The Mad Energy Scramble

Energy has been a hot topic around the desks at Fat Tail Investment Research this month.

Well, truth be told, it’s been a hot topic far longer than that.

There’s no question that energy markets are going through a period of immense flux.

We’re transitioning from a fossil fuel-based system to…well, something else.

Despite what you read in the mainstream, what the future of energy looks like is still up in the air.

As we’ll discuss shortly, renewables sound great on paper, but the reality on the ground suggests they’re not the entire solution.

This is not just conjecture from me.

As the old saying goes, actions speak louder than words.

And that’s very true in a capitalist system where businesses have real money on the line.

So, today, let’s look at what’s really happening in energy markets right now…

Nuclear myth busters

This month’s big developing story has been a resurgence of interest in nuclear energy.

Of course, this has been a hot political topic here in Australia ever since the Coalition touted it as a viable option for Australia’s energy transition.

The critics scoffed and said nuclear was too expensive, too slow to build, too dangerous, and the latest small nuclear reactor (SMR) technology wouldn’t be available for many decades.

I’m no expert here, so I can’t tell you how right or wrong some of these critiques may be.

You can find experts who will argue strongly on either side of this.

But here’s the thing…

You don’t need to be an expert to get some idea on the truth of this. Simply look at what’s happening.

This month, we’ve had several huge announcements from big technology firms that are committing to investing in nuclear power.

Last month, Microsoft inked a deal with a US energy firm to resurrect a defunct reactor at the notorious Three Mile Island nuclear power plant in Pennsylvania.

Just last week, Google signed a deal to purchase power from Kairos Power, a developer of SMRs.

Weren’t SMRs a completely untenable technology? I mean, we’ve been told that by the mainstream for the past year or so.

Apparently, Google doesn’t think so…

Our own Nick Hubble wrote a compelling piece on Friday explaining why ‘Big Tech Needs Nuclear’.

The important question he posed was this:

‘…all this begs a very awkward question: why aren’t big tech firms willing to hook up their AI to the electricity grid you and I use?’

The crux of it is that big tech needs access to reliable, clean, cost-efficient energy to power their huge artificial intelligence (AI) ambitions.

And, as Nick suggested, these moves suggest they certainly DO NOT want to rely on an unstable national grid supplied by predominantly renewable energy as the politicians seem to want.

Anyway, these big announcements certainly got investors interested in nuclear, with the uranium index shooting higher this month:

That was good news for a number of editors here at Fat Tail Investment Research who have uranium exposure in their portfolios.

For example, in my Alpha Tech Trader tech-focussed newsletter, a recent trade in a unique nuclear-themed stock is already up 11% in just one week.

And our resident geologist, James Cooper, tipped an ASX-listed uranium miner last week too based on his energy thesis. It’s up 6% already.

We’ll see if these moves follow through.

But I certainly feel that the consensus around nuclear energy has changed.

Especially when you see stories like this appearing…

50 years of antinuclear advocacy
out the window

What’s perhaps more telling than big tech’s nuclear forays was this story…

In case you didn’t know, The Sierra Club is an American environmental organisation with chapters in all 50 US states.

They’ve been around since the 1950s and, for most of that time, have intensely lobbied politicians against nuclear energy (as well as to abandon fossil fuels) in favour of renewables.

Well, it seems they’ve changed their mind…

In a new report, they’re calling for the use of nuclear energy to protect the climate.

Make no mistake, this is a big shift from a long-standing opponent.

The bigger point is…

Money is made investing in reality,
not political allegiances

As I said at the start, energy systems are complex.

The black-and-white versions of reality sold to you by various political parties or media outlets are never the whole truth.

And what people actually do is often a lot more important than what they say.

The recent actions suggest nuclear is very much back on the table as a viable, carbon-free energy source.

The debate around nuclear is just one myth that is in the process of being busted.

There are many more…

From the ‘wastefulness’ of Bitcoin mining – the truth is Bitcoin mining doesn’t waste energy; it actually makes use of waste energy – through to the cost and timelines of battery technology.

Like most things in life, arguments in favour of one energy source or another are often grey areas that involve trade-offs somewhere else.

Trade-offs in costs, CO2 emissions, timelines to commercial readiness, technology availability, safety, base load energy, and energy security (as Germany discovered last year when its gas line to Russia was cut off).

We’re in the midst of a ‘mad energy scramble’ as my colleague Brian Chu put it in one team chat.

[Editor’s note: Speaking of Brian, our resident gold investor sees a looming opportunity to make the most of the current gold price run. He calls them ‘ignition points’. And funnily enough, changes to energy inputs (costs) for gold miners could be one of the catalysts behind it. To find out more, go here now.]

That flux, that uncertainty – that’s your big opportunity.

But to find the right opportunities, you’ve got to do the work and try to understand the complex dynamics at play.

One thing is clear…

You can’t just rely on the simple mainstream narratives.

Regards,

Ryan Dinse,
Editor, Crypto Capital and Alpha Tech Trader