Nuclear Power Can Help Fill thé (Green) Energy Gaps published in the Australian Financial Review 10 October 2021 :
Mike Hewitt, a former US naval rear admiral, is shuttling across the Atlantic this month to pitch a green venture to investors. Nothing unusual about that, you might think: such projects are popular ahead of next month’s COP26 climate talks in Glasgow.However, this particular environmental project, known as IP3, has an unusual twist: it is focused on nuclear power. More specifically, Rolls-Royce, the British engineering group, is organising a consortium to install more than a dozen so-called “small modular reactors” (SMRs) across Britain.They hope to get £210 million ($392 million) from the British government to fund this, according to Hewitt. His group is also raising matching finance from private sources, including investors with environmental, social and governance (ESG) mandates.“The traditional ESG criterion has kept nuclear power out [of their funds],” he tells me. “But we think this is changing.”Is this right? It is not clear yet because the plan is not officially in place. But the fact that IP3 is even attempting to make nuclear reactors part of an ESG pitch is a striking sign of the climate times – and one that should be welcomed.Until recently, the word “nuclear” was toxic to most green activists and many politicians, because of the pollution risks linked with spent nuclear fuel and previous accidents at nuclear plants. Indeed, events such as the 1986 meltdown in Chernobyl, Ukraine, or the 2011 tsunami that damaged Japan’s Fukushima plant have left such a legacy of fear that countries such as Germany have been shutting their existing plants, along with US states such as New York and California.Meanwhile, a row has broken out inside the team that has been drafting the EU’s taxonomy for sustainable finance, which will help investors ensure projects are environmentally sound. The French government has lobbied for nuclear power to be included because it does not emit carbon (since France relies on nuclear for much of its electricity). But this has been blocked by Germany.Unsurprisingly, this makes ESG funds wary. Or as Bank of America observed in a recent research note: “We have received feedback multiple times from a variety of environmentally conscious investors that they cannot invest in certain utilities due to nuclear exposure.”Growing sense of realismHowever, there are now two factors that could (and should) change this conversation. First, nuclear technology is shifting. Whereas 20th-century reactors were so big and expensive they required a decades-long commitment to install, the new generation of SMRs are smaller, cheaper and far more flexible. This means they can be located in more convenient places and – crucially – treated as a temporary or transitional energy source.Evangelists for nuclear power such as Bill Gates say such technological breakthroughs have also made plants far safer, with less pollution risk because they can be run on recycled fuel, although these claims remain controversial.The second factor changing the conversation is a growing sense of realism – or desperation – about carbon emissions ahead of COP26. In an ideal world, there is (or should be) no question that the best way to slash emissions is to use renewable sources, such as solar, wind and hydroelectric power.In the real world, however, renewables account for only a small slice of current energy sources and that is unlikely to change without dramatic innovations in battery storage and transmission systems. This miracle seems unlikely to happen any time soon.Thus, the nasty choice confronting policymakers and environmental activists is this: should they swallow the risks of nuclear, at least temporarily, to cut carbon emissions? Or should they tolerate higher use of fossil fuels?If they want to keep global warming below 2 degrees, what the COP26 attendees face is not a beauty contest around the best energy choices, but an “ugly contest” to pick the least-bad energy mix.I favour using nuclear as a transitional option, even with the attendant risks, to cut the near inevitable rise in carbon emissions without it. As a report from the World Economic Forum notes, “the contribution nuclear power can make to the energy transition lies in its ability to follow and assume the system costs generated by the intermittency of renewables”.In other words, it fills in gaps that renewables still (sadly) create.Governments that continue to shun nuclear plants are haunted by the dirty secret that this move is likely to increase emissions. To cite one example, officials in New York privately tell me that while politically popular, closing their nuclear plant at Indian Point will probably increase reliance on fossil fuel, something no one will admit publicly.But don’t expect Western politicians to talk too frankly about this difficult choice, especially given they face a “Nimby” – Not In My Back Yard – voter problem when it comes to nuclear plants.
Expand
(20min delay)