April 30, 2025

POWER SURGE: Report on this one-day conference

Power surge conference

An important conversation hosted by Doon Insights

Doon Insights, an investment-focused group organized by Howard Chao, convened dozens of subject-matter experts as speakers (see the list below) across many disciplines in Santa Cruz, California to address trends and issues impacting demand for and supply of energy in the coming years and decades. Energy, which is what makes today's technologically-dependent society possible, is a very large and important topic and was a lot to cover. But in an ambitious, rapid-paced one-day conference titled "POWER SURGE: Solving for Unprecedented Energy Demand," dozens of people laid out the fundamentals and discussed the key questions around both what is driving demand and how will we meet that demand. Questions tackled included:

The demand side    Demand Side

  • Why projections for US power needs now greatly exceed what would have been predicted only a couple of year ago
  • Why the exceptional needs of AI Data Centers and the electrification of diverse parts of the economy are driving energy demand
  • What are the challenges of building, financing and operating new data centers? 
  • How much more power will these new facilities require? Where will they be located and what is the attitude of utilities, state and federal government towards supporting them?  
  • How will the rapidly changing AI competitive landscape affect these power projections? Does the advent of very cheap, highly efficient, smaller SLMs, open source models and Chinese competitors mean that investors have overestimated the need for huge data centers?  
  • How will the electrification of vehicles, buildings, industry and transactions (blockchain and cryptocurrencies) further accelerate and add significant incremental power demand?
  • What are the primary challenges to meeting these power demands of these expanding use cases in the coming years and what will be the main challenges to implementation, including the need to expand the transmission capabilities of the grid?
  • Will the new administration's renewed emphasis on fossil fuels result in a slowdown in electrification? 
  • What will be the impact of the tariffs on the buildout of all these projects?
  • How will the new administration's energy policies impact all of these areas? Will we be able to unleash power generation sufficient to sustain the foreseeable economic growth while also continuing to reduce carbon emissions?

"The Nuclear Option" panel title displayed on the big screen.      Supply Side

  • What are the near and longer-term challenges and solutions to the surge in power demand?
  • Will growing renewables and batteries be sufficient?
  • Will fossil fuels experience a resurgence, with all that drilling?
  • Will the sexiest and biggest solutions—nuclear fission and fusion—be coming on stream faster than most people believe?
  • What are the short, medium and long-term prospects for these new technologies?
  • Will the "privatization" of nuclear innovation and the prevalence of an industry being led by fast-moving private companies, pleasantly surprise us with their speed to market?
  • What will be the near-term and longer-term mix of energy solutions?
  • How will a patchwork of revamped legacy technologies, including fuel cells, wind, solar, distributed generation, energy storage, energy time-of-use shifting and other behind-the-meter solutions help in the short-term? 
  • How are advancements in small modular nuclear reactors (SMRs), which offer enhanced safety features, reduced construction times, and the flexibility to be deployed in diverse locations, going to contribute?  
  • Given that major technology companies like Google and Amazon are investing in SMRs to power their expansive data centers, how will this accelerate commercialization?
  • Fusion energy—which is experiencing a wave of breakthroughs, with multiple companies and research initiatives racing to develop and commercialize multiple technologies, such as high-temperature superconductors, improved plasma confinement techniques, and novel neutron flux applications—is beginning to generate revenues but has yet to complete a power-generating reactor design. Will the new administration help accelerate progress towards practical fusion power with pilot plants within the decade or is this game-changing technology still decades away?

The Nuclear Option

Screenshot 2025 05 04 at 8.23.42 amValerie Gardner, Nucleation's managing partner, moderated the day's fission panel, called "The Nuclear Option: Generation IV and Small Modular Reactors," which looked at the role of fission innovation and the coming wave of small, modular reactors (SMRs), that were poised to bring nuclear power into the 21st century. She and her panelists, Leah Crider from Westinghouse (seated on the left), representing the eVinci design, and Clayton Scott from NuScale Power (in the center), which has the first NRC-certified advanced fission design, discussed how and why next-generation nuclear will be the ideal clean energy solution that few think is possible.

While the Fission panel had a full 45 minutes (and probably went over-time) to cover a lot of ground, including reviewing nuclear's status as a major source of today's clean energy, the fact that nuclear is turning into a "technology" product that can be manufactured in factories and shipped to locations, and how a growing assortment of energy buyers like Google, Amazon and Dow Chemical see advanced nuclear as solving their energy needs better than other solutions, because the subject matter was so expansive, Valerie and her panel were able to cover many but definitely not all of the important points. Nevertheless, the fact that this conference's supply-side conversation included nuclear fission at all was a huge victory. This inclusion reflects the fact that nuclear energy is no longer seen as the taboo topic it was long deemed to be, at least up until the last couple of years. For too long, nuclear fission was excluded and no one considered it a vital part of the clean energy solution set. But times have changed and especially among investors looking to understand key long-term trends and be able to invest into them at an early stage.

According to Howard Chao, each panel of the conference, by design, was too short, leaving a lot of unfinished conversations. Nucleation Capital was honored to have been included in this discussion and we look forward to continuing to see interest in advanced nuclear broaden.

POWER SURGE: List of Speakers

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March 25, 2025

POWER SURGE: Solving for Unprecedented Energy Demand

Announcing a Doon Insights Workshop

Power surge

Registration link for the Power Surge Conference

Doon Insights, hosted by Howard Chao, is convening dozens of experts to address trends and discuss issues impacting demand for and supply of energy in the coming years and decades. This one-day conference is being held on April 30th, 2025 in Santa Cruz, at the Boardwalk's Cocoanut Grove Resort.  This is Doon Insights first energy-focused workshop, so the event will bring investors up to speed on the topic of energy and how we will meet that demand. It is not too late to register to attend. The conference is titled "POWER SURGE: Solving for Unprecedented Energy Demand."

Ray Rothrock, renowned venture capitalist and Nucleation Capital advisor, will give a keynote talk about the solutions to the demand surge in conversation with Howard Chao. Valerie Gardner, Nucleation Capital's managing partner, is moderating an afternoon panel on Long Term Supply Side Solutions from Nuclear Fission: Specifically Gen IV and Small Modular Reactors. Following that, Matt Trevithick of Leitmotif Ventures, will moderate a panel on Fusion.  For the complete event overview and agenda, see thePOWER SURGE website.

Official Event Description

Doon Insights is pleased to announce our Power Surge Workshop: Solving for Unprecedented Energy Demand!

Our Power Surge Workshop will convene an exclusive gathering of industry leaders, investors, technologists, and innovators to explore one of the most pressing challenges of our time: meeting the surging demand for energy in a scalable and sustainable way.

As data centers, the electrification of everything, crypto mining, and other emerging energy-intensive applications create an unprecedented spike in demand, the energy sector is facing a pivotal moment. This perfect storm of demand must be addressed with both more conventional power generation, better power management and revolutionary new technologies.

Why Attend?

This Workshop is a must-attend event for energy innovators, investors, technologists, energy, manufacturing, mobility and other energy industry executives. Engage in in-depth discussions, network with industry leaders, and discover actionable insights into our energy future. And enjoy the beach and mountains of Santa Cruz!

Event Details:

Date:April 30, 2025 - 8 am

Location:The Boardwalk's Classic Cocoanut Grove Ballroom, 400 Beach Street, Santa Cruz, CA (Workshop); Bonny Doon, CA (Reception and Dinner)

Join us to explore the technologies, strategies, and collaborations that will define the next generation of energy systems. Secure your spot today!

Very much looking forward to seeing everyone in Santa Cruz!

July 1, 2024

African Nuclear Newcomer Aspirations

Post guest written by Collins K. Wafula, Bungoma Town, Kenya (with editing support from Darius Tirgan)

Introduction

Emerging countries have held discussions regarding the role of nuclear power in their energy mix. As a result, African states have embarked on a joint effort to achieve a nuclear renaissance. However, they face geopolitical tensions and technical incapacity alongside other issues identified by the International Atomic Energy Agency (IAEA). Ten African governments are nuclear-ready and have discussed the IAEA’s milestone approach to achieve their nuclear goals and elevate Africa's standing on the global energy map. Examining their energy spectrum and economic capabilities, these nations are keen to collaborate on advanced reactors but struggle to find the right partners. Therefore, for large-scale power and nuclear deployment to succeed, there must be an increase in coordinated efforts and financing to meet the rising African energy demand.

African Energy Demand

Shows the change in total final energy consumption by fuel and sector in the Sustainable Africa Scenario, 2020 - 2030

Africa makes up 17% of the world’s total population but only accounts for 3.4% of global energy consumption, with fossil fuels being the most prominent power source. They generate 91.5% of the African energy grid, with oil and gas producing over 12 times more energy than renewables, despite aiming for climate neutrality by 2050. As of 2023, renewables have produced 62 GW out of Africa’s 245 GW installed capacity, with South Africa contributing 10.62 GW of renewable electricity.

Africa has the least modern energy consumption per capita. However, as the population grows and more people gain access to appliances, power consumption is projected to increase by 1,180TWh over the next decade. Although, increased energy and infrastructure efficiency is estimated to lower energy demand by 230 TWh, 550 TWh of power will be required for universal access to sustainable energy by 2030. The IAEA's Africa Energy Outlook (2022) predicts that energy consumption will increase by one-third between 2020 and 2030.

To meet this rising demand, African countries have approved the African Union Agenda 2063, which provides a growth path over the next five decades. This includes attaining equitable growth and sustainable development in the race to manufacture and enhance energy infrastructure. Initiatives and projects are in place across Africa to power the continent using solar, wind, hydro, geothermal, nuclear, and other sources.

The question, “Is Africa ready for nuclear energy?” resonates with both the OECD and African nations. However, this should really be, “Is Africa ready to collaborate for a successful nuclear power renaissance?” The answer is yes. South Africa has a commercial nuclear power plant with two reactors in Koeberg, and other African nations are seeking to industrialize agriculture, mining, infrastructure, and other areas in a climate-friendly manner.

There is close competition between nuclear and renewable energy sources in Africa. Uganda has vast hydro resources, Ethiopia has powerful winds, Kenya has enormous geothermal power, and Morocco has widespread solar power. These renewable sources are crucial for meeting Africa's growing energy demands. However, there are still challenges in establishing a strong regional energy system. African nations follow differing energy policies. Kenya anticipates that nuclear power will provide 30% of its electricity by 2037 while constantly readjusting its plans to maximize its safety and security.

Geopolitics and the Energy Crisis in Africa

The African energy crisis is also linked to the geopolitical dynamics reshaping the global energy landscape. With climate change moving the world towards alternative energy sources, Africa has an opportunity to leverage its abundant renewable and nuclear resources.The pursuit of nuclear power could serve as a catalyst for greater regional cooperation and integration across Africa. The shared interests and technical expertise required for safe nuclear operation create incentives for collaboration on regulatory frameworks, skill development, and resource sharing. Strengthening nuclear governance and safety through continentally unified policies will build confidence and trust.

This cooperation also nurtures collective diplomatic capital. Groups like the African Commission on Nuclear Energy promote civil nuclear development as a pathway for sustainable development as opposed to proliferation. These unified positions give African nations greater leverage in non-proliferation discussions with global powers. The threat of nuclear weapons proliferation, however, still looms large in the minds of nations outside Africa. The latent risk of nuclear technology being used for military purposes or nuclear materials falling into corrupt hands raises security concerns. There is also an idea that poor states could collaborate with nations like North Korea given the right monetary and economic incentives.

This geopolitical stigma requires that African nations tread cautiously and work hard to assure the world of their commitment to the peaceful use of nuclear energy. Ratifying and adhering to international safeguards, export control regimes, and nuclear safety and security protocols is crucial. Being transparent about their nuclear fuel cycle activities will help foster additional trust. While exercising their sovereign rights to pursue nuclear power for economic development, African countries must pacify the global powers that may impede access to nuclear technology, investments, and fuel supply chains if left unsatisfied by the non-proliferation commitments.

Africa also has a rich uranium resource base that could power its nuclear reactors. For a long time, Namibia has been the largest producer of Uranium in Africa with reserves of up to 470,100 Mt, enough to power a 1GW reactor for a minimum of 1,175 years. Geopolitical tensions in Western Africa have caused Uranium prices to surge, with the spot price nearly doubling to $106 per pound due to Niger's reduced uranium supply impacting France. This comes after the G7 nations pledged to reduce their reliance on civil nuclear-related goods from Russia and diversify their fuel supply sources. It is a race towards sustainable energy which could highly benefit Africa.

At its core, Africa's energy crisis is a humanitarian emergency. Over 600 million people lack reliable access to electricity, one of the biggest barriers to economic mobility and human development today. This energy poverty perpetuates cycles of agrarian minimalism, disease, poor educational outcomes, and marginalization of entire communities and nations. Overcoming this through large-scale electrification via nuclear and renewable sources is imperative for inclusive economic growth and to unlock Africa's potential. Reliable base load power from nuclear energy can catalyze new industrial capabilities, healthcare provisions, education systems, and raise standards of living.

Extroversive Nations Seeking Advanced Reactors

Nuclear newcomer nations have looked at Small Modular Reactor (SMR) technology as a solution for the energy crisis due to its lower installation costs compared to traditional nuclear. Other reasons include their flexibility in rural region development, which would greatly benefit Africa as it is 51.76% rural. There has been a rise in collaborative work and events to meet the African energy demand, leading to the World Bank funding $1.3 billion for the Eastern Africa Power Pool (EAPP) and sparking a debate on whether Africa should go nuclear. Interested nations include Nigeria, Ghana, Senegal, Kenya, Uganda, Tanzania, Zambia, Namibia, Rwanda and Ethiopia. These nations are diversely choosing their collaborative partners through Nuclear Energy Agencies or Commissions, but their goal is still one: to increase their current energy capacity.

These are the current energy generation capacities excluding nuclear:

  • Nigeria 16.38 GW
  • Ghana 5.4 GW
  • Ethiopia 5.2 GW
  • Kenya 3.3 GW
  • Zambia 3.3 GW
  • Tanzania 1.9 GW
  • Uganda 1.8 GW
  • Senegal 1.4 GW
  • Namibia 0.6 GW
  • Rwanda 0.3 GW

The HDI of these nations may not be near the OECD nations, but their electricity access rates tell a different story. In 2022, Ghana had an 88.8% electricity access rate and an 86.8% household electricity access rate. It has been highly active in the nuclear power program and has established a  commitment to explore SMRs.

However, it is also important to mention renewables. Kenya’s renewable capacity is 2.7 GW with an additional 70GW of geothermal potential. Most Kenyans desire other energy sources to fully utilize Kenya’s current grid capacity. Ethiopia has a hydropower potential of 45GW—the second most after the DRC. In Rwanda, a small nation with big ambitions, the Ministry of Infrastructure has projected that 3.8 million households must be connected to the national grid. In 2021, it consumed 1.022 GWh with 58% coming from renewable energy. Nuclear is expected to produce up to an additional 300 MW. South Africa is ready to add 2,500 MW and combat severe power cuts affecting their country. ESKOM’s Koeberg Nuclear Power station is currently going through a refurbishment program to extend its reactor lifespan to 2044/45. Unit 1 shut down but was expected to be back up and running in the summer of 2024, and Koeberg Unit 2 will be coming back online in September 2024 as scheduled.

Developing New Technologies Needs Collaboration  

In an era marked by growing energy demands and climate change, Nuclear newcomer nations stand at a crossroads. With the African population projected to double by 2050 and rapid urbanization driving increased energy consumption, the continent faces a pressing need for sustainable and reliable power sources. Amidst this backdrop, nuclear energy is a promising solution, offering a low-carbon alternative capable of meeting Africa's energy needs while fostering economic development.

Ghana’s Energy Minister and Deputy Power Director, Robert Sogbadji, has listed the foreign companies vying for the prospective nuclear power plant project for Ghana. They include France’s EDF, US-based NuScale Power and Regnum Technology Group, and China National Nuclear Corporation. Other companies vying for the project include South Korea’s Korea Electric Power Corporation (KEPCO), its subsidiary Korea Hydro Nuclear Power Corporation, and Russia’s ROSATOM. These companies are essential for providing the funding and regulatory support necessary to develop and manage successful nuclear energy programs. To sustain this new technological outpour, African countries are developing a skilled workforce capable of managing and operating nuclear facilities while ensuring safe and secure operations.

But there is no great development without resistance. The public and key activists, like Kenyan Phyllis Omida, echo the nuclear waste mantra. They are desperate to keep nuclear out of Kenya. Some politicians are resisting the project due to the high initial cost, and engineers are unsure if they can manage innovative technologies. New companies are encouraged to offer training and resolve these concerns, so nuclear programs remain a priority. Furthermore, Africa's new energy system aims to be powered by renewable and nuclear energy.

Nuclear is also gaining popularity at business and climate conventions, such as the Conference of the Parties (COP), as a sustainable energy source for Africa and the rest of the globe. Countries in Africa require clean and inexpensive energy. However, there are significant challenges in establishing the correct partners and energy policies. Do they support energy independence but compromise with coal? Which nation or nations are best suited to collaborate with specific African states?

Bringing nuclear into the energy mix can help nations like Burkina Faso, one of the least electrified countries in the world with only 20% power access, develop and industrialize. However, political incoherence is preventing collaborations with OECD states. The future of nuclear energy in Africa is a multifaceted endeavor involving holistic approaches and technologies aimed at ensuring sustainability, accessibility, and reliability.

Advancing Nuclear for Energy Independence

Nuclear power is especially appealing to African nations because it satisfies one of the most important cornerstones of economic and national security: energy independence. For years, African nations have heavily relied on imported fossil fuels such as oil, gas, and coal to fulfill their energy requirements. This dependency has left them highly susceptible to the unpredictable nature of energy markets’ price fluctuations, which are influenced by geopolitical factors, disruptions in supply chains, corruption and other external variables.

This absence of self-sufficiency has significantly hindered Africa’s ability to progress forward. Relying on imported fuels depletes foreign exchange reserves, limiting resources for investment in vital sectors like infrastructure, healthcare, and education. Furthermore, excessive reliance on suppliers raises concerns about security as energy sources may be exploited for influence or disrupted during conflicts. Nuclear power would allow African countries to break this cycle of energy dependence.

Domestically produced nuclear power does this by providing a consistent, self-controlled supply source. This newfound autonomy unlocks significant economic benefits through lower and more stable electricity costs for industries and households. A reliable power supply enables new industrial activities, attracts investment, catalyzes job creation, and bolsters economic growth. Additionally, stable and affordable electricity is a prerequisite for improving quality of life through the electrification of homes, schools, and hospitals.

Furthermore, nuclear energy can be a pathway to self-sufficiency since African countries possess abundant uranium reserves. By developing nuclear programs and fuel cycle capabilities, nations like Niger, Namibia, and South Africa could leverage these supplies to achieve total energy independence as well as greater economic activity. Instead of exporting raw uranium, they could capture more value by enriching it to fuel level and using it in domestic reactors.

This shift could lead to the emergence of high-tech industries, the creation of employment opportunities, export revenues, and a reduction in imported energy expenses. A true 'resource blessing.' Nations could enhance their expertise in engineering, manufacturing components, and managing the fuel cycle efficiently. Technological advancements and the development of capital stemming from initiatives would enhance innovation and progress across various sectors.

Nuclear power plays a key role in helping African countries lessen reliance on imports, strengthen energy security, decrease energy expenses, and utilize their uranium resources for complete self-reliance. This enables them to move away from the "resource curse" of exporting materials. Though requiring high initial investment, the lasting advantages include energy self-sufficiency, sustainable progress, and increased economic autonomy.

Thus, Africa is working closely with nations around the world to develop nuclear reactors that will be cost-effective and flexible. Most of the discussion revolves around small modular reactors (SMRs), nuclear fuel design and production, medical isotope production, reactor safety analysis, robotics, and human resource development; many African nations question if they should be the first with a “new design,” due to the uncertainty of their safety. Additionally, these countries are considered poor nations, focused on establishing national grids as their main concern. However, a grid capacity of less than 10GW cannot serve a 1GW nuclear power plant, hence the focus on designs for smaller reactors. The lack of developed energy grids has become a major challenge in the nuclear transition.

Despite this, many countries are still assisting Africa with advanced reactors. The most notable is Russia, having made agreements with Egypt, Tunisia, Algeria, Morocco, Nigeria, Ghana, Ethiopia, Sudan, Zambia, Rwanda, Burundi, Congo, and Uganda. China, South Korea, Canada, and the USA are also willing to help.

ROSATOM is actively engaging with Africa, South Asia, and Latin America to develop Floating Power Reactors capable of being deployed across coasts and delivering nuclear energy to inaccessible areas. Of these FPRs, the RITM-200 has power capacities of 100 and 106 MW. Egypt has already started a $30 billion 1.2GW VVER at El-Dabaa and has received $25 billion from ROSATOM. Kenya signed an MoU with the USA-based Holtec Company for an SMR-160 design but may focus on developing a research reactor first.

The USA also recently announced that they will assist Ghana with SMR deployment through an MoU with NuScale. This MoU seeks to provide a NuScale Energy Exploration (E2) center and other related services at the Ghana Atomic Energy Commission (GAEC). The USA is the first country to offer training for African engineers in lieu of the IAEA’s standards for SMR deployment.

IAEA, the Watchdog

From the IAEA

The International Atomic Energy Agency (IAEA), based in Vienna, is the international agency charged with watching over activity involving nuclear energy. Their mission is "to accelerate and enlarge the contribution of atomic energy to peace, health and prosperity throughout the world’.’ As such, African nuclear newcomer nations have received great support from the IAEA through its milestone approach. However, a potential issue is whether the African nations would be held to the same standards as the OECD states, given that the requirements may be “too much” for such poor states. The IAEA is working closely with these states to map out the pathways towards potential nuclear builds, including identifying suitable locations for reactors, establishing a clear set of infrastructural rules, and eventually, guidance on bidding on and install these reactors.

These nations are also subject to the Integrated Nuclear Infrastructure Reviews (INIR), which began in 2009, and many are eagerly attending training programs to help them achieve their nuclear goals.

Before the IAEA begins Phases 1, 2, and 3 of their Milestone approach to develop a country's nuclear power infrastructure, the national energy strategy must already include a nuclear power option. Uganda wants to generate 1GW by 2031, but they have another strategy to develop an additional 1GW by 2040. Ghana plans to issue a Request for Information (RFI) in 2024 to choose a partner for their nuclear power program. Rwanda began collaborating with Dual Fluid, a Canadian SMR business, in 2023, with the goal of establishing a research reactor by 2026. The Rwanda Atomic Energy Board (RAEB) has approved their feasibility study, which is scheduled for completion in August 2024. Kenya is still in Phase II of the IAEA milestone approach, having completed the INIR in 2015 and 2021. MoUs with China, South Korea, and the United States have demonstrated strong commitments to nuclear energy. Finally, Nigeria has invited the IAEA to conduct its second INIR, aiming to achieve the nuclear power strategy outlined in the National Energy Master strategy (NEMP).

Cost Concerns and Conclusion

Much of the objection to nuclear from the continent pertains to perceptions of its high costs. While the initial investment for constructing nuclear power facilities is notably high, the fact is that when the lifetime operating expenses and unique benefits of nuclear energy (high degree of reliability and operating capacity factors, long facility lifespan, stable prices, economic and educational ripple effects, negligible pollution or climate impacts and energy independence) , nuclear power emerges as one of the most cost-effective and beneficial sources of electricity generation, especially in a world that emphasizes reducing carbon emissions.

The high initial investment for nuclear plants is due to the historically massive construction process, requiring specialized talent, special equipment, robust safety protocols and systems, as well as a highly stringent regulator to conduct frequent inspections, which requirements all drive up costs. However, once a plant is operational, the fuel costs are remarkably low compared to fossil fuels. Uranium fuel is extremely energy-dense, and a single pellet can generate as much electricity as a ton of coal. This allows nuclear plants to operate with low fuel expenses over multi-decade lifetimes.

As per estimates by the IAEA, the levelized cost of introducing nuclear power systems in Africa falls within the range of $60 to $100 per megawatt-hour (MWh). Though this may appear steep, it stands on par with generation costs from fuels in African nations when factoring in greenhouse gas emissions, air pollution repercussions, and forthcoming policies on carbon pricing designed to curb emissions. Even now, the average LCOE for coal power in South Africa was about $75/MWh as of 2020 and is expected to continue rising with tighter environmental regulations. Meanwhile, nuclear costs would remain steady over 60–80-year reactor lifetimes. These economics increasingly favor nuclear over time.

Moreover, nuclear power offers a key advantage of price stability that fossil fuels lack. Once the initial capital is paid, operating costs are predictable due to low and stable fuel costs. In contrast, coal and gas plants are exposed to volatile global fuel markets with a history of major price shocks. When this price volatility gets factored into these Levelized Cost of Electricity (LCOE) analyses, nuclear power's price advantage becomes even more compelling. Adding in both the benefits of energy security and nuclear low-carbon generation in a carbon-constrained future in which emissions result in economic penalties, the zero-emission profile of nuclear energy further improves its competitive strength.

Finally, it is apparent that deploying Gen IV reactors that are smaller, modular and which can be shipped to locations for more rapid assembly, could further reduce capital costs through economies of scale from factory manufacturing and reduced financing costs. For these, financing vehicles like public-private partnerships and energy banks can also help Africa access capital for major nuclear builds at levels far less than what has long been required for traditional nuclear builds.

So, while the price seems high initially, the total lifetime costs, price stability benefits, lack of emissions, and long-term economic payoffs make nuclear a compelling investment for African nations serious about energy security and sustainable development. With proper financing, nuclear power can be an affordable source of energy independence. Smaller designs with a shorter lifespan are cheaper to install, making them affordable for all.

In conclusion, Nuclear energy, while still posing significant challenges, remains a credible path for rapidly scaling Africa's electrification and catalyzing economic transformation, if the geopolitical tensions can be successfully navigated. With transparent governance and innovative international partnerships, nuclear power can be a blessing for human development across the continent and enable Africa to bring electricity and economic development to all people, while avoiding the detriments posed by increased reliance on fossil fuels.

* * *

Collins Wafula is a young graduate of Maseno University's School of Environment and Earth Sciences, where he studied Geography and Natural Resources Management along with Information Technology. With a passion for addressing energy and climate issues through nuclear power, he successfully leverage technologies (like LinkedIn) to connect with others, including the WePlanet team, a global grassroots movement  campaigning for radical science-backed solutions to the climate and nature emergency, and Nucleation Capital, all while remaining in his home village of Bungoma, Kenya. Collins represents the best of technology-empowered youth connecting globally to solve local problems. He is on the forefront of Kenyans working to leverage next-generation nuclear power to improve access to sustainable and clean energy for his country and other Africans.

[Note: Editing support for this article provided by Darius Tirgan, Nucleation Capital's 2024 Summer Associate.]

References:

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February 12, 2024

Nuclear Energy: Now or Never

By Valerie Gardner, Managing Partner

UC Berkeley students' annual Energy Summit addresses the world's energy and resource challenges. This year's conference included a panel titled "Nuclear Energy: Now or Never." Valerie Gardner, Nucleation Capital's managing partner, participated on the panel, bringing her bullish outlook on the prospects for innovation in nuclear to have a significant impact on the world's ability to decarbonize. 

BERC's Nuclear Energy: Now or Never

This year's Berkeley Energy & Resources Collaborative (BERC) Energy Summit included a panel called "Nuclear Energy: Now or Never." There to discuss this topic were UC Berkeley professors, Dan Kamen and Per Peterson, who is also Chief Nuclear Officer at Kairos Power; former Berkeley Ph.D. student, Jessica Lovering, currently the Executive Director of Good Energy Collective; and myself, founder and managing partner of Nucleation Capital. This was, as it turned out, a lively conversation about nuclear power and its prospects in front of a diverse audience of mostly undergrad, graduate students and young professionals.

I'm always happy to talk to students. They are generally well-informed about what's happening with climate change and the risks that it poses to their future. This makes them concerned, distressed but also particularly open-minded. As a climate investor, I spend quite a bit of time reading the science and evaluating a wide range of potential solutions. It is easy to get frustrated and even discouraged by how little progress we are making. I can only imagine how they may feel having to face this crisis.

We're less than six years from 2030, when we are supposed to have achieved a 50% reduction in global emissions. Some countries, including the U.S. have made progress, but we've been unable to move the needle on a global scale, largely because the demand for energy keeps growing, especially in places where they don't have enough even now. But, as it turns out, demand for electricity is growing in the U.S., propelled by the growth of online services, vehicle electrification and technologies like AI and cryptocurrencies.

Unfortunately, even in the U.S. the majority of our power comes from coal and gas, which we cannot afford to continue using they way we have.  According to the latest reporting from Dr. James Hansen, we are already exceeding the "safe" limits of global warming, which was to limit heating to less than 1.5° Celsius of warming (equivalent to an increase of 2.7° Fahrenheit). Because of the scale of the "global warming in the pipeline," we've committed the planet to exceeding those limits and face an exceptionally difficult time securing a "propitious climate" for future generations. This should be a big wake up moment for everyone. It certainly makes me want to shake people out of complacency.

Places like California and Germany, which have leaned in to decarbonization and invested billions into wind and solar, are struggling to keep their grids reliable. While they should have focused on shutting down coal and gas, for mostly political reasons, nuclear was already in the crosshairs. This was a big mistake. Germany, against all climate reason, went ahead with a scheduled shut down of its nuclear power and is paying a huge price, having had to re-open coal plants after Russia invaded Ukraine, a far worse climate, health and energy outcome. California was also planning to shut down its remaining nuclear power plant. Fortunately,  it became clear that the state needed its nuclear plant to avoid blackouts—and, in doing so, could save $21 billion in decarbonization costs while helping it with its climate goals.

Increasingly, results like these establish that nuclear is a central part of a more effective clean energy solution set. Nuclear power, which uses the smallest land footprint, the least amount of material per kilowatt and which has the highest capacity factor, has an "energy return on energy invested" (EROEI) more than 3X that of fossil fuels and more 20X that of wind or solar. It stands alone with the greatest potential to leverage 21st century innovation to produce a new set of truly paradigm-shifting energy solutions. 

Which is what makes nuclear, despite all of its idiosyncratic risks, a compelling investment proposition. The threat to our societies by our continued use of fossil fuels vastly outweigh the risks of expanding the use of nuclear—especially when an advanced generation of designs promise enhanced capabilities, improved safety, boosted fuel efficiency and manufacturing cost-economies.

So, sharing my excitement for the potential of innovative nuclear energy solutions together with some those who are also working on bringing these advanced solutions to market, like Dr. Peterson and his team at Kairos and Dr. Lovering and her team at Good Energy Collective—was a way to help point students towards a future that may well include dozens of new types of energy—spanning fission, fusion and other technologies.

After the panel, a number of students thanked me for my comments, expressed both renewed optimism and an interest in learning more about nuclear. Hopefully, a few of those attending will be inspired to further explore opportunities in the industry.

January 20, 2024

The A, B, and especially C’s of ESG

By Valerie Gardner, Managing Partner

ESG investing is the largest and most profound global trend happening in the capital markets. Its popularity points to the global recognition that investors should and do have an important role to play in helping to solve environmental, social and other issues that have put the planet on a bad trajectory. In fact, no business can survive without investor support so businesses do care to meet investors' demands. Yet, as structured, ESG is not working to fulfill investors' true underlying needs or produce measurable objectives. The good news: there is an easy fix, when we start with "C," assessing climate impacts.

Like many things today, an initiative based upon a meaningful and important purpose, has become mired in controversy. Like the Socially Responsible Investing (SRI) movement that preceded it, ESG (an acronym for rating and selecting companies based upon their environmental, social and governance performance) has emerged to enable investors to focus their investments on companies that are taking care to behave more morally and responsibly vis-a-vis the environment, their employees, their shareholders, their suppliers, their communities and the climate. Many of these types of good corporate behaviors previously went unreported. What's become clear to investors is that short-term profiteering by managers may appear to be beneficial for shareholders but often may not be. It can conflict with what we know are looming issues which need action. Thus, sometimes taking a longer-term view and making corresponding sacrifices or investments that actually reduce overall risks can vastly improve longer-term enterprise value.

ESG has emerged to identify, elevate and reward companies which invest in doing what is right, even if such actions reduce returns in the short-term. It is intended to broaden the metrics on which corporations report information, so investors can make better informed decisions and invest in companies taking ethical actions, treating employees, suppliers and their communities fairly and protecting the environment—much of which costs more but which can reduce risks and other future costs, including litigation, public opposition or climate impacts.

While collecting data to make this type of assessment might seem uncontroversial, traditionally company management was required to focus on meeting only one goal: maximizing shareholder value. Because actions that affect long term enterprise value are often difficult to quantify, management reports have traditionally focused on easier t omeasure financial metrics like Price/Earnings ratios and quarterly profit trends. Deviating from the objective of maximizing per share profits could and often did result in shareholder lawsuits, if management took even smart and common sense approaches which reflected a community value, but which did not clearly improve shareholder value.

Fortunately, in 2019, under the leadership of Jamie Dimon, the Business Roundtable officially changed their statement of purpose and so businesses now broadly recognize that they are also accountable to their employees, suppliers and communities — constituents whose needs and actions can also impact the bottom line — but there is no consensus as to exactly how much or how little is enough and companies employ widely diverging approaches. ESG is now a way that investors can better discern the differences and reward companies that are acting responsibly on environmental, social and governance issues. Unfortunately, it is not working very well.

What ESG Currently Is

The Harvard Law School Forum on Corporate Governance published an article entitled ESG Ratings: A Compass without Direction which aptly summarizes the main issues with ESG as it currently is. The authors describe their findings as follows: "We find that while ESG ratings providers may convey important insights into the nonfinancial impact of companies, significant shortcomings exist in their objectives, methodologies, and incentives which detract from the informativeness of their assessments."

Critically, there's a significant dichotomy between what people commonly think ESG is supposed to indicate and what it actually indicates. Most people believe that an ESG score reflects a company's positive impact on the environment and stakeholders beyond its shareholders, such as employees, customers, suppliers, and local communities as well as the environment—a type of "Doing Good" metric which would tend to produce more shareholder value in the long run. In actuality, most ESG raters are assessing a company for the existence or absence of risk factors that could impact the future value of the company, such as the risk of discrimination in hiring or the risk of climate change on the supply chain. This is more of a "Risk Reduction" approach to data collection.

From an investment manager point of view, any time you can get meaningful information about a company's actions and potential future value, you are generally willing to pay for that—especially when your clients are clamoring for more sustainable investment options and are willing to pay more. Thus, there are now a plethora of third-party ESG rating services working to provide ESG data for a fee and a very large majority of impact-focused investment professionals are using these services to provide more options for clients. But, sadly, the entire space, which is still in its infancy, is chaotic and incoherent.

Studies show very low correlations across ESG ratings providers in total scores as well as across the three distinct components of "E," "S," and "G." Not only isn't there agreement about what an ESG score reflects, there is no standardization in the types of data collected or used and no consistency to the methodologies of collecting, assessing or prioritizing within or across categories. Thus, not only are ESG ratings badly correlated with environmental and social outcomes, the relationship between ESG ratings and financial performance is also uncertain. Those investing in ESG-type funds will typically pay more in fees for having accessed ESG data but they will generally get just equivalent or worse performance.

High and rising demand for ESG information has caused ESG-type rating services and funds to become profit centers, even as the quality, consistency and efficacy of the ratings has failed to provide meaningful results. At the moment, in addition to all of the inherent confusion as to what data matters, how to collect it, how to assess it and then how combine it with many other data points into a meaningful score, there is also the problem of greenwashing. Greenwashing is the deliberate efforts by some companies to game the system and try to obtain better ratings and scores than they probably deserve.

Which points to a growing problem in the ESG space. Companies control what data they will share with which rating groups, creating an inherent ability for companies to influence their scores by refusing to give their data to groups that don't rate them highly. This has rendered the existing ESG industry scores almost meaningless, since many of these raters are dependent upon the good will with the companies they are rating to get the data they need.

There is no better example how badly ESG is doing for guiding investors to more ethical and sustainable companies than when the S&P Sustainability Index did its rebalancing in May 2022. At that juncture, the S&P ESG team ejected Tesla (the largest EV car maker and one of the most successful climate companies on the planet) from the Index but welcomed ExxonMobil (a renowned climate villain), prompting Elon Musk to call the S&P Sustainability Index a "scam."

This decision caused a broader uproar within the sector and forced Senior Director and Head of ESG Indices Margaret Dorn to publish an explanation. Not only was this shift a climate and ESG travesty but, in fact, the S&P's "delicate balancing act" revealed that ESG raters and ratings are meaningless for a whole host of reasons, predominantly because there is just too much data, too much manipulation, and not enough understanding of what really matters. ESG raters appear to be so lost in the trees, they have effectively lost sight of the forest, namely the critical issue that matters the most to investors: climate change.

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What ESG Isn't

Investors are looking to ESG ratings to enable them to invest in companies that are doing better on a wide range of areas but, most critically, are environmentally responsible, especially around reducing carbon emissions. For many, this means working to provide solutions along the lines outlined by the United Nationa's Sustainable Development Goals. ESG investors care to invest in companies which improve global sustainability and solve climate change.

There are plenty of dire human, environmental and governance problems—you could name dozens—but none that threaten to seriously and even permanently disrupt the planet, human society and economic order as much climate change, the forced heating of our climate caused by burning fossil fuels. This crisis dwarfs everything.

So, while it may be troubling that there are reports of a toxic "bro" culture at Tesla, every single day, Tesla ships electric vehicles that enable people to stop purchasing and burning fossil fuels, which is the primary driver of climate change. In stark contrast, every single day ExxonMobil strives to greenwash their aspiration to keep selling more and more fossil fuels for as long as they possibly can—threatening not just human survival but that of all species and potentially our well-functioning societies, which could effectively wipe out the concept of wealth as we know it.

Shockingly, ESG as it is currently designed doesn't enable either the experts or investors to clearly assess companies on the single most important metric of sustainable performance—whether the company contributes to climate change or if they provide solutions to climate change. The average ESG investor, however, thinks that this is primarily what ESG does. Clearly, if ExxonMobil is rated highly but Tesla is not, ESG is not just meaningless, it is actually misleading for the average impact investor.

Fortunately, in order to fix this problem, ESG doesn't need to change that much, it just needs to make a small, relatively easy modification, which will then substantially improve its effectiveness and performance and begin to have a truly beneficial impact on humanity's ability to invest "sustainability."  I propose a very basic approach for doing that below.

ESG Can Easily Be Fixed:  Start all ratings with a "C" assessment

(Click to enlarge.)

As those concerned about what's happening with our climate saw, 2023 experienced a succession of seven record-shattering and "gobsmackingly bananas" (in the words of two climate scientists) hottest months on record. Not surprisingly, 2023 was also a record-breaker for climate disasters in the U.S. and around the globe, which have cost humanity billions annually. The bill for extreme climate disasters in the U.S. since 1980 now totals over $2 trillion and growing. Hundreds of millions of people are already being affected and/or displaced by the extreme weather events resulting from burning fossil fuels and allowing the CO2 pollution to escape into the atmosphere. These climate events are impacting the global economy, national security, geopolitics, businesses and politics in a range of ways but especially by increasing over systems risk.

(Click to enlarge)

Not surprisingly, at COP 28 in December, 198 nations gathered in the United Arab Emirates and finally agreed that we need to "transition away from fossil fuels." Though fossil fuel exporting nations like the UAE, Saudi Arabia, Russia and Iraq fought hard against adopting the specific words "phasing out fossil fuels," this is a pointless distinction, since it is abundantly clear that humanity needs to stop using fossil fuels as fast as humanly possible, whether transitioned or phased out. The climate is so bad, even Middle Eastern countries, whose primary source of revenue is fossil fuels, finally acknowledged what we've known for a very long time: only by eliminating the use of fossil fuels will we start to turn the tide against our worsening climate change and the dire ecologic and economic crisis that it threatens.

Against this backdrop and in light of the fact that ESG analyses and ratings are clearly still in "beta," we believe that ESG raters could make a very minor modification and start to have a much more significant impact. Simply by commencing vetting with one very simple sorting action, they would improve the coherence of ESG ratings by a lot. Prior to applying the rankings from hundreds of data points amassed regarding a plethora of corporate actions, ESG needs to divvy up the universe of companies into three distinct buckets: Climate Villains, Climate Neutral companies and Climate Heroes. This is a very easy distinction to make. Climate villains are those that are actively extracting, refining or selling virgin fossil fuel products or related services. Climate neutral companies are those that doing other business and are merely energy customers. Climate heroes are those companies which are actively developing and/or delivering key solutions to climate change (unrelated to ongoing fossil fuels operations), like low-carbon and carbon-free energy such as nuclear power, hydropower, wind, solar, geothermal and wave power; providing electrification support, such as with electric vehicles, heat pumps, charging stations and energy efficiency; and lastly carbon management, including carbon capture, carbon utilization and carbon sequestration (so long as unrelated to fossil fuel operations).

Once this vetting process has been done, then all of the current ESG metrics can then be assessed for more comparative performance relative to a company's other environmental, social and governance risks. But the top line assessment will easily enable every ESG-rated fund to exclude all Climate Villains. ESG funds will then be able to select their choices of best-performing companies from the other two categories for a mix of risk and return characteristics and use whatever type of analyses they wish. Investors will then have a very clear sense of what the composition of the fund is, across these three categories. Companies whose business is actively extracting, refining, distributing or selling fossil fuel products or services that cause climate change will likely still be included in standard, non-ESG funds, of course, but even these funds would easily be assessed for their climate impacts. Such funds could also be assessed for their ESG conformance, relative to other similar funds. But with this big bucket approach, no company or fund would be able to manipulate their "S" or "G" ratings in such a way as to feign that they are environmentally sustainable or acting responsibly relative to climate risk or sustainable development goals, when they are not, which is what impact investors mostly care about.

Summary

Despite inconsistencies in and controversy over ESG, we believe that demand for ESG research and investment vehicles remains strong largely because of concerns about climate change. Investors demand greater clarity about which businesses have more sustainable and ethical business approaches and want to own those and not companies shirking their responsibilities to future generations. Although ESG is in a nascent and chaotic state and not currently delivering the data ESG investors really need, a simple modification will be enough to ensure that more investor capital is directed into sustainable ventures.

Here's how we think it can work.

Prior to running the current slate of ESG assessments, each company should be given a climate score:  "C Minus" is given to "Climate Villains," companies whose products and services are contributing to climate change, namely the fossil fuel extraction, refinement, distribution and sales companies that are responsible for contributing millions of tons of carbon emissions. Companies that not involved with climate-impacting businesses (such as those in healthcare, education, textiles, manufacturing, etc.) would be deemed "Climate Neutral" and get a straight "C" since their business is not directly causing climate change other than through their energy usages (or idiosyncratic emissions). Lastly, the final category are the Climate Heroes who get rated "C+" as they are actively working to solve humanity's need for clean energy and/or carbon services, which seek to restore the natural carbon balance in the atmosphere.

Once these very broad but clear buckets are determined, ESG ratings can be applied to provide more nuanced distinctions between the companies in each of the three buckets, based upon their treatment of employees, governance policies, whether or not they take care of their toxic emissions or waste products, whether they protect water sheds or try to use clean energy for their operations, etc.  In this way, Tesla will be in the C+ bucket with other climate heroes and rated in comparison to other electric car companies but will never be in the same climate bucket as disgraced Climate Villain, ExxonMobil, which must try to out-maneuver other fossil fuels purveyors stuck in the C- bucket.

If this simple change were implemented, ESG funds could showcase their percentage of holdings that are C+ versus C, and ESG would finally become a highly effective tool for enabling investors to invest towards increasing the sustainability of our planet.

References

Columbia University, Climate Science & Solutions, Groundhog Day. Another Gobsmackingly Bananas Month. What's Up?, by James Hansen, Makiko Sato, Pushker Kharecha, January 4, 2023, the title is taken from a tweet by Zeke Hausfather.

NOAA National Centers for Environmental Information (NCEI) U.S. Billion-Dollar Weather and Climate Disasters (2023). DOI: 10.25921/stkw-7w73.

Fortune, Musk claims S&P ‘lost their integrity’ after Tesla gets booted from sustainability index while Exxon is included, by Christiaan Hetzner, May 18, 2022.

New York TImes, Sustainability Index Drops Tesla, Prompting Insult from Musk, By Jack Ewing and Stephen Gandel, May 18, 2022.

4. The (Re)Balancing Act of the S&P 500 ESG Index, by Margaret Dorn, Senior Director, Head of ESG Indices, North America, S&P Dow Jones Indices, May 17, 2022.

5. Harvard Law School Forum on Corporate Governance, ESG Ratings: A Compass without Direction, by Brian Tayan, a researcher with the Corporate Governance Research Initiative at Stanford Graduate School of Business, David Larcker, Professor of Accounting at Stanford Graduate School of Business; Edward Watts, Assistant Professor of Accounting at Yale School of Management; and Lukasz Pomorski, Lecturer at Yale School of Management, August 24, 2022.

October 22, 2023

Parnassus Versus Green Century: A Contrast in Styles

By Valerie Gardner, Managing Partner

June, July and August of 2023 were the three hottest months the Earth has ever seen by such a large margin, it left climate scientists agog. Climate disasters are abounding apace, with the U.S. hit by 23 large-scale disasters, a record-breaking year already. In Pakistan, extreme rainfall and flooding affected 33 million people, killing more than 1,700, displacing more than 8 million and causing damage estimated at over $30 billion, not counting the estimated 2.2% loss to the country's gross domestic product. North America and even Hawaii were ravaged by intense forest fires, with record acreage subsumed, scorching towns like Hahaina, killing hundreds, and forcing evacuations in areas of the northeast, northwest and Hawaiian islands once seen as refuges from the expected heat. Decades of increasingly severe drought, now complicated by shortages and war, have displaced millions in Iraq and other regions of the Middle East and the bad climate news is just getting worse, adding to the cacophony of alarm bells being rung by scientists in almost every field. In this context, when it is clear that we humans are not coming close to winning this fight, it's illuminating to contrast how two competing sustainable investment groups have chosen to address their obligation to invest "sustainably."

As we reported back in May, Parnassus Investments, a leading sustainable investment fund, issued a stunning press release in which they announced the removal of their negative investment screen on nuclear power along with a positive outlook for its role in reducing emissions.

In a succinct six paragraphs, Parnassus explained the basis for this momentous decision that reversed a policy in place for the entire 39 years of their existence. While it is not issuing an absolute commitment to invest in nuclear equity, the statement showed that Parnassus’s Sustainability team had thoroughly researched the issue of nuclear power and were sufficiently convinced that nuclear could be an important contributor to helping the world decarbonize to change their minds and finally include nuclear in the universe of investment prospects.

We regard this milestone decision as an impressive example of science and fact-based ESG leadership, reflecting actual changes in the nuclear industry over the last few decades as well as the utter catastrophe we are facing, if we don't find better ways to reduce emissions from our energy usage. Similarly, around that same time, Bank of America Securities analysts released their first "BUY" recommendation for nuclear power in nearly four decades. In BofAS's highly detailed report, titled "The Nuclear Necessity, a team of five analysts explained why they were "bullish on nuclear power" and laid out both the case for and the methods by which investors should start increasing their exposure to nuclear equities and uranium. This event, we noted was yet another milestone.

Nevertheless, on August 30th, writing in a publication called ESG Clarity, Leslie Samuelrich, the CEO of Green Century Funds, another investment fund which considers itself a leader in sustainable investing, issued her pushback in the form of doubts. Ms Samuelrich wrote: "Even though I knew for months that an ESG firm was thinking about removing its exclusion on nuclear power producers, I was taken aback when I read their press release. Why would they revert their position and turn to nuclear when investing in renewable energy has grown so dramatically?"

Ms. Samuelrich then proceeds to trot out five dog-eared paragraphs containing the standard litany of antinuclear arguments (Safety, Cost, Timing, Emissions and Waste) which, like figures in a wax museum, reflected views so frozen in time, no amount of new data or climate rationale could have had any effect. She makes no reference to nuclear's improved safety performance, nor any mention of new designs nor the accelerating customer interest in them. The stark contrast between the perspectives laid out by these competing sustainability-focused investment firms offers an excellent opportunity to compare the styles and seriousness of their approaches to their ESG investment missions.

Parnassus Investments

Parnassus Investments was founded in 1984 to provide socially-responsible investments. Headquartered in San Francisco, they now have 70 employees and about $42 billion in assets under management (as of Sept. 30, 2023). This is a serious investment firm with an impressive $600 million in AUM per employee.

Reflecting Parnassus’s seriousness is the Climate Action Plan that the firm adopted in December 2022. This Plan established a goal of net-zero emissions in all their funds by 2050, in alignment with the Paris Agreement. This document and commitment demonstrate that Parnassus understands this key point: it is not enough to avoid fossil fuels; society also has to figure out where all the future clean power that we need will come from. It's the long-term "rubber meets the road" reality check. Parnassus's statement that they will now include nuclear in their investment universe to support the transition to a low-carbon economy reflects their deep thinking about this urgent reality.

We imagine that it must have been a difficult decision for the Parnassus team. But they displayed the intellectual honesty to take a deep, critical look at the landscape for where we will produce our clean energy and, like many of us, found the calculations around deployment of renewables did not add up. It is never easy to have to change one's mind. Never easy to reverse course. With respect to nuclear—which evokes so much knee-jerk prejudice and emotion—even being open to an objective evaluation is difficult. Many members of the antinuclear community see it as such a betrayal, they'll question your motives. What ultimately forces objective people to look more closely at nuclear is the fact and increasing certainty that we cannot meet our climate and energy goals without it. Parnassus demonstrated both analytical clarity and courage in their decision to abandon their negative screen and allow nuclear back into the universe of possible equities—without a thought of abandoning their commitment to rigorously evaluate each prospective candidate for its adherence to high ESG performance metrics.

Although in 1984, Parnassus was also concerned about the safety and cost issues involved with nuclear power, they have since learned that nuclear is a critical source of low-carbon power whose benefits include both safety and a stability. They've also recognized that, over the years, tighter regulations have led to improved designs and operating performance. Additionally, they were pleased to find that the new generation of nuclear technology being developed now offers both higher safety and lower costs. The Parnassus investment team, led by Marian Macindoe, Head of ESG Stewardship, has clearly done a deep dive into today's more diverse nuclear industry, where a broader menu of options are being developed, and believes that "nuclear energy will be an essential source of fuel in the transition to the renewable sources required to support a low-carbon economy . . . and a reasonable choice."  This reflects considerable research and learning. We applaud the extremely professional work this team has done.

Green Century Funds

Green Century Funds, founded in 1991 by a "group of environmental and public health nonprofits," has nearly $1 billion in assets under management as of June 30, 2023. Green Century’s Registered Investment Advisor, Green Century Capital Management (GCCM), has 13 employees, six of whom provide investment advisory or research work (as of GCCM's most recent ADV) about $86 million in AUM per employee. Any profits from their investment advisory operations go to Paradigm Partners, a holding company owned by the founding entities, predominantly NGOs affiliated with Ralph Nader's Public Interest Research Group — Mass PIRG, NJ PIRG Citizen Lobby, Conn PIRG, CA PIRG, Washington State PIRG, Missouri PIRG Citizen Org, Colorado PIRG, PIRGIM Public Interest Lobby, and Fund for the Public Interest. These are all advocacy groups. None are scientific or investment experts.

Green Century's stated mission conforms to an advocacy model: to help people save for their future without compromising their values and to help investors "keep their money out of the most irresponsible industries."  In other words, Green Century Fund applies a simplified, reductive view that merely screens out investments that don't meet their "values" — i.e. no fossil fuel, tobacco, nuclear and conventional weapons, nuclear energy, genetically modified organisms (GMOs) and other industries "whose core business threatens the environment and public health." Green Century specifically does not aspire to invest into companies that will enable a sustainable future. They also have not published a "Climate Action Plan," from what we could see, so they have made no specific commitment to decarbonizing their fund. We were curious as to what they do invest in.

A cursory overview of Green Century's Equity Fund, the largest of its four mutual funds boasting $544 million in AUM, reveals the following Investment Categories and percentages of investments:

  • Software & Service 23% (52% of which is Microsoft)
  • Semiconductors 10% (52% of which was NVIDIA)
  • Media & Entertainment 8.2% (83% is Alphabet)
  • Pharmaceuticals & Biotech 7.3%
  • Financial Services 6.4% (26% is Mastercard)
  • Capital Goods 6.2% (20% is Caterpillar or Deere & Co.)
  • Food & Beverage 4.5% (57% is Coke and Pepsi)
  • Renewable Energy & Energy Efficiency 4.1% (90% is Tesla)
  • Healthcare 4.0%
  • Consumer Discretionary 3.7%
  • Equity REITs 3.0%
  • Insurance 2.9%
  • Household/Personal Products 2.7%
  • Consumer Services 2.5% (43% McDonald's)
  • Materials 2.5%
  • Tech Hardware & Equipment 2.5% (43% Cisco)
  • Transportation 2.0%  (31% Union Pacific Corp)
  • Consumer Durables & Apparel 1.2%  (58% Nike)
  • Banks 0.9%
  • Telecom .8% (98% Verizon)
  • Commercial & Prof. Services .5%
  • Consumer Staples .3% (54% Sysco Corp)
  • Automobiles .3% (Rivian is here at 17%)
  • Utilities .2%
  • Healthy Living 0.0%

There are several interesting things that pop out from our review. Of the top 9 listed investment categories, containing 70% of the total assets, five have a majority of capital concentrated in just one or two companies. Thus, by dollars, this fund is dominated by its investments in Microsoft, NVIDIA, Alphabet, Mastercard, and Tesla. While these are great companies, it is notable that all of them, without exception, require massive amounts of electricity for their success. Which means from a sustainability perspective, that they will need reliable, affordable and growing sources of clean electricity to remain profitable over time. Where will that come from?

In her written response to the Parnassus shift, Ms. Samuelrich pointedly asks "Why would [Parnassus] revert their position and turn to nuclear when investing in renewable energy has grown so dramatically?"  Well, Ms. Samuelrich can easily find the answer to her question in her own firm's largest portfolio. It lacks meaningful investment in clean energy. Green Century claims to have put 4% of its assets into "Renewable Energy & Energy Efficiency."  If that were true, one could imagine justifying that level, as the traditional Energy sector represents 4.7% of the market capitalization of the S&P 500 index [S&P 500 9/30/23 FactSheet]. A closer look, however, paints a different picture.

Of the 4% of assets designated as Renewable Energy & Energy Efficiency, 90% was actually invested in Tesla. Tesla is an electric car company, as everyone knows. Cars, even when electric, are neither a source of "renewable energy" nor do they produce "energy efficiency."  But Green Century knows this because it has properly categorized Rivian, another electric car manufacturer, in the "Automobile" category. Yet, Green Century chose to put Tesla into the "Renewable Energy" category. Perhaps this is because Tesla acquired Solar City, and so has a small division that sells solar panels and battery walls. But Tesla’s 6/30/23 10-Q reports that “Energy Generation and Storage” produced less than 7% of Tesla's total revenue ($3.038 billion of total revenue of $48.256 billion) for the first six months of 2023.

Aside from Tesla, the amount of capital that Green Century has invested in Renewable Energy & Energy Efficiency is just 0.4%. These investments include five companies, of which Johnson Controls represents 60%. Johnson Controls provides HVAC systems, fire protection, and automated data information about energy use for many types of commercial buildings. They also service "90% of the world's top marine and oil and gas companies for all types of assets and facilities." In other words, a sizeable portion of their business derives from the oil and gas industry, conveniently ignored by Green Century. For argument's sake, we'll assume that Johnson is credibly working towards "energy efficiency" wherever they are but they are definitely not creating renewable energy.

The remaining .16% portion of Green Century's “Renewable Energy & Energy Efficiency” holdings is comprised of four investments:  Acuity Brands, Itron, Ormat Technologies and First Solar. Acuity Brands markets smart lighting and building management solutions. Itron provides smart networks, software, services, meters and sensors to help manage energy and water. Acuity and Itron may contribute to energy efficiency, but neither produces renewable energy. Ormat Technologies claims to be a leader in providing "Green Power Plants" spanning geothermal power, solar power and "recovered" energy (i.e. storage). First Solar, the only US-based solar manufacturing company, claims to offer next-generation solar technologies, a high-performance, low-carbon alternative to conventional photovoltaic panels. At last, two companies that actually contribute to the creation of renewable energy! Yet the Green Century fund invests less than 0.12% of its total assets into these two companies. In contrast, Green Century has invested over 2.5% in Coke and Pepsi — more than twenty times the amount invested in renewable energy companies that Ms. Samuelrich claims are growing so quickly.

We are a bit "taken aback" by the choices made by Green Century, not only their degree of concentration in a few large cap companies but the misleading industry categorizations and failure to invest meaningfully in the lauded renewable energy companies working to clean our energy system. Ms. Samuelson argues that sustainable investors should support the renewable energy sector, so why isn't she, if she truly believes that "the world is set to add as much renewable power in the next five years as it did in the past 20?"

Samuelrich asks, "Why gamble with the environmental and public health risks of [nuclear], especially when renewable energy is cleaner and cost competitive?" The answer is clear to those who actually do the research and care about facts: because neither solar nor wind actually provide the reliable or climate resilient power that societies demand and need. Geothermal remains highly limited by geography. So, as we've witnessed, without a truly reliable source of clean energy, humanity will continue to demand reliable but dirty fossil fuels and emissions will keep growing—as they have continued to do, despite big increases in renewables. The only clean and firm source of power that can scale up with the speed we need it to, is nuclear. It's gotten a whole lot better over the last 40 years—in part due to the public's concerns about it's safety and increased regulatory scrutiny—and now a new slate of advanced designs with different sizes and features is emerging and buyers like Dow Chemical and Microsoft are leaning in. 

We would urge all sustainable-minded investment groups not to take shortcuts and pander to aged ideologic tropes like Green Century, but instead examine today's facts and data carefully and think critically, as Parnassus did, about the real challenges around how we will produce the enormous and growing amounts of clean grid-scale, distributed and industrial-process heat power on which we all depend. Simply saying “no” to technologies you don't like may have been a justified approach three decades ago but it has not helped solve our true climate dilemma—meeting humanity's growing energy needs without impacting the climate. Until we make this transition, nothing is "sustainable." Nor will it enable one's investors to participate in the growth of a sector—like next-gen nuclear—that is increasingly being recognized by climate and energy experts as critical to our survival.

We are extremely glad that serious, research-focused investors, like Parnassus Investments and Bank of America Securities, are figuring this out and are willing to do the hard work, risk the bruises that may result from following the facts to where they sometimes inconveniently reside, and build the necessary technical capacity to both analyze and potentially invest in the advanced technologies and companies working hard to actually deliver a more sustainable future.

References

  1. New York TImes, Record Number of Billion-Dollar Disasters Shows the Limits of America's Defenses, by Christopher Flavelle, Sept. 12, 2023.
  2. World Bank: Pakistan: Flood Damages and Economic Losses Over USD 30 Billion and Reconstruction Needs Over USD 16 Billion - New Assessment, October 28, 2022
  3. Parnassus Investments: Parnassus Investments Removes Investment Screen for Nuclear Power in Support of Our Transition to Low-Carbon Economy, May 1, 2023
  4. ESG Clarity: Should we embrace nuclear energy to solve the climate crisis? By Leslie Samuelrich, CEO of Green Century Funds, August 30, 2023
  5. Bank of America Securities, RIC Report, "The Nuclear Necessity," by Jared Woodard, published May 11, 2023.
  6. Parnassus' Annual Stewardship Report, Principals and Performance in Action 2023
  7. Green Century's Equity Fund Holdings, as of June 30, 2023, with assets of $544,380,517.
  8. Parnassus Funds, totalling over $42 billion as of 9/30/23.

September 13, 2022

DOE finds that 80% of US coal plants could be converted to nuclear


AI rendering of a coal plant.

According to a new DOE report, hundreds of coal plant sites could be suitable for conversion from coal to nuclear energy in an economically-viable way. In fact, as much as 80% of qualifying retired and operating coal plants appear to have the capacity to undergo what the report calls the "Coal-to-Nuclear" (C2N) transition. (Note: we have previously reported on efforts to develop standardized and efficient  processes for this conversion to happen quickly.)

Amy Roma, an attorney with Logan Hovells writes:

"The 127-page DOE report concludes that hundreds of United States coal power plant sites could be converted to nuclear power plant sites, adding new jobs, increasing economic benefit, and significantly improving environmental conditions. As part of the study contained in the report, the research team examined over 400 retired and operating coal plants based on a set of ten screening parameters, including population density, distance from seismic fault lines, flooding potential, and nearby wetlands, to determine if the sites could safely host a nuclear power plant. After screening, the research team identified 157 retired coal plants and 237 operating plants as potential candidates for a coal-to-nuclear transition. The report determined that 80% of those potential sites, with over 250 GW of generating capacity, are suitable for hosting advanced nuclear power plants, and that while these nuclear power plants vary in size and type, they could be deployed to match the size of the site being converted.  See DOE Report at pp. 2, 22, 71."

According to the DOE's Investigating Benefits and Challenges of Converting Retiring Coal Plants into Nuclear Plants report, a coal-to-nuclear transition could increase nuke capacity in the U.S. to more than 350 GW.

Power Magazine reports that, depending on the technology used, nuclear overnight costs of capital could decrease by 15% to 35% when compared to a greenfield construction project, through the reuse of infrastructure from the coal facility.

In a case study replacing a large 1200 MW coal plant with NuScale’s 924 MWe of nuclear capacity, the study teams found regional economic activity could increase by as much as $275 million and add 650 new, permanent jobs to the region analyzed. Nuclear can have a lower capacity size because it runs at a higher capacity factors than coal power plants.

In general, DOE says the occupations that would see the largest gains from a coal-to-nuclear transition include nuclear engineers, security guards, and nuclear technicians. Nuke plants could also benefit from preserving the existing experienced workforce in communities around retiring coal plants sites.

Read more at Reuters: About 80% of U.S. coal plant sites suitable to host nuclear reactors -U.S. DOE report, published September 13, 2022. Power Magazine, "DOE study finds hundreds of U.S. coal plants could convert to nuclear," by Kevin Clark, published September 14, 2022. And Hogan Lovell's Engage, with analysis by Amy Roma, entitled "New DOE Report shows former coal plants can support new nuclear plants and a just energy transition," published September 20, 2022.

August 10, 2022

Thorium Molten Salt prospects are good


Chinese teams have designed and built and are now commissioning an experimental thorium-powered molten salt reactor. This is exciting news for those who have long advocated for thorium-based energy. It is also a sad and poignant moment for the US's atomic energy legacy, that China is smart enough to do what we will not.

The very first prototype molten-salt reactor (MSR) was developed and tested by the United States in the 1960s and 70s at the Oak Ridge National Laboratories under the direction of Alvin Weinberg. The design tested the use of a thorium-fluoride salt liquid which used Thorium 232 as the fertile material and Uranium 233 as the fissile fuel. This prototype experiment was known as the MSRE (Molten-Salt Reactor Experiment) and it operated successfully for almost five years before it was discontinued for a range of mostly political reasons.

According to the Thorium Energy Alliance, a non-profit educational group working to preserve the history of molten-salt development in the US and to lay the foundation for the use of thorium energy in the future, Interest in thorium has remained strong. The reason is simple: Liquid-Fluoride Thorium Reactor (LFTR) holds significant technical, economic and safety advantages over traditional nuclear power plants.

By dissolving the uranium and thorium into salts of lithium and beryllium kept hot enough to stay liquid, you do not need to produce fuel rods or pellets, which saves considerable costs. Plus, the liquid salts are so chemically stable, they are virtually imperious to damage from the high temperature, neutrons or radiation, that they will not corrode the vessels that contain them. Although thorium is 4 times more abundant than uranium, one ton of thorium can produce as much energy as 200 tons of uranium or the equivalent of 3.5 million tons of coal. This means that with greater energy potential and fewer production costs, a LFTR could be developed at a fraction of the cost of a traditional nuclear reactor, while also being significantly safer.

Unfortunately, under the current NRC regulator (which has only ever licensed light water reactors), U.S. developers have been unable to license even prototypes of next-generation LFTRs, so now, the lead in this very promising technology has moved to China.  According to WNN, construction of an experimental 2 MW thermal Molten-Salt Reactor began in September 2018 in Wuwei City, in the Gansu province of China and was reportedly completed in August 2021. That would mean this experimental plant took just three years to build. It has now been reviewed and approved for commissioning by the Chinese Ministry of Ecology and Environment.

[Aside: China clearly has a much better understanding of the critical role that nuclear power plays in protecting the environment than the US does, because it has new nuclear reactors approved by its "Ministry of Ecology and Environment."  If the US were to rename the Nuclear Regulatory Commission the Commission on Regulation of Energy and Ecology, it might actually do its job better.]

UPDATE:  The US NRC accepted a construction permit application from Abilene Christian University (ACU) to build a molten salt research reactor (MSRR) on Nov. 18, 2022. In a letter dated Dec. 16, 2022, the NRC estimates that the date that the permit review will be complete is in May 2024.

Read more at World Nuclear News: Chinese molten-salt reactor cleared for start up, published August 9, 2022. To learn more about thorium, please visit the Thorium Energy Alliance website where you ca browse their extensive Media Library.

April 29, 2022

Newsom tells L.A. Times editors that he’s reconsidering the Diablo Canyon closure

Governor Gavin Newsom, a consumate politician, finally is willing to declare his support for Diablo Canyon, something he has long refused to do.  As the L.A. Times reports in an article titled California promised to close its last nuclear plant. Now Newsom is reconsidering, Newsom has chosen to come out publicly with support for saving Diablo Canyon. It is doubtful that Newsom has suddenly "seen the light" about nuclear. More likely, he's seen recent polling showing that a majority of Democrats and Republican understand the importance of nuclear power for addressing the goal of reliable clean energy in the absence of fossil fuels.

It appears that Governor Newsom is now working to delay the closure of Diablo Canyon.  While this will disappoint his fossil fuel donors and those touting renewables (which is a majority of environmental organizations of all stripes), it is definitely the right thing to do.

There are numerous reasons for Newsom having finally found the political will to disrupt what many in California consider a settled matter. As the article mentions, the reality is that shutting Diablo would cause the forthcoming energy shortages that are already projected to be far worse.  Back in August 2020, hundreds of thousands of homes and businesses lost power during some of the hotest and smokiest days of the year, and the state narrowly avoided even worse blackouts a few weeks later.  Now CALISO is projecting increased grid fragility going forward, even without shuttering Diablo Canyon, given increasing heat waves, more aggressive forest fires and reduced hydropower supply, as a result of California's extended drought.

Additionally, the DOE recently announced their Civil Nuclear Credit program and are now dangling some $6 billion that is earmarked for at-risk nuclear power plants. Gavin recognizes that such funds could help underwrite some face-saving upgrades to the plant, possibly even to the once-through-cooling (OTC) system, the imposed costs of which by the State Water Resources Board were ostensibly the basis for PG&E finally giving up on their plan to re-license the plant.

Then there the small matter of the upcoming election and a Democratic primary where the leading contenders for Gavin's place on the ticket were nearly all expressing strong pronuclear positions and calling Gavin out for his apparent retrograde or donor-induced political ignorance of climate science.

Needless to say, that the joint Stanford/MIT report providing evidence that closing Diablo Canyon would cost the state $21 billion, which was followed by a pronuclear rally in San Luis Obispo, itself followed by the very public letter from 79 high-level scientists, academics and business leader urging Governor Newsom to protect this existing (and paid for) asset, was a triple punch that probably alarmed everyone that he was being seen as being on the wrong side of science.

While the article suggests that Newsom is simply in process of "reconsidering," in fact the word on the street is that a deal has  been done to preserve Diablo Canyon, although what that is remains unknown, as no information has yet been officially issued. Needless to say, these are very encouraging signs. Nucleation Capital supports protecting Diablo Canyon, Michigan's Palisades plant and other at-risk plants.

Read the L.A. Times article, California promised to close its last nuclear plant. Now Newsom is reconsidering, by Sammy Roth, April 29, 2022 here.  To learn more about what you can do to support Diablo Canyon, see the Save Diablo Canyon campaign at Climate Coalition.

December 10, 2021

10 EU countries call on Brussels to label nuclear energy as green source


With the eyes of the world watching, French President Emmanuel Macron led an effort, joined by nine other European nations, to call on the European Commission to recognise nuclear power as a low-carbon energy source that should be part of the bloc's decades long transition to climate neutrality.

Making the case for nuclear energy as a "key, affordable, stable and independent energy sources" the writers argue that nuclear energy could protect EU consumers from being "exposed to the volatility of prices."

Nuclear energy accounts for over a quarter of the electricity produced in the European Union, and over 74% for France, which initiated the letter that was signed by Bulgaria, Croatia, Czech Republic, Finland, Hungary, Poland, Slovakia, Slovenia and Romania.

Over 90% of the EU's natural gas come from foreign importers, with Russia as the main producer. This great dependency has been credited as one of the main factors behind the rise in energy prices as well as supply insecurity.

"Supply tensions will be more and more frequent and we have no choice but to diversify our supply. We should pay attention not to increase our dependency on energy imports from outside Europe."

The signatories urge the Commission to include nuclear energy inside the EU green taxonomy, a technical guidebook that helps governments and investors to identify which projects respect the Paris Agreement and which ones are in breach of its climate goals.

Read more in Euro News' Led by France, 10 EU countries call on Brussels to label nuclear energy as green source, published December 10, 2021.

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