By Irina Slav
Source: irinaslav.substack.com
On January 10 this year, Reuters came out with a report headlined Cancelled NuScale contract weighs heavy on new nuclear. The report detailed the woes of small modular reactor developer NuScale, which had lost a first-of-a-kind supply contract with a Utah power utility after failing to secure enough takes for the future electricity supply. The reason: cost.
Fast-forward 10 months and we get this headline from the FT: Nuclear energy stocks hit record highs on surging demand from AI. In the report, the FT details stock price movements for nuclear power companies including NuScale, following reports that Big Tech mastodons are pouring money into nuclear technology to secure reliable supply for their data centres.
Nuclear was due some much needed vindication after decades of neglect and outright animosity, and not only in Germany, so all this is good news for an industry in need of some. But what’s happening in nuclear right now may have much broader and truly devastating implications for the energy world — more specifically for wind and solar.
A week ago, the news broke that Google had sealed a deal with Kairos Power, a developer of small modular reactors, to build a total of 500 MW in capacity across the United States by 2035. “The first of these reactors is expected to be operational by 2030, and the power plants will be strategically located to supply clean electricity directly to Google’s data centres,” Power Technology reported.
The Google nuclear news followed a report that Microsoft and Constellation Energy had inked their own deal for nuclear energy supply, to come from the Three Mile Island power plant in “the first-ever restart of its kind,” per Reuters. “Nuclear plants are the only energy sources that can consistently deliver on that promise,” Constellation chief executive Joe Dominguez said, referring to uninterrupted and low-carbon power supply.
In the above report, Reuters hilariously hedged against being accused of nuclear shilling by noting that “Nuclear energy, […] is nearly carbon-free and broadly considered more reliable than energy sources like solar and wind.” I guess you could said it is “broadly considered” to be more reliable than intermittent windosolar although it would be more accurate to say that it is an established fact that all baseload generation is indisputably more reliable than intermittents.
Anyway, following the Microsoft and Google news, Amazon wasted no time in joining the nuclear party by buying a stake in a small modular reactor developer by the name of X-energy, which was also among companies that had the pleasure of watching their stocks soar this month. It’s all down to five little words: data, centers, clean, reliable, and power.
“The grid needs these kinds of clean, reliable sources of energy that can support the build out of these technologies,” Google’s energy and climate senior director told media last week. “We feel like nuclear can play an important role in helping to meet our demand, and helping meet our demand cleanly, in a way that’s more around the clock.”
You’ve got to love the not-so-subtle hint there at the end. Everyone knows that wind and solar are not reliable but nobody dared talked about it — until now, when nuclear appears to be making a comeback. It could turn into the nuclear version of the shale revolution, if developers can bring those costs down and prove SMR technology works as advertised. But with Big Tech’s billions and Big Tech’s motivation, that might just happen.
When NuScale cancelled its supply deal with the Utah Associated Municipal Power Systems, it did so because the price for its future SMR electricity was going to be $89 per MWh, up from an originally estimated $58 per MWh. This is quite a difference and the price factor has been a big deterrent to small modular reactors whose main advantage over the huge NPPs of the past and present appears to be in the fact that they can be built a lot more quickly without compromising on safety.
This is exactly what Big Tech needs right now, as the race for domination in the AI world intensifies for some reason known only to Big Tech itself. That industry just can’t do things slowly, which makes SMRs a perfect match for it. Yet the tech majors are so desperate for some low-carbon electricity that’s “more around the clock” than wind and solar that they would happily resurrect conventional nuclear power plants as well. And that could at some point turn into the death sentence of wind and solar as the dominant energy technologies their fans like to think they would become.
Let’s consider the plainest of facts. Big Tech is a big client of wind and solar capacity operators. But it’s not just about supply. In addition to buying these operators’ output whenever such output is available, Big Tech is also a big buyer of carbon credits that it uses to offset the emissions from its less intermittent electricity supply. Carbon credit trade is a significant income stream for wind and solar operators, which are going to have a lot more problems with negative prices in the not too distant future. And that would only make carbon credit trade even more vital for them.
As activist pressure continues for businesses to decarbonise, wind and solar operators could, at least theoretically, get rich despite negative prices, thanks to their carbon credits. Yet that would be a scenario where nuclear is not part of the equation. Add nuclear, which is both zero-emission and zero-intermittency, and the profit equation for wind and solar changes radically. To state things as plainly as those facts, nuclear could kill wind and solar without the slightest effort.
“Revitalizing America’s nuclear sector is key to adding more carbon-free energy to the grid and meeting the needs of our growing economy — from A.I. and data centers to manufacturing and health care,” U.S. Energy Secretary Jennifer Granholm said recently, as cited by the New York Times, which noted that “The Biden administration sees nuclear power, which provides about 20 percent of the nation’s electricity now, as critical to its goals of reducing greenhouse gas emissions.”
Amazingly, the EU is not hopelessly behind on the latest hot trend and is also working on small modular reactors. Power Magazine reported earlier this month that the European Commission took part in the formation of an entity dubbed the European Industrial Alliance on Small Modular Reactors and that this entity had already thrown its weight behind as many as nine projects for new nuclear capacity, set to go into operation in the 2030s.
French EDF, the boss of the country’s conventional nuclear fleet, is also active in small modular reactors and it is forging its own way along. In July, Reuters reported that EDF was dropping plans to innovate in the field and was opting instead to use its existing technologies to pursue the next generation of nuclear capacity.
“These large investments show the tech industry does not feel renewables and batteries can provide enough stable or cost-effective power and nuclear will be needed,” the chair of the American Nuclear Society’s International Council and chief executive of nuclear fuel producer Lightbridge Corporation told the FT last week, commenting on the latest stock price developments in the sector. You can feel the vindication coming off every word.
It is well deserved vindication, too. Nuclear has been smeared by both the hydrocarbons industry because it used to take away business from them, and by so-called environmentalists with an unhealthy fixation on spent nuclear fuel and, of course, Chernobyl and Fukushima.
Wind turbines and solar panels are much cheaper and much safer than nuclear, the argument goes. Some also have the audacity to point out the amount of concrete that goes into the construction of a nuclear reactor, conveniently forgetting the amount of concrete that goes into building the pad for a single wind turbine.
It is, however, payback time, all thanks to the loudest advocates of the energy transition and, by extension, wind and solar. Big Tech, which has been instrumental for the proliferation of windosolar eye sores in fields, forests, and deserts, could now turn into the instrument of their destruction, after it remembered that low-emission electricity is good but reliable low-emission electricity is even better.
Nothing is, of course, certain. Small modular reactors may yet flop, leaving coal and gas, and wind and solar equally triumphant. But then again, thinking of the shale industry, probably no one believed 30 years ago fracking would ever become cheap enough to adopt on the massive scale we see today.
There is a possibility that the same could happen with nuclear, only much faster. Because Big Tech needs its reliable power supply now. And it has the money to risk on an unproven but potentially massively promising technology. Right about now, the windosolar camp is working on its new nuclear smear campaign. If it isn’t, it should start.
Other articles by Irina Slav:
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