PERSPECTIVE3-5 min to read

The Value Perspective Podcast episode – with Matthew L Wald

Hi everyone and welcome to The Value Perspective Podcast. This week, in another entry in our occasional ESG miniseries, our guest is independent energy analyst and writer, Matthew L Wald, who from 1977 to 2014 was a reporter for the New York Times. While there, he wrote extensively on various energy topics but specialised in civilian nuclear power in the wake of the Three Mile Island accident in Pennsylvania in 1979. Matthew then spent six years as a senior adviser for the Nuclear Energy Institute before becoming an analyst for the Breakthrough Institute, a non-governmental organisation based in Berkeley, California. He has also written extensively on the production of materials for nuclear weapons and its environmental ramifications. For this episode, regular pod host Juan Torres Rodrigues is joined by Value Team colleague Andrew Lyddon and they discuss with Matthew: where nuclear has got it wrong; the biggest modern misconception around nuclear power; issues around nuclear waste and how different countries handle it; what the ‘levelized cost of electricity’ is and why it is useful when discussing energy infrastructure; and, finally, the live, real-world renewables experiment that is California – in more ways than you might think. Enjoy!



Juan Torres Rodriguez
Fund Manager, Equity Value
Andrew Lyddon
Fund Manager, Equity Value
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JTR: Matt Wald, welcome to The Value Perspective Podcast. It is a pleasure to have you here. How are you?

MW: Very good, Juan, thank you – and I want you to know the world of energy is changing. I am out in the country and, in the background, you can see I have a wood stove that is a back-up to the other forms of energy here. Now, wood stoves have turned out to be highly-polluting – electricity is much better – but the electricity out here is unreliable. So my ambition is to fit the woodstove with a catalytic converter – such as you would have on your car to take out pollutants and turn them into waste heat. But with a woodstove, the heat is not waste and it is not a three-way catalytic converter. It is a two-way catalytic converter that would convert carbon monoxide and unburned hydrocarbons into heat and improve the efficiency of burning wood. So it might become environmentally acceptable to use wood – but I still prefer electricity.

JTR: What a fantastic way to start our session – and I was actually going to ask you, Where do we find you today? I also want to hear about your new house because, as you know, I have been chasing you for weeks – and as I mentioned just before we started recording, I hope you see persistence a quality rather than just annoying!

MW: Moving was our own personal climate-mitigation strategy. I was living just outside Washington, DC and, when we moved there, 30 years ago, there were several unbearably hot days every summer. Now there are many unbearably hot days every summer so now we are living by a small lake in upstate New York.

JTR: That sounds very nice. Matt, could you provide our listeners with a little of your background?

MW: Yes. I started work after college at the New York Times, where I covered many different subjects – but mostly energy – for 38 years. That included nuclear energy, which I find particularly appealing and interesting, but also wind and solar and end-use technologies, such as hydroelectricity, refining technologies for hydrocarbons, automotive technologies – anything that makes or uses fuel is what I specialised in. Then, for six years, I worked for the Nuclear Energy Institute, which is the trade association of the US power utilities and also now represents new reactor developers. Now I am an analyst at the Breakthrough Institute, a non-governmental organisation based in Berkeley, California, and I am particularly concerned with climate and energy and agriculture – but please don’t ask me about agriculture as I don’t know much about it!

JTR: And you still write journalistic pieces on the side?

MW: I do. I recently wrote a series of three articles for the American Nuclear Society on the nuclear fuel situation, which is much changed after the Russian invasion of Ukraine.

Where, when and how did the nuclear sector get it wrong?

JTR: Very interesting. You have been covering civilian nuclear power for more than four decades so, in your opinion, where, when and how did the industry got it wrong?

MW: Well, in the United States, it got it wrong. In Asia, it did not get it wrong but there has been a series of events in the United States that have made life more difficult for nuclear – and the most recent one is the improvement in drilling technology. We turn out to have massive amounts of methane fuel, natural gas, fossil gas that we didn’t know we had and we didn’t know were accessible – and the price crashed and that brought down the price of electricity with it. And, in that environment, nobody wants to build nuclear.

Before that, we never really standardised our nuclear products – each reactor was built slightly differently. So they do have common components but you can’t simply move operators from one to another; and you can’t simply use the plans from one to build another. This lack of standardisation left us with a variety of plants, all of which are highly optimised – they run very well, they run very reliably – but they are hard to duplicate. In addition, we ceased doing a lot of research and development on new reactor technologies.

The United States now uses entirely light-water reactors and that is patterned on what the US Navy did. Light-water reactors are perfect for submarines but, on land, there are other options we should have been trying out – and which we are now racing to perfect. Europe used a somewhat wider variety of reactors – Great Britain uses some gas-graphite reactors, which is a direction we are now going in – but we had a gap in construction, which is difficult to recover from. We don’t have the skilled workforce, we don’t have the techniques in place and we had a gap in research and design work – but we are now working to address those gaps.

We also are in a situation in the United States where electricity growth has been very slow – demand growth has been very slow – and there has not been a real reason to build anything new. So we are putting in wind and solar, which have an advantage in that they reduce fossil-fuel burn. They are not much for meeting peak capacity but, during many hours of the day, they reduce the amount of coal and fossil gas you have to burn. But we have not just had a lot of call for building new generation of any type.

JTR: It does feel that interest or awareness is picking up. Do you agree – and, either way, what needs to happen for it to improve?

MW: Well, it is picking up for several reasons. One is concern over climate. We have a weird climate at the moment – California had a tropical storm; where I live, we have had smoke from Canadian wildfires coming down into large parts of the US; we have had droughts; we have had floods; and people are generally more concerned about this. People are also more concerned – especially after the war in Ukraine – about energy security. And it is easier to maintain energy security with reactors, than it is with fossil plants that require large volumes of fossil fuel to be shipped in – often from very distant places. And I believe, for those reasons, we have returned to intense research and development – and we will return to largescale construction.

In the United States, this is a real challenge. If we are going to get to 100% fossil-free carbon-free energy, we need to retire about 60% of our generating system. And, if we are going to convert all of the cars and trucks to electricity, all of the industrial use of natural gas to electricity, all of the heating to electricity, by mid-century, we are going to have to multiply our supply of electricity by a factor of 2.5x to 3x. So, to throw out 60% of what you have and multiply it by a factor of 2.5x to 3x, we need roughly 10 times as much non-emitting electric generation as we have today. By mid-century. That is a very tall order. We can get some of it from wind and solar, which can be easier to install, but we need to get a lot of it from nuclear.

JTR: To what degree, does the environmental lobby – especially with its extreme campaigns against nuclear in some countries in the 1970s and 1980s – bear responsibility for the lack of progress made?

MW: Well, it is true that, in the United States, we regulate nuclear energy to a much, much stricter standard than fossil energy. We know fossil fuels kill people in obvious ways – we have explosions now and again – but it also does so in not so obvious ways, such as elevated death rates because of air pollution. We know nuclear power doesn’t do that. The risk we will tolerate from a reactor is a lot smaller than the risk we will tolerate from other forms of energy generation – and this has put a burden on the nuclear industry. Now, the established utilities will not complain about this – they have learned to live with it – but it is a problem if you go out to build something new.

Big misconceptions about nuclear’s environmental footprint

JTR: This is a question we often ask our energy-expert guests but we would be very interested to hear what, in your opinion, is the biggest misconception about nuclear power today?

MW: It is that it somehow has a bigger environmental footprint than other forms of energy. It doesn’t – it has a smaller environmental footprint. We don’t have to take bulldozers into the desert and level vast areas to build solar farms. We don’t have to build enormous new transmission systems to handle intermittent energy from really distant places. The trouble with wind and solar is you have to build them where the wind and solar is – nuclear fuel, you can ship anywhere. Granted, you can’t put a reactor just anywhere but there are lots of places to put a nuclear reactor. We don’t have to build enormous windfarms that make life difficult for other people in the neighbourhood. The fuel requirements can be met in a mostly environmentally benign way – certainly more benign than coalmining or gas-drilling or oil-drilling.

All in all, nuclear is an environmentally friendly technology but it isn’t always seen that way. I would love to live near a nuclear plant – for one thing, they pay lots of taxes so it keeps your local property taxes down! They don’t pose a risk to their neighbours – or at least not as large a risk as coal and gas do – and they are more pleasant to live near than a windfarm. Also, at the moment, we have a backlash, here in the United States – it may be true in Europe also – against massive renewable development. Offshore wind we will probably tolerate but it has environmental problems and it has aesthetic problems and construction problems. Onshore wind and solar face big challenges in siting – in getting permission from local authorities to build them – as opposed to all of the places for which new reactors have been proposed, people welcome them.

AL: Just to build on your point on the misjudgement of nuclear’s environmental impact, one issue people often point out is the impact of storing or treating nuclear waste and the long-term environmental implications of that. Could you talk a little on the facts around those issues?

MW: There is no impact from storing spent fuel. In an area the size of a basketball court or a tennis court, you can store decades of fuel. We have gotten very good at packaging this stuff. I’ve seen it done – you put it in a cask; you dry out the cask; you pump the cask full of inert gas so there is no corrosion; and you move it to a small concrete silo out in the open. It is passive and does not have any moving parts. If it was in a location that sometimes gets snow in winter, you would know it is nuclear waste from a distance because it is slightly warm and so snow will not stick to it. That is about it. These things have holes at the bottom, in the concrete surrounding silo, and holes at the top. So there is a passive airflow – a chimney effect – that keeps it cool. And you have to send somebody out there every few weeks to ensure no small animals have built nests next to the metal interior, which would block the airflow.

They are guarded but they are really very secure. One of our problems is we are babysitting these things here in the United States at scores of different locations – it would make more sense to centralise them. As time goes by, their heat production declines. As their heat production declines, they get easier to bury. If you look at places where we want to bury nuclear waste, the controlling factor is heat production – because you don’t want to boil the groundwater. If you boil the groundwater, you get steam, and whatever chemical reactions are going to occur will occur faster with steam – with a hot repository rather than a cool repository.

So, to a certain extent, there is an advantage in delay, although I think everybody would be happier if we found a place to bury this stuff – or to bury many of the components of this stuff. I think a lot of it may be chemically reprocessed and recovered for re-use. The Finns and the Swedes are going to demonstrate it is technically possible and that actually, in the United States, the difficulty is an artefact of our governmental structure – which is the federal government can pick some place, the locals can like it but the states do not. But, eventually, we will overcome that problem and, in the interim, we will just babysit the stuff. This is different from coal waste or waste from burning natural gas, which you and I are breathing. We know where that waste is – it is in the atmosphere. I would rather have it bottled up in a secure container.

JTR: How do other countries manage nuclear waste? France has a very big stock capacity; Canada has been quite successful; the Chinese are building a lot of nuclear power – how do they address this?

MW: It differs – but let me go back a step. When you run a nuclear reactor on uranium, you produce a little bit of plutonium. The plutonium is a very good reactor fuel. It is not a good weapons fuel – and the reason is, it is a mix of isotopes and, for a weapon, you want pure isotopes. In a light-water reactor of the kind we operate here in the United States, after the fuel has been in place for a few months, you are fissioning not only uranium, but also some plutonium. But then, when you are done, you take the fuel out and the fuel is like a battery in a flashlight – its form has not changed. From the outside, it doesn’t look any different, and we package it and store it out on an open pad somewhere.

The French take this material, chop it up mechanically, dissolve it in acid and sort the components chemically – and they recover the plutonium and use it as fuel. The remainder has a smaller volume and, to some extent, it won’t be radioactive for as long. There are still some long-life components but one of those – plutonium – has been removed. Then, after they have chopped this stuff up and removed what they want, they pour the rest into a strong form of glass that blocks radiation. So the final waste form they have to dispose of is a solid liquid. And you’re better off with a solid because it won’t dissolve and move around on you.

The Russians are very good at this – although they have a mixed civilian and military system, they have been reprocessing for years. The United States did this early on but now has what’s called a ‘once-through cycle’, which is we use the uranium, we use a little of the plutonium, but we don’t touch the used fuel. In the United States, the law concerning a repository – a burial site – specifies the fuel must be retrievable for the first few decades. So if you change your mind later, you can take it out of the ground, chop it up and recover the valuable components.

In the US, we understand all those technologies and we practise them to a limited extent but we don’t do them routinely. At some point, we probably will do them routinely. And at the other end, there are the Swedes and the Finns, who are just building granite repositories. Granite is very stable – you can find granite structures that have been there for millions of years – and they will bury it in granite. And, eventually, we will do the same – even with fuel that came out of a reactor; or fuel that came out of a reactor, had useful materials removed from it and then the remainder was solidified and buried.

JTR: You’ve been covering the issue of nuclear waste for the last 40 years. Has the problem from a perception point of view and execution stayed the same – or has the fear around it changed?

MW: The people who don’t like nuclear energy, the first thing they will say is, Well, what about the waste? But I don’t think their objection is actually the waste – I think they are afraid of accident. And that is just not a rational fear – especially compared to the alternatives, especially compared to oil and gas and coal. I think a lot of people have just accepted the idea that this is a problem we are not going to solve in the immediate future and we will manage the stuff securely until we figure out how to handle it.

What is ‘levelized cost of electricity’ and does it matter?

JTR: That’s very interesting. Something you have been writing about recently is a concept developed by Lazard investment bank – the ‘levelized cost of electricity’. Could you please explain what that is and why it is important to consider it in the context of the entire climate change debate?

MW: Yes. I’m not certain Lazard invented levelized cost of electricity but they certainly are the leading practitioner – and they have recently walked back from that. They have changed their minds a little bit and cautioned people about how the metric should be used – I would almost say they have repented! Still, ‘levelized cost of electricity’ [LCOE] means it costs me this amount to build a plant; over its lifetime, it will produce X amount of electricity; the operating cost is Y amount – now, let’s get out a pocket calculator and figure out total cost, total production and the cost per kilowatt hour.

That is very useful but it embeds a concept that is so basic, nobody ever thought about it much. That is – you are only going to run the plant when you need it. So if you are going to build a coal plant or a natural gas plant, you are going to run it when the system needs the electricity and when the production has value. If you go to solar, there is no operating cost, basically – you are going to run it whenever the sun is available. And you are going to run the wind turbines whenever the wind is available. Sometimes that production will enter into the market and be worth a great deal. But solar is fratricidal – solar is cannibalistic. So sometimes, there will be so much solar out there, it will drive the price down to zero – or even below zero. So it doesn’t matter if it is cheap to put up a solar panel and get electricity out of it – what matters is the ratio of cost to value. And if the value is zero or less than zero – and we have had episodes in the US when the value is less than zero – it doesn’t matter what it cost you. It doesn’t matter what the LCOE is.

A nuclear plant – the ones we have today – want to run 24/7 for 92% or 93% of the hours in a year. It will produce electricity when there’s a lot of solar out there and there’s not much demand for the electricity or the price is very low. It will produce electricity when there’s no renewable energy out there – when there is very high demand, which happens typically around sunset and little after – and when prices are very high. So its value will be averaged out over all the market conditions, market prices, all the hours of the year. So, if you look at LCOE – yes, the cheapest way to get a kilowatt hour at this point in many locations might be solar. But so what? It is not like you are growing potatoes you can store – there is just no use for this stuff. You are either going to unplug the panel or waste the electricity somewhere because you don’t have anything to use it for. Therefore, although the price of electricity coming out of a reactor may be higher, the reactor will still have higher value than a solar panel.

Now, this is a system integration problem and it will depend on how much solar is on the system. It will depend on what value you put on reliability – on having electricity 24/7. If you were running a cattle ranch and your only use for the electricity was to run a well and pump water into a trough so the cattle could drink and the water would sit there for hours or days, you don’t care what time it is sunny – all you care about is getting enough kilowatt hours to do that work. If you and I are having a conversation on the internet, though, we really don’t want to arrange it around the solar production at my end and yours – we want a 24/7 system. So LCOE still has some value as a metric but, because of technological changes, you have to think twice about all of the metrics you need to use when choosing the components of an integrated electric system.

California’s real-world, real-time renewables experiment

AL: It looks as though renewable capacity will continue to grow so what are your thoughts on how big that portion of the overall generation mix could be before we start to get into trouble? Is there a natural place where it can sit and not be too problematic or how can those considerations be balanced out?

MW: Luckily, we are running a real-world experiment – it’s called California! In California, there is a law that, if you build a new house, it has to have solar on the roof. There are lots of incentives to build solar and so they now have a reverse of the ordinary price pattern – they have dirt-cheap electricity in the middle of the day and high prices in the evening. They also have a problem, which is, as the state’s geography is oriented from north to south, then the sun goes down at the same time, all over the grid. Ideally, what you need is a grid that runs east to west for thousands of miles but we don’t have that – I don’t think any place has that.

So they end up in a situation at sunset when all solar goes away at the same time. All the fossil plants have been turned down during the day to make space for the solar on the grid – and then they have to start up again. But fossil electric plants are not like automobiles that can go from zero to 60 miles an hour in five seconds. They are more like trains, which will start up when they leave the station but not achieve maximum speed for some time after that. In fact, they end up at sunset with a rise in electric demand faster than they can meet – the solar is going away faster than the other systems can get started.

So California has mandated batteries. People think, Oh, batteries – it is so we can get solar power to use at night. Well, sort of. Its real function is to help California get over the evening challenge every day – something to tide the system over until the natural gas plants can get started. So California is reaching the point where the marginal new solar panel is useless. They are going to demonstrate for the rest of the world how much they can assimilate – and technology will help them and things will change as time goes on. Batteries may get better and cheaper – at the moment, they are not very good and they are very expensive.

And they may find some ways to shift some demand into the middle of the day instead of the evening or other peak times when there is no solar. One technique I find interesting is, if you are at work all day, you are going to come home from your office at 5pm or 6pm and start up the microwave and the TV and turn up the air-conditioning because it has been turned down all day. But California is suggesting one strategy is to set the thermostat to get your house really cold – 65 degrees, 60 degrees – when there is too much electricity on the grid at noon. Noon is peak-production hour – that is the definition of noon – and when you get home, you turn the electricity, the air conditioning off, but the walls are cold, the floors are cold, the furniture is cold and you don’t need air conditioning for a little while. The whole house is a thermal battery. That’s one possibility.

Something I find really interesting is the Natrium reactor that is planned for Wyoming. This is built by GE and by a company backed by Bill Gates. This reactor turns out a steady level of heat but that does not go straight to electricity. It heats up a large tank of salt and the salt gets hotter and hotter over the course of the day. On the other side of the tank is a steam generator system – there are pipes running through the salt, you pump water through them and the water boils into steam – so you have a thermal battery. So you might have the plant producing 100 megawatts at noon, when there is lots of solar, and 500 megawatts right after sunset when there is no solar and everybody quickly needs electricity. It is a reactor that is designed to rescue the grid from too much solar. Now, that is a battery that is not like the kind you put in a flashlight. It does not have a positive and a negative terminal – it is just a big tank of heat. But the heat is a form of storage.

So the exact amount of solar or wind a system can tolerate isn’t clear. The dominant form of storage right now is pumped hydro – in other words, when you have too much electricity, you pump water up to the top of the hill; and, when you need it, you let it run back down through a hydroelectric plant. That has some drawbacks. First of all, its round-trip efficiency is only about 66%, meaning you have to put in three kilowatt hours to get two kilowatt hours back out. Second of all, the upper reservoir and the lower reservoir are both sterile because fish and aquatic life don’t like big changes in the level of the water. But if we discover, develop and make economic other storage technologies, then the amount of intermittent renewable sources you can sensibly use will rise. But we are not going to get to zero and we are not going to make enormous cuts in carbon dioxide output unless we have sources we can dispatch – that is, tell when to run. You can tell a reactor when to run – especially the modern reactors now under development – you can’t tell wind and solar when to run.

More practical implications of timeframe and budget.

AL: One other big question mark over nuclear is less dogmatic than practical and that is the time and cost of installing new capacity. Maybe we can talk about Vogtle 3 specifically in a second – or maybe it is a bad example – but, given the time and cost of building it, even if you took a very pro-nuclear view, must you accept nuclear may be the answer but it is not one we will see the benefits of for some years?

MW: Well, Units 3 and 4 of the Vogtle plant took a lot longer and cost a lot more than they were supposed to. Vogtle was originally a two-unit reactor plant built in the 1980s [in Georgia]. Unit 3 just entered commercial operation and they just started loading fuel at Unit 4. These are Westinghouse AP1000 reactors – a design done by Westinghouse in the 1990s that did two things. It was designed with a much simpler, more robust emergency system, with less wiring, fewer valves, fewer pumps, less requirement for energy after an accident – just all-around better thought-through. And, believe it or not, it was designed for constructability. The idea was, you build major components off-site, plonk them in place and put them together.

The first example in the United States did not go well – partly because the company building the modularised components was not accustomed to nuclear work and could not deliver the modules on schedule and with the appropriate level of quality checks. But it may not be the technology: the Chinese built four of these things – two twin-unit plants – and they did a much faster, much better job. Now, they have a different economic system – among other issues, their labour is a lot cheaper – but we could probably learn something from how they did it. And the Koreans built a Korean model reactor in the Persian Gulf that is based on a Westinghouse design and they did that more or less on schedule and more or less on budget. They built four of them and are talking about building two more in the United Arab Emirates. So it can be done. It requires management expertise and addressing a manufacturing supply chain that has atrophied – but we can bring it back.

But it is true: you can put in a solar panel and get out a kilowatt of electricity faster than you can for a kilowatt of nuclear – because you don’t put in a kilowatt of nuclear, you put in many megawatts of nuclear. But we’re going to need both and we’re going to do both. You simply cannot decarbonise the system on the basis of wind and solar. They can help, they could be a good bridge technology – they could minimise our fuel-burn as we get more advanced nuclear online – but, no, you can’t do the whole system that way. In addition, after the Vogtle plants, the industry has turned to smaller plants that are designed for constructability. And the theory is probably correct – that we can stamp out components in a more assembly-line fashion.

Also, Vogtle is a pressurised water reactor – it has an operating pressure in the neighbourhood of 2,200 pounds per square inch – so we are talking about hunks of steel that are eight or 10 inches thick. Some of the advanced reactors run at near atmospheric pressure because they’re not using water – they are using molten metal or molten salt or inert gas as a coolant – and they produce higher temperatures. That does two things for you. It gives you higher thermal efficiency – you can make more electricity per megawatt of nuclear heat – and it gives you the opportunity to use nuclear heat in industrial processes. Today’s nuclear reactors don’t run particularly hot – they’re not as hot as some coal and natural gas plants. If you can raise the temperature of their output, which you can do if you’re not using water as the coolant, you can use them to make chemicals, you can use them to make steel, you can use them in all kinds of roles where they will displace carbon-based fossil fuels. And, if you are using them in a low pressure system, the components are a lot easier and a lot faster to make and to assemble.

AL: Just for a bit more context, looking at the more successful projects you mentioned, such as the ones in the Middle East, obviously their being on time and to budget is brilliant but, roughly, what are the timeframes and sums of money involved? Even if it is to schedule, but that schedule is 10 years, that is a long time – so what are the numbers we are dealing with here?

MW: Yes. If you get the supply chain in order and have a country of skilled and specialised workers and an appropriate management system, you should certainly be able to do it in less than 10 years. It will still take time – maybe it will take you eight years – and you will use an amount of nuclear that is appropriate to your system, depending on what other resources you have available, which depends in part on geography. And you will probably pay more for the nuclear per megawatt of capacity – but it will be worth more.

Remember – a well-run nuclear plant has a capacity factor of over 90% – ‘capacity factor’ meaning how many hours of the years it is running. A solar panel may have a capacity factor – in my neighbourhood – of about 14%. Out in the desert, it could be maybe 21% or 22%. Wind can get higher but it is also intermittent. So, like LCOE, the dollars per megawatt of capacity are not strictly comparable – you need to look at them in terms of not what’s cheapest, but what does the system need?

AL: And the smaller modular reactors you mentioned – they are still a nascent technology so how far away are we away from seeing them installed, not just in trial mode but in widespread roll-out?

MW: Well, Ontario Hydro thinks it is going to put up GE Hitachi BWRX by the end of this decade. The BWRX stands for ‘boiling water reactor’, with the X being a Roman numeral denoting the 10th version. Their previous versions got larger and larger but this one is smaller and is designed for constructability. There are other plans out there to get reactors up and running by 2030 and some of them may do it – some will come close. If you look at first-of-a-kind construction projects in any field, none goes completely as you planned. Many of them are over-budget and delayed – railways, big buildings and so on. Nuclear is not going to be any different. But it may get to the point where you can stamp out the problems and make them run better.

AL: Demographically, there are lots of people in emerging markets without access to electricity so, balancing global pressures to reduce the carbon intensity of them growing their power output against concerns about nuclear technology proliferating in some parts of the world, what role do you see for nuclear power in developing economies?

MW: At the moment, the fastest-growing source of electricity in the world is coal. Forget what you may have heard about a blossoming of solar and wind – it is coal and the reason is because it’s cheap, it’s fast and it’s reliable. We need technologies we can deploy in developing countries that have forms of limits in their infrastructure. One form is, you never want to have more than about 10% of your generating capacity in a single unit because plants of any kind – coal, gas, whatever – will trip, will go offline. And you don’t want that to cause a national blackout. So small reactors are a better fit for a lot of grids than big reactors.

The other place where developing countries have to catch up is they don’t have an extensive supply chain and human technical base. However, advanced reactors with good automation and good design may be easier to ship in and assemble and build and operate than the kind we run today. Because they are smaller and modular, they require less work at the site. People in the United States – and Europe – point out, Well, we are only a few percent of the world’s carbon output so nothing we do is going to make a difference. It ain’t so – what we are going to do that makes a difference is we are going to invent the technologies to solve this problem. We are going to export the technologies that solve this problem. We are going to export the hardware and the human skill that is going to do this. The demand for electricity is growing very rapidly – not in the developed world, but in the developing world. And that is where small reactors can make a big contribution.

Ramifications for the nuclear sector of the Ukraine invasion.

JTR: Matt, we cannot pass up the opportunity to get your views on the impact on the nuclear industry at large of Russia’s invasion of Ukraine at the start of last year?

MW: There are two categories of impact. One is that, in a place like Poland, which was reliant on Soviet and now Russian fossil fuels, they have a very strong desire to be energy-independent. And one of the ways to do that is to build reactors. The other is what is going on in Zaporizhzhia is clearly not what anybody wanted – a reactor in a warzone – but it turns out that reactors built to contain terrific pressures and amounts of heat and earthquakes and other natural challenges are tough installations. And they are difficult to damage accidentally.

You could damage them intentionally but there is not a lot of reason to do that. If you think about Zaporizhzhia, if the Russians want to control Ukraine, they would love to own this nuclear plant. They may do a little damage to it but they certainly don’t want to wreck it – and they don’t want to let loose radioactive material that would cause problems for them too. This isn’t the first instance of reactors being caught in a warzone and it probably won’t be the last – but, in an industrial society, there are all kinds of civil infrastructure that are vulnerable and could be hazardous. Reactors don’t rank particularly high on that list.

There are concerns raised by anti-nuclear types on the security of spent fuel – if you have dry-cask storage for spent fuel, what happens if somebody hits it with a rocket-propelled grenade? Well, the answer is the fuel is a solid – even if you busted one open, you would get a little puff of inert gas out of it and then you would have solid material that might spread in the immediate area. This is not in the category of widespread death and destruction. It is not in the category of hitting an oil refinery or chemical plant with a conventional munition. So I think, on balance, the experience of Ukraine is a strong desire for energy independence by a lot of places – and a cognisance that, yes, like anything else, nuclear infrastructure can be in the path of opposing armies.

JTR: Matt, what are your thoughts on the risks arising from the Russians controlling a significant amount of the supply of uranium?

MW: While the Russians do control the supply of some uranium, mostly they provide uranium processing. You take uranium ore – ‘yellowcake’ – and you run it through a chemical process to mix it with fluorine gas. In that form – ‘uranium hexafluoride’ – you put it into a centrifuge to enrich it and then you ship the enriched uranium to a fuel-fabrication plant. The Russians have a terrific capacity in converting uranium to uranium hexafluoride and enriching it. They do mine some uranium but the world’s largest supplier is not Russia – it is a different former Soviet republic, Kazakhstan.

And because Kazakhstan is a low-cost supplier, there are huge deposits elsewhere that nobody has really bothered with. Canada and Australia, for example, and even the United States, have lots of uranium that is available for a few dollars more per pound than we are paying for Kazakh yellowcake, Kazakh uranium ore. And there is more interest now in developing these alternative sources that are in more stable areas. The Kazakhs had been shipping through Leningrad but they have now done some shipments through Pakistan, which avoids Russia – but, even so, there is more interest now in a diversity of supply.

In addition, none of the technologies involved here is secret – lots of people could build conversion plants and could build new capacity to enrich uranium with centrifuges. There is a lot of work going on in laser-isotope separation, which has never been commercialised, but may now be – partly as a result of this conflict. The problem is it requires investment – and once you get one of these plants built, you want to keep it running. It is not the kind of thing you start and stop – for technical and industrial reasons, you want to keep it running.

So you want to build without creating a surplus – if you create a surplus, you will be operating at a loss for years. So the commercial interests are rather reluctant to go ahead and invest. What would happen if there were regime change in Moscow? If the war ends and if all that Russian capacity is suddenly back on the western market? They want some guarantee that there will be a market to supply with the product for which they are building expensive infrastructure. So there is a commercial problem here and there is an inertia problem here – but there is not a resource problem or a technical problem.

Three book recommendations

JTR: Matt, we are coming to the end of our session and we always ask our guests for a book recommendation or two for our listeners. What would you suggest?

MW: I can recommend three. There is A Guidebook to Nuclear Reactors by Anthony Nero, which was published some years ago and runs through all of the various types of reactors, advanced reactors, basic reactors, what we have today, what we might have tomorrow, what their strengths and weaknesses are. There is a good book on the state of the grid, which is not nuclear, but it does point out how nuclear fits in – and that is Shorting the Grid by Meredith Angwin. And there is a book I am just reading now on the nuts and bolts of pressurised water reactors written by Colin Tucker, a licensed reactor operator in Great Britain, called How to Drive a Nuclear Reactor, which is kind of fun. I would recommend any of those.

JTR: I absolutely love that list of recommendations. We did read Meredith Angwin’s book last year – and then immediately invited her on the pod to talk to her.

MW: There is not a lot of good analytical literature on how the rules of the grid influence technical choices and how the engineering context is shaped by political decisions that are not always optimal – and that is what Meredith does in that book.

JTR: Matthew Wald, thank you very much for coming onto The Value Perspective Podcast.

MW: Thank you, Juan. Thank you, Andrew. Thank you to both of you. It has been a pleasure.

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Juan Torres Rodriguez
Fund Manager, Equity Value
Andrew Lyddon
Fund Manager, Equity Value


The Value Perspective
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