Nuclear is the last great power standing

The energy transition and war in Iran taught us a lot of lessons the hard way. But our government is still denying the obvious implication: the need for nuclear power.

How bad do things need to get before we embrace the inevitable?

How much longer will investors have to position themselves for the coming nuclear boom?

Perhaps making a list of all the things we’ve learned will make the right course of action too glaring to ignore…and trigger a spike in nuclear power stocks.

What the energy transition taught us so far

We’ve learned about the difference between energy capacity and actual energy produced.

If you transition to intermittent energy sources, you need to build out an energy system that is orders of magnitudes larger just to get the same amount of power. That adds a lot of cost and complexity.

This is most stark in the country that led the world into the energy transition. Germany’s energy capacity has shot up in the last few decades. But the amount of electricity actually produced has faded.

It wasn’t just deindustrialisation that cut energy demand. The country went from a net exporter to an importer of electricity.

We’ve learned that energy grid costs soar if the complexity of the grid rises. All that power needs to be moved around. Whether it’s renewable energy in far off places, converting natural gas to LNG and back again, or interconnecting grids, it all costs money. But the source of the costs are hidden because they aren’t directly attributed to a particular form of energy.

We’ve learned that investors in intermittent power sources want to get paid when they don’t produce energy, when they produce too much energy, when they produce energy in the wrong place, and when they aren’t even hooked up to the grid.

We’ve learned that renewable energy causes problems with inertia and frequency, making blackouts more likely.

We’ve learned that subsea power cables are vulnerable to sabotage. And interconnected grids spread problems like voltage instability and unaffordable electricity prices, sometimes internationally.

We’ve learned that long-term electricity storage is difficult and expensive.

We’ve learned that many technologies we were banking on don’t work at scale in a cost-efficient way.

We’ve learned that those who made renewable energy targets never really considered how they’d be met.

And we’ve learned that after trillions spent on the transition, fossil fuels still play a dominant role.

Fossil fuels may be better, but…

The transition back to fossil fuels is well underway. Governments, companies, industries and electricity systems are turning back to gas and coal to shore up their grids.

But even that’s not a panacea.

The trouble with fossil fuels isn’t so much that they’re fossils. It’s that they’re fuels. You use up what makes the turbine spin around.

Whether it’s coal or gas, you need one heck of a slick supply line to keep the lights on. If your pipelines blow up, shipments get stuck, or mines go down, you’re in trouble.

And those supply lines are surprisingly vulnerable. Especially if you don’t have them all domestically.

Energy importing countries can choose whose vassal they’d like to be. But they can’t choose their own foreign policy. That’s what Europe is struggling with right now. It’s favourite guarantor of energy supplies, the US Navy, is the one creating disruptions.

Part of the energy transition was to starve our economies of domestic coal and gas. (Although exports oil coal and gas are fine in Australia…)

We also shut down refining of fuels. So, even Australia’s own fossil fuel exports don’t necessarily keep us safe in a crisis. We still rely on foreigners to turn them into something useful.

Coal’s domestic supply is plentiful. It is a lot easier to store vast stockpiles of. And there are no complex refining issues. But we shut down the power plants that use it.

Even if we had kept all the domestic supply and industries, the global price of your fuel still plays a huge role in the price of your energy.

Unless, of course, you buy the stuff under long-term supply contracts with controlled prices. Which would be very easy to do. It’s how we used to get cheap power – coal mines and power stations nearby. But apparently few countries have the foresight to know that they’d still need gas and coal in the future. So they didn’t buy enough in long term contracts. Now they complain about shortages and high prices…

So, the energy transition faces a dead end. It can’t turn back easily. But the way forward is proving too expensive to support itself.

What do we do now?

How nuclear solves these problems

Nuclear power has its problems. But what’s noticeable is how it solves the particular problems we just so happen to face today.

Nuclear is stable, controllable power. We can ramp it up and down to meet demand. Capacity and output remain in tandem – you don’t need to build vast amounts of excess capacity in case the atoms stop spinning.

Nuclear is comparatively clean, so environmentalists should love it.

The key financial costs are safety, decommissioning and financing the plant. It is an expensive upfront cost. But this also keeps costs comparatively steady and predictable over the long-run, once built.

Nuclear fuel is a surprisingly small component of the cost of running a nuclear plant. About 15%, by some estimates. If the price of uranium spikes, it won’t make a huge difference to power bills. Especially given the long-term supply contracts that nuclear utilities like to lock in.

Uranium is abundant and found in geopolitically friendly locations. It is cost efficient to store thanks to its extraordinary energy density. And we could comfortably onshore the entire supply chain which converts uranium into nuclear fuel.

Nuclear power plants can be located where they are needed. Not far away from energy demand centres.

Nuclear power is far safer than other forms of energy, except perhaps solar.

Nuclear’s size can be adjusted to meet local conditions – from micro reactors to behemoths that power countries.

We know how to build nuclear power plants – roughly 61 units in 13 countries are under construction.

It is an obvious solution. And it is only a matter of time before continuous energy crises force us to accept it.

That’s how the last big nuclear rush began last time around, after all. When the US Navy declined to support Europe’s attempt to secure oil.

For now, though, the world continues to try and plug the gaps with makeshift solutions. A vast wave of energy project permitting has begun in the West. Even the UK’s extremist environmental secretary is considering approving a new gas field.

But not every country was caught out by the current energy crisis. One was prepared. The same country that caused the latest mess in the Strait of Hormuz.

And these companies are already poised to profit.