013 Rod Adams, Managing Partner of Nucleation Capital

Fire2Fission Podcast
Fire2Fission Podcast
013 Rod Adams, Managing Partner of Nucleation Capital

Rod Adams chats with Mark Hinaman about the existing and future nuclear industry, his time working as a Navy nuke and writer in the industry, and describes Nucleation Capital.

Watch the conversation on Youtube. Follow along with the entire transcript on Descript.

[00:00:00] Rod Adams: So you can’t say, my only job is to make nuclear perfectly safe. My job is to use radioactive material to make the country safe and to balance the risks of using nuclear against the risk of using something else to produce the same amount of energy. 

Just because the facts are A, if the narrative is B and everyone believes the narrative, then B is what matters. But it’s our job in our industry to speak up proudly Soberly. And to engage people in this dialogue, those two and a half billion people that are on energy poverty, they need us. America cannot meet this threat alone.

If there is a single country, of course, the world cannot meet it without America that is willing to, we’re gonna need you the next generation to finish the job. Nuclear regulations, we need scientists to design new fuels, focus on net public benefits. We need engineers to invent new technologies for over absurd levels of radiation production entrepreneurs to sell those technologies.

And we’ll march towards this. We need workers to. With High Tech Zero Prosperity Football, diplomats, businessmen, and women and Peace Corps volunteers to help developing nations skip the development transition sources of, in other words, we need you.

[00:01:25] Mark Hinaman: Okay. Welcome back everyone. Today we have joining us very special guest, Mr. Rod Adams, Managing Director of Nucleation Capital. Rod’s a good friend of mine and I’m super excited to talk to him. 

[00:01:36] Rod Adams: Rod, how. 

Good. Can’t complain. Everything’s going well here. Beautiful day outside. 

[00:01:41] Mark Hinaman: Rod, for the audience, why don’t you give just a quick 30, 60 second intro about your background for those that are unfamiliar with you, but hopefully many people in the nuclear industry already know who you are.

[00:01:52] Rod Adams: Okay. I’m Rod Adams. I’ve been passionate about nuclear for, well, most of my life. I go by the moniker of Atomic Rod on the internet and have done that since about 1991. Graduated in the Naval Academy, was accepted into the Navy nuclear power program. Second to last class that was interviewed personally by Admiral Rickover, the founder of the nuclear navy kind of world.

Famous for his engineering drive and determination and very careful selection process. Every single person, every single officer who went in the program was got a personal interview. The 40 years he ran the program after about 10 years of going to sea on submarines, spending a lot of time underwater, but a lot of time personally engaged with the nuclear power plant, nuclear propulsion plant.

I surfaced in about 1990 and decided to look around and figure out why the rest of the world didn’t like nuclear as much as I did. Long story short, I spent the last 35 years learning about nuclear advanced nuclear building on the foundation I had from being in charge of a nuclear power plant.

Learned about all kinds of different technologies meant a lot of amazing entrepreneurs who were looking at ways to do things better than we’ve done before. Ways to improve on the technology that had been serving as a workhorse for many years, but hadn’t really changed much. Yeah. And had some fundamental technical challenges that could be overcome with the investment of a lot of time and effort.

And there are ways to do things cheaper and easier, and that’s what the entrepreneurs are doing now.

About five years ago, I started the process of learning how to bring investors into the space. Met some people from the Silicon Valley area. Valerie Gardner, my main partner, a successful startup entrepreneur was a member of the founding team of web TV that eventually got sold to Microsoft spent.

She spent about 20 years as an investment advisor in a partnership that has the over 300 million AUM and has been trying to fig, she started trying to figure out how to balance a portfolio for her investors. Without fossil fuels, very passionate about climate change, which couldn’t come up with a reasonable way to have a balanced portfolio that is exposed to all sectors of the market properly by eliminating what supplies about seven or 8% of global gdp, the, and the energy sector and underlies the rest of the gdp, looked around and said, solar, wind can’t do the job all the time.

We need something that can’t do the job all the time to help those, those guys out and laying it on nuclear. So we’ve been investing in advanced nuclear startups since the end of 2021. We have a, a rolling fund that allows people to, to selectively place investments in a very risky but very high potential sector.

And we can talk a little bit more about how that works later, but that should. Let you know a little bit about me. 

[00:04:51] Mark Hinaman: Yeah, perfect. That’s, that’s, that’s awesome background. I wanna chat a little bit more about Atomic Insights and kind of your advocacy efforts in the industry. You know, you’re, in my opinion, you’re well respected.

Anytime your name comes up in conversation, people are like, oh man, Rob Adams, love that guy. And I, I really appreciate all of the content that you’ve created. So for, for our listeners, why don’t you give a little bit of background, Kevin, about some of the writing that you’ve done and then, you know, the podcast series that you’ve released and what, what you’ve tried to accomplish with that over, over the years.

Because I’ve read a lot of Atomic Insights and I, I really appreciate it. And I, I imagine I’ve actually probably read more than most people, especially somebody that’s found it so late. 

[00:05:32] Rod Adams: Well, there’s a, there’s a good archive of the work. We’ve tried to organize it pretty well. It’s got a good search engine so you can find links to some of the old publication. We’ve accumulated over the years, almost 3000 blog posts, and some of ’em are more in-depth articles with research. The purpose of the, of Atomic Insights initially started by, I was starting up a small modular reactor company in 1993, had realized that people didn’t understand much about nuclear and its potential for being small, not large.

The whole idea of mass production of nuclear propulsion systems or nuclear small nuclear power plants, what I called nuclear engines at the time, atomic engines was foreign to people. So I started publishing articles about things like the Army Nuclear Power Program, which built a series of six, one of a kind demonstration reactors.

They were never followed up, but they were reactors such as the A reactor that was. Prefabricated in Pennsylvania, I think then disassembled with all the number of pieces that go with prefabrication, packed into crates, put on a ship, transported to Greenland, put onto to sleds and transported to a base maybe a hundred miles over the ice from Tule, Greenland.

And that whole process, from funding it to assembling and testing that reaction was about 19 months long. Imagine that. Yeah. Design. 

[00:07:06] Mark Hinaman: That’d be awesome. Let’s do it. 

[00:07:07] Rod Adams: Three fabrications. 

[00:07:08] Mark Hinaman: We can do it. 

[00:07:09] Rod Adams: Yeah. So that was one of the so I started talking about technologies and I got involved in some of the nuclear politics and some of the, the history of opposition to nuclear and support for nuclear, how that happens and, and where all this goes.

So those, that all, all that history is, is part of Atomic Insights. I continue to write, Not as often as I used to. There was a time when I was putting an article out almost every day, sometimes 10 a week. During the Fukushima event, I put out like 25 articles in a month. So it, it was you know, ups and downs.

Done some writing for other publications. I used to write a column for Forbes for an industry publication called Fuel Cycle Weekly for the Energy Collective. So all this stuff is, is on the web as well. I, I got into the habit of writing on the web about 1990 when I was involved in discussions about nuclear on the Usenet.

For those people who, you know, probably of your age might not have even heard of the Usenet Bulletin board system where people would get involved, I think topics, yeah. Yeah, pretty much and then, I also got really interested in, in podcasts in general around 2004, 2005 because I was commuting back and forth from Ann, from Annapolis to Washington, DC and the radio wasn’t keeping me awake.

The music would put me to sleep. But listening to conversations, listening to people talk about important stuff, you know, that wasn’t in the mainstream, but it was things that were important to me. Got really excited about this podcasting thing cuz I could drive back and forth to work, listen to two or three shows and everything was safe for me.

Yeah. And informative. So I met a guy, Shane Brown, we started the Atomic Show podcast very early in the days of podcasting on 2006, I think. And we’ve k kept that going again, spotty at times. There’s been times where I’ve gone. Almost a year without a podcast. But fortunately, when you’re subscribed to a podcast, if a new one comes up, it shows up in your feed as long as you don’t unsubscribe.

Well, we’ve up to about, oh, you’ve got a bunch of 303 shows. 303 shows some really good interviews with leading entrepreneurs at the early stages of their development. I talked to Jose Reyes and Paul Lorenzini from New Scale 10 years ago. Talked to Ian Scott from Multex pair Peterson and Dan, I can’t remember from Kairos.

Oklo’s been on there lots and lots of the developers. Francis Francisco van from USNC, and Claudia Philippon from HolosGen. All those people have been guests on the podcast. We also used to do a round table. We’d get together four or five nuclear experts and just have a chat. I may have to get back to those sometimes, but that’s basically the atomic show and Atomic Insights.

[00:10:24] Mark Hinaman: That’s, that’s excellent. 

I, I think the contribution to the ecosystem and the knowledge base is fantastic. And you know, Claudia can be a mystery and I think that in your episode with him is one of the only ones that’s actually public. I think there’s a couple others, but yeah. 


[00:10:39] Rod Adams: Well, he’s the kind of engineer that really likes to make sure his stuff works, and he spends a lot more time doing that than he does talking about it. It’s good. I’m, I’m a, I, I remain a fan, partly because Claudia’s design concept is very similar to the Adams engine that I spent so many years working on in the nineties.

Not that I’m saying my invention is the greatest in the world. But I think it is pretty good. 

[00:11:10] Mark Hinaman: Do you wanna talk a little bit about the Adams engine? I, you know, I I discovered it for the first time when I was reviewing the World Nuclear Association’s Review on SMRs, and it’s actually listed on there as one, one of the conceptual designs.

Do you wanna give a little bit of background on why you, you liked it so much and what some of the applications you think could be if it were developed? 

[00:11:31] Rod Adams: Sure. I was a steam plant engineer as well as being a nuclear engineer, nuclear plant engineer. So I’m not a design guy, I’m a operator. But for the most part, the nuclear part of a submarine power plant works fine, lasts a long time, and is really simple.

The, one of the easiest jobs on board a submarine is the typical reactor operator job during normal operations. Just sits there, the plant, because of physics. Maintains its temperature within a narrow band. It, if you want more power to produce more power, you want less power to produce less power without even operating anything.

You just ask for more steam. It gives you more steam. It’s amazing. Now, the steam plant of a new, of a submarine is a maintenance beast. I had a fleet, I had a crew of 15 mechanics and nine electricians who spent a lot of time repacking valves chasing steam leaks, figuring out why certain things were not doing what they should do, inspecting.

There’s quite a lot of piping even crammed inside a small submarine. So steam plants are a bear, and the Navy had made a decision many years before to phase steam out of the. Propulsion systems were at all possible. The only steam left in the Navy were nuclear power plants, and people have always been taught that nuclear heats up, water boils, creates steam and turns a turbine.

When I was in graduate school, my running mate, literally not only my buddy in, in doing design work at the postgraduate school, but my buddy is a runner was a guy named Mike La Fever, who had been the engineer officer of a Spruance CLA or a s class cruiser, which same as a spoons class destroyer in terms of power plant.

He had 120 megawatt power plant composed of four gas turbines, each producing 30 megawatts of power apiece. And we would talk about the difference in his job and my job. And the simplicity of the gas turbine as a power plant versus the complexity of steam and kind of the, the efficiency of gas turbines.

The ability to, if you had a problem, you could replace the entire engine. Each one of the engines could replace it about a day, you just pull it out the stack, you put in a new one, you’d hook it back up and maybe a little bit longer than that, but not much longer. Okay. Yeah. So I, we would go back and forth, you know, how guys would do and he’d talk about how his power plant is better.

And I’d talk about how mine never had to get re replenished it sea, and how we could, you know, go underwater and he couldn’t, and all those neat things, you know, back and forth. And we decided that the best power plant we could have would be the combination of my heat slash fuel source of nuclear heat and fuel and his gas turbine power plant.

Few years later, after I finished my engineer tour and was went to see, I went to the liBraytonry and I typed in nuclear and gas turbine. And this is back in the days where the liBraytonry search was on a single functional, you know, isolated computer from the rest of the world. So it had just that liBraytonry.

And it was on a yellow, on yellow screen where they had the bright letters and it was all text. I said, nuclear and gas turbine. And believe it or not, it came up with some great documents. Told me all about the army’s ML one power plant, which was a nuclear gas turbine where the nuclear provided the heat and Brayton cycle.

Gas turbine was a power plant. After doing that research and learning more about the possibility of using higher temperature react. To produce the, the input temperature for a Braytonyton cycle gas turbine. Essentially having the reactor replace the combustors of a Braytonyton cycle. So you still had the compressor to compress the gas, you flow the gas over a hot surface.

Instead of using combustion, heated up, you expand the gas through the turbine. You cool the gas, you put it back in, in the compressor. Very simple cycle, very simple machinery. Essentially one moving part. The compressor turbine is all in a single shaft. Now, can also do it differently with a compressor is separate from the turbine, not mechanically linked.

And that gives its own advantages. But I didn’t know about that at the time and that inspired me. I said, well, this, this is great. Why don’t we haven’t done this before? There were research projects to do nuclear gas turbines in the fifties and sixties, and there were people that wrote articles in the forties.

It said that combining nuclear heat with the Braytonyton Cycle gas turbin is the ultimate in, in power plants. But at one point some people decided that helium was the best coolant to go through a reactor cuz it doesn’t get activated in a reactor. And it does have a high specific heat transfer capability per unit mass, five times as high as air per unit mass.

But they neglected, in my opinion, was that helium is a very light gas, so you gotta move a lot of gas compared to moving air, which is eight seven times as dense. Per unit volume. Cause all gases are governed by Boyle’s law. And every mole of gas takes up the same amount of space no matter what, how light or how heavy the gas is.

And all the gas turbines that have been designed are designed around air, well going, pushing air through a turbine has a little bit of, through a reactor, has a few issues. But part of that is cause there’s a natural component of air. It’s roughly 1% of all air is argon. And argon going through a reactor activates to a fairly troublesome isotope called Argon-41.

[00:18:13] Mark Hinaman: And it becomes, it becomes radioactive, right? That, 

[00:18:17] Rod Adams: yeah, exactly it becomes, it goes from argon 40 to Argon 41 and it becomes radioactive. It has a couple hour half life, but it gets pretty intensely radioactive. Because it’s got a short halflife and so it does cause maintenance problems and access problems and that kind of stuff.

But there’s an, and you also have corrosion problems caused by the oxygen and maybe some, some moisture. But there is an inert component of atmospheric air called N2, nitrogen, which works just great in a turbine cause it’s got all the same thermodynamic characteristics of air. So the Atoms Engine concept was how do you combine a high temperature gas reactor with a conventional off-the-shelf Braytonyton cycle?

And the reason I wanted to go that way is cuz if you have to design specific Brayton cycles for each of your applications over a wide range of power and gets really expensive, although we have some really good Brayton cycle machines out there, each one, the development process could be a billion dollars to get it refined to the point where you would use it reliably.

So I wanted to be able to use whatever Brayton cycle’s already been developed in whatever size the customer wanted and adjust the reactor size to fit that. So I like the pebble bed reactor concept, cuz I think you can adjust the size pretty easily with that concept. So pebble, pebble bed reactor, a standard Brayton cycle machine running with nitrogen, operating roughly at the same pressures as an atmospheric gas turbine.

So much lower pressures than most people conceive of, but let letting the the reactor get a little bit larger if it needed to, to go give you enough surface area. And pointing to the idea that if you look at a standard wall chart for a nuclear reactor, conventional nuclear reactor, it’s almost like playing Where’s Waldo to find the reactor core.

That the, the main source of heat, the main nuclear part is way down in the corner somewhere. It’s so small. Yeah. Yeah. Compared to the whole part. So if you, if you left the reactor, grow a little bit for a unit power, you can come up with very compact power system with low cost. That was the whole concept.

We had some traction, but for a lot of reasons we never moved very forward. But there are still people developing nuclear gas turbines. A lot of the, the people that competed for project PELE were the Army Transport Reactor program. Were looking at nuclear gas turbines, radiant technology to get a small nuclear gas turbine.

And HolosGen is got a really sophisticated design for nuclear gas turbines. 

[00:21:08] Mark Hinaman: Yeah. We’re big fans of all of them. We, we love talking to all those guys. So let’s, let’s touch on Nucleation Capital and give perhaps a little bit more background you know, venture capital fund, running fund, or Evergreen investments.

What kind of companies are you guys looking at? What, what size of company who, if you could share, who are some of the companies that you guys have already made investments in? 

[00:21:29] Rod Adams: Sure. Yeah. Well see. The interesting about venture capital is it’s a lot easier for me to share with you the companies we have invested in than to tell you about the companies we’re looking at.

In other words, I can do one, I can’t do the other. Yeah. So we’ll get to that a second. Nutrition Capital is a evergreen rolling fund running on the platform of the Angel List which is a serv, a software as a service provider that handles all of the backend management of a fund, takes care of.

Account establishment. Keeping track of all the investments that the investors make, gives online statements, gives the ability to provide all the paperwork. It, it’s really transforms. The whole idea of managing a fund gives us Valerie and I and our supporters, the ability to spend most of our time doing the outreach to investors.

And in doing due diligence on the companies we invest in. We spend a lot of time on due diligence. We kind of a, a rolling process of due diligence. It results in us being able to make an almost one investment every quarter. But many of the companies we’ve invested in, we’ve been keeping track of for, in some cases, several years before.

We get to the point we make an investment. We know the, the entrepreneurs, we know the leaders, we know the, the project. Team pretty well. Before we make an investment, we gotta get a good understanding of their technology and where it fits in. Now we’re not that we’re agnostic cause we think that there are some systems that are better than others and some concepts that are better than others, but we’re not sure who’s gonna be the winner.

There are a lot of different ideas, a lot of different technologies, different advantages and disadvantages. One of the exercises we used to run in the Navy was when you’re making comparisons, you list all the advantages, you list all the disadvantages. You, you try to do a decision matrix and put priorities and, and waitings on different ones.

It’s, yep. Something that we, probability of success 

cost. Yeah. 

Yeah. All kind. And in some cases you optimize for different factors. Some of the designers are optimizing to reduce the waste. Some are optimizing to be able to use a smaller amount of input by trying to breed new pH material from fertile material.

Some are trying to optimize the cost and schedule in the early stages and thinking about how to do mass manufacturing down the road. There’s all kinds of different ways to balance, and so we have a process. We, we are really careful about who we invest in. When a investor decides they want to get into the advanced nuclear sector, cuz they’ve read a lot of good stuff, they’re recognized in that nuclear is gonna play a, an important, perhaps even the most important role in transitioning our society from a high energy society resting on hydrocarbons to maybe a higher energy society, resting on producing energy without Dumping the waste products into the atmosphere.

You have to try to figure out how to do that, but remain and recognize the value of being a high energy society. Unfortunately, of course, there are people that really don’t like human beings, and they are malthusians who think that we should make as light a footprint on the earth as possible. And of course, the best way to make a light footprint is to, you know, somehow get to a population of perhaps a billion or 2 billion people, neglecting the fact that there’s already 7 billion people on the planet.

Meaning that to get to 2 billion, you gotta somehow figure out what 5 billion have to, you know, step off the, the rotating sphere that we live on. I don’t like that at all. I have a, I, I didn’t have a big immediate family, but I have a big growing family now, and I love the, the family nature, and I love being around my daughters and their friends and their kids, and, and seeing all the potential that gets developed with human minds and human interests and curiosity and all that stuff. I, I really like people, so I wanna enable, empower people. And that’s our philosophy of going there. But if, if you’re an investor and you want that same kind of vision and you realize nuclear is a tool that will enable that, but you don’t really understand much about the technology, much about the companies, what’s the regulatory aspects? How do you handle the waste? 

And those are all good questions, but they’re not, they’re not rhetorical questions that have no answer. They’re questions that can be addressed. There are answers, there are solutions. There are ways to improve the regulatory process even without rewriting regulations.

Sometimes it’s just a matter of changing the philosophy and recognizing. In different interpretations of the word protect the public health and safety. Yeah. Protect the, 

[00:26:47] Mark Hinaman: or just the word reasonable 

[00:26:50] Rod Adams: and important to understand reasonable and what reasonable assurance of adequate protection means. That’s, by the way, the NRC standard is reasonable assurance of adequate protection.

They assess a standard that they, that they profess now some of their people have somehow developed a different version of the word reasonable than what you and I might have. 

So if you’re interested and you have some resources, it’s not an investment for people that are struggling or that, you know, have to worry about how they’re gonna pay for their kids’ college or where their home down payment’s going to be.

It’s not for them. Okay. But if you’re an investor, Who wants to balance your portfolio and get a piece of an energy offering that might have a really big or has the opportunity to be a player in a very large industry, energy is valued somewhere between six and 10 trillion dollars per year, depending on the prices of, of fuels.

If you wanna get a piece of that, you can get into the Nucleation Capital Rolling Fund for a commitment of roughly $20,000, $5,000 per quarter for four quarters. That’s our minimum subscription. We encourage investors and encourage them with some financial rewards to go for an eight quarter subscription.

You get a 25% discount on the fees and the carry. For those who aren’t familiar with venture capital, there’s very standard. Two and 20. The fund manager charges a 2% per year management fee on the money invested. Now that management fee actually gets returned to the investor later down the road. We also take a piece of the investment returns.

That’s the 20% carry. So if an investor at the end of, when we liquidate their investment, if they say made $10,000 in, in capital gains, and that’s after their fees have been repaid. So the $10,000 is net after fees had been repaid back to them. So they get their whole capital returned, then we get 20% of that.

So it sounds like a big number. It is a big. We’ve done a lot of work for that. So yeah, that’s, no, and I course this, if you do the eight, eight quarters, it’s fif 1.5 and 15. All right, go ahead. 

[00:29:36] Mark Hinaman: Okay. No, no, no, that’s good. Yeah, so a little discount there instead of 2 and 20. I like the structure and, and the concept because I, in my opinion, there’s not a lot of access and because this is like access to a private market investment, right?

Mm-hmm. say you have to be an, an investor in sophisticated investor, or at least an accredited investor, right? And it’s not a, something in the retail space that someone can go on their bro brokerage account and purchase. You know, there’s already plenty of that. Well, not plenty, but there’s a little bit of that that’s growing.

For example, NuScale’s SPAC and X-Energy’s SPAC that, that are, they’re growing public or have a vehicle to go public now. But what’s different in my mind from those retail opportunities or opportunities that are available through retail guys versus the accredited investors or the amount of dilution that exists and how early stage you get access to.

So you’ve spent a career developing an awesome network and access to the best companies with an awareness of who is working on what essentially. And that gives you the ability to very rapidly make investments in these private companies when, when opportunities come up which isn’t available to a lot of people.

[00:30:45] Rod Adams: We are, we believe that we’re aware of the investment opportunities in almost every advanced nuclear company out there. I, I can only say I, I can’t say that we’re aware of all of ’em, cuz. If I’m not aware of it, I don’t know and I can’t, you know, but we’ve been able to, to, to be involved and in some cases we are too small cuz we’re still working, we’re still developing interest in larger investors because there’ve been a lot of shyness and a lot of good reasons, not just political, but the nuclear industry has a terrible record of paying returns on investment.

Too many projects have gone a long way and then failed. A whole lot of people the, the whoops, the shore, the some DC summer, all kinds of examples of reasons to make investors shy. So we haven’t really yet succeeded in attracting institutional investors, but we’ve got 55 accredited investor LPs. Some are much larger than others.

Some are right at the minimum. Some are in the much larger range, several multiples of the minimum. We do have access to most of the private deals, and we’re at venture capital, we don’t invest in public companies, but think about what happens when companies do start going public.

The people who now have access to the reward from that public are the people that got in invested when it was private, the people that had access then yet a significant return on their investment liquidity events. That’s one of the venture capital goals is to approach a liquidity. Then they can be either a public offering or an acquisition by another company. Now in the tech venture capital world, in recent years, very few companies have gone public. The much higher percentage of them have been acquired by Google or Apple, or not many Apple. But Meta those kinds of big companies with big pocket books, who instead of taking the risk of developing a new product themselves, go to the on the startup infrastructure startup ecosystem and say, you guys come up with great ideas and once you prove it in the market, you take all the risk, we’ll come in and give you a good reward for that risk.

But that way we haven’t had to do it on our balance sheet. We haven’t had to convince our board to do this wild and crazy idea. And in the energy world, there’s a lot of potential acquirers. Of people who have really good ideas and develop them to the, to a stage where they actually have commercial potential.

They’re not to actually be in the market to be able to be an acquisition target. Imagine the value of a company that develops their system, keeps their head down, go through the nrc approval processes, and comes up and has the approval for their system. Now that they haven’t yet built anything, maybe they’ve built a lot of test equipment, but that company now has something valuable that could be of interest to a big player in the energy market and our players in the energy market that do things like earn 40 billion worth of net profit after taxes and dividends every year.

[00:34:28] Mark Hinaman: I wonder who did that last? Could, that might be a little sector of it, but yeah. Might have made 200 billion in profit in 2022, but yeah. 

So what’s, what’s changed now? You know, part of investing is timing, uh mm-hmm. Be very important. And so why, why is 2023 and beyond more ideal than, than it’s been?

What’s, what’s different to make these investments more attractive and nuclear more attractive than it’s been historic? 

[00:34:53] Rod Adams: That’s a long list, but here’s a couple of key ones. Yeah. What are your favorites? ESG ESG, environmental, Social and governance okay. So that whole area of investing has been growing rapidly, but walled off from nuclear up until 2022 when the European Commission after a five year. Dog eat, dog fight with some members of the EU being adamantly opposed. There’s five I can name ’em. And all the rest being supportive.

Added nuclear to their list of, to their, what they call the taxonomy list of, or class classification of investments, their sustainable taxonomy or taxonomy for sustainable development nuclear’s on the list. Now there’s some caveats, but the caveats are pretty easy to overcome. You have to make sure you have a waste plan, those credible waste plan, and you have to, you know, make sure you pay proper wages and all that stuff.

So those hurdles are easy for nuclear to overcome. So every, not everybody, but many in the ESG community follow the models established by the eu. So that, that’s a big impact. Now there’s ESG money that’s gonna be able to come into nuclear for projects. There’s a lot of effort being. Made to make the development banks, the World Bank, the European bank, the, I can’t remember all the titles, but the development banks that have also walled off nuclear to make them recognize that investing in nuclear, in developing countries is a great way to achieve many of the goals of sustainable development.

So that’s another thing. The US in particular has gone through about four years of passing really supportive laws for nuclear, whether it be directing the NRC to modernize their systems or creating the advanced reactor demonstration projects. Lots of things. I think the most important one has.

It’s not gotten the attention deserves, but I’ll be writing more about that. And that’s the inflation reduction act. And a lot of people on a certain part of the political spectrum laugh at the title cause it’s how can you reduce inflation by spending? What they don’t understand is if inflation’s being caused by an imbalance between supply and demand like it has been in energy.

And energy, inflation impacts inflation in the rest of the economy. Whether it be because people demand higher wages to commute to work because they’re commuting, costs have doubled. Or people who are manufacturing cement clo charge a higher price because the energy input to cement making has doubled in price.

Whatever it is, energy inflation really is driving overall inflation. So the best way that, ECON 101, way to address that kind of inflation is to support creation of new supply, to change the supply demand balance back in favor of the customers. And the inflation Reduction Act of 2022 offers very well targeted incentives to increase the supply of energy, not just build new solar and wind farms, but includes nuclear at the same support level as wind and solar.

So nuclear new reactors coming online after the beginning of 2024, which means any new reactor, cuz nobody’s gonna start producing electricity before then, except for vog. And Vogel’s already got a different system in, and I think the Dean Place Reduction Act was carefully crafted to say, okay, Vogel, you’ve got the one we agreed to back in 2005 and updated again in 2021.

That’s yours. Everybody else gets this new one, which is a production tax credit that in the law says 1.50 cents per kilowatt hour actually says 3.30 cents per kilowatt hour, and you get to 1.5 by adhering to prevailing wages. Well, nuclear always does that, which pretty much a union shot. But it says 1.5 and that’s what people read.

What they don’t read is a fine print that says it’s adjusted by referring to this area of the tax table and this, and if you go back and you re retrace it back, it says it’s inflation adjusted with the base year of 1992. Oh wow. One point I had 5 cent, 1.50 cent per kilowatt hour is actually already 2.60 cents per kilowatt hour as inflation adjusted from 1992.

And it will continue be inflation adjusted, so it will continue to increase in value down the road. I think your, your, your actual amount gets set as a fixed amount when you first start generating, but it might keep going up while you’re generating, but it’s good for the first 10 years of operation. Or you can select the investment tax credit.

You do one or the other, either a production tax credit or an investment tax credit. And for nuclear, since the early projects are gonna be high capital cost, it might be more beneficial or financially less risky to select the ittc, which is 30% of the project cost. 30%. Yeah, that’s a big number if you’ve got a big project.

Okay. And it could be bumped up by 10% for investing in an energy community, which is one of the reasons why cold to nuclear is suddenly becoming a much more popular discussion. Okay? So you build your nuclear plant either at a place where the coal power plant was a big employer, or where coal mine is a big employer, and then you can get one more bump.

So you could get up to 50% ITC if you run it carefully. Now those are huge, but again, it’s gonna bring on new supply. And the best way to drive down the price of natural gas, oil and electricity is to increase the supply of energy in a meaningful way. And nuclear has proven they can do that. Many don’t.

Notice that for 15 years the price of oil was in a slump from 85 to 2000 and 

[00:42:05] Mark Hinaman: inflation adjusted, it became less and less valuable every year, and we produce more and more of it and people use more and more of it. 

[00:42:13] Rod Adams: It wasn’t just, it wasn’t just the oil and gas guys that were producing more of it from.

In 1980, nuclear was adding maybe the equivalent of six barrels of 6 million barrels of oil a day in 1980. But we completed a bunch of nuclear plants, not only in the US but in France and Japan and Taiwan and a few other places. By 85, the world nuclear plants were producing 10 million barrels of oil a day, and by 90 it was 12 million barrels of oil a day.

Now that’s bringing on an entire Saudi Arabia into the energy market. That, well, OPEC couldn’t tell us or didn’t agree with those companies or those countries to reduce production. Every time they had a, an, an annual or a quarterly meeting and everybody had agreed on production quotas, the nuclear guys weren’t in the meeting.

Nobody thought about the fact that they were taking a lot of, they were producing a lot of energy, adding a lot of supply. And although some people say, well, nuclear doesn’t compete with oil, actually that’s because nuclear won the competition against oil up until there is no competition. Well, no, they did.

Up until 1977, the US was burning 1.8 million barrels of oil a day in its electric power sector. By 1990 was roughly zero and nuclear had gained that market share it. It, there’s different ways to interpret those graphs, but France was. 80% oil in their electric sector cuz they didn’t have any coal and there wasn’t much gas being used at that time.

They were importing oil, by the way, mostly from their former colony in Algeria. And there was a, if people are students of history, they’ll know that the breakup of the French Empire and Algeria becoming independent was a very bloody and contentious process, which happened right about the time of the oil crisis in the 1970s.

But France’s choice to build nuclear was really not just about the world oil prices, but the fact that its oil supply in Algeria had been severed. Cause Algeria wanted to sell to the whole market, not just to France, but if you look at Japan, Japan had a huge oil I import oil section of their electricity supply.

Belgium burned a lot of oil. Sweden burned a lot of oil. All of that had to get absorbed somewhere else in the market when they built their nuclear plants. Once again, you can address inflation, especially long-term base inflation by creating more supply and pushing the power back to the customer from the supplier.

[00:45:11] Mark Hinaman: That’s fascinating. You know, and I’ve, I’ve read the whole, well, I’ve read much of the Inflation Reduction Act, and that’s an interesting observation that frankly I hadn’t caught. I’ve got a whole essay on it, so yeah, I have to update that with some of those details. 

[00:45:23] Rod Adams: Well, one more, one more piece that’s that, unless you’re an accountant, you don’t necessarily recognize the values. 

[00:45:30] Mark Hinaman: It’s, it’s a zoo. It’s, that’s a way harder job than being an engineer, 

[00:45:35] Rod Adams: but, but by putting nuclear in the same category as wind and solar under the clean electricity credits, Nuclear now qualifies for an accelerated depreciation schedule.

Okay. Instead of having to depreciate your investment in nuclear over a 40 year life, five, it’s a depreciate over five years. 

[00:46:04] Mark Hinaman: So each of those attributes, in my opinion, lending themselves well to smaller systems, meaning SMRs and micro reactors being deployed and being more feasible or more palpable for the market.

[00:46:19] Rod Adams: Well, one of the reasons I’ve been advocating for small reactors and and actually invested a lot of time in money trying to build a small reactor company in the nineties is the word of scale gets misunderstood. Yeah. Scale doesn’t mean big machines, it means a big enterprise. A steady production level, a increasing production level of your systems, whatever your system happens to be, you could, you can achieve scale.

Intel achieves a scale, even though their products are very tiny, right? Yep. Ford Motor Company achieved scale with bigger products. Samsung achieved scale with television sets that sometimes may be really big, 85 inches in, but those, that’s all scaling an enterprise. By going small. You really open the aperture of the potential customer base with the very large reactors.

Your customer base is tiny. It’s national level electricity companies in the US there’s, there’s more electricity companies cuz we get such a big economy. But it’s still. Going to companies where they’re the biggest player in their state, the biggest company in their state, Florida Power and Light Company, or Georgia Power or something.

They’re, they’re huge companies with lots of, of very conservative investors. And they also have a long habit of what I call follow the leader decision making. You get somebody saying, nuclear’s no good. We’re not investing in it. It’s not useful. Say John Rowe from ex, the former Exelon ceo, say, we’re not gonna invest in nobody else invests in nuclear.

But if you have a period where somebody says, well, nuclear’s really good in the 1960s, the CEOs would mean on the golf course. Well, I’m investing in nuclear, I’m investing in nuclear, I’m investing in, cause they didn’t wanna be left out. And all of a sudden you had the bandwagon market where everybody was investing in.

And the initial delays for creating nuclear power plants had nothing to do with regulation. They were caused by the fact that the pressure vessel manufacturers predominantly Babcock and Wilcox at the time, could not manufacture pressure vessels fast enough to supply the market. So there was a big backlog developed.

And you can’t really go very far in building a nuclear power plant without installing your pressure vessel. It’s the, you have to get that in place first before you can get the other stuff built around it. And so that, and it wasn’t just your pressure vessel, it was the steam generators and the big reactor, cool pumps and all that stuff.

There were manufacturing slowdowns. So even by 1971, nuclear plants were missing their delivery. Way before 

[00:49:21] Mark Hinaman: that was more of, that was more of a supplier issue. Sure. Than, and lack lack of supplier. But I, I like your comment on more customers for smaller systems. Let’s, let’s touch on that quickly. And Sure.

And cuz you, you know, you said utilities for gigawatt scale plants are really some of the only customers. And you know, it might be even governments that need to be the customer. But if you’ve got a smaller system, then who else can you sell to? 

[00:49:44] Rod Adams: Well, there’s, everybody in the world is an energy customer.

Most of us energy, yeah. Most of us don’t need much more than a tiny generator who want to supply our own energy. But if you get to levels, say a commercial park where you’ve got a number of industries altogether, that might be several tens of megawatts to supply that commercial park. If you’ve got grocery stores, believe it or not, are big.

Energy customers, they might need several megawatts just to supply a good sized Walmart grocery store. Think of all the freezers and everything else that you have in a grocery store that, that needs electricity and it needs it all the time, cuz it, it goes down. Food spoils, hospitals, college campuses, big college campus not only has a lot of electricity demand, but many colleges have a district heating system.

They use pipes to move heat around to the dormitories and the classrooms and all that stuff. So those are other small islands. We used to get really excited about the island power market after visiting Bermuda, realizing that that island uses about 150 megawatts of electricity and all of it is supplied by large diesel generators.

Hawaii, Puerto Rico, Guam, that’s all. Those are just US islands. Lots of them around the world that had the same issue. Ship propulsion, of course that was for Adams engines. That was a fundamental market for us, was we were wanted to, to supply ships cuz we thought, hey, we had a real proven track record of pushing ships around the ocean with nuclear energy.

But it’s all been military ships. There’s only been three outside of Russia, there’s only been three ships that were not owned by the military. And that was the NS Savannah, the Otto Han and the Musu. So that’s US, Germany, and Japan. And none of them really succeeded. Although the Adhan operated as a or carrier for a dozen years and was very successful.

The problem that the Germans had was as one of a kind and. Anybody who’s ever done anything with big machinery re recognizes that having a one of a kind system gets really expensive as time goes on. There’s no spare parts locker. There’s few and fewer people know how the system was designed, how to maintain it.

There’s just no scale there. The one of the reasons the Atlantic failed was it was designed from the bo ground up as a beautiful ambassador for nuclear energy, beautiful lines and, and nice white paint. Had room for 110 dignitaries with beautiful state rooms, a swimming pool, a dance floor, or a dining hall, a dining, not in a dining hall like you’d have on a ship, but a, a dining room with white tablecloths and all stuff like, like he had on a cruise ship.

But then it was also supposed to carry some cargo around the show could do that too. So it had. Holds, it could carry something like 10,000 tons, not much. And it was in, in holds that were triangular shaped to far in with that beautiful bow it had. So it was never designed to be a commercial proposition.

It ran as an ambassador for three years, very successfully got transferred to the commercial fleet to do some demonstration and wasn’t cost effective cuz it was hard to load and that kind of impact. Sure. He carried a lot of stuff that wasn’t useful for a a cargo carrier. So Savannah and, and Elsa had to maintain his own shore facility cuz Admiral Rickover didn’t like commercial nuclear power cuz it wasn’t under his control.

Yeah, he was a great guy, but arrogant about his abilities and also very protective of his own stuff. Certainly didn’t want to have an accident on a commercial ship impacting the nuclear navy. For a lot of reasons. He refused to help support the Savannah, even though it was a US government project, and he was able to swing his weight around at that time to not support it, so had to maintain their own shore facilities.

Yeah. Anyway, so those are some of that. We look at lots of, lots of markets for energy. 

[00:54:18] Mark Hinaman: I love it. I, I wanna touch on real quick the regulatory environment in the us um mm-hmm. Or, or globally but you know, we’re, we’re focused on the US and think that the regulatory hurdle is the highest cost of entry because it’s viewed as biggest risk.

Do we, do you see that changing over time? And if so, why? And if not, why not? 

[00:54:40] Rod Adams: It could change very fast. I, I think that, that, in general, the regulations aren’t, Burdensome in their written form. Yeah. I think they can be addressed. They, you, you have to be careful with the technology, like nuclear for public acceptance rates, all kinds of reasons.

But you have to change the attitude. You have to ho you have to appoint the right people to lead the organization and say, read your mission statement. We have to protect the health and safety of the country, not just protect them from radio radioactive material, but to use radioactive material to help us protect.

We’re supposed to protect the environment. That means if we make it so burdensome that people wanna shut down nuclear plants and burn natural gas, we’re failing. Yeah. Because it’s not protecting the environment to do that. You’ve gotta be able to open your aperture and, and have a mission. And I think that, that, that could change things dramatically.

And that’s doable. By the president who says he supports nuclear. We’ve passed a lot of laws, a lot of good support. The government is in charge of the Nuclear Regulatory Commission. They may claim that they’re, they’re in independent, but the government, the, the Congress and the president still have to choose the leaders and have to supply their budget and can say, Hey guys, get with the national program.

I’m not saying, we’re not saying change your regulations or lower or lower barriers, but do things efficiently. Stop spending 10 months to put out a, a thing and ask for comments and review the comments. Come on. You can do that quicker. You gotta come up with ways to do it. But I think that the regulations don’t have to be the barrier that some people think they are, and they can be planned for if you get the right people in in place and you establish a precedent saying, This is what we want to do as a country.

Stop going back and using some sort of legalese to reverse decisions that were already made, like the subsequent license renewal and the yeah, you know, don’t sell Diablo can. They gotta start from scratch after they’ve already invested so much time and money into a licensed renewal process and already done the work to show that the NRC why he is already, it’s safe to continue operating.

You know, take the work that’s already been done and start from there. Don’t, you know, put ’em into a box. So can that be done? I think so. I think it can be done much more quickly than some people think. I don’t think it requires a big process to write a new rule for part 53 and all that stuff. I think it requires leadership that says this is our job: to regulate radioactive material and doses to protect the public health and safety, protect the environment and contribute to the common defense and security of the United States of America. Really, that’s their mission statement. 

[00:57:43] Mark Hinaman: That’s a pretty straightforward job. And it’s what they spending so much time on to get these reactor license.

No, I couldn’t agree more. I think summarized it’s having a dual mandate to protect, but also recognize that if you overprotect, then you are hindering and not doing your job adequately because people use other options and then get hurt using those options. 

[00:58:04] Rod Adams: So you can’t say, my only job is to make nuclear perfectly safe. My job is to use radioactive material to make the country safe and to balance the risks of using nuclear against the risk of using something else to produce the same amount of energy. 

You know, those are the kinds of things you have to recognize. It’s sort of an on board, a submarine. We had some people that would focus on the reactor itself and say, I can’t do it cuz it might risk the reactor.

And I would say, who cares it’s a ship sinks, who cares about the safety of the reactor if your perfectly safe reactor is at the bottom of the ocean with the rest of us? Okay, the reactor’s there as a job to propel the submarine and to supply electricity. And yes, you have to work carefully to make sure it continues to do that job, but don’t focus so much on the minutia and the, the compliance with rules that were written as in some cases, guidance.

Don’t do that and say, well, I’m gonna take the ship down with me, but we’re gonna not violate any of the previously assigned directives. That’s dumb. Come on guys. 

You know, like you said, the onboard a submarine, the reactor, we treat them very carefully, but we don’t treat ’em with kid gloves. We make the reactor do its job of propelling the submarine.

And in some cases we do have to do it differently than what the rules say, not violate the rules, but the rules can’t always apply. So we have, we have a procedure on board to do almost anything if the captain gives his approval. He just has to be able to justify it, explain why it’s safe, why it’s better than the alternatives, and you go forward.

You know, we need to recognize the importance of energy in our economy, the importance of doing things well, but doing them with a broader understanding of what safety really means. Is it safe to breathe coal fumes? Is it safe to depend on natural gas in New England for your electricity at the same time people need it for heat?

[01:00:42] Mark Hinaman: Depends on how much supply it is. But yeah, no, you can have some extreme shortages. 

Rod, it’s always great to talk to you and we can talk for more we’ll, we’ll have to go back. Um, But the, we’re, we’re up on our time today, so leave, leave us on an optimistic note. Where, where do you see this going?

What’s, what’s the future look like? 

[01:01:01] Rod Adams: I believe that by 2030. We’re gonna have several new reactors operating. They will have been expensive to build because they’re first of a kind. There will be follow on orders for those that will show an increasing demand. And we will be transitioning fairly quickly from emitting sources to non emitting sources.

And since the non emitting sources are gonna be, are treated equally, at least most of the way, they’re gonna win the, the, the nuclear guys are gonna win because they’re gonna show decreasing costs and schedule cuz they’re starting at a much higher base. The solar and wind guys have done a great job reducing their costs and schedule.

But are they continuing to do so? have they hit a 

[01:02:05] Mark Hinaman: I think there’s a lot of data that shows they’re actually increasing. 

[01:02:09] Rod Adams: Yeah. So it’s, it’s a lot easier to be most improved when you’re really bad to begin with. It’s really hard to be most improved if you’ve done a good job over the years of getting down to as low as you can go.

And I think that that’s pretty much where wind and solar are today. Actually. They were as low as they could go in 2020. Now, as you said, the, the data, when you look for it and find it, shows that there’s significantly increasing costs. And even where the cost to the developer hasn’t yet increased, the suppliers are saying we’re losing a billion dollars a year selling wind turbines.

I think Siemens Gams had just announced 897 million of losses in a single quarter. They’re not gonna keep their prices where they are. Or they’re just gonna stop selling. They’re not gonna keep producing at a loss. So the pressures, and as I said, energy inflation, gas and oil and coal prices drive inflation in the rest of the economy, including the steel use for NACE for towers, the fiberglass used for blades, the copper used in the windings of the generators inside the nayc cell.

The diesel fuel used to supply the offshore wind turbines. The aviation fuel used to use the helicopters that drop the wind, turbin, all kinds of things that are part of the renewable systems are going to inflate as well. Again, they’ve done a great job reducing, but part of their reduction was very low energy prices and really cheap interest rates, almost free money.

When those things go away, prices are gonna change.

[01:03:58] Mark Hinaman: Absolutely. Rod, thanks so much for your time. I appreciate it. 

[01:04:01] Rod Adams: Optimistic. We’re gonna have a, an abundant nuclear future and I’ll see it before I pass away.

[01:04:09] Mark Hinaman: I believe it. Couldn’t agree more. 

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