Transcript: Going Deep on the Energy Crisis and Nuclear Power with Mark Nelson (Part 2 of 2)
Transcript of Podcast #14
Below is the full transcript of this episode (part 2). You can listen to the audio here:
And here is part 1 (if you missed it):
Liberty
Hi, Mark. Thank you for joining me again for part two, the sequel. Hopefully, it's one of the good sequels, like Aliens, or T2, or Empire Strikes Backs. We talked about a lot of things in part one. Anyone listening to this first should go back to part one to get more context, but we were left with, I think, a lot more to say. Today, we're going to try to go over a bunch of things. I add a little intro first, I want to get out of the way, because I have been thinking a lot about this.
We discussed a lot about the psychology of everything surrounding nuclear power and energy in general. I see it as how humans are very tribal. It's just part of us. You see these energy tribes, people need a team to root for. People from a certain part of the world where there's a lot of that will root for coal or for oil and some maybe more techy people will go for nuclear and more romantic greens, or even techy people would go for solar and wind, because it's a new thing. I tried to look at all these things as just tools and they all have pros and cons and trade offs.
I think coal was amazing for humanity because it got us to where we are and there was not much else at that time that we could have used to get the same effect, 200 years ago we weren't going to build a nuclear power plant. The coal and gas were also almost magical in getting humanity very far forward and giving us plenty of energy. I'm trying to look at it as just how can we keep the upsides of all this abundance of energy and mitigate the downsides. I just want a better future for our civilization, make rational decision. From my kind of business background, my investing background, I'm looking at nuclear as a very undervalue stock.
If everybody was setting all the time, it was perfect, the answer to everything, I may point out some of the flaws or the problems or the downsides, but right now it's so far in the other direction that that's why I may seem like someone who's on team nuclear or just waving the flag as totally sold for it. But I just want to give this intro to talk about how, that's not how I'm trying to see it internally. Even if it sounds like I'm just waving the nuclear flag all the time. Long intro, but what can we talk about today?
Mark Nelson
Well, I reject almost all of that.
Liberty
Awesome. I'm curious why.
Mark Nelson
Here's what I mean, is food just rational fuel that we put in our body so we can move about the day and do other things? Maybe it's rational fuel so we can just go online and be irrational about energy. I don't know, but no, of course not. Food is not just human fuel.
Liberty
Absolutely.
Mark Nelson
It's feasts. It's important dinners with a beloved partner. It's a first taste of freedom when you make your first travel overseas by yourself as a young man or woman, right? It's nationalism. There's a famous quote, I'm trying to remember who is it, Orwell? George Orwell? That nationalism is a little more than people wanting to eat the foods they ate as a child. Is that rational or not? Because the calories matter, you can't stay alive without it. Too many new and you become obese and maybe have health issues. But you see my point. Why should the power sources not be just as emotional?
Liberty
I agree. I think they can be more than one thing at a time. I think food can be a bunch of nutrients that you decompose into the building blocks of it, but it's also a bunch of other more romantic things, more psychological thing, more cultural things. I agree it can be all that. I agree power is all of these things [inaudible 00:03:05].
Mark Nelson
Let me push further. Let me push further. It turns out that there's emotional connections to food. True, they can be hijacked by clever marketing or by maybe food business pushing in one way or another. But those emotions often have valuable long term health advantages. Even the cycling of foods through seasons, the seasonality of food, it's a subject talked about frequently by Nassim Taleb, for example, where religious prescriptions and prescriptions on diets end up having some amount of possibly beneficial dietary effect over the long term.
Not that you must prove it with science to do something you believe in or enjoy or gives you meaning. It turns out that emotions can be very fast reactions that when added up over a long period of time have a protective or beneficial role. I think that possibly one of the downsides of the way we've managed large complicated systems like electricity is we've removed emotions from just the areas where they might have been excellent downside protection against unusual or unexpected events.
If I must give an example, how about this? Economists said that electricity is just a commodity like any others. It's traded back and forth between borders. Some countries have a competitive advantage in energy. Some have a competitive advantage in electricity. Why shouldn't Germany, the industrial heart of Europe, get its energy based on which country has the cheaper or more expensive? Germany can get its cheap energy from other countries, namely Russia, and then convert it into high value products using its industrial advantages and its technology advantages, it's incredible labor force at home.
What's the problem with that? Well, I would argue that the emotion of maybe you should just make your own because it's just better to do it because of German pride or something. I think that that may have been a little bit valuable. I think that pushing back on economists who wanted to abstract out geopolitical realities from the grid and the way we manage it, the way we plan it now, I think that was a huge error. I think a little bit more of emotion could have served us well.
Certainly, the people fighting against nuclear energy were using plenty of emotion. They were just coming up against weak, brittle, emotionless technocrats who were easily persuaded.
Liberty
I agree. I agree with everything you've said. I suspect we both agree. We're just looking at it from a different angle, right? The rational angle for Germany would have been, you don't want to depend on a dictator or potential enemy, on people outside of your border. That part can be gotten to from the more emotional side, nationalistic side, or it can be gotten to from a more strategic thinking rational side, but I think-
Mark Nelson
Guess how we decide which to choose. That's right, emotions, not rationality. In other words, I reject this framework. I reject this framework almost entirely that there's the rational self or the irrational, because when you say rational or irrational, you must ask rational for whom, over what time period, considering what known or unknown possibilities? In order to venture into the murky unknown, the fog of future war, the decision to do that is fundamentally an emotional one or even an aesthetic one.
Liberty
I agree. I think that's a large part of the problem for nuclear, is the industry has been pretty bad at giving the right emotions to people, at explaining itself and at showing itself as the thing that provides a bunch of good things for society. Rather than the anti-nuclear people who have associated with nuclear Holocaust and all these negative things and all these emotions are what comes up. Yeah, I agree. That's what, at the end of the day, will end up generating the decisions.
Mark Nelson
If the correct numbers, the correct mathematics, the correct long term downside protecting factors are not tied with emotions worthy of them, then the emotions tied to long tail risk and incorrect numbers and blinding hateful ideology, those things will win. Let's do that. In this segment, let's use a bit of our emotions and just tie them to a better material.
Liberty
If you decide to root for a certain hockey team or basketball team, nobody can convince you to change teams. It's purely emotional. In the case of infrastructure, hopefully some numbers come in at some point. I don't want to be part of the people who have picked a team and then never looked at the numbers of the other teams or never looked at the downsides of my own team.
Mark Nelson
Now, we're getting better, because you happen to be from a team in Quebec that has fundamentally rejected nuclear energy as something that the rest of Canada need to.
Liberty
Though as a caveat I would just say that I don't see myself as the collective Quebec. I'm very different from my neighbors, from other people. Just to be clear, I don't necessarily believe everything that my government or people here say, but go ahead.
Mark Nelson
You understand how that could be a disadvantage if you're needing to convince others who do believe that way or do see that way, that their interests, especially long term interests, are best served by occasionally rooting for the other team. That's our challenge. How did we get into this European energy crisis as a sub-portion of the global energy crisis? Because the European energy crisis is very bad. It's almost like one of the richest block of countries in the world is now facing the day to day realities of the poor countries, whose energy systems they have declined to fund.
Liberty
Yeah, it's incredible how if you had told someone a few years ago, how bad things are today, they will not believe you that things could deteriorate so quickly. You read about Germany selling out a firewood and fireplaces. It's getting really bad. If we're unlucky in the next winter, as certain conditions combined very cold and not much wind and very cloudy and this and that, depending on how the war goes and what Russia does, if all these things align in the wrong way, it could be terrible, cataclysmic, right?
Mark Nelson
I'm probably going to be your least agreeable guest ever, because I'm going to disagree with what you said.
Liberty
I love that.
Mark Nelson
Even one of those factors you mentioned goes the wrong way, it could cause what you just said, very, very bad downer slide. If they all line up, I don't know, at that point, it's a divide by zero. Somewhere between societal collapse and somehow all pulling together in some immense fashion to figure out how to build nuclear plants in two years.
Liberty
How did it get so bad? Because Europe has all the pieces to have a tremendous infrastructure. They had tons of nuclear power plants to begin with. They had the potential to do fracking, which we decided not to. How did we get here? Is it purely like some Machiavellian plan from Russia influencing German politicians and NGOs and trying to align everything so that they're so dependent on north stream and such? Is it purely some of the anti-nuclear movements like being so successful? I'm curious, what's your overview of how we got from there to here.
Mark Nelson
How far should we zoom out? How weird should we get? Because one of the reasons, Liberty, that I'm obsessed with ancient history, obsessed with it, is because as much as we ever can, we can see the results. We don't know the results of the things we do today. We can guess at them, we can imagine them, but if you go far enough back, you can see for a fact what did occur. As the work of historians expands, as the work of archeologists and historical climatologists expands, we can know more and more about the conditions being faced by people with certain levels of agency, certain levels of decision making capacity, certain cultures.
I'm particularly obsessed with ancient Egypt. Of course, ancient Egypt proves you can do marvelous things based on nothing but renewable energy. Don't let anyone tell you you can't. After all, the pyramids were built entirely through sustainable methods. Where I'm going with this is that Egypt had almost the same amount of people at the point that it stopped making great pyramids, at the point that it was making the biggest one. Did it lose the capability? Let me even put a finer point on this.
After the three great pyramids at Giza were built, Egypt never again moved even the tiniest fraction of that amount of stone in the rest of the 2,500 years of the pharaonic civilization. They built those pyramids further in time from Cleopatra and the end of the pharaonic system, compared to where we are today. What happened that turned their attention away? Was there a collapse? Did they just lose the technology to build in such extraordinary fashion? Did they lose their engineering?
Well, at first, it seems that their focus and the tension turned to other things. They started building pyramids that were nearly as beautiful, but were not made of stone course, or they were not made of tightly fitted precision engineered stone course. Within a few centuries, I would imagine a few decades for the unlucky pyramids, these giant structures would start crumbling and fade away. Even though the exteriors, by all things we could tell, were just as finely and beautifully made as the exteriors once were of the great pyramids.
It's just the focus and attention, and eventually the abilities of the court switched to different areas. At some point, even if they had wanted to rebuild pyramids, they could not have.
Liberty
It's like civilizational capabilities has muscles, they atrophy if you don't use them for a while.
Mark Nelson
The question that we're about to have answered for us over the next few years is, can we take this century, maybe 130-year long contiguous experiment of the grid, can we maintain it? Can we keep it up? Can we expand it? We don't know for sure, because it was the product of an almost continuous series of successful construction efforts. Property rights arranged in such a way that you could build out the grid, that you could make sure you had enough power plants, that you arranged for enough fuel, that you arranged for enough customers and load growth and things like that.
A lot of the ways that we made electricity work were intentionally changed, broken if you will, about 20, 25, 30 years ago. We are now coming to the conclusion where we broke down the traditional way of building enough power plants, intentionally, and a new way of doing it correctly has not emerged.
Liberty
It looks like the war in Ukraine has made a lot of things happen very quickly on that front. At least when it comes to politicians claiming, "We're going to do X." As far as shovels on the ground and things being built, all these projects take so long. Is there a way to regain those capabilities? Do you think if you had to place odds, bet on it, what are you seeing that's going in the right directions in Europe and what are you seeing that's just pure denial?
Mark Nelson
Well, here's one. European countries, or at least the leaders that I'm seeing talking about European energy, are still talking as if this will be a one winter crisis or maybe one season, right? They failed to understand that this is a crisis that will be continuous, every year from now on. They failed to understand this. In some ways I can empathize. They just have to get through this winter, just through this winter. But do you think that the Germans selling out a firewood is a sustainable thing?
Do you think that they'll only need it for this winter? Do you think that the amount of trees left in Europe is enough for getting energy wrong? No, it's not. Europe's trees, the ones that are still there and Germany regrew its forest much less than other countries. That's another thing to keep in mind. There are several factors that are influencing this, but even forests didn't matter as a discussion point in Europe, certainly they weren't connected to energy. That was a triumph of electricity.
That was a triumph of energy provision, modern energy provision that led us forget about the forests of Europe and just hope that they grew back, and they did. Many countries in Europe woodlands were returning, partly through the devaluing of agricultural land, but also partly through no longer needing it to heat.
Liberty
Yeah. The plan right now, from what I can see, seems to be, "Okay, let's restart some coal plants. Let's try to get some LNG terminals. Let's try to-"
Mark Nelson
Temporary, temporary restart of coal plants, just for this year, not future years. Just this one, right?
Liberty
Yeah. Temporary. Oh, boy.
Mark Nelson
Until the Russians turn the gas back on. Yes?
Liberty
They haven't even decided to extend the life of their last remaining three nuclear power plants in Germany.
Mark Nelson
Wait, no, no, no. They're thinking about it, maybe a few months or whatever, until the energy crisis is done.
Liberty
I guess that's the denial part I was talking about. It's incredible that even at this point, if they still have three working plants and they have this huge tidal wave coming right at them, this huge crisis, why do you think they just can't bring themselves to? Is it green party having a hold on things? Is it the emotional stuff that we were talking about? Like, the whole of Germany is just, just doesn't want it. You could show them all of the maths and it doesn't matter. They've decided that they move past nuclear and that's it. I just can't understand.
Mark Nelson
Liberty, what's the value of old people? What has Nassim Taleb wisely said about the value of old people in human society? It's to remember how high the water gets. It's also to remember how low the water gets. The old people that we have in charge of Europe, including the young, old people, they don't know how high or low the water gets. They don't understand and they don't have any working intuitions about energy on a quantity scale. They also don't have working intuitions about energy on a substitution scale.
That's why we keep hearing in Germany, they say, "Oh, well, you see, natural gas is not needed for electricity in our country. Bringing more nuclear electricity back doesn't help us with natural gas." These are the same people that have spent years saying, "We must electrify all heating." But this year, because they are looking for reasons to still shut down nuclear, they forget all the things they just said about the substitute ability of electricity for gas heat. Here's another one. They say, "We've got to bring the coal plants on, just now, just for now, to replace natural gas."
But nuclear, as everyone knows, directly also competes with coal for electricity, but they forget that part in order to make the instant correct judgements to bring back every power plant that they've got fuel for, but they don't extend that knowledge. Again, there's a very segmented knowledge indicating that they're just bullshitting, they're just improvising constantly. Their advisors are the ones who push them, who help push or let's say, they gave stamps of approval to really horrible directions. These are the technical experts at the cusp of either saving or losing their careers.
Of course, they're going to only give the little parts at a time needed by the leaders to do what they wanted to do anyway. There's an entire ecosystem of incompetency in the leadership and incompetency in the degree and salary technical staff. They've all got to go. They've all just got to go. Sooner the better, but we'll see what happens this winter.
Liberty
From the outside, it seems to me like Germany is in the worst position, but is it all connected? How's the UK or France-
Mark Nelson
Germany is absolutely not in the worst position. They have a much more orderly and competent society than many other nations.
Liberty
Who do you see being in the worst position? How do you see the interconnectedness and the dominoes falling if things go wrong?
Mark Nelson
The UK is in the worst position.
Liberty
Really? Okay.
Mark Nelson
Yeah.
Liberty
Can you explain why?
Mark Nelson
Sure, because already all the meat is gone. They're down to the bone already. The fat's gone, the meat's gone. They're down to the bone for much of the population. They're coming into this crisis in a worse state, but unlike Italy or Spain, they haven't been there for a generation, shall we say? I'm generalizing heavily based on lots of discussions, looking at the numbers, in the case of the UK, traveling there pretty extensively and working and studying there for several years.
Here's another thing. The Brits have made their fortune and their reputation on on enforcing deals and doing what they say they're going to do. They make their money on finance. The countries around them don't necessarily claim to do that. If they get into a desperate crisis, they will break their contracts earlier than Britain would to protect their interests. But since Britain is the one who made its money on deal making rather than supplying the raw ingredients of society, supplying the machines that made the machines, supplying the machines themselves, supplying the energy to run those things.
It did have an oil and gas industry that's declining and it does have some wind turbines, but everyone else has wind turbines that run or don't run at the same time, Liberty. They all are connected to one big weather pattern over about a billion people, a small land area in Europe. Britain has fewer backups, fewer safety systems and an economy much more built on correct legal executing of contracts as written. I know this sounds like a weird focus, but as far back as 2013, when I first started hearing about the coming British energy collapse, I was already hearing important people in the government.
Not important like being listened to, but in roles that in a correct world should be very important and given great deal of formal and informal power. The head of the Office of Gas and Electricity Markets, that should be a really important position. If you decide to turn over state survival related things like gas supply and electricity supply over to the market, your head of the market operator should be like a god. But instead, they're just ignorable. People don't even know their names.
I can't even find the head guy on LinkedIn when I searched for his name. When I tried to uncover this speech that was powerful, shocking, and horrifying back in 2013. What was the speech? It was through a tiny audience at my college at Cambridge Pembroke College, just in a little room over decent but not great wine. He just told a small audience that Britain was going to run out of wiggle room by about 2016 or '17, the winter of 2017 say. If things went wrong in 2018 and '19, and no course corrections were made, by about '18, 2018 and '19, each winter would be a gamble for survival every single winter.
Liberty
I'm not as familiar with the UK grid as some others, and maybe the listener isn't. If you had to describe why they're in such bad shape, what's the composition, and how did it get worse over the past 10 years?
Mark Nelson
Let me just make it simple. It's natural gas and wind, and the wind can stop for weeks at a time. The natural gas storage is about three days for the country.
Liberty
How much of their natural gas are they getting from their own fields than from outside? They're probably in pretty big decline in the North Sea? What a terrible situation to be in.
Mark Nelson
Shall we make it worse? Even then, their balance comes from imported electricity. Now, when their wind is blowing well, when their own demand is relatively low, they're exporting. Amazing, it's commerce, it's trade, right? Liberty, that's extraordinary. Adam Smith would be proud, Ricardo would be delighted, but the thing is you don't survive in the long run by surviving on average. You do it by getting through each month, each day, and on the grid, each second.
Each second is a discrete thing on the grid. There's a rolling one second time period, if we want to be poetic and talking about it, that you are surviving constantly and then forever.
Liberty
It's like a heart beat.
Mark Nelson
Electricity is one of the most sophisticated and wonder systems we have ever made. Economists don't understand it, so they abstracted out the parts that make it work and then said, "Now, we have an image of it in econ language." Then, they broke it.
Liberty
As Buffet would say, "You never want to multiply by zero."
Mark Nelson
Or, they say, "Wow, it's just unimaginable event X happens, so that won't happen. Okay, let's deal with the other events."
Liberty
Yeah. This modeling and this, "Oh, it's a Six Sigma event." All this stuff that keeps happening all the time, and just showing that the models are terrible and we can't do probabilities well. Instead of focusing on making the thing as resilient as possible to anything, they try to model the center of the bell curve and, "Oh, that'll be good enough."
Mark Nelson
Yeah, so they look at the system, they're like, "Oh, I guess it's like power plants compete against each other. That sounds good enough." Then, it turns out that some power plants have attributes that are necessary for the grid to stay up. When those power plants close because the market wasn't based on those attributes, it was based on other attributes, then they say, "Oh, the grid has that in it? Oh, good to know. We'll invent another market for that purpose." Then, they do this ad hoc adding of market mechanisms.
It's like so many astrologers or early astronomers trying to add complications to the geocentric model to keep it alive. This is what it feels like to me, except it's not a danger of inventing powerful telescopes and then getting embarrassed. It's a danger of the very things that make it possible for this number of people to live in a certain degree of grace and dignity all at one time. It's a breakdown in act.
Liberty
Yeah, you tweeted about people claiming the base load is dead. How can people even think that you don't need base load plants? What was the argument there?
Mark Nelson
It's by doing this, deciding either based on emotions or evidence that renewable energy is the way forward. Then, once renewable energy is the way forward, you realize that it's devastating for renewable financing if you can't get first priority on the grid. Then, if you see that renewables must get first priority in the peaks and the troughs, you realize that a power plant that must make its revenue by constant operation or at least mild ups and downs, that there's no room for a plant with those economics of running it all the time and recouping a bit of money all the time.
There's no room for that. You define out the need using marketing language and wishful thinking, even though physically the need remains, as we're seeing in Europe.
Liberty
Yeah, you start with the answer and then you backfill in the logic to get there.
Mark Nelson
Yeah, and since you never actually understood the underlying system, and you only learned about the system one little bit at a time because of an emerging crisis with your previous understanding, that's how you can get that logic and trap yourself in that direction.
Liberty
I'm just a civilian, right? I'm just interested in energy and the grid as an outsider. But I feel like a huge step in my understanding has been when I went from looking at all these technologies as separate things, "Oh, solar is cool because of this. Let's study the NREL list of the efficiency records and blah, blah, blah." All these technologies separately are interesting in themselves, but not enough people, I feel like, make the jump of looking at it as a system. Systems thinking out all of this connects together over large grids and over countries and continents.
Mark Nelson
And large periods of time.
Liberty
Also, because a period of a few years of cheap natural gas doesn't mean that natural gas will be cheap forever. But if you close on all of your other plants and then you get to a expensive period, that's like-
Mark Nelson
Maybe we say this, this is the way we'd say it if we wanted to use fintwit slang, European civilization did a YOLO short on natural gas. Now, there's a squeeze. They thought natural gas was cheap forever, and so you could make money against the fools who thought that it wouldn't be cheap forever. Now, there's a squeeze, and it is a squeeze. Look at the charts of the natural gas connected base load price of energy going up in Europe.
Liberty
Yeah, and the thing is, this isn't just finance. This is geopolitics. This is war. People are dying.
Mark Nelson
It's everything. Because once you convert, that's the horror in the UK, coal is really expensive right now, but at least it's not the same item, it's not the same product coming through the same pipes as natural gas. Meaning, if you have a natural gas disruption, it does not cut out both the natural gas heating and industry and electricity at the same time. The UK YOLO'd load on the same fuel for both electricity and heating and industry.
Liberty
You give up your sovereignty, partly, because how can you make independent decisions when Putin could turn off the gas, right?
Mark Nelson
Soft power is looking awfully mushy right now in other words.
Liberty
Yup. All right. Well, now I'm depressed about Europe. I already was, but-
Mark Nelson
Should we try to find ways to be optimistic about the 2030s?
Liberty
Yeah. Let's do it. Let's try to bring some sunshine in or some gamma rays.
Mark Nelson
Sure, let's do it. The magic is nuclear plants take up tiny little plots of land and you can store 10 years of fuel in a few month's time right next to the plant, in a little bitty shed. It's a miracle.
Liberty
How convenient would it be if we have those right now, right?
Mark Nelson
Yeah. Wouldn't it be? People constantly throw it in my face. When I talk about Germany's world leading nuclear plants, they're like, "Ugh, no, there's energy crisis because the French can't manage theirs." To which I say, "That is the entire point, that Germans are destroying by choice what they managed spectacularly by culture. The French chose to exercise the worst parts of their cultural deficiencies on the nuclear fleet."
Liberty
That's my understanding too. It's like, Germany had some of the very, very best nuclear plants in the world, best run. If France's fleet was run like Germany's and Germany's was as big as France, how different would the situation be right now?
Mark Nelson
Exactly. I'm hearing Cleveland visiting family and I found a coffee mug in the cabinet. If you'll humor me, I'll read it to you. Heaven is where the police are British, the chef's Italian, the mechanic is German, the lover is French, and it's all organized by the Swiss." Hell is where the chefs are British the mechanic is French, the lover is Swiss, the police is German, and it is all organized by the Italians." Liberty, I'm afraid we have a situation in Europe where the energy policy we could write up in that.
Where if the recent French turnaround to love nuclear, if that were the way the Germans were, but the French nuclear plants were run by Germans, we would be talking much less about an energy crisis now. In fact, we'd still be needing to justify the existence of nuclear plants, which now, at the moment, self justified. You see the problem here? You see the necessity of emotions? Even religious belief in not doing stupid things for the long term that are smart in the short term?
Liberty
Yeah, that's the thing. When things are going well, they fade in the background and people forget that they still have to explain it and educate and defend it and be on the ball to not let someone else define the brand, the framing of the thing. I think that's what happened in France for a while. But let's talk about Europe's future. If we get through this period, the '30s, if what people are starting to talk about now happens, because you'll never know, but what are we looking at? Is there a chance for Germany?
I know France has said some things about building more. I think the UK too, is it Belgium and the Netherlands looking at nuclear too? It seems to be a huge turnaround for Europe, but not at the right time.
Mark Nelson
We're in a weird moment where countries that still have phase out policies in law, and France has a law saying they have to turn off, they have to get rid of a bunch of their nuclear output. It's still in the books. No matter what Macron says about building, France still has a law saying they have to dramatically cut their nuclear output. I can't miss the irony that they're achieving it just in a bumbling, humiliating, shambolic fashion, not the intentional destruction of ... they're not intentionally destroying their resources now.
They're just unintentionally doing it exactly according to the law. Can you believe this? It's what? It's August 2022, a year after this energy crisis started, and the French nuclear phase down is still in the law. Okay, let's move to Belgium. Let's move to Belgium. Belgium is starting for the first time to think about adding little reactors. They're still scheduled to shut down their large reactors, all of them. It is in the law to get rid of 50% of the nation's electricity in the next two and a half years. Do you know what their replacement is supposed to be, Liberty?
Liberty
Probably gas.
Mark Nelson
Essentially 100% natural gas. Well, not just that, also?
Liberty
Wind and solar?
Mark Nelson
Imports.
Liberty
Oh, imports.
Mark Nelson
From the other countries having horrible energy crises.
Liberty
I don't know the politics of Belgium. Is it similar to Germany and France? Is it just like, "We don't like nuclear, so let's just shut it down." But is it purely politics?
Mark Nelson
No, it's a colossal confused goat rodeo. It is a giant clown circus. It took them 500 days to form a government out of seven minor parties, after the last elections.
Liberty
They horse traded nuclear somewhere in there.
Mark Nelson
Yeah, so you know how crystals can form in a super saturated solution once you have a seed? A little seed and then it starts to form. The green party is saying, "We care about nothing else other than shutting down nuclear plants, so we need the Energy Ministry." That was the seed crystal for the recent government, as I'm told by my Belgian contacts. We almost have to, because we're not going to get heat from actual energy sources in Europe, we have to get our joy the old fashioned way, from jokes and stories and tall tales and mythology. I'm just trying to get that started early.
Liberty
I'm depressed again now. I thought this was the optimistic part?
Mark Nelson
But I'm saying it with such a grin on my face. I wish you had a video in this so people could see that we were having a good time. Okay. Let's move on to the Netherlands. The Netherlands, one of the great gas producers, which shut down much of its gas production because of earthquakes. I'm not even saying they shouldn't have, it's just they should have had a bunch of nuclear. Netherlands has had a remarkable public attitude shift on nuclear, but now they actually have to do it and it will take some time.
On nuclear, they have one remaining reactor that they've decided to love and cherish forever and forever. That tiny little reactor, a little baby, what is it? A 500, about a 500 megawatt version of the giant reactors that Germany has, basically the same design, Siemens design. It's a brilliant little plant. You can go inside of it, you can go inside the containment during the operation of the reactor vessel. I've done it. It's marvelous. The plant's humming with a quiet energy. The turbine hall is humming with an extremely loud energy, but it's just an incredible experience to go to that plant.
Order, even simplicity, even beauty, the protective clothing you put on just as the plant visitor is bright orange and it fits pretty well. I love it. That's what the Dutch have and that tiny little plant is making so much money that it alone could sponsor another nuclear program. Now, that's bad. I need to catch myself. If your nuclear plants are making cataclysmic piles of cash, you've made horrible decisions with your energy system. Instead, nuclear plants should slowly and steadily pay themselves off five, 10, or 15 times over the course of a dignified 100, 120-year life.
They should not print so much money that whatever entity is in charge of the nuclear plant becomes a new oil baron. That means you're destroying industrial mundanity, if that happens.
Liberty
Good thing it's only 500 megawatts. Good things it's not four gigawatts, right?
Mark Nelson
Think about this, in order for a nuclear plant to be making an immense amount of money, it means that either you did not anticipate being able to sell your power or you couldn't sell your power back when the prices were much lower and you might not have been able to stay alive. Why might you not have been able to stay alive? Because these down electricity markets that said that if the wind comes on super strong today and the price, wholesale price, plunges into the negative, but it doesn't matter to the wind turbine because they've sold their power forward to companies that need good ESG ratings or something.
They're also protected and given good priority and their own transmission and all these other goodies and surpluses at the expense of the existing system. Then, all that market price does is says that the nuclear plant should pay a penalty for the privilege of existing during those hours, if they're having to sell their electricity on the market.
Liberty
That's crazy.
Mark Nelson
Who on earth come up with such a stupid idiotic system? Only ones who with almost no understanding of history, of engineering, of people. It's just simply awful, and these are the race, these are the zombies that still haunt the halls of power all over Europe. They have got to be almost completely purged. You leave one or two as a punching bag to humiliate as an example to the others, and it serves as a training exercise for young economists. I think that would be a very important outcome this winter.
I've accidentally got us back into the depressing stuff, where's the signs of promise. Eastern Europe has a lot of coal, heck some Eastern European countries just straight up bought the coal infrastructure from Germany, that's still in Germany. It's just owned by Eastern Europe. That hopefully will produce an immense amount of money that will allow them to buy their own nuclear fleet based on having bought the "stranded assets" that Germany said wasn't going to be in the plan because they were going to get off of coal and move to Russian natural gas.
Liberty
Is there even the capability to build up nuclear power plants in all these countries in parallel over the next 10 years? The number of engineers and the expertise, and can we even have this throughput of nuclear construction in Europe?
Mark Nelson
It's a bit of a meta problem, because before you build up nuclear in parallel, you need to build up the ability to build it in parallel. Is that there now? No, no. Is there some word time style mobilization it might be possible? I don't know. Maybe it will require a lot of people to switch career paths and new talents that are being underused need to be discovered, an immense amount of German talent and abilities will be used outside of the current industries that use them in Germany. Germany will continue to be an incredibly capable and important part of this puzzle.
Even though they're, as much as anybody, the reason we're in the mess that we are now. I am hopeful about human ingenuity when the pain is high enough, the pain is about to be high enough. If we can make it through the horrors and readjust our sense of how brutal modern life should be, we may make a brighter, less brutal 2030s.
Liberty
Yeah. That feels scary, even if you, okay, you've decided on the answer to the problem, there's a gap in between where you need to build it, and that's multiple years. That's the pain phase that we have to get through. How about we move on to something that maybe less depressing? Though I'm skeptical there too, it's SMRs. I'm going to give you context of my evolution on SMRs, right? You hear about them. It's like, it's the next thing. It must be better. It must be cooler. Next is better in technology, usually.
Then, after a while I realize, "Well, okay, maybe it's just like a financial thing. Maybe if we can't build the big ones right now, if you have a bite size thing that you can more easily get going and finance, okay." But now, I'm skeptical of that too. It's almost as difficult to get a design improved and pass through regulators and it takes almost as long as to build. Then, at the end, you have a much smaller reactor. Energies of scales are so important, feels like, with power plants that ... I'm not sure if you know this dream of, "Oh, we're going to build them in factories and just pop them everywhere."
You still have a lot of concrete to pour. Even regular reactors are also built in factories, anyway, you don't get so much improvement as well. Anyway, I'm pretty skeptical of SMRs. I'm curious, what's your view?
Mark Nelson
You sound a bit like me. I started spreading those heresies about exactly two years ago. This month I did my very first podcast ever, two years ago. It was also recorded here from Cleveland, from family house. It was about the marketing mumbo jumbo around so-called advanced nuclear and how much of it was only possible because of historical blindness and not even knowing what's done in the rest of the world. That is, a lot of the nuclear, the advanced nuclear industry, is so divorced from actually existing nuclear that their marketing language is as bad as what you've said.
Let's tear this apart. Small modular reactor, how small is small? Well, small is just however small you want it to be. Some people use a definition of 300 megawatts and below. To give you a reference point, 300 megawatt barrier was broken by reactors being built in the mid '60s, coming online in the mid late '60s, 300 megawatts started being small. We still have brilliantly performing plants of 400 or 500 megawatts, sometimes twin 500. In the US, we have a few of those. Built for a few hundred million, in 2022 dollars, in four years.
I guess maybe you could think that if you redefine small to be anything under 600 megawatts, then exactly copying what we used to do would be considered a small modular reactor now. Then, there's the word modular. Let's talk about modular. There are small modular reactor proposals where aspects of the plant are modular, but other parts aren't. If you have a semi non-modular power plant system, what does it mean to say that reactor's a modular? That touches on what you said, which is another thing that I feel like I have to tell people all the time.
What the competent successful nuclear exporting countries do is that they make large modular reactors. What does that mean? It means since any nuclear plant is going to provide a lot of laboring jobs for the local society, you build your big structures, you just do that. Then, you install modules in the plant. People might say, "No, a module means that you have to have it in a chunk and it has to drop down and plug and play." Well, look, nothing in the real world truly does plug and play the way you imagine.
When the modules for the modular plant at Vogtle in Georgia were being made, well, they made them and brought them to the side and they didn't pass inspection, and they didn't fit. They were custom rebuilt on the spot as single one-time manufacturing efforts. In which case, what was the point? Especially when that's typically not the limiting factor in building your plant. It's weird little delays here and there, not being able to do your rebar properly, or having some issue with paperwork on that or this. People want repeatability in language.
They get it in language and it may not be delivered on the site. Furthermore, there can be really large units that are made with modular construction styles. The parts that are made in factories still are made in factories and are sent to the site like the steam generators or the reactor vessel, all connected together with big pipes, made in factories. But if you don't construct the entire project, manage the people, manage the quality of the labor, manage the documentation, now the dream is you do all of that in a factory building or you do it repeatedly over and over.
But as you mentioned, the reality is, nuclear plants are currently going to take forward of 10 years to construct. Then, they're going to last for what? 80, 100 years. The more you change, the less we can verify going into the project that the project will perform well day to day and last for an extremely long time. When I'm dealing with folks in positions of power and authority in developing countries who need a reactor, they often don't even want to hear a word about reactors that they cannot go visit and touch today, that they can't show their sovereign or their ruler or their president or their ministers.
They need a reactor that they can go and show them and have a tour in. Why? Because the closer you get to the responsibility of making a decision for which you will feel massive downside, personally, the more conservative you get about changes here and there, innovations. Let someone else innovate. Maybe you'll do that for your next plant after it's not an innovation anymore and it's already in reality. That's what it feels like to be in the hot seat making very large deployment decisions about nuclear energy.
When you're not in that line, it feels like you want to solve errors through doing something new. When I'm seeing news stories about China making record time on activities in some of their standardized nuclear plants, you read about what the innovations are. It's things like, "This time we used this crane of this large size, but then we also added smaller cranes in order to do this simultaneously." Okay, crane positioning? That's your breakthrough? If you love construction, if you love building, which so many of us have from a young age, it's amazing to hear about correct utilization of the right number and size of cranes.
That is amazing, and they're going to get it done in four or four and a half years. It's part of a program that may have taken eight years, and at the end you're producing, you're turning on a reactor per year at a mega plant. That's awesome. That's good enough for me. What we're doing with the SMRs is in many ways we're so decrepit in our abilities that we're restarting from the beginning. Why would we be doing something that we're bad at? Because nothing else provides what nuclear energy provides.
The advantages of having the densest fuel in the world with the advantages of almost no environmental impacts. That's why it's worth struggling. That's why it's worth rebooting our nuclear industry anywhere that needs energy, which is effectively everywhere. It's just a matter of admitting to ourselves that we're building small because we're bad at building big. Admitting to ourselves that as soon as we build it well small, we're going to want to size it up exactly like you said, and that's okay. That's how we got good at building nuclear in the first place. We built smaller and then we sized up.
Liberty
I feel like this always chasing the new thing, maybe we've been conditioned by the semiconductors industry and by software and all of that, that things are going up Moore's Laws and always improving and getting so much better, but nuclear power isn't on that kind of curve. If we just took a reactor that was built in 1980 and made dozens and dozens of them all around Europe, in the US, that'd be great too. We wouldn't lose much by doing that than by building the latest design.
Some things, of course, have improved a lot, but the amount of clean nuclear power that would be gotten there would still be fine. It would still work as shown by the plants built back then that are still operating great today. We talked in part one about the ship of Theseus.
Mark Nelson
Yeah, the dream of a modular plant, where almost everything that's like metal and has nuclear material inside can be pulled in or pulled out. I guess you may even have permanently higher costs potentially, but as long as they're predictable and you know exactly what you're spending money on, how much you're spending for what output, this, again, may require not having these stupid electricity markets that can't conceive of longer than 10 years at a time.
If you have a technology that's the correct long-term capital investment, it may very well be worthless trash to the market designed intentionally to ignore long-term capital efficiency. That is of no account. It's about marginal cost today to turn on. That's it. Now, we've added, in some markets, mechanisms, like I referenced, the epicycles on epicycles. We've added a capacity mechanism to try to induce long term power plant being there, but they have their problems too.
The market purists, the market believers, the people who helped design these things say, "These capacity markets are dumb. You should have the purity because then people, you are removing the fear that drives this correct long term capital deployment of building enough nuclear plants." Yeah, but that fear only ... If your firm acts out of individual firm fear that there won't be enough power and builds a power plant and then you're wrong, your firm individually goes down, but not the grid. When all the firms see it as not their problem to make sure that the whole grid stays up.
Liberty
So much of the potential problems get externalized to society in general and some little firm can't bear on its shoulders people freezing in winter or national sovereignty being diminished or all these geopolitical problem. There are so much stuff that you can't reflect in these markets and some commodity's price that should still be taken into account that, yeah, some market failure.
Mark Nelson
What technologies am I excited about? Because it's not just all doom and gloom. I think that although some designs are not the ones I would gravitate towards as an engineer, if enough people get behind them, then you can move forward. Will the performance be good? Maybe, might even be better. I'm not saying I don't think new designs won't have great performance. Some of them may actually have performance breakthroughs. By necessity we've lost, we have to do some things new because we've lost the ability to do the old in many ways.
Maybe some of those new things end up better than before. Maybe we'll have the nuclear equivalent of the reusable launching rockets that Elon Musk and his team at SpaceX have developed. We're still needing to see the long term economics of that. But assuming that what appears to be the case, which is a sharply lower launch costs, assuming that's born out over the longer term, then we could see in nuclear our own version of that really important breakthrough. That almost required a total split with the ways of doing things of the past, in order to even conceive of that as being an option.
We might get that on nuclear. One of the reactors that I think is most fascinating is also one of the most ancient. It's derived from the very oldest reactor designs. That is the CANDU, the Canadian Deuterium Uranium reactor. The idea of the CANDU was for a nation like Canada that did not have, and was not planning to get uranium enrichment technology, that's where you take natural uranium from the earth, purify it to make it just the metal or the metal oxide.
Then, you have two flavors of this uranium that shows up in the earth. One is the dominant flavor, Uranium-238, 99.3% of your uranium is going to be that slightly chubby or atom. Then, 0.7% of natural uranium is going to be Uranium-235, slightly slimmer version. That slightly slimmer version is a little bit unstable and it breaks down over time. By over time, I mean over the life of our solar system. It's been going away for as long as the earth has been here. That Uranium-235 has been fading away a bit.
That part does really well in reactors. We'll leave the physics aside. If you don't have the ability to selectively increase the proportion of that Uranium-235, a process called enrichment, then you need a reactor that is unbelievably efficient at economizing and getting the most out of each neutron that comes out of a Uranium-235 split, and make sure that that neutron is highly likely to find itself back in the uranium, atom splitting apart, and make more neutrons that can split more uranium.
The way they design their reactor is to have a modular core, as in the core itself, where all the neutrons are split, and going around and the nuclear reaction is taking place is modular. It's a series of small tubes, about this big, what, seven or eight inches, called calandria tubes. These have pressurized water running through them, taking away heat from the fuel. The fuel, it comes in bundles that you can carry in your hand. Bundles are like foot and a half long, half a meter long let's say.
These bundles are being constantly loaded and unloaded from these long skinny channels. Why would you do such a weird system? Well, it means you have a reactor that can run 1000 days in a row. In many ways, it shuts down only for little repairs or checkups. You have a system also, that because each bit of the core is modular and replaceable, you can substitute it out after 30, 35 years in a big refurbishment. The refurbishment can take a few years, cost a billion or two, and then you have effectively another 30 to 35 years of live, funny reactor.
All the other parts can also be replaced. Now, here's the interesting thing for me, if we were going to expand the word nuclear. You're going to end up with a lot of bottlenecks. That's the bottlenecks that we were referring to without using the word in Europe. If Europe wanted to go in parallel towards nuclear, what would be the holdups? What would not be manufactured in the continent? What would you need to order from abroad? But what if they were also trying to expand nuclear?
Some of the largest components are the ones that the fewest number of metallurgical facilities of machine shops can actually work with. There are almost no forges on planet earth big enough for the large modules of some of the modular reactor designs. You see the issue here?
Liberty
Yeah.
Mark Nelson
You may say modular, but if the biggest module has stuff on a critical path of a severe industrial bottleneck, there's a limit to growth. If you can remove the most number of the biggest bottleneck, then you have a system that might be reproducible with, to high standards in emerging economies, with cheap labor but good engineers. That brings us to India. India uses this reactor design. Their own version of it. If you had an Indian supply chain, with outstanding engineers from the IITs and their technical training institutes, but at Indian engineering costs, and you had small parts that can be certified and checked to meet Western standards, as I believe they would probably find, because even developing countries are very, very serious about their nuclear safety standards.
It's just an international thing. It's like the fact that developing countries don't lose jet planes all the time, because it would be bad for Boeing, bad for Airbus, bad for global airlines, bad for the pilots, bad for the customers coming to and from the fancy countries, you see my point.
Liberty
Yup.
Mark Nelson
There's a great deal of shared interests in international nuclear, where even during this war you have experts working together to keep nuclear plants safe outside of the war zone from countries involved. I'm going to keep some of the strong thoughts I have about that situation for a different time, different podcasts. If you have a rapidly expandable, by nuclear standards, supply chain for a reactor where the core itself is modular, and a lot of the other demands are going to be local labor, local concrete, construction, supplies that can come from the country itself.
Then, you also have a chance for a lot more localization to build out a fleet in each country that needs more energy. Because these reactors have a lower power density from their larger core, meaning less energy per unit volume of the reactor core, they also have extraordinary world class safety standards, both active safety systems and passive. Active meaning somebody has to do a thing or a controlled switch has to read that a sensor setting has been exceeded and make a change. Well, these reactors have outstanding passive safety because you have a huge amount of time to respond to anything compared to other reactors, because there's less power in a given space.
Liberty
Yeah, the more I've learned about the CANDU, the more it checks almost all of the boxes of a lot of claiming advanced nuclear is, right? Even apparently it's a particularly good design to produce radioisotopes for medicine and sterilizing equipment and radiotherapy, I think it's Cobalt-60, so that kind of stuff is extremely useful.
Mark Nelson
Because you're loading and unloading constantly, it becomes possible to vary the amount of time you have access to the core. Now, this does make it a worry for proliferation. What do I mean by that? If you're constantly loading and unloading uranium fuel, you will be producing some amount of plutonium. If you also then develop the ability to process that spent fuel, you can presumably separate out plutonium and use it for a weapons program. One of the advanced nuclear companies that I find most fascinating, and full disclosure, they're a client of mine.
I work with them, they're based in Chicago, where I live, is a company intending to put thorium plus enriched uranium in these reactors. The goal is to reduce the refueling rate by a factor of seven and also reduce the spent fuel, the spicy radioactive spent fuel that has to be monitored and kept separate from humans and the environment. The amount of that is cut by a factor of seven. That spent fuel has essentially no plutonium in it, and much of the power comes from breathing and then burning thorium into Uranium-233, as you go.
Liberty
What's the name of that company?
Mark Nelson
Clean Core Thorium Energy, based in Chicago, Illinois. You can find them on Twitter at Clean Core Thorium Energy. The concept here is, you want advanced nuclear. CANDU checks almost all the boxes. You take the weaknesses, the worst weaknesses of CANDU, and you can convert them to strengths. Then, you have potentially, if India's interested in this, and I believe they should be, exporting their own small modular CANDU with a production system that cannot just be expanded quickly, but also localized, because their parts are much smaller, to build small modular reactors with advanced modular course.
Fueled by a fuel that should alleviate much of the proliferation concern, while offering substantial operational cost advantages due to reducing the need to constantly fuel and unfuel the reactor. Sounds like a pretty good deal to me.
Liberty
This aspect of CANDU was one that surprised me when I learned about it, but this flex fuel aspect where it can burn uranium, non-enriched, can burn thorium. It can even apparently burn reprocessed materials from nuclear weapons that have been dismantled.
Mark Nelson
Many reactors can do that. What's fun is that CANDU reactors can deal with material essentially straight from operating pressurized water reactors, from the main types of reactors. That material, when it's not radioactive enough to work, or it's not radioactive in the right way enough to work in traditional reactors anymore, it can go to Canadian reactors and then be reused. We don't do that because the uranium's pretty cheap and it's just not necessary, but it becomes a possibility.
Liberty
In a world where if we imagine much bigger planetary fleet of reactors, having these kind of recycling plants in a way could be part of the process.
Mark Nelson
That's another question I suppose we ask, is nuclear truly renewable? Is nuclear, if used to meet the world's energy needs at the standard of living of Europe of 2021 and before, maybe not 2022 and after, but 2021 and before, if reactors are meeting that standard of living and providing both heat and electricity for all industrial needs. Let's say we had 10 billion people, how quickly would we use up the uranium supply? Well, you would use up the currently in production supply pretty quickly.
Then, you would use up the various inventories of under enriched material or unenriched material or waste if you reprocessed it, that would last you another few centuries. At that point, you just start exploring for more uranium. Uranium is not rare. It is just hard to find. That's a very important distinction. Not rare, just hard to find. Meaning, you have to put effort into finding it. When you find it, you can find it in really rich or patches, really rich. Then, you mine it specifically.
If you truly run out, you start using more of that thorium. You start using ocean uranium. Uranium dissolves from rocks around the world, often sedimentary rocks, where it's been deposited over time, where water's flown and then it flows again to the ocean. Then, it gets spread around the ocean waters. Then, you can extract it from ocean waters using a special kind of sponge. We haven't needed to develop that process because uranium is just too cheap. But if you wanted to supply 10 billion people's worth of electricity and heat energy for a long time, you end up with several billion years of nuclear fuel from ocean water.
Liberty
Yeah, that's what I've heard. If we even forget uranium, just thorium from seawater, if we got to that and just filter it out somehow, that would be millions and millions, and possibly billions of years there. At this point, it's more like we are not fuel limited, let's just say.
Mark Nelson
We are not. We're imagination limited.
Liberty
How long until we have fusion? That's another topic, but at some point in the future, we may not even be talking about fission as much, fusion may work.
Mark Nelson
Think about this, fusion doesn't really deliver a big bump over fission because if your fuel costs are already de minimis and not quickly, not tightly linked to the price of nuclear energy. Then, the gains from having a little bit better are almost nothing. If we invent a type of light bulb that's more energy efficient than LED, it will do almost nothing for global energy demand. Why? Because we've already got that down to a bit of an [inaudible 00:59:49]. In the United States, domestic lighting, if it were all LEDs would be a vanishing fraction of total energy needs in households, 1% or less.
Liberty
That's a good point. That's the thing, when I started hearing about fusion, it was like, "Oh, it's the holy grail. Because it's like nuclear, but without all of the downsides of nuclear." But then when you learn more about fission, you're like, "Well, those downsides have been exaggerated a lot. The waste is not much of a problem. It's more about the construction cost." Fusion is not going to be cheaper than fission, at least not as far as the eye can see.
Mark Nelson
Well, Liberty, one of the amusing things about getting a little closer on fusion is that I've seen a decline in the narrative that an advantage of fusion over fission is that the reaction is so unstable that it just shuts down easily, because that's only a good argument if you don't need energy, or if it doesn't need to be reliable, or you don't actually have a facility that's in production. Furthermore, shutting down the reaction is just not the hard part of nuclear fission.
It's removing decay heat, if an event of the violence and magnitude to require emergency shutdown also damages the ability to do emergency cooling. That's the problem with fission.
Liberty
Yeah, I think that's what I found so cool about when I ... One of the first designs I read about was the LFTR, the Liquid Fluoride Thorium Reactor, where they had this plug that's kept cold. Then, if there's ever total loss of power, then passively this plug melts and all of the liquid molten salt drains to a holding tank underground by gravity. Those kinds of designs are extremely elegant. The other designs are already extremely safe.
You may not even need to go all the way there, but the amount of thinking that goes into making these nuclear power plants safe, I think most ordinary people underestimate how many processes of mechanisms there are.
Mark Nelson
It was an obsession with safety, both real and imaginary, from a position of what now turns out to be unsafety. The assumption that we had enough energy, the assumption that we had enough electricity, even in the short term, that assumption is gone this winter.
Liberty
One other thing that's come up lately. There has been a big announcement by Dow and X-energy about building a SMR, but not only for accuracy, but building it onsite in a gulf coast chemical plant for heat too. It feels like almost it's under the radar how much energy is produced, not for accuracy, but for heat, for all kind of industrial processes. That's another place where nuclear is one of the only solutions, I feel like, for decarbonization. Because if you're not going to burn fossil fuels to get that energy and heat, what else are you going to do? You're not going to get it from wind turbines and solar panels.
Mark Nelson
Well, the proposal was, you could. You have so many extra wind turbines and solar panels, so much vast overproduction in times of surplus. You're still down to zero at nighttime for solar, and you're still down to extremely low over whole continents that there's a wind drought. But the idea is you would build so much that on average there would be an oversupply. Then, you would take that oversupply, use it to split water to make hydrogen, to name one of the technologies to make hydrogen.
Then, you would use the hydrogen and store it, and then recombine it in various industrial processes for both heat at high temperature flames, and to use the hydrogen in itself, perhaps, to form synthetic hydrocarbons by combining with carbon, perhaps captured from CO2, and also itself broken down using extra energy. Yeah, right. If you do this system, you end up with energy efficiencies of conversions that are absolutely pathetic. You're working a lot with hydrogen, which is one of the most annoying and unfortunate gas molecules you could possibly work with, because it is the smallest.
It is a pain in the ass for engineers. It doesn't mean we can't, it doesn't we don't even need to, if we're going to go full nuclear, it's just, you want to avoid it where you can. If that was the proposal for wind installer, imagine their relief if you could just guarantee high or pretty high heat all the time from a nuclear reactor, or barring that if you have a lower temperature reactor like our present day water cooled reactors, that are mostly topping out at 300 degrees centigrade.
If you have those reactors, you can use the electricity. Now, you've asked about the X-energy reactor that Dow chemical has made an announcement with. That would be a gas-cooled reactor, where the fuel are these almost indestructible pellets, ceramic pellets, where there's a ceramic coating around ceramic coated smaller pellets within. It's layers within layers within layers, almost like a gumball. I don't know if you have that, that can be in Canada, but it's like one of those everlasting gobstoppers, but the interior are little tiny, tiny little grains of enriched uranium.
The idea being that these plants, you could walk away and they would just sit there and glow red hot for a while, but none of the ceramic pellets would break down. Yeah. Then, hot gases would flow through these big pellets, these pebbles, and those hot gases would get to levels that start to be really attractive for direct use in many different chemical processes. Or, you can have those gases and add a bit more energy to them using electricity. Then, you can get arbitrarily high temperatures.
If you're not converting the majority of this hot gas into electricity, then you're retaining 50%, 60% extra energy, depending on which temperature of gas. Maybe for the highest temperature of gas processes you're losing about 40% of the energy in that gas to convert it to the highly ordered, easy to handle electricity. If you just don't do that, then you end up with the solution to decarbonizing the industrial world.
Liberty
Yeah, and that seems to be a much better use for SMRs than the power grid.
Mark Nelson
Maybe you might want them large too. If you get them to work right, you'll want those bigger too.
Liberty
Yeah, it depends what kind of industrial cluster you have and what scale you need. But in many places, they won't build a gigawatt reactor, but yeah, if you think of the alternatives there, it seems like a no-brainer to go that way rather than the Rube Goldberg machine of like, "Let's overbuild a ton of this, and once in a while we just won't be able, over the plan, and we'll be losing tons of power to conversion from ... " I don't know, but we'll see. That's the rational thinking, right? The emotions, I don't know, maybe industrial is less emotional.
Mark Nelson
That's your problem, Liberty. You're so emotional. You're throwing out this renewable thing that's working so well. You're trying to get some completely different system. Instead, if you've accepted that only renewables are the way forward, and you're only looking at the next marginal change, and you see industrial heat is this colossal thing that holds up civilization, but it's on the horizon, it's further off. You've forgotten to check and see whether you have to do that to decarbonize, which yes, you do.
You've forgotten to see if you have to keep doing that in order to survive in a rich world, yes, you do. Then, you can just say, we're just dealing with the next 1% of electricity generation. That's all, it's just next 1%. Somebody says, "There's industrial heat lurking at the end." You're thinking, "Ah, well, let's just produce three or four times as much renewable electricity as we need. Then, we'll convert that to hydrogen and convert that to industrial heat." Nah, people are wonderful. They aren't worth that. Not at the global level.
I'm not even saying that as a normative statement. I'm just saying that literally, ignore money. People are not teaming up and making themselves worth enough to do energy at that level of inefficiency and still have the benefits of industrial stabilization. We're pushing the limits this year on how much people are worth, how much heat is worth to a government. Is the government willing to mortgage its future, sell all of its family jewels to buy consumables to make it through this winter without losing some percentage of its elderly and young?
How grim, how awful, yet those are the considerations facing developing countries, even part of the level of price that we're seeing. Now, how much is it worth it to a nation to back the trading firms or the national energy companies to buy a cargo of L&G at a given price, if you know that that's what it takes? You have to buy that L&G to keep this number of people alive or to keep growing the economy and not have immense suffering that leads to the downfall of whole governments. Those are the choices we're facing. It's just a lot of countries that were developing will no longer be, and a lot of the countries that were developed will find that it's not a permanent status.
Liberty
Back to the depressing part. It's so sad that a lot of the narrative and the lack of vision that we have is about ... It's almost we're playing defense. It's like, "Oh, let's try not to lose what we have. Let's try to replace this part. Let's use less of this." I wish we had the vision to be like, "No, what we need is to be better, to have more abundance." If you have plenty of cheap and clean power, you can do large scale desalination and irrigation and you can make some deserts bloom and food can be cheaper.
Even using nuclear to displace gas on the grid makes natural gas cheaper, all is equal. Now, fertilizer and other users of, industrial users of gas, you'll make those things cheaper. Food is cheaper. All that stuff helps the poor. This is making the world better, right? Yeah, I wish people would see it.
Mark Nelson
If I'm choosing a team, if I am tasked with decarbonizing and I'm choosing a team of people to work with, I'll take, any day, I'll take somebody who thinks it's a scam but believes in abundance, over somebody who thinks that global warming and climate change are totally happening, but doesn't believe in abundance. Why? Because you can't build the systems necessary with somebody who doesn't believe in abundance. You just can't get them to understand the necessity of sacrificing to build today, to provide in large amounts for tomorrow.
Liberty
What if people, 50 years ago, all believes [inaudible 01:09:32] and all that and said, "Oh, it's all going to crap anyway. It's never going to work."
Mark Nelson
See? let me stop you there. Enough believe that eventually those ideas took hold and justified destructive capital burning management systems for the grid, so they did win, and we're seeing the returns now.
Liberty
That's the Churchill phrase, right? About how we're going to try everything, try all the wrong things until we have left no choice but to do the right thing or whatever.
Mark Nelson
That's close enough, you can trust America to always do the right thing once it exhausted all other options.
Liberty
Exactly. That's the one I was looking for.
Mark Nelson
But look, that's one of those phrases, you can turn it around to almost every single government, because eventually they'll have some big fixed idea over the long term that drives them into trouble. I think it may even be impactful, but we can check.
Liberty
We've been talking for a while now and I want to let you go, but before you go, I'm curious if you could have, if you had a magic wand, if you had a genie, if you had whatever those things and you could change just a few things, like a handful of policy changes around the world, or even just in Europe or the US, what kind of tweaks would you make to the system right now to make the biggest difference? Where's the most leverage?
Mark Nelson
One thing on electricity markets. There should be, I don't know, speaking in these religious terms, God's share or the church's share of electricity where the government does extremely long-term planning for ultra secure supplies of electricity. What is that going to be? 50%, if you want to be risky, maybe 75% if you want to be safe, where that 75% of electricity just is taken care of by ultra long-term planning of the most absolutely secure fuels and absolutely secure facilities. Of course, I think that should be nuclear.
You ended up with something like the 75% French nuclear that they are now wasting, but you'd have that. Boy, now that France has mismanaged so much nuclear, they certainly value what they have left. Let's see if they can pull it out. I would make that change. Even if there's such thing as electricity markets, they need to be, for that wild, wild west, final 25% or 15% or 10% or whatever. There's a reserve, a national park of the reactor energy, and then a reserve bit just to keep everybody a little honest with the remaining portion.
I think that almost everybody who has invested in renewables needs to take a massive haircut because it turns out that those aren't, although they are the correct thing on average in some ways during an energy crisis of fuels, the process by which they were constructed eliminated the correct decision-making. You see? It's a little bit subtle. I'm not saying, especially in a crisis, tear down the wind turbines and solar panels that already exist. Just they were built using decision-making that was extremely damaging to the thing that was actually necessary. Solid fuel energies like coal and nuclear, and if you add the environment as one of your goals, coal's out, too.
Liberty
Right, that's the thing, right? There's not 98 choices. Once you start going down the list, you're not left with that much if you want something. That's this safety net you're talking about, below which you can't go you need something that's super reliable, that's local, right? Because gas is like, if you have plenty of gas like the US, okay, gas can be secured in some ways, but if you're like Europe and you depend on the neighbor for gas and this neighbor is Russia, well ... So, I agree, it seems like there should be this bedrock below which society cannot fall because the consequences are just too great.
Mark Nelson
But you will always need a religious level of faith, a religious belief in that needing to be maintained, because you won't be able to prove it at any time. At any point, people will come and say, "On the margin we should do a little bit of something else." Or, "On the margin, it would make sense for some other entity or some other process to come in and you have to be careful of that erosion." That's the way the French dissent started, really.
Liberty
Yeah. If we want to see the silver lining of the situation now, hopefully in the same way that the Second World War has stayed with a generation for a long time and they've made decisions based on how bad things could be. Hopefully the energy crisis now is going to color the next 50 years or something and we won't let it get back to that level if we get out of it.
Mark Nelson
Yeah, we need to see a Mediterranean refocus via, again, a source of great energy trade with a ring of nuclear power plants along the ocean, all also connected to industrial facilities that produce the goods that keep us alive. I think that would be a beautiful vision. The Russians are kindly starting that with two giant nuclear plants in that ancient part of the Mediterranean, so the southern coast of Turkey and the northern coast of Egypt. Yeah, mainly one coast, but the northern coast of Egypt just west of Alexandria, immense nuclear plants going in there.
The start is there. I guess I have to ask, what's going to be the European response? That's a big one. I don't know if I have other recommendations, perhaps one's like a reintroduction of quality energy curriculum, starting at a relatively young age. There's a lot of people now working in something you could call progress studies, where they have emphasis of history, especially history of technology. I think that would be a valuable and fascinating way to especially keep young kids interested in schooling in a time of lowering horizons, lowering living standards, which we have to get through to come back on the other side.
I think within nuclear itself, I want much more attention to beauty and to imagination and creativity in telling and showing the story of nuclear energy. If that is even just internal rituals, so when refueling is done at a nuclear plant there should be feasts. Feast on, again, a religious scale. There should be feast days dedicated to the return of a reactor to regular operation. When all the high pressure hard hours are done, there needs to be an actual celebration that, depending on the interest or the ambitions of the nuclear plant and their host community, should become regionally, nationally, or even internationally famous as a once every 18 years harvest.
The equivalent of a harvest festival, where people, maybe a lot of people are going to get really drunk, but you don't have to have too much alcohol. A lot of nuclear workers are not heavy drinkers, so maybe that doesn't fit. But where there's a celebration of return to operation of this great energy combine, this great energy harvester. I think that would be a great step forward for the nuclear energy.
Liberty
I like that. Because we take so many important things for granted, even indoor plumbing or that kind of stuff. Even making nuclear plants look better. If they all look like Diablo Canyon, I think that would be a good start.
Mark Nelson
I have to say that Diablo Canyon still has that ugly untreated concrete exterior on the containment structure. It's mainly benefiting from a gorgeous natural setting.
Liberty
It's the landscape. It's the landscape.
Mark Nelson
And maybe a cool surface treatment on the generator, really, turbine hall.
Liberty
Cool. Well, this has been great. I think we've covered so much in these two parts. I think my brain is going to have a meltdown now. There's been so much flow in there, so thank you for your time. I really appreciate it. I'm going to put in the show notes all of your links to social and all the links that you mentioned at the end of part one. Thank you so much. Have a good day.
Mark Nelson
All right. Thanks, Liberty.
Wow, great interview, lots of good info there. We have got to restart our nuclear program yesterday. Politically I like SMRs to start because they don't sound so threatening to thos on the fence and, like Mark Nelson said, since we've been so bad at large scale nukes of late it's probably good to start small (and I assume their modular design can be added to overtime anyway).