The Future of Existing Nuclear

Podcast Transcript

Ed Coyne: Hello, and welcome to Sprott Radio. I'm your host, Ed Coyne, Senior Managing Partner at Sprott. I'm pleased today to welcome a new guest, Mark Nelson, Managing Director and Founder of Radiant Energy Group. Mark, thank you for joining me today on Sprott Radio.

Mark Nelson: Good to be here, Ed.

Ed Coyne: Mark, I'd love to discuss all things nuclear, uranium energy, and so forth, but before we do that, tell us a bit about yourself and the company you started, Radiant Energy Group.

Mark Nelson: Sure. I'm from Oklahoma City, Oklahoma. I came out of a long line of oil and gas people and caught the clean energy bug when I was young. I didn't get anything out of looking at wind turbines, even though I was an aerospace engineering student then. Suddenly, I saw a viral YouTube video about nuclear power.

A few minutes in, I realized that's the thing for me, and that's what I will do. I'm going to make clean energy, it's going to win and it's going to beat out oil and gas. Although my attitudes have moderated a bit, I still retain a lot of that story of coming in because I cared specifically about clean energy. However, I wanted to do something that was a hard, muscular engineering and social lift to get done right.

Ed Coyne: I had to ensure I was reading it correctly when I looked at your degree, which you got at Cambridge, because I was thinking philosophy and nuclear energy. How do those two meld together? Help me understand that. What do you do with that?

Mark Nelson: Cambridge is an ancient university—over 800 years old—with weird ancient traditions, words, systems and bureaucracies. It's not like other places, and I love it for that. One weird thing is that almost everywhere else still has a Doctor of Philosophy or Ph.D. Still, nearly everybody has dropped the former name of the master's degree, called a master of Philosophy. It is just the highest-ranking master's degree offered by the university.

Ed Coyne: Good on you for getting that over the finish line.

Mark Nelson: Thank you. You can imagine what it felt like to be obsessed with nuclear energy in 2012, a full decade before it broke out into the general air of our times through the energy crisis and the war in Ukraine.

Ed Coyne: The renaissance, the nuclear energy renaissance. Talk about that. What's driving that? Who's behind it? Where's the money coming from? Can we go into that a bit?

Mark Nelson: Sure. There's a new nuclear cultural renaissance. It is true, it is fundamentally different from the last things called a nuclear renaissance, and it has more in common with the incredible optimism around nuclear in the first great nuclear age.

The difference is in the cultural optimism, people who know nothing really about energy, nothing much in particular about nuclear physics or engineering, who now love nuclear energy and feel that they're being cool by talking about it, and I say they are cool for talking about it, nuclear is cool now, that is not exactly the same thing as the value of an existing nuclear plant.

It's not the same thing as whether we're going to build nuclear successfully, but I would argue it makes a rich environment for us to go and try to build nuclear in. This means all sorts of cultural protection and opportunities are available for nuclear power now. If we mess this one up, it really is on us in the nuclear industry. That's the cultural renaissance. We can talk a little bit more about it, and what the signs were, and where it came from.

Let's talk about something that we know without a doubt is more solid financially than the cultural renaissance. You can cash it in more, but it's also here today as opposed to the construction sance that we're hoping to build together as an industry over the next few years, and that is the renaissance in the value of existing nuclear plants. Several things are happening at once. There's a huge need in the West for steady energy, clean, if you can get it, dirty, if that's all you have available. Nuclear fits the bill perfectly. If you have an existing nuclear plant, it's one of the most precious and prestigious objects in the energy world now.

Only three or four years ago, nuclear plants were often albatrosses on the necks of the utilities that owned and operated them. Nuclear plants were being driven to their destruction, both through policy, punitive taxes and the sheer economics of competing against natural gas in liberalized electricity markets that did not take into account the difference between a long-lived, steady-operating nuclear asset and a shorter-lived natural gas market-dependent gas turbine asset.

Nuclear plants are now extremely valuable. A few years ago, they weren't so valuable. That is an undeniable financial renaissance for nuclear. To put some very rough numbers here, operating a nuclear plant in America takes about $30 a megawatt-hour of expenses. That assumes that you are running your nuclear plant full-out and the amount you're spending is not changing year-over-year based on how much power you produce, so you'd better produce full-out about $30 a megawatt-hour.

The value of nuclear electricity on the open market before the most recent renaissance of value in nuclear plants was anywhere from $45 to $50 a megawatt hour. Maybe I'll say a bigger range. Anywhere from $35 to $60, depending on your location and what deals you did. That meant the profit was barely enough to justify the risk of owning a nuclear asset. There was very little penalty for shutting down a nuclear asset because you already had a big decommissioning fund that, with the increased experience in decommissioning nuclear, you could be pretty certain was sufficient to cover all your costs.

When we weren't good at decommissioning nuclear plants, or it wasn't a competitive business, we didn't know for sure whether the decommissioning funds, the trust funds, were enough, so there was some risk that you might not be able to decommission your plant profitably. Now we don't have that issue. The temptation was strong enough to decommission nuclear energy and move on to other types of electricity generation or entirely eliminate electricity generation.

The value of nuclear now has gone from making it at, say, $30 a megawatt hour and selling it for a few dollars a megawatt hour profit, maybe, all the way to being able to do 10, 15, and 20-year deals for $80, $90, or $100 a megawatt hour or more. That means the amount that you're increasing the revenue is significant, but the amount that you're increasing the profit of a nuclear plant is fast. I'm not saying that it's absolutely certain that we'll never lose another nuclear plant, but that's the thing.

This renaissance is happening right as our nuclear plants reach 35, 40, 50, and 60 years of age, which is revealing both a market for very old nuclear plants to stay around and unprecedented profit for those nuclear plants super late into what was popularly thought to be their lifespan.

. If it takes up to $1 billion for very expensive custom retrofitting, it will be worth keeping a plant in service that might make half of that back each year in profit if you do the retrofit and keep the plant around.

The nuclear plant value renaissance has occurred, and the nuclear cultural renaissance is in full swing. There are people who try to be so cool that they're anti-nuclear just because everyone else likes nuclear now. That's how culturally cool nuclear is at the moment. However, the nuclear renaissance and the construction of nuclear power are the ones we still have to build together.

Ed Coyne: It was cool to shut them down. That was a whole thing too. We had the green pieces of the world that were very in vogue to be anti-nuclear, so the pendulum is certainly swinging. I guess about a year and a half ago or so, I had Heather Hoff on. I don't know if you know Heather Hoff, but Mothers for Nuclear.

Mark Nelson: I know her well. I have worked with her.

Ed Coyne: She was directly involved with Diablo Canyon. That was, to me, a great example of a state like California going from aggressively wanting to shut it down to keeping it open for energy and economic needs. That was the tip of the spear, it felt like. I talked to Heather about a year and a half ago.

Mark Nelson: That was a very hard-fought campaign I was in.

Ed Coyne: Yes, it was.

Mark Nelson: It was the first thing I worked on, months after it started. The first day of my first proper job in nuclear energy was stopping that closure. That was a fight that went on for another six years and, in some ways, is still going on a little bit. There are still factions that cannot openly be anti-nuclear and are working to stop Diablo Canyon from continuing. Although it's much better protected than it was, there's still work to be done.

It's not just California that said, "We don't want nuclear weight. We want nuclear," it's individuals in California. Gavin Newsom was a lieutenant governor who specifically worked to bring about the end of Diablo Canyon to prove his leadership abilities in doing what he thought was the future. Then he specifically made it possible and helped engineer the saving of the nuclear plant both times, without wanting to publicly take any leadership position in saying he was doing so.

Ed Coyne: That's politics.

Mark Nelson: That's human. We've seen that in France, where Macron ran on shutting down at least 14 nuclear plants. Not for any reason, not because it was good for the economy, but just to prove he had what it took to destroy his own nation's energy supply. Then, the next time he ran for president, he ran on the addition of 14 nuclear plants.

That one is beautiful in its symmetry. He just changed from a negative to a positive side, same tone of voice, same energy, same ambition. That is the difference between the late 20-teens and the early 2020s. That's the magnitude of change brought about, partly by the cultural renaissance, but also by a thing that threw a big pot of gasoline on the cultural and nuclear value renaissance. That's the energy crisis of 2021-2022.

Ed Coyne: This pendulum is swinging. Who's driving that then? It doesn't sound like the politicians are actually driving it. Is it what you're hearing with tech, data centers and AI? Are they driving it? Are they making it cool? What's the driving force behind this? Why are people now saying, "Hey, we need more nuclear?"

Mark Nelson: The cultural revolution was in full swing before the AI companies realized they needed nuclear. In fact, big tech was, if anything, on the opposite side. They had a bunch of people within the big tech companies who were hired to whitewash the image of the companies, and the way to do that was to attack nuclear and only do renewables.

Now, for the people at the top of the companies, like the founders of the company, that was just a business decision way down there in the dirt. Energy was part of the things you did, corporate marketing, reputation washing, ESG and investor relations. The big tech companies were also sponsoring environmental groups to go to war against industrial electricity.

Look at it. If you're a big tech company and you're worth a trillion, and you're a pathetic little national champion steel company, that's only worth $20 billion, you see, do we really need power supplies to make steel in America? No, let's have big tech instead. What happened is that big tech suddenly invented itself into the realization that it was itself an industrial sector. In fact, they needed not just as much electricity as some of these big industrials; they needed more, and they needed it now, and they needed it at almost any price as long as they could get it, it was guaranteed, and it was steady.

That was a huge seismic revelation that happened about three years ago. I can't help but see a connection between the realization by the AI companies, "Oh, wait, we're not at war with industrial electricity. We are industrial electricity." That was helpful, but it meant that they had to be careful about financing these anti-nuclear groups to do damage just because it fit in with the culture of the non-technical people they were hiring to do energy reputation laundering, because obviously, these big tech companies were always using steady grid power.

They weren't using renewables. They were building renewables, maybe owning some and putting them far away out in the countryside, but they were building their data centers where they needed them. They were plugging into the grid and saying all the numbers would work out in the wash.

That was true until they needed 10X and then 100X power, and suddenly, it did not all come out in the wash. You could launder the clean certificates all you wanted, which wouldn't give you electrons. That wouldn't give you the ability to hook up a city's worth of power next year on the grid in a place where no more steady power plants exist.

It didn't matter how many certificates you trucked in from Wyoming or something, saying, "Oh, last year I generated two spins of a wind turbine or something." That did not power a northern Virginia data center. The executive teams had to learn about energy for the first time after the big AI boom.

Ed Coyne: I hear the term 24/7 base load all the time. Two years ago, no one said the word.

Mark Nelson: Wait, Ed, they did. They said it was a myth.

Ed Coyne: There you go.

Mark Nelson: There were groups sponsored by and working directly with the big tech companies with various opinions. Some said that base load is a myth. It doesn't exist, and it’s a fossil and nuclear people trying to tell you that we can't do it all. Almost nobody with any kind of professional standing still says that, and they quietly scrubbed that they ever thought it or said it. That's gone. Baseload is back, so there's that. Some groups say Google knew by the late 20-teens that they eventually needed nuclear. It wasn't so much that there was a political consensus within the company to buy nuclear power.

Google could have dominated the world by buying nuclear power super cheaply a long time ago. They knew they needed it, but didn't buy it because it was still politically untenable. Not just outside, generally in democratic or ESG-aligned circles, it was untenable internally, and it wasn't enough to break out above the heads of the departments to the top of the companies, as far as I can tell. I'm still trying to map out what exactly happened socially inside companies that needed constant power, more of it every year, and refused to buy nuclear when it was dirt cheap.

At Google, we know for sure they knew they needed steady power as far back as 2018 and 2019. 2021, 2022, come around, and they start talking about clean power. Clean firm power, steady, 24/7, clean firm, clean firm, 24/7. They couldn't quite say nuclear. Finally, in 2023, they were willing to show up at nuclear events and say the word nuclear. It was very hard, and it was already after this massive explosion in power costs and after this massive explosion in the expectations of needing more power at Google.

Then what was fascinating was Amazon. Amazon went straight from not buying nuclear, refusing to talk about nuclear, no nuclear, only renewables, to suddenly buying a million people's worth of nuclear electricity overnight from an existing plan, not additional or anything. They didn't talk about it at all. They didn't say, "We did this because we want to be clean." They didn't say, "We did this, but we're planning to add more nuclear." It was just out of the blue, buying just under a gigawatt of nuclear power early last year.

We also have things like this in California, the little blackout that scared Gavin Newsom into trying to save Diablo instead of closing it, was something you probably could avoid in the future without even having Diablo, or it might've been something that would've happened regardless of the status of nuclear in the state. It could've been a distribution issue, or transmission, not even a generation. It was a close call on generation, but I'm just saying, I would not count on his reaction to that blackout being about a super in-depth knowledge of electricity and electricity systems.

. Would he have done that without the little power blackout in Southern California? It's not clear. Maybe, you might hope, but there's a sense in some parts of the nuclear community that people will learn their lesson when the first blackouts hit.

I've heard that there was a change in heart at the top of the European Union because of the Spanish blackout, which is still being harshly negotiated in expert communities. What was at fault? Who was at fault? Did the nuclear make it better? Did the nuclear make it worse? Was it really from renewables? Was it from transmission?

You have to be an expert to pick apart that debate. If you're reporting on it without being a technically trained expert, you will be able to choose whichever side and make a plausible story that fits your existing bias. Here's the thing: It may be true that little blackouts scare people and cause change. I do not count myself in the camp where I'm hoping or wanting that to happen secretly, so people will wake up.

I will also reconfirm that people do apparently care about clean power. They don't necessarily know what it means. They have an expectation, I think even a right, that those of us on the technical or political sides can deliver the clean power. That's the fight for nuclear to deliver your cake and let you eat it too. To have nuclear power and steady power going to new industries and existing homes is no reason we can't have that, but that brings us to the question of why we haven't gotten there yet.

If culture is moving in our direction, politics will start to move in our direction. Undoubtedly, the market value of existing nuclear has absolutely moved in our direction. Why haven't we started building today? What is the real problem with nuclear? It's not the availability of fuel. If the price goes up, we're going to find more fuel. It's not the waste. That's a marketing problem, a politics problem, and we will have amazing politics and amazing marketing. We're going to figure that out.

It's not the cost of operating these nuclear plants, which is also part of the fuel cost. Once the nuclear plant is up and running, that is an incredible energy supply. It's not the longevity of the nuclear investment. If you can build a nuclear plant, you will eventually make your money back. No matter how much you spend, if that nuclear plant gets built, you may not be alive when your money keeps coming back to you. Still, you will recover your costs because nuclear plants are cheap to operate and very long-lived, and we understand our current nuclear technology so well that we get very high reliability performance.

What is the weakness of nuclear? It's that at the moment it requires a lot of people to work together over a long period of time in good faith with a lot of trust, commitment and a lot of quality to get the job done. It's hard for a lot of people to work together now. You can say maybe our attention spans are low, too many lawyers, there are so many factions. We don't have the right entities. We haven't aligned the incentives, but all of those excuses are starting to fall away, and it's up to us to pull together the projects, put the right leadership and financial structure in place, and then rule the construction projects with an iron hand.

Whatever contractors come in, you need iron control over nuclear plants. That's historically what's gotten these plants built. Someone had a brutal iron fist and controlled quality schedules, pacing supply chains. You cannot expect somebody to walk up and say, "I'll sell you a nuclear plant. Just trust us. Just give us the contract." You must be an intelligent customer of your nuclear plant.

Ed Coyne: Who does it best right now? If you had to look at it globally, who is doing its best right now (I’ve heard Korea). What have you seen?

Mark Nelson: The Chinese utilities are doing it best within a super stable internal context. That's mainland China. The Russians are doing it best in strange new climates and strange new locations. The Russians are best at delivering in very weird, difficult political and widely spaced geographical and climate settings. The Chinese slightly beat the Russians in time and schedule and cost, but they're building inside for themselves in a 100% homogenous environment, culturally and politically.

There's an enormous amount to be learned from both, which is translatable to projects in the West. We don't have to import the Chinese Communist Party; we don't have to have Putin. We don't even have to have the full structure of Rose Adam or anything like that. We don't have to use their designs. By the definition of building nuclear over and over and over through the last 15 years of changing communication technology, changing personnel, they have proven out concepts for making nuclear job sites go faster, and there is plenty to learn that is removable from their cultural context that is part of the nuclear construction site context internationally. That's part of it.

We need enough pain and hunger for energy, combined with the cultural revolution, ending in the national interest, where it's acknowledged by enough of the political apparatus that we're committing to nuclear over long periods. I think there's a beautiful moment coming when we have this pension crisis all over the world, which fundamentally is that there are not enough people working to support a lot of people getting older.

The way we get around that is maybe a lot of AI for a lot of robotic help powered by a lot of energy and pensions invested in super long-term profitable nuclear electricity production. There's a system where we need the old folks and the money that is the old folks, building the things that physically provide for the old and young folks and hopefully, jobs for the young folks, too.

I'm speaking generally about this new movement of putting massive chunks of pension money into nuclear builds. We just saw that with Sizewell C, and there was a lot of room for a lot of pension money because that was a profoundly expensive project, but it was the best thing on offer for the Brits at the time, and they just needed to go for it. The big question in Western nuclear is, what super teams will come together, and under what level of risk will the governments or the investors be involved?

Ed Coyne: Now you're stepping into my universe, the world of investing, which is a cloudy, dark place, my friend.

Mark Nelson: I think it's up to the nuclear industry to provide investment-worthy nuclear reactor construction projects, and I work on that.

Ed Coyne: Two final questions, for listeners that want to track your success, your company's success, hear what you guys are doing or talking about, somebody who's listening on this podcast today, how can they track you down and find you?

Mark Nelson: I'm most frequently to be found on Twitter mouthing off on the issue of the day. On Twitter, I am @energybants. That's B-A-N-T-S. It's a joke reference to my British days. You can also meet me in person if you come to the documentary launch I'm a part of, on September 15 at the Kennedy Center in Washington, DC. You'll need to get ahold of me somehow. My direct messages are open on Twitter, or you can find me on LinkedIn at Mark W. Nelson—either of those two ways. If you're interested in what you're hearing, I would love to see you at the premiere of my documentary. I will not be watching or listening even if I'm in the room because I don't like to see myself, but I'm in the movie and wearing a nice leather jacket, so see that movie and meet a lot of the glitterati of the nuclear industrial world.

Ed Coyne: Cool.

Mark Nelson: If you're around Washington, DC, on September 15, I would love to see you in the early evening at that documentary premiere. You can also add me on LinkedIn, message me on LinkedIn, or email me at mark@radiantenergygroup.com.

Ed Coyne: Awesome. Thank you. I'm an older guy, I'll probably find you on LinkedIn. I didn't know this premiere thing was happening in DC. That sounds very cool.

Mark Nelson: It should be a good film. Cameco, Nucor, and The Nuclear Company have all come together with a few others to put together a documentary about restarting nuclear construction.

Ed Coyne: That's cool. That's going to be cool to watch. All right. This is the second one. This is the one that I am cautiously asking you about. What didn't I ask that you wanted to hopefully deliver to our audience today?

Mark Nelson: Do we have to have nuclear energy for an AI boom and/or a clean energy revolution? In America, we have to get nuclear right to ensure it takes the biggest possible part of the coming AI or clean energy boom. Also in the U.S., there is some dependency on people caring about clean energy, but not total dependency. Why? Because we have an enormous amount of abundant natural gas, and until we run out of it, we're going to keep producing it.

I'm not saying that people have to be scared to death about the climate. I'm not even encouraging it, especially among young people. I don't think it's a very healthy attitude, but it matters that we do get nuclear right because otherwise, we're not guaranteed to build it just because we think it's so good, somebody will eventually.

Ed Coyne: I appreciate you taking the time today to spend with me on Sprott Radio. Really cool to meet you over a video here and talk, and hopefully we'll cross paths at some point in person.

Mark Nelson: Yes, I would love to.

Ed Coyne: Again, my name's Ed Coyne. Thank you for listening to Sprott Radio.