Nucleation Capital

When will we hear that construction is restarting on VC Summer 2 & 3? It might be sooner than many think. Anecdotes have been floating around the nuclear world about the physical condition of the VC Summer expansion project. According to rumors, the equipment and structures were abandoned and rapidly deteriorating. BACKGROUND VC Summer Units 2 and 3, both of which are Westinghouse AP1000's, were started at the same time as Vogtle units 3 & 4. Faced with significant cost overruns and a long runway to completion – along with the challenge of very low natural gas prices and low wholesale electricity prices – the project was halted in July 2017 after $9 B had been spent and each unit was less than 50% complete. (Unit 3 was significantly less than 50% complete.) END BACKGROUND Inspected condition of VC Summer construction site On September 24, 2024, two senior, experienced members of the SC Governor's South Carolina Advisory Council toured the site, took a series of photos and produced a report. The important top line of the Conclusions section of the report is as follows: "From a technical perspective, • The general impression of the site condition is one of a shutdown of several months rather than the actual term of seven years since cancellation in 2017. • No obvious conditions preclude undertaking completion." The Governor's representatives found that both warehoused components and those that had already been installed were in "excellent condition" with well-maintained inventory records. There are many additional hurdles that must be overcome before the project can be restarted and eventually completed. But much of the work that has already been completed is still in reasonably good shape. That gives VC Summer owners a head start in efforts to complete new units compared to those who own a greenfield project. Note: One of the hurdles will be defining "VC Summer owners." There are some tangled legal considerations. https://lnkd.in/ebRUKkXx

Can nuclear fission costs be significantly reduced without affecting public safety? During the First Nuclear Age – when nearly all operating nuclear plants were built – none of the participant were incentivized to keep cost under control. Monopoly utilities earned a fixed return on investment (higher cost meant more revenue) Vendors earned more money selling and servicing more equipment. Their market domination strategy included using regulations as a moat and capitalizing on their ability to manufacture enormous components and machines. Contractors did what contractors do – they bid low and made most of their money on change orders and overruns once customer was completely committed Regulators were told that cost was no object and that safety had to be perfect. They believed they needed to impose major changes in response to any incident. Financing was mostly borrowed money with rates determined by the market. Those rates climbed precipitously during late '70s and early '80s, just when project borrowing magnitude was maximized. Great for lenders, existential corporate risk for borrowers. We all know the result – nuclear plants became too expensive to build, especially in a market with low fossil fuel prices. [That was generally the case from 1986-1999 with a bump during 1st Gulf War.] During the current nuclear age, the incentives have been realigned. Customers like Big Tech and huge industrials have a deep history of cost reductions and the importance of learning curves. They will help drive costs down as deployment expands and learning happens. Some reactor designers see themselves as being owner-operators that sell power instead of equipment. They're adopting the razor blade model. Note: The best razor blade manufacturers in the world design, own and operate their own blade manufacturing machines. They fiercely protect the IP in those machines and make them as efficient as possible while selling huge volumes of blades. Contractors are still a bit of an issue, but skilled developers are emerging who know how craft contracts that better align the interests of all involved Regulators have been directed – by law – to become more efficient and to avoid unnecessarily limiting the deployment of nuclear energy and uses of radioactive materials. The law emphasizes that the standard is "reasonable assurance of adequate protection." Perfection – which is a goal that can never be attained – is neither required nor implied. A larger portion of financing is equity, especially in startup ventures. Bottom line – past performance does not predict future results.

Abilene Christian University received permission last week from the NRC to build a 1 MWth molten salt research reactor. The reactor will be supplied by Natura Resources. It is designed to be a vital stepping stone in Natura's planned production of a large number of 100 MWe molten salt reactors. The MSRR at ACU will be the first NRC-licensed liquid fuel reactor. It will also be the first new research reactor built at a US university in more than 30 years. For Atomic Show # 321, I spoke with Andrew Harmon, Natura Resources's Vice President of Operations and Business Development, about the historic project. We talked about the project's beginnings, the leadership provided by Doug Robison – a career energy entrepreneur from the oil and gas industry, the interest in the project from the Texas energy industry, the local support given to the project in the form of an impressive new university research facility and the cooperative engagement with the NRC during the licensing process. I think you'll enjoy the show. https://lnkd.in/ekgtMvZ7

The Nuclear Regulatory Commission, which is designed to be overseen by five Presidentially-nominated, Senate-confirmed commissioners has had a vacant seat since June 2023. A few weeks ago, President Biden nominated Matthew Marzano, a relatively young nuclear energy industry professional who has been working in Washington DC policy roles since 2020, to fill the important position. That choice was novel in the sense that just 16% of the commissioners that have served the NRC since its creation in 1974 have any nuclear industry experience at all. While Marzano has received letters of support from a number of groups, Ted Nordhaus of the Breakthrough Institute – a man who has repeatedly earned my respect and admiration – believed that Marzano was too inexperienced and too tied to the way things have always been. He felt so strongly that he published two critical opinion pieces with damning headlines - Is Matthew Marzano the Most Under Qualified NRC Nominee Ever? and Matthew Marzano Is Exactly Who I Said He Was Those pieces sowed doubt and concern among some of my nuclear advocate associates, so I took a hard look at Marzano's education and career path. I obtained valuable background information from longtime colleagues and friends in the nuclear world. My conclusions are the polar opposite of Ted's. I'm pretty sure this topic will not damage our professional relationship. It might sound weird in today's world, but disagreements can happen agreeably. Marzano is a good fit with important experience. He will help improve technical understanding and diversify decision making processes on an important commission in a positive way. He has been committed to taking full advantage of safe atomic energy since he made his undergraduate decision to major in nuclear engineering. He will help enable nuclear energy to cleanly serve an ever larger portion of the world's energy needs while also taking actions that should improve its acceptance and social license through sustained superior performance. I published a much longer version on Atomic Insights. https://lnkd.in/eg839eEW Ted Nordhaus

Oracle CEO (Larry Ellison) made an announcement on Monday's earnings call that he described as "bizarre." He told the audience that Oracle was going to build a data center that required 1 GW of electricity. Then he told them that the power would be supplied by three SMRs to be built on a site where there are already "building permits for three nuclear reactors". The location was not disclosed. Neither was the reactor design. Outsiders might confuse an NRC-issued early site permit (ESP) with a "building permit." If that is the case, there are 5 possible locations. (The NRC has issued 6 early site permits, but one of them was used for the Vogtle expansion project.) TVA's Clinch River site's ESP specifically mentions 2 or more SMRs, but the others include a total power level limit and a phrase about the possibility of using modular designs. There are a few 300 MWe SMR designs. (Three units would be close to 1 GW) None of them has a design certification – yet. Note: I think Larry's choice of "bizarre" was a little outdated. These days, almost everyone is talking about using SMRs to power data centers.

It's currently true that nuclear power plants have very high capital costs and take a long time to plan and construct. But cost and schedule are characteristics of all products and projects that can be improved by skilled human beings. The US Advance Act takes a major step forward in addressing nuclear energy's primary remaining obstacle. It directs the NRC to improve its processes and make them more efficient. It also tells the NRC that its mission includes regulating without adding unnecessary limitations on beneficial use of radioactive materials and nuclear energy. Other regulatory bodies will take their cues from the improved NRC, just like they have been taking cues from the inefficient NRC that doesn't take nuclear energy benefits into account when issuing and enforcing unnecessary regulations & policies designed to make some people feel good. Focused, purposeful action to improve the efficiency and motivations of those involved in approval processes, will gradually make it as easy to install nuclear power plants as to install equivalent fossil fuel generation. Improved regulatory processes need to be matched with improved project management and construction performance. Practice will make a difference, but so will effective recruiting. Better regulatory environment and public acceptance will help attract skilled people who have often avoided nuclear because they prefer faster moving industries and technologies. Better cost and schedule performance will attract the vast flows of capital that provide rewarding jobs and career opportunities. It will become a golden circle of improvements. Fission is just another way to boil water or heat a flow of gas. Fundamentally, it is a clean, reliable and efficient heat source that uses tiny quantities of material. That means it is potentially cheaper and easier to install a nuclear power system than a fossil fuel power system.

In early June 2024, I had the pleasure of participating in a fireside chat with Amy Rotman during the 121 Mining and Investor Summit. We talked about Nucleation Capital and our thesis revolving around the importance of nuclear energy as a tool in the energy transition. I described some of the new technologies being developed or refined to make nuclear systems that are able to serve the needs of a much larger customer base than the one served by monopoly electric utility companies that wanted huge central station power plants. Industrial heat and electricity production on a smaller scale are driving forces leading developers to configurations that allow higher operating temperatures at lower pressures. We also talked about the business model innovations being pursued, including the idea of companies that build, own and operate fleets of nuclear reactors while selling heat and power under long term power purchase agreements. https://lnkd.in/ecg-grGx

E&E News published a comprehensive piece about the importance of the nuclear energy ADVANCE Act. It provides useful details about the bipartisan nature of the support for nuclear energy deployment, the history of the years-long effort to develop broad and deep support and the usefulness of the bill’s provisions in creating a fertile environment for nuclear energy growth. How many issues can garner vote totals like 393-13 in the House and 88-2 in the Senate? (Aside: While the two NEAs in the Senate were no surprise - Markey & Sanders - I was surprised when I found that 12 of the 13 NEAs in the House were Republicans. Times have changed since I started publicly advocating for nuclear energy on the USENET.) Unlike most E&E articles, this one is accessible to all. https://lnkd.in/gWeXZZr4

There is an energy transition underway, but progress is about as visible as the progress of an aircraft carrier or a large submarine at the time it has finished removing all of its mooring lines. There is a rather lengthy path to open ocean where the throttles can be fully opened. Along that path, the external tugs will continue to play a role in successful navigation and shoal avoidance. Employment of all available tools will accelerate the process of coming to full speed. In the transition from fossil fuel dominance to clean energy dominance, electricity will play a major role because it enables a wide variety of non fossil fuel sources, including nuclear, wind, solar, hydro, and geothermal to provide useful contributions. (Note: Extracted hydrocarbons will always contribute to human prosperity. But their dominant role is nearing its apex.) https://lnkd.in/e7cRTcNV