Blain’s Morning Porridge 12th July 2024 – The Future is About Energy. The West is Losing.
“The act of avoiding nuclear power generation is one of auto-genocide. Nothing more clearly demonstrates the limits of our intelligence.”
Smart pundits are buying Uranium. While China builds out its nuclear fleet, the US looks set to favour fossil fuels while the UK’s nuclear plans are over-engineered and slow. Future economic leadership will be determined by energy. It’s a game the West could well lose.
What will the future look like?
Market uncertainty is driven by fear of what the future holds. There are as many scenarios as there are stars in the heavens:
- Will it be a dystopian future where AI takes over the planet and wipes out humanity?
- Will dysfunctional geopolitics push the world to the brink of nuclear war and one step beyond?
- Will global climate change create uncontainable migration, massive social instability, galloping inflation and class conflict?
- Will the mobilisation of fake news, media manipulation, bots and troll farms by “bad actors” to manufacture distrust of politicians, polarisation and undermine democracy, fracture societies beyond repair?
- Will the indebtedness of Western nations, and the apparent unaffordability of repairing decaying infrastructure, cause the breakdown of nation states?
Or, might it be something from the history books – which have a habit of repeating themselves:
- Will the world tumble into a New Age with a new Global Economic Hegemon based on acquired competitive advantage?
I very much suspect the latter is the most likely scenario – it will all be about competitive advantage in Energy.
Our modern society is 100% reliant on energy and is becoming more so – witness the power demands of AI and the monstrous waste of energy mining Bitcoin – don’t dare tell me it doesn’t count because if it uses renewable energy. In the West our dangerously decrepit and decaying power infrastructure could ultimately cost us the future.
Recently on a podcast I discussed the state of energy transition, and 2 key points came out:
- Car sales in China are over 50% electric. China is building electric infrastructure at speed to de-oil its economy and enable an electric-based economy.
- A key part of China’s transition strategy is 55 nuclear power stations online, another 23 under construction including new safer, more efficient 4th generation plants, and many more planned. The Chinese build their power stations from conception to completion in 5 years. They have constructed the supply chains for the materials needed, and have trained a large highly skilled work force to build them. (South Korea’s KEPCO is even faster and cheaper.)
China has grasped the moment – its’ energy transition is real and isn’t just climate friendly, but averts the risks of becoming hostage to external energy rich powers. They aren’t going to rely on imported gas or oil, and they aren’t hoping unreliable wind power or solar panels (even though they dominate production) will achieve energy independence!
Because everything is energy dependent, the cost of energy will be the critical component of national competitiveness and influence. Nations with plentiful cheap energy will outcompete those without. They will dominate the future trade, services and tech because they are power rich while others are not. They will acquire and set the price of critical resources.
While the rest of the world is struggling with the politics of energy transition – and arguing about the number of wind turbines on a pin-head – China are executing the plan. They have gone nuclear. The West has not.
It may interest readers to know this morning’s quote: “The act of avoiding nuclear power generation is one of auto-genocide. Nothing more clearly demonstrates the limits of our intelligence”, is from James Lovelock, the environmental scientist and originator of Gaia Theory; that the earth is a self-regulating environment.
Despite its promise, Nuclear Power has always been deeply distrusted – originally seen as an offshoot of nuclear weapons. The anti-nuclear lobby has terrified the public about radiation risks, reactor safety, planning objections, nuclear waste and environment damage across the board from mining uranium to the massive amounts of steel and concrete required.
While we debate. China builds. China grows, the West stagnates.
In the US the bulk of the reactor fleet was built pre-1990 – only two new plants have been built this century – over budget and late, but have preserved many of the critical skill sets! Democrats are talking about new reactor designs, extending the service life of existing units through subsidies, and setting up a new delivery “working group” to address potential cost over-runs. Trump supported nuclear technologies in his first administration, but has been talking about expanding nuclear weapons production this time around. His plans for nuclear power are unclear (happy for any reader to enlighten me). He clearly favours freeing up restrictions on oil and gas production as vote winners – but that may make sense if it’s part of a planned transition to future nuclear technologies (including Thorium-Salts and maybe, even Fusion).
In the UK, nuclear has been…. neglected. Even though we Brits invented nuclear power – and once rejoiced in the challenge and our mastery of building difficult engineering stuff – we haven’t built a power station in 30 years, meaning our whole nuclear skills base has been lost to retirement.
Earlier this year former premier Rishi Sunak’s lips were moving, but I didn’t have the will-power to listen to him whitter on about the “UK’s largest ever investment in nuclear power” and the creation of 80,000 skilled jobs. Too little, too late, I thought. It sounded the usual Potemkin village stuff, but promised a third large UK commercial nuclear station – which we now know is planned for Wylfa in Anglesey. (If I’m still around when it’s completed, I will be most pleasantly surprised.) Even if built, it means only some 20% of current UK energy needs will come from Nuclear… when/if the three plants are completed.
The problem with Nuclear Power in the UK is planning and regulation. The current new Hinkley Point C (being built by EDF!) was originally costed at £18 bln. It was first proposed in 2008 (by a Labour govt), took 10-years to get through planning, and now completion will be a decade late, and might not be finished till after 2031. It will cost more than £50bln. Anti-nuclear protestors have a point when they say the UK’s large multi-gigawatt reactors “are the slowest, most expensive energy sources to build”. Taxpayers will ultimately pay the cost at source or in higher energy bills.
As we are discovering in it takes years to train nuclear welders. An engineering chum, now retired from a very senior position, told me the build of Hinkley Point C, the UK’s re-entry into building grown-up power, has been a bit like watching a child discovering Lego for the first time… There is a chance the problems with the Hinkley build will result in it never being commissioned.
Famously the government’s safety regulator, the Office for Nuclear Regulation demanded 7000 design modifications from the proven but very complex French design, but everyone agrees the UK’s new reactors will be the safest ever! (Despite Chernobyl and Fukushima, nuclear is relatively safe compared to the fossil alternatives.) The environmental impact assessment review for Hinkley Point was nearly 32,000 pages! Sizewell C was even more troublesome. No wonder UK nuclear power is more than 5 x more expensive to build than in South Korea – meaning our energy will be a factor more expensive over its lifetime! It’s all down to planning, consents and environmental over-protection resulting in over-engineered and over-regulated plants.
Whenever I mention nuclear power, somewhile will pipe up about Small Modular Reactors (SMR) – nuclear plants that could be built cheaply, quickly and efficiently to power up the UK, even down to powering individual AI/DataCentres – which will demand and consume enormous amounts of new, unplanned for, energy. The tech exists to put submarine size reactors in place quickly – but the delay is where will accept them. In the US, Bill Gates and the US Army are paying to build them.
There is a consensus in UK politics the UK could yet be a leader in SMR because of our “engineering excellence”. Don’t bet on it. In April, Rolls Royce mothballed its SMR factory plans because the government couldn’t get its act together on the design plans or a first site. The plan has been for 40 so new SMR power stations, each built within 4 years, producing 200mm of electricity each (compared to 3.4 GW at Hinkley C). In the meantime, Westinghouse got a contract for 4 small SMRS to produce 1.5 GW at the North Teesside .. Doh!
Where will the haves and have-nots of Nuclear Power leave the global economy in 30-years time. A fully electric China powered by Nuclear, versus the West arguing about the dangers to baby jellyfish from sea-water extractions to cool nuclear plants?
Go figure.
Out of time, back to the day job, and have an excellent weekend…
Bill Blain
CEO and Founder,
Wind Shift Capital
www.windshift.capital
