Advanced nuclear energy systems are ready for investors who seek ground floor opportunities
Last week, the Nuclear Infrastructure Council hosted its 5th annual Advanced Reactor Technical Summit. The agenda was packed; information and ideas came rapidly enough to inspire significant post-event reflection. One question worth of significant additional discussion is “How do we match the ingenuity and enthusiasm of atomic innovators with the large magnitude financing sources needed to advance the field so it can become a major success story?”
Several of the Summit’s former primary participants have dropped out of the field or are realigning their efforts; financing became either a solid barrier or a hindering hurdle needing to be better addressed. Several new entrants made their debut. Stalwarts who have been a part of the summit for several years, including some who have been at every meeting so far, provided status updates with significant progress to report.
Though there are still no commercial reactors designed in the past 30 years operating in the United States, the field is maturing and ripe for investors willing to side-step conventional wisdom so that they can be in at the ground floor. In my opinion, the foundation and basement level investors have completed enough of their tasks to declare that the remainder of the structure is ready for construction.
There’s no doubt that many risks remain to be retired before investing in advanced nuclear systems is appropriate for widows, orphans or near term retirement funds. For those with a greater appetite for risk or who understand the importance of long term, patient investing, there are some impressive opportunities available. The identified, addressable markets are enormous while the universe of potential suppliers is rather compact.
Virtually all of the currently participating companies, however, are either small, not-yet-public start-ups only accessible to investors of a certain sophistication or wealth or they are very large companies with modest levels of involvement in advanced nuclear compared to their overall size.
That reality makes it difficult for people with modest resources but significant professional understanding of the opportunities to make strategic, long term, focused investments in the field.
During several of the breaks throughout the course of the event, I engaged in a thoughtful conversation with Dr. Warren (Pete) Miller, a former head of the Office of Nuclear Energy at the Department of Energy. Though neither of us are financial experts, we agreed that it is probably time for advanced nuclear energy advocates to attract the attention of people who specialize in aggregating small investors into large, focused funds.
Though the specific form of the fund(s) need a lot of creative development, there is an opportunity to put together investment vehicles similar to exchange traded funds (ETF) that specialize in identifying and investing in high potential nuclear energy developers. Such funds could spread the execution risk among several different projects and among several different phases of the supply chain. With careful communications, the fund managers can develop the kind of patient money needed for success in this field by making it abundantly clear to participants that they need to be willing to wait for 5-15 years before seeing strong results from selected investment targets.
Conventional wisdom assumes that kind of patient investor doesn’t exist anymore, but that wisdom is belied by the fact that parents and their children still cooperate in developing plans to invest in lengthy, costly college degree programs or such long-term investments as medical school. Major energy corporations still develop capital intensive projects that often need a decade or more of ever-increasing expenditures before they begin to generate any revenue at all.
Successful people, including nuclear professionals, still make long term investments, save for retirement, and enter into financial agreements that might last for thirty years or more.
Of course, many sources agree that the “puck” in the energy investing world is currently heading towards an ever increasing penetration for natural gas and its renewable energy partners. People who believe that straight line trajectory will continue without deflection are all skating in a certain direction, sure that they are following The Great One’s advice to move to where the puck is going to be.
It takes confident, informed and observant participants to see that there are discontinuities in the ice and numerous opportunities for other players to change the puck’s current trajectory. It is always possible that the crowd is absolutely correct in its prediction of the future location of beneficial investing in energy. Time will tell, but by the time it does, the crowd may have seriously misjudged the best place to make strategic investments.
Smart investors looking to separate their strategy and seek less crowded, potentially more lucrative targets would be well advised to learn more about the scale and breadth of the new (or renewed) ideas in nuclear energy.
In the very near future, I will add more specifics about the opportunities revealed during the Advance Reactor Technical Summit. In the meantime, I’d be interested in hearing from anyone with thoughts about developing mechanisms for investors with moderate resources and long time horizons to focus part of their portfolio in this potentially high payoff field.
A lot of the uncertainty for current plants is the presence of customers. Vermont Yankee closed because it couldn’t get a new contract, and apparently Duane Arnold is going the same way. This problem isn’t going to go away just because of a new design.
The one thing that can cement nuclear’s position is customers willing and able to pay for reliable power. Had someone been ponied up 5¢/kWh for VY’s output, it would still be running.
I don’t have any solutions, but would be interested in the type of investment you’re referring to. Keep us updated.
@E-P
Well, actually, Entergy held out for 6.1 cents per kWh. That was a good price compared to alternatives like wind and imported hydropower, but customers balked because it was a 50% increase over the PPA price agreed when for the first ten years after Entergy bought VY. Of course, those customers did not have a good understanding of the investments that Entergy made in the plant, both voluntary and designed to improve its performance and involuntarily to meet ever changing regulations.
I’m looking at the business case for something right now and 6.1¢/kWh seems feasible. Such a pity I didn’t have this idea 10 years ago and have it ready to roll when VY’s fate was being decided.
Rod,
I recommend this Podcast episode. This guy might have some interest. Lux Capital had some pretty nice success in founding Kurion (subsequently acquired), which has done a lot of cleanup work at Fukushima (whether all of what they’ve been paid to clean up was necessary is a whole other possible debate).
https://www.luxcapital.com/companies/kurion/
Invest Like the Best podcast episode:
http://investorfieldguide.com/wolfe/
-EntrepreNuke
What about using crypto-curency to facilitate moderate investing? If the businesses/ETF wanted to make a coin, and back it up somehow with their future profits, then they could set up an exchange and let it trade after some initial offering price. Obviously, it should be made clear that the payoff from the coin is not guaranteed, and that any given company is years away from having a truly “valuable” coin, if they manage to get one at all. In the meantime however, the coins could still be used to raise money as one would use company stock, and buy/sell them back as needed. I have a feeling that plenty of people investing in cryptos right now anyways would also be interested in investing in nuclear power.
@Engineer-Poet
Kewaunee and Ft. Calhoun could also have been saved if the owners had been able to obtain a PPA for most or all of their output in the same price range.
I suspect at this point that most of the financially stressed nuclear plants would suddenly be quite profitable at such a firm price. In most unregulated markets, however, there are some odd rules that prevent nuclear plants from participating in the same kind of PPA negotiations and contracting that has enabled many RE projects to be viable.
I’m still learning about how that system works, especially since nuclear plants can actually deliver on their promises minute by minute while wind and solar may only be able to supply a reasonably firm commitment for total energy supplied – at wildly varying rates – over a much longer period of time.
Rod
Thank you for remembering VY.
Meredith
This is a huge gray area as there is a lot of confusion and government crackdown on ICOs used to offer securities. It is a possibility though.
@Rod Adams ” That was a good price compared to alternatives like wind and imported hydropower, but customers balked because it was a 50% increase over the PPA price agreed when for the first ten years after Entergy bought VY. ”
I will never understand the, “Well it’s more than we want to pay, so we’ll decline and go with something guaranteed to cost even more.” mentality.
That’s basically what Austin did in 2009 when they declined to participate in an expansion of STNP. On the other hand, given the problems the industry seems to be having managing large construction projects, perhaps it is not as terrible as it seems. Not good — just not as terrible.
Let’s start by making it easier in which to invest in the first place. A major reduction in regulation and requirements when building nuclear plants would help in many ways including, but not limited to, reducing the up front costs (engineering and construction), reducing the time for regulator approval, and reducing the amount of learning / knowledge one needs to have about the project (by this I do not mean that one would not do an appropriate amount of due diligence, but rather that nuclear regulations have their own neauances, techinical jargon, precedent history, etc. that an investor would need to be knowledgeable of. The less of that “stuff” the bigger the pool of potential investors becomes. Plus, it allows the investors to focus on the merits of the technology / idea and not so much on forecasting what the regulator would think about the merits of the technology / idea).
For many of the advanced reactor concepts being worked on, this shouldn’t increase any risks to the public because the concepts are (in many cases) inherently “nuclear safe” already.
Nuclear power plants represent a better choice than coal, oil or natural gas power stations, which means that in order to reduce the level of air pollution produced by the fossil fuels we need to increase the low-carbon energy sources.
I read on https://www.alternative-energies.net/advantages-and-disadvantages-of-alternative-sources-of-energy/ that nuclear power is considered a clean source of electricity.
Rod, I have been thinking along these same lines for a while now as well. You and I need to talk!