Hi, Meren Talks Money. Listeners, I've got a new column out at Bloomberg dot Com. It's all about ices. We're coming up to iSER season. We all love an iSER, we all like to be an iSER millionaire. But are ice is good for the country as well as good for you? Now, that's a question we've got to ask. Because this is a tax break, are we using it properly? There's a case to be made for the brit iSER only allowing you to invest your iSER money in companies
actually listed in the UK. You can read the argument for that at Bloomberg dot Com. At the same place, you can also find columns from Bloomberg's many other brilliant columnists, and be sure to subscribe for access to insightful stories, data videos, podcasts, and much more. Welcome to Meren Talks Money, the podcast in which people who know the markets explain
the markets. I'm meren'sumset Web. This week, a conversation about the UK's future energy mix with Kafrinport and independent energy consultant at what Logic, and after my conversation with Catherine, stay tuned for a conversation with Bloomberg energy reporter John Morrison Yadron. Hello, thank you so much for joining yesterday.
My pleasure.
Okay, we're going to dive right in with a super easy question. Isn't it zero possible by twenty fifty?
Probably not?
Is it desirable?
Now, that's a very interesting question. I think that we have been focusing very single mindedly on carbon dioxide, and some of the policies that we've been adopting in pursuit of that aim have caused other harms and are causing other harms that aren't really getting the attention that they need. I did some work recently looking at the critical minerals required for the energy transition and the huge increase in mining that's going to be needed. And the problem with
mining is it's very environmentally harmful. It's often taking place in countries which are quite arid, so issues around water supply, keep maintaining clean water, availability of water for agriculture and
human consumption are quite significant. Blasting and so on causes a lot of air pollution, and you have huge challenges with managing the rights of indigenous peoples on whose land or underneath whose land these resources are often found, and often that you have a lot of labor and human rights abuses associated with them.
Can I just take you back and ask you about water. I think a lot of people won't understand quite how water intensive mining is.
Yeah, So the issue with water comes up in a few different ways. One is that miners often deliberately remove water from the water table to reduce the risk of flooding in their minds. That have been studies in South Africa that have shown that water table levels might take more than a century to recover, and this affects mooreholes that are being used for local people's consumption and for agriculture.
Water is also used quite extensively in the processing and extraction of the minerals from the rock, and so they're taking that water away is then unavailable for other uses.
Then the third area where you have an impact is that there's a lot of waste material from mining and the extraction of metals from are and you get what's called tailings, and they're usually stored in these ponds and all sorts of contaminants can leach out of those ponds into local water sources, whether that's fresh water or seawater.
And then that also gets into the food chain, both marine let's say, fish, and so on and then people eat the fish and get sick or just straightforward drinking the water, and so it has a really significant impact. And we've seen in South America there's been increasing social pressure against mining. So in Panama recently they closed a very large copper mine as a result of basically political pressure, and now it's a lot harder to open new mines.
And so you have a population of people, particularly in South America and what's called the lithium triangle. I'm really objecting to new.
Extraction in Pritus and Chile. You haven't there around lithium minds that.
Exactly, they're objecting to mining. They're objecting to extraction that they say not unreasonably. Then they're not receiving a fair share of the economic benefits of all of this. But then on the other hand, you have populations in low lying Pacific islands and in the Indian Ocean i am,
you know, clamoring for more action on climate change. So you have two populations in fairly sort of underdeveloped and more deprived parts of the world with very conflicting sets of interests, and so far there really hasn't been any effort to balance those and sitting here in the UK, or what right do we have anyway to say which rights are better than which are the rights and all the rest of it. So I think that we need to start thinking in a more holistic way about what
we're doing. And you realize that common dioxide is only one part of the puzzle. If we don't have enough drinking water, then having clean air isn't going to be that much of a comfort.
Yeah, I'm maintaining with agriculture and so on. So there's massive downsides to what we're trying to do exactly, Okay, So let's talk then about what the ideal energy mix would be.
Right.
So we spent a lot of time in the UK, in particular under wind energy and solar energy and trying to up the level of these particular renewables into our energy mix. So we reached a limit. Do you think of what we can do there?
I think so.
I think solar has some contribution, but it's very much at the margin because in our times with peak energy demand, it's just not sunny, you know, winter evenings, and we haven't found a way of seasonal storage for energy yet it's not one that works within Britain. We don't have seasonal hydro capability because of our geology, so until some other technology is developed, it allows us to store electricity from the summer to the winter. That is really not that useful.
Okay, So so simply doesn't work for us beyond a certain Yeah, I mean it's.
Nice to have.
It feels a bit good as at the margin, but without a way to storage at least overnight, if not seasonally, it's kind of points you really need.
To have seasonal storage to move your solar from the summer to the winter.
Yeah. And we have a similar problem surely with wind and there's not so much seasonal but intermittent.
Yeah.
And intermittency is the big problem with renewables because our grid is not designed to deal with it, and because we need to create a constant backup system to deal with the intermittiency.
That's exactly right. And so it's extremely expensive. And this notion that renewables are cheap because all the wind is free is extremely naive because you have to build at least the same capacity again either as alternative generation or as storage to bridge those gaps when it's not windy.
So straightway that costs money. But then also you have a lot more expenditure on the grid because now this renewable generation is very distributed, so instead of having one big lump of generation in one place with one cable connecting it, now you need lots more cables. And then also you have to manage the moment by moment intermittency, so this is called balancing, and the balancing costs have
gone up by billions of pounds a year recently. So all of these costs are added on to consumer bills, and it's why if you look at a chart of retail versus wholesale electricity prices since the beginning of the century, you see that retail prices have just gone up sharply, whereas wholesale prices sort of wiggled around and done some other path. And it wasn't really until September twenty twenty one that wholesale prices really drove the retail price, because
they then rose very significantly. But otherwise that relationship hasn't been that strong because the retail price has contained all sorts of other elements, wind subsidies in particular.
So when we'd hold that wind is cheap, it is not taking account of the backup power, the cost to expand the grid to figure out the balancing and possibly also the adding environmental cost of the rare earth metals, etc. That we need to create the components.
Absolutely not and it doesn't so it doesn't include the direct costs that currently go on to consumer bills. So consumers don't see that rare earth environmental cost, but they definitely see the extra grid cost because the network component of bills has gone up.
They see the.
Extra balancing cost because that also comes in through the
network component. Now, when I did this work on critical minerals recently, I went from being a little bit sort of neutral I think maybe we should pause the whole wind roll out while we upgrade our grid, to actually been quite negative because once you understand the huge amounts of additional copper and aluminium that are required to support that build out, and they are the two minerals that are going to be mostly required for the energy transition,
the increase in aluminium and copper supply will have to be very significant, much bigger than everything else. I mean, it takes ten years and billions of pounds to develop a new mine, and all those other challenges we mentioned earlier, it starts to actually look morally questionable, and so I think more sensible strategy is to go for nuclear where it fits in with the way grids were designed and it doesn't have the intermittency problem. So yes, nuclear has
very high capital costs. Once you've built it there, it can run for sixty years. It's extremely safe. Nuclear and solar have the lowest deaths by unit of electricity generation of all generation technologies.
Okay, that's unexpected, and make sure for most people, I would say.
Yes, it is unexpected, but that absent Chernobyl. Aside from Chernobyl, there have been no nuclear reated related deaths from any nuclear incident worldwide.
Huma, for example, there were no death related to that. The deaths around that were related to the tsunami, not.
Exactly so at the the consumer plant itself there were some fatalities, but this was because you know, things fell on people's heads during the earthquake and tsunami. That's not a nuclear incident. That's just an earthquake related incident. And so you get industrial accidents. And that's why even with solar, for example, non zero deaths associated with solar. Obviously solar panels themselves are completely inert. But then if you look
in the mining industry. The mining industry is extremely dangerous, very high levels. In fact, all extraction industries oil and gas is the same, and coal and so on, so all of these other industries. And then of course if you're using those materials to build your generation, then that it's within that supply chain, and renewables wind in particularly you get working at height issues as well. So yeah, nuclear has a very strong is you're only.
In mining, not as dangerous as some other kinds of mining, but.
There's just less of that.
You need so little, yes, that it doesn't make any difference. Yeah, I wrote about this reason. You're actually saying that you're only miss so interesting because it's the most price insensitive thing in the world because you only need a tiny bit of it in each nuclear plant. But without it you can't do anything, so you'll pay anything for it, so it's not to have to shut the thing down, right, Yeah, Okay,
let's go back briefly. I want to come back to nuclear and how it's financed and how we should do that, but let's go back to the grid. So the grid is initially designed to have these big power stations in the middle of the country, is sending out constant power of heartbeat and never stops, etc. Even with nuclear, if we're going to have a lot more electrification, even with that, we'd still.
Need to upgrade the grid.
Right, Yes, you need to build more generation and you'd need to upgrade the grid, but it's a much smaller challenge if you're not doing it using a lot of intermittent generation. It's the fact that we're having all this intermittency which requires a doubling of capacity. So you need all of the reliable capacity that you can call on your thermal and nuclear generation as well as the wind, and it will be much more economically effective and a better use of resources to just have that and not
have the wind. And obviously you're not going to want the thermal because of the the carbon emissions, but you can have the nuclear which doesn't have the emissions problem.
Okay, again, I want to come back to Nikle. I'm gonna put that one side because I think you're I probably both agree that this is the answer, the only answer. Everyon want to move away from a fossil fueld. So let's go back and talk about fossil fuels a little. Because it's hard to imagine a world without them. Right, So when we have let's stop oil throwing souper around
the place, et cetera. Even everybody's plans for net zero still have us using fossil fuels, right, Even in net zero plans, It don't go away, even in the most ambitious, ambitious plans that anybody has. And even now when the whole world of talking about reducing fossil fuel use, coal and oil and gas use is still rising. Right, we might be able to make them slightly fall as a percentage of use, but not much.
No, even in Britain, not coal use, but oil and gas use has increased in recent years.
So when we talk about in the UK not not using the shell gas that we could get access to if we wanted to, and not producing any more licenses for exploration and production in the North Sea, this is just silly.
It is.
Yeah, So I think the shell questions a little bit different when it comes to the North Sea. We should really maximize the potential of the North Sea and guess as much out of it as we possibly can, because the alternative is just imports. And then people say, oh, yes, but you know it has to travel around anyway because we don't have all the refining capacity, but we still control the production emissions, and we do have some refining capacity,
so that argument doesn't really stack up. As soon as you're importing, you really lose control of the supply chain. With shale, it's a little bit different because although given adeology, we're fairly confident that the gas is there, we can't
be it's confident that it can be extracted economically. And if you look at Poland as an example, you know, the Polish would crawl over hot coals to avoid buying gas from Russia, and they looked at shale quite extensively, and in the end they concluded that L and G would be a better approach to get the more Russian gas, and so that's the route that they've taken. So it's not given that that can be economically.
Extracted go back to the North Sea. So, if I understand you, rightly, is suggesting that there's really become of almost a moral imperative to continue to the extent that we can produce our own oil and gas, because at least we can control it, control its production, control the way it's taken out, control the way people who work on those rigs are treated, etc. So if we don't pull it out ourselves, we're going to be importing it, correct and we it's a huge sort of revenue for
the treasury, So it's just crazy to import it when we could produce it ourselves. And the windfall tax terrible.
I mean the windfall tax was introduced because of political outrage and public outrage around people like Shell and BP earning huge profits. Now I kind of object to that a little bit because nobody's giving them sympathy in years when they don't turn huge profits, and when they make losses, nobody compensates them when they drill a dry well for example, and you know you mentioned the people working in the North Sea. It is one of the most dangerous, strong
jobs that you can do. So I do slightly get annoyed when people are throwing stones at these companies as if they're evil and terrible, when they're really not. They're providing goods and services which are essential to everyday life in which we all benefit.
Than my living standards would collapse absolutely.
But also BP and Shell only a tiny proportion of their global income comes from the UK, so really it's harmed. Companies like Harbor Energy. Well, most people have never heard of Horbor Energy. Harbor Energy making profits or losses is not headline news, and yet it's the biggest operator in the North Sea. It's taken a big hit to its finances as a result of the windfall tax and as
a result is reprofiling activities away from the UK. And what we're seeing is that across the North Sea operators they're are scaling back their activities and we're seeing rigs moving out of the area. Now, once these rigs go, it'll be really hard to get them back. And obviously without rigs you're not going to do anything. So it's been really damaging and it needs to go. And this is politicians need to avoid these kinds of knee jerk reactions.
The windfall tax has not achieved what it was intended to achieve. All it's done is harm companies that most people have never heard of and don't really care about.
And the belief in the time was that it would raise large amounts of revenue without affecting production. Well was that the view? It must be?
Well, I think yeah, And now the government is trying to sell we'll have these annual licensing rams as a way of signaling ongoing commitment to the region. But the best way to signal that commitment would be to get rid.
Of the EPL.
Where are the rigs going West Africa?
West Africa?
It is certainly not coming back, are they? No? No, There's one form of energy that I haven't asked you about, and that is bio mass. And one of the big conversations I know in the energy world is about drags. Is drags good or is drags bad? Right? And I think you might be on drags bad side. I think, well, first have a claim DRAGS does.
So. The Drags used to be a coal fired power station, and because everyone got very squamish about coal, they decided that they would initially co fire with wood pellets and then convert to using wood pellets completely. And wood pellet biomass is considered and has this sort of very neutral cabin accounting, because the idea is that you plant new trees and then those trees grow and I absorbed common dioxide and that offsets the cobbon dioxide that you're emitting
by burning the wood. And so DRAGS is a huge power station and it burns a lot of wood, and this wood is being sourced in the US, and they like to say it's mostly wastewood, but it would be hard to supply drags using just wastewood. I'm interrupting you because I've I've got their table here. I have a drag supporter who has sent it to me. Stormal and other wood industry residues nineteen point seven percent branches and tops three percent, sinning, thirteen point eight percent, low grade
round wood twenty two percent. That seems pretty valid. Well, what they do next is they have to chop it all up, they have to dry it out, and they have to pelletize it. All of those steps take energy. Then they load it onto ships and those ships are fueled with bunker fuel, which is the dirtiest bit at the bottom of the crack, and then they sail it halfway around the world to Yorkshire and then they set
fire to it. And the emissions from the chimneys at Drax when burning wood pellets are higher than they were when they were burning coal. So not only is this bad for the people of Yorkshire because their air quality goes down, it is bad for all the people in between Yorkshire and the US because of all the emissions from the shipping, and it's bad for the people in the US because of all the emissions from drying, pelletizing and all the rest of it.
Okay, how about this.
Honestly, anybody can plant trees so you could be residual.
Fiber depellot plants significantly improved the economics of timberland. This has contributed greatly to land owners making the eping economic decision to shift from let profitable land used like carbon nasty cotton in the US planting trees for lumber and biomass. Timberlands of the save Lee to the US are now growing in size, increasing carbon sequestrations and habitats for the nice animals.
But what you're doing is no, because they're fast growing variety, So you're losing biodiversity by doing that.
Okay, you're just not going to be convinced on this one.
No, no, no, There are other forms of biomass energy, so I think it's always important to be specific that we're talking about wood pellet biomass in the context of drags. But when you look at the supply chain emissions and the fact that the stack emissions are higher than they are with coal, then really the best thing that dracts
could do other than just closing. Would we go back to burning coal, and yes, you'll have some emissions ship in the coal, but you don't have to dry it and pelletize it and do all that other stuff.
Okay, so it would really the best thing for us to do. Absolutely the best thing for us to do is to forget about the woodpellers, forget about everything, go back to coal and just open up our old coal mines again, dig up the coal sticking into drags, and then you've got a nice, constant efficient source of power that just goes directly into the grid without any of the environmental consequences for other countries. So or is that now really pushing it?
I think that's pushing it because I don't think we're going to sustain a coal industry with two coal power stations, because we've got Drags and Ratcliffe and they're both getting quite old. So honestly, I would keep I would have them as coal because it's cleaner than woodpellers, and I wouldn't close them because I worry that we're going to run out of generating capacity come the end of this decade.
So I think closing anything that isn't actually broken, shouldn't happen, and one or two coal power stations isn't going to destroy the planet. What's going on in China?
Yes, and they create excellent backup exactly exactly. So that's what's going on in China being the increasing use of coal exactly. I mean, that's increase really interesting because their use of renewables is increasing massively, but so is their use of every fossil fuel known demand because.
Their energy use is expanding sort of yeah, and it's orders of magnitude bigger than what we're doing. So one or two coal power stations in the UK not even running all the time, it's not really moving the dial up from a climate perspective. But if we have blackouts then that would have very serious consequences. If we had winter blackouts in the UK, people would die, that's highly likely.
So to avoid that at a very bad outcome, running a couple of coal power stations doesn't seem like a bad trade off.
Okay, so we leave Rags doing what it does, but we probably leave it doing what it does with biomass because it's not going back to coal. And as you say, if we don't have those backup generators, running. We are vulnerable, so we need drags and it's biomass. If we're not going back to coal, even if you don't strictly streaking improve of it and the way it does things, if we didn't have it, we've been putting ourselves at risk exactly.
And I think it's unfortunate because it's received so many subsidies to do something that's far worse than it was doing previously. And I don't criticize Drugs for that. I mean their management team has done a bangup job. Really, if persuade incentivized exactly, they've persuaded governments to pay them lots of money to do something even worse than they were doing before and really give an obsolete business model new legs. So their management has done a brilliant job.
I don't blame them. They're doing what they're supposed to do for their shareholders. Yeah, it's the government, not just our government. You know, the EU is in exactly the same boat with the way that it incentivizes by a mass.
Yeah, so our governments have made a real massive the senergy business, haven't they incentivizing all the wrong things?
They have.
But this is not a political comment because the mainstream parties are all broadly in the same boat on these things. I think the Conservatives now are starting to see a route to maybe if they soften their commitments on net zero, that gives them, you know, a slight benefit in the polls, given that they're so far behind any to do the results of Uxbridge.
But I mean, this is written into law.
Well yeah, but laws can be changed quite tough, I don't think so. It depends if you have a decent sized majority then you can do it. And people say, oh, well, the net zero target is written into lots is definitely
going to happen. Well, I completely disagree with that as an argument, because I think you'll get into the twenty forties, be remote from the target, be facing an enormous bill, and are dropping people's living standards to achieve it, and suddenly there will be a growing consensus to move or
change the target. Okay, so it won't happen. It won't happen now, and it might not happen in the twenty thirties, but as you approach the twenty fifty day, it will happen exactly so, and you can't stop a future parliament passing different laws so a future parliament. Just because the law exists today does not mean it will exist tomorrow. Do you think that this is an off topic question that if Richard Sinec were to give one last gift to the nation before he's removed from office in the
next election, it would be removed be that zero. Will there be a gift you g givers.
So I don't.
I think that's possibly too abstract as a gift. I think that what he would need to do is to phrase it in ways that where people could see a benefit to them in the short term, because that's really what's hurting people right now is the high cost of living. So that zero people are starting to realize that's going to make energy.
And goods more expensive, you know, just.
Starting to talk about carb and border adjustment mechanisms and things like that. That's going to make stuff more expensive. It will be inflationary.
So well, let's let's look at the answer. Then we can come back to it to assume act gift, because the gift give us around this to come back to nuclear which I think you believe is the answer for doing to our energy problems. Right first, explain going to be why there isn't the expense extent which it's feasible inside the timeframe that we need.
So I think nuclear ticks all the boxes because, as I said before, it fits in perfectly with the way the grid was designed. It's not intermitted, and it produces huge amounts of energy from a very small site. And once you've built it for the last decades, you know, now you're really looking at sixty years operating lifetime for these reactors, and they are very safe. So what's not to like? The high upfront cost and the wist those are the two things not to like, whereas the wast
is actually very manageable. Volumes of waste involved are extremely small. The problem we have with waste these at the moment is a legacy issue. It's dealing with all the stuff at cellar Field from back in the day when waste wasn't handled properly. But the waste that comes out of power stations now, although we haven't identified a long term disposal site, it's all being stored in a perfectly safe way. The volumes are small. It's all very manageable.
Can you see volume small? What do you mean like.
A coke can's worth a year? All that kind of.
Small, okay, But compared and compared with all the other toxic waste that we generate from all of the other industries that we have going on, it's really smart.
And people forget that.
They think nuclear as being unusually bad, but actually other industries both produce more toxic waste and are actually far more dangerous. The biggest industrial accident ever was Boparl. Nobody wants to stop making pesticides as a result of.
That, okay, But how do we get a buy in for this in that you know, to get some power stations up using nuclear reasonably quickly in the timepime that is required. Given you already concerned about having about us having blackouts towards the end of the decade, right well, Steton.
Number one is don't prematurely close the advanced gas called reactors, which on the current schedule would all be shut by March twenty twenty eight. They could continue running into the twenty thirties, and they need to, and that requires the Office for Nuclear Regulation to soften its approach in certain areas where it's really taking much too.
We're really bad at softening regulation in the UK, well, really bad at that's so that to keep those running requires a regulation shift at and to build new ones inside the time frame. In the next sort of thing, I would personally disband and replace it with something else because I think it's it's it's got a little bit out of control and the structures around it, so it
sits under DEFRA. It's not connected with the Department for Energy in any way, so it's and how much of a priority is it for DEFRO, you know, looking after nuclear safety, I think we need to we need to do better. So step number one is don't close the ADR's step number two we need to start quickly building new reactors.
Now. There are various sites around the country, Wilvera being the most obvious, where there's not just local buy in, there's an actual, active local desire to have a new reactor put on that site. They want it, they would they would crawl over broken glass to get it. The low is known as atomic Kitten because she's pushing for getting a new reactor at Wilver. This is, you know, it's like the perfect storm of everybody wanting it in that area, so we need you know, it's pushing it an open door.
Let's let's do it now.
The most credible route to delivery at the moment is with KEPKO, the Korean Electric Power Company. They are about to open their eighth APR fourteen hundred. They've got four open in South Korea. There's a fourth one about to open in UAE America. They're delivering these reactors in eight years, on time and on budget. No one else at the moment can come close. Neither EDF nor Westinghouse. Who are the other competitors in the Western world, if you like, are anywhere near that?
Do we order now? We can have them by the early thirties correct.
KEPKO, I think is estimating about a tenure delivery for the UK, given sort of UK specifics. Now, their reactor is not certified in the UK, but it is certified in the US, and there's a virgin that's been certified by the EU. Now the government has said it wants to cooperate with trusted country regulators. This is a perfect opportunity to do that. If this technology is good enough for the NRC in the US, it should be good enough for US. Like the NRC is a perfectly credible regulator.
It's not some Mickey Mouse outfit. They will you know, they have high standards, So we shouldn't be reinventing the wheel to get that certified.
Here, okay, what about the and we should pay for it?
Okay, that's what I was gonna ask. So who's going to pay for it? It's so to me that my view yep, okay, tell me your you. My view is not tell me the.
Government should at least for the first So I think we need to sign a contract with Capcove for maybe five reactors and not all once, you know, come up with some sensible delivery schedule, and at least the first couple need to be paid for with public money on the public balance sheet.
Because energy security is as important as any other great, yeah.
So I when we don't outsource funding the military or the police to the private sector, and that's our physical called security is a nation, so we shouldn't necessarily take a different view for energy security. But I believe security then there, well we'll come, but we don't. But we're not in the same boat with food security. So I believe that one of the challenges at the moment with securing private investment is there's a concern, well, there are
two issues. One is kind of easily overcome investors have something of a blind spot around nuclear that's similar to their blind spot about AI. They sort of put it in, oh, this is quite complicated and scary bucket, and then they're just not doing the normal risk analysis.
So it's sort of like, just work.
The problem like you would any other problem. Your risk professionals, for goodness sake, just do your job. The other aspect is a genuine concern over regulatory consistency and the stability or otherwise of the policy and regulatory environment, and those are legitimate concerns, and I think that the government needs
to do more to de risk the construction phase. So if it just simply put its own money down, and of course the government can borrow more cheaply than any of the other potential investors, so this would also reduce cost of consumers. I'm fairly confident that after construction they could refinance and probably at a profit as well, because these will be long term profitable assets. So once you've de risked construction, these are going to be a very
different and more attractive investment prospect. And also once you've demonstrated the commitment, you started rebuilding supply chains, you started building up work for skills and the confidence on delivery, then actually you probably find more investor interest even before the operating phase that you might get people coming into finance construction.
As long as the bill costs didn't get out of control as they seemed to on everything we try and build.
Well, no, but Capco's has been keeping its costs under control. So we need to just bring them in and give them the ability to deliver in the UK in the way they've delivered in South Korea.
And ue, what.
About small modular reactors. I mean these we've been building these for years and sticking them on submarines, right, so yeah.
Unfortunately we can't just put the same ones on land because well, because they use a much more enriched type of fuel, it's not actually licensed for use in civil applications. So the idea with nuclear submarines is they can stay under the sea for years on end. You know, they resurface because the people need to exactly and they need feeding and stuff, but the you don't need to refuel them. That type of fuel can't currently be I mean, why it's not considered as safe. That's why, I mean there
are concerns over the safety. Well, yeah, but if you're a nuclear submarine operator in the Navy, then you have other safety concerns. I mean, yeah, that's already part of the deal. Okay, so we can't just transfer this to land, so that at the moment, none of the this type of fuel is not it's just not licensed. Now they're starting to increase the concentrations of fuel allowed in civil applications,
but it's very much a softly softly approach. So maybe in some point in the future they would be able to do it, but it's not at the moment now. I think small modular reactors have great potential, but it's they're more a twenty mid twenty thirties onwards conversation, and we just can't afford to wait. The most promising ones are a couple of boiling water react to technologies that are being developed in Canada, and if they work, that
will be very promising. But they're essentially a scale down version of large scale reactor technology.
Okay, is it possible that all our problems will go away once we can mirror solar energy from space.
Hull?
All our problems could go away. If we invented nuclear fusion, all our problems could go away. If we could capture unicorn tears and harness them trying to end on atmistice gather.
Now we don't me try something else.
You can come up with an optimistic answer to.
How confident are you that we will get our energy makes sorted out before we end up having power cuts? The real question being should I buy candles?
Well, I actually advise people with elderly relatives to buy tortures and have them sort of secreted around their houses because if they had power cuts and you know, navigating stairs and stuff, it's that's kind of dangerous. So if the longer we leave it to act, the narrower our
choices become. So we're rapidly approaching at a stage where the government's going to have to hugely increase the procurement target for the capacity market and build more gas unabated gas fired generation, which will be expensive because there's uncertainty about how they will operate post twenty thres can be reasonably quick, but they can be delivered in under two years, so that could be done to fill the gap. If that isn't done, then you're really looking a demand catailment.
So if you're expecting a blackout because of a shortage, and you can see that shortage coming, then you have to tell your industrial demand to turn itself off so you can potentially avoid blackouts that way. Of course, you're greatly reducing system stability and increasing the risk of widespread blackouts when you're doing that, and damaging your economy. But it's hugely damaging. It'll be politically and economically damaging to do that, So we do currently have the tools to
avoid blackouts. Don't close the ADRs, don't close anything else unless it's actually broken. And look at building new gas because if you don't, you know you're running out of time. And try and accelerate the build of new nuclear so that when you do have to close the ADRs in the beginning of the next decade, you've got something coming on.
To replace it.
Yeah, I'm bang handles.
And then you've got electrification to consider as well.
Yeah.
Okay, Catherine, thank you so much. I will just ask you one last question, which you'd have to take stab at, even though not your area, because I ask everybody, and I can't let you off. If I was going to lock you up somewhere for ten years, somewhere nice by the way, and before I did that I asked you to make one investment and one investment only. And I normally say to people they have a choice between bitcoin or gold, but in okay, I'm going to add on uranium.
Well, sume bitcoin or gold. I do gold. I am between gold and uranium.
That's interesting. Yeah, I'll probably do uranium. Yeah, of course if you go for the gold, you can always wear it afterwards, you can.
Yeah, uranium, I.
Just make something pretty and bitcoin you're not convinced by not really, no, wonderful.
That was very kind of you to answer that question. Thank you so much for joining us today. That was fascinating.
Thank you.
With me now to reflect on what we just heard from Catherine porter Is Bloomberg Energy reporter Rachel Morra and Rachel, thank you so much for joining me today.
Hugely appreciated.
That was an interesting conversation, and I wanted to start by asking you what you thought about Rachel's thoughts on net zero. She says probably not possible by twenty fifty, which seems to be a growing concernsuscietally, and she's also not convinced it's desirable either. So do you from your work, do you think that it's possible by twenty to fifty on our current projectory.
I think when we are thinking about it, we're thinking about the word net within that and how much emphasis is going to be on that net. So there's new technologies where you can capture carbon from the air and so you can remove carbon. So can we be offset that against some of the emissions that we haven't been able to prevent. So I think within that we could probably get close by twenty fifty. It's very hard at
this point because it's so far away. I think we're looking at some of the twenty thirty goals, particularly in the UK, the clean grid by twenty thirty five under the Conservatives or twenty thirty under Labor and people are saying that that looks very difficult. That's just too soon for some of those technologies like carbon capture and storage or hydrogen.
Yeah, okay, So it's really meeting it at the moment based on what we can do at the moment. It's more about carbon capture than anything else.
That I think we're at a crossroads where we sort of have to see which becomes more successful and more widely used, and that's on a global basis. Carbon capture or hydrogen both, especially if it's green. Hydrogen can solve some of the problem in the places that are difficult to decarbonize, such as industry.
And then when we moved on to talk about desirable this is when it all got pretty interesting with Catherine, because she looked at it very much through the prism of cost, and not just financial cost, but also environmental
costs that not everyone looks at. So we talked a bit about water supply and the massive amount of water used in mining for the critical minerals that we need for transition, and talked about the general environmental harms and also social harms that that mining might might have in the kind of countries where lithium, etc. Is And that was quite an interesting way to look at it. This
is not something you heard about that much. That that a this focus on financial cost, which is gathering speed, right, and b this focus on the environmental cost of the minerals. What did you think about her take on all that?
Yeah, I think you're right. A lot of the focus tends to be on the kind of sustainability from the kind of labor involved in some of those minds, and the availability of the critical minerals needed for making batteries, and the water aspect is interesting because you know, it seems like almost every solution we find has some other strain on the environment and on the planet. When it comes to cost, I think it's quite difficult calculation to make,
particularly for renewable energy. And yeah, the conversation was focused very much on the lowest cost of consumer and there is this idea of the trilemma, which is an idea that sort of come back into fashion, where you have cost, you have security of supply, and you have environment and at one time only one of those things can be at the apex of the triangle, so at the detriment of the other two. So if you put cost at the top, then obviously that might mean using fossil fuels
for longer because it might be cheaper. But if you put the environment or sustainability at the top, then you know, perhaps one of those things it has to give is that we have to pay more. And I think what she didn't mention is that having huge amounts of renewable energy which feeds into the grid at a low cost, does lower the price of energy for consumers. So we do have that bill lowering impact of having lots of
renewable energy. Yes, we have to pay for it. We have to subsidize those technologies at the moment, but the cost has come down significantly. You know, you kind of are weighing up that you pay to build it now and it operates for decades into the future, giving us a source of clean and low cost electricity versus just sticking with fossil fuels and not building anything new.
Yeah, but when you say it brings down costs, you are talking about the future, right, I mean it's more expensive now.
We have to rebuild.
We've put up all this infrastructure, and we have to pretty much rebuild the grid from scratch and make it much much bigger and develop it in a very different way to take on many, many, many tens of thousands of different sources of energy as opposed to the small number of energy sources we used to have in terms of big power stations in the middle of the country, et cetera. So we have to do that, and then we have to pay for the backup power, the intermittency,
et cetera. So in the short term, that doesn't reduce builds, and I when we see that do not build. It doesn't reduce bills. But the hope is that it does over the medium to longer term. Right, well, it does.
You can see it on your bills. If you have one of the kind of flexible or agile tariffs and it's a super windy day, then you can see that you get exposure to a price that is much much lower than usual. So you can not everybody has that. I mean, it makes more sense if you have something like an electric vehicle, but it is possible for the consumer to get exposed to that decrease in price when
renewables are plentiful. I think what you're describing is the shift from this big centralized system where we have big power stations and big centers of demand to much more decentralized lots of input points along the grid for your heat pump, your electric vehicle. And yes, that requires a lot, a lot of investment. But on the other hand, the power stations we have don't last forever. A lot of
them are going to close. We have old nuclear plants that are going to close, gas plants that will closed they reach the end of their life. So whatever we would have to build something new, we can't just use things that are sixty seventy years old, so there would be some kind of rebuilding no matter what we did.
And I think when you look at some of the research, you can find that the status quo and continuing to use fossil fuels that are subject to big price swings like the war in Ukraine ends up being more expensive than investing and receiving the benefit of that cheaper, cleaner power.
Well, it seems like I mean that the efficiency and cost base of renewables such as solar and wind is always going to cause arguments, partly because there's the arguments around land used efficiency, etc. But fossil fuels, of course are always going to cause arguments. But there does seem to be this one thing in the middle that I talked about a lot with Catherine, which is nuclear power,
which seems like an increasingly obvious solution. If we just really focus on building out nuclear you don't really need anything else. You can you can stop with relying on China for solar, you can stop with worrying about where the minerals come from. We can so arguing about whether we have to colonize the Moon together the lithium, et cetera. We can just get on with it, and that seemed the way she described it and the way that I've
heard other people talk about it incredibly compelling. It takes away all the other problems. Do you think she's been too simplistic about that?
I think that. I mean, it depends which country. But you know, in the UK, for example, we are sportive of nuclear. Here the government, both on both sides, supports a build out of nuclear. The problem is it takes so long. The big stations that like Hinkley Points see size well see that are Hinkley's being built. It's taking much longer and costing more. And there's been several examples throughout Europe. There's one project in France that EDF is
also working on, Flamonbilee, that's been incredibly delayed. And so if we if we could rely on nuclear to be built quickly and not cost a lot more than we were thinking, you know, perhaps it could play a bigger role. And I think most people sort of think yes in part, but maybe it's not the full solution for those reasons. And the small modular reactors are interesting too, but we haven't got a working example of those yet. You know,
they're still in their infancy. Of development, so it's sort of a leap to rely on them too much at this point.
Although she did say, I mean I found at the very end of the conversation that that that we just closed on. We were to talking about the Korean Electrical Power Company KEPCO and how they're just opening these things all over the place. They've got four open in South Korea. They're opening them all over the place, and they're delivering them in eight years, on time, on budget in a
way that nobody else is. And I said to it, so if we order them now, we can have them by the early thirties and years like, yeah, absolutely, and we should do that.
I think the nuclear sector would respond by saying that our kind of safety standards are so high here. I mean, I know that getting a reactive design approved takes a very long time, and I've visited the Hinckley site, and even though we're not likely to have a tsunami, they have to build walls that would protect the power plant from the impact of a tsunami. You remember Focushinger, you talk about it in the interview, and there's just trying
to protect against that. I think would mean it would be difficult to loosen the regulations and allow nuclear to move faster. But often it's actually the construction and the people that takes a long time, the supply chains. It's not necessarily just the regulation.
Okay, I mean there there is or she suggests that there's a case for not being quite so so safety conscious. Obviously very safety conscious, but she does suggest that we go a little ott with us in that. I mean, for example, for Coushuma that was not actually a nuclear accident. There was a tsunami, but it didn't cause any any deaths from the nuclear station itself, just from you know, the kind of physical damage of a tsunami.
Yeah, I think it's just such a high risk. And I'm sure you remember from some of the worst points in the war in Ukraine that there were worries about a nuclear plant there. And if you know, if there's an attack on a nuclear plant and the wind blows towards Europe, you know, we could all be impacted too, and it's impossible to contain and stop, and so it just you know, policy makers just cannot risk that, even if it's unlikely. Still, the Fakashima incident impacted how you
build nuclear all over the world. Regardless of the likelihood of it actually happening.
Okay, I'm getting that you're just not quite as keen as as Catherine was and don't see it just quite sort of straightforward way out of the whole thing.
I think it's part of the solution, but I think a huge amount of capacity would just be very difficult to do.
Okay, thank you, Thank you very much, thanks for listening to this week's Maren Talks Money. We'll be back next week. In the meantime, if you like us show, rate, review, and subscribe wherever you listen to podcasts, and we finally have our show emails, so send along your ideas, your questions, to your comments, and of course your criticisms to Merin Money at Bloomberg dot net. This episode was hosted by me Maren sumset Web. It was produced by Someasadi, additional
editing by Blake Maples. Special thanks to Katherine Porter and of course to Rachel Morrison.