The inevitable future of energy

And how to invest

Sheepwash in Devon. Photo by Ron Strutt

Sheepwash is a tiny village in North Devon with a population of just 250 or so people, and the Sheepwash Chronicle is the local magazine, for and about the residents.

It’s not what you might call the mainstream media.

I have some close family down there so I visit quite often, and recently I stumbled across an article that might be the best article I’ve ever read about green energy and our future electricity needs.

With the war in Ukraine bringing the subject of power generation, and both the UK and Europe’s dimwitted strategy (or lack of it) into focus, I thought I’d discuss it today.

Nuclear energy is clean and safe – so why is it so hated?

It’s by Dr Philip Bratby of the Countryside Charity and it’s called: Small Modular Reactors - An Opinion Piece. The ultimate low-carbon renewables.

It’s worth declaring up front that Bratby is pro-nuclear. It often seems that the energy debate is no longer about what is the cleanest, most-efficient energy source. The debate has been politicised and corrupted, often by those with their snouts in the trough of government subsidy, so anyone who suggests that fossil fuels have done a lot for mankind or that nuclear power might not be all bad, is immediately branded a heretic. 

But Bratby’s views seem particularly pertinent at the moment because of the current energy crisis in which we find ourselves, spiking natural gas prices and the fact that only recently, with no wind, the government has had to switch a load of coal-fired plants back on.

I googled Bratby, and there isn’t much online. He has a first class honours degree in physics from the Imperial College of Science and Technology (London University), a doctorate in physics from Sheffield University, he worked in the military and civil nuclear industry as a energy consultant, and is now semi-retired.

There are a couple of anti-nuclear websites that have a go at him, using straw man arguments, quoting out of context and so on, so I won’t stoop to mention them here. Let’s get to the article.

All those millions of electric vehicles that, if the government gets its way, we will soon be driving are going to a lot more electricity than we currently produce for heating and for charging . To meet these needs, the electricity supply will need to be both expanded and more reliable. 

Commercial nuclear power stations have been operating for nearly 70 years. They have provided huge amounts of reliable and affordable “clean” and almost-infinitely-renewable electricity. Nuclear energy has the best safety record of any energy technology. All environmental concerns, such as waste disposal, have been solved. 

So why hasn't nuclear power been widely accepted? 

One reason is that over the course of many years environmental activists have persuaded much of the public, many politicians, and the media that nuclear is unsafe.

However, some activists have recently changed their minds.

For example James Lovelock, who proposed the Gaia hypothesis, has said that “nuclear power is the only green solution”. Bryony (now Baroness) Worthington, a lead author of the Climate Change Act, who once said that she was “passionately opposed to nuclear power” has more recently said of nuclear power: “I urge you on moral, ethical, scientific and environmental grounds to rethink your opposition to it”. 

One-time anti-nuclear campaigner, environmental activist and author Mark Lynas, who has said that he “grew up hating nuclear power” has now said that “continuing to oppose nuclear was a mistake… it’s extraordinarily safe… and we must learn to love nuclear power”. 

So why do some environmental organisations still oppose it and prefer environmentally-destructive wind and solar farms coupled with batteries? 

The reason, says Bratby, is not that it doesn't produce abundant low-carbon energy, but that it does, and that conflicts with their aim: to halt economic growth. 

Now – and this is me speaking – I think there’s a lot of truth to that last statement. I often feel that that’s the main agenda behind a lot (not all) of authoritarian activism. The agenda, as well as to impose their views on others and dictate how to behave, is to stop capitalism, progress and economic activity altogether. Hence the hashtag #endcapitalism which you find everywhere.

Anyway back to Bratby: thanks to anti-nuclear propaganda, regulators require multiple, excessive layers of safety in nuclear plant design that needlessly pushes up costs. The regulatory process is complex, slow and cumbersome, and so takes years to complete. 

The long lead time between building and operation adds to expense. And so political uncertainty is one reason why many recent proposals for nuclear power stations in the UK have been abandoned, leaving the twin power stations at Hinkley C in Somerset as the only ongoing project. 

That narrative is now all changing with the inflated energy prices we are all now paying.

The future of nuclear power

To overcome some of these problems, the focus for future nuclear power stations has switched to SMRs – small modular reactors. 

SMRs have been in operation for over 60 years in submarines, aircraft carriers and ice-breakers, but only in the last few years has serious attention been paid to developing land-based SMRs for commercial electricity generation. 

The advantages of SMRs have over current nuclear power stations are legion: 

• They use relatively simple, proven technology. 

• They can be manufactured in factories and built on site rapidly.

• They are safer than current nuclear power stations. 

• They occupy very little land and have little impact on the landscape. Some can even be constructed underground – surely preferable to wind turbines and solar farms.

• They provide generation that can be controlled to provide baseload and load-follow capability.

• Their output is not weather-dependent. 

• They are synchronous and the large rotating generators provide inertia, which is a positive benefit to the reliability and stability of the grid.

• They use very high energy density fuel and thus require a lot less land. A 440MW SMR would require about 25 acres of land and would produce about 3.5TWh of electricity per year (enough for about 1.2 million homes). A solar farm would require about 13,000 acres (20 square miles) for the same output; wind farms would need about 32,000 acres (50 square miles). 

There are about half a million homes in Devon. So Devon's domestic electricity needs could easily be met by a single 440MW SMR occupying a small area of land. By contrast, a huge area of Devon's farmland would need to be covered in solar panels or wind turbines, to provide the same amount of electricity. Even then, alternative sources would be needed for when the wind doesn't blow or the sun doesn't shine. 

I read that the biggest solar farm in the country is planned for Holsworthy, about 15 miles up the road from Sheepwash: 76,000 panels over 165 acres. It won’t come close to meeting Devon’s electricity needs.

In the UK, it is envisaged that SMRs would be constructed on the redundant sites of closed nuclear and coal-fired power stations, i.e. on brownfield land where grid connections are readily available. 

If they really are such a silver bullet, SMRs are going to happen whether activists oppose them or not. A shortage of energy will demand it. You don’t have to watch videos of Extinction Rebellion blocking traffic on social media to know that the British public have lost patience.

Ways to invest in SMRs

So how to invest in SMRs? 

Several competing designs are being developed around the world, ranging in size from 10s of MWs to 500MW and of many different design concepts. But at the moment none of the pure play SMR companies are publicly listed.

RollsRoyce (LSE: RR) has built seven generations of SMRs for use in nuclear submarines and, with its design for a 440MW SMR, it is a contender - so that is one option. It is not exactly a pure SMR play, but as a British company is likely to win British contracts in this new age of deglobalised power generation.

That Rolls Royce chart is quite something.

Another contender is NuScale, an American company, which is unfortunately still private. There is a way to get exposure to NuScale, however. The majority shareholder is engineering company Fluor Corp (NYSE: FLR). It has been through the wars a bit, but its share price is now in a steady uptrend - though again it is not a pure play.

I own a bit of Rolls Royce in my SIPP. I don’t own Fluor, though I like the chart.

This article first appeared at Moneyweek.