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Nuclear

September 17, 2023

With Russia’s invasion of Ukraine, we seem to be hearing a lot about nuclear. In the war context, the conversation has been mostly about securing the nuclear plants of Zaporizhzhia (active) and the infamous Chernobyl (Ukraine has other active nuclear plants but they are distant from the front lines). A great deal of attention also went to Germany which was in the process of decomissionning all of its nuclear reactors following the Fukushima meltdown at the onset of the invasion, making it particularly susceptible to the whims of the global energy markets and showcasing its reliance on Russia.

With political and practical challenges to other forms of sustainable energy (e.g. building dams and their downstream effects, energy storage limitations), nuclear energy generation can lead the way in the energy transition and meeting the IEA’s Net Zero Emissions framework. As many existing reactors in advanced economies are reaching the end of their initial operating lifecycles, cost-effective investments to extend the lives of some plants would significantly reduce the need to build other low-emission replacements. Ultimately, even with decomissioning, nuclear power generation would need to double between now and 2050 in order to meet emission goals (see chart below).

ImageChangingWorldNuclear.png

While nuclear plants have predominantly been government-backed projects, the next generation of nuclear power generation may largely come from entrepreneurship. The development of small modular reactors (SMRs) which have capacity of about 300MW compared to the 1GW capacity of traditional reactors, have gained a lot of interest from private investors. Their reduced capital requirements and better safety and waste management characteristics may help both with funding and with gaining public acceptance. According to Pitchbook, deals involving investment in nuclear technology increased by 400 percent from 2015 to 2020.

From Somar’s perspective, SMR technology will be very intersesting to watch. The technology is still largely in the design phase and is untested in real-world power generation and deployment scenarios Additionally, like many other grand innovations with lots of interest and funding that we’ve seen lately, this is an area that is ripe for fraud and promotion, or just poor execution. However, if one or a few companies are successful in deploying the technology, that could be game-changing from both a planetary and investment perspective.

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