Building Energy Security the Chinese Way

Podcast Transcript

Ed Coyne: Hello, and welcome to Sprott Radio. I'm your host, Ed Coyne, Senior Managing Partner at Sprott. I'm pleased to welcome a new guest to Sprott Radio today, David Fishman, who's the principal of the Lantau Group and a frequent guest on Bloomberg, CNBC, the Financial Times and many others. David, thank you for taking the time today to join me on Sprott Radio.

David Fishman: Thank you for having me, Ed. Pleasure to be here.

Ed Coyne: David, as a new guest of Sprott Radio, I thought it would be a great way to kick things off by just talking a little bit about your background and maybe some of the work you're doing currently at the Lantau Group.

David Fishman: I'm based in the Lantau Group's Shanghai office in China. I've been with the company for about seven years. I've been in China for about 15 years now, between school and work. I've spent my whole career here in the energy sector. Started out working for a nuclear power consultancy, doing market entry for a lot of the AP1000 supply chain players who were looking to sell some of the new builds in China.

In 2019, I moved into a new role after our company got acquired and started doing more China electricity consulting, both for people who want to build or invest in power plants, as well as large buyers of electricity, your metals, your chemicals companies, anyone who has a lot of exposure to the price of electricity, either as they sell it or buy it. That's what I do now, work on projects, essentially commercial mandates, transactions or large power procurements.

Ed Coyne: What got you into China? What got you into this field? What sparked your interest in this and got you involved?

David Fishman: I studied Chinese in school, not because I had any specific long-term plan. I just thought it seemed like a challenging, interesting language. It was 2008, and it was very trendy. It was in vogue to study Chinese, and everybody thought it would be great for my future. So I studied Chinese. I studied abroad in China, had a great time and thought that I'd like to come back, maybe do a master's degree and try to figure out something that made sense in relation to China. I didn't have energy yet. I really only discovered energy while I was doing my graduate studies and realized how impactful it was. At that time, in 2011 and 2012, the very infamous Chinese air pollution was in full swing.

It's improved a lot since then, but it's certainly where you realize this country needs a lot of energy, but they've also got really severe pollution stemming from the types of energy they're using right now. If I get involved in this sector in this country, I'll surely be doing meaningful work. I'll have something meaningful to work on. And so far that's been true. I'm very pleased to say that I feel like the work we're doing is meaningful.

Ed Coyne: China seems so opaque to me, like you don't know what information is coming out of there and so forth. And there's a perception versus reality of that. What's that been like for you? You've been there for over a decade and a half; it must be fascinating to work there. Give us a little insight into that as well, if you don't mind.

David Fishman: I'd like to be able to tell you all sorts of incredible anecdotes about how wild the day-to-day is. But the day-to-day is similar to many people's. I live in an apartment, not a house. Many people live in apartments in cities. I have my work. I pursue hobbies. I go on vacations. Things are very convenient, and you've probably heard about some of that.

Deliveries are really quick. Takeout is really quick and cheap, and a lot of daily conveniences like transportation are really good. The trade-off, of course, is that you sometimes get poor air quality even today. It's improved a lot since then, but the air quality can still be poor. You have to use a VPN if you want to access some foreign websites, stuff like that, so there are some trade-offs, but generally, I live a normal life. That's the best way I can describe it.

Ed Coyne: You mentioned the air quality a few times. Let's start with that. We talk about China and what they're doing in nuclear, and there was this whole clean energy renaissance that probably got sparked about a decade ago with wind and solar and whatnot. But air quality is a big thing you experience firsthand in China. Do you think that's one of the primary drivers behind nuclear energy in China today, and why they're really ramping things up so aggressively?

David Fishman: I think it's part of it, but it would probably be an overattribution to say that's all of it. Definitely, the idea of transitioning from high-carbon-emitting sources to low-carbon sources, including renewables and, of course, nuclear, has been part of national and economic planning. First, it was slow and measured, and then, from around 2020 to 2021, it was really meaningful. The nuclear plan predates that by quite a lot. The real driver for the nuclear plan is that it's not only decarbonized, but secure and stable. It's not reliant on imported fuels. I think that's one of the more attractive features: it's stable, dispatchable and totally secure domestic technology and fuel.

Ed Coyne: When you talk about stability, that goes to the safety of the reactors as well. Everyone who has a Netflix account has watched Chernobyl, and this whole concept of it's the boogeyman in the corner. It couldn't be further from the truth when you think about nuclear power today. Can you talk about some of the things that have happened in the last decade or so from a technology standpoint? What's happening from a safety standpoint?

David Fishman: You can split that answer into two parts. The actual physical technologies and how they've improved, and then a lot of the institutions, the regulatory regimes around nuclear power and its governance. Starting from the more straightforward one is physical. Since 2019, 2020, or so, China has only approved third-generation nuclear reactors. AP1000s are passively safe, as are Chinese domestic third-generation reactors that include many of the same features. They should be meltdown-proof, feature many passive safety measures, and provide a substantial increase in safety and a reduction in LOCA (loss-of-coolant accident) incidents across the entire fleet. That would be the standard, and that's all they build and approve now.

You can talk about the physical advantages of third-generation reactors. But on the governance and regulatory side, China's nuclear sector is also young compared to other global reactor fleets. And if you've ever encountered reactor operators from developing countries or those that developed nuclear later than some of the front-runners like the U.S. or France, the attitude is always extreme conservatism. They have a bias towards conservatism because they came later, and so they want every choice they make about how to operate, run, replace, and repair the plant to be based on pre-existing evidence from France, the U.S., Canada, or somewhere with a longer operating history. Every time they can't find a pre-existing example to draw from, usually, and this is just nuclear safety culture, you add an additional layer of conservatism. That's just if we get out of uncertainty by becoming even more conservative. And in many cases, when we were working with the Chinese regulators or when our customers were working with them, they chose to address uncertainty and probabilistic assessments the way nuclear safety culture around the world ordains: to be more conservative.

And that's been reassuring from an institutional perspective. I think that's the way you should deal with it until you have built up, through modeling results or operating practice, best practices over many operating years, that you can say, maybe we don't need to be so conservative, but the default is conservatism. And so that's the other thing, the institutional safety mechanisms around how you govern your sector.

Ed Coyne: Unless I'm incorrect on this, I believe the U.S. still has the most reactors. And I think it's like 18-20% of the electricity is coming from nuclear power right now. And I think it's only like five or six in China. But they're closing that gap very quickly. It sounds to me like the student, call it China, is now schooling the teacher, call it the U.S. and France.

What are they doing that stands out in your mind and really makes them best in class? Why is everyone talking about what China's doing and making reference to China as it relates to nuclear?

David Fishman: The Chinese builders have really mastered the specific sticking points that have dragged out so many Western builds. We can talk about technology or governance or all those things, but at the end of the day, if you build one and it ends up over budget and over schedule, you're going to really struggle building another one. And that's just been the case for a long time. That's just the paradigm we operate in now in the West. And because those are the specific sticking points, the fact that China seems not to be burdened by them really stands out. They build them within their own budget and according to the schedule they set. Not every single time. Sometimes they hope to do it in 64 months, and it takes 70 months for full construction. But we're looking at comparisons of, I don't even know how many months go in 13 years or 15 years. At that point, you stop counting it in months and start counting it in years instead, when you look at some of the most overscheduled Western reactors. So that's the thing that always sticks out. How do they manage to keep it on time and within budget? And of course, batch construction is responsible for a big part of that. They've been enjoying the benefits of deployment for a while now.

Ed Coyne: Is that just take a model, plug and play and repeat? Is that what you're referring to, or is that something else?

David Fishman: That's right. You deploy them almost like a factory. Of course, they have small modifications and improvements each time, but all of the components that go into them are being turned out at scale, at volume, and all the people that are working on these things, the metal fabricators and the welders and everything, they're also doing it at scale and they're doing it this week and then next week they're going to a different site and they're doing it again. They have that assembly-line view of one-of-a-kind reactor development.

Ed Coyne: Is that a distinct benefit that China has that luxury because maybe profitability isn't as important, at least on day one in the U.S., it's over budget, we got to make money off this thing, and how do we do this? Are there some advantages that China possesses that, frankly, you just can't compete with in other parts of the world?

David Fishman: Until recently, Chinese nuclear power plants were mostly not market generators, which meant they didn't really have to compete on a merchant market basis in power markets. They enjoyed fixed feed-in tariffs. Now they're moving more towards marketization, but I don't think that's particularly scary for them from a revenue perspective. They have to hire some people and learn how to trade power and function in a merchant market, but I think they'll still do very well and recover their costs.

The killer feature has got to be financing costs. These are state-backed builders taking on loans from state banks, and the entire system is really channeled towards building power plants and generating electricity, not necessarily making a lot of money from financing and operating them. The banks are seeing lower returns on low-interest loans, and power generators may not be seeing the stunning returns they would hope for in other countries to pursue a project.

Ed Coyne: In China, basically, does the government go to a bank and say, if you want to keep your bank charter, you're going to loan us money to do this? Is it that clean and that simple? Or am I imagining things that probably don't happen?

David Fishman: I don't know if it's exactly that mechanism, but the outcome is very much like that. You want to do something in a certain municipality. You're the state-backed builder who wants to develop a power plant in this province or municipality. They know it's going to bring a lot of construction activity and high-quality jobs to the region, and they can work with a local branch of some state bank to make sure that you get very attractive lending. From the state bank's perspective, it's not a risky prospect. They've already built plenty of these. They know exactly how long it will take to build. As long as they're reasonably competent at trading power, they know roughly how much they're going to earn. You don't have to lend at cutthroat rates. You lend at rates that enable the energy economy to function. Your money is a tool to build power plants. Your money is not necessarily a tool to maximize returns.

Ed Coyne: Another distinct advantage that China seems to have is its geography, compared to the U.S., France or even Canada, where they're trying to add nuclear power to an existing grid or maybe a grid that needs to be replaced. Do you see China having a distinct advantage because they're going into new builds, new communities, that environment? Is that something that's going to be very hard for us to compete with because they have that advantage? Is that the case?

David Fishman: When we talk about the geography of China overall, so far China has chosen to place its nuclear power plants along the coasts, that's where the loads are, first and foremost. So it makes sense purely from a load-matching perspective to put your power plants along the coast. But then they also get to use seawater for cooling.

If you've ever seen pictures of Chinese nuclear power plants, you'll notice there are no cooling towers because they use seawater, which is simply circulated back into the ocean. So no need for cooling towers. From a geography perspective, they're placing the plants close to the loads. Now there are inland loads, of course. The country is huge, with large inland cities as well.

But so far, that has been more of a barrier than an enabling factor. They're not building or approving inland power plants right now. There are also concerns about building them on rivers. There are concerns that the river might dry up during droughts or that an accident could affect the watershed that irrigates half of the country. The magnitude of harm is absolutely massive, even if the probability of danger is very low. And so that makes maybe a probabilistic risk assessment very tricky. So far, that's been a limiting factor for inland plants. But geographically, sites next to the ocean are also close to loads along the coast. That's a good match.

Ed Coyne: You mentioned cooling, and in preparation for this podcast today, I came across a lot of different cooling methods that China is at least exploring. Could you talk about that? I guess that falls into the same category as technology. Can you talk about some of the other cooling methods besides just water cooling that they're either a) exploring or b) using?

David Fishman: There’s mostly light water reactors in China. They're domestic technology, and they're imported technology. They have experimented with these other cooling approaches. I think the earliest one, really, is that they've got a couple of CANDUs (Canada Deuterium Uranium) in one of their plants, too. We do have a couple of heavy-water reactors, but the next-generation stuff is probably what you were asking about.

Initially, there was an experimental sodium-cooled reactor in Beijing for a long time. They operated it as an experimental reactor and then expanded it to the first commercially deployed prototype commercial-scale sodium-cooled reactor. So that's one avenue they're exploring. There's also a high-temperature gas-cooled reactor with a pebble bed, which is now officially in commercial operation. That one's a little smaller, but it has been successfully operating for a while. And I think they do want to build more, not as a huge part of the fleet build-out, but niche applications. I know there's some export interest for that. And I think there's also a lot of discussion over the potential of using those eventually to repower coal-fired power plants, because they do need very high temperatures typically for the coal-fired plants.

And then there's also a molten salt reactor out west. They're experimenting with a bit of thorium. Now it's not entirely thorium, but they are experimenting with it in their molten-salt reactor. They have simultaneously gotten pretty far along with three of the six designs from the Gen IV forum that were identified. And I do believe there might even be some experimental plans for a lead-cooled reactor out there, too, but I haven't heard anything about that one for a long time. So, in total, four reactors from the Gen IV forum, out of the six named, are worth looking into.

Ed Coyne: Let’s go into Gen IV because, first of all, the name AP1000 sounds really cool. I'm sad to see that's not the future. But Gen IV seems to be the next generation of reactors being built before we get into SMRs, which I also want to touch on. But can you talk about what makes the Gen IV such a standout reactor?

David Fishman: There are many options that could fall into the Gen IV bucket. But if you think about the relationship between Gen II and Gen III, it is a big change, but it's an evolutionary one. We're moving from a familiar technology to a much better implementation. And going to Gen IV is a much more revolutionary change. You're using a new cooling medium. You're using a new fuel type, a new reactor architecture, something like that. Gen IV should be really new stuff. It should be revolutionary that they achieve high efficiencies and high burn-up rates, or that they can be flexible with the types of fuel they use. I think those are usually the big selling points. In China's case, I think there's a lot of interest in one or more of their Gen IV explorations, serving as a complement to what will, at least for the foreseeable future, be a Gen III-based buildout. Gen IV reactors aren't going to become the backbone of their fleet; they're going to keep building mostly Gen IIIs, the AP1000s and the Chinese domestic HPR1000, but it's nice to have Gen IVs in there.

They provide a nice function and an export option for countries that want to do nuclear power and desalination, for example. High-temperature gas reactors are good for that. Or that you can use them as a garbage disposal for waste. The waste being generated by your Gen III light water fleet could be processed, or it could become fuel for a sodium-cooled reactor.

It would be a nice complement if you're not sure what your long-term waste plan is. And China does have a waste plan that's officially closed loop with reprocessing. That's been the stated plan for a long time. They're still storing all their waste on site, either in dry casks or in wet storage in the pools. But officially, for a long time, the plan was to pursue reprocessing. And that would probably fit in nicely with a complement of fourth-generation reactors as your industry's garbage disposal.

Ed Coyne: Let's stay on that for a moment, because I think the waste was always the big concern for many consumers and populations in general. You don't really hear the word “waste” anymore; it's more like “spent fuel.” And I think it's called that because you do see it getting potentially repurposed. Can you talk a little bit more about the technology that has turned this waste into more spent or repurposed fuel for other types of reactors? What's cutting-edge or what's going on in that part of the equation as it relates to nuclear power?

David Fishman: The most low-tech way you can deal with it is to put it in an underground repository, put it away forever, don't think about it for a long time, for a variety of reasons, which has been controversial for the countries that are pursuing that version of spent fuel disposal. Reprocessing is your other big option, that there are a great number of very useful things in your spent fuel.

If you wanted to go through the effort of separating some of them out, you can get quite a lot of good out of it, whether it's certain radioisotopes or uranium and plutonium, usually being the main ones, that you can repurpose into fuel for other reactors. You've got your mixed-oxide fuels, which come from reprocessed spent fuel. That's pretty common across Europe that they choose this reprocessing route. After reprocessing, the resulting mass that is no longer usable for anything is much smaller than what you started with for your spent fuel. You've extracted a great deal of very useful material from your spent fuel. Now, the logic changes a little when you start working with fourth-generation reactors, because you're not necessarily stuck separating out all the uranium and plutonium to feed it back into a light-water fleet.

You have a fast-neutron reactor; the moderator or coolant interacts with the fuel in a very different way, yielding very different results. Now that's going to take a long time of testing and experimentation to figure out what exactly a fuel loop that relies on a functional fourth-generation fleet really looks like, and what's left at the end of it? Is that something that you still reprocess? Is that something that you then go to a deep geological repository? I can't say that I have a really good idea about what that looks like, because I don't think anyone really does right now. I think we'd probably have to see China run a lot of experiments with its different fourth-generation options to see if this is a useful alternative pathway for spent fuel.

Ed Coyne: The spent fuel goes downstream or to downsizing. Is that partly why we're hearing more about smaller, more modular type reactors? Is that where potentially some of that spent fuel can go to power those reactors? Or are those two completely different things?

David Fishman: Those are probably more in different realms, although small modular reactors (SMRs) are, the way they're designed, typically also light-water reactors. They could also use reprocessed fuel. They could use mixed oxide fuels as a result of reprocessing. But now, typically, SMRs are considered a distinct branch of technology. Many of the designs are essentially smaller versions of light-water reactors.

Ed Coyne: Are they better technologies? Is that going to be in the marketplace in the next three to five years or 10 years? What does that look like from your seat? What are you seeing as relates to small modular reactors?

David Fishman: I think some builders, designers and promoters of small modular reactors have been very effective at promoting small modular reactors and inserting them into the public consciousness. And they really appeal to a certain type of technocratically minded person who cares about the issues. They care about tech, the economy and energy, and they think nuclear is pretty good.

But they also hear so many people saying gigawatt-level reactors are too expensive. They take too long. They have all these risks. And then somebody introduces them to the idea of SMRs, and they latch onto it. Because that's awesome and sounds great. That solves all my problems. They say they're modular, deployable and cheaper. I don't know how many of those will be true. I do know China is building a small modular reactor. The way things are going globally, I think they'll be the first ones to have their SMR operational and to be gathering operational data on it. And then China will be making a decision about whether and how they want to deploy more of them, whether they're going to become an export tool, disaster relief, mobile deployment platforms, or whether they're just going to put them in vessels and turn them into military applications.

That is something China will probably be doing, gathering initial information on, because they've got one under construction in Southern China. It's been under construction for a few years, and by Chinese building standards, it should be completed in a few years.

Ed Coyne: It certainly seems like just in talking to you that China is on the cutting edge from a technology standpoint, from an adoption standpoint, from a build-out standpoint. Are they an open environment? Do you find they're willing to share their findings and designs with other countries, or are they just a closed system? I guess the question is: do you ever see a world where the U.S. works with China on energy solutions?

David Fishman: It is a surprisingly open environment considering how sensitive the sector is and how sensitive the topic is overall. They publish a lot of papers. They attend many conferences and present their reports. Now you can't go knock on the door of one of their design firms and be like, " What are you working on? I'd love to see it.” But they already put a lot of information about what they're working on out there. And if you are also in the sector or space and want to have some type of technological exchange, you can give them a visit; they'll bring their engineers, and they'll talk shop with you for sure. At least that was the case when I was still doing a lot of that type of work. Of course, the world has changed a little bit. That was pre-COVID. Post-COVID, everything got a little tighter, a little more sensitive.

But it's never been super secretive like that. If it ever was secretive, that was a flag for me that we were talking about something different. We weren't talking about a civil nuclear reactor. We were talking about something that maybe had other applications. Some of those fourth-generation reactors have always been super secretive, and they make me think that maybe that's got some other application. There was a long talk about a floating nuclear reactor, and I’m pretty sure that had some military application as well. The more sensitive ones are also much quieter. And the ones that are not are the civil nuclear fleet. I think there is a lot of willingness to share, and there's a lot of information that is in the public space. It's just in Chinese very often. It's being published in Chinese journals or presented at Chinese conferences, and all the publications are in Chinese. If you want to take the time to interact with the people publishing, you can, but there is a real language barrier.

Ed Coyne: There are some other sources out there creating electricity today, such as wind and solar. How do you see nuclear competing with or behaving relative to those kinds of lower-cost renewable-type energy sources? Where does nuclear power sit in that lineup?

David Fishman: So far, nuclear power has not had to confront some of the challenges that have afflicted the nuclear power plants, especially in the U.S., where they find themselves competing in an open competitive merchant market against very low-cost renewables, find themselves pushed around in the merit order and find it really difficult to make money selling power on that basis.

And even now, as they're becoming more marketized in China, they're becoming more merchant generators. So far, they've been largely protected from that vigorous competition due to the different contracting structures available in China. There's still a strong preference among both power buyers and power sellers to contract for power on a long-term basis, typically an annual contract or longer. And nuclear power is really favored.

Nuclear power is stable and dispatchable, and the price is very predictable. Nuclear power generation is highly stable year-round and low-carbon. Nuclear doesn't have any real trouble selling power into an open market as long as it's allowed to contract annually. If it's forced into the spot market in a province with a lot of wind and solar, you could see periods of the day when they're exposed to very low clearing prices and begin to face profitability issues. Because of China's current market design, it's not forced to compete that way. Wind and solar are intermittent and non-reliable generators. They generate when they can, and they get compensated when they're available. And when they're not, it's not going to be the nuclear power plant that's ramping up and down to make room.

In the U.S., it's maybe a gas generator that's ramping up and down to accommodate the appearance and disappearance of your intermittent generators. China is planning to address that problem with its coal fleet, which it has retrofitted with a flexible fleet expected to yield when wind and solar go away. The nuclear generators will be shielded from that, and they'll happily keep generating and selling to customers who contracted for it, because they really appreciate it.

There's this assumption that when people talk about baseload, they're assuming that power is both being dispatched and contracted primarily on a short-term basis. Instantaneously, in this moment, how many resources do I have out there? And how much load do I have? I match up my load and my generators, satisfy all the load, reach a clearing price, and the market clears at that rate, and everybody gets paid. The way that it's different in China is that China has this big blend of annual contracts, and very little power or maybe like 20%, 30% of power is being contracted on a short-term basis. When you have a structure like this, the concept of baseload starts to disappear a little bit. Your baseload is not determined by dispatchable generators in real time. Your baseload is almost determined by what was contractually set last year when we signed our annual contracts. Whatever must be dispatched under contracts is fixed in the system. And by that logic, "baseload" as a word means a little bit less. Someday, if China moves towards much more power being dispatched through short-term markets, we might have a much stronger definition of base load. Or maybe by that time, there are so many renewables and so much storage, and the concept of base load has weakened again entirely. These are questions about your philosophical approach to what you think a market is and what it needs.

Ed Coyne: What are some of the things that maybe you're cautious about or worried about? In this field of nuclear power, nuclear generation, nuclear construction, what are some things that maybe have you concerned or things that you're paying attention to that worry you from time to time?

David Fishman: When I think about what's needed to scale up the Chinese industry at the pace that it is scaling up, every year, if you're going to imagine, say, eight to 10 new units come online, starting from next year, that will be the case. We saw 10 reactors approved in 2021. They mostly started construction by 2022, and they'll all be completed by 2027 or 2028.

When that happens, think about the human capital requirements to staff all those plants and the regulator. The regulator needs to be able to expand its own resources to cover all the plants. It's expanding so incredibly rapidly. All the people filling these slots must have an average age of 27. The entire industry will be staffed by people with an average age of 25. And that's great. You have smart, young, ambitious people. In this industry, you really hope you have many experienced engineers in key decision-making roles. And there certainly are those in China. But they're going to be very few compared to just the sheer size of the industry. They weren't graduating that many back in 1990 or 1995 for them to be at that level of maturity in their industry. I do worry a little bit just that they're going to be having a little bit of just a dearth of expertise. No dearth of talent, knowledge and capability, but just expertise. There's no substitute for expertise, and you've got a whole industry full of people who've only been in it for five years or less.

Ed Coyne: What about the supply side? As more of these reactors are built, 8 to 10 more units are expected to come online in the next 12 to 24 months. What will that do potentially to uranium itself? Do you think there's enough supply out there? We talk about that a lot, the supply-demand dynamics of uranium versus reactors coming online and existing reactors operating. Any concerns there that we won't find the fuel, that the fuel price needs to be higher, or anything along those lines you see in your day-to-day operations that's being discussed?

David Fishman: The fuel is out there. That's always the case. At some price, the fuel is out there. That's just economics. Given current demand and prices, is fuel out there? I think you might need to see a bit more upward price pressure to make some of the uranium plays out there more viable. But China has moved quite assertively over the last 10 years to reduce its exposure to spot markets. It has its domestic mines. It has also been quite aggressive about taking ownership stakes and equity stakes in overseas mines. And when it's attractively priced on international spot markets, it also stocks up. We know China likes to stockpile when it can, when the price is right.

China looks to insulate itself from the volatility of its international markets as much as possible. There's no way to completely insulate yourself from international markets when you've got ten new cores coming online every year. Every 18 months thereafter, they'll need to swap out a third of their core. That's going to create a pretty substantial demand for uranium, and so either directly or indirectly, that demand has to filter out into the global uranium markets, even if it's in the form of Chinese equity stakes and certain mines removing that supply for other people and therefore creating a scarcity in the global market. You can do the math: 10 reactors a year every year for the foreseeable future. How many pounds of uranium does that imply? And then you start working backward: Is the price we have right now accurate, or will we need to get more out of the ground or draw on a reserve?

Ed Coyne: Let's end with a positive here. What are some of the things that you're enthusiastic about? What are some of the things that you're watching closely that you'd be willing to share with us?

David Fishman: I don't know if you've noticed, but the news says that we are currently in the midst of an international energy crisis, and I think it's true. Maybe the market's not pricing it properly right now, but from a supply and downstream perspective, it feels like we're in an energy crisis. If you pay attention to what's happened to some of that export infrastructure in the Persian Gulf, it doesn't look like we'll be getting back to normal anytime soon. Even if a ceasefire held, and I'm not sure that it will, it doesn't look like gas is going to be making its way back onto the markets at its previous volumes and prices for years at this point.

The reverberations of what's been happening will be felt for years, not just months. And with oil and gas prices high, everything is bullish for electrotech. Now, that could mean coal-fired generation, wind and solar or nuclear, but it's going to mean electricity, for sure, because electricity hedges against oil. Electricity hedges against oil for electric vehicles; electricity hedges against oil for industrial heating; everything now goes through electrotech. That's bullish for nuclear. Now, deciding to do something about nuclear strategy because of something that happens in the Persian Gulf is a bit of a mismatch.

If you want to build a nuclear power plant, that's a 10-year decision, including the construction and permitting. But China has clearly taken the approach that we will structure our energy sector and plan on the assumption of chronic global instability. It might not happen today or tomorrow, or next year, but it could, so we're going to plan accordingly.

And so far, China has come out of this current bout of instability looking stable. Not immune, not perfect, but looking a lot better prepared than most. And you've got to imagine globally, more than a few countries are looking at that and saying, “How do I get some of that? How do I plan for that?” And the answer leads back to electrotech. Maybe we should take a harder look at nuclear again.

The one we looked at previously didn't make sense because we decided we could just import liquified natural gas (LNG) forever. Well, maybe we don't want to do that anymore. The one we shelved because we weren't sure how long it would take or whether it was justified by the geopolitical situation. Well, now it looks like nuclear is justified again. So that gives me a lot of reason for optimism that, in this crisis, there will certainly be an upside for anyone who builds, operates and invests in electricity generation or any of the accompanying industries.

Ed Coyne: David, before we sign off, any other topics, concepts or ideas you want to leave the listeners with that I didn't address or didn't ask you that you think might be of interest for everyone listening to this podcast?

David Fishman: When we look at what China is doing right now for all of its electricity sectors, whether it be solar or wind or lithium-ion batteries or electric vehicles or nuclear power plants, inevitably the question is, how can we do it ourselves? What can we do ourselves when we don't have China's scale? We might not have those deep-pocketed state-backed banks. What parts of it are recreatable, if anything? And I think you shouldn't be too negative or too pessimistic about it. China uses industrial policy very effectively to promote the growth of its energy sectors. And it's used it in every single part of its energy sector, from renewable energy to batteries, EVs and nuclear. And at this moment, it's looking like it's paid off.

For every country that really wants to do it, I would say you can. You can, if you're willing to use industrial policy in a way similar to China's. If you are, for ideological reasons, really attached to the idea of the free market, figuring out for you the free market choosing to build this incredibly expensive, difficult, complicated technology, I think you'll be waiting a while.

But if you're really determined to do it because it's of utmost strategic national priority, then just do it. You can afford it. You can make it so with the power of state backing. And if that's a priority to you, don't wait for the market to tell you it's profitable to do it now. Use your state power to do it instead.

Ed Coyne: I think it's interesting that we talk about China in a way that, forgetting geopolitics for a minute, because that's a very sticky topic. Maybe there's a way for us to all work together with the goal of creating a cleaner, more sustainable environment. Fingers crossed on that. I think it's fascinating to watch this all unfold. David, thank you again for taking the time to join me on Sprott Radio.

David Fishman: Indeed. Thanks, Ed. Have a good one.

Ed Coyne: Thank you. And once again, you're listening to Sprott Radio, and I'm your host, Ed Coyne. Thank you for listening.