The Power Hungry Podcast

Rod Adams: Managing Partner at Nucleation Capital and Publisher of Atomic Insights

December 26, 2023 Robert Bryce & Rod Adams Season 1 Episode 212
The Power Hungry Podcast
Rod Adams: Managing Partner at Nucleation Capital and Publisher of Atomic Insights
Show Notes Transcript

A retired commander in the nuclear navy, Rod Adams has spent most of his life working on and around nuclear energy. In his second appearance on the podcast (the first was in December 2020), Rod explains how high interest rates are hurting nuclear startups like NuScale Power, why Georgia Power had such huge cost overruns on the new reactors at Plant Vogtle, why he’s skeptical about fusion, and why, “if you have energy, you can do anything.” (Recorded November 21, 2023.) 

Robert Bryce  0:04  
Hi, everyone, welcome to the power hungry Podcast. I'm Robert Bryce. On this podcast we talk about energy, power, innovation and politics. And I'm pleased to welcome back my friend, Rod Adams for his second appearance on the power hungry podcast. Rod. Welcome back to the power hungry podcast.

Rod Adams  0:19  
Thank you, Robert. It's been a while, it

Robert Bryce  0:21  
has been a while it was December of 2020, which makes it about three years. So that's been far too long. And a lot has happened in the nuclear sector. Now, I did not mention I didn't give you the proper introduction, or just as you know, the brief introduction here, the managing partner at nucleation capital and the publisher of atomic insights. But as you know, guests on this podcast introduce themselves. So you know, the drill, you have 60 seconds, please introduce yourself.

Rod Adams  0:48  
My name is Rob Adams. I'm a native Floridian, which makes me kind of a rare breed, grew up loving nuclear power, partly because dad was a electrical engineer for a company with building new nuclear plants and introduced me to a power plant by saying, Hey, Rob, this kind of power plant doesn't even have smokestacks. After learning about that, and then deciding that energy was a big part of our economy, that being a child of the 1970s, I think you and I are almost exactly the same age Robert. I was impacted by two major energy crises during my formative years and decided that I want us to do something about that. So I joined the Navy to learn about nuclear energy. Join the nuclear submarine force, after having been interviewed by Admiral Rickover himself about a 62nd long interview, we'll talk about that someday.

Robert Bryce  1:50  
I do what I do want to hear about that I haven't. So I didn't, I didn't realize that. But please, well, so

Rod Adams  1:56  
go ahead and continue, and then served on submarines for most of the 1980s surfaced 1991 At a time when the US was once again fighting over oil, decided to deal with some reason that the rest of the world didn't like nuclear as much as I did. decided to try to do something about that developed a small modular reactor design. In my free time. Left the Navy, left active duty to start Adams atomic engines in 1993. Realize that we're a little ahead of the bleeding edge, went back into the active duty Navy, finished serving my career, having done a lot of work at Navy headquarters related to nuclear submarines and training. joined a small modular reactor company gone BMW M power didn't do so well that that project were beautiful design, but never managed to apply to the NRC for a license. Investors got tired of spending $100 million a year on the project, pulled the plug, I had decided about three months ahead of them pulling the plug that I needed to go do something else. And anyway, so been working on investing in advanced nuclear and small modular reactors. For the last five years nucleation capital has been investing now officially for for two years, and we've made investments in 10 Different companies in the space. Gotcha.

Robert Bryce  3:37  
Well, let's, let's bring us up to date. I've written recently about the cancellation of the new scale power project with you amps in Idaho. I was just looking at new scales stock price this morning. It's down over 75% for the year to date down again early today in early trading another 5%. Let's talk about that deal. Specifically, why did that deal, which was the only the only commercial contract that has been signed for a small modular reactor that hasn't had a design approved by the NRC. Why did that deal fall apart?

Rod Adams  4:19  
I wrote a post about this. About a week or so ago. deal from the beginning was set by a number of conditions. One was that to the customers back in the 2012 2013 timeframe, believe that there was going to be some reason why they would need to leave carbon behind that there would be either a price on carbon there would be some sort of mandates, reducing carbon, all kinds of things that they said we really need to adjust carbon free power project. Well, those can This didn't come to fruition. There's no disadvantage economically in the western states that are served by us for burning carbon. So there's no incentive to do something cleaner economically anyway. You know, there may be some moral incentive, but it's just as cheap for the customers to keep burning coal or burning natural gas. So that was part of the problem.

Robert Bryce  5:25  
The other day, I'll put it or put it another way, it was too expensive, right? Because I mean, that was the key that the price per megawatt hour went from no, no, no $90 to

Rod Adams  5:33  
it's not that it's too expensive. I mean, on the east coast of the US, people are willingly signing contracts with offshore wind for $150 a megawatt hour $180,200 A megawatt hour. So it's not that the cost the power from the new scale project was too expensive. It was too expensive in the market it was trying to serve. Okay, it cost $89 A megawatt hour, which is a lot more expensive than burning coal and existing coal fired power plants, right, or burning natural gas, and even brand new combined cycle natural gas turbines. Right, especially in an area where there's what's called associated gas available. Right. In North Dakota, they're drilling and fracking for oil. And by the very nature of it, natural gas comes out as well. Right? But they don't have the infrastructure getting rid of the gases. So they almost give it away. Because if they didn't give it to it if the flare, right.

Robert Bryce  6:40  
So so it came down, ultimately, if I'm paraphrasing, paraphrasing what she said, just came down to simple economics that it wasn't it ultimately didn't work in that market at that price.

Rod Adams  6:49  
Yes. Especially since they were going to build a 462 megawatt power plant on the Idaho National Lab site. Right. If you've ever been to the Idaho National Lab site, you know, it's 800 square miles of nothing. There's nothing there, except for a few installations is wide open plains. So you got to build transmission lines, because there's no customers for 800 megawatts nearby.

Robert Bryce  7:17  
Right? Well, so But is this a black guy? I know, this is where you're investing, and I hope they're hopeful. I've been pro nuclear for a long time. Not as long as you but for a very, you know, 15 years. So I've been saying the same thing, natural gas to nuclear, how big of a black eye or how is this a checkup or a check on the whole SMR industry isn't indicative that the whole industry may not work out as people have been hoping?

Rod Adams  7:44  
I sure hope that's not the lesson that people take away. First of all, it's one project, not even don't not even really indicative of whether a new skill is going to survive or not, whether new skills are going to prosper or not, it was simply one project, one customer in one market. The Yes, new scale has gone through the process of getting a certification. They started a long time ago, new skill has been operating and working at this for since the early 2000s. I think I interviewed Jose Reyes and Paul Lorenzini on the Potomac to a podcast in 2006. But it it again, it was a troubled project to begin with it was a group 40 some odd municipal utilities, who may not have shareholders. But they've got what's more important, they've got customers that live in the same town as the decision makers, or the guys that shake the trees and say, hey, you know, guys, why are you approving this project is gonna raise my electricity bill by 20% or 50%, or whatever it would do that then they don't have even the power of going to the capital markets. There are nonprofit municipal utilities, who certainly can access lower interest loans, right, but not interest free loans. Sure, they still are gonna pay some price relative to the market. So if the interest rates go up for the general market, they're gonna go up for us. Right? There's lots of reasons why it shouldn't be indicative, the technology is somewhat evolutionary is not revolutionary, natural circulation system, that new scale, develop, it works fine will last a long time. But putting it in a 4.5 million gallon tank of water that has to meet the the NRCS aircraft impact assessment, you know, may have been a bridge too far, you know, may have been well,

Robert Bryce  9:53  
so let's follow on that because I've heard that same discussion about new skills technology that they've had to have This massive water cooled this water cooling system. But I'm looking at iceberg research. They they shorted new scale. And I'm guessing they made a lot of money. And they're pointing out, I'm just looking at the I pulled it up. You know, there, they point out new scale says they have a solid balance sheet 197 million in cash at the end of September, no debt. This perspective overlooks new skills, rapid cash burn of 154 million over the past nine months, and ignores the impact of the US contract termination which had 63 million. So I mean, as I read that, I'm thinking well, there's there's a possibility that new scale just fails, I mean that they go bust. There's one other indicator here that has happened just in the last few days, which is that x energy which I've been bullish on their technology, because of the high temperature gas cooled reactor, they have the site, an agreement with Tao, in Seadrift, Texas to put in four of their modules for their reactors at that site. But they just canceled their deal with Ares acquisition Corporation, they're not going to go public. Now. I don't know whether Oklo power is still planning to go public. Sam Altman was going to be their backer. But now Sam Altman is having some trouble. So I mean, it does seem like it's not just one car wreck here in the SMR space, it's multiple car wrecks. And it's disturbing. I mean, to me, it's very concerning. So well, let me just let me just highgrade this. So how much of this is high interest rates? Because this is one of the points that's been made several times is the same impact that the high interest rates are having a big impact on the renewable sector? Because these are front loaded cop projects that have a lot of upfront costs, and they don't get immediate payback, or very quick payback. is the same, or the same headwinds that are hurting renewables hurting nuclear in that regard, is supply chain high, high interest rates?

Rod Adams  11:47  
Absolutely. Capital intensive projects are absolutely impacted by high interest rates. To a great degree. I mean, just think about if you, I mean, again, we're about the same age. So when I graduate from college, and wanted to buy my first house interest rates were 13%. The payments, the monthly payments for my $70,000 house in 1983. were higher than my $130,000. House in 1987, when interest rates have dropped down to 5%. Okay, so this the kind of impact that it has, you know, when right now, you know, I was fortunate enough to have bought my house in 2018 3%. Right? What are the poor people doing today when interest rates are 7%? Yeah, hugely changes what you can afford. And so nuclear is capital intensive, the operating costs of a nuclear plant is not free like it is for a windmill. But nuclear fuel is pretty cheap, pretty darn cheap. It's roughly $15 A megawatt hour, something like that. Maybe no. $7. And then we're out we're just a fuel. Right? So it's very low cost. So Hi, sister, big problem. And by the way, the highest rate that made it hard for me to buy my $70,000 house in 1982 83, is exactly the same thing that made it very, very expensive for the nuclear plants that were coming online in the 1980s. Because high interest rates were affecting them in a big way. Right. Some cases, the overruns were half interest rates.

Robert Bryce  13:39  
I didn't realize that but let's let's talk about that because we also I mean, there's a when we can talk about the the the losses here and the and the and the things that are going badly in the SMR space, but we can also celebrate the the fact that Vogel three the big project, the gigawatt scale reactor, AP 1000, in Georgia, has achieved commercial production and Unit Four at Vogel will come online in the next few months. This is a win, right, but it comes at a high cost. So the roughly twice the expected budget twice the expected time. Or it was I was in Savannah, Georgia recently and heard a presentation from Oglethorpe power and and they told me what I asked what's the wholesale price of the power that you're going to be getting from those reactors and they own 6600 660 megawatts out of that 2200 Something like that. It's going to be about 13 cents a kilowatt hour. Now that doesn't it's not going to surely affect their customers that much because they have 8000 megawatts of other capacity right but 13 cents out the door. Okay, well, but if that's good for 50 years, 60 years that's pretty good price. So that's that's a long introduction to the this question what went wrong at Vogel? Because it wasn't interest rates there. What what what went what went wrong on that project?

Rod Adams  15:00  
interest rates were exactly what went right. By the way, I wrote about this several times. At the time, where interest rates were low, inflation was low, labor was cheap. And why aren't more people investing in new nuclear right now, because this isn't the time to be built, but vocal. So first of all, we had to build a new nuclear plant in 40 years, roughly started and completed, so as green as a greenfield project. And so the regulators and experienced all of the people actually inspecting the work, you know, had to go slowly and carefully, because I don't want to make any mistakes. All of the workers were had to go slowly and carefully. There were there were mistakes made, you know, there were design mistakes, designer said, you know, I'll, I don't know exactly what the specifications should be. But this is the measurement and I'm gonna make a really tight tolerance to make it easy to get approved by the license. Well, but that makes it very hard to build if your tolerance is that tight, right. And that's what happened, caused a nine month delay when they were laying rebar. Because the not that the rebar was improperly later unsafely laid, it just didn't meet the specification on the drawing, right. And the inspector by very nature says, Hey, you didn't meet the spec, you got to do it over again. Right.

Robert Bryce  16:28  
And I heard that I've heard that from today. I've heard that from two different sources, one at Sargent and Lundy, and one from from Oglethorpe that, in some cases, they you know, the way the drawings were done was so badly done that they had one area where it was kind of a confined space, and they could and it was a critical part of the plant, but they can only get two or three people in there at once. Because they hadn't thought about thought through the process of actually designing it to help it get built. And so. So I guess that was but that was one of the key problems. But where was it? First? Okay, so you said first of a kind, we didn't have the labor, we had the regulatory issues, bad design plans. And you know, that hadn't been vetted and hadn't been used before. But was there was it a combination of all of those that knew that caused all of this,

Rod Adams  17:15  
it's just, you know, pile on design wasn't complete. But many people forget that there was real strong motivation, push for the project to get started. Because of many political things that would money being offered to the nuclear industry, the Energy Policy Act of 2005, and put incentives in place, and had incentives in place that had a deadline, he had actually finished the plant by a certain deadline. And of course, you know, looking back, you should say, Well, if we're going to go faster if we are ready, before we get started, but it's hard to do that when you got these, you know, decision processes. We haven't done this for a long time. And people said, well, let's get started. Get started. And the design was complete. They weren't got to certain stages. And they said, well, shoot, we can't keep going because we don't know what to do next. And we gotta go back and pull out stuff. And, you know, it is a hard thing to do. It's very big project. You know, big projects are hard, you know, whether it's in I think, in Boston, or whether it's a bridge in California, high speed rail is hard. Yeah, big stuff.

Robert Bryce  18:31  
I think Mike Smith said it when he's the CEO of Oglethorpe, and he presented in Savannah and I was there for the cooperative Finance Corporation convention a few days ago. And he said that at one point, they had 7000 workers on site. And then, in fact that well, and they worked through COVID. And he said, in fact, that was one of the interesting things was that some of their most productive days were during COVID that they but they were able to manage through all of that. And so it's you know, it's great that it's coming online. So Well, let's talk about them that AP 1000 design. Now there's talk I've heard that some of the some of the people, the key people from Bechtel, the engineering firm and construction firm that worked on Vogel are now in Europe, and that the next ap 1000s that are built there, I think it's in Poland is in Poland is going to build five is that right? That there? Now they may be able to learn from what happened at Vogel three and four. Does that ring true to you?

Rod Adams  19:26  
Oh, absolutely. I really wished that we would be applying the lessons here in the US. You know, we have well, there's actually more but there are four ap 1000 units in the southeastern US that already have a combined operating license a CLL. Two units in Turkey point. Two units at Williams states Lee. Those CEOs are still active, they're being maintained by the owning utility. They've invested several 100 million dollars in Going through the entire Environmental Impact Statement on all kinds of stuff. The plants are ready to go. All they need is a final investment decision by the utilities. And we could get for AP 1000 startup and by the way that that design is officially provably complete.

Robert Bryce  20:19  
And that's tricky. Turkey point and what was the other plant? William

Rod Adams  20:23  
States? Lee it's in Gaston, South Carolina just about, I don't know. 15 miles south of the North Carolina border. Uh huh. Okay, it's like the last exit. Often 95 you go I visited the site. Gosh,

Robert Bryce  20:37  
in South Carolina, and Turkey point is Pennsylvania or

Rod Adams  20:41  
turkey points in hosted Florida, Florida.

Unknown Speaker  20:44  
Okay. Yeah, right.

Rod Adams  20:45  
It's a owned by floor panel, my company that by the way, Turkey point? I think it was three or four. I can't remember what that was the unit that inspired me to be new was floor power lights 50 miles from my home.

Robert Bryce  21:01  
Right. Next era energy is the parent there. So Right. And then And then who owns William stately, who owns that project? Gotcha. Okay. So what about Europe? Let's go back to that, as I was told it was five AP, when 1000s are going to be built in Europe. Do you know that? Or do you know what the particulars are there?

Rod Adams  21:24  
I think that's the there is a project. And I don't know exactly the number of can't remember what it's initially to units. And then there's options for for three or four more. That's in Poland, there's there's one or two other people that are countries that are interested in AP 1000s. In Europe, it's a it's a good design, now it is complete, it's probably going to provide a nice capacity factor. They've got lots of good advances compared to existing, they certainly weren't built to be constructed initially. They think there was 1000 design changes during the construction. No kidding. That Vogel at will. And by the way, that design change processes, part of what slowed it down. Not only is a design change process, always a challenge in any new project. But it was particularly a challenge in the Volvo project, because the AP 1000 design was a certified design. The NRC had issued a rule a regulation, approving that design. So any changes to the design had to go through a license amendment process at the NRC like the two step, part 50 process where there's a recognition that things are going to change during design. And you have to apply for the final license once you've completed your construction. With the AP 1000. It was, quote, a one step process where they had to make it anytime they made a change. It was a license amendment. And then the final stage of the of the project is to do what's called high tech inspection tests, sort of get game or what I tech stands for, but they had to do almost 1000 tests, and had to successfully complete each one of those ITEX in order to finish the single step of getting their their project completed and ready to operate.

Robert Bryce  23:35  
Wow. Well, I knew it was laborious and talking with different people around the process. But I didn't, you know, I didn't realize there were 1000 changes. That's, that's it's really well, it's remarkable. It's, but you know, glad. And I think the people that Oglethorpe and Southern, obviously very happy now that they got finished. Going to

Rod Adams  23:57  
be happy for a long time. I mean, many people in Georgia, of a certain age, remember that the Vogel one and two, were some of the most expensive nuclear plants constructed at that time, right. But they've been very happy that they did the job. And particularly now that, you know, Volvo one and two are probably fully depreciated and supplying really cheap power, and they have continued supplying really cheap power for another 30 or 40 years. Yeah.

Robert Bryce  24:27  
Well, and that's the similar story to what we saw here in Austin and Austin Energy, you know, there were politicians in this town and I know some of them who made their careers opposing the South Texas project, right that Oh, it's too expensive. And it's the you know, they call it the the new kid, and you know, it's cost overruns, and brown and root was involved, and therefore, it's all bad and the city should pull out and I remember, this is now close to 30 years ago, I was writing for The Austin Chronicle and the city of Austin tried to sell at 16% share in the plant and there were no takers. I mean, I think there was one bitter guy who said, Oh, you paid me a million dollars. I'll take it off your hands. Well, now It's the best investment the city ever made. I mean, by far, I mean, you know, there's no second place and we're getting electricity from that plant, I think at about two or three cents kilowatt hour. I mean, it's dirt cheap compared to everything else on the system. And so in retrospect, it was the right move, and it was fought bitterly by the Liberals here, right, then progressives and that many of them made their careers on that, and they don't talk about it now because it doesn't look so good. Especially with this issue of climate change, right. So anyway, that's that's a little side note, little editorial note. So let's talk about uranium prices. So SMR stocks, like new scale isn't the only one it's it's a ticker. It's SM is SMR. Some of the the enthusiasm for SMRs. Let's face it has cooled over the past few months. uranium prices, though more than doubled this year. What's driving that? Is that is that excessive? I think I look just look at chemical it's price to earnings ratio was over 100. That's remarkable is this bullishness around uranium, is this justified if we talk about you know in your in the investment business now, does this make sense that uranium is so high and that companies like Cameco are seeing such a strong tailwinds in their stock price?

Rod Adams  26:18  
Well, I got to disclose it, I mean, your aim investor, as well as and we don't own it. We don't have any uranium and nucleation capital because uranium is, you know, mostly even the tiny companies in uranium go public on some of the exchanges that are specialized for that. There's exchanges like the Toronto Stock Exchange in Canada, and there's one in Australia to they don't necessarily do venture capital they go out go public and get people to jump on. Right.

Robert Bryce  26:49  
micro cap micro cap miners that are traded on Vancouver exchange, I'm guessing as well. Yeah,

Rod Adams  26:55  
yeah, exactly. But the big tailwind in Iran is the fact that we've had very low uranium prices for a very long time. Starting in around 2008, the uranium tank like many other commodities did. And then in 2012, when Japan shut down most of its nuclear plants, by 2012, they set him sort of saying down 2011. But by the end of 2012, all of Japan's nuclear plants were shut down. So that took a very, it's it's 50 plants, and took a pretty significant demand out of the market. And then the owners of those plants had a bunch of inventory, they started selling into the market. So the supply demand balance was really there was a lot of returning available. And so the prices were very low, which means the miners stopped investing in new production. And some of the biggest miners cut back and stop selling some of their most abundant from sub selling from some of their most abundant and, and rich, seems the coninco chemical has some mines that are as much as 25% uranium in the ore. Wow. Now around the world there are there are mines operating with profitably with point 5% uranium, right. So you got a minus 25%. You decide, Hey, why are Mike giving away this product? So, Kaz Adam from Cameco, a few other big players pulled stuff out of the market. And eventually, you know, if you have a long series long period with very low prices, the mining capability, the mining capacity is way below what the actual demand is right now, with today's nuclear plants. We are not mining enough uranium to supply today's market. There's a lot of stuff still coming out of inventory. But the inventories are pretty much depleted. Now, the available inventory can be sold on the market. And so it's time to start bringing on new capacity. Well, it takes 510 years once you've identified the reservoir or the resource to create a mine and bring it into service. So there's a gap. There's a big current demand, an overhang of demand that is going to appear as we build more nuclear plants. And as things like Japan brings its nuclear plants back in the market, which is not something that takes 10 years to do, right. It's taken too long, but they really can't turn on a nuclear plant and a year or so. Right and bring those that demand back in the market. So there's no so

Robert Bryce  30:01  
bullish bullish sentiment overall in the global market for your for nuclear, Despite the setbacks here in the US, you've got also the Canadians bringing on are going to expand Bruce Power or double the double the scale right at Bruce and then they're going to build the BW RX 300. at Darlington. They're refurbishing some of their other existing reactors. And then, of course, you got the demand from China with their, their, their reactors, etc. So, globally, the US nuclear sector is not the global sector, right. The global separate is going to continue

Rod Adams  30:35  
but we do I mean, we do have a lot of things looking up in the US that are putting demand on uranium. We've got the advanced reactor demonstration projects in Wyoming and in Texas, we've got TVA and participating actively in the btbr x 300. And will be a fast follower according to I can't members name right now, but the C. Lashed CEO of TVA, okay. He says he says he's not going to build one reactive maintenance planning is carefully, you know, going to build the first. But after he builds the first he's gonna build another 19. That energy's got SMRs in its integrated resource plan, for the first time in a number of years, Dominions got advanced reactors and their IRP uses all kinds of interest in building new reactors. And we've had a lot of conversation us about Halo, right? Well, to get the equivalent amount of fuel into a reactor using Halo, it takes four times as much raw natural uranium, to produce Halo, as it does to produce Leu. So you're going to have there's this enormous demand for uranium coming up. And the supply constraints are there. So it's not surprising. But by the way, even with today's today's price, we're still at less than half of what uranium peaked at in 2007 2007. uranium prices get to $147 a pound.

Robert Bryce  32:17  
And now they're at 50. Is that right? What is it 7575? And so well, you said you're an investor? Well, let's talk turkey. So who you like what do you if you were gonna buy a uranium miner? You're not nucleation capitalized? I don't know if you're investing in miners. But so who do you like,

Rod Adams  32:33  
I love you. I love chemical. I mean, it's, it's a great story. There's all kinds of reasons. They're very well established firm. It's got great management, and tremendous resources, though. Cameco is a big, big part of my my personal portfolio. There's a couple of small miners that have developments that are almost ready to come and service. Dennison mines next gen. Those guys are getting close. There's a couple others. So it's kind of chemicals big in my portfolio. My personal portfolio that stuck in here is Rob Adams, not in certainly, I got you. But you know, the the small miners are also of interest. But I mean, I've got I think chemical is half with my uranium moments. And then the others are.

Robert Bryce  33:24  
Right. Well, so let's talk about fusion. This is one of the other areas that I've followed for a long time. And you know, as you've said, we're both in our dosage now. I'm 63. I've heard about fusion since I was 10 years old, and it's 20 Year 3040 years away. And is it? Well, I'll ask the question directly, is fusion still 2030 or 40 years away? I mean, I'll be I've said this before, if fission works, why don't we just focus on fission? Why do we need to spend any but why is there are all this froth around fusion now because it seems to me still the problems that were existed 2040 3050 years ago, were the same problems today. So I'll ask the question directly. I'm kind of rambling here. What, what about fusion? Are you bullish on fusion? Are you still think that it's how long away? How far away? Is it today?

Rod Adams  34:15  
I attribute the excitement in fusion to the fact that physics professors throughout the country, maybe throughout the world, had been telling their bright students for 60 years, that fusion is the ultimate energy source. And I actually support the idea when people say, well, it is the holy grail of energy. And I say yep, it's exactly like the Holy Grail. It's mythical. Okay, you will, you will have all kinds of power and eternal use and everything. If you ever discovered this holy grail, if you ever find it, it makes us somewhere. And obviously, fusion works on the sun, it works in thermonuclear weapons. You can do it on very small scale, you can make fusion, we're in manufacturing, you're in Texas, you got a lot of fusion devices around your state. They use them in logging for oil wells. But they put a lot of electricity in them, and they make a few fusion reactions occur. And they can use the neutrons from there to detect them. I've held one of my hand, but it's not a particularly useful device in terms of producing energy. It produces fusion, which releases a 14 MeV neutron, which is a nice thing to have when you're trying to detect things underground. But fusion energy? No, you're skeptic, I hate the idea that you hate the idea of people talking about fusion as a as a cure for climate change, you know, it just doesn't exist. And, you know, once you get to having self sustained chain reaction, it actually produces a useful amount of power, you still have to design a power plant, you still have to build the power plant is going to convert that heat into electricity. And it's not a simple task, because, you know, the the heat comes at it initially at 100 million degrees Kelvin. Yeah. So

Robert Bryce  36:30  
so why is it attracting so much capital then, because I think Commonwealth fusion is because they've raised $3 billion, Tae hundreds of millions. Because

Rod Adams  36:40  
some of those great physics students went on to make a lot of money in tech. They always thought about, hey, my professor told me that fusion would be a great thing to do. And so they've made all this money in tech, and they want to put it to use they want to save the world. They want to have saved the world in a proprietary, you know, solution that they can sell, that they can sell maybe or they find somebody who's willing to buy, what is it the next few? They know a greater fool thoughts theory? I don't know. I, we are a fusion investor, by the way, we have one investment in a fusion company, because we really liked their lasers.

Robert Bryce  37:25  
So it's the laser, not necessarily the the actual process itself, then you're investing in a different part of their technology portfolio, or you're bearish on a different part of it.

Rod Adams  37:35  
Yeah. There, they are following the path that is seems to have been the closest to actual fusion from the nuclear the National Ignition Facility. They have much, much better lasers, and were installed in our National Ignition Facility when it was built 15 years ago. And so they looked like if there's going to be a breakthrough, we think that there's, they're close. But even if there's not a breakthrough, they've got some really terrific laser technology, and some amazingly bright people. So.

Robert Bryce  38:10  
So let's talk about when it says we're talking about commodities, we talked about uranium. Let's talk about natural gas. I think we were at the same meeting, and I think it was in Salt Lake City. And it was probably 10 years ago, and it was an executive from Exelon I think, who was lecturing or giving his presentation. And I asked him, I said, Maybe you remember this, what price do you need natural gas to be? What price do you need for net gas for you to justify a new nuclear plant in the United States. And he said, If I remembering correctly, $8 per mm get to you. And it's exactly the number of remember, and he said we and we and we need another $8 in a carbon price or something like that. So we need nat gas to effectively be $16. Now, you talked about nat gas in the West and the abundance of nat gas, I'm looking at the Henry Hub, front month price now. $2.91 is is that because gas is so cheap, is that what's going to be one of the things that is going to just hinder the growth of nuclear then for as long as gas is cheap?

Rod Adams  39:17  
I think so. I think cheap natural gas will hinder the development of nuclear it has for the last dozen years. 15 years now. Since 2007 when gas prices tanked during the global financial crisis, right or maybe it was the summer 2008 comes on my history.

Robert Bryce  39:37  
I think it was eight but yeah, go ahead. Yeah.

Rod Adams  39:39  
Okay, so, so gas prices are cheap. And they definitely have impacted nuclear and they will impact nuclear as long as they're cheap and there's no price on carbon. Right. However, I am skeptical about the fact that they bet the predictions of them remaining cheap. Yeah. Partly because I remember being very interested in natural gas prices in the 1990s. Watching gas prices from 91 to 96, dropped from $4, and maybe to you down to about $1 and a half. And then having people proclaim through 1999, that gas prices were going to remain low. And the Energy Information Agency said that they're going to increase it slightly below the rate of inflation, from 1999, and the dollar 60 million Btus. Right. What were they in 2008? When they crashed, over $12, a million Btus.

Robert Bryce  40:42  
I knew it was over. It was over, it was over. I knew I knew it was over $10. And that's the that's the worry. But

Rod Adams  40:47  
dollars was the that was the electric generation price. Other people were paying as much as $15, and maybe to you for wholesale prices. Right? So the what's happening in the natural gas world today? I'm a I'm a big fan of Adam Rosen swag, and Goehring. You know, they're real bullish on gas prices. And of course, bullish on gas prices, meaning they're betting they're going to go up, right? Partly because of things like, in the next year, the US LNG export capacity is going to increase by 50%. Right. And that means it instead of exporting 10% of our production, we're going to be exporting 15% of our production. Yeah. So that starts to increase the, or change the supply demand balance. There's also indication in some, among some people that we've been doing really well in fracking and making fracking look more and more efficient, right, by focusing on the most productive areas of the various reservoirs. You can only do that for so long before the most productive areas are no longer the most productive areas, right? Because you suck the gas out. So how much longer are we going to be able to maintain our current production? Who knows? Yes, keep drilling. It's keep doing a lot to maintain production. And we'll see how that, that I just

Robert Bryce  42:25  
said, I'm just looking here, I just pulled it up. Because I was looking at this the quarterly average residential natural gas price in a 1981. The real price now nominal is different, right? It was nominally it was $4. In 1981. The real price there's that it according to the EIA is $14. That's in 1981. And for, you know, pushing forward here to 2023 second quarter real price $16.48. So compared to $14. I mean, it's essentially the same price today as it was 40 years ago. I mean, it's a remarkable technology story, right. And so I hear what you're saying about high grading and the exports and the rest of it. And I've heard that story before. But I, you know, I also am a believer in technology and what we've seen in the shale revolution and talking to drillers, talking to frackers, they're figuring out ways to wring more and more oil and gas out of out of lower quality rock. And so I don't know, I wish I knew, but I you know, I think hydrocarbons are here to stay. But at what price.

Rod Adams  43:29  
There's no doubt that we're going to keep using hydrocarbons. And when and there, there's going to be a look around the world, there's a big market for gas, even if it costs $15, or maybe two or $20. Or maybe to the market, people need to burn to do what they need to do. But the US ability to be so much lower than the rest of the world prices, I think is going to come to an end. And certainly there's people that are excited about bringing more stuff out of the rocks, right, but are they going to be able are they willing to keep selling it for such a discount? Right? Or are they excited about the idea of moving the discount or lessening a discount away? The people that sell gas aren't as motivated to keep the price low as some might think they are? Yeah.

Robert Bryce  44:25  
They're always looking for the higher price but that this is a long time ago I was in Paris and I met with I forgot what his name is. He's at the he's at Shell now. Laszlo Varro and he said that nuclear is going to be more attractive in Europe for a long time because Europeans are paying more for natural gas. So I'm just looking at the you know, I just mentioned Henry Hub today is it 290 The front month price, front month price for nat gas at T TF which is the Dutch trading hub is $14.70. So almost 5x Right roughly 5x The US price so I mean, that's going to make nuclear more attractive in Europe. So handicap Europe for me, we talked about Poland is I had Bill Magwood on the podcast a few months ago. He said France is where he thinks the new the first new reactors are going to come online in in Europe. What about you? Where do you they're a bunch of paper reactor companies that are you know, vying for the in the European Space. Brett Kugel mas has a company that's they're aiming for that market. You get the BW RX 300. You got the AP 1000. The handicap Europe for me, who do you think is going to take the lead there in terms of deploying new nuclear?

Rod Adams  45:35  
Well, if they could stop fighting with the Russians, the Ukrainians are near the top of the list for new, more nuclear their poles are very interested in moving to nuclear to or to lessen their dependence on coal. Sure, you've got sweet isn't is a really interesting play to me because people forget that Sweden, a very small little country of what 12 or 14 million people, they built enough nuclear plants in 15 years to supply half of their electricity. And they did it with their own designs. They didn't go by Westinghouse or GE designs, they built their own nuclear plants. Now, the boiling water reactors are fairly traditional light water reactors, but they're Swedish design. And so they had an independent regulator, an independent system, and they built the plants. For a long time they had been anti nuclear But several years ago, the the population of Sweden elected a very overtly pro nuclear coalition. And they are changing the rules and making it possible to to bring on new nuclear plants that got you know, good disclosure, full disclosure, we have an investment in a Swedish nuclear power plant developer called bigla, which is translates to lead cold as a lead cooled fast reactor. But they've got some really high quality nuclear experts. They've never lost their nuclear expertise. They've got a strong regulator. So and they're changing their regulations to make it more straightforward to get a plant license in Great Britain as the great British nuclear, they've kind of gotten fits and starts with support, but they moved on from Hinkley C to sizewell C. And they're they've got small modular reactor competitions going on with their own hometown favorite of Rolls Royce, but they got I think there's, there's a list of six. And some people will say, well, that's that man. They're all light water. Of course, they're all atwitter reaction because that was the initial criteria was they want something they can build right away. So there's a light water reactor competition for the first six but they're interested in high temperature gas reactors and and other technologies that mostly high temperature gases is a big leader in Great Britain because they're used to gas cooled reactors and you know, of the reactors operated in Britain over the last 50 years all but one had been gas cooled. co2 Gas still gas cooled reactor.

Robert Bryce  48:17  
Interesting. Who knows what so Sweden that's an interesting, Italy

Rod Adams  48:20  
may even join the fray. There's there's talk about Italy be becoming a new nuclear plant owner, they you know, they've got out of the business and after Chernobyl, but then want to come back again. So so

Robert Bryce  48:36  
it So is it fair to say this time it is different. When it comes to nuclear globally, that this time after we've heard this, you've we've agreed for both old men now that this time it is different.

Rod Adams  48:51  
It is different this year, so many positive pushes for nuclear? First of all, unlike the 1970s, where people had a legitimate question about safety and security, and what do you do with the waste? Those were all legitimate questions that we didn't really have answers for. Right. But now we've got 60 years of history that show that the overall technology base between regulators and designers and and operators, we know how to operate nuclear safely. We know how to operate reliably, instead of having capacity factors of 65%. In the 1970s, we have 90 to 93% depending on what year. Sometimes, you know, every not only do we have power, average fleetwide capacity factors 92% Every year, there's between 15 and 22 US nuclear plants that operate for 100% of the hours that a year. are at 100% power. Yeah, okay. They don't refuel during that particular year they go for the whole year. breaker to breaker. Nothing. Always at the at max. That's amazing. Yeah. Okay now. So, and we also know how to store US nuclear fuel safely. Do we have an ultimate disposal? No, but we store it safely.

Robert Bryce  50:25  
Yeah. Well, let's talk about that because that was in fact, my one of the questions that there are 14 states, I think this is still the right list that have restrictions on the construction of new nuclear power facilities. California, Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, Montana, New Jersey, New York, Oregon, Rhode Island, Vermont, and West Virginia now, maybe

Rod Adams  50:46  
Virginia is off the list. West Virginia is off Illinois off the list.

Robert Bryce  50:49  
Okay. So then, but there are six have regulations that prohibit New Reactors unless there's a demonstratable technology or means for high level waste disposal or reprocessing. Now, I think I have West Virginia here but California, Connecticut, Illinois, Maine, Oregon and West Virginia. So are Illinois and West Virginia off of that list as well now?

Rod Adams  51:11  
Yeah. Illinois, in West Virginia, West Virginia.

Robert Bryce  51:15  
A year or so ago. Right. And Illinois, Illinois, just in the last few weeks. Right.

Rod Adams  51:20  
So within the last week, I think, yeah. So

Robert Bryce  51:24  
what about the waist? I mean, is it I know, I've written about this, and I've written about it many times. And that was the Harry Reid problem with Obama, we'll all support you. But you have to kill Yucca Mountain and Obama dutifully did so. And now we are back at not square one but maybe only square 1.5 or something. I don't know where but do we you said we can store it safely. But meaningless right now storing it safely means in dry casks on the sites of the existing nuclear plants. You think that's just okay, just enough for that for now that we should just Well, let's go ahead. And we will deal with that later. How do you think about that problem? Because that's the one that one issue rather than challenge. How do you think about that? Because that's the the opponents are always gonna say, Oh, we can handle the waist? How do you reply to that?

Rod Adams  52:12  
Well, first of all, some opponents are going to say whatever they need to say, of course, doesn't necessarily have to be rooted in truth or or facts mean, some people are going to, we have to understand that are going to be people opposed to nuclear no matter what happens. Sure, there's way too much money involved in energy for people to give up fighting, such a, an amazing competitor, right? So it can't please everybody, so I won't, I'll stop drawing. Sure. And of course, I've got documents dating back to the 1990s. When the coalition's the official coalition to get together to the critical mass energy project got together in DC, and gave a list of things that they would do and emphasizing the waste issue was part of that list of things they would use to stop nuclear. I've got to I can shoot show you a link on my site. But anyway,

Robert Bryce  53:06  
that's 50. And that's 50 years ago, yeah,

Rod Adams  53:08  
but to dry cask are, are adequate, and they're safe for at least 200 years. That's a pretty good solution to any industrial problem. But that doesn't stop us from working on solutions. And oh, by the way, once again, I gotta disclose nucleation capital as investment in a company called Deep isolation, which I think is just very creative company, started by a father, daughter team, the molars, Richard Mueller is one of the most respected professors of energy, he's written books, energy for presidents and just a smart guy. But he looked at the problem, he says, you know, around the world, scientists have agreed with all the countries, they've agreed that if you need to dispose of nuclear waste safely, deep geologic repositories are the best way to do it. Right. They will isolate the waste for millions of years, if that's what you need to do. And so there's lots of effort in that Yucca Mountain was a deep Geologic Repository that finishes a deep Geologic Repository, the UK, France, China, they're all doing I mean, France, Canada, they're all doing deep geologic repositories, but they've all been predicated on the idea of digging a great big mine. Right and then putting it down with vehicles and access and elevators and ventilation systems and all that. Moeller, Mr. Mueller says, Well, you know, we drilled deep holes in the ground all the time. We've got this great drilling technology that goes way deeper than you can mine. It goes down 1000s of feet. And then now these days you don't just drill as a straight hole. You can turn the drill bit and go horizontally. Right. So if you could just put your assemblies down this depot, go horizontally, you got a mile or two mile long laterals, and you can just stack the assemblies. And these things are 5000 10,000 feet underground, right way below any aquifers into stable layers of rock that you can tell have been there for millennia, but doing bazillions of years, you know, wherever, you know, forever. If you can find layers of rock that have gasoline, you can find layers of rock that have other characters. So deep.

Robert Bryce  55:38  
Yeah, and we've and I've had Elizabeth Mueller on the podcast to talk about this. So that's it's a promising technology. But the waist issue is still one that is we got to deal with. But we're coming up on about an hour and I have failed to make a station break here to remind our listeners who I'm talking to. This is Rod Adams. He is a managing partner at nucleation capital and publisher of atomic insights, you can find him at nucleation capital.com and atomic insights.com. Rod, we just have a few minutes left, left, I want to keep our pod or podcast in about an hour. So what are you reading these days? You know, I asked these questions of all my podcast guests. What do you what's on the top of your book list?

Rod Adams  56:22  
Let's see it. You know, I, I usually prepare for this. But I did.

Robert Bryce  56:28  
That's okay. You can see I gotta admit this because

Rod Adams  56:31  
I spent so much time reading reports and financial statements and projections and then presentation on stuff. When I am not doing that work. I have been digging into a whole bunch of different series of books by writers. They call themselves at Tropical authors. And they write books and many of them publish them on Kindle Unlimited. And I'm a fast reader. I love to read novels. So I've been reading tropical authors, authors like Wayne Senate and, and Matt Lincoln and a few others and they all focus on stories that are are the places they do are my home, home areas, the keys, Florida, the golf, boating, scuba diving, sailing, all kinds of things and their adventures. I'm kind of a Jimmy Buffett fan, so that kind of fits into that same category. All these guys talk about every once in a while Jimmy will make a guest appearance in their novel. So that's what I read in my free time.

Robert Bryce  57:32  
So was Carl Hiaasen, right isn't he the Florida kind of the Florida's iconic novelist as well? Are you a fan of his I've

Rod Adams  57:42  
got a full collection of Carl hyacinths book I do like his books I haven't read any recently. He is a I think he's slowed down a little bit but he he's right some very interesting books inspired by the oddities that call themselves Floridians.

Robert Bryce  58:03  
And we'll I was in Florida where I was there recently. What is it then will they explain that if you don't mind the oddities about Floridians? What is your, your native? What is it? What what's

Rod Adams  58:12  
Well, you know, Hiaasen was a columnist and a reporter for the Miami Herald, right? And people ask him where he gets his ideas for characters. Like there was one character in a suit I can't remember his name but I think they called him Skink, he was a former Florida governor who decided to drop out of society and he wanders around the Everglades and to fake out naturalist who are trying to track cougars, he found a a tracker, so he wears around his neck and they they think they're dragging a cougar around. He's roadkill. I mean, just it just kind of weird characters. Hiaasen will say he found people like this in his reporting. There's, you know, there's people that are in his books, there's drug dealers, there's people that are bodybuilders who go steroid nuts, there's, I guess, striptease was a movie that was you know, built on one of hyacinths, books, and, you know, a character who is a real nasty character that nobody likes, ends up getting chewed up by a sugarcane harvester. He has all kinds of weird stuff in his books, but this is what you know. He's He's, he's very much opposed to the mouse at eight Orlando and right.

Unknown Speaker  59:37  
Yeah, I got you. What gives you hope, Rod,

Rod Adams  59:42  
my knowledge of fission and, and I specifically said fish because going back to our conference, in my view, fusion works. It's worked at all temperatures. All you gotta do is pile enough of the right materials together, and it works. You can control it by having some absorb Was it just, it's simple. I don't know if you've seen it, but I was at an interviewed expert for Oliver Stones nuclear now. And I pointed out that one of the easiest jobs in US Navy is being the easiest watched me do is to be the reactor operator on watch on a submarine, because the reactor controls itself. And it's not because it's got real fancy controls. This is because the physics of the reactor, make it want to stay at the same temperature and want to produce exactly as much steam as you ask it to. You open the throttles, it produces more power, you reduce this relative reason. And it's just a simple system. And it works. And it's so incredible, you know, fellas this big, has as much energy as a ton of coal. There's no emissions to get rid of, there's no need for smokestacks, you can run it inside a sealed submarine, there's an abundance of uranium around the world. And oh, by the way, if you run out of uranium, you can always look to thorium. And you don't need to run out, you can do both. You can use plutonium, you can use spent fuel, you know, that all the stuff that we call nuclear waste, or most of us still usable fuel. It's just incredible. And we have this at our fingertips, we have the ability to train people, it's not that hard to learn how to do nuclear power, you don't have to, you know, you don't have to know the details of fission anymore, you need to know the details of the combustion in your in your car engine, you turn the key it works and nuclear plant, you turn the the rod you make it work, you can train people to do this. Effectively, we have such an abundance of energy. And if you've got energy, you can do anything. You can recycle any materials, you can go to landfills and turn them into mine mines. You can you can use plasma torch, you can do all kinds of neat stuff. You can create freshwater, you can make the desert bloom, you can do all this stuff with energy. And we've got it in our fingertips. So yeah, I've got hope. Of course, sometimes I get into deep depression, because I see people that will talk all about the challenges of energy and the crisis of climate change. But they refuse to even say the word nuclear. It's like the like Voldemort is the name that can't be spoken. And I kind of know why I don't like it. And I want to find it. I want to tell people stop talking about energy security without saying nuclear talk talking about climate change without saying nuclear. I'm not saying it's the only solution. But it's got to be part of the conversation. It's, it's ridiculous to eliminate is it it's crazy. Anyone say their name, whatever they keep saying say they're gonna say the name, say nuclear and talk about it. Let people understand what it is we're fighting for. What kind of world can we have if we enabled nuclear to flourish? If it's regulation or if it's perceptions that are the problem? Well, we can change human minds a lot easier than we can change physics, and certainly a lot of us and we can change the rotation schedule the Earth, which is what drives other energy sources. We can't get stopped it, or we can't start it at will.

Robert Bryce  1:03:26  
Well, that's a good place to stop for today. So let's do that. My guest again, has been my friend Rob Adams. He's a managing partner at nucleation capital and publisher of atomic insights. nucleation capital.com. Atomic insights.com. Check him out there, Rod. Thanks again for coming back on the power hungry podcast. It's always a pleasure.

Rod Adams  1:03:46  
Thanks for having me, Robert. And it's always a pleasure. You didn't bite me more often than once every three years

Robert Bryce  1:03:51  
that will we will make that happen. That was my oversight. And I'm glad we made it happen belatedly, but that we won't make it three years next time, I promise. So all right. And thanks to all of you out there in podcast land, tune in for the next episode of the power hungry podcast. Until then, see you