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Hello and welcome to another episode of the Odd Lots podcast.
I'm Joe Wisnal and I'm Tracy Alloway.
Tracy, how about that reopening of a three Mile Island nuclear facilit You.
Know what, I saw that headline kind of float by and it seemed like a big deal. So I think Constellation signed a deal with Microsoft to reopen the three Mile Island nuclear plant, which everyone remembers from the disaster that happened there in the nineteen seventies. What I did see was Constellation's share price just exploded higher, like up thirty percent in a day. Maybe I shouldn't say exploded in a context of three Mile melted up. That's right, it melted up.
You know a couple things about this, So one, I'm kind of not surprised because we all know that the big hyperscalar tech companies have all this demand for electricity, they have a desire to not use further fossil fuels, and nuclear is an obvious theoretical solution to how to get more clean energy. You know, I will say one thing about this deal, and it's very exciting, and I don't want to diminish it in any way. But there's
one aspect of it. I didn't realize that one of the reactors at Three Mile Island had only closed down in twenty nineteen. So I only know there was like something bad happened in the nineteen seventies and the probably contributed to the US as general pulling back from nuclear. But I hadn't realized that actually, you know, there was still nuclear being produced at Three Mile Island up until
twenty nineteen. Does it make it a little less exciting, But it's not like we're fully turning back the calendar to nineteen seventies.
Well, I think there's a nice narrative, full circle aspect to this, right, which you just touched on. After the Three Mile incident. I mean that really kicked off the death of nuclear in some respects in the US, Like there is a lot of hesitancy and fear really about building new plants, and so in some ways, we're restarting at least one of the reactors. Yeah, it's a nice story, let's put it that way.
So, okay, so this operation is going to get restarted, And you mentioned the death of nuclear and how we basically went forever without building new There was that Georgia plant. I think it came online sometime last year, the Votal plant.
But it does raise the question of, like, how much was the fact that we more or less stop building nuclear a function of the fact that we got scared of nuclear regulations, it became too cautious, et cetera, versus the fact that we just had as multiple guests we now have pointed out this sort of flatlining of load growth, this sort of flat lining of overall demand, which is something that's now changed in the last few years with
the reacceleration of demand for data centers. And to how much is this a story of we got scared of nuclear and we overregulated it versus how much did the economics just not make sense when there was not growing demand for lectures.
Yeah, I think that's a good point. I mean, there's another tailwind that's sort of behind the potential nuclear resurgence now, which is there's a lot of government fundings floating around the IRA and programs like that, and so that's another thing that maybe is making maybe this time is different. There have been a lot of predictions about a nuclear renaissance over the years, but maybe maybe this is it.
Let's learn why the stars have aligned the constellation, if you will, why the stars have aligned you for this seeming revival of nuclear in America with the restarting of the Three Mile Island Reactor. We really do have the perfect guest. We've had them on the podcast multiple times. Truly one of our favorites in the fan. We're going
to be speaking with Jiggershaw. He is the director of the Loan Program's Office at the Department of Energy, a key player in all of the Inflation Reduction Act's efforts to stimulate clean energy growth in the US. With the Inflation Reduction Act, his office went from a lending authority above forty billion to over two hundred billion. A big advocate of nuclear and other sources. Jigger, thank you so much for coming on at Lots and great to have
you in the studio. It's the first time we've talked to you here in studio.
It's so great to be in the studio. Thanks for having me.
Thank you so much. So I'm going to start off with this question, which is, Okay, we went for a long time basically without building new nuclear power plants. It's starting to pick up again. How much is it because something has changed policy wise with you know, subsidies and tax credits, et cetera versus demand is back. Therefore the economics of nuclear makes sense or would you say it's not binary?
Well, look, I think that when you think about what happened through historical contacts teen seventies, we had high inflation, right, and nuclear power was subject to high inflation, and so you know, part of this is people were already worried about building new nuclear plants before the incident occurred because
things were just getting more expensive, right. And when you think about the utility bankruptcies that occurred right way back when, it was because it had cost overruns on nuclear power, right. And so so I think that in general, it goes to when America stopped believing in itself and its ability
to do big things in infrastructure. And I think this moment with load growth and with the President saying we are going to build big things here like has gotten people thinking again, Hey, what would it take to actually figure this out this time around?
This is actually exactly what I wanted to ask you about because I was reading that the initial construction cost for Unit one of three mile was about four hundred million dollars, and I guess like today the cost of building a nuclear plant would be like five billion, ten billion. Obviously the four hundred million isn't, you know, adjusted for nineteen sixties prices. But it does seem in general like it's more expensive to build nuclear plants certainly since the
nineteen sixties. Where did that additional cost increase actually come from?
So when you think about building things, like if you were to build multi family housing, and you would build one multi family housing building versus building twelve right throughout the city, you can imagine if you're using the same design, it would be cheaper, the workers would get better, you know, the first one would cost more, the second would cost less, the third would be even less.
You get faster.
I mean you see that when you go into like a new home construction place. The first home takes it seems a lot longer, and then suddenly, like the homes start popping up every week. Right, this is the same with nuclear power. We trained thirteen thousand people to build the Vocal nuclear plant in Georgia, right, and then we were done, And where did all those workers go?
To?
Other jobs? So, now if we wanted to build units five and six. We wanted to rebuild you know, VC Summer in South Carolina, which is like one hundred miles away, Right, we'd have to go and find other thirteen thousand workers, right.
And so one of the things that we have to figure out how to do is to figure out how to build ten right and have those same workers that we trained, all those same EPC contractors, all of those same suppliers not have to stop and start, but we you know, continue to like to do these one off things.
This is why I recommend everyone should go read. Your office puts out a series of reports called Pathways to Commercial Liftoff, reports about what it takes to really commercialize various types of energy, not just nuclear. And you always talk about the importance of the order book going forward so that people know that there's a second and a
third project and a fourth project out there. So I want to get into that and also talk some more about the workplace development, but just on this project a
little bit more. Tell us what happened. How did the stars align such that Constellation thought it's worth taking on the operational risk to get this going Again, Microsoft neat thinking that yes, this is the best solution for their clean energy needs, and what is the role of supply and demand, and then the role of various tax credits and such within the IRA that made this all happen.
Yeah, I mean it's a juicy tail, right. I Mean, when you think about the nuclear energy industry, there aren't really any entrepreneurs, right. Constellation is a company that bought up a lot of other people's nuclear plants. They are the best operator of nuclear plants in the world, right, and then they got spun out of Exelon right into
their own stockticker. But you know, I think we all have to acknowledge that if it wasn't for the Palisades Nuclear plant in Michigan that we announced a conditional commitment for and that we're you know, closing the lon On here, there's no way that the rest of these projects happen. Right in Palisades is owned by hole Tech, which is a genuine entrepreneur, Chris Singh right, private company, right, one of the most successful entrepreneurs in the nuclear industry, right
and in the whole world. And it's one of those weird things where he woke up one morning and said, well, I've just got a contract to dismantle the Palisades Nuclear plant, and you know, we went to him and said, would you think about restarting and he said, do.
You think about doing the complete opposite? Perhaps?
Yeah, And he said, well sell me. And I was like, well, here are the incentives out of the Inflation Reduction Act you can get, you know, the forty eight E and some of these other at tax credits.
Walk us through the specific what are the what do you get in there?
So when you restart a nuclear plant, right, the nuclear plant is viewed as new additional capacity, right because it was shut down. And so as a result, this technology agnostic credit that was created by you know, Senator Widen right, because remember we always had the solar tax credit and the wind tax credit and all these other things. So over time, like the IRA moves us to a technology neutral tax credit, so that everything that is clean gets
this technology neutral tax credit. It's you know, it's a pretty lucrative tax credit, depends on the technology. But let's say three cents a killo what hour? And so now you're in this place where you actually have a bonus production credit. Now you separately can choose to get an investment tax credit. Right. But it happens to be that the production tax cred is more lucrative for these restarts
of nuclear plants. But if you decide to do the investment tax credit, then you get the thirty percent tax credit. Then there's bonus tax cred So if it's part of an energy community, you get an extra ten percent, right. If you have a lot of domestic content, you get another ten percent.
Right.
So you could imagine that some of the folks you're building brand new nuclear plants might go that direction. But as a result of these incentives, nuclear power is now very cost effective. Then the question becomes like who actually wants to buy this power? Right, because wholesale market prices have been low, and so then the question becomes who
was to buy it? And it happened to be that two different utility groups in Michigan competed over wanting to buy all the output out of the Palisades restart, and so he you know, picked one of the groups to buy that power, and then that led to you know, the project becoming financiable, right, and so once that succeeded, then you know, Constellation was like, hell, maybe we could do this.
So when you say with the tax credits and those other changes. It suddenly becomes cost effective or it becomes financiable. Walk us through the actual math, like what is changing here? Is it the discount rate or the future projection of revenue? Like what is it exactly that changes in the equation.
So for a restart, you generally choose a production tax credit, not the investment tax credit. And that's because the cost of restarting a reactor is a lot lower than the cost of building a brand new reactor. Right, so you make more money by getting that extra three cents of kill what hour for the next you know, twenty years.
So the math there is you put up, it depends on you know, where the final costs runs outpu let's call it one to two billion dollars to do the restart, And then you get this three cents kill what hour multiplied by the number of kill what hours that that
plant creates. And remember a nuclear power plant runs on average in the state's ninety two percent of the time, So that's a lot of killo what hours that comes out of that plant, whereas with a solar farm you might get twenty five percent of the time production right
with a tracking system. And so so the math means that you could get almost all of your money back on the one to two billion dollars from the tax credits, right, and then you've got the sale of the power right that you're signing a long term contract for, and you know that's where you make your return, right, Which is why I think Constellations stock price jumped so much because they have so many existing sites where a lot of those nuclear sites have one reactor and they were made
for four reactors or five reactors, but we never built the rest and so while this one was the easiest way to get in right because it was a restart, there's all these other sites where you could build new reactors. And now that Microsoft has come in and said we want to buy all that output because we are taking seriously the commitments we made to twenty four x seven clean power by twenty thirty, then you now have the
makings of an equation. And if you heard but like Meta came out right after that and said, we are also all in on nuclear power and meeting that twenty four x seven requirement.
So we have a lot of physical capacity or just space capacity right now to add more reactors. And so that's sort of the exciting aspect walks through a little bit more of the math with the three mile Island deal. Specifically, for consolation, it's going to cost them one point six billion, I think, is what I've seen reported to get this
reactor back up and running. And then Microsoft makes some sort of commitment where they're going to be a buyer over I don't know, X many years, like talk to us a little bit about more about this particular deal.
Yeah, So I don't know what the final cost of the Constellation restart will be, just because I think they still need to do more engineering work to figure out exactly what needs to be fixed. But there's some massmates floating around. The way that Microsoft and others sign these
contracts is they don't actually buy the power. What they do is this thing called the contract for differences, okay, and so power generally gets sold into the open market to look into the PGM, and Microsoft says, depending on what happens with this power, we will make you hole on the payment. Right. So if we said that we're going to pay you know, nine cents coed hour, and you end up getting seven cents of code hour, we'll
pay that two cent difference. And that includes not just the kill a what our price, but also includes the capacity payment.
Right, So you may have.
Heard that the PGAM had a very large increase in the price that the capacity payment cleared. And the capacity payment is essential because it convinces the coal plants or the natural gas plants or others who are sort of at the end of life to make investments to last a little longer because they got paid a capacity payment to stay open. So the pieces that come here are
both the capacity payment and the energy payment. And Microsoft is saying that we get all the attributes, so we get to call our usage green, but separately like, if for whatever reason, the wholesale market value for what the nuclear power plant is creating is less than the strike price that we agreed to, then we will.
Make you hold.
So you mentioned the idea that there are some nuclear sites out there already that have spare capacity that could either be restarted or with new reactors or units built. So I guess I have two questions based on that. But one, if you have space in your nuclear facility, is that space specifically designed for one type of reactor already? Like, are you wetted to a particular model that you have to follow? And then secondly, what's the actual process to
build a new reactor? Like I can't imagine you open up the nuclear reactor catalog and you know, you go like, ah, I'll take this one. How does it work?
Well?
So, just to start with your last question, first, it used to be that you did have a nuclear power catalog. Oh and that's the problem, right, that's why we have ninety you know plus reactors and only four of them are exactly the same. And so it used to be that used to be able to customize your and that led to a lot of inefficiencies. And so I hope and pray that this time around, when people build new nuclear they build the exact same cookie cutter thing every
single time and we get our costs down. But to answer your question, so the Department of Energy commissioned to study to look at all of the fifty four sites that we have with nuclear plants. Some of them have one reactor, some of them have to, a couple have three, and then only one. The Vogel Nuclear Plant has four. And we can build any type of reactor on those empty sites because really it's just land that's behind a security perimeter, right, and that's what you care about is
a security perimeter. And so we have about sixty five thousand megawatts of capacity at the existing nuclear sites, which is massive. If we use small modular reactors, right, which are the ones that are sort of in that three to six billion dollar range, and if we use AP one thousands, which is what we built at the Vogel, then you could build almost ninety five thousand megawats at
those same sites. But those are more like ten to four fourteen billion dollars each, right, And so you have to decide whether you want to spend that much money.
Are you limited at all? Or does space maybe become a factor in the sense that the hyperscalers want to be co located close to the plants.
So they're not going to be within the security perimeter. They be outside of the security member. And most of these nuclear plants are in fairly the middle of location. These are somewheres I grew up near a New time side, but you know, but they're going to be well, let's say five to seven miles away, and so you don't need to use a transmission infrastructure and tax it. You can create your own line directly from the nuclear plant
to the data center. And so that saves a lot of cost because now you don't have to pay for the transmission. And so that's why a lot of this colocation makes us sense. It also disrupts the grid the least. And then the other thing that is so great about this colocation idea is that the people who live around a nuclear power plant love nuclear power plants. The public perception of nuclear is that ninety plus percent around a
nuclear power plant. And so you know, instead of going to a brand new spot where you might have a mixed reviews, it's easier publicly to use existing sites.
It's good to know. Yeah, here's a random question. I've been one of those things that wanted to ask someone. I probably could have just tweeted it years ago. Sometimes I see these things it's like, oh, there's like a three year wait to like plug some new production of any sorts of energy into the grid. And I'm always like, is this just like someone like like go out and plug a line into the wall or something. What's that all about? And like why does it have to be that long?
It's it really is an extraordinary thing, right. I think that you know, most people view electricity like water, right, so you just put a bigger pump in, you put in more pipe, it gets to your house.
You got hot water.
That's great. It's not like that at all. There is this complex physics equation that you have to solve.
For because the greatest to be in perfect balance all the time.
Right.
Well, so there's the there's the perfect balance between supply and demand, but then there's also figuring out, you know, what the constraints are of each individual segment on the transmission line.
Right.
So if you're using power in New York City and you're creating a lot of extra power in out of the nuclear plants in Illinois, right then that power has to go via Indiana and Ohio and then through Pennsylvania to New York City, and they may or may not be able to carry that much, right, And so they have to do these studies. So every time you try to add something to the grid, they have to do a study, and they have to figure out whether that capacity is there, how often it's there, whether it would
continue to be balanced, or whether it be imbalanced. And so the big fight there is that. So in Texas, what they do is they just look at the safety part of it, but they don't look at the capacity part of it. They just say, you like, connect at your own risk, and if we're clogged, we're just going to tell you to shut down, and that's on you, right.
So that's why they're proving people super fast, whereas with a PGM and others they're saying, not only we're going to do a safety study, we're also going to do a capacity study, and we're not going to let you connect until this other generator shuts down and frees up capacity for your generator. And so that then makes the wait time much longer.
Since you mentioned safety, just then, I got the impression that the other thing that's been holding nuclear back is I guess licensing barriers and regulation and things like that. Has anything changed on that front recently? I saw there was a bill over the summer called, I think the Advance Act or something like that that I think made some progress. But is that starting to evolve too?
Yeah, So, I mean there's definitely been a lot of people giving their unsolicited advice to the NRC, saying we want to beat you up because we don't think you're
moving fast enough. But when you think about it, it's only the vocal units three and four that they've had to process right, And ultimately what the people who built Vogel did was said, we are going to tell you exactly how we're going to build it, and then you hold us accountable to building it that exact way, and then you license it at the end, right, And so
so that's what the NRC did. The alternative pathway is they can go in and say, we're just going to build this thing, like you're going to like preapprove that the fact that the license for the reactor is pretty safe and it's fine, but you're just going to like approve the as built drawings at the end right. Now, Like when you do that, well then it's a lot easier to get away with things being one inch off
here and there, which is fine. But like if you give them as builts and say we're going to choose a licensing path where you hold us responsible to no changes, well then when they come in and inspect it, it's one inch off, they're like, you got to redo that and do it to exactly the specs you told us. So now all of the different reactor companies are deciding to go with this new pathway because it would be
a lot cheaper. But you know, like then you have to wait till the end for them to say that something you did wasn't like a safety concern, and so it could cause you a lot more cost, which is why people generally don't do that, right. And so my thing with the NRC is that they have a job to do, not unlike the fed's dual mandate, right, Like the NRC now has a dual mandate.
Right.
So with the Advance Act, it used to be that they just were safety minded. Now they're safety minded and they have to support the building of new nuclear right. And so the way this kind of stuff works is you got to flood the zone.
Right.
So if you actually build ten reactors, it'll be amazing how efficient the NRC will become. But if you have all these people working there and you only do one reactor, well, then a lot of people are like, well, we have a lot of time on our hands and we're going to like study your application a lot more, right, And so the efficiency comes from people using the NRC more and actually like pushing a lot more reactors through.
Joe, I can't wait for the Phillips curve of your incidents versus capacity built.
Out Whenever the day that that is a debate. You can be sure that we are going to cover it. We talked a little bit in the beginning about the market's reaction to Constellation. So the market likes the deal, and as you mentioned, the market likes the sort of possibility that this has opened up of maybe the Constellation isn't just going to be in the business of running nuclear but actually building nuclear. You know, talk to us
a little bit more about the prospect. And it gets also back to your point about how for this to actually work. It can't just be one offs. There has to be a series. It's like that thirteen thousand people that build Vogel, then they go onto the next project,
and they go on to the next project. Where are we on the sort of I don't know, second derivative question of whether we have the sort of momentum in the industry to actually learn from the previous project and redeploy talented work and all these things that we need to get the cost curve bent down.
So I think the first piece is right, yeah, And I think the why part of this is, as you suggested, there are three aspects to load growth.
Right.
One is data centers and frankly, AI is not really a big part of it. It's mostly just clouds, an expansion of cloud But then there's some AI sprinkled in that's at least twenty five thousand megawatts of new load by the end of the decade.
Right.
Then you've got all this success we've had with you know, the president's agenda around on shoring and reshoring, and so there's a bunch of five inner kilowatt and two megawatt and four megawatt manufacturing facilities that are popping up everywhere. Eight hundred new manufacturing facilities that have been announced, right
and that are under construction or expanding. And then the third piece is you have this electrify Everything movement where a lot of people are buying electric vehicles and they're doing heat bumps and they're doing all these things. And so so you've got all three of these, and you know, then the question becomes like, how do you want to
meet the load growth? And for a lot of the electric utility companies, remember, you know, they haven't had load growth in thirty years, right for sure for twenty years, and then very slow load growth in the nineties, and so they're now saying, can we do this with the tools that we have in front of us, and it looks like it's going to be really hard for them to do it with the tools that there are used
to using. And so they're saying, we're going to need to figure out this nuclear thing, but also we're gonna have to figure out how to use geothermal, expanded hydro, et cetera. And so then the question becomes, you know, how does one wrap their brain around doing this right?
Because the electric utility companies are filled with people who run them who generally, we're running a dividend yield stock, right, Like these are shareholders who are like, we want no volatility, we just want our dividends.
Right.
And now you see like JP Morgan's Infrastructure Fund in others that are taking some of these utilities private and saying, we think you're a growth stock and we don't think that we could actually do this in the public market, so we're going to take you private and give you all the tools you need to become a growth stock. Right.
And so they're some of those dynamics going on, and you've got a lot of governors who are yelling at the utilities saying, I spent so much time attracting all these manufacturers to our territory, and now you're giving them a three or four year timeline to interconnect.
What the heck, right?
Like, we want to create family sustaining jobs for all these people who want just to have a high school education and not go to college.
Right.
And so the pressure on the electric utility companies is getting real, right. And so now you're in this situation where the question becomes, Okay, if we're going to do this, how do we do it right? And so we have been facilitating those conversations with the Nuclear Liftoff Report, with lots of conversations around what new tools might you want for risk mitigation from the federal government, how do you
want to do this stuff? In Constellation, for instance, has said, we're amazing at running utility scale nuclear plans, but we don't know how to build nuclear plans, so we don't want to build them. We want other people to use our sites and we want them to build them and then we'll operate it right, because we're really good at operations.
Right.
And so you're starting to see a bifurcation of the market where there's some people who are doing development work and developing these sites and figuring out how to negotiate with the hyperskilled data center companies, etc. And then there are other people who are trying to figure out how do I construct these things and how do I build the workforce, etc. To do ten or twelve of these things.
And then you've got others like Constellation who are saying, we have an interesting financial model, right, because they have to do subsequent license renewals of their plants that are reaching sixty years old to extend the life to eighty years, right, And so a lot of folks are saying, well, you know that's also a risky bet. That's probably going to
be ten billion dollars of capex to do that. Well, if I had off take agreements from the hyperskilled data center companies, that would be a safer way for me to make that bet, right, because they're really risk averse. I mean even like I would say, up to like two weeks before this announcement around the restarting of the Crane Clean Energy Center, a lot of folks were like, I don't know, like how the stock markets can react to us, right, right, So they were really nervous, right,
And now they've got the validation. I think that it gives them even more of an incentive to figure it to make more. But also the electric utilities, right, it's it gives electric utilities and an incentive to say, like, why are we being so risk averse? Like our shareholders will probably reward us for becoming a growth stock.
You explained it very well just then. But in light of a lot of utilities starting to look like growth stocks AI adjacent growth stocks rather than like boring old divis in plays, are there new sources of financing that are potentially interested in the sector, Like have you seen the actual mix of funding, either the investors or the structure start to change?
Well, I mean, you know, the reason why we're in the middle of this is because the Loan Program's Office has this expanded authority, and we are in the middle of all these conversations because everybody wants to figure out whether they can use the money out of the Energy Infrastructure Reinvestment program that we were given out of the Inflation Reduction Act or our traditional innovative clean energy program where we've got you know, probably one hundred and fifty
billion dollars between the two of those programs of loan authority. And then you saw the big announcement from all the big banks this week saying that they are now pro nuclear. I don't exactly know what that means.
Yeah, I was going to ask you so, by the way, just for those curious recording this September twenty fourth, but yeah, keep going with it.
And so, you know, I think in general, those big banks like to do balance sheet related investments, and so in some ways, I think they're signaling to the electric utility companies, where you know, a lot of these big banks own the debt for a lot of these companies that say, hey, you know, we're going to be pro you guys doing nuclear power. So I think that's good.
I don't quite know exactly what they're going to do differently, but it used to be that they, you know, like a lot of the utility companies thought that their stock would be downgraded if they announced a new nuclear plant, right. So I mean, at the very least, I think everyone's sending a signal that we're not going to downgrade you.
We actually want you to do this stuff. We want you to promote economic growth in the United States of America, and we're actually going to like, you know, give you tailwinds and so I think that message is being sent.
Since we're talking about funding sources if we step away from nuclear for a second. I think it was last week I saw this report. There's this geothermal company called Fervo. There's always a lot of excitement about and I think
they've raised some VC money, et cetera. Anyway, the report asserted that the problem for them, and I guess maybe you can explain it better, but I think geothermal is you stick a pipe in the ground and there's heat in the earth and it comes to and then the heat comes out, and that's energy that the vcs are maybe excited. But then project financing is a charge, whether it's the lending to actually like Okay, here's the funding that it's going to be for this site specific I
don't know much about this. Who've never done a geothermal episode? From where you sit? Is that a real constraint either on geothermal specifically or other forms of energy? Which is that Yeah, maybe some investors like the idea of equity in some of these companies, but like the project financing component of whatever we're talking about is still not a mature market.
Yeah, so geothermal is a very interesting technology, you know, as you may know. The traditional geothermal is you basically have to find a liquid that like sits under the earth, like sort of near a hot pocket, and then you basically like tap into it and then you let the liquid go up and down and then you know, and that's sort of how you do geothermal. This new enhanced geothermal allows you to create your own pockets and so
use use modern hydraulic fracturing technologies. You drill you know, mile down or wherever it is, wherever you think that heat pocket is, and then you fracture the rock there and you put pipe in there, and then you basically allow the working flow to go down there. It gets super hot and it comes back up and now can turn a turbine right, And so as a result, you can do it anywhere. You can do it in New York State, you can do it in North Carolina, you
can do it in Nevada. You can really do it anywhere. Now it's only really cost effective today in six states in the West, but once we get really good at that, then it should propagate across the United States because it's
super cost effective. Again, though the first units are going to cost more, right, and so Fervo got a clean transition tariff signed with Nevada Energy, so Nevada Energy is buying their power, and then Google is buying it from Nevada Energy, so that Nevada Energy isn't taking this premium power and spreading it across all of their repairs, but
Google will buy it. Right. And then they made another announcement recently that they had done more drilling tests and everything went far faster, far cheaper than they thought it would, and so they're getting closer to the oil and gas speed rates than the geothermal speed rates. Right, and Haliburton and SLB have said, Wow, this stuff is ridiculously easy. We like are happy to do all this drilling because this is child's play compared to what we do regularly
for the oil and gas sector. Now, to answer your question, the problem is what the solar and wind industry are used to doing is getting money directly from large pension funds and pushing all the risk off to the contractors who do the work. And the contractors say, don't worry, we'll take cost over on risk. We'll do everything else because this stuff is crazy easy, and so now low cost infrastructure funds can invest in it. Right when you
go into geothermal. Haliburton SLB say, we don't take any risk. You pay us as a drilling company, and sometimes we hit gold, and every once in a while we don't hit gold, but we're not guaranteeing you gold. You pay us for the drilling, you give us the subservice data. We'll do exactly what you tell us to do, and it works, it doesn't work. So then a lot of this low cost so and win money is saying that
seems strange. You're saying, I could like have a cost overrun because you don't fail per se and enhance U thermal, it might just be able to build another hot pocket, like instead of five, you build six or seven, right, and so then costs a little bit more. I don't want to take that risk. I think someone else should
take that risk. And after you've certified with inspector that you've done everything correctly, then will buy the project because we don't want to take that risk, right, And so they're going through this pathway where they need to find money from people who actually like taking that risk. And so that's why it was important to see that Fervo raise money from Devon Energy, which is clearly an expert at managing this kind of risk for fracking, and so
they are not afraid of this risk at all. Right, but their cost of capital is clearly higher than super low costs, so or and win money. But they're willing to go faster because they are very comfortable with these risks. And so this whole thought process, how we're thinking this through is something that I had to do when I started son Edison back in two thousand and three and got all the big financial firms who thought solar was
too risky to come in to the market. And so now we have to promote this exact kind of thinking across geothermal, long duration energy storage, nuclear hydro, like all these technologies that we've been researching for twenty or thirty years, and like it's ready for primetime.
People are like, wait a.
Second, that looks a little different than what I did yesterday.
Right, Yeah, it feels like the proof of concept is there. For instance, I really like geothermal just on a sort of individual housing basis, and it would work for my property in Connecticut. But the constraint for putting in geothermal in an old house in Connecticut is that you would have to tear everything up and put in the duct work to actually make it work. So on that note, are there other restraining factors on a lot of this new technology? I mean, that's kind of what we've been discussing.
But setting aside the fine nancaying we have proof of concept for a lot of these what's holding back the growth? Are there physical realities perhaps or you know, shortages for instance of HVAC workers going back to the housing analogy that maybe are restraining growth.
Well, we definitely have a huge problem with trained craftsmen, right, and so you know, I think that we're probably between five hundred thousand and a million people short, depending on your assumptions for how fast folks are going to retire from the craft And so it's an extraordinary thing, right, I mean, you could start at sixteen years old, become a union craftsman, be making six figures by the time
you're thirty, and you know, have a family sustaining job. So, like, I think there's a lot of people who thought for a long time that their kids going into the trades was probably like not what they wanted to brag about
at cocktail parties. But it's great to see that. Like in the last year, I've seen people start to brag about their kids going and becoming an electrician or a plumber, and so some of that stigma's going away, which is great because a lot of people need to go into the trades, and frankly, a lot of people don't want
to take on the college debt, et cetera. I think the other constraints though, are really around the grid, which we talked about before, which is that no matter how much stuff we do to build new HVDC you know, high voltage DC lines or like grid enhancing technologies reconductoring existing lines to put new materials in there that can carry twice as much power, like, we're still going to be grid constrained. Right, So then the question becomes how
efficiently are we using the grid. Geothermal and nuclear operate at like between seventy five and ninety two percent of the time, and so it's pumping electrons into the grid at that rate. Solar, you know, if you add two hours four hours of battery storage might get from twenty five percent to maybe thirty five percent, right, But so
you're inefficiently using the grid. So now you might have to put a lot more storage on the front end of the transmission line to use the grid more efficiently and then put more storage in the back end of the line, which we call electric vehicles, to use that more efficiently, right, And so so we can get so much more out of the grid that we've already paid for, but we have to be intentional about the mix. So we love so and win and we should build as
much of that as we can. But we also need a lot of this clean firm power generation to match it as we retire so many coal plants, not because of environmental regulations, but largely because they're at the end of life. I mean, many of these coal plants are requiring billions of dollars of additional investment to stay open, and people don't want to put that money into them.
And so I think there's a lot of constraints around us basically deciding what we're going to get good at, right and where are we going to start the flywheel? I would suggest to you the flywheel has to get started across all these technologies. The IRA and the bill you know, legislation have been the single largest investment in starting this flywheel in the world, and so.
We're super excited about it.
But the other piece of it, I remember, is that everybody else in the world wants our solutions. So if we do it here, I mean Poland, Eastern Europe, all these other places want to use American nuclear designs, they want to use American technology, they don't want to be tied to Russia or China. And so part of this also is recognizing that like the world is looking to
us to show this leadership. The President has passed all these laws, and now we need the private sector to be a little less worried about whether the stock price is going to go up and down. By showing leadership and recognize the last five people that were nervous about it, their stock price went up. It's like it's time to believe.
Jiggershaw, thank you so much for coming back on odd lots, kind of perfect timing all of this news to announce, and for your point. So far the stock market seems to be helping your efforts. So thank you so much.
Oh thanks for having me me, Tracy.
I always really like talking to Jigger. You know, this sort of reminded me not even related to this conversation. I have one of my friends who is more i would say, on the right side of the ideological spectrum, and he's always he's like, I think you mentioned to me once He's like, I don't really care about climate and all that stuff renewable energy, but when I hear Jigger talk like, yeah, I'm totally on board, it's always great talking, very compelling.
Yes, I mean, I do think one of the things that has perhaps changed a lot of the equation is also the experience of the pandemic, which did not necessarily cause shortages in energy per se, but certainly kicked off a general awareness of wider infrastructure and the idea that you can get choke points in certain vital things for the economy. So I think that is like kind of always hovering in the background. And from that perspective, even if you don't like cleaned energy for some reason, you
probably like cheap energy. Yeah, and so hearing about potential expansion in capacity should be a good thing.
I really like how much this story is kind of a stock market story, and I think it's one of the things that makes it particularly exciting for us at this podcast, where it's like truly at the intersection.
Capital markets plus clean energy.
Yeah, like engineering real world things. So, for example, I liked his explanation of like why it's not trivial to just add massive amounts of power because all of the balancing that has to go on throughout the entire expanse of the grid from Illinois to New York and everything. But then also this role, like it really does make
a difference. Like if the stock market rewards your deal, then you want to do more of them, and all your competitors will want to do more of them, and so sort of like this signal from.
This signaling effect. I was about to say exactly that. So you can scratch your head and be like, well, why are the banks putting out with statement saying they like nuclear energy now? But like the value is the signaling effect, right, And it is kind of crazy. So again we're recording this on September twenty fourth, but just in the past few days there have been like five or six positive like nuclear rel related things that have happened. Kind of crazy.
Totally, And to Jigger's point about like it's sort of a tragedy if you build the Vogel plant in Georgia and then you have all these people trained on how to construct a nuclear reactor and then that to the end of the line and then everyone goes to get a job in some other field. We're not going to have cheaper, more abundant energy unless what we've learned from one project quickly gets deployed to the next project, which is why all those lift off reports from the DEE.
Like Jiggers talked about this on past episodes, the order book is just absolutely key.
I'm thinking about the nuclear reactor catalog now, maybe it'll maybe it'll come back, but it'll only be like two pages long, and it'll be like the model T where you can have the nuclear reactor in black, gray, gray or gray.
Yeah.
All right, yes, looking forward to that catalog arriving in my inbox.
Shar on Christmas time.
Shall we leave it there?
Let's leave it there.
This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm Jill Wisenthal. You can follow me at the Stalwart. Follow Jiggershaw. He's at Jiggershaw DC. Follow our producers Carmen Rodriguez at Kerman Arman dash Ol Bennett at Dashbock and kel Brooks at Keil Brooks. Thank you to our producer Moses ONEm For more Oddlocks content, go to Bloomberg dot
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