now you might have
to put a lot more storage on the front end
of the transmission line to use the grid more efficiently
and then put more storage in the back end of
the line, which we call electric vehicles, to use that
more efficiently, right, And so so we can get so
(39:01):
much more out of the grid that we've already paid for,
but we have to be intentional about the mix. So
we love so and win and we should build as
much of that as we can. But we also need
a lot of this clean firm power generation to match
it as we retire so many coal plants, not because
of environmental regulations, but largely because they're at the end
of life. I mean, many of these coal plants are
(39:23):
requiring billions of dollars of additional investment to stay open,
and people don't want to put that money into them.
And so I think there's a lot of constraints around
us basically deciding what we're going to get good at,
right and where are we going to start the flywheel?
I would suggest to you the flywheel has to get
started across all these technologies. The IRA and the bill
(39:46):
you know, legislation have been the single largest investment in
starting this flywheel in the world, and so.
Speaker 5 (39:53):
We're super excited about it.
Speaker 4 (39:54):
But the other piece of it, I remember, is that
everybody else in the world wants our solutions. So if
we do it here, I mean Poland, Eastern Europe, all
these other places want to use American nuclear designs, they
want to use American technology, they don't want to be
tied to Russia or China. And so part of this
also is recognizing that like the world is looking to
us to show this leadership. The President has passed all
(40:16):
these laws, and now we need the private sector to
be a little less worried about whether the stock price
is going to go up and down. By showing leadership
and recognize the last five people that were nervous about it,
their stock price went up. It's like it's time to believe.
Speaker 2 (40:30):
Jiggershaw, thank you so much for coming back on odd lots,
kind of perfect timing all of this news to announce,
and for your point. So far the stock market seems
to be helping your efforts. So thank you so much.
Speaker 5 (40:42):
Oh thanks for having me me, Tracy.
Speaker 2 (40:56):
I always really like talking to Jigger. You know, this
sort of reminded me not even related to this conversation.
I have one of my friends who is more i
would say, on the right side of the ideological spectrum,
and he's always he's like, I think you mentioned to
me once He's like, I don't really care about climate
and all that stuff renewable energy, but when I hear
Jigger talk like, yeah, I'm totally on board, it's always
(41:17):
great talking, very compelling.
Speaker 3 (41:18):
Yes, I mean, I do think one of the things
that has perhaps changed a lot of the equation is
also the experience of the pandemic, which did not necessarily
cause shortages in energy per se, but certainly kicked off
a general awareness of wider infrastructure and the idea that
you can get choke points in certain vital things for
(41:41):
the economy. So I think that is like kind of
always hovering in the background. And from that perspective, even
if you don't like cleaned energy for some reason, you
probably like cheap energy. Yeah, and so hearing about potential
expansion in capacity should be a good thing.
Speaker 2 (41:56):
I really like how much this story is kind of
a stock market story, and I think it's one of
the things that makes it particularly exciting for us at
this podcast, where it's like truly at the intersection.
Speaker 3 (42:07):
Capital markets plus clean energy.
Speaker 2 (42:09):
Yeah, like engineering real world things. So, for example, I
liked his explanation of like why it's not trivial to
just add massive amounts of power because all of the
balancing that has to go on throughout the entire expanse
of the grid from Illinois to New York and everything.
But then also this role, like it really does make
a difference. Like if the stock market rewards your deal,
(42:30):
then you want to do more of them, and all
your competitors will want to do more of them, and
so sort of like this signal from.
Speaker 3 (42:36):
This signaling effect. I was about to say exactly that.
So you can scratch your head and be like, well,
why are the banks putting out with statement saying they
like nuclear energy now? But like the value is the
signaling effect, right, And it is kind of crazy. So
again we're recording this on September twenty fourth, but just
in the past few days there have been like five
(42:57):
or six positive like nuclear rel related things that have happened.
Kind of crazy.
Speaker 2 (43:03):
Totally, And to Jigger's point about like it's sort of
a tragedy if you build the Vogel plant in Georgia
and then you have all these people trained on how
to construct a nuclear reactor and then that to the
end of the line and then everyone goes to get
a job in some other field. We're not going to
have cheaper, more abundant energy unless what we've learned from
(43:24):
one project quickly gets deployed to the next project, which
is why all those lift off reports from the DEE.
Like Jiggers talked about this on past episodes, the order
book is just absolutely key.
Speaker 3 (43:33):
I'm thinking about the nuclear reactor catalog now, maybe it'll
maybe it'll come back, but it'll only be like two
pages long, and it'll be like the model T where
you can have the nuclear reactor in black, gray, gray
or gray.
Speaker 5 (43:47):
Yeah.
Speaker 2 (43:48):
All right, yes, looking forward to that catalog arriving in
my inbox.
Speaker 5 (43:51):
Shar on Christmas time.
Speaker 3 (43:53):
Shall we leave it there?
Speaker 2 (43:54):
Let's leave it there.
Speaker 3 (43:55):
This has been another episode of the All Thoughts Podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (44:01):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow Jiggershaw. He's at Jiggershaw DC. Follow our producers Carmen
Rodriguez at Kerman Arman dash Ol Bennett at Dashbock and
kel Brooks at Keil Brooks. Thank you to our producer
Moses ONEm For more Oddlocks content, go to Bloomberg dot
com slash od Lots. We have transcripts, a blog, and
a newsletter and you can chaut about all of these
(44:23):
topics lots of interest in there in our discord twenty
four to seven with fellow listeners Discord dot gg slash odlocks.
Speaker 3 (44:30):
And if you enjoy odd Lots, if you like it
when we talk to Jiggershaw about a potential revival in
America's nuclear power, then please leave us a positive review
on your favorite podcast platform. And remember, if you are
a Bloomberg subscriber, you can listen to all of our
episodes absolutely ad free. All you need to do is
find the Bloomberg channel on Apple Podcasts and follow the
(44:52):
instructions there. Thanks for listening in
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:20):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:23):
I'm Joe Wisnal and I'm Tracy Alloway.
Speaker 2 (00:26):
Tracy, how about that reopening of a three Mile Island
nuclear facilit You.
Speaker 3 (00:31):
Know what, I saw that headline kind of float by
and it seemed like a big deal. So I think
Constellation signed a deal with Microsoft to reopen the three
Mile Island nuclear plant, which everyone remembers from the disaster
that happened there in the nineteen seventies. What I did
see was Constellation's share price just exploded higher, like up
(00:55):
thirty percent in a day. Maybe I shouldn't say exploded
in a context of three Mile melted up. That's right,
it melted up.
Speaker 2 (01:03):
You know a couple things about this, So one, I'm
kind of not surprised because we all know that the
big hyperscalar tech companies have all this demand for electricity,
they have a desire to not use further fossil fuels,
and nuclear is an obvious theoretical solution to how to
get more clean energy. You know, I will say one
(01:24):
thing about this deal, and it's very exciting, and I
don't want to diminish it in any way. But there's
one aspect of it. I didn't realize that one of
the reactors at Three Mile Island had only closed down
in twenty nineteen. So I only know there was like
something bad happened in the nineteen seventies and the probably
contributed to the US as general pulling back from nuclear.
But I hadn't realized that actually, you know, there was
(01:46):
still nuclear being produced at Three Mile Island up until
twenty nineteen. Does it make it a little less exciting,
But it's not like we're fully turning back the calendar
to nineteen seventies.
Speaker 3 (01:56):
Well, I think there's a nice narrative, full circle aspect
to this, right, which you just touched on. After the
Three Mile incident. I mean that really kicked off the
death of nuclear in some respects in the US, Like
there is a lot of hesitancy and fear really about
building new plants, and so in some ways, we're restarting
(02:19):
at least one of the reactors. Yeah, it's a nice story,
let's put it that way.
Speaker 2 (02:24):
So, okay, so this operation is going to get restarted,
And you mentioned the death of nuclear and how we
basically went forever without building new There was that Georgia plant.
I think it came online sometime last year, the Votal plant.
But it does raise the question of, like, how much
was the fact that we more or less stop building
nuclear a function of the fact that we got scared
of nuclear regulations, it became too cautious, et cetera, versus
(02:48):
the fact that we just had as multiple guests we
now have pointed out this sort of flatlining of load growth,
this sort of flat lining of overall demand, which is
something that's now changed in the last few years with
the reacceleration of demand for data centers. And to how
much is this a story of we got scared of
nuclear and we overregulated it versus how much did the
(03:11):
economics just not make sense when there was not growing
demand for lectures.
Speaker 3 (03:15):
Yeah, I think that's a good point. I mean, there's
another tailwind that's sort of behind the potential nuclear resurgence now,
which is there's a lot of government fundings floating around
the IRA and programs like that, and so that's another
thing that maybe is making maybe this time is different.
There have been a lot of predictions about a nuclear
(03:36):
renaissance over the years, but maybe maybe this is it.
Speaker 2 (03:39):
Let's learn why the stars have aligned the constellation, if
you will, why the stars have aligned you for this
seeming revival of nuclear in America with the restarting of
the Three Mile Island Reactor. We really do have the
perfect guest. We've had them on the podcast multiple times.
Truly one of our favorites in the fan. We're going
(04:00):
to be speaking with Jiggershaw. He is the director of
the Loan Program's Office at the Department of Energy, a
key player in all of the Inflation Reduction Act's efforts
to stimulate clean energy growth in the US. With the
Inflation Reduction Act, his office went from a lending authority
above forty billion to over two hundred billion. A big
(04:21):
advocate of nuclear and other sources. Jigger, thank you so
much for coming on at Lots and great to have
you in the studio. It's the first time we've talked
to you here in studio.
Speaker 4 (04:28):
It's so great to be in the studio. Thanks for
having me.
Speaker 2 (04:30):
Thank you so much. So I'm going to start off
with this question, which is, Okay, we went for a
long time basically without building new nuclear power plants. It's
starting to pick up again. How much is it because
something has changed policy wise with you know, subsidies and
tax credits, et cetera versus demand is back. Therefore the
(04:51):
economics of nuclear makes sense or would you say it's
not binary?
Speaker 4 (04:54):
Well, look, I think that when you think about what
happened through historical contacts teen seventies, we had high inflation, right,
and nuclear power was subject to high inflation, and so
you know, part of this is people were already worried
about building new nuclear plants before the incident occurred because
(05:15):
things were just getting more expensive, right. And when you
think about the utility bankruptcies that occurred right way back when,
it was because it had cost overruns on nuclear power, right.
And so so I think that in general, it goes
to when America stopped believing in itself and its ability
to do big things in infrastructure. And I think this
(05:36):
moment with load growth and with the President saying we
are going to build big things here like has gotten
people thinking again, Hey, what would it take to actually
figure this out this time around?
Speaker 3 (05:49):
This is actually exactly what I wanted to ask you
about because I was reading that the initial construction cost
for Unit one of three mile was about four hundred
million dollars, and I guess like today the cost of
building a nuclear plant would be like five billion, ten billion.
Obviously the four hundred million isn't, you know, adjusted for
(06:12):
nineteen sixties prices. But it does seem in general like
it's more expensive to build nuclear plants certainly since the
nineteen sixties. Where did that additional cost increase actually come from?
Speaker 4 (06:24):
So when you think about building things, like if you
were to build multi family housing, and you would build
one multi family housing building versus building twelve right throughout
the city, you can imagine if you're using the same design,
it would be cheaper, the workers would get better, you know,
the first one would cost more, the second would cost less,
the third would be even less.
Speaker 5 (06:44):
You get faster.
Speaker 4 (06:45):
I mean you see that when you go into like
a new home construction place. The first home takes it
seems a lot longer, and then suddenly, like the homes
start popping up every week. Right, this is the same
with nuclear power. We trained thirteen thousand people to build
the Vocal nuclear plant in Georgia, right, and then we
were done, And where did all those workers go?
Speaker 3 (07:06):
To?
Speaker 4 (07:06):
Other jobs? So, now if we wanted to build units
five and six. We wanted to rebuild you know, VC
Summer in South Carolina, which is like one hundred miles away, Right,
we'd have to go and find other thirteen thousand workers, right.
And so one of the things that we have to
figure out how to do is to figure out how
to build ten right and have those same workers that
(07:26):
we trained, all those same EPC contractors, all of those
same suppliers not have to stop and start, but we
you know, continue to like to do these one off things.
Speaker 2 (07:37):
This is why I recommend everyone should go read. Your
office puts out a series of reports called Pathways to
Commercial Liftoff, reports about what it takes to really commercialize
various types of energy, not just nuclear. And you always
talk about the importance of the order book going forward
so that people know that there's a second and a
third project and a fourth project out there. So I
want to get into that and also talk some more
(07:58):
about the workplace development, but just on this project a
little bit more. Tell us what happened. How did the
stars align such that Constellation thought it's worth taking on
the operational risk to get this going Again, Microsoft neat
thinking that yes, this is the best solution for their
clean energy needs, and what is the role of supply
(08:19):
and demand, and then the role of various tax credits
and such within the IRA that made this all happen.
Speaker 4 (08:26):
Yeah, I mean it's a juicy tail, right. I Mean,
when you think about the nuclear energy industry, there aren't
really any entrepreneurs, right. Constellation is a company that bought
up a lot of other people's nuclear plants. They are
the best operator of nuclear plants in the world, right,
and then they got spun out of Exelon right into
(08:48):
their own stockticker. But you know, I think we all
have to acknowledge that if it wasn't for the Palisades
Nuclear plant in Michigan that we announced a conditional commitment
for and that we're you know, closing the lon On here,
there's no way that the rest of these projects happen.
Right in Palisades is owned by hole Tech, which is
a genuine entrepreneur, Chris Singh right, private company, right, one
(09:09):
of the most successful entrepreneurs in the nuclear industry, right
and in the whole world. And it's one of those
weird things where he woke up one morning and said, well,
I've just got a contract to dismantle the Palisades Nuclear plant,
and you know, we went to him and said, would
you think about restarting and he said, do.
Speaker 3 (09:27):
You think about doing the complete opposite? Perhaps?
Speaker 4 (09:30):
Yeah, And he said, well sell me. And I was like, well,
here are the incentives out of the Inflation Reduction Act
you can get, you know, the forty eight E and
some of these other at tax credits.
Speaker 2 (09:39):
Walk us through the specific what are the what do
you get in there?
Speaker 4 (09:43):
So when you restart a nuclear plant, right, the nuclear
plant is viewed as new additional capacity, right because it
was shut down. And so as a result, this technology
agnostic credit that was created by you know, Senator Widen right,
because remember we always had the solar tax credit and
the wind tax credit and all these other things. So
over time, like the IRA moves us to a technology
(10:06):
neutral tax credit, so that everything that is clean gets
this technology neutral tax credit. It's you know, it's a
pretty lucrative tax credit, depends on the technology. But let's
say three cents a killo what hour? And so now
you're in this place where you actually have a bonus
production credit. Now you separately can choose to get an
(10:26):
investment tax credit. Right. But it happens to be that
the production tax cred is more lucrative for these restarts
of nuclear plants. But if you decide to do the
investment tax credit, then you get the thirty percent tax credit.
Then there's bonus tax cred So if it's part of
an energy community, you get an extra ten percent, right.
If you have a lot of domestic content, you get
another ten percent.
Speaker 5 (10:44):
Right.
Speaker 4 (10:44):
So you could imagine that some of the folks you're
building brand new nuclear plants might go that direction. But
as a result of these incentives, nuclear power is now
very cost effective. Then the question becomes like who actually
wants to buy this power? Right, because wholesale market prices
have been low, and so then the question becomes who
(11:05):
was to buy it? And it happened to be that
two different utility groups in Michigan competed over wanting to
buy all the output out of the Palisades restart, and
so he you know, picked one of the groups to
buy that power, and then that led to you know,
the project becoming financiable, right, and so once that succeeded,
(11:26):
then you know, Constellation was like, hell, maybe we could
do this.
Speaker 3 (11:30):
So when you say with the tax credits and those
other changes. It suddenly becomes cost effective or it becomes financiable.
Walk us through the actual math, like what is changing here?
Is it the discount rate or the future projection of revenue?
Like what is it exactly that changes in the equation.
Speaker 4 (11:50):
So for a restart, you generally choose a production tax credit,
not the investment tax credit. And that's because the cost
of restarting a reactor is a lot lower than the
cost of building a brand new reactor. Right, so you
make more money by getting that extra three cents of
kill what hour for the next you know, twenty years.
So the math there is you put up, it depends
(12:13):
on you know, where the final costs runs outpu let's
call it one to two billion dollars to do the restart,
And then you get this three cents kill what hour
multiplied by the number of kill what hours that that
plant creates. And remember a nuclear power plant runs on
average in the state's ninety two percent of the time,
So that's a lot of killo what hours that comes
out of that plant, whereas with a solar farm you
(12:35):
might get twenty five percent of the time production right
with a tracking system. And so so the math means
that you could get almost all of your money back
on the one to two billion dollars from the tax credits, right,
and then you've got the sale of the power right
that you're signing a long term contract for, and you
know that's where you make your return, right, Which is
(12:57):
why I think Constellations stock price jumped so much because
they have so many existing sites where a lot of
those nuclear sites have one reactor and they were made
for four reactors or five reactors, but we never built
the rest and so while this one was the easiest
way to get in right because it was a restart,
(13:20):
there's all these other sites where you could build new reactors.
And now that Microsoft has come in and said we
want to buy all that output because we are taking
seriously the commitments we made to twenty four x seven
clean power by twenty thirty, then you now have the
makings of an equation. And if you heard but like
Meta came out right after that and said, we are
(13:42):
also all in on nuclear power and meeting that twenty
four x seven requirement.
Speaker 2 (13:46):
So we have a lot of physical capacity or just
space capacity right now to add more reactors. And so
that's sort of the exciting aspect walks through a little
bit more of the math with the three mile Island deal. Specifically,
for consolation, it's going to cost them one point six billion,
I think, is what I've seen reported to get this
(14:07):
reactor back up and running. And then Microsoft makes some
sort of commitment where they're going to be a buyer
over I don't know, X many years, like talk to
us a little bit about more about this particular deal.
Speaker 4 (14:19):
Yeah, So I don't know what the final cost of
the Constellation restart will be, just because I think they
still need to do more engineering work to figure out
exactly what needs to be fixed. But there's some massmates
floating around. The way that Microsoft and others sign these
contracts is they don't actually buy the power. What they
do is this thing called the contract for differences, okay,
and so power generally gets sold into the open market
(14:42):
to look into the PGM, and Microsoft says, depending on
what happens with this power, we will make you hole
on the payment. Right. So if we said that we're
going to pay you know, nine cents coed hour, and
you end up getting seven cents of code hour, we'll
pay that two cent difference. And that includes not just
the kill a what our price, but also includes the
(15:02):
capacity payment.
Speaker 5 (15:03):
Right, So you may have.
Speaker 4 (15:04):
Heard that the PGAM had a very large increase in
the price that the capacity payment cleared. And the capacity
payment is essential because it convinces the coal plants or
the natural gas plants or others who are sort of
at the end of life to make investments to last
a little longer because they got paid a capacity payment
to stay open. So the pieces that come here are
(15:27):
both the capacity payment and the energy payment. And Microsoft
is saying that we get all the attributes, so we
get to call our usage green, but separately like, if
for whatever reason, the wholesale market value for what the
nuclear power plant is creating is less than the strike
price that we agreed to, then we will.
Speaker 5 (15:45):
Make you hold.
Speaker 3 (16:02):
So you mentioned the idea that there are some nuclear
sites out there already that have spare capacity that could
either be restarted or with new reactors or units built.
So I guess I have two questions based on that.
But one, if you have space in your nuclear facility,
is that space specifically designed for one type of reactor already? Like,
(16:26):
are you wetted to a particular model that you have
to follow? And then secondly, what's the actual process to
build a new reactor? Like I can't imagine you open
up the nuclear reactor catalog and you know, you go like, ah,
I'll take this one. How does it work?
Speaker 5 (16:44):
Well?
Speaker 4 (16:44):
So, just to start with your last question, first, it
used to be that you did have a nuclear power catalog.
Oh and that's the problem, right, that's why we have
ninety you know plus reactors and only four of them
are exactly the same. And so it used to be
that used to be able to customize your and that
led to a lot of inefficiencies. And so I hope
and pray that this time around, when people build new
(17:05):
nuclear they build the exact same cookie cutter thing every
single time and we get our costs down. But to
answer your question, so the Department of Energy commissioned to
study to look at all of the fifty four sites
that we have with nuclear plants. Some of them have
one reactor, some of them have to, a couple have three,
and then only one. The Vogel Nuclear Plant has four.
And we can build any type of reactor on those
(17:27):
empty sites because really it's just land that's behind a
security perimeter, right, and that's what you care about is
a security perimeter. And so we have about sixty five
thousand megawatts of capacity at the existing nuclear sites, which
is massive. If we use small modular reactors, right, which
are the ones that are sort of in that three
to six billion dollar range, and if we use AP
(17:50):
one thousands, which is what we built at the Vogel,
then you could build almost ninety five thousand megawats at
those same sites. But those are more like ten to
four fourteen billion dollars each, right, And so you have
to decide whether you want to spend that much money.
Speaker 3 (18:05):
Are you limited at all? Or does space maybe become
a factor in the sense that the hyperscalers want to
be co located close to the plants.
Speaker 4 (18:15):
So they're not going to be within the security perimeter.
They be outside of the security member. And most of
these nuclear plants are in fairly the middle of location.
These are somewheres I grew up near a New time side,
but you know, but they're going to be well, let's
say five to seven miles away, and so you don't
need to use a transmission infrastructure and tax it. You
can create your own line directly from the nuclear plant
(18:37):
to the data center. And so that saves a lot
of cost because now you don't have to pay for
the transmission. And so that's why a lot of this
colocation makes us sense. It also disrupts the grid the least.
And then the other thing that is so great about
this colocation idea is that the people who live around
a nuclear power plant love nuclear power plants. The public
(18:58):
perception of nuclear is that ninety plus percent around a
nuclear power plant. And so you know, instead of going
to a brand new spot where you might have a
mixed reviews, it's easier publicly to use existing sites.
Speaker 2 (19:11):
It's good to know. Yeah, here's a random question. I've
been one of those things that wanted to ask someone.
I probably could have just tweeted it years ago. Sometimes
I see these things it's like, oh, there's like a
three year wait to like plug some new production of
any sorts of energy into the grid. And I'm always like,
is this just like someone like like go out and
plug a line into the wall or something. What's that
(19:32):
all about? And like why does it have to be
that long?
Speaker 4 (19:35):
It's it really is an extraordinary thing, right. I think
that you know, most people view electricity like water, right,
so you just put a bigger pump in, you put
in more pipe, it gets to your house.
Speaker 5 (19:47):
You got hot water.
Speaker 4 (19:47):
That's great. It's not like that at all. There is
this complex physics equation that you have to solve.
Speaker 2 (19:53):
For because the greatest to be in perfect balance all
the time.
Speaker 3 (19:56):
Right.
Speaker 4 (19:57):
Well, so there's the there's the perfect balance between supply
and demand, but then there's also figuring out, you know,
what the constraints are of each individual segment on the
transmission line.
Speaker 3 (20:08):
Right.
Speaker 4 (20:08):
So if you're using power in New York City and
you're creating a lot of extra power in out of
the nuclear plants in Illinois, right then that power has
to go via Indiana and Ohio and then through Pennsylvania
to New York City, and they may or may not
be able to carry that much, right, And so they
have to do these studies. So every time you try
(20:29):
to add something to the grid, they have to do
a study, and they have to figure out whether that
capacity is there, how often it's there, whether it would
continue to be balanced, or whether it be imbalanced. And
so the big fight there is that. So in Texas,
what they do is they just look at the safety
part of it, but they don't look at the capacity
part of it. They just say, you like, connect at
(20:50):
your own risk, and if we're clogged, we're just going
to tell you to shut down, and that's on you, right.
So that's why they're proving people super fast, whereas with
a PGM and others they're saying, not only we're going
to do a safety study, we're also going to do
a capacity study, and we're not going to let you
connect until this other generator shuts down and frees up
(21:11):
capacity for your generator. And so that then makes the
wait time much longer.
Speaker 3 (21:18):
Since you mentioned safety, just then, I got the impression
that the other thing that's been holding nuclear back is
I guess licensing barriers and regulation and things like that.
Has anything changed on that front recently? I saw there
was a bill over the summer called, I think the
Advance Act or something like that that I think made
some progress. But is that starting to evolve too?
Speaker 4 (21:41):
Yeah, So, I mean there's definitely been a lot of
people giving their unsolicited advice to the NRC, saying we
want to beat you up because we don't think you're
moving fast enough. But when you think about it, it's
only the vocal units three and four that they've had
to process right, And ultimately what the people who built
Vogel did was said, we are going to tell you
(22:03):
exactly how we're going to build it, and then you
hold us accountable to building it that exact way, and
then you license it at the end, right, And so
so that's what the NRC did. The alternative pathway is
they can go in and say, we're just going to
build this thing, like you're going to like preapprove that
the fact that the license for the reactor is pretty
safe and it's fine, but you're just going to like
(22:25):
approve the as built drawings at the end right. Now,
Like when you do that, well then it's a lot
easier to get away with things being one inch off
here and there, which is fine. But like if you
give them as builts and say we're going to choose
a licensing path where you hold us responsible to no changes,
well then when they come in and inspect it, it's
(22:47):
one inch off, they're like, you got to redo that
and do it to exactly the specs you told us.
So now all of the different reactor companies are deciding
to go with this new pathway because it would be
a lot cheaper. But you know, like then you have
to wait till the end for them to say that
something you did wasn't like a safety concern, and so
(23:09):
it could cause you a lot more cost, which is
why people generally don't do that, right. And so my
thing with the NRC is that they have a job
to do, not unlike the fed's dual mandate, right, Like
the NRC now has a dual mandate.
Speaker 1 (23:22):
Right.
Speaker 4 (23:22):
So with the Advance Act, it used to be that
they just were safety minded. Now they're safety minded and
they have to support the building of new nuclear right.
And so the way this kind of stuff works is
you got to flood the zone.
Speaker 5 (23:34):
Right.
Speaker 4 (23:34):
So if you actually build ten reactors, it'll be amazing
how efficient the NRC will become. But if you have
all these people working there and you only do one reactor, well,
then a lot of people are like, well, we have
a lot of time on our hands and we're going
to like study your application a lot more, right, And
so the efficiency comes from people using the NRC more
and actually like pushing a lot more reactors through.
Speaker 3 (23:57):
Joe, I can't wait for the Phillips curve of your
incidents versus capacity built.
Speaker 2 (24:02):
Out Whenever the day that that is a debate. You
can be sure that we are going to cover it.
We talked a little bit in the beginning about the
market's reaction to Constellation. So the market likes the deal,
and as you mentioned, the market likes the sort of
possibility that this has opened up of maybe the Constellation
isn't just going to be in the business of running
(24:22):
nuclear but actually building nuclear. You know, talk to us
a little bit more about the prospect. And it gets
also back to your point about how for this to
actually work. It can't just be one offs. There has
to be a series. It's like that thirteen thousand people
that build Vogel, then they go onto the next project,
and they go on to the next project. Where are
we on the sort of I don't know, second derivative
(24:44):
question of whether we have the sort of momentum in
the industry to actually learn from the previous project and
redeploy talented work and all these things that we need
to get the cost curve bent down.
Speaker 4 (24:58):
So I think the first piece is right, yeah, And
I think the why part of this is, as you suggested,
there are three aspects to load growth.
Speaker 5 (25:07):
Right.
Speaker 4 (25:07):
One is data centers and frankly, AI is not really
a big part of it. It's mostly just clouds, an
expansion of cloud But then there's some AI sprinkled in
that's at least twenty five thousand megawatts of new load
by the end of the decade.
Speaker 5 (25:20):
Right.
Speaker 4 (25:21):
Then you've got all this success we've had with you know,
the president's agenda around on shoring and reshoring, and so
there's a bunch of five inner kilowatt and two megawatt
and four megawatt manufacturing facilities that are popping up everywhere.
Eight hundred new manufacturing facilities that have been announced, right
and that are under construction or expanding. And then the
third piece is you have this electrify Everything movement where
a lot of people are buying electric vehicles and they're
(25:42):
doing heat bumps and they're doing all these things. And
so so you've got all three of these, and you know,
then the question becomes like, how do you want to
meet the load growth? And for a lot of the
electric utility companies, remember, you know, they haven't had load
growth in thirty years, right for sure for twenty years,
and then very slow load growth in the nineties, and
(26:03):
so they're now saying, can we do this with the
tools that we have in front of us, and it
looks like it's going to be really hard for them
to do it with the tools that there are used
to using. And so they're saying, we're going to need
to figure out this nuclear thing, but also we're gonna
have to figure out how to use geothermal, expanded hydro,
et cetera. And so then the question becomes, you know,
(26:26):
how does one wrap their brain around doing this right?
Because the electric utility companies are filled with people who
run them who generally, we're running a dividend yield stock, right,
Like these are shareholders who are like, we want no volatility,
we just want our dividends.
Speaker 5 (26:42):
Right.
Speaker 4 (26:43):
And now you see like JP Morgan's Infrastructure Fund in
others that are taking some of these utilities private and saying,
we think you're a growth stock and we don't think
that we could actually do this in the public market,
so we're going to take you private and give you
all the tools you need to become a growth stock. Right.
And so they're some of those dynamics going on, and
you've got a lot of governors who are yelling at
(27:05):
the utilities saying, I spent so much time attracting all
these manufacturers to our territory, and now you're giving them
a three or four year timeline to interconnect.
Speaker 5 (27:16):
What the heck, right?
Speaker 4 (27:17):
Like, we want to create family sustaining jobs for all
these people who want just to have a high school
education and not go to college.
Speaker 5 (27:24):
Right.
Speaker 4 (27:25):
And so the pressure on the electric utility companies is
getting real, right. And so now you're in this situation
where the question becomes, Okay, if we're going to do this,
how do we do it right? And so we have
been facilitating those conversations with the Nuclear Liftoff Report, with
lots of conversations around what new tools might you want
(27:46):
for risk mitigation from the federal government, how do you
want to do this stuff? In Constellation, for instance, has said,
we're amazing at running utility scale nuclear plans, but we
don't know how to build nuclear plans, so we don't
want to build them. We want other people to use
our sites and we want them to build them and
then we'll operate it right, because we're really good at operations.
Speaker 5 (28:07):
Right.
Speaker 4 (28:07):
And so you're starting to see a bifurcation of the
market where there's some people who are doing development work
and developing these sites and figuring out how to negotiate
with the hyperskilled data center companies, etc. And then there
are other people who are trying to figure out how
do I construct these things and how do I build
the workforce, etc. To do ten or twelve of these things.
And then you've got others like Constellation who are saying,
(28:29):
we have an interesting financial model, right, because they have
to do subsequent license renewals of their plants that are
reaching sixty years old to extend the life to eighty years, right,
And so a lot of folks are saying, well, you
know that's also a risky bet. That's probably going to
be ten billion dollars of capex to do that. Well,
if I had off take agreements from the hyperskilled data
(28:50):
center companies, that would be a safer way for me
to make that bet, right, because they're really risk averse.
I mean even like I would say, up to like
two weeks before this announcement around the restarting of the
Crane Clean Energy Center, a lot of folks were like,
I don't know, like how the stock markets can react
to us, right, right, So they were really nervous, right,
(29:12):
And now they've got the validation. I think that it
gives them even more of an incentive to figure it
to make more. But also the electric utilities, right, it's
it gives electric utilities and an incentive to say, like,
why are we being so risk averse? Like our shareholders
will probably reward us for becoming a growth stock.
Speaker 3 (29:48):
You explained it very well just then. But in light
of a lot of utilities starting to look like growth
stocks AI adjacent growth stocks rather than like boring old
divis in plays, are there new sources of financing that
are potentially interested in the sector, Like have you seen
the actual mix of funding, either the investors or the
(30:10):
structure start to change?
Speaker 4 (30:13):
Well, I mean, you know, the reason why we're in
the middle of this is because the Loan Program's Office
has this expanded authority, and we are in the middle
of all these conversations because everybody wants to figure out
whether they can use the money out of the Energy
Infrastructure Reinvestment program that we were given out of the
Inflation Reduction Act or our traditional innovative clean energy program
where we've got you know, probably one hundred and fifty
(30:35):
billion dollars between the two of those programs of loan authority.
And then you saw the big announcement from all the
big banks this week saying that they are now pro nuclear.
I don't exactly know what that means.
Speaker 2 (30:45):
Yeah, I was going to ask you so, by the way,
just for those curious recording this September twenty fourth, but yeah,
keep going with it.
Speaker 4 (30:52):
And so, you know, I think in general, those big
banks like to do balance sheet related investments, and so
in some ways, I think they're signaling to the electric
utility companies, where you know, a lot of these big
banks own the debt for a lot of these companies
that say, hey, you know, we're going to be pro
you guys doing nuclear power. So I think that's good.
I don't quite know exactly what they're going to do differently,
(31:14):
but it used to be that they, you know, like
a lot of the utility companies thought that their stock
would be downgraded if they announced a new nuclear plant, right.
So I mean, at the very least, I think everyone's
sending a signal that we're not going to downgrade you.
We actually want you to do this stuff. We want
you to promote economic growth in the United States of America,
and we're actually going to like, you know, give you
(31:34):
tailwinds and so I think that message is being sent.
Speaker 2 (31:38):
Since we're talking about funding sources if we step away
from nuclear for a second. I think it was last
week I saw this report. There's this geothermal company called Fervo.
There's always a lot of excitement about and I think
they've raised some VC money, et cetera. Anyway, the report
asserted that the problem for them, and I guess maybe
you can explain it better, but I think geothermal is
you stick a pipe in the ground and there's heat
(31:59):
in the earth and it comes to and then the
heat comes out, and that's energy that the vcs are
maybe excited. But then project financing is a charge, whether
it's the lending to actually like Okay, here's the funding
that it's going to be for this site specific I
don't know much about this. Who've never done a geothermal episode?
From where you sit? Is that a real constraint either
on geothermal specifically or other forms of energy? Which is
(32:23):
that Yeah, maybe some investors like the idea of equity
in some of these companies, but like the project financing
component of whatever we're talking about is still not a
mature market.
Speaker 4 (32:33):
Yeah, so geothermal is a very interesting technology, you know,
as you may know. The traditional geothermal is you basically
have to find a liquid that like sits under the earth,
like sort of near a hot pocket, and then you
basically like tap into it and then you let the
liquid go up and down and then you know, and
that's sort of how you do geothermal. This new enhanced
geothermal allows you to create your own pockets and so
(32:56):
use use modern hydraulic fracturing technologies. You drill you know,
mile down or wherever it is, wherever you think that
heat pocket is, and then you fracture the rock there
and you put pipe in there, and then you basically
allow the working flow to go down there. It gets
super hot and it comes back up and now can
turn a turbine right, And so as a result, you
can do it anywhere. You can do it in New
York State, you can do it in North Carolina, you
(33:16):
can do it in Nevada. You can really do it anywhere.
Now it's only really cost effective today in six states
in the West, but once we get really good at that,
then it should propagate across the United States because it's
super cost effective. Again, though the first units are going
to cost more, right, and so Fervo got a clean
transition tariff signed with Nevada Energy, so Nevada Energy is
(33:40):
buying their power, and then Google is buying it from
Nevada Energy, so that Nevada Energy isn't taking this premium
power and spreading it across all of their repairs, but
Google will buy it. Right. And then they made another
announcement recently that they had done more drilling tests and
everything went far faster, far cheaper than they thought it would,
and so they're getting closer to the oil and gas
(34:03):
speed rates than the geothermal speed rates. Right, and Haliburton
and SLB have said, Wow, this stuff is ridiculously easy.
We like are happy to do all this drilling because
this is child's play compared to what we do regularly
for the oil and gas sector. Now, to answer your question,
the problem is what the solar and wind industry are
(34:23):
used to doing is getting money directly from large pension
funds and pushing all the risk off to the contractors
who do the work. And the contractors say, don't worry,
we'll take cost over on risk. We'll do everything else
because this stuff is crazy easy, and so now low
cost infrastructure funds can invest in it. Right when you
go into geothermal. Haliburton SLB say, we don't take any risk.
(34:45):
You pay us as a drilling company, and sometimes we
hit gold, and every once in a while we don't
hit gold, but we're not guaranteeing you gold. You pay
us for the drilling, you give us the subservice data.
We'll do exactly what you tell us to do, and
it works, it doesn't work. So then a lot of
this low cost so and win money is saying that
seems strange. You're saying, I could like have a cost
(35:07):
overrun because you don't fail per se and enhance U thermal,
it might just be able to build another hot pocket,
like instead of five, you build six or seven, right,
and so then costs a little bit more. I don't
want to take that risk. I think someone else should
take that risk. And after you've certified with inspector that
you've done everything correctly, then will buy the project because
(35:27):
we don't want to take that risk, right, And so
they're going through this pathway where they need to find
money from people who actually like taking that risk. And
so that's why it was important to see that Fervo
raise money from Devon Energy, which is clearly an expert
at managing this kind of risk for fracking, and so
they are not afraid of this risk at all. Right,
(35:47):
but their cost of capital is clearly higher than super
low costs, so or and win money. But they're willing
to go faster because they are very comfortable with these risks.
And so this whole thought process, how we're thinking this
through is something that I had to do when I
started son Edison back in two thousand and three and
got all the big financial firms who thought solar was
(36:09):
too risky to come in to the market. And so
now we have to promote this exact kind of thinking
across geothermal, long duration energy storage, nuclear hydro, like all
these technologies that we've been researching for twenty or thirty years,
and like it's ready for primetime.
Speaker 5 (36:24):
People are like, wait a.
Speaker 4 (36:25):
Second, that looks a little different than what I did yesterday.
Speaker 3 (36:28):
Right, Yeah, it feels like the proof of concept is there.
For instance, I really like geothermal just on a sort
of individual housing basis, and it would work for my
property in Connecticut. But the constraint for putting in geothermal
in an old house in Connecticut is that you would
have to tear everything up and put in the duct
work to actually make it work. So on that note,
(36:51):
are there other restraining factors on a lot of this
new technology? I mean, that's kind of what we've been discussing.
But setting aside the fine nancaying we have proof of
concept for a lot of these what's holding back the growth?
Are there physical realities perhaps or you know, shortages for
instance of HVAC workers going back to the housing analogy
(37:14):
that maybe are restraining growth.
Speaker 4 (37:16):
Well, we definitely have a huge problem with trained craftsmen, right,
and so you know, I think that we're probably between
five hundred thousand and a million people short, depending on
your assumptions for how fast folks are going to retire
from the craft And so it's an extraordinary thing, right,
I mean, you could start at sixteen years old, become
a union craftsman, be making six figures by the time
(37:38):
you're thirty, and you know, have a family sustaining job. So, like,
I think there's a lot of people who thought for
a long time that their kids going into the trades
was probably like not what they wanted to brag about
at cocktail parties. But it's great to see that. Like
in the last year, I've seen people start to brag
about their kids going and becoming an electrician or a plumber,
and so some of that stigma's going away, which is
(37:58):
great because a lot of people need to go into
the trades, and frankly, a lot of people don't want
to take on the college debt, et cetera. I think
the other constraints though, are really around the grid, which
we talked about before, which is that no matter how
much stuff we do to build new HVDC you know,
high voltage DC lines or like grid enhancing technologies reconductoring
(38:19):
existing lines to put new materials in there that can
carry twice as much power, like, we're still going to
be grid constrained. Right, So then the question becomes how
efficiently are we using the grid. Geothermal and nuclear operate
at like between seventy five and ninety two percent of
the time, and so it's pumping electrons into the grid
at that rate. Solar, you know, if you add two
(38:40):
hours four hours of battery storage might get from twenty
five percent to maybe thirty five percent, right, But so
you're inefficiently using the grid. So now you might have
to put a lot more storage on the front end
of the transmission line to use the grid more efficiently
and then put more storage in the back end of
the line, which we call electric vehicles, to use that
more efficiently, right, And so so we can get so
(39:01):
much more out of the grid that we've already paid for,
but we have to be intentional about the mix. So
we love so and win and we should build as
much of that as we can. But we also need
a lot of this clean firm power generation to match
it as we retire so many coal plants, not because
of environmental regulations, but largely because they're at the end
of life. I mean, many of these coal plants are
(39:23):
requiring billions of dollars of additional investment to stay open,
and people don't want to put that money into them.
And so I think there's a lot of constraints around
us basically deciding what we're going to get good at,
right and where are we going to start the flywheel?
I would suggest to you the flywheel has to get
started across all these technologies. The IRA and the bill
(39:46):
you know, legislation have been the single largest investment in
starting this flywheel in the world, and so.
Speaker 5 (39:53):
We're super excited about it.
Speaker 4 (39:54):
But the other piece of it, I remember, is that
everybody else in the world wants our solutions. So if
we do it here, I mean Poland, Eastern Europe, all
these other places want to use American nuclear designs, they
want to use American technology, they don't want to be
tied to Russia or China. And so part of this
also is recognizing that like the world is looking to
us to show this leadership. The President has passed all
(40:16):
these laws, and now we need the private sector to
be a little less worried about whether the stock price
is going to go up and down. By showing leadership
and recognize the last five people that were nervous about it,
their stock price went up. It's like it's time to believe.
Speaker 2 (40:30):
Jiggershaw, thank you so much for coming back on odd lots,
kind of perfect timing all of this news to announce,
and for your point. So far the stock market seems
to be helping your efforts. So thank you so much.
Speaker 5 (40:42):
Oh thanks for having me me, Tracy.
Speaker 2 (40:56):
I always really like talking to Jigger. You know, this
sort of reminded me not even related to this conversation.
I have one of my friends who is more i
would say, on the right side of the ideological spectrum,
and he's always he's like, I think you mentioned to
me once He's like, I don't really care about climate
and all that stuff renewable energy, but when I hear
Jigger talk like, yeah, I'm totally on board, it's always
(41:17):
great talking, very compelling.
Speaker 3 (41:18):
Yes, I mean, I do think one of the things
that has perhaps changed a lot of the equation is
also the experience of the pandemic, which did not necessarily
cause shortages in energy per se, but certainly kicked off
a general awareness of wider infrastructure and the idea that
you can get choke points in certain vital things for
(41:41):
the economy. So I think that is like kind of
always hovering in the background. And from that perspective, even
if you don't like cleaned energy for some reason, you
probably like cheap energy. Yeah, and so hearing about potential
expansion in capacity should be a good thing.
Speaker 2 (41:56):
I really like how much this story is kind of
a stock market story, and I think it's one of
the things that makes it particularly exciting for us at
this podcast, where it's like truly at the intersection.
Speaker 3 (42:07):
Capital markets plus clean energy.
Speaker 2 (42:09):
Yeah, like engineering real world things. So, for example, I
liked his explanation of like why it's not trivial to
just add massive amounts of power because all of the
balancing that has to go on throughout the entire expanse
of the grid from Illinois to New York and everything.
But then also this role, like it really does make
a difference. Like if the stock market rewards your deal,
(42:30):
then you want to do more of them, and all
your competitors will want to do more of them, and
so sort of like this signal from.
Speaker 3 (42:36):
This signaling effect. I was about to say exactly that.
So you can scratch your head and be like, well,
why are the banks putting out with statement saying they
like nuclear energy now? But like the value is the
signaling effect, right, And it is kind of crazy. So
again we're recording this on September twenty fourth, but just
in the past few days there have been like five
(42:57):
or six positive like nuclear rel related things that have happened.
Kind of crazy.
Speaker 2 (43:03):
Totally, And to Jigger's point about like it's sort of
a tragedy if you build the Vogel plant in Georgia
and then you have all these people trained on how
to construct a nuclear reactor and then that to the
end of the line and then everyone goes to get
a job in some other field. We're not going to
have cheaper, more abundant energy unless what we've learned from
(43:24):
one project quickly gets deployed to the next project, which
is why all those lift off reports from the DEE.
Like Jiggers talked about this on past episodes, the order
book is just absolutely key.
Speaker 3 (43:33):
I'm thinking about the nuclear reactor catalog now, maybe it'll
maybe it'll come back, but it'll only be like two
pages long, and it'll be like the model T where
you can have the nuclear reactor in black, gray, gray
or gray.
Speaker 5 (43:47):
Yeah.
Speaker 2 (43:48):
All right, yes, looking forward to that catalog arriving in
my inbox.
Speaker 5 (43:51):
Shar on Christmas time.
Speaker 3 (43:53):
Shall we leave it there?
Speaker 2 (43:54):
Let's leave it there.
Speaker 3 (43:55):
This has been another episode of the All Thoughts Podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (44:01):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow Jiggershaw. He's at Jiggershaw DC. Follow our producers Carmen
Rodriguez at Kerman Arman dash Ol Bennett at Dashbock and
kel Brooks at Keil Brooks. Thank you to our producer
Moses ONEm For more Oddlocks content, go to Bloomberg dot
com slash od Lots. We have transcripts, a blog, and
a newsletter and you can chaut about all of these
(44:23):
topics lots of interest in there in our discord twenty
four to seven with fellow listeners Discord dot gg slash odlocks.
Speaker 3 (44:30):
And if you enjoy odd Lots, if you like it
when we talk to Jiggershaw about a potential revival in
America's nuclear power, then please leave us a positive review
on your favorite podcast platform. And remember, if you are
a Bloomberg subscriber, you can listen to all of our
episodes absolutely ad free. All you need to do is
find the Bloomberg channel on Apple Podcasts and follow the
(44:52):
instructions there. Thanks for listening in
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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