TITANS OF NUCLEAR

Bret Kugelmass [00:00:05] We're here today with Alexandra Hoffman, who's a senior reporter at HuffPost, and done some of the best journalism, I think, on nuclear energy, climate science and policy overall. So thank you so much for joining us.

Alexander Kaufman [00:01:09] Yeah, thank you for having me.

Bret Kugelmass [00:01:11] I'm a big fan of nuclear and I'd love to hear about your journey, how you discovered it and got so much good information. I really think you're writing on this topic of some of the best that I see out there. But before we get there, I'd love to just hear about you as a person. Tell us, where did you grow up? I think you're from Long Island right?

Alexander Kaufman [00:01:26] I am. I am from Long Island. Yeah, I grew up in Huntington. So, yes, I'm a fourth generation New Yorker. My family has seemingly never been very curious about anywhere beyond the 30 mile radius of the tenements where they showed up 100 years ago. And that's fine by me because I love New York. But so, yes, I grew up in Huntington. I live now in Astoria, Queens. I began my journalism career in Huntington, actually, as an intern at the Long Islander, which is a small weekly newspaper. The claim to fame is that it was founded by Walt Whitman, and I got my start there and then went to college in Boston, worked briefly at the Boston Globe before going to Los Angeles, where I worked at the Web site, The Wrap, and I was a media reporter, and I learned a lot about doing business reporting there. I really love L.A., but I think I'm too much of a New Yorker to live there full time. So, I left after a year. I came back to New York and I worked briefly at the International Business Times before joining HuffPost in 2014, where I started as a business editor and kind of went from covering business to covering climate and energy issues.

Bret Kugelmass [00:02:50] Have you noticed an inflection points or maybe it's just gradual in terms of your writing quality? Have you ever looked back at some of the things you've written and said, Hey, I'm way better now? And do you know where that came from?

Alexander Kaufman [00:03:02] Yeah. I mean, I certainly I go back and I read things I've written and I'm utterly humiliated by them, not only because of the prose, but because of how because of the limits to the information that I was taking at that given moment in time. That is evident to me from the way I wrote about things and the way that it may have framed things. And I you know, I find that a little bit embarrassing, but I also see no shame in that because I think part of why I chose to do this for a living is that I feel like it's a you know, you get to continuously intake new information. And, you know, I don't consider myself an advocate. You know, I'm a reporter. And so my my my stories and my thinking have changed as new information has come in and helped me to think of those things in that different kind of way. You know, whether. Have there been moments that I have really reflected on, on my writing, you know, I mean, all the time I wish that there were some actual, you know, colorful anecdote that I could share that that illustrates how I have transformed or some kind of epiphany that I have. It's a moment in time, but that's just not the case. I mean, I've always read I tried to read a diverse array of writers. I tried to pick up on little tools from from each of them. But for the most part, I just try to write things in a way that I think is clear and understandable. And I try to write for an audience that I don't want someone to need a master's degree or even necessarily bachelor's degree to understand the things that I'm writing about. You know, I think one of the privileges of working in a place like HuffPost is being able to reach people who might not afford or prioritize in their budgets, costly newspaper subscriptions. And so I tried to write clearly in that way, but I also try to write in a way that makes me want to read, you know, and I like I like writers who are deliberate about word choice and who appreciate that readers like to have a scene painted for them. I can't just consume a wall of information I need. I need something to latch on to. I need something to relate to. I need something to picture. And I try when my editors permit me to, to, to, to paint as, as specific and interesting of a picture as I can.

Bret Kugelmass [00:05:42] How much of writing? I realize this may vary from journalist to journalist, but in your case, how much of it is figuring out what to say versus figuring out how to say it?

Alexander Kaufman [00:05:52] That's a good question. You know, I would say that's probably not even a journalist journalist situation, but a story by story situation. You know, I write news stories. When I write news stories, those are quite formulaic and straightforward. And so there is a teacher in journalism school, the inverted pyramid, and it's about prioritizing information and presenting it clearly and succinctly. And so there's not much to yeah, there's not that much thought that goes into every sentence of a piece like that. But for a longer story, you know, I tend to first focus on what it is that I want to say and what I feel like was the takeaway of the reporting that I've done. And I try to decide when I have arrived at the conclusion of the reporting I have done. And then I spend varying degrees of time, you know, massaging language. You there there are times that I spend days on a paragraph and that can be really challenging and stressful. And there are times that certain stories are are pretty easy to write and, and come out in a, in a straightforward way. And that's always a gift. And those are days that you really ride high, feel like. You know, I feel very fortunate that the words just came to you and then brace yourself for how quickly that high can crash and you can find yourself stuck on on how to phrase something or stuck on whether you've done enough reporting to have reached the conclusion that you're sort of coming to. And those those days can be solved with a lot of reconsideration and imposter syndrome.

Bret Kugelmass [00:07:46] And how does it work at HuffPost? What's the relationship like with the editor? How much help do you get bouncing ideas off and how does all of that work?

Alexander Kaufman [00:07:56] I mean, I've been very fortunate to work with really great editors throughout my career, and especially at HuffPost. You know, when I started covering climate and energy and environmental issues full time in 2018, late 2015, 2016, that was under Kate Shepherd, who has since left. Now she is the managing editor at a website in North Carolina called The Assembly. But she had been a the climate and energy writer at HuffPost before me, and she gave me plenty of ideas and sources. And we would talk at length about any story that I, I was pitching. And it wasn't like a formal process where she would give me the green light or the or the red light, but rather ideas that I had. And if we both agreed it was a good story, then I'd move forward with it. She left earlier this year. I've been working now with a guy named Jordan Zorn, also just tremendous editor and doesn't have the same background in climate and energy issues. But because of that, is really curious about certain things and is really helpful to me in understanding what people who aren't following this day in and day out and having curated their Twitter feeds around a certain type of subject matter might be interested in and curious about. And he has been very curious along with me in issues such as nuclear power. And and it was a very strong supporter when I was going over to the Netherlands in that he said that I had to make time to see the plant there and use that to understand what was going on there, given that he had that baseline understanding of what was happening in Germany just over the border. So so my editors have been very supportive and very helpful. And, you know, it's a casual but a very enriching, collegial relationship.

Bret Kugelmass [00:10:01] That's amazing. But you touched upon something that I've struggled with in terms of science communication also. How do you know exactly who is going to be your audience and when to put something out there in the public? And how do you know what their baseline knowledge is? To me, this is like the hardest thing because I could spend an hour just trying to build up the foundational concepts to deliver a point, but if someone over gets it, they're going to be bored by that. If someone doesn't have information, they might be confused by the point. I was like, How do you balance against that?

Alexander Kaufman [00:10:33] It's a it's a big challenge, but I think it's one of the things that is exciting about covering energy and climate issues. You know, that this is something that. Tends to be technical and wonky and finding ways to communicate topics of either incredible precision and technicality or just, you know, just grandiose that that is is difficult to find parallels for in any other realm of politics or or writing on those subjects. I think that that is part of the thrill of it. I don't know that we always know exactly what the audience understands, but I try to use myself as the stand in for that audience or try to use my parents as the stand in for that audience. And, you know, I mean, and, you know, I most of the people in my life are, you know, smart people who like to read but don't necessarily follow these topics because, you know, but they are active people that are making decisions about their day to day lives at any given time. And so I try to figure out what I know about that can be relevant to them and can fit into, you know, preexisting narratives or associations that that they might have not to not to misleadingly tell a story as part of a different narrative, but to have certain signifiers that allow people to understand where a story about nuclear power or story about direct air capture fits into the broader discourse that, you know, you assume that that a reader is is aware of.

Bret Kugelmass [00:12:16] That's yeah, that's one of my favorite topics. So I'm so glad you've been writing about that as well. It's real. There's plenty on that, too. I mean, especially since I feel like it was missing from the narrative for so many years. I remember I wrote one op ed in my life on USA Today. I mean, I've written one that's the only one that ever. And then I'm not on Twitter and it's for a reason. And it's because some famous climate people start attacking me over that, and I'm like, Man, it's just so good to see it become even more mainstream now with all the direct, with all the talk of direct or capture. Whereas before, I feel like certain people in the climate community are like renewable pushers or whatever. Like, they just want it. So great to see you discussing it.

Alexander Kaufman [00:12:58] Yeah. And look, I mean, I've been I have I have faced that that same kind of attack on Twitter that where it's, you know, an ad hominem attack. And if you say something that breaks with the orthodoxy that certain people have have adopted, and that is reinforced by activist groups or NGOs that kind of hold a certain line and help to dictate what is taboo and what isn't. You know, that people, even when faced with, you know, I think really good faith proposals or ideas or just trying to grapple with certain things that they jump to a kind of, you know, really brutal and critical response. You know, assume that somebody who doesn't toe the exact same line that they do is a climate denier or, you know, doesn't care about decarbonization because they are proposing a different way of doing things. I think this is a very troubling phenomenon, and it is something that I think exists probably in many realms of public discourse, although the one that I'm most familiar with is in climate and energy issues. And I have tried my best always to be a fair reporter and to to try to understand viewpoints that I instinctively disagree with as charitably as I possibly can. If I find them persuasive, then then I want to be persuaded by the best possible information. And if I don't find them persuasive, I want to be able to argue against them in the most persuasive possible way or identify people who can argue against them in the most persuasive possible way. So, you know, I while I find this to be a difficult and ongoing issue that I think Twitter and social media generally reinforces in really negative ways, I think that there is a real hunger for information that isn't pandering to people's preexisting worldviews. I have found that in writing stories about these these topics that have otherwise gotten a lot of criticism from people whose viewpoints I might respect on other issues. And, you know, far from discouraging me from writing about them, I actually am encouraged in the sense that I think it offers some hope that climate change won't be wrapped into these kinds of culture war battle lines that we see on so many other topics. And that, I think is very frustrating and frustrating personally. But. It's frustrating in the grander sense that it frustrates and makes the possibility of change seem farther on way.

Bret Kugelmass [00:15:52] How do you view your context of the reported in the same domain? Do you like first read what's out there so you can bring forth a different perspective, whether it's worth your time investing in? Or do other people not have a bearing on what you do? How do you see that?

Alexander Kaufman [00:16:06] I mean, I try always to read everything that's been written on something, particularly if I'm writing about it or I'm new to writing about it. And I try to make that as as clear as possible. I try to lay back to people who I think have done important work or landmark stories on any given Jack that have changed the way that they get talked about. But for the most part, you know, I mean, I try to look at the landscape of other people that are writing on this. It has grown tremendously in the past few years, which is wonderful and reflects, I think, the magnitude of the story of climate change. But I I'm not as interested in, you know, competing with people to write the best version of something that other people have written. I'm attracted to stories that I think haven't been told correctly, haven't been told at all, or are matters of a lot of debate and nuance at a time when I think that a lot of media is geared toward more simplified, opinionated writing, which serves a role. And I'm not I'm not bashing the hot take economy that that that is important for for some people and for some subject. And that can sometimes be the gateway drug that gets someone into a deeper type of writing. I'm not as attracted to that. I just don't think I'm as good at it. And I think there are plenty of people who are. And so I try to seek out subjects where I think I can make some kind of a difference on the way that they are being discussed and where I think that, you know, some misinformation or myths or cultural taboos are standing in the way of having a really sober conversation about something that requires that kind of discourse.

Bret Kugelmass [00:18:01] Okay. Well, all that sounds like nuclear energy. So is that the one you were thinking about in the background or do you have a whole list of ones that are like that? I mean, I just love to hear more about your journey towards learning more about these topics that are nuanced and might have some social taboos. Please.

Alexander Kaufman [00:18:17] To be honest with you, you know, nuclear is sort of always loomed in the background as something like that. But the first topic that I guess was the gateway drug for me of sorts was actually direct air capture. You know, I was struck by how fierce a lot of the criticism was to a story that I had written about a study maybe two years ago or a year ago that was just screaming out what, you know, how much direct air capture we might need by a certain date in order to stay within two degrees of warming or 1.5 degrees of warming. And, you know, this struck me as a really important conversation to have, because it was a question I was asking myself a lot in the back of my head. You know, what happens if we do not mitigate at this speed and with the success that we would need to in order to avoid that kind of warming? What happens? I mean, there's no evidence to suggest to me so far that the world is really moving in that direction at the speed that that we need to go in. And the answers that I would hear from some people were really rather weak. To me, you know, when pressed about how dire things seem to be becoming, you know, the answers were, you know, that we are going to abandon economic growth and have a complete and utter revamp of of of our economy, that we need to have a revolution that that overthrows capitalism before we can have decarbonization, you know, that we need to have economic metrics that model the US on due time. You know, I don't I don't think that that any of those ideas are, you know, unworthy of conversation and consideration. And I welcome, you know, a great diversity of voices in my writing and in what I read. That being said, you know, I don't know how how I can meaningfully communicate that to, you know, regular people who are just trying to get by, you know, people who are among the more than 50% of Americans who said they don't have $1,000 for an emergency if something like that happens. You know, people who it's it's exhausting enough to figure out child care, you know. Getting the windows fixed on the house, you know, making sure that the car is repaired. And, you know, there's someone to pick the kids up from school. You know, people live really chaotic lives. And, you know, I realize maybe that some proponents of things like degrowth might argue that, you know, that they have an answer to that. I find that there is a degree of chauvinism in in telling people that if only they adopted your radical view of how their lives and their desires, their consumption patterns and their hopes for their children and where they lived, that those things, you know, if only they surrender agency over all those things and adopt their world view that all the problems of the world will go away. You know, I, I, as a Jewish person, there's something very evangelical about that. And I just I don't I don't believe that in in anything that says that if only my worldview becomes hegemonic, the problems will be solved. And so that requires, I think, entertaining different types of solutions and tools. You know, and it just didn't make sense to me that, you know, technology that could help to balance the ledgers of carbon in the atmosphere should be completely written off because there are bad actors using that to avoid making difficult changes in their own business practices. That seems to me to be a kind of logical fallacy that puts us at tremendous risk. And, you know, and I don't say that lightly, but I look at the issue of adaptation as as an important parallel here, where if you look back at what was being written in 23, 24, all the way up to 2009, quoting people like Al Gore, you know, they were dismissing doing any kind of investment or planning for climate adaptation because of the moral hazard that posed to the difficult work of mitigation. And when we look back now at the heat waves that are killing people and and and when we look at things, I mean, the runways are melting in the UK right now and they're not able to move. Would it have been a real risk to long term mitigation to be planning for those things? Would it be a risk to long term mitigation to be thinking about how we avoid flooding in coastal neighborhoods or how we start having difficult conversations about moving people from those places? You know, it seems to me like we lost a tremendous amount of really vital time where we could have had more sober discussion of how we do those things, given how difficult it was going to be and given that we still had some time. And so when I look at that, I see a mistake. And I don't want to be a part of making that same mistake again with other tools that I put in the same category as seawalls or other types of adaptation. And so that led me to look very differently at something like direct air capture. It led me to have a more nuanced opinion other than this is a false solution that must be written off. And if it is mentioned at all, we have to smear those who who bring it forward and are pointing to empirical evidence that suggests that it might matter. And that then opens up the door to other things that I think get that similar type of treatment are dismissed as false solutions, where it's not always wrong that that some malevolent actors are using something as a way to obscure reality or mislead policymakers to allow for more fossil fuel production or, you know, to to misdirect climate policies. But, you know, I think that these are important things that matter and that I think readers. I don't think that it I don't think that it prevents readers from encountering these ideas. If you purge them from respectable discourse, you know, it leads them to turn instead to, I think, some of the worst bad faith purveyors of that information and assume that this is some kind of, you know, secret knowledge that should color their worldview and should be, you know, might be the panacea, you know, the the golden unicorn that that they can that they can use to to be smarter than everyone else on climate. And I don't think that that's true. So I feel like having an adult conversation that grapples with the gray area difficulty of these problems is is. What is needed. And rejecting that just to me is, you know, abandoning having a seat at the table for things that are likely going to happen anyway.

Bret Kugelmass [00:26:04] Yes. That discourse around moral hazards and not wanting to talk about mitigation. Why did that become the mainstream perspective or did it not as just a few loud voices and everyone else just kind of nodded along, like, why? What do you have to do to convince them? It seems to me like your perspective is like you've explained clearly it's the rational one. Like, actually, if you want to talk about moral hazards, not doing something for people who might get hurt, that's the moral hazard here. It's like, do you have a sense of why the major narrative goes one way or the other?

Alexander Kaufman [00:26:37] Well, you know, I think that there are certain political actors who help to dictate how the public discourse goes, particularly around, you know, environmental issues, energy issues. On the one hand, you might have big business groups that promote a certain perspective that is, you know, in line with with what their members or what certain corporations or industries might want. On the other hand, I think you have a very vibrant and influential, you know, green NGO space that has its variety of reasons for promoting certain things and not others. You know, I don't claim to be any kind of expert in political organizing or, you know, coalition building or any kind of things like that. I'm a humble reporter. Never, you know, because I've been doing journalism since I was a teenager. I've never formally participated in any kind of activism beyond my union, organizing a union in my workplace. You know, of course, I have opinions and viewpoints I have expressed publicly, but I just I don't I don't have that that kind of background. And I don't claim to have a sophisticated view of what you're supposed to do if you are Greenpeace or the Sierra Club or any of these other organizations that may, for a variety of reasons, have a certain viewpoint on a certain topic, or feel that pushing aggressively for one specific goal is really important in a, you know, in a political negotiation for ultimately reaching a compromise outcome that's more palatable. Yo u know, those are types of political theater that that you know, I will know I don't always agree with it, but but I understand the role that it plays in our broader public discourse. The problem, I think, is that those groups on either side tend to have a lot of sway over journalists who just are generalists and don't have a background in these things. And it's a lot easier to outsource analysis to various groups or various actors than it is to read whole books and studies and research papers and policy proposals to ultimately come to some kind of judgment about what ought to be depicted in one way or the other. And so I think that gives a lot of power to these interest groups that have various reasons for doing things but don't have the fundamental responsibility or role in the public discourse that a journalist has to try to tell a story that is as trustworthy and as balanced and believable and grounded as you possibly can. I think that is a unique role that reporters are supposed to play and don't always. And it's not this isn't my knocking, you know, my colleagues in the industry either, because the pressures of this industry are immense and most places do not afford their writers the liberty to take extended periods of researching a subject before publishing something or writing about a subject so that you a through a certain amount of knowledge to be able to state things that might challenge the orthodoxies within whatever that the public discussion is. And so I think that those are I think those are kind of systemic problems that that lead to a kind of warped depiction of certain debates in public. And I would say, you know, I realize I'm criticizing, you know, some environmentalist perspectives on various topics, but, you know, the the the original version of this is the the hope of climate denial. You know, where where you had, you know, certain players that were able to exploit the need to seek balance and the need to outsource, you know, information gathering and commentary to other players and were able to use that to present a complete the warped sense of what the debate over the accumulation of carbon in the atmosphere actually looked like. And so, you know, I would say that that is one of the worst examples or the most dire examples. But but that same dynamic plays out, you know, in varying degrees of good or bad faith, I think, on many subjects.

Bret Kugelmass [00:31:26] Yep. Yeah, totally. I'm you know, when I first started getting into climate, it's it's funny you mentioned direct air capture because that's where I started. Also, I started thinking. Problem is we have carbon in the air and it just seems like part of the solution to be getting out of the air. You know, just starting with some ideas, you know, that led me to, well, you know, it's going to take a lot of power and that power has to be very low carbon. So what are our options? And that's how I got to nuclear at least. You know, I've seen some articles you've written about nuclear. I've read off some of the titles of Morison's. You know, we got already at the dawn of the nuclear energy renaissance, you've got Finland on the brink of a nuclear power game changer. And one never had I mean, very few times because it's so well written The Netherlands want. So I'm like as a journalist I'm going to rent.

Alexander Kaufman [00:32:21] Here not how please.

Bret Kugelmass [00:32:22] How do you get into this story like how do you find this decided it was worth it. You said earlier you actually got there, too. I mean.

Alexander Kaufman [00:32:30] Yeah. Yeah. So, you know, so I was actually I was going to be in the Netherlands for a conference where I was moderating a panel in in Sudan. And, you know, whenever I have the ability to travel for those reasons, I try to make it well worth my time. And, you know, I, I love to I love to report stories from from other places. I mean, it's just a great way of learning and understanding a place. And, you know, at a time when I think that so many newsrooms across the US are not able to send reporters to places and tell stories from those places, that there's a responsibility to tell those stories when I can. And so I knew I was going to the Netherlands. There were two subjects I was really interested in that in the Netherlands, one is green hydrogen, which I had a story about that hopefully in the next month or so. It's it's, you know, a couple other things that need to come first. And another subject that I think fits into this this false solutions debate that we've been discussing. But but the other one was nuclear, you know, and I, I knew that they were planning on building new reactors so that they were discussing it. And, of course, I knew what the trend was in other parts of Europe. And, you know, having been writing about the embrace of nuclear by different countries, seemingly more and more every month since the COP, that just struck me as a really fascinating story. And then when I found out that they only had one reactor, which I was surprised by, I just figured, you know, in my mind, the Netherlands is is this pretty large industrial player that punches above its weight. You know, I just assumed, given all of their other heavy industry, that they might have built out their nuclear sector in a bigger way at the point that they were still building those things. And so it was a fascinating topic to me. And after being in Finland the month before and writing a story about what's going on there and the opening of all the three and the work that they were doing on Anglo, it was a subject that I think, you know, we had demonstrated with that story that there's a clear hunger among readers of HuffPost for stories that help them understand what's going on with nuclear, what role is it supposed to play and in the climate story, and what are other countries doing and how might that differ from or be parallel to the United States? It just seems like such an obvious thing to try to answer that question in the Netherlands, which is a country that feels much more culturally and politically akin to the United States, more so than in Finland, and a country that, in embracing nuclear power, was, you know, really carving out a different path than its closest neighbors. And so those tensions, as I don't really think of them as contradictions, but those contrasts, I think, make for a really interesting story and make for something that can help readers to understand the debate. You know, and I, I can read I can listen to a debate, actually, between debaters and I can read, you know, dozens of stories. And sometimes it's just one particular story that is telling the story of a debate, but it's being refracted through a different country or different players or a different bill or a different proposal. And it just helps me to understand these things better. And so my hope was that by going to the Netherlands and seeing what they were doing, you know, we might get a better understanding of what's happening in that country, but also what's happening in Europe and how it should relate to our own country.

Bret Kugelmass [00:36:43] And we encourage everyone to go and read this article, you know, I've been praising you for, but I'll just say it again. It's so well-written just from a story perspective, so good and easy to understand, navigates a complex subject, illuminates such a broad issue. It's just so good. And so I encourage everyone to go read that in your other work too. Can you give me or us the audience just like, what's your take on nuclear? If you could summarize it, what have you learned? What's happening? Where's it going? Where's the debate being framed correctly right now and what's the correct range?

Alexander Kaufman [00:37:15] Yeah, I mean, I, I don't claim to be an advocate for or against nuclear. You know, I try to I see myself as a reporter, as a, you know, as an information filter. And. With the skills that I have and with the reading and analysis I do on the broad subject of decarbonization and on climate, I try to give people the best information that I have and give people the clearest sense of what is really happening as opposed to what might happen or, you know, somewhat what a utopian future looks like or overfocus, I think, on who the bad players are and kind of feeding into that that feedback loop of that disastrous story of climate change. As I'm 31. I really would like to still be alive and thriving in 2050. You know, my wife and I would like to have kids at some point. Yeah, I'm pretty invested in knowing what to do about this this issue. And so, you know, when it comes to nuclear, you know, it seems to me like, you know, this was a technology that was clearly quite effective. You know, fusion reactors are very effective at generating electricity in huge volumes on relatively small areas of land and with rather small volumes of fuel and even comparatively rather small volumes of waste, even though that is an issue that I think has continued to dog the nuclear debate. Now, I understood most of my life that people didn't want to be near a nuclear reactor. I vaguely understood the fears of a meltdown. You know, I remember Fukushima quite well. And, you know that that always made me wonder what role it was supposed to play and how it stacked up to other energy sources. And for a long time, I kind of bought into what was the mainstream line that, you know, solar and wind were all we really needed. And if we could just get fossil fuel lobbying out of the way, that it would unleash this solar and wind revolution and all of these other energy sources that got us through the 20th century would be found in history books. And that's it. And the more I started to read about how you actually reach net zero or zero emissions, the last, I was convinced that there are that net that renewables right now on the market are up to the task of doing it completely. And I have done very few, if any, convincing models that that suggests that they could go it alone in the U.S. to say nothing of the rest of the world and and issues and that unique circumstances in many of those places. The Finns, for example, would laugh if you told them that they could use solar power to keep their keep their lights on when they are in darkness for months out of the year. But I. You know. So I think that this I think that this is the real state of play when it comes to discussing nuclear. I think that it is an extremely powerful and useful source of energy generation. I think it is a you know, it is something that that public opinion on. It has been primarily influenced by some distinct disasters that, you know, if only there were more pop culture references to the horrors of coal ash contamination or of, you know, the choking to death on PM 2.5 because you live next to a gas or coal plant that is routinely spewing that out next to a highway. And so, you know, all of those things, I think those points of comparison were really important to understand and to understand how to do a real assessment of the risks when it comes to nuclear power. And I saw that those things were just not part of that broader conversation. And then so, you know, very clearly a useful tool for generating a lot of low carbon power, very clearly not being adequately compared to other sources of generation and the risks from pollution associated with those. And then on the other hand, you know, there is the question about the cost and the time it takes to build these things. Know and this is where I see a lot of the anti-nuclear advocacy really zeroing in on now that some of the questions around pollution or radiation or or nuclear waste are less compelling given what people understand increasingly about air pollution from fossil fuels and about climate change. You know, the the push that comes from these things are too costly. It's a distraction. And they you know, they can't be they just don't work from a financial standpoint and therefore are not worth building. And, you know, talking to people about this, you know, you see that there is a reason for these things. It's not always specific to to nuclear that, you know, we've had this hollowing out of the workforce that we just haven't been building them for the past 40 years. And we haven't been building them in part because for the past 40 years we've been building and relying more and more and more on gas and other fossil fuels, and doing so without any clear grappling with the risks associated with relying more and more on fossil fuels. And so we just you know, there are there are answers to why it's expensive and why it takes a long time and it doesn't necessarily have to be that way. You know, I always find it surprising when people, you know, the same people who are pushing back against economic austerity in other realms of politics and policy or who are pushing back against the fossil fuel, people who claim that, you know, renewables and batteries are overly dependent on subsidies and government support to make them viable, you know, that somehow they rely on those same austerity arguments or questions of what government support should look like when it comes to a disfavored technology and end solution. And so I don't claim to have the answers about how you make those things cheaper, faster to build, or how you avoid, or how you might come up with a permanent waste repository that is more successful ultimately coming into operation in the United States. But I don't think that those are insurmountable obstacles to using this technology. And quite the opposite at a time when it seems like the broad public line that you see, not just from liberals or Democrats, but from many people writing about climate, that, you know, the failure of the narrow Democratic majority in Congress right now to pass climate policy is the end of any kind of decarbonization policy that strikes me as so and so irresponsible of a claim to make. I mean, if you're a Democrat looking to get reelected, by all means, it's powerful argument. But to repeat that as as a fact strikes me as something very frightening and, you know, silly in particular, because the tool that we know works to decarbonize the grid in a very big way is one that. Happens to be widely supported by Republicans claims. You know, this is such like this is clearly an area where where you could have some kind of bipartisan agreement about how to do these things. And unlike with renewables, where there aren't clear examples of large industrial societies completely revamping their energy systems to be completely dependent on those technologies, you do have that with nuclear. You know, like I'm not saying that France is a perfect model for the United States, but it exists. And so, you know, I look at those things and that makes me think that this is something that is that is very seriously in play that people are going to rely on more. And I just don't really know what the what the alternative is to this. You know, I mean, I do have these discussions with people who I otherwise respect, but who are very married to some of the main line view on on climate and to some of the the Duma is, if you will. And they are more willing to countenance the idea that we are going to reach a point where we decide to completely, completely change consumption patterns and shrink down society and limit what the U.S. economy or the global economy is designed to do. And, you know, I the idea that that is somehow an easier thing to countenance than, you know, building nuclear reactors or keeping nuclear reactors open is just the you know, I mean, I think it's it's lunacy, you know, and and I don't know how you can with a straight face, argue that to regulate people who are not already sort of in the, you know, in the the choir of the converted on, you know, really radical environmentalist policy. I don't know how you can possibly argue that to them more easily than that. They should accept something that perhaps in 2012 they were very scared of and averse to. And I find it even harder when this is not a theoretical thing. Now, I don't understand how this could be a foreign concept to people when 20% of our electricity is being generated by reactors. People know that they work. And people in communities that are not, you know, deep blue liberal coastal states, you know, work at these places. They understand them. They have union jobs at these places. It seems to offer a lot of the promise that Green New Deal activists and others have put out there, where we could take climate it away from being an environmental issue and turn it into populist industrial policy that allows us to prosper and create good union paying jobs. You know, I mean, renewables I think renewables are extremely important and will continue to be a bigger and bigger part of the grid. But renewables haven't really delivered on that. Most of the country, nuclear has. And so just in the sense of no political coalition building, it strikes me as a very strange thing that, you know, in throughout the Trump years, nuclear and coal were politically lumped together and were championed by the same actors and opposed by the very people who claim that we are on the edge of Armageddon. And so, you know, that all leads me at this given moment in time with the information that I have and the way that I'm looking at how other countries are making decisions, it leads me to believe that nuclear is not only quite viable and important, but that it needs to be part of a broader conversation and that people need lay readers, regular people. The kinds of people who read HuffPost and I think read my stories need to know that it's time to have a serious adult conversation about these things. And it's not just talking about climate policy. And decarbonization isn't just some, you know, long term utopian goal. You know, it isn't how we just pray and pay our arms. We're all going to get into heaven someday. And it's going to be, you know, one degree of warming and that's it. You know, I think I think people want to have a serious discussion about what it's going to take. And I think that there are many things about nuclear that are very attractive. And it's surprising to me that it hasn't played a bigger. Art in that broader discussion around climate.

Bret Kugelmass [00:50:48] Yeah, though I think people like you are going to make it happen. That's pretty awesome how you think about it. What else more do you want to learn on this topic or are you going to learn more on this topic? Or what's the give me the focus and then I'll broaden this question to other topics in the sector and then we can wrap there.

Alexander Kaufman [00:51:03] Sure. I mean, I am really I'm interested in you know, I'm interested in a lot of things. I'm really interested in seminars and what you know, what obstacles that they may actually face. You know, I mean, I would I am I'm excited by some of the rosier projections about when they will reach commercial viability. And I've heard arguments from people in the industry, both who are making these things or just looking at their overall and or looking at, you know, maybe five years out, early 2030s, when when we might see a real boom in these things, you know. Man plans and God laughs. So, you know, who knows what may occur between now and then? But I am interested in knowing what could occur, and I'm interested in knowing how viable that will be as a technology in the future. It seems like most people who are bullish on We are in the US are waiting for that to hit the market, to really plot out what that what new nuclear will look like in the US. So very curious that on Mars I'm deeply interested in thorium and molten salt reactors and how viable that might be, what it would require for that to be a serious contender in the industry and what the obstacles are around that. And you know, likewise, I'm really interested in what regulatory reform might be like for nuclear what what common sense things you could do to safely continue to deploy more of these things. And I don't just I don't limit that to nuclear, you know, I mean, I think there's a lot of really interesting regulatory reform around siting and read NEPA reviews and and and the like that are critical to, you know, building more renewables and building more transmission lines to make those renewables more viable on our grid. So those are topics I'm I'm I'm really interested in, I guess one other and I'm fascinated by hydrogen production with reactors. That's sort of another thing where, you know, I like with direct air capture, you know, I hear these arguments around green hydrogen that we just have to dismiss it out the gate because it will require too much energy. And I was like, you know, if your answer to things is like, we just say no to things that are going to require a lot of energy because we're unwilling to work with particularly abundant sources of zero carbon energy. I mean, that just seems to me to be a completely losing argument. I mean, the other part of it, it's like Bitcoin. I'm not I'm not like a pro crypto guy, but you know what? Your answer can't just be that you will shut down anything that ends up being a large source of electricity demand. I don't think that that's how you can run an economy. And frankly, I think if anything has been demonstrated to us in the age of the Internet, you can't just end things by fiat. Know, people are very creative and have a an enlarging set of tools to do things for themselves. So how do you facilitate those things? It seems to me like the goal of decarbonization policy should be figuring out how you create as much zero carbon electricity abundance as is humanly possible because that is what would be required to electrify the things that need to be electrified and hopefully power. The many things that we can't even envision being, you know, subjects of debate or uses of energy today. You know, I mean, we weren't predicting crypto being this big thing, you know, ten years ago when I found myself writing about it. And not again, I'm not defending that. But but I don't think that your posture has to be that you oppose anything that deviates from, you know, some, you know, some some some false rosy picture of the perfect ecological balance that we once had before the Neolithic revolution. You know, I think that that there needs to be we need to be thinking about how we how we just build as much clean energy capacity as we possibly can to decarbonize everything that we need to decarbonize now and tomorrow. So those are big questions I find myself really interested in around this subject and things that I'm I'm I'm excited to see that many other people that are much smarter than me are asking and seeking to answer these questions, which means there's plenty for me to write about.

Bret Kugelmass [00:55:55] And we could not end on a better note than that. Kauffman Everybody.

Alexander Kaufman [00:56:00] Thank you so much for having me.

Bret Kugelmass [00:00:05] So we are here today on Titans of Nuclear with Edgardo Sepulveda, an economist out of Canada and obviously a great friend of a friend from Chris Keefer's Decouple Podcast, where I've enjoyed listening to you several times. I mean, you must've been on there a half dozen times already, and I always learn something new. So thank you so much for coming on our show.

Edgardo Sepuvelda [00:01:16] Oh, thank you, Bret. I mean, as I was saying just before we started recording, before there was Decouple, before there was [00:01:22]Exhaust, [0.0s] before Nuclear Barbarians, there was [00:01:25]Titans of Nuclear. [0.5s] And so I've been a big fan for a couple of years now, so it's great to have the invite and get to meet you at least this way anyway, virtually.

Bret Kugelmass [00:01:37] Yeah, that's awesome. So before we get into brass tacks, tell us, where did you grow up?

Edgardo Sepuvelda [00:01:42] Well, I was born in Chile, so my first language is Spanish. And then we immigrated here to Toronto, Canada. I did high school here.

Bret Kugelmass [00:01:54] Any reason for the immigration?

Edgardo Sepuvelda [00:01:58] My parents were traditional, what we call in Canada, economic immigrants. They felt that for themselves and for the kids at the time that they would have a better economic life.

Bret Kugelmass [00:02:13] Did they play an influence on what subject areas you got interested in?

Edgardo Sepuvelda [00:02:19] They certainly wanted me to do... I was always sort of quantitatively oriented at school, you know, math and science and that kind of stuff. So I think they would have always encouraged me to do that, to do the hard sciences or the hard social sciences. That's what I enjoyed doing, so I think in that regard, doing economics, which is the more sort of quantitatively-oriented, traditionally, less so now, of the social sciences, would not have surprised them. But like a lot of immigrant kids from developing countries, an engineer, a doctor or a lawyer would also have been good. Being an economist was okay, I guess, as well.

Bret Kugelmass [00:03:30] Cool. Okay, so how did your studies and your career evolve over time?

Edgardo Sepuvelda [00:03:37] So again, I had started university. I did university here in Canada. I originally started doing engineering, well actually, science. I got into engineering and I just found that a little too dry, too quantitatively based, and then took some time off, did a kind of traditional year, year and a half off to kind of think about things, do some part time work, do a bit of traveling. After which, and by doing a lot of reading, I decided on economics. I decided because it was a nice marriage of the kind of quantitative stuff, the social policy that I've always been interested in, and that it could potentially have good career prospects. So I went back to school and did both a bachelors and a master's in economics and then started working. My first gig out of school was with, at the time, monopoly, privately-owned, regulated telephone company called Bell Canada. And a lot of Americans don't know this but Alexander Graham Bell, the inventor, is Canadian, the inventor of the telephone.

Bret Kugelmass [00:05:13] I did not know that. I thought he was one of ours. Oh my god!

Edgardo Sepuvelda [00:05:16] And so he actually made the call here in Ontario. And so hence the Bell Companies, and originally the original Bell Canada. So I did that in the economics shop. At the time it was very large. At the time I think we had... Bell Canada was kind of like the AT&Ts of the world, the Bell South, the newer telephone companies were pretty large. We had maybe 50,000 people in terms of organization. And I was just one little cog in that.

Bret Kugelmass [00:05:55] Yeah what'd they need an economist for? What role did you play there?

Edgardo Sepuvelda [00:05:59] Well, at the time, and even to this day, like any regulated utility, there are regulatory shops within any large regulatory utility. And so in there you would have the lawyers, you would have the accountants in terms of rate base and stuff like that, and you'd have the economists who would do, among other things, demand forecasts. So whenever you go and you do, and we can get into this in terms of like a regulated rate of return, which is kind of a traditional way in which utilities are regulated both in North America and around the world, is that you have to go to a regulator and show what your costs are, show what your expected demand is, what is your cost of capital, how much debt you have and you have to forecast demand, and anyway a series of other things. So that's how you learn about Regulatory Economics 101. You do it in a shop where you're working in a multidisciplinary team of lawyers, economists, accountants and engineers. And you're in the nitty gritty, right? Like you're in the crossing T's and dotting I's, running large computer models for forecasts, for demand, for costing and a series of other things. So I did that for four years, and then I found that a little on the dry side, after which I did a stint with the U.N. in the Dominican Republic. The U.N. Development Program, UNDP, hires, at the time, younger people to get them into the U.N. system. And so I administered the economic reform program in the Dominican Republic. One of the reasons it was there is because, having grown up in Spanish and I was bilingual, it was easy for me to do that being stationed there for, it was two and a half, three years.

Bret Kugelmass [00:08:18] Is it the same Spanish or is there like a bit of a learning curve between each?

Edgardo Sepuvelda [00:08:23] No, no, so there are, there are probably more Spanishes than there are Englishes, if I can say it in that way. You've got your South African English, you've got Australian English, you got New York English, Canadian, etc..

Bret Kugelmass [00:08:52] Scottish doesn't even sound like English.

Edgardo Sepuvelda [00:08:54] Scottish. And then, so within Spanish there is from Spain, and then there's within the Americas a great deal of variations. And there are some distinct ones. Like, for example, if you're from Argentina or Uruguay, it's a very specific set of of accents that you open your mouth and anyone around Latin America says "That guy is from Buenos Aires or he's from Montevideo," etc., etc., etc. Chile has another distinct accent. The Caribbean generally has a distinct accent, so Puerto Rico, Dominican Republic, Cuba would have sort of a generic accent from the Caribbean that you could probably if you knew how to really attune to it, you could tell the difference. A long way of saying, it's the same language just with the different accents and specific words that may or may not be different. The hood, the bonnet, a lorry truck, that kind of stuff would be variations in Spanish from Chile and Spanish from the Dominican Republic.

Bret Kugelmass [00:10:07] So, sorry we went on a little bit of a detour there. I'd love to learn about when energy became a subject of interest for you. Obviously I get the whole utility thing through telecom, that makes a lot of sense now in your history. So when did you switch over to energy?

Edgardo Sepuvelda [00:10:20] I mean, I haven't switched over yet. I'm sort of half-half now.

Bret Kugelmass [00:10:26] But you know a lot about it.

Edgardo Sepuvelda [00:10:28] Yeah, I know, I know. I came back to Canada after the stint at the UN and I started doing consulting. And doing 100% telecoms consulting first within a kind of large law firm, consulting firm, and then independently. And so, I've been doing this for 20 years, 25 years now. So I've been doing this for a bit. And then over the last, I want to say maybe six or seven years, Bret, I've been thinking about, I want to continue doing this, but I also want to... I've been doing this for 25 years, I want to do other things beyond just telecom consulting. And so at the time, I kind of committed to kind of saying, listen, as you know, for anyone who's been doing consulting for that many years, especially as an independent consultant, there are peaks and troughs. And 15 years ago, if I was in a trough of a consulting, I would say, "Oh my God, I'm never going to be able to work again. It's a drought. This is it. This is my career," and all that kind of stuff. And I used to stress about it because I was at the beginning of the process. Now I said to myself, "You know what? I've got enough experience, I've got enough of a track record that if there's a slowdown, I'm going to go and study another field." And so six or seven years ago, I had one of those troughs. And in Ontario, as you know, as having interviewed so many people from here, including Chris, we had a bit of an electricity crisis and had been in a sort of on and off electricity crisis for about seven or eight years now. And what I mean by crisis is that, kind of like in California and kind of in a lot of other specific states and jurisdictions, for some reason, electricity seems to be always at the top of the political agenda here. Not just now, in the current economic sort of energy crisis, but just for a very long time. And people always used to say to me, "Hey, you're like a telecoms economist, like, what the hell? Explain to us what is going on with the electricity grid and why are prices skyrocketing?" And I'd go, "I don't know, it's not my field." So anyway, I decided to make it my field. On my part, on my own, volunteer.

Bret Kugelmass [00:13:10] Can I just stop you and tell you what I love so much about that?

Edgardo Sepuvelda [00:13:13] What's that?

Bret Kugelmass [00:13:14] What I love about that is that when people are brought into... You know this whole thing, this whole expression, like, "You can't make a man understand something when he's paid to not," or something like that? It's like, when people come from outside on their own volition, just out of curiosity, I think that they're able to see things that people who have been inside the industry and kind of been trained since day one to think a certain way, like their brain is literally carved up, by the time they have enough experience, like make some critical claims, their brain has already been divided for that. But like you coming in with fresh eyes to an area, obviously having a tremendous amount of experience in a comparable industry, but with none of the biases of the new one, are able to formulate entirely original thoughts. I just love it so much.

Edgardo Sepuvelda [00:13:59] Yeah, yeah. And that's what I mean. It's a steep learning curve, as you can appreciate.

Bret Kugelmass [00:14:05] Especially the grid. I mean, I think you can go a whole lifetime because there's so many models across the world, you could go a whole lifetime and not know what's going on.

Edgardo Sepuvelda [00:14:11] Yeah, yeah. And so, kind of like 5,000 hours later of learning, 12 podcasts. I don't know, I've probably written 40 or 50,000 words and blogs and articles.

Bret Kugelmass [00:14:28] What do you write? What's your medium? Do you submit to journals? Do you write to blogs? What do you do? Op-ed?

Edgardo Sepuvelda [00:14:35] So originally I started writing in kind of like a shared blog called the Progressive Economic Forum. Which is a Canadian, I mean, it's very descriptive. It's by progressive economists, progressive economists, and we all write about areas of interest. And so I started writing there. And it was mostly about the Ontario grid and how messed up it was and how expensive it was and how it was becoming more unreliable and the politics of it. But fundamentally, as you were saying, Bret, I brought my own kind of set of interests in it. And one of the things that I found within the electricity and energy space was that very few people had training or interest in, again, not when we talk about regulation, not the regulation that 99% of people in the nuclear space refer to, which is NRC, and the other safety...

Bret Kugelmass [00:15:36] Not safety licensing.

Edgardo Sepuvelda [00:15:38] Not safety licensing.

Bret Kugelmass [00:15:40] But rather, market regulation.

Edgardo Sepuvelda [00:15:41] Correct. Correct. The electricity markets and the regulation of markets. So that's one of the things I brought, because I'd been doing that for 25 years professionally. And so the way I think about when I write, it's basically I've kind of transferred my clients, and I have a new set of clients, and those are people like yourself, like policymakers, like decision makers and other people who are interested in the conversation in the ecosystem. You are my clients, and it's all for fun, quote unquote. And these are my clients now. And so I write for a client base on areas that I'm interested in and I can choose whatever I want. And those are the sort of two or three things that I wanted to talk to you about, because I think it's one of the things that I've found interesting. I think that there's been a fair bit of good reception among energy people about the kinds of insights that, like you said, I've been bringing from outside. I'm not so much outside now, I'm sort of more inside now or as much as inside as I'm going to get, on those areas from an economic perspective because I mean, I know you've had some people on Titans who have some economic background and some regulatory. But, you know, it's certainly, as you say in economics, you've got to follow the money. If you don't follow the money...

Bret Kugelmass [00:17:16] Totally. I think incentives drive everything so much more than people realize. You never even realize how people are being controlled or manipulated or are leading to it by broader market forces.

Edgardo Sepuvelda [00:17:27] That's exactly it. That's exactly it. And that's one of the things that I you know, so like, that's the first thing that I've been writing about, especially in the last 18 months. And so just in terms of where people can find me before we get into the nitty gritty, so again, there's a lot of my writing, and I'll put it in the show notes on that Progressive Economic Forum. I've been doing this for about six or seven years now, and then I decided to set up my own website. So it's called Electrification Decarbonization, short for edcarb.org. And so that's where I'm doing the writing mostly now. But people who go there will see this wall of data. One of the things I did, Bret, is I did a deep dive on 30 countries and their decarbonization journey over the last 50 years.

Bret Kugelmass [00:18:35] What's the highlight? Give us a tease here. Like out of that analysis, what did you find that other people didn't know before you compiled that data?

Edgardo Sepuvelda [00:18:42] Well, there are two things that are different. Because there's a lot of databases that do this. But the first thing that I did was I went back 60 years. And so what happens is that often the case is that you see a snapshot and you compare a Germany and a France. How many times have we seen that? Or an Australia and a U.S., etc., etc.. But that gives you the snapshot. It doesn't tell you the actual transitions that have occurred. Like for example, even if you go back to 1990, France and Germany looked very different because by that point in France, they had rolled out, I want to say, 95% of their nuclear free by now. And so they look fundamentally different. It's as if it had fallen from the sky and that there was no hard work to be done in France to get to where they were.

Bret Kugelmass [00:19:43] And what was the key metric that you were analyzing? Was it cost or carbon or what was it?

Edgardo Sepuvelda [00:19:49] So just to finish that thought, but if you go back to 1960 or 1970, France and Germany are identical. So first of all, things can change. And so when you think about the narrative now, Bret, of how hard things are, but if you go back to that, we've actually made these changes. So that's one of the things that make me relatively optimistic is that there are countries in the world that were more or less, you know, pretty dirty from a carbon perspective and were able actually to change it within a generation. And everyone makes it so difficult. It's so difficult, it's so difficult. It isn't. It does require concerted effort. And we'll talk about what that is, but it's totally feasible and you can see that. So what I did was, you'll see in the chart, it's basically I take four or five technologies, hydro, nuclear, gas, oil, and then I track them as they change their relative generation mix over 60 years. And at the same time, for every single year, I'm tracking what are emissions. So you can track 1 to 1 the change in generation mix and emissions. So you can see, for example, as France rolls up their nuclear rollout, you can see emissions going down at the same time. France has not always had low emissions. And if you go far back enough, it was actually relatively dirty. The other thing that I'm able to do is I've been tracking prices. One of the things that often is the case is that, economists the first thing we do is look at prices. And so that's something that hasn't really been looked at. It's been kind of like, because it is so hard to track. So I've got prices there back to 1976.

Bret Kugelmass [00:21:46] Because prices and costs are two different things. And then there's other stuff in between also.

Edgardo Sepuvelda [00:21:50] Exactly. Oh, yeah, for sure. For sure. Ultimately, and I want to be doing some further kind of like academic work on this is, ultimately you want to do some inference testing, some check your hypotheses. What empirically can you show? What technologies actually decarbonize and which do not, which ones increase prices and which ones do not, etc., etc.. These are ultimately the way in which social scientists work. You can have opinions, but ultimately you have to have a hypothesis and you have to be able to test it and put it in a peer reviewed journal and add to the academic discussion, because that's one of the other things that I'm trying to do. I think every single thing I've ever written has been, first you do the data work, you set your hypothesis, you present your proof, and then you write about it, rather than the other way around. And that's just because that's the way that I've always worked as a consultant, because, when you're doing this for a client, the client going to say, "Well, show me. Don't just tell me, show me. Show me and sell it to me and persuade me that this is the right policy. And where has it been done before?" Like it's not something that Edgardo has dreamt up on the plane, when we used to get on planes.

Bret Kugelmass [00:23:17] Yeah, I've been flying for a year now.

Edgardo Sepuvelda [00:23:19] Oh, have you? Okay. All right.

Bret Kugelmass [00:23:21] The minute they lifted those travel restrictions, I was on a plane every other weekend.

Edgardo Sepuvelda [00:23:25] Well, yeah, and for my business, the number of miles that I've logged over the years, decades, yeah, exactly. So, yeah. So that's sort of the kind of stuff that I've got. And then I'm doing more and more, articles being published in magazines, interviews, etc., etc.. So yeah, yeah. That's mostly what I'm doing.

Bret Kugelmass [00:23:52] I was just gonna ask what you, I think you're going to reference two different insights that you gathered. One was around the data set that you collected tracking different countries over time, going back 60 years, looking at their carbon emissions and the relative breakout of energy sources. Was there another primary paper that you feel super proud about that impacted or coincided?

Edgardo Sepuvelda [00:24:13] Yeah, yeah. I mean, that's the analysis. But I mean it's all part of a process, and so earlier this year I was asked to put the newsletter together, a monthly newsletter for a French nuclear advocacy group called Voices of Nuclear. And so that's one that I want to talk about today, among other things. And there I did, at the back end of it, I did two things. First of all, I kind of looked at to get to the point of sort of where are the incentives and what are the market systems that are going is that I think one of the things that are overlooked in the history of nuclear and therefore the future of nuclear has been growth and market incentives. There is a narrative that we put a lot of the demise of nuclear due to sort of the safety and overregulation, like the criminalization of nuclear and the NRC, etc., etc.. We also tend to focus on people who are anti-nuclear and their political successes. And I think those are all important. But from my perspective, given sort of my set of skills, one of the things that I have thought about that has been relatively overlooked, Bret, is the idea of markets and growth.

Bret Kugelmass [00:26:03] And may I try to draw a thread that ties a lot of these together because I think they're just so interrelated, because I've seen in studying the history is when the industry moved towards this model of more regulatory capture and that became the business model, it so disincentivized other players to come in who would have lobbied for market reforms. So you see what I'm saying? Nuclear just became so difficult that legitimate, big Fortune 500 companies just bowed out and they said, "We're not going to touch this." But they also bowed out all of their lobbyists, too, who might have fought for the market reforms that you espoused.

Edgardo Sepuvelda [00:26:49] Look, I mean, as an outsider, you go in and you try to disassociate all of these multiple issues and try to understand what is signal and what is noise. What is a story we tell ourselves versus what the underlying reasons are. And what we know about nuclear specifically, but also the electricity markets in the West, in the developed, in the industrialized countries, is that from when Edison set up the Pearl Street Generating Company down in 1882, 83, basically to the late 60s or early 70s, 1970, 1980, what you see is you have this phenomenal growth of electricity. Year in, year out, decade after decade. And so if you look at sort of what the planners and the owners of these companies were doing, did they ever have an economist in there? Virtually no.

Bret Kugelmass [00:27:57] Because they always knew they were going to be able to build more.

Edgardo Sepuvelda [00:28:01] That's exactly it.

Bret Kugelmass [00:28:01] The decision's already made for us. Build more.

Edgardo Sepuvelda [00:28:04] That's right. Build more. And so what you did is we said, okay, you know, you put your finger out and you said, "Okay, what's going to happen next year?" Well, you know, you may have a recession or whatever, but ultimately you're going to do what you've been doing for 100 years, which is that you're going to grow at 6 or 7% year over year, your demand. And if we build it, they will come. And so what you get is you get this... and it's 7, I think it's at 7.2% annual growth, if you do that for ten years, you double your grid. So we were doubling our grid in the West, our respective grids, in the 50s and the 60s and the 1930s, etc.. So the idea, Bret, that we are all kind of like freaked out now that we have to double the grid by 2050, and you go, how hard is that? The reason is that's an ahistorical perspective, because over the last 20 years, we've actually shrunk our grid. So for somebody who doesn't have the history of 100 years of literally doubling your grid every ten years, but you've only known shrinkage, degrowth, and what I'm going to call grid austerity, over the last 20 or 30 years, the very idea that you can grow something, including nuclear, and this is where I'm getting to, including that you can grow and it's so impossible that we can't do it is a totally ahistorical approach to not looking at this properly, which is that for 100 years we grew the grid and doubled the grid literally every ten years.

Bret Kugelmass [00:29:51] Totally, totally. And when I hear people push back on the "can we grow the grid or not," I'll tell you the most common frustration that I hear, maybe this is just a selection bias of people that I talk to, but it's the same type of people who would naysay why we can't build like high speed rail. It's all about like, we have become so bad at allowing any permit and anyone can sue any project and derail it and cost billions of dollars that people have just kind of given up. They're like, "Listen, in the West, we can't do development anymore. Our NGOs are too powerful to sue us to heaven. They've already gotten into all of the regulators and promoters on the local level, on the state level, on the federal level. And they just have made development impossible."

Edgardo Sepuvelda [00:30:39] Yep, yep. I don't deny that. I don't deny that. I don't deny that that is a political constraint, but my point is that I think that part is a reflection that we haven't had to grow.

Bret Kugelmass [00:31:05] Okay. I think I see you what you mean.

Edgardo Sepuvelda [00:31:10] Think about what is happening in Europe now in the context of the energy crisis. Things that were virtually politically impossible a year ago are now becoming politically possible because we need to grow. So, you don't push back on, I'm going to call it the NIMBYs. You don't push back on the NIMBYs because there's no political consensus or will to fight about. And so you kind of say, "Okay, fine, whatever, we don't need it." And so you make it so difficult, right?

Bret Kugelmass [00:31:41] Do you have policy ideas on structural ways to literally fight against the NIMBYs? Is there a provision in any given modern constitution where government, if they declare it to be an emergency, they can just say "Sorry, like you don't get a say in transmission corridor. Like, we don't care. We're building this transmission corridor and that's it."

Edgardo Sepuvelda [00:32:06] Yeah, I'd have to get back to you on that. Like, in terms of legally, it's not my area. But one of the things that I wanted to talk about is that what is it about growth? And we're not going to talk about what happened in the 1970s and 80s that kind of stopped that growth. Other than a couple of things, Bret, because I think one of the things, one of the reasons I'm optimistic because if this hypothesis is right whereby the primary cause of nuclear's relative demise in the West has been as a result of lower growth overall in the grid, in the electricity generation. If that is the case, and then everything else is secondary about markets, about the environmental regulations, about NIMBYism, I think that once we start to recognize that and focusing on those issues, I think a lot of the other secondary constraints will weaken as we've seen in Europe.

Bret Kugelmass [00:33:20] Perfect. So, elaborate on this thesis a little bit. So let's look at the growth, what comes next?

Edgardo Sepuvelda [00:33:25] Right. So let me explain what happened. Why is it that we stopped growing? Because then that's the diagnosis. And then you start thinking about how you start to grow. So without repeating, the whole economic crisis, the 1970s, and stagflation and all that kind of stuff that we're seeing now, basically what happened is that again, in the 40s, during the Second World War, 1950s, 1960s, grid planners, utility companies, the state owned enterprises, because it was done by sort of combination of those three, could basically say, "Listen, we're going to grow at 6 or 7% year in, year out, and we can plan." In that context, you could build an expensive hydroelectric dam project that's going to have a 50 year life, and say confidently that I'm going to be able to recover the costs of that over a 50 year life, because I'm going to have demand for 50 years. And so, therefore, the idea that I have to go either use it going to private capital, and this is private patient capital, or go to the state coffers for if it's a publicly owned enterprise like it is in most of Canada, like Electricite de France is in France, etc., etc., where you go, you have to go to cabinet basically and say, "Listen, I need to borrow, like the prime minister of France, Messmer saying "Listen, guys, I'm going to do this rollout, and I'm going to endebt the French government to billions of francs because I want to build out 50 nuclear reactors." And so like the cabinet ministers who would have been sitting around the table said, "Are you crazy? Like, what are we doing here? Like, that's a huge amount of commitment. You're going to mortgage the company and mortgage to the nation." And so, it's in that context that you had to have been pretty certain to be able to borrow for 40 or 50 years, whether it's a hydroelectric dam or anything that is long lived, and you had to have certainty. And you couldn't be thinking that, and you had to be certain over two things, that if you build it, they will come. That is there's going to be demand, and the expansion of demand. And you have to be certain about the amount of money that you're going to be able to recover. So if you're in the 1970s, and you have been growing at 6 or 7 or 8% year over year, and you had monopoly utilities or monopoly state owned enterprises where you basically set the price to recover your cost, you had pretty much a de-risked investment where you could get somebody to sign on to a 50 year bond, like an institutional or a public pension fund, and you could sell that at 2 or 3% in real terms. Think about that proposition now in 2022. In most markets, you don't know what price you're going to get today, let alone in 5 minutes because it's spot prices. So you can't guarantee you're public investor or even private investment what's going to happen in 50 years, let alone in 50 minutes. So the derisking associated with some kind of system, whether it's either a rate of return or some kind of long term contracting, has been totally lost. And so that's what we call in economics a market failure. Our system has dissuaded long term private capital and public capital to invest in the long term patient capital because we're all looking now for payback periods of 2 or 3 or 4 years, whereby most of your marginal cost is on fuel, such as, for example, on gas, rather than on the upfront investment.

Bret Kugelmass [00:37:49] So as you explained, I mean, you explain very clearly, it seems obvious. So why don't countries just do that? Why don't they value long term price stability in their market construction?

Edgardo Sepuvelda [00:38:03] Right. And that gets to the second point which is that we have 100 years basically of a model, and then you get into the whole reform structure in the 1980s. It first happens in Chile, my home country. Then Margaret Thatcher liberalizes, and then, you know, the U.S., California, New York, etc., start putting in these wholesale markets. And so that's the second part that I'd say is that this experiment in market reform of wholesale real time auctions to be able to determine for a public service such as electricity what is to be invested for how long, and allowing a five minute clearing market to determine your electricity grid including that long term investment is a policy mistake. Among economists, this is one of those I wish we had the one hand economist because you can't say, there's a disagreement among telecoms economists and among energy economists about the relative failures and benefits of those wholesale clear market. So what I'm telling you is my own view. It's not a consensus view, but it is definitely increasingly, even the people like the Paul Joskows and all the other huge proponents of market reform in the 1996, especially after what happened in Enron and what is happening in Texas, people are recognizing that these energy only clearing markets are not sending, because of a market failure, are not sending the proper signal for long term clean investment.

Bret Kugelmass [00:40:07] So who does it right? In the Western world, who has the right, who has closest to the right market rules that you would agree with?

Edgardo Sepuvelda [00:40:19] Look, I think the evidence is that in the United States, we have half of your states have been reformed and half have not. For example, the Californias and New Yorks have restructured, and the Floridas and the North Carolinas haven't. And so you have a real experiment whether the promises of market reform have actually born fruit. And the answer is no, they're virtually the same. And so the traditional rate of return provision is a hundred year institution that has provided for us. All those 6 or 7 or 8% growth that occurred over 100 years was under that traditional methodology. What we've seen under the market methodology is 20 years of stagnation. It's not that one drives to the other, it's that the market system was not inconsistent with a market that wasn't growing. But once you actually expected the growth, this is where the challenge occurs.

Bret Kugelmass [00:41:31] So how come someone can't just set up a system of rules that has here all of the values that we care about in a grid. Long term, clean, and just list them out. You got eight or nine, you list them out, and then you just put a different weighting on each one and you can maybe make it adjustable. So every 2 or 3 years you can just, I'm allowed to twist any one of these up to 10%. You know, just set it that way and that way you're not like defining the rules up front, but you're defining a framework that allows you to be responsive to learnings over time and to how things change. So maybe we were in relatively secure world, but maybe we get into a non secure world. So you need to crank up the long term fuel security aspect year over year by 5%. How come that doesn't exist? A framework written into law that has flexibility built into it.

Edgardo Sepuvelda [00:42:25] Yeah, yeah. Look, people have tried, right? People have tried and in the realpolitik world of economic interests and trying to make sure that investments you made 20, 30 years ago still are being paid off and that you recover them, I think reform oriented people are asking that very same question, Bret. And people are thinking, some are optimistic that, yes, that we can add like a capacity factor in such a way that we have basically two markets. One is we have like a five minute clearing market that is based on like a marginal cost, and that deals with the price component, the short term price component. But at the same time, we have to have what are called capacity mechanisms to make sure that in next year or the year after that, we have sufficient capacity in 2 or 3 years time that we're not going to go into blackout situations. What happens under that situation is that you get into, politics aside and financial interests aside, you get into, which is always very difficult to do, you get into a situation where the complexity of market design and all the little add ons become so complex that it defeats the very purpose of having market mechanisms. Because what you're dealing with is you're dealing with a series of market failures that you have to correct at every single time, and you get into like a second or third best where you start thinking, "Look, let's go back to the old system where you had, an integrated resource plan and you dealt with it on a monopoly basis with a single clearing, and you didn't have to have like this wholesale price." So at some point, you're going to get different levels of what we call state failure, whereby the designers of the system cannot design a sufficiently complex and understandable and ungameable, because remember, this is what Enron was about. They were gaming the system. And so, how do you know that the very system, the very rules that you're doing are not going to be gamed, versus more of a top down approach. I'm of the view that we have provided sufficient, of an experiment, of a natural experiment. We have half the country's doing something, half the country's doing something else, and you kind of compare after 20 years, you look at the results. The promises of market reform and wholesale markets have just not borne fruit. We're not getting the kinds of huge decreases in prices. Actually, states in the United States that have reform actually have prices that are higher than the ones that are traditional rate of return regulation. So that's an important thing and that's an area that in nuclear specifically, we have tended not to focus on. That is that we have now a market like market clearing where the nuclear industry is, it gets paid is... You know, if you're going to get paid your marginal cost in a wholesale free market, you're virtually never going to have new nuclear. Because your marginal cost is going to be... What nuclear does really well is that it has a very low average cost, which is the sum of the fixed costs and the sum of the...

Bret Kugelmass [00:46:33] Can I ask a question? Why can't the private sector then just fix this because individual companies that buy power have economists and can look long term and try to secure power on a long term basis to tell you that average. How come you don't see that? How come we don't just say, "Okay, so the market structure as is today has these crazy fluctuations, but you know what? I'm going to build a nuclear plant. I have a sales team that goes out and signs a gigawatt worth of 10 year long term PPAs."

Edgardo Sepuvelda [00:47:01] You could totally do it. That's exactly it. And in fact, I mean, this is one of those funny things, Bret, is that even in free markets, no one wants to be in a clearing market. Like wind doesn't want to be in that market. They are in the market, but they have all kinds of out of market revenues. The production tax credit and the investment tax credit, they're all out of market revenues that, if you put the question as, would you actually ever enter this wholesale market, is you're crazy, I wouldn't.

Bret Kugelmass [00:47:38] Because then there'd be negative prices.

Edgardo Sepuvelda [00:47:40] Correct, correct.

Bret Kugelmass [00:47:42] The other auxiliary subsidy is they actually distort the market even more.

Edgardo Sepuvelda [00:47:46] Well, this is exactly it. If you actually look at what's happening in the U.S. and in Europe, virtually no truly merchant investments have come in. I think it would be like 10 or 15%. Everyone comes in either on the one of two things, Bret, which is you've identified it. Everyone skirts the pure market and says, "Forget that, that's for suckers. I want to go in with guarantees." So you go in with an investment tax credit or a production tax credit or you go in with a PPA. Virtually no one is going in the way that it was designed to go in is that you kind of say, "Hey, what's today's rate? And I'm going in." So the very idea of the designers that are going and saying "Listen, the way in which we will determine investment, where, how and what," no one is using that because it's a sucker's game. Everyone is doing exactly what you're saying, that you're avoiding the market and you're going into PPA.

Bret Kugelmass [00:48:46] This is so bizarre because of how foundational energy is to every other industry.

Edgardo Sepuvelda [00:48:54] Exactly.

Bret Kugelmass [00:48:55] And like national security and everything, it's like you'd think countries would care a little bit more to get it right and adjust from their mistakes a little faster. You just think, given that you can't make steel without energy. You can't make concrete without energy.

Edgardo Sepuvelda [00:49:11] Exactly. Well, but I mean, this is ideology trumping pragmatism.

Bret Kugelmass [00:49:18] So what do we do about these crazy ideologies?

Edgardo Sepuvelda [00:49:19] Well, think about what happened in the whole liberalization in the United States under Reagan and, you know, you go through. We're talking not unsmart people who said, "Oh, yeah, let's do this in California and we'll set up a market here. We'll set up in New York, and we'll set up these markets and they're going to solve everything. We're not going to be involved in this. We're not going to pick winners and then we're just going to let it market." But when you go in there, no one goes in there. Everyone goes in with a minder, a bodyguard. No one goes in to fight the lions by themselves to see whether they're the ones who are going to be able to fight the lions. You take in your PPAs, you take in your ETCs, you take in your PTCs, [00:50:04]you take in your rate of returns, your side cards, your ZETs, your RECs, [5.4s] your investment tax credits. No one is going in on a pure merchant market the way it was designed to be. So that's why these rules are so thick. It's because you have a market. How hard is a market? A market is super easy, right? You know, the market to do it is you just put it out. But the reason it's so difficult is you have the set asides, because no one wants to play the market because it's a sucker's game.

Bret Kugelmass [00:50:39] That's a bit discouraging, like how do you get out of that system, given all of the... you called it the realpolitik, right? So it's like, how do you get out of it?

Edgardo Sepuvelda [00:50:48] Well, you know, I mean, it's not easy. The people who advocated for these wholesale reforms, that was like a 40 year intellectual exercise of seeing a crisis and then saying, "Hey, here's my solution." Aand then, with the politicians, the decision makers who actually are there saying, "Actually, that's a good idea." You're like, I don't want to be responsible for the grid. I'm going to let the market decide on the grid. And, Bret, I'm going to make some money by selling my state owned enterprises in a privatized new firm. So that's pretty win win, right? So you've got to then think about and show, and that's one of the things that I'm trying to do is try to say, "Listen, we've had this experiment. We now have the evidence to show that it certainly did not deliver on the huge promises that were made and is barely keeping up and is just not fit for purpose for what we need to do in the future." It's fit for purpose in a stagnant market where growth... like very few people know this, like in the United States, electricity demand has dropped year in, year out for the last 15 years. So to go to anywhere and persuade people to buy nuclear or anything else other than something that can have a two or three year turnaround is a very hard sell because you're saying, "What for? What am I going to sell it? Am I going to be able to sell it five years from now, let alone 50 years from now?" So one of the things you have to be thinking about is how is it that we got into this shrinkage of the grid. One of them is deindustrialization. The biggest driver of growth in the grid in the 50s and 60s traditionally was industry. Industry used to be, I don't know, 30% of the GDP in the United States in the 50s, and now, I was just looking this up a couple of days ago, it's now, you know that manufacturing in the United States accounts for 11%, 11% of the GDP in the United States.

Bret Kugelmass [00:53:14] Wow, I thought it was still at 30%. Oh, my God. Thank you for waking me up, that's crazy.

Edgardo Sepuvelda [00:53:18] So in the 50s and 60s it used to be 30%, and now it's down to 11%. So what's happening is that, you can get another iPad, I can get another TV, but us little residential guys, we're not going to grow the grid. So we continue to go along, but it's going to be industry and the heavy users of industries that are going to grow the grid, and that have traditionally been responsible for the grid. Look, the residential component of the grid in terms of growth grew as you know, we actually got connected. And then we got the washing machines and all that kind of stuff. But it was really industry that was growing it. And in the West, industry, for most countries, it has actually been shrinking. We become more efficient and the industry goes somewhere else. With that industry migrating and becoming more efficient, there goes the electricity. So what we're going to have to do in the future is we're going to have to electrify areas that to date have not been electrified. Like that's the electrification process, whereby instead of heating my home with natural gas, I'm going to have to heat it with electricity, like in a heat pump. Instead of driving an internal combustion engine, I'm going to be driving an EV. The steel that is right now used as metallurgical coal to build the steel that goes into my electric vehicle, that's going to have to be done through like an electric arc furnace, etc., etc., etc.. So that's the way in which we're going to be growing the grid again, or that's the way we should want to grow the grid again, and becoming more industrial, if we can, to build all the things that we need to do to be able to shift our energy demands from fossil to clean electricity and to be able to start thinking about growing our demand, maybe never to the 6 or 7 or 8% that we used to do, but, you know, certainly more than population growth and hopefully more than GDP growth, so that we can provide the market basis and the right incentives and the right market signals to an investor, some of your clients, for example, or other people who are saying, "Listen, I'm pretty confident that I'm going to have 30 or 40 years of steady, not fantastical growth, but steady 3 or 4% growth, whereby I have great certainty that I'm going to have sufficient revenues and sufficient demand in my 49th year and 50th year of a 50 year investment in nuclear to be able to actually pry money from the banks to lend me the money to then say, yeah, actually, that's a pretty good bet." So that's what you're going to be, that's what we need to be doing. We need to make sure that if we want nuclear to grow, we need to have the grid grow in terms of generation in the way that it used to grow before. So that's one of my kind of like hypotheses, is that we grew in a situation where we were pretty certain that we could grow robustly for 40 or 50 years to have the revenue stream that you could then bank and borrow that money, whether it's private capital or public capital, and we just have lost that ability. If you say to somebody, "Listen, I'm going to grow the grid and double it," they're going to laugh you out of the bank because it's not credible. We need to have the policy tools and the right incentives, as you mentioned, to be able to actually credibly grow the grid. If you have the expectation of doubling the grid every 15, 20 years and certainly by 2050, that is going to be a fundamental driver of growth across all technologies, but in particular for long lived capital intensive technologies such as nuclear.

Bret Kugelmass [00:58:01] Amazing. Couldn't end on a better note than that. Edgardo Sepuvelda, thank you so much for joining us on Titans of Nuclear. It's been a real pleasure and I hope for many more conversations to come.

Edgardo Sepuvelda [00:58:10] Excellent. Thank you very much, Bret. I've really enjoyed it. Again, I've been a long time fan, so I was very pleased that I was able to join you today.

Michael Crabb [00:00:58] Well, welcome to another episode of Titans of Nuclear. Our guest today is David Stearns, a nuclear financing partner. David, great having you on the show.

David Stearns [00:01:09] Hi, I'm very pleased to be here today. Thanks for inviting me.

Michael Crabb [00:01:12] Of course. Okay, so before we talk about what a nuclear financing partner is and does, tell us a little bit about yourself. Where are you from?

David Stearns [00:01:20] So I'm a U.S. citizen, I actually recently acquired French citizenship as well, my wife being French. But I've traveled a lot around the world, usually following some crazy project or another. I started out in finance with Citigroup, Citibank, and so that was as good a place to have an international career as any. So this was in the early '90s.

Michael Crabb [00:01:46] And where is this in the world? New York, Egypt?

David Stearns [00:01:49] I started in New York, but then moved to France, had training in London, moved to Egypt, moved back to New York and then and that was 10 years, you know, in a nutshell and then I stayed in global banking for 20 years. Obviously doesn't show at all, does it?

Michael Crabb [00:02:15] I couldn't tell, I couldn't tell.

David Stearns [00:02:19] The scars are here.

Michael Crabb [00:02:21] Yeah. There's more scars on the back than the front if you're in banking, for sure. So you always wanted to do banking or did you want to do energy? Give us a sense of how you ended up sort of doing what you do.

David Stearns [00:02:34] Well, I was always interested in kind of this intersection between what the market can do and what public resources or what the government can do or should do. So I come from a very kind of government family. We traveled the world and that was really, really interesting. But it just seemed that whatever flag you have on your passport or whatever country you come from, nothing is more powerful than what a market can do or what a market is unable to do. And so I was just really interested in that, that there are limits to foreign policy and there are limits to, you know, hard strength, and you need to use soft or hard power. And I was interested in the soft power side, which I think business really is and finance in particular was because in the early '90s, it was the eve of, well, it was just at the beginning of financial deregulation. So, especially at a U.S. bank like Citi, they encouraged us to get in touch with clients, to get new clients, to think of new products, to accumulate more and more risk or at least identify those risks. And they gave us kind of carte blanche to do a lot of things. I was almost more interested in the real economy side of banking rather than, you know, pure derivatives or trading floors and CDOs and things like that. So I don't want to cast myself as a good guy necessarily, but I always saw banking and finance as being at the service of other things as opposed to being at the service of itself, which is what it turned out to be. But my first assignments, you know, it's the luck of the draw, isn't it, when you're 25 years old or something, were in the energy sector. They just threw me in as an associate into the portfolio of energy clients. In France, my first transaction was something very plain vanilla called an MOF, a multi-option facility, it's a syndicated loan, the Big Mac of banking, and it was Framatome which then was the French state owned OEM, nuclear vendor.

Michael Crabb [00:04:44] Wow. So you're sort of accidentally introduced to energy and then accidentally introduced to nuclear kind of right out of the gate.

David Stearns [00:04:51] Absolutely, absolutely. But what was interesting was, as long as I was in banking, 20 years, it was always a sideshow. Nobody was ever kind of saying, "Oh, we've got to do the next nuclear deal, let's go talk to this utility or this vendor who probably needs some financing." It was actually the opposite, which was we just stay away from that unless they ask us about it, in which case, you know, we'll just kind of say, "Well, let's talk about your renewables portfolio or let's talk about your gas infrastructure, or let's talk about things that we actually can finance." Because banks, you know, you make money on the transaction typically. You don't really do advisory work. You might advise to arrange is what we called it. So you're getting involved early enough in the project where you can steer the financial structure and the project structure, but you're steering it towards the things that you know you can do as a bank and you know the market can deliver for you. And nuclear never fit those parameters. So I was always doing every other type of energy. I was mostly IPPs. And so in the '90s, you know, especially in Egypt, they had the privatization law and we had the first InterGen IPPs. And it was just fascinating work. And I never really considered nuclear to be a career until I left banking or when I realized that it was better to leave banking if I wanted to make an impact in the nuclear sector.

Michael Crabb [00:06:13] Interesting. Okay, so tell us a little bit more. I mean, in the '90s, you had probably two or three sort of major market cycles in power, right? You had sort of your own financial market deregulation, you had energy market deregulation, you had commodity price cycles and you had technology cycles. I mean, this is an unfair question, but can you give us like 3 minutes on the three decades of craziness that you got to participate in?

David Stearns [00:06:43] Yeah, yeah. I mean, the condensed version, I suppose, Michael. So the '90s was really about unbundling and restructuring utilities and getting commercial finance, external finance, whether controlling or non-controlling finance, equity and debt.

Michael Crabb [00:07:04] Can we double click, because I do think it's important just from a nuclear perspective that we can get to later, tell us a little bit more about unbundling. I think this shift on the commercialization of energy projects just hasn't quite made it to the nuclear industry, right? Like, as a utility is not necessarily your customer.

David Stearns [00:07:27] Yeah. Well nuclear today, right? But in the '90s, it was still possible. I mean to the extent that there were nuclear construction projects. The renaissance was really in the early part of the 2000's, I suppose, with TVO. So we'll talk about that. But the '90s didn't see any nuclear transactions other than... I mean there was no new build. It was post Chernobyl, post Three Mile Island, and to the extent that there were construction projects I'm trying to think what they would have been. I don't think I saw a single one. I mean these were all... What were we doing? Gas.

Michael Crabb [00:08:03] Yeah, combined cycle.

David Stearns [00:08:04] We were all doing gas. We started dabbling in onshore wind, with these 700 kilowatt turbines, kind of saying, "Oh my God, I mean, that's big." And then Vestas comes up with the one megawatt and then the three megawatt and then the gearbox issues and everything was very progressive, fairly linear. And we could see that the policy backdrop, and this was the great or the interesting about thing about the '90s was that it seemed like the policy backdrop was not important. You know, who cared who was president. The liberal order had won the day and so markets were going to decide pretty much everything for us. And that was good because it drove down prices, it created competition and it gave the country and the consumers everything that they wanted or that's what we thought. And so in the '90s, it worked until it didn't work. And where it didn't work, for example, you had policies about renewables. In order to support that there were tweaks, there were policy tweaks in different markets where the governments would say, "Well, let's provide a subsidy so that we can bring some onshore wind investment forward or, do more R&D in solar," for example. Or, "Let's do some policy tweaks, negative policy tweaks against the coal fired plants." And so we're going to do in the European Union, there was the LCPD, the Large Combustion Directive, which basically forced all coal fired power plants that didn't have SOx and NOx cleanup equipment in the FGDs, it forced them to shut down by, I can't remember it was so long ago, but I think by 2020. They had a certain number of operating hours. So what were we talking about with the utility customers who were pretty much the owners of these assets? You know, they were saying, "Well, should we shut this coal fired plant down? And maybe we can repower it with gas or we can put biomass in it like Drax, or maybe we can just... Let's separate our business entirely," which the U.S. did, which the Germans did, the French did, which was let's put this generation over here, let's put supply over here, transmission over there, and within the generation said, "Let's make it competitive." And they were being forced to in many of these markets. And what sticks? What are the technologies that work? And it was a treadmill on the banking side. There were just so many deals and so many projects. And it wasn't just the utility clients. It was all of sudden the independent developers who were showing up. You know, AES Corp., for example, was a class act. It still is. And InterGen, I mentioned as well, International Power. These were great firms doing a lot of really good work, bringing kilowatt hours to people all around the world who wouldn't have had them otherwise. And in most cases, it was cleaner than the alternative, which was coal or diesel. So we were doing good, right? The banks were doing good through the '90s, but markets change, don't they? So what's part two? Part two is: enter nuclear. This was where it got really interesting for me because my first kind of full contact with the nuclear sport was TVO in 2002. We got an invitation landed on. I was in the project finance team of a French bank called Credit Agricole Group, in 2002 in France. And it was an invitation from this nuclear co-operative in Finland that had two operating units and was saying, "We want additional capacity. We think that the market and our investor/consumer base will be needing this over the next five, ten years. There was a 40 page info memo for a €3 billion transaction, you know, $3 or $4 billion dollars, I suspect at that time. Debt transaction, because the investors that the co-operative investor consumers were putting in their, what, 25% of the deal, so this was a highly-liquid transaction.

Michael Crabb [00:12:21] How mature was this deal when it landed on your desk? Was it just sort of an idea or did they have some of the contracts and the interconnect and some of that?

David Stearns [00:12:34] For Finland, it was very mature. For a lot of other markets it wouldn't have been. But the Finnish template for me is really just a gem. You know, it's a jewel and a really interesting model for the rest of the world. Obviously you can't replicate things, but they had a decision in principle from the parliament, which is essentially the government approving the fact of a utility or a group of investors saying, "We'd like to build this plant on this site." I think they had their environmental impact assessment and they didn't have their nuclear licensing, obviously, but they did have their EPC that they were ready to sign with Framatome. And it was a fixed price, turnkey, I don't want to say date certain, but it looked a lot as a CCGT, you know, as a conventional thermal IPP banker, it had a lot of the things you would have wanted or you would have expected. And so we looked at it. But people said, "But this is nuclear." And so that was really a chance for me and for the team, the project finance team, to actually think, well, first of all, is this project finance? And second of all, to say and if it's not, it doesn't actually matter, can we do it? Because what they were asking for, it was a fascinating transaction and it continues to be the benchmark for me, sadly, 20 years literally down the road, where it is a highly levered... It's a nuclear project financed without shareholder guarantees, without government guarantees, highly levered, without a PPA or any kind of structured offtake agreement. And they raised what turned out to be enough money at the time, but obviously not enough based on the actual structure of the project, the deliverability of the project which was a huge learning curve Framatome, but also for TVO as an owner. But it was actually a transaction where I would say, I mean it's been a laughing stock for people outside the industry and maybe even inside the industry for 10, 15 years because that's the delay. There's been arbitration, counter arbitration. But, it got commissioned earlier this year and I'll bet you in 10 or 20 or 30 years, Finland and the world and the investors and the consumers in Finland will be really, really happy that they did it. I've got some ideas around that. I'd spent a lot of time thinking about why that one worked. What are the things you could take away from that, usefully? And I think there's quite a bit.

Michael Crabb [00:15:14] Oh, yeah. What are they? Share.

David Stearns [00:15:17] Well, the cooperative model for me is really interesting because I have this view that nuclear energy, it's not just my view, actually I think a lot of people probably share it, that nuclear energy doesn't get remunerated the way it should. That, sure, a kilowatt hour of energy on the grid is a kilowatt hour of energy, and there's a competitive market for that in most of the open, in the OECD economies, let's say. And so that's fine. And then on our bills, we can choose our generators or our suppliers. It says that the price to compare, never mind the system cost, but, here is the actual energy consumption cost for you, David Stearns, at your home, and you can change that. That's really interesting, but that's not really a proper accounting of costs and benefits for me. And it does exclude a lot of the benefits of nuclear. Whereas the costs we know. I mean, it's a fascinating industry for me because, for me, it's an industry that has actually fully accounted for its costs. And the investors do not get a free ride unless they've lost all of their money, obviously. And, you know, there are catastrophic events in which that happens. I mean, policy wise, but also technically and in terms of nuclear accidents. But there are very well trodden paths, sadly or not, but not that many. But there are paths and a pecking order that says "You, the investors, you take the first loss." That's how it is.

Michael Crabb [00:17:02] And that's a horrible thing. If you have a gas combined cycle, you have an outcome that is a catastrophic loss from an investor perspective. You have a wind turbine. I mean, those are all probabilistic outcomes that are part of an investor's return, right? Otherwise, their return would be zero. That is sort of a basic infrastructure thing, right? There's some anticipated loss across portfolio of investor assets.

David Stearns [00:17:32] The real problem with nuclear is that... I can go on and on about cost and benefits and say, "Llife isn't fair. What about security of supply? What about energy resilience?" And I think that is a real problem at the policy level. There is an intrinsic problem in the industry, which is the promises are not delivered. So when TVO, let's use that one. I hope people who are involved in TVO like me will forgive me for maybe my somewhat faulty memory. But basically, there were promises that this was a €3 billion project back in 2002, 2003. That it would be operational by 2009, I think, so a five year nuclear construction period to commissioning. And so 13 years ago we would have had first power. And that didn't happen. And I think there's an intrinsic problem, and I think you've had a lot of very, very interesting people on your program who have really good ideas about how to educate not just the regulators but the vendors and the owners about licensing and how to clarify that and how to shorten timelines. So there are a lot of really good ideas out there. I'm a financial guy, so I'll mostly nod my head when I hear them. But what I would say is, as a financier, as a financial guy, I would say that the problem on costs and schedule and quality and performance is what I would call an accounting problem and a communications problem. Because we know that megaprojects, they always overrun, they always do. Nuclear in particular; but it's not to forget, it's just to observe. And I think what is interesting is that maybe when the developer who is trying to build up his or her stakeholder base with politicians and consumers saying, "This is going to be really cheap, really fast, really safe," you do want to say that and we should find as many ways as possible to be able to say those things and to be challenged. But was there enough challenge on the financial side? I don't know, in all the cases. But you would expect that the management case would say, "Oh, this is going to be a five year construction period. It's going to be $2,000 per kilowatt." And then you would want to hand that over to the financial people, wouldn't you? They can say, "Well, let me just look at your..." And then there's a very... EDF is on record as proudly standing up in front of the British Parliament here saying, "The EPR and EPR construction project is a series of 55 million unique engineering tasks." And the individual who said that was quite proud saying, "You know, we can do that, and we can pull that off." And I was just thinking, oh my God, I wouldn't have said that necessarily. But in some ways it's like, yeah, boast and be proud because they're really, really complex. And I have only admiration for the industry in that respect to pull that off. But at the same time, are those decisions being made, and when you're announcing a budget, when you're announcing a schedule, would it help maybe to say, "We think it's a P50, you but our external financiers think it's more like a P5." In other words, it's very, very optimistic. You know, you do that in the energy industry. You know, what is the wind resource? What is the oil reserve? You know, we use probabilities. And they don't have to follow a normal curve. But in nuclear, they certainly don't follow the normal curve. They're very skewed. So I call it an accounting problem and I call it a communications problem, which is to say we think it can be done in this envelope, in this financial envelope, but because of real issues like the supply chain and the licensing uncertainty and maybe public opinion, maybe changes in law and change orders in the EPC contract and innovation, because we're going to maybe freeze at least part of the design as much as possible before we raise the money and before we start building. But then we might realize that we shouldn't have frozen all of that, and so we want to go back, and maybe that's a good thing. But then you have to convince a lot of people that that's a good thing. And then you need the financiers to agree as well. And then you need the consumers to agree. Are they going to pick up the costs for that? So all of that innovation is really, really good. But I think what's really important is you have to have an early, early, early conversation on what the financing and the commercial specs are so that you're not accumulating risks at all the different levels in the program. And these 55 million unique engineering tasks turn out to be maybe 110 million and not completed, from start to finish in 5 years, but maybe in 10 or 15 years. And you do need that diligence, but it's not at the end of the process. It's really, you need those voices at the table early on, I think.

Michael Crabb [00:22:34] Yeah. No, that all makes sense. I don't know, it strikes me that there's a level of complexity in nuclear that sometimes is sort of overly, I don't want to say overengineered... But I mean, a nuclear plant is basically the steam side of a combined cycle, right? I mean, it's a coal plant or a biomass plant with a hot rock in it. I mean, there's like some level of complexity here that I can't... I really struggle to connect the dots on, you know what I mean? And I'm not sure what drives all of that. Because I hear you. It's an accounting, it's a communications problem. But we're building $2 billion offshore wind farms. We are erecting 500 foot towers in the middle of the ocean, connected to the sea floor, running a cable back to land. Like we're doing some ridiculously complicated stuff in one side of the energy industry, and then we have this, you know, 70 year old technology that we can't figure out. And that's the part that I mean, there is something missing in my mind. I don't have a good question here, but there's like...

David Stearns [00:23:48] I'm agreeing with you, that's for sure. What I would add is I've thought about that a little bit. I don't know that it really is entirely, you know, the way you've described it.

Michael Crabb [00:24:04] I mean, it's admittedly unfair. As a finance guy to a finance guy, it's admittedly unfair for me to call it a hot rock and a steam cycle. I admit that entirely.

David Stearns [00:24:12] We'll have the technical advisors explain it to you...

Michael Crabb [00:24:13] Yeah, yeah. They don't want to hear me say that.

David Stearns [00:24:15] But what I mean financially, maybe, is that I think there's more value in what the nuclear offering actually is because it's not just, this is a design, we froze it, and now it's spitting out kilowatt hours, or, you know, process heat and steam, or whatever, and that's exactly what it was supposed to do and that's what it's doing. And then 25 or 30 years later, it's not going to do that anymore, we're going to decommission it. Nuclear, is is it 40, is it 60, is it 80, is it 100 years? I don't know. Yeah, I've heard some good arguments that say it could be a hundred years, but in practice, for now it's mostly 40 years. But that's a long time. But there's an embedded kind of variability, which is what I would call safety, which is if the safety bar ever has to move up, then you've got to stop what you're doing as the owner, as the licensee, and you've got to have a conversation with the regulator to say, "Okay, what am I going to do about my sea walls? What am I going to do about my emergency diesel generators? What am I going to do about my redundancy, my defensive depth or, you know, all these things?" And I've got to improve that because, you've heard it as many times as I have: an accident somewhere is an accident everywhere in nuclear. And so, in March 2011, every reactor around the world, as far as I know, was shut down for an inspection or for just a review of the target safety case versus the actual plant status. And then 9/11 was another one. And so sure enough, the regulator legitimately said, "We actually think we need to build up safety." And so, I would say that's good. I like safety. I think we should definitely agree to that. But there needs to be a funding mechanism because there's a benefit to the world, to the consumers, but to the world, if the plant is even safer than we thought or than we'd been planning. And somebody's got to pay for that. Why is it the investors? What shouldn't it be the consumers? The internalization of those benefits says to me that if we're in an open economy, a competitive market... I mean, if we're in a kind of a government to government framework, then everything you and I are going to talk about, none of that matters. If we're talking about a vertically integrated, state owned utility or talking to a third world country, they will do it a different way. So I think you and I are talking mostly about competitive markets and so on.

Michael Crabb [00:26:37] Yeah.

David Stearns [00:26:38] The consumer should be paying for safety.

Michael Crabb [00:26:39] Yeah, the marketplace for safety is a really important conversation because it feels like it only exists in nuclear. It's almost nonsensical, I mean, we kill 5 to 10 million people with air pollution around the world every year. It's not even just an accident in nuclear somewhere is an accident, it's any sort of accident. Like after 9/11, we didn't say we need buildings to be able to withstand a plane crash. I almost feel like the nuclear culture has sort of gone down two really bad paths or like really challenging paths. There's an assumption now, there's like this burden of failed projects in the past. You said people haven't lived up to their promises, so there's just an assumption that that happens, so why try something? Why go through another regulatory process? It's just going to fail like the last one, right? There's a defeatism in half the industry. And then there is this view that making something too expensive to ever build in the name of safety with no context... There's no context. Maybe that's a solution, and maybe what you're saying is like, "Okay, make it a government allocation question." Like, elevators could be safer. Let's protect people from lightning, or let's build sea bubbles around every city on the coast because of a hurricane. There needs just to be a constant, like social contract, social calculation around that, I think. I don't know how that happens; I'm sort of... again, not a real question there. But have you thought about what a mechanism, what a market mechanism would look like for that from a government perspective? Have you talked to policy holders about that?

David Stearns [00:28:47] You've got market design teams in a lot of the different governments that are, I think, really actively working on that. How do you integrate nuclear or newbuild nuclear into the existing market that is doing very well, thank you very much. Nobody wants that elephant to do a cannonball in the middle of the swimming pool, right? Oh, my God, let's make room for, you know, two or four or six gigawatts of nuclear. Nobody wants that. So, there's not a natural constituency to kind of say, "Oh, let's make room on the bus for some nuclear units."

Michael Crabb [00:29:20] I mean, you've been in projects. I don't know if that's necessarily true, right? There's a number of countries that are least, outward facing, very supportive of new nuclear.

David Stearns [00:29:34] Oh, sure. Yeah. So France and Finland are really good examples. The Czech Republic, Slovakia, you know, these are countries that have real projects as well. It's not to say that they're saying one thing and doing another, it's actually the momentum in the market is, "Yeah, yeah, yeah. Let keep nuclear at the table and let's help out EDF, or let's help out Fortum or EABW or any of the German utilities." But that's a different story. But if nuclear is moving more slowly and with greater uncertainty than onshore wind, offshore wind, battery storage, solar PV and so on, then you know, the squeaky wheel doesn't get the the grease, in this case. Policymakers will say, "Well, you know, nuclear, what more do you want? I've taken care of your liability issue, remember that one? I've given you the accelerated or specific sites and permitting, not shortcuts, but pathways. I'm helping pay for R&D at the national laboratories. I'm doing as much as I can. And, you know, public opinion says I shouldn't really be doing more." And so I think that's the problem. Nuclear has to wash its own face, has to stand up and say, "You know, we've been really bad at communicating, communicating our numbers. Not communicating, but safety, but our economic value added, our costs and benefits. And we, the industry, respectfully request a realignment of costs and benefits so that consumers are actually internalizing all the benefits and paying for those benefits, and we the investors are paying for the costs, obviously, or we're taking the risks. And we'd like to have a conversation, please, about how economic and how efficient that actually is for us investors to be taking all the risks." I've actually got the UK's CFD model in mind, which is Hinkley Point, Hinkley Point C, whereby the investor takes 100% of the construction risk and the consumer gets a guaranteed strike price or tariff, if you like, that shall not exceed, £92.50 in 2012 money. So, that's a really radical kind of Yalta moment for me, which was to say investors take all the risks and they have to embed their returns in that strike price. And if they miss it, in other words, if they undershoot or the costs overrun basically, too bad. But if you are within budget and if you are within schedule and you've got kind of super returns above what the strike price was supposed to give you, then we're going to claw some of that back. Which is what the European Commission asked for for Hinkley Point C in 2016 or '17 under the state aid kind of proceedings. So the investors are taking all the risks, the consumers are set, and actually £92.50, as we can see for EDF, it's not enough. But it's the deal that everybody hates, right? Because, the past six months in the UK have been very, very difficult, obviously, from a wholesale market price perspective and so on. But the longer term trend is not... the value of that strike price of that CFD for Hinckley Point is somewhere about $120 per megawatt hour right now. And that's just a lot for a 35 year contract it seems, in today's money. And then it inflates, which is also kind of funny because your costs don't actually inflate. I mean, the whole cost structure doesn't inflate for 35 years. A few things go up, but you've got your maintenance plan, you've got... So it's a crazy deal. It doesn't make any sense at all. The consumers hate it. EDF must hate it. I can't speak for them, obviously, but there's no sign that they're happy with how things are going at Hinkley Point. They're being recapitalized or they've just been recapitalized and they might have to go through that exercise one more time. And they've run out of, you know, they're tapped out financially, which is why the UK government is looking at this regulated asset base approach because EDF has run out of balance sheet. So there's got to be a better way, and I think a lot of the discussion underway in the UK, but I think there's an osmosis effect because the nuclear community is small enough around the world is, there's got to be a better way to look at risks. You know, target costs are great, target schedule is great, and the servicing industry can do it, but there are a lot of reasons why they don't. And let's just look at that a little bit and try to see if consumers aren't getting a free ride on some things with the existing nuclear power plants, and see if we can't, whether it's safety, whether it's security of supply, whether it's resilience of the generation set and the energy portfolio. You know, I don't know whether it's giving nuclear plants or generators additional sales opportunities with respect to producing hydrogen or process steam or district heating or desalination, and things like that... Let's give them those opportunities and let's broaden that accounting framework so that consumers are really internalizing the full system costs of the portfolio that they are benefiting from today, nuclear and non-nuclear.

Michael Crabb [00:35:34] Yeah, that's a lot to dig in there. So maybe I'm in the minority here, but I like the contract for differences. I actually think this is one of those situations where nuclear sort of pioneered the contract for differences approach. And it has been used to commercialize every other technology but nuclear. And I kind of feel like this is an opportunity. It's one of those moments where I think there were some... failures is unfair, but there were some things missed on both the developer side and sort of the regulatory side. And both parties, instead of internalizing where they could improve their processes... How do you think about a different product? How do you think about being more efficient? It's just a lot easier to blame the contract. So nuclear turns around and blames the contract, and it's easy because this is not like a scalable contract. We're doing one big mega project with 10,000 people over ten years. As that project breaks down, people don't like that. But look at wind. Started at £140, £150, right? The contract for differences mechanism, I mean that's sort of how risk should be shared. Investors should have a return... Now, put aside the gain sharing. Like you shouldn't have to give back. If you're giving a strike price as an investor and you perform better than you expect, then you get that return, right? That's how it should be. And then the flip side is also true. And then if the project never gets done for whatever reason, development fizzles out or whatever, the ratepayer doesn't pay for any of that. That's how project development in energy is done. But then there has to be this sort of policy reality check on like, yes, there is huge value to have this power in your community. And I hear you on saying, "Well, let's talk about the accounting," but I don't think people actually care about the accounting. I think there's 10 or 20% of the people that will hate nuclear no matter what. They say things like, "I don't understand it, but I saw some horror movie and it turned us all green and I don't trust it." There's 20% of the people that know the science and they love it and they can't figure out why we're not building more. But most people don't really know anything about it or care or even pay that much attention. I think the industry sort of needs to come... it needs to shake off the fear a little bit. Because instead we just don't try. We say, "Oh, we'll never get there, we'll never meet our promise. We can't get the commercial deal. We're just going to do research." Look, you've been there, you've been in the room. The regulated asset based model for me is just a way to create more work without necessarily... I mean, you still have to come to an agreement on what the rate of return is. You still have to figure out what project costs are reimbursable and what aren't. it just creates more administrative burden and longer timetables. And that's what people don't like. So I don't know, to me, it's like we're not fixing the problem. We're just sort of adding more stuff to hide the problem.

David Stearns [00:39:03] So I like the CFD. I mean, I'm familiar with it as you are in any other type of technology. And it has worked, but I'm just saying, the Hinkley Point CFD is hated equally on all sides. And I'm just saying. So, this is a David Stearn's personal prediction, I'm going to kind of caveat that, but there will never be a nuclear CFD, a large reactor nuclear CFD, not in the UK, and maybe not anywhere if the CFD structure follows the same as they did in the UK. Because the strike price is too low for the investors, and it's far too high for the consumers. And I think the reason why is because there's an insurance policy inside that CFD which says the investors are saying, "I will deliver this energy to you hell or high water." I mean, no, that's not right. There are carve outs, obviously. But basically, the normal types of downsides, let's say in mega-projects, EDF is taking, the investors are taking. And that's just... mortal investors can't do that. And even if your balance sheet was bigger than EDF's 30 billion, the market cap today, which is not that much, is it? Because I think the Hinkley Point, the new budget is €30 billion.

Michael Crabb [00:40:44] So that's a bad product. Look, if we could build giga scale reactors for $10 billion or $15 billion, like maybe there is some government to government structure to build them... Like any way to get new nuclear, I'm all for it. But let's walk before we run a little bit. I mean, capital markets are really efficient, right? I mean, we could argue how efficient, but they are at least reasonably efficient. If we can't figure out in a period of record dry powder and record low interest rates and like still have this sort of level of challenge, it may not be a good product.

David Stearns [00:41:29] It is maddening. It drives me crazy because I stand up sometimes, I do some work for the IAEA on the member states to kind of talk about nuclear economics and financing, and, rule number one is the cost of capital has got to be really, really, really, really low. And people are saying, "But they're negative. I mean, what more do you want?" And I'm like, "Oh, right, I need to update my slides." But obviously the presentation goes much beyond that; that's a starting point and it's a very helpful starting point. The UK government has learned this lesson the hard way and the investors have learned even harder, well, just equally hard, you know, through failed projects and failed processes. So the Japanese, you know, there are three or four different developments over the past 10 years here, none of which other than EDF's has been taken forward. So the next iteration is under this RAB framework, which is definitely the right way to go, because what they're saying is... Instead of asking EDF to write, the investor to write an insurance policy that says, "I will make good. I will deliver this project, and if I don't, under normal downside circumstances, obviously it's on me." We can see that that doesn't work for most utilities and it doesn't work for EDF anymore. And so there is a level of risk sharing in the sense that EDF is saying, "If I had to price my strike price, if we do a Hinkley Point again, I would not make it 92 and a half, I would make it under £120, £150. Is that okay for you?" And obviously everybody would freak out. So the opposite is to say, "Because my cost of capital is so high then my risks are so high," so you do the RAB. But we're halfway to where I think the world should be in my idealized mindset, which is the co-operative model. We're halfway there because we're saying consumers do need to share some of the risks that avoids the investors having to make promises that they can't realistically keep. Will there be change orders? You betcha. Will there be changes in law? Of course. Will there be nuclear safety issues that you could never have foreseen when you put the shovels in the ground? Of course, there will be nuclear safety issues. You know, the standards rise relentlessly. And that's a good thing for the industry and it's a good thing for the world. But let the consumers pay for it in that case. And I like RAB for that. But it creates a layer of complexity that I don't like at all, and it creates this agency, an economic regulator, that has to sit there and kind of say, "I'm working extensively on behalf of the consumers here, but the policymakers are saying they want nuclear." And so I think that's an impossible mandate. I mean, at the highest level, there are ways to make it work, obviously, but I wouldn't have started there, you know, saying RAB. There are other ways to do it, but you know, politics is also the art of the possible. And so maybe that was the closest stepping stone from the CFD. And it was, because there are regulated asset based infrastructure assets here in the UK. Not that all the investors in those assets are all that happy with it on non-nuclear projects.

Michael Crabb [00:44:52] The nuclear ones, they're not happy with it, for sure.

David Stearns [00:44:56] So this is a really, really challenging kind of obstacle course. I think that there are two kind of possible outcomes. One is that the large reactor business becomes the technology of prevarication, which is, "Oh, but next year we'll do better, on the next project we'll do better." And the status quo is maintained, the status quo is maintained, the status quo is maintained. And you actually never really see any large reactor projects and you don't achieve the economies of scale or the fleet economics that France is looking for, that the UK should be looking for, and that most countries should be trying to achieve. Not OECD countries, obviously. That's outcome number one, which is the large reactor industry basically is in permanent decline. And outcome number two, it could be that the SMR side, who probably can work with the CFD side... If they're front loaded promise, which is, you know, I can design and deliver nuclear safety from my factory floor. You know, I'm simplifying. But if they can do that, I like that. If they can do that, then, yeah, give them a CFD. And I think they'd be happy with one. And that CFD might be really low, but it just depends on what their order book is going to look like. But where we are today is not satisfactory to anybody. And the future for nuclear doesn't look at all the way it looks like today. And so it just seems like a really interesting time to be in the industry. But I'm running out of time, you know, like I've been at it for 20 or 30 years now. It's going to be my kids who are going to be solving these problems, or maybe it'll be too late by 2050.

Michael Crabb [00:46:45] Yeah, hopefully not. You still have some time left here. In the last few minutes, tell us what you're most excited about over the next five or ten years.

David Stearns [00:46:54] Oh, yeah. I love this duality between... I love what the SMR industry has done to rejuvenate the nuclear conversation, to challenge the large reactor business. And I love, somebody said it... I wish I had said it, but somebody said it first. The large reactor business is a technology without a business model, and the small modular reactor, the SMRs are a business model without a technology. And I love that. You know, that's neat, right? For us financial types, I can understand that. And I love this convergence where the large reactor business does need to think much, much harder about what I call the accounting and the communications and the risk sharing. You know, fundamental root to branch restructuring of how they deliver projects, including putting financial and commercial people in the room from the first day, not after the engineers have written the info memo, what a beautiful project this is going to be, and can you just go find the money for me now. So, there's a huge reeducation on the large reactor side that they've got to do. The small reactor side has learned that. It's a younger group of people, but they've got all of the lessons that the large reactor side has already learned, which is licensing is not as quick or as easy as you might think it is. Getting public opinion approval or support is... you don't want to overpromise is what the large reactor people have learned. And I wonder, and it's probably the one kind of word of, not warning, that's far too harsh, because everything is quite looking really, really good, I think, for the industry. But the one kind of word of caution, I suspect, for SMRs would be to say just the large reactor boys and girls, they learned things the hard way. They have totally overperformed in some areas and underperformed in other areas. Don't underestimate or don't write off that whole experience pack there. There's a lot to be learning and to be transposing, but they can't be the same teams. That's what I love. If you just take a big vertically integrated nuclear utility and say, "Okay, now we want you to do the same thing, but reverse it all. The diseconomies of scale and everything that you learned for the past 20 or 30 years, you're going to unlearn that and you're going to do it smaller, faster and so on." You know, it doesn't work with the culture in that side of the industry. And so there's a culture clash emerging, and that osmosis hopefully will work well. Sometimes it does, sometimes it doesn't, but I'm looking forward to a new nuclear culture where economics and finance and risk are part of the conversation with consumers and with the people who are providing the funding from the first day. Not after the engineers are all done saying, "Here's the leftovers, just go sort out the money problem now because we've done our jobs."

Michael Crabb [00:50:03] Yeah, yeah. What a great way to close it out. I couldn't agree more. And yeah, I'm going to capture that paragraph or two and put it on the site because that was excellent.

Bret Kugelmass
So we're here today in the Titans of Nuclear podcast with Congressman Byron Donalds, thank you so much for joining us.

Rep. Donalds
Absolutely. Good to be here.

Bret Kugelmass
Yeah, you are an up and coming champion of nuclear. I mean, just the time that I've gotten to spend with you over the last few months, seeing you come up to speed on the topic, and just become an expert so quickly is quite frankly, amazing. So thank you again, for this opportunity.

Rep. Donalds
Well, look, first and foremost, I have to give credit to my staff. I mean, Chris has been fantastic. Really, as a policy idea I've always been supportive of nuclear in general. But I didn't really think it was something I would dive into in Congress. I mean, it's really happened because of economic policy, and economic policy, the impacts, obviously, of energy on the current inflationary spikes that we have. Now we're in a recession, and you start looking at financial policy, ESG stuff and all that stuff. And what you start to realize is that we have real dislocations in the energy matrix of the United States. So you know, like, if you want to acknowledge the goals of my colleagues on the other side of the aisle, who say they want to have a carbon free America, they want to, you know, they want to save the planet, etc, etc. You still need cheap, affordable, readily available power. Because if you don't have that, you don't have an economy. You don't have an economy, you have chaos.

Bret Kugelmass
So you see this very clearly this connection between energy and the economy, a lot of other people don't make that connection. Do you know when this came together for you, how you figured this out?

Rep. Donalds
My career is in finance. So I'm a finance guy by trade. Yeah, you can't build an economy without energy.

Bret Kugelmass
Start from the beginning. You grew up in Brooklyn, right. How did you get into finance from there?

Rep. Donalds
Oh, man, I was in high school, there was an investment class when I was a junior, and everybody got a chance to pick a stock in the class. I picked Nike stock. This is like the height of you know, Michael Jordan says '95. Okay, so you know, he just came back, he just won a title, I picked Nike, everybody picked something else. I won, because Nike stock had popped up. And so I just really, it spoke to me, I kind of fell in love with finance. And so from there in college, I majored in finance, and marketing. By the way, those are my two degrees. In my career, I started in commercial banking. So I was a commercial bank underwriter for a community bank. I ended up managing a loan portfolio, I was writing loan loss reports to bank regularly.

Bret Kugelmass
Okay, now, this is making sense because I've known you as a champion for small businesses, you got it firsthand at this at the bank.

Rep. Donalds
I would deal with SBA as a loan underwriter as a credit officer. And so I've always known that they've been inept, at best and bureaucratic and just incredibly slow. So coming to Congress my being able to serve on small business, the interplay was easy for me, because I had worked with SBA in my career.

Bret Kugelmass
This is unique, probably amongst congressmen that have such real life tangible knowledge of the topics that they're governing over. Yeah. I mean, do you find that like, when you sit in on committees that you're bringing to bear your experiences from the real world, and people look at you and like, Oh, my God, this guy knows what he's talking about.

Rep. Donalds
You actually it happens a lot. And then the funny thing is, is that sometimes the witnesses for the majority party, they end up starting, they start agreeing with me. That's true. They're like, Yeah, that's right. But like, I think at the end of the day, what Congress needs from a broad perspective is you need people who have actual, tangible experience, who've done things in the real world, they've worked in firms, they ran firms, they built companies, and then they bring that in to help make sure that the regulatory process makes sense for the country to continue to thrive. So you know, after banking, I went into insurance. And after insurance, I went into financial services. So I'm securities licensed. So I remember when the Obama administration was trying to do Department of Labor rules about fiduciary responsibilities that made no sense. But here, they were all like, Oh, this is the best thing since sliced bread. And I'm like, Yeah, spoken like people who don't have a book of business and don't know what they're talking about. But my understanding of our economic structure, and really a historical understanding of all types of economic structures, the one thing is consistent whether you want to talk about free market capitalism, you want to talk about fascism, you want to talk about large, heavy handed socialism, you wanna talk about communism, no matter what your economic structure is, you need energy. If it's a totalitarian state, you need energy. If it's a monarchy, you need energy. If it's a parliamentary system, you need energy, if you don't have consistently cheap and readily available energy, and just like, basically your base power load, and if that doesn't exist, you can't grow an economy. You can't even build an economy for getting rolling.

Bret Kugelmass
Yeah. How'd you get into politics? I mean, you could be making millions dollars a year with your financial background.

Rep. Donalds
I mean, I got the bug, it was actually the financial collapse of 2008. So I actually just left a hearing and they were talking about the financial collapse. And our recovery now is quicker than then and I'm going through all the things that Washington did wrong during that time period. But, my insurance, our clients were international. They didn't know what was happening in our economy. I was the one with the economics background in the firm. So I got tasked with doing a report for our clients to calm them down. I started turning on committees in Congress, something I never did before, I was apolitical. Didn't care. I was like most Americans, didn't care about politics. I was living my life doing my thing. I turned on C span I was just like, all right, let's see this committee I heard it starting. I was actually reading it in the Wall Street Journal. Okay. This committee starting, let me turn it on. And watching the members of Congress do what members of Congress do. And I was like, they're wrong. Like, that's not what's happening. And it really upset me. And caused me to start thinking about politics, really learning about politics.

Bret Kugelmass
So where did you go to learn about it?

Rep. Donalds
I started reading, I started watching cable news cable.

Bret Kugelmass
This seems to be a recurring theme for you. When you get curious about something, when you see a problem to solve, you just dive right in. You don't have to wait for something to come to you. You figure it out.

Rep. Donalds
Yeah. Especially to me if I think that the answers are transparently right there and I'm trying to figure it out, why isn't anybody else? Well, if nobody's gonna really lead on it, then let me just dig in and see what's happening. And I think it's not a thing of like trying to say, Oh, I'm now the House leader on nuclear, it's not really about that. It's more about what's really the issue that we need to solve. And I'm quite sure there's other people in the Congress who want to do the same thing. And so I think it's just us collectively working together, adding whatever I bring to the table, then it might provide the necessary inertia to actually get something accomplished.

Bret Kugelmass
Okay. So we've drawn your connection now from growing up your interest in finance you building experiencing small businesses firsthand wanting to, you know, actually make a difference and now entering Congress understanding energy's role, how did you come across nuclear?

Rep. Donalds
It was simple man. We were in a hearing and it was about the oil and gas companies. Carolyn Maloney had the hearing, and she's going on and on and on about the, you know, fossil fuels and the oil guys are not following the science, or they're putting money against the science or whatever the case might be. And I was just like, why are we berating companies like we need those guys to drill. Like, if they decide we don't want to do this anymore, we'll go somewhere else, like we're done. Like this whole thing called economy depends on this whole thing is kind of over. I mean, the members, I don't think most of members even know that right down the street there's a coal power plant, that powers this thing, that powers the capital. So the capital is powered by coal. Most members don't know this. Anyway, so it was really that's kind of what started it. And then when we were looking at ESG policy that added to it even more, and then it was just a simple question. Well, if you want fossil free, or carbon free energy creation, well, what about nuclear? Yeah, because solar and wind don't have the output capability, right? And battery technology is just not where it needs to be for you to harness that. And then from a national security perspective, we don't mine the minerals for solar panels. We just don't, the Chinese dominate that market. And it's not a thing. I understand you want to be the number one economic power in the world? Why would I give you my economic power for solar panels? Like, why would I do that? What are some of the other options that are out there? Last part is one of the guys that I first really get engaged with on politics back home, he was a commander on a nuclear sub. And so he would talk to me every now and again. He's like, well you know, Byron, if we actually took the little micro reactors and modular reactors we have in our subs, we could deploy those. I was like, what? Yeah, because I said, well, what about all the radiation because I'm thinking all Chernobyl Oh, Three Mile Island. What about all the radiation? He was like are you kidding me? We slept 100 feet from nuclear, we sleep 100 feet from the thing and it just powers, it just keeps on going. So it's, it's kind of been in the ether coming here, looking at all the different other policy issues we have from a finance perspective, from a broad energy perspective, that's what actually brought me into into focus on nuclear policy.

Bret Kugelmass
It's amazing that you see that you're able to draw that connection, you know, the clean energy, the baseload, you know, the the value to the economy, energy security, being able to have, you know, the production of the your energy system here. Okay, so what's going wrong? I mean, you know, we've been relatively stagnant, stagnant and building nuclear in this country. Have you figured out why that is, what the problems are?

Rep. Donalds
Actually, what's going wrong is a similar symptom of everything that seems to go wrong in the United States. We have a bureaucratic malaise that nobody in this town I feel really wants to deal with. But we have to, why don't they want to deal with this bureaucratic malaise because it's easy for members of Congress to just pass a bill, pat themselves on the back, get, you know, get an interview, or two have your name on the chiron on Fox, or CNN or MSNBC, and move on to the next issue. The hard work is rebuilding the federal bureaucracy. It's not sexy, you can't run on it. Very few people will be like, oh, this is a great thing for the country, not saying people don't care but people are looking at what are you doing about gas? What are you doing about immigration? What are you doing about poverty? You know, what are you doing about outcomes? It's kind of like the core four things that people kind of care about. I just love to hearing talking about economic and income disparities. And one of the key things that came out of it very, very quickly, well, there's so many different programs, people just don't know how to access them. So it's like, well, we have a bureaucratic failure, if people don't know how to access, how do you rebuild it? So that's the thing, I think, and I'm just, I'm a straight shooter. I'm very concerned that the NRC doesn't have the capabilities to do what needs to be done to be innovative going forward.

Bret Kugelmass
The NRC is the Nuclear Regulatory Commission.

Rep. Donalds
Yes, I'm the one that's always asking the acronym explanation.

Bret Kugelmass
It is interesting, you know, I personally tracked their work over, you know, since they were created 47 years ago, it turns out that they haven't given an operating license for a single new, new, single new reactor of any sort, not a medical reactor, not a research reactor, not a power plant. So how do you take an institution and so ossified and reform it?

Rep. Donalds
Well, I think, in some respects, and this one is the tough one, you may just have to stand it down, and be like, you know what, thanks, we're going to stand this thing down, we're going to build something new. You can take a lot of some of the, you can take some of the staff and roll it over to the new agency, but it needs a completely new mandate. It needs new leadership. And this is a whole of government situation. This is not just members of Congress, or members of the House saying is what needs to be done. You need senators on board, you need the White House on board. So that the branches of government, the two branches of government actually work together to solve something that is not only in the energy interests of the United States, but the national security interest of the United States.

Bret Kugelmass
I don't think we put enough emphasis on that. I mean, especially as you've articulated how energy is so fundamental to the economy, like, yeah, how can we not see energy as intrinsically a national security issue? What new mandate would you give the NRC? How would you I mean, one thing that I've often struggled with is that right now, it's a single mandate organization.

Rep. Donalds
It's mandated on safety. Right.

Bret Kugelmass
But there's like, you know, the FAA, which, obviously, you know, there's important safety component or, you know, not just the FAA, but the FDA, also, all these other organizations that have serious, you know, significant safety components or dual mandate organizations, they have to enable commerce, yes. Whereas the NRC is a single mandate, organization. Safety, which means, yeah, okay, the safest thing is to just do nothing ever, which for the last 47 years has been the case. So what, is that just it? Is it just you add that mandate in there too? So they know, because some of the staff are amazing, right. I've gotten to meet some of them, you know, intelligent, they know their work, they mean well, they want to help, it seems to be just more of an institutional challenge. Right. So is that it? You tear down, you rebuild the institution with a mandate that incorporates, you know, the, what will enable the staff to actually license new reactors?

Rep. Donalds
I think that's the path forward. I really do. I've seen in the last 10 years I've been in politics, I've seen the attempts to refocus an agency, that typically does not happen. There has to be some unwinding of it to a degree. Obviously, you need key personnel and whatever that new agency is going to look like. But there has to be a new mandate. There has to be because not only is the technology readily available for us, it would address so many of our needs. For my colleagues on the other side of the isle number one thing I tell them is I'm like you guys love electric cars. They're like yes. You want to double the electric car market United States. They're like yes. I said, you know what happens when you double the electric car market United States? They're like, it'll be great for our environment. I said, No, you will have blackouts. And they're like, No, that's not true. We don't have enough baseload power on the grid. And it's just, it does not exist.

Bret Kugelmass
Can you give me a little bit inside baseball here? When you have these conversations with your colleagues what's the setting? How do you really get through to them? Because I can imagine, you know, there's a lot of like, grandstanding, you know, when it's actually in the halls of, or the in the big rooms that bills are passed? How does it work behind the scenes?

Rep. Donalds
Actually, behind the scenes members have pretty candid conversations. When I was in the state legislature, members filed bills all over the place. You were given a, we call it referencing, you were given an opportunity to find out where your bill, what's your the pathway for your bill to get to the floor for a vote. So you would work your bill in the House with the chairman. And then you have a Senate companion. And sometimes I did it. You went over to the Senate, and you looked at the Senate's reference tree, and and you're working the chairman of the Senate committees with your Senator, hopefully, your senator is not lazy. And then you're working it that way. And so once you actually create, number one is a is a collaborative environment, where members are actually doing the job people sent them here to do which is legislate on behalf of the American...

Bret Kugelmass
You are creating a collaborative environment. I mean, you got to, can we talk about this, this new nuclear bill that you're going to be pushing forward with bipartisan support?

Rep. Donalds
Well, I mean, it's a couple of things. The first is it acknowledges the need for innovation. That's number one, it acknowledges the need for fuel, and actually being able to attain and find fuel. That's number two. And some of the stuff that I may not particularly like is, you know, you have the the conferences for collaboration, it brings in aspects of fostering international relationships, which I think does have an important national security aspect, because if we can become a global leader on not only just nuclear innovation, but then also sourcing for nuclear fuel. Yeah, that's it sets up some real binding relationships, I think are crucial for the United States.

Bret Kugelmass
Absolutely. And that's the risk right now, the risk is that we're losing our leadership position, because we're not able to take any of these like incredible, you know, innovators and entrepreneurs that are trying to bring forth something like 50 Different reactor designs right now. But none of them have been able to do it, because of the bureaucratic malaise that you identified. We're about to lose our position of global nuclear innovation leadership. And that would be a disaster, given how important this technology is.

Rep. Donalds
Look, I think innovation regardless of the industry, but specifically here, innovation is what breeds economies. So sometimes with my colleagues, I'm like, Guys, if we have an innovative process, and innovative system, and economies grow, you guys are gonna have far more money to spend, and you're able to do it. So we can't look at innovation in terms of a static, a static model, it has to believe to look at it from a dynamic approach. Because when you expand economies or expand energy possibilities, that not only breeds more innovation, like everybody thinks of like the best way to do nuclear as nuclear fusion that's sat on the back of the DeLorean in Back to the Future. Well, you can't get there. If you don't have a commercial, innovative environment.

Bret Kugelmass
Everything just becomes a research project. You know how those goes. I mean, we've seen like, you know, fusion research in France, they've spent $20 billion haven't even turned on the thing yet, right? We don't want a bunch of science projects.

Rep. Donalds
I'm gonna tell you what I don't want. I don't want a bunch of papers sitting on my desk saying, Well, here's the study that came back from the bill from the study bill past four years ago. Here's a new study bill on this. And nobody, nobody, here's the truth, nobody's reading those reports. Maybe the staff is reading them. That's about it. Yeah. So we just get bogged down in talking points as opposed to real action.

Bret Kugelmass
So tell me about the world that you envision if you're able to carry forth your agenda here. I mean, I know that, you know, yeah, you're a freshman, but man, I see you already making big moves. So if you're able to, you know, take your agenda, you know, get it through the machine of Congress. What kind of world do we create?

Rep. Donalds
The truth is, I don't really know but it's gonna be super exciting. Yeah. I find that a lot of times, you know, the members try to create, they try to say this is what the world's going to be. The truth is, none of us know. I think the one thing is, and if you we go down this road, it's going to be an exciting new world. People talk about poverty all the time, the number one driver of poverty is energy costs. And food costs, if you can actually solve the energy equation, the most efficient way possible, you're not just addressing the needs for industrial plants. You're addressing the needs for farmers, you're addressing those needs. For schools, you're addressing those needs for hospitals, if you can, if you can crack that nut, if you will, which I think is the goal of innovation, cracking that nut and seeing what the future really holds. There's so many things that we can do. It's it's limitless potential. So I don't even want to try to quantify it in in the terms of how I would see it. I mean, I think I'm pretty smart. But the truth is, as intelligent as I may be, I'm nowhere near as intelligent as the trillions of ideas and trillions of decisions that will be made because we unleashed innovation in the United States.

Bret Kugelmass
Limitless potential. We couldn't end on a better note than that. Congressman, thank you so much for taking the time. Really appreciate it.

Bret Kugelmass [00:00:59] Welcome to another episode of Titans of Nuclear. We're really excited to be joined today by Philip Johnson, VP of Fuel Supply at UxC. I think I got that right.

Philip Johnson [00:01:12] Fuel Cycle. Close enough

Bret Kugelmass [00:01:15] Fuel Cycle, Fuel Supply and Fuel Cycle. Well, welcome.

Philip Johnson [00:01:15] Thank you very much for having me. It's an honor to be here. As I told you before we started recording, I am a fan of the podcast, so this is super cool.

Bret Kugelmass [00:01:24] Great. We're excited to have your expertise and sort of unique lens. Maybe before we get to what you're doing now, give us your background. Where are you from?

Philip Johnson [00:01:34] As we record this here at the SMR and Advanced Reactor Conference, I from here in Atlanta. Born and raised; one of the few. It's a big transplant town if you weren't aware. I grew up in East Atlanta. I'm guessing we're working our way into how I got into nuclear.

Bret Kugelmass [00:01:56] Yeah, we're going through it. You grew up, and as a four year old, you said, "I want to know everything about nuclear fuels," or what?

Philip Johnson [00:02:01] Not at all. But highly interested in all things science. But, yeah, it never really crossed my radar. I will say, now that I've been in the industry for going on 14 years, it's kind of a weird, synergy, full circle thing. My two grandfathers were both engineers for the Navy in coastal Virginia and one of which was building the first reactors that went on subs and then boats. So it's kind of weird. It's come really full circle for me.

Bret Kugelmass [00:02:38] And did you know that in like high school as you were getting into science? Was that something that was talked about or like you didn't find out until later?

Philip Johnson [00:02:45] Yeah, I knew about it. He passed away from cancer as many of the fellows did that worked on those boats. But, yeah, I knew about it at the time, but I did not know how great nuclear energy was at the time. And that is something that now that I am a dad of two little kids, they've always got a social science project waiting in dear old dad. You know, I can educate the youth through them. So that's great. I will right that wrong that I had of not knowing.

Philip Johnson [00:03:21] So in high school, I was a golfer. I ended up working at a golf course here, a country club east of Atlanta, and worked my way up. As I got into college, I became a head professional there and then eventually general manager. It took me a long time to get through my undergrad, right around the corner at Georgia State here in downtown Atlanta. But I got a degree in economics and a minor in English. I know that's a very right brain, left brain kind of thing.

Bret Kugelmass [00:03:54] That's got to be a big advantage to have that sort of context.

Philip Johnson [00:03:57] Once again, I didn't know it at the time. That also coming full circle. I had no clue that it would be as advantageous as it proved to be. But as I was working in the golf industry, I said like, "You know, this isn't what I want to do forever." And when I graduated in 2008, in the middle of the, you know, financial crisis, there were limited opportunities. And my thought at the time was, I want to get into finance of some sort, or at least analyzing financial markets, using both my econ and English backgrounds. And initially I was planning on working at the Atlanta Federal Reserve Bank, and then and our back-end director, Senior Vice President of Back-end Publications Carlyn Greene said, "Hey, there's this big nuclear renaissance going on." Bear in mind, it's 2008, so the uranium price is coming off its highest high point of $136 bucks a pound, which still has not even come close to being met. And I was like, "You're in a nuclear renaissance? What is that all about? Please inform me." And so luckily, UxC, my company, invited myself and two of my colleagues that I still work with every single day, Anna and Christian, to come out to our Nuclear Fuel Training Seminar, which we put on every year. So if anybody is interested in learning about the nuclear fuel and nuclear power markets, please come, we'd love to have you. It's a wonderful training seminar for everybody from the supply side to the utility side and all points in between. Yeah, so that's where I kind of like got steeped in it and instantly I was hooked and luckily I got the job after that. So that was also super cool.

Bret Kugelmass [00:05:46] Yeah. And so you knew there was an opportunity at UxC. They happened to be putting on this training, which we can talk more about later. And then you're like, "Oh, this is super cool." It was done. It was an instant like, "This is super cool. I want it."

Philip Johnson [00:05:59] Instantly. Instantly I said, "Oh, not only is this interesting, it's something you can believe in," which is something I keep coming back to. Any of these conferences you attend, you see that you might have people that are pessimistic about the future because of what's happened in the past, but generally, if you are in this industry, you are a believer and there is nothing changing that tilt, right? So when I saw that firsthand and I got bit by the bug, so to speak, I instantly was like, "Oh yeah, totally." Not just something that I could work to have a job, but something that I can work and believe in and know now as a father that I'm doing something, in a little tiny, teeny, tiny, infinitesimal way to make the future a little bit better.

Bret Kugelmass [00:06:47] Yeah. But you got there in a day. I mean, that's incredible.

Philip Johnson [00:06:51] Yeah, it was very interesting. I've always had a very science background growing up. I've always been interested in it and just never really like crossed the divide between everyday environmental science and power production science, especially nuclear science.

Bret Kugelmass [00:07:08] There's complexity upon complexity there.

Philip Johnson [00:07:10] Exactly. And so it was kind of like you were saying, it was peeling an onion of just like every time I was like, "Whoa, what is SWU? That is crazy. You can make more uranium out of one, you know, amount of uranium. Wild." And so especially for UxC's purposes, we're focused predominantly on nuclear power statistics and data and nuclear fuel cycle market data and analysis. So it is quite a broad spectrum that we all get to kind of work in every day and monitor all the time. It is never ending. But because of that, it's made us great experts in the room. I would like to think at least.

Bret Kugelmass [00:07:56] Yeah, really cool. I want to push on this because it took... You know, I feel like I'm of average intelligence and it's taken me some time to really wrap my head around the different misperceptions. So you went to this seminar, and was there like a moment where it all clicked? I What really was that? Take us to that day where a day before you knew nothing about this.

Philip Johnson [00:08:24] Well, I'll say this. In the leadup to the seminar, I was researching heavily.

Bret Kugelmass [00:08:29] Okay. Yeah, you were doing your homework. You're doing your homework, and you say... Okay, okay, okay.

Philip Johnson [00:08:33] I will say at the time, the uranium side of things was the most attractive, especially like the mining and the market.

Bret Kugelmass [00:08:42] And you were approaching that from sort of an economics lens. There's a big supply and demand, slightly illiquid market.

Philip Johnson [00:08:50] Bingo, you got it. Absolutely. So it was very interesting, but then as the seminar progressed and I got to see how conversion happens, how you convert uranium to a gas and what all that entails, and then enrichment happens, which is still to this day to me, the greatest conundrum on Earth that you can enrich an isotope of uranium to make it more fissile. It's wild. It is like the closest humans have gotten to magic, in my opinion.

Bret Kugelmass [00:09:21] And that's really the secret sauce in this whole process, right?

Philip Johnson [00:09:25] You got it. If they were all CANDUs it would be pretty simple.

Bret Kugelmass [00:09:27] Right, right.

Philip Johnson [00:09:28] You mine this much and you burn that much, right. So our company, just to talk a little bit about UxC, we're the full spectrum data analysis company. We have three main lines of business, starting with we are the nuclear fuel price reporter, the industry's leading nuclear fuel price reporter. We do reports and analysis on everything from reactors all the way down to uranium conversion, enrichment, fabrication, spent and stored fuel and all points in between. And then we have tailored client-focused services for everything across the fuel cycle and spectrum.

Bret Kugelmass [00:10:13] Crazy. Yeah, let's take each of those one at a time, if we can. There's a lot there.

Philip Johnson [00:10:18] There is a lot, yes.

Bret Kugelmass [00:10:19] So, yeah. So talk to us a little bit about the fuel pricing and there's some relationship with what's traded on NYMEX, right? I mean, give us some of that background.

Philip Johnson [00:10:30] We'll start with the NYMEX part first. In 2007, right before I came on, we helped NYMEX, now CME Group, launch the UX Uranium Futures Contract.

Bret Kugelmass [00:10:43] That's a SWU contract?

Philip Johnson [00:10:44] No, that's a uranium financially settled contract. And so each contract is a 250 pound lot. So it is traded on the futures market. There's nobody in a pit yelling at anybody. I don't even think they really do that anymore for corn and cotton, all the other things.

Bret Kugelmass [00:11:03] They're all lined up, you know, the exact same meters away from the...

Philip Johnson [00:11:08] Exactly. So that was kind of UxC's foray into our prices becoming regulated because the CFTC kind of has like an audit capacity over anyone who is helping launch a futures initiative.

Bret Kugelmass [00:11:25] Were you there for this process?

Philip Johnson [00:11:27] No, I was still in college.

Bret Kugelmass [00:11:29] It would have been fascinating to see how that... Like who says, "Hey, I want to go create a financial derivative around uranium," that's crazy.

Philip Johnson [00:11:35] Right, right. You got it. You got it. And there has been a lot of push over the years to make it physically settled, but uranium storage constraints make it such that it's just, it's never gotten there. It doesn't mean it won't. I'm not endorsing, I'm just saying that has been kind of a thing.

Bret Kugelmass [00:11:53] So that's interesting, because there are challenges in storing other commodities that are traded and settled physically, right?

Philip Johnson [00:12:00] Of course, of course.

Bret Kugelmass [00:12:01] Is it just like the liquidity in the market, like the physic of that?

Philip Johnson [00:12:05] I would say that would be an overriding factor. But people have tried. This is not... It just, it's never materialized. And, you know, just like anything in this industry, you can point to big points in time where things had a crescendo of progress and then something happened and then for some reason it stopped, right?

Bret Kugelmass [00:12:28] Sure.

Philip Johnson [00:12:28] 2011. How about that? Why did it all stop right there? So, yeah, you asked about pricing. So UxC publishes prices every Monday. So last night we published our spot UX U3O8 price. And so that's basically, call it a 100,000 pound lot of uranium that is for what we call prompt delivery, but that's anywhere greater than or equal to three months. And then once a month, for us it's the last Monday of every month... I know this is a testament...

Bret Kugelmass [00:13:09] No, no, that's good. I'm just trying to keep it all straight in my mind. I'm used to like hourly trading of commodities.

Philip Johnson [00:13:13] Sure. I was going to say this is a testament to how illiquid the uranium market is at hand. It's just how it goes. But on the last Monday of every month, we publish all our other fuel pricing indicators for conversion enrichment.

Bret Kugelmass [00:13:32] Got it. So that's across the enrichment and fabrications spectra.

Philip Johnson [00:13:36] Right. Plus we publish, on the last Monday of every month, our long term UX U3O8 price.

Bret Kugelmass [00:13:42] Got it. And how close are these financial products priced to the actual underlying commodity? Does it get pretty disconnected just because of the long-term contract nature?

Philip Johnson [00:13:55] Our price is the most referenced indicator in contracts.

Bret Kugelmass [00:14:00] So you create the benchmark.

Philip Johnson [00:14:01] Right. This is delinked from the CME Group, the futures market, right? They settle on our price. But because that's just a financial, our price is actually used for physical trade as well, more than... There was an independent analysis done a few years back and most of the time it's referencing UxC's prices, so. So spot gets priced out every week, we're in the mid-40's now, we're coming off of the highest high point in since pre-Fukushima, $63.75 I think, just a few weeks ago. If you'd like to talk about what's happened in the market lately...

Bret Kugelmass [00:14:50] Yeah give us kind of a six month window because I mean there's really been a couple of macro events on that course. Give us your view of that.

Philip Johnson [00:14:59] Right. So my colleague, Anya, whom I spoke of earlier, who got hired when I did, she gave a presentation recently and dubbed 2022 "The Year of Policy." Now to back up before that for the uranium market side of things, it was the year of the financial funds who have gotten into the market and started buying up spot uranium and in doing so have tremendously improved the price in quite short order. So right now there's a handful of funds. The leading is called Sput, it's the Sprott Uranium Trust. And so basically when their stock price is trading at a premium to their NAV, they can raise money by issuing new units, selling them on the market and then buying more uranium.

Bret Kugelmass [00:15:57] Good business model, little built-in gain.

Philip Johnson [00:16:01] It is a great business model and they've been really great at it. They came in after transitioning, taking over a company called UPC that was a similar vehicle but did not have the liquidity prowess, the ability to generate capital so quickly and buy so quickly.

Bret Kugelmass [00:16:21] And that's done in the public market. Public equities, now public markets?

Philip Johnson [00:16:24] That's correct. And they're not the only ones; there's other ones. Yellow Cake plc just recently; Kazatomprom, the Kazakh uranium mining giant, they are helping to back another one called ANU Energy. There's URC. So we have a bunch. What really kicked this off was in 2021, we had a slew of junior uranium producers. So like near term producers, guys that either had production and had to shut it down because prices were too low or are getting close to producing from a mine. They saw, "Okay, this is a good time to raise some money, buy our own pieces of supply that we can use to backstop contracts." And so they did in early 2021, while Sprott was working on transitioning the UPC Fund to now the Sprott Fund. And in that time, I checked it this morning, I think they're over 55 million pounds. So that's a tremendous amount considering that, you know, global annual production last year was like 123 million pounds. So their ability to absorb inventory has been huge for this market. It has been incredibly price supportive and really sustained prices where after Fukushima we were coming off just a continualy down...

Bret Kugelmass [00:18:05] It was a supply glut, right? Turned off demand, instantaneously.

Philip Johnson [00:18:08] That's right. And even the biggest uranium miners in the space will say that they were overproducing, well beyond when they should have. And hindsight's 20/20; that's how it goes. But now there's kind of like new life breathed into the industry. I'm sorry, I started in '22, went back to '21, back to '11. Now let's go back to 2022. So at the outset of the year, I mean, as everyone knows, everything is pandemic related, supply chain issue for everything. And that also affects uranium production because now while you have these health and safety procedures loosening up, you also have supply chain issues that are causing disruptions for, let's say, lixiviants and mining solutions, getting to in-situ recovery sites. So, "Oh, we don't have enough to feed our well fields right now, or it's, "We have a problem getting tubing from China for new drills." There are a lot of little disruptors, and then as 2022 started, Kazakhstan, the largest uranium producer in the world, they had some civil unrest. It kicked off in mid-January, and that kind of started propelling prices, getting them up a little bit. And kind of when we all thought we were out of the woods, then the Russia-Ukraine situation kicked off. And that has truly put a point on Anna's contention that this is the year of geopolitics because it has left so many folks and our industry, and that's not just limited to fuel buyers, that is the finance side, that is the government side, kind of wondering like, "What do we do now?" Russia is such a huge player...

Bret Kugelmass [00:20:15] Yeah, how big are they? Give us a sense here of the percentages.

Philip Johnson [00:20:19] I don't have anything specific off the top of my head as far as like... So Russia is not a huge uranium producer. They are a huge supplier of SWU. So they're a huge supplier of enrichment services. Now, something that I feel the casual, just nuclear fan, can appreciate is, back to hindsight is always 20/20, we've heard a lot and seen on Twitter a lot that people are like, "Well, how could U.S. utilities sign contracts with Russia?" And they say it like, "Oh, you should have seen this all along." But the point is, it started with there was a megatons to megawatts agreement where our government, the United States government and the Russian government brokered a deal to take warheads, dismantle them down, blend them into commercial reactor fuel and put them into nuclear power plants. Well, that was kind of the first major step of good faith. And from that time, the folks that work in Russia in the Russian enrichment industry have gotten to be so that they are just a part of the market unlike anyone else. I feel like the outsider looking in is... I feel like their head's going to spin, but it's like this is just how it is. And not only that, shortly before everything went crazy, there was a new deal brokered by the United States government that set limits for what could be imported from Russia under the RSA, the Russian Suspension Agreement. So the point of it is, is that while the casual viewer might be like, "How could they hitch their wagon," so to speak. It's like, it's baked in the cake at this point.

Bret Kugelmass [00:22:26] Is that a pun, or?

Philip Johnson [00:22:30] Unintentional, but good call. But in the wake of it, we've seen a lot of utilities the world over trying to figure out what are our next moves. Where do we diversify? Where are we going to get enrichment? The ones that are feeling the pinch the most, I think it's fair to say, are those that operate VVER reactors that are, you know, their fabrication services are fully supplied by Russia. Now, Westinghouse has the capability and does supply several VVER-1000s, but there are a bunch of VVER-440s that the only supplier is Russia. It was a Russian-built reactor for places like Finland and former Eastern Bloc places. So right now, in the Year of Geopolitics, a lot of fuel buyers minds are keen to figure out how do I diversify? Where should my next pounds come from? That's not just enrichment that's worked its way back up the fuel cycle, or back down, whatever, all the way across.

Bret Kugelmass [00:23:46] Upstream, in oil and gas parlance.

Philip Johnson [00:23:49] Yes, exactly. So it's been a very interesting year. And then on top of that, adding to kind of the price supportive factors, you have Macron getting elected in France, coming in saying, "We're going to build new reactors." You have Boris Johnson and Kwasi Kwarteng, greatest name in government if you ask me, saying in the UK, "We're going to launch the great British nuclear vehicle and we are going to build reactors." And I think one that is getting highly overlooked right now, if I can talk about reactor side of things, is South Korea. South Korea recently elected... Moon Jae-in government came in in 2016, I believe, and he said, "No new nuclear, and we're going to cancel all the projects that we have underway." And then he put Shin Kori, I believe 1 and 2, up to a public vote to say, "Do you want this?" And the people voted for it. So that was great. Those units continued construction. But since the South Korean nuclear industry has experienced, you know, job degrowth and just deterioration of skills, there have been many in the government that have over the years clamored like, "Hey, this is a problem. This is a major export for our country." And so in the latest election, the opposition candidate Yoon won. And that is incredibly bullish for nuclear because he's already made it a priority to restart construction on two new units that were all the way at the shovel ready stage. And so those are supposed to be under full construction by 2024, 2025. License extensions for the oldest units. They're going to start with first Kori 2. And then what I think is really incredible is an internal edict to build ten export reactors.

Philip Johnson [00:26:10] Now, if you have been watching what's happened with the Barakah nuclear power plant in the UAE, it is one of the few nuclear projects that, despite whatever challenges that they have encountered, they put a new four unit nuclear power plant, I mean, now today only two are fully operational, but they've said we're going to build it; they built it. And that for nuclear should be like, "Hey. This is possible. This can be done." So that is incredibly important when you consider that KHNP, the state utility in Korea, went out to Poland and said, "Hey, you guys want reactors, right? Look at what we've been able to do in the UAE." Well, it's gone swimmingly for the most part. And then just yesterday, KHNP's CEO said that the company would be even willing to take a stake in the new units, which only further supports from a financial perspective. Because, you know, you see in the UK, the UK government carved China's CGN out of the Sizewell C project, and now they're out raising foreign capital or foreign investment and domestic investment to get that plant built as well. If you had an agency that said, "Not only can we build it, we have, and we will help you finance it," that's yet another tick on the box, I would say, for more nuclear supportive measures.

Philip Johnson [00:27:54] And then add on top of all of that the reason why we are in this room today, the SMRs and ARs of this industry. You can't say they're back because they were never really here, but I would say if there's a "who's back of the year," it's the SMRs and ARs for this industry, because just as evidenced by how many folks are here at this conference, the fervor around the future of nuclear is small nuclear that can be flexible, that can provide a bunch of ancillary services ranging from hydrogen production to heat, desalination, steam, all the things. And honestly, this industry, that's what the future is demanding. And we are cautiously optimistic on the future of SMRs. But, you know, we have to see them get built first. And right now, China is doing a great job of it. The Changjiang SMR Demonstration Program, that's in Hainan Province, and that's built alongside Changjiang 1 through 4, where units 3 and 4 are being built today. But that SMR is a 125 megawatt PWR SMR. It's just a scaled down version of China's domestic technology.

Philip Johnson [00:29:22] Also, can't talk about nuclear today without talking about how China has done a really remarkable job to take their Hualong One HPR 1000 large reactor design and make it a reality. They're saying in their environmental impact reports, "We're going to build it in 60 months," and they're building it in 60, 65 months. I mean, for this industry that is crucial. You have to expand capacity because we see just a lot of numbers. You can only operate a nuclear power plant for so long. Now we're finding that you can continue to extend and extend and extend and that's awesome. The longer we can keep the current fleet online, the better for everybody. But the ability to shorten construction schedules for the next wave of LWRs and SMRs and ARs is going to be key.

Bret Kugelmass [00:30:16] Yeah, I mean there's really a lot happening. And sometimes that's good and bad. I mean, think about the different levers you just talked about as far as customer sats, right, and business models and everything else. What are you most excited about and most nervous about as you think about all of those things, and you kind of see across the different geopolitics?

Philip Johnson [00:30:37] Whew. Let's start with nervous first. I would say personally, I'm not speaking on behalf of UxC when I say this, I am concerned about Russia because they are currently having to operate under constrained financial sanctions from every direction. Yet they are building four units in Turkey and about to pour concrete any day now in Egypt. There are reactors that are what the industry has been counting on for a while now as these are the next units coming online. And I'm not saying that they won't, at all. I'm not saying that. I believe they are able to conduct business. But if they can't, then we'll see what happens.

Bret Kugelmass [00:31:34] And you think that's just a messaging issue where there seems to be some macro discussion about nuclear? And then if the next couple of projects get pulled, people won't look behind the curtain as to why, they'll just say, "Hey, this is... Look, we can't..." There's been enough sort of black eyes, I would say, that it's just one more.

Philip Johnson [00:31:52] Tthere you go. I think that's key. And, you know, it would be one thing if it were such that midstream you could change vendors and say, "Oh, I want a different supplier now." You can't do that with a nuclear power plant. You know, the VVER-1200s that are under construction at so many sites are built and manufactured and delivered from Russia. So if anything should go wrong, if that is a concern point, to me that would be it.

Bret Kugelmass [00:32:28] I mean, it's really a lose-lose proposition, right? Because otherwise you have a global enemy building something or you have... you actually kind of paint a corner a little bit.

Philip Johnson [00:32:41] Yeah, sure. From our standpoint, since we're not just in reactor ops, we are fuel cycle consultants as well and fuel cycle data suppliers, we look at every new unit as new future demand and that demand lost, it reverberates down the supply chain for fuel. So that is a thing. Now to the positive, I'm happy that I started with negative and get to end on a positive, there are for the first time in such a long time so many bright spots in this industry ranging from... Look, Vogel has had its troubles getting to this point, but there are two reactors that are going to finally come online in Georgia here in the next year or so. That's incredible. It could have gone the way of V.C. Summer and been canceled altogether. So, wonderful. Two new units. On top of that, we have seen that here in the United States, several state programs, namely Zero Emissions Credit, ZECs, were adopted in several states like Illinois, New York, New Jersey. Pennsylvania got a carve out in their Regional Greenhouse Gas Initiative. So we're seeing all these state factors, state supportive measures that are helping to support aging reactors. What's happening also that I think can't be overlooked is that's happening at a time when natural gas prices are creeping up. Because so much American supply is getting put on a boat and delivered elsewhere because they can get more money for it. Why wouldn't you? And natural gas has been, and to a lesser degree, subsidized renewables has been the the thorn in the craw of nuclear, especially in deregulated environments because when you're baseloading with gas and backfilling with renewables that basically get paid even if they don't work, then hey, we don't need a nuclear plant. From an energy perspective, what should be priced in is the clean energy component of that. And unfortunately that has failed until now that you have these supportive programs. But I think, to put a bow on it, you take it to the federal level and you see that now the United States government through the Department of Energy, is administering $6 billion dollars of potential funding for nuclear power plants to keep them on line.

Philip Johnson [00:35:41] Unfortunately, we lost Palisades on May 20th, so too little, too late, but I guess better late than never. And that is the truth, because the most important reactor is the next one, right? Because you can't keep cutting and expect things to be cool. It just won't... It doesn't work. But then across presidential administrations, I think Caroline from Oklo said this today, that they've seen across now three different presidential administrations, there has been undeterred support from the federal level down for domestically built SMRs and ARs. And that is incredibly encouraging because you can see a future where you have SMRs and advanced reactors baseloading smaller grids and able to load follow renewables if necessary. As I said, I'm a huge fan of this podcast and I totally agree with a lot of the conjecture that I've heard over the years that it's like, "Renewables? Who needs them?" But I think they are a factor and we do need them. I think they're great. I just don't think that they should be considered baseload power. And I don't feel like that's a "I'm going out on a limb" type of statement.

Bret Kugelmass [00:37:06] I mean, it certainly, and I would nit at one word that you said in there about, you know, if you have gas backstopping renewables, you don't need nuclear. And that's not really true. A lot of these markets actually have relied on nuclear, it's just a question of, do you really want to create a demand incentive around energy based on the cheapest 30 minute deliverable? Would you pick the cheapest doctor available? There's some necessity around energy in our system today; it's a missing money conundrum, which is a term even back from my gas days. It's like, how do you value that reliability portion? And then on top of that now, how do you value the clean portion?

Philip Johnson [00:37:48] That's right. And so thus far, the best we've found is through Zero Emissions Credits. And in the case of Pennsylvania, it hasn't "happened" happened yet, but putting reactors under, actually it happened in Connecticut, putting reactors under a clean energy, higher priced environment so that nuclear operators can obtain just a few more dollars so that they can cover their capital costs because you've got to maintain plants to keep them going.

Bret Kugelmass [00:38:17] Truly technology agnostic market solutions.

Philip Johnson [00:38:20] Got it.

Bret Kugelmass [00:38:20] I mean, it seems straightforward.

Philip Johnson [00:38:21] Yeah, it seems straightforward. Unfortunately, it seems like we wasted too many good nuclear power plants to get to the point where people are like, "Maybe we should stop doing this."

Bret Kugelmass [00:38:30] Yeah, that's true. There's a lot of promising future though. Okay, I guess last question. What last thing do you want to leave our listeners with? We covered a lot of ground.

Philip Johnson [00:38:44] I hope the future is nuclear. I want it to be. I think everyone that is in this building right now that is here for this conference does. But I will say that getting hired in the nuclear renaissance and living through Fukushima and the downturn after has made me kind of appreciate the importance of this time for nuclear. Now it is nuclear's chance to show that it can be what we all want it to be, what everybody here wants it to be. It has to. It cannot miss this opportunity. So I think the next two years, three years are going to be critical for the future of this industry. I mean, no hyperbole, it is going to be make or break. It's weird that you have so many headwinds kind of pushing on each other right now, which is nothing new for the nuclear industry, that's the name of the game, but it feels like... I don't like saying this too loud, but it kind of feels like for once, the positive tailwind is pushing a little bit harder. And the longer we can sustain that, the better off it will be for everybody.

Bret Kugelmass [00:40:12] Couldn't agree more. Time to execute.

Philip Johnson [00:40:14] That's right.

Bret Kugelmass [00:40:14] Well, great. Well, thanks so much for coming on.

Philip Johnson [00:40:16] Thank you so much.