Climate change

If you’ve studied chemistry, you’ll know that the nucleation point describes the start of a change in physical state, such as from a solid to a liquid, or liquid to gas. Water starting to crystallize into ice nucleates where the first H₂O molecules reorganize as a solid.

We’re seeing a similar transformation of human society—forced by the heat of planetary warming, costly extreme weather and the recognition that more catastrophic shifts are underway—compelling nations, provinces, states, cities and even remote villages to re-think their use of energy to reduce emissions.

This Earth Day, the level of concern and the degree of activity being directed towards slowing the additions of heat-trapping gases to the atmosphere has never been greater.  This would be encouraging except that decades of study, thousands of scientific reports and billions invested has yielded little progress. Prior to the economic slow-down caused by Covid-19, even the rate of growth of emissions had not been meaningfully reduced. Now, with economies starting to recover, global emissions are rising again, when what is needed is for these emissions to be dramatically declining.

We only have nine years left to achieve the goal of a 50% decrease in the level of global emissions by 2030, as set out by the IPCC back in 2018 as what is needed to keep global temperature rise to 1.5°C (which though the aspirational goal, will still mean the loss of 90% of all coral reefs). Whether or not you agree that this is the right goal for us to achieve, we’ve still failed to make even remotely appropriate progress. This despite a growing parade of nations, states, and entities announcing emissions reduction goals. What’s the basis for this failure? 

Lack of agreement on effective solutions. The Renewable Portfolio Standard (RPS) that became widespread has not worked. Instead, the RPS let us take our eye off the goal of emissions reductions to focus on increasing the penetration of renewables. Solar and wind, as intermittent energy sources, require backup generation for the majority of their nameplate capacity. Somehow, use of natural gas was back-doored, allowing gas generation to expand like a weed beneath the thin veneer of renewables, despite its huge emissions and ecologic footprint. What little emissions decline we got, was due to the offsetting decline in the emissions from even dirtier coal plants retired by increasingly cheap gas.

The world, to do better, needs an effective solution—not a politically popular one. Fortunately, legislatures in a few states are beginning to replace the RPS with the Clean Energy Standard (CES). These policies call for requiring set amounts of emissions reductions by certain dates—not prioritizing a particular technology solution. This is very promising for achieving real reductions and provides an opportunity for nuclear power to be utilized. Indeed, many utilities already knew they could not achieve ambitious reduction goals without nuclear, and now some utilities are even beginning to admit publicly that they will need nuclear in order to deliver on their emission reduction commitments.

Unfortunately, over the last decade, nuclear power, the only true source of carbon-free firm generation that is independent of weather or geography, has suffered declines. Nuclear energy has been excluded from the RPS standards passed in 30 states, hobbling the profitability of established businesses. Furthermore, nuclear’s wealth of grid reliability benefits, including long-term fuel availiability and storage, extreme weather resilience and transmission line voltage regulation, have all been devalued through a complex set of market functions within the deregulated energy markets, aimed apparently at serving the political goals of those in charge.

How so? Take the case of New York State.  In upstate New York where Republican voters dominate, Governor Cuomo passed Zero-Emissions Credit (ZEC) climate legislation to protect the region’s three nuclear power plants, which were quite popular with the voters there. The legislation reflects the evironmental value of the nuclear plants’ reduced carbon emissions and pays the plants “zero emission credits” in a fashion that protects the nuclear generation from the vagarities of low gas prices. 

Yet, Governor Cuomo, shrewdly excluded Indian Point, in downstate New York, where his political support consists largely of Democrats with well-conditioned antipathy for nuclear. Coincidentally, it also happened to be where natural gas lobbyists were desperately seeking to increase their market share and managed to get Cuomo to approve permits to build three new gas plants. In depriving Indian Point of the benefit of the Zero-Emission Credits, Cuomo was able to force this nuclear power plant to close—despite the passage of New York’s CES.  

The irony is that upstate Republicans, with much less articulated concern about climate, have almost 90% clean energy powering their grid, thanks to Canadian hydro and three nuclear power plants that Cuomo worked hard to preserve. Downstate Democrats, ostensibly more motivated to see Cuomo address climate, will see 94% dirty energy in a few weeks, once Indian Point’s last reactor closes on April 30th, eliminating all but a trickle of hydro, since there is scarse open space for wind or solar and lots of NIMBY. (See NYISO’s Power Trends Report, p. 29 for these charts.) Cuomo, in a masterful stroke, did good for the gas industry, pleased the Riverkeepers worried about fish fry, and will still earn political popularity points despite eliminating the single largest source of clean energy for Manhattan, adding to the region’s already poor air quality, and completing its dependence on fracked gas.

The situation in California, with the forced closures of its two nuclear power plants—San Onofre in 2012 and Diablo Canyon in 2024 and 2025—being the result of direct action by a politically-shrewd Governor—is frighteningly similar in how it impacts state emissions for the worse. Which is why there is a growing chorus of voices appealing to President Biden to protect the nation’s nuclear fleet—which provides 55% of all of the U.S.’s clean energy—from being the political football that it is wherever environmentalists and/or fossil fuel lobbyists have sway. 

Senator Joe Manchin of West Virginia, Chairman of the Senate Energy and Natural Resources Committee, sent a letter to President Biden earlier this week specifically requesting action to protect America’s nuclear power, stating that “preventing the closure of existing nuclear power plants is critical to achieving emissions reduction goals while ensuring a reliable grid.” 

Similarly, the Climate Coalition, a non-profit group working to build a coalition of both nuclear and renewables supporters focused on emissions reductions, launched a campaign called Protect Nuclear Now which issued an appeal to Jennifer Granholm, the new Secretary of Energy, urging the use by President Biden of his emergency declaration power to prevent the premature closure of at-risk nuclear power plants. Biden could intervene to save Indian Point, the most imminently at-risk plant, and preserve these high-value clean energy assets, giving Congress time to resolve the problems of discriminatory state energy policies, lack of carbon pricing, and political patronage which together prevent nuclear from being properly valued and put at risk so competitors can benefit at the cost of rate payers.

President Biden hasn’t responded to these appeals but he has shown that he is guided by science and seeks real solutions. Biden’s bold support of innovations in advanced nuclear reactors has already been widely hailed by climate scientists and energy experts. After all, the pressurized water reactor may be one of the few 1970s-era technologies that is still in active use today but there is a growing cadre of entrepreneurs and engineers who have been working hard to bring nuclear energy into the 21st century—making it safer, more efficient, more scalable, more flexible and better suited for tomorrow’s distributed clean energy grids. American firms can be the ones that offer the right energy solutions to the world, rather than the Russians or Chinese. Biden has expressed strong support for pursuing advanced nuclear innovation and development and he’s brought on a Climate Task Force that appreciates the importance of this technology for meeting US emissions as well as economic development goals.

This is a really good thing. As we celebrate Earth Day in the midst of a global climate crisis, there are growing signs that nuclear’s time is finally coming. Congress has already laid the foundation, quietly passing the Nuclear Energy Innovation and Capabilities Act (NEICA) and the Nuclear Energy Innovation & Modernization Act (NEIMA) two pieces of legislation vital to modernizing nuclear power in the 21st century. The Energy Act of 2020 provides further support for US investments in advanced nuclear technologies. Clearly, the president and the Congress understand what too many environmentalists and investors do not: that deploying advanced nuclear will be critical to our ability to transition fully away from fossil fuels within the remaining carbon budge, while preserving grid reliability.

Seeing advanced nuclear roll out in a time frame that can make a difference for climate is a goal near and dear to Rod and me. We’ve been working since 2018 to develop an investment vehicle that can invest in ventures developing advanced nuclear reactors, grid optimization and deep decarbonization technologies. Climate change may be the most serious environmental threat ever faced by humanity but it is also one of the biggest, foreseeable economic opportunities.  If we must transition away from fossil fuels, investing in the best alternative sources of clean generation just makes good sense.

With a few key milestones behind us—namely the certification of the NuScale modular design by the NRC and the submission of the first non-light water design for combined license by Oklo—those who follow trends can see that nuclear’s prospects are gaining traction. We are excited to place some early investments, follow the progress and participate in the exciting growth of this nascent sector.

Why exciting? Because of the scale of the transition that is needed. If we just supplant the fossil fuel generation that is used around the world, we would be shifting some 70% of total grid generation to clean sources. That’s a huge market in itself but that’s not all we need to do. Decarbonizing the electric grid is just the first step. We also need to decarbonize transportation, industry. agriculture and the built environment. This will involve either high temperature steam—which advanced nuclear can produce—or the electrification of nearly all the energy devices used, which further shifts energy demand from oil, coal, diesel, propane and natural gas over to electric grids—estimated to double or triple the amount of grid power needed today.

Now combine that growth with current electrification trends in developing nations and the increasing applications of online services, such as video conferencing (think how much Zooming you’ve done this year), online shopping, telemedicine, online banking, Netflix, videogames, online education and even cryptocurriencies, whose energy consumption just surpassed that of Argentina. With exploding data centers—whose energy use is 24x7x365—and multiples for estimated grid expansion, one can really begin to see how much more load global grids will have to bear in becoming the primary power source in the 21st century. These projections simply don’t jive with any realistic vision for an all-renewables solution. Nuclear has to be part of the solution to meet the timeframes and keep costs within reasonable bounds, all while maintaining reliable service.

But wait, there’s more. We have yet to come to terms with the energy demand of decarbonization. If we want to restore our climate, we need to reduce the amount of free carbon by capturing, processing or sequestering CO2 out of the atmosphere (CCUS). Experts estimate that we need an industry about the size of the fossil fuel industry devoted entirely to reversing the direction of CO2. This industry further requires yet another massive increment of clean energy to power its activities. It is a huge undertaking—and possibly one best taken on by the fossil fuel industry itself—because without this, all of our efforts to transition to clean energy will only stop things from getting worse. It will not prevent the baked-in heating of our atmosphere, which scientists predict will continue to cause forced global warming for decades to come, straining ecologic systems well past dangerous tipping points.

Can solar and wind power keep up? At present, despite seeing their costs decline due to Chinese mass production, solar and wind installations are not even keeping up with global energy growth, if you don’t count the gas back-up. It is hard to imagine that they could ever succeed in replacing a large capacity coal or gas power plants entirely by themselves. But paired with advanced nuclear, versions of which can be built on existing coal or gas sites in lieu of retiring furnaces and we can more quickly build resilient, 100% clean energy grids, with excess capacity on super hot days, and clean up polluted American skies in the process. Clearly, if we are to replace all fossil fuel power and double or triple the size of our grids to fully decarbonize and draw down carbon, all types of clean energy—solar, wind, nuclear, hydro, geothermal, wave and even future technologies—such as fusion—will be needed. The faster these players all learn to work together, the more efficient and cost-effective our global transition will be.

It can be disheartening to hear renewable advocates arguing that nuclear power is not needed, because it is not “dispatchable” and will result in excess power when renewables are generating. When taken in light of the array of ventures developing CCUS solutions, all of which need reliable sources of clean energy, this argument makes no sense. In fact, we need an entire industry’s worth of decarbonization tech to get busy, so if and when the grid doesn’t require power from nuclear, advanced plants operators will be able to route their power to revenue-generating climate services such as hydrogen or synthetic fuel production, water desalination or other industrial heat applications. Utilities are already beginning to test these applications and explore the prospect of alternative revenue streams for non-grid directed clean energy.

Clearly, solving climate will cause enormous shifts in how we generate and use energy. There will be major winners and losers as new clean technologies are deployed and old technologies are wound down.  Energy is so central to our modern-day existence and the elimination of emission is so critical to our long-term survival, it is no wonder these are extraordinarily controversial and contentious issues. The only certainty is that this transition must happen. No one can predict the future but those who know and appreciate the power of nuclear technology have an opportunity to invest in the innovations happening today, ahead of those who haven’t done their homework.

Back about a decade ago, I went through the exercise—as a partner in an investment management firm—of trying to figure out where our clean energy would come from. As easy as it was to know what stocks to divest, it was equally as challenging to figure out what could possibly replace fossil fuels.  So I took a hard look at our overall energy sector to see where our clean energy came from. The answer surprised me: about 65%  of our clean energy was nuclear power. That was a pretty compelling clue to the future.

I’ve now spent much of the last decade exploring nuclear energy and the nuclear industry as an investor. My willingness to do so appears to be where my investment process diverged from that of many other investors. Others bought the hype about solar and wind: I preferred to look realistically at the data. But delving into the nuclear industry has been both a fascinating and a dismaying process. There is a strong, passionate and articulate pronuclear community and extraordinarily competent teams running our power plants but, after decades of facing virulent opposition, what exists of the industry is weakened, cowed and entirely reluctant to stand up for itself.

This has contributed to traditional nuclear’s bumpy ride. Despite generating about 20% of U.S. electricity and 55% of clean energy, nuclear remains subect to ongoing campaigns to vilify it.  One must look beyond the propaganda coming from both fossil and renewable competitors and seek out the data. We’ve seen what nuclear has achieved in the past: but we don’t know where it is going. Still, extrapolating from available technology and manufacturing learning curves, if advanced nuclear can benefit from mass production, digitization, AI, robotics, advanced materials and other well-understood 20th century technologies, from an energy density and material-efficiency basis, it is hard to see any other energy technology performing better than nuclear fission for human society over the long term. Fortunately, this next generation of nuclear ventures is showing that they recognize their critical role in the climate fight but also their obligations to the broader community, for social justice and fair governance.

In 2018, when I finally reached out to Rod about my interest in investing in advanced nuclear, we agreed that it seemed like the right time. It has taken us a few years to figure out how best to structure our fund but, in the interim, concerns about climate change and support for including nuclear have only grown stronger. Thanks to the recent introduction of the AngelList Rolling Fund, Rod and I now have our answer: Nucleation Capital, a “rolling” venture fund that uses technology to enable individual investors to participate on a subscription basis at lower, more affordable capital levels. We plan to invest broadly, to participate in the overall growth of the sector, and also go deep with those particular ventures that are crushing their milestones. If this interests you and you’d like to learn more, please let us know through the interest form on our website and we will be happy to follow up with you.

With a new, science-respecting president in the White House and with growing global support for effective climate action, evidence is emerging that we are witnessing the nucleation of a new carbon-managed economy. Under Biden, America has its best and possibly last chance to coordinate a global response to the climate crisis. Advanced nuclear entrepreneurs also have an opportunity to show the world how the next generation of nuclear power can not only end our reliance on fossil energy but also begin to restore our climate without causing massive ecosystem impacts. Against this backdrop, investing in these technological innovations and providing some of the capital that is needed to get them to commercialization, even with all of the uncertainty and risks that these ventures certainly face, seems like not just the right thing to do but a darn good investment in the future as well.