I'm No Economist #9: ☢️ Have you Thanked Your Lord and Savior Nuclear Power Today?
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A few weeks ago the Inflation Reduction Act, with a US$ 369 bn investment, was approved by the U.S. government and this week Japan is reopening its nuclear plants. Cool. Why's this important?
We're no longer able to draw a clear plan to attack the carbon emission problem and be efficient in energy generation and distribution, let alone invest in clean energy. Not as long as Europe and the rest of the world suffer from decreasing energy supply.
I believe it's time for us to accept that zero carbon emission by 2050 is - at the very least - unlikely since the conflict between Russia and Ukraine began in 2022.
It got worse this week with the Russian announcement of a need for "maintenance” from a “gas leakage” of Gazprom, the main gas supplier of the old continent.
Reminds me of that video of Trump that went viral, where he is laughed out of the room when he talks about Germany's dependence on Russian energy.
The canary in the coal mine - I love puns - is that some governments are already in the acceptance stage of grieving and opting for energy supply alternatives. Even those that were once seen as devastating are now seen as a healthy way of getting out of this whole they dig themselves into.
IRA Impact
People better than me have already done a breakdown of the impact of the Inflation Reduction Act. And what a rockstar breakdown indeed. Kudos to the Climate Tech VC team.
If you have little time, refer to this TL;DR to get a better picture of the impact of the IRA:
Carbon Capture (30-70% cost decrease for Direct Air Capture; 70+% cost decrease for Carbon Capture and Storage);
Sustainable Aviation Fuels (26-46% cost decrease);
Hydrogen (61-88% cost decrease);
Battery manufacturing (~30% cost decrease);
Built Environment (25-52% cost decrease for Heat Pumps);
EVs (14-27% cost decrease).
The IRA is somewhat controversial. During episode 92 of the All-In Podcast, Chamath Palihapitiya from Social Capital points out important issues of this bill. Here's an excerpt of the episode where he shares his point of view.
First of all, this bill has a backdoor cost of US$ 80 bn to hire IRS agents that will audit tax evasion - these agents will be allowed to be armed, by the way.
Second, the goals of carbon emission by 2040 are delusional in his point of view. I for one share his feelings and couldn't agree more with what I think to be an absolute preposterousness.
On the bright side, I believe that the U.S. is doing what it does best. That is investing in its own infrastructure using the most powerful weapon they have: the U.S. Dollar.
The Case For Nuclear Power
I understand the fear and loathing of nuclear. Especially with the escalation of global tension and the beginning of Cold War part II. However, it bears discussion that we are increasingly in need of clean energy.
While trying to come up with reasons why investing in nuclear would be a safe alternative to fossil fuel, I thought that splitting it into the most pressing concerns would be a good idea. On the top of my mind those are:
How safe is nuclear power?
How clean is nuclear power?
How cost-effective is nuclear power?
How safe is nuclear power?
According to the International Atomic Energy Agency, despite the accidents we've had with nuclear, it's still one of the safest power sources there are.
When comparing death rates per TWh - 1 TWh is what 4,255 currently consume during their lifetimes if they live up to the average of 72 years - nuclear kills 0.03 people by TW generated.
Hydro, which makes up 66% of the electricity source in Brazil kills 1.3 people by TW generated. Staggering 4,200% more deaths than nuclear.
Sure, wind and solar are also safe. But they're both intermittent energy sources that can not rely on as an “always on” energy source, but alternatives.
How clean is nuclear power?
I could spend a few paragraphs on this one, but I'll leave you with this amazing Twitter thread from Madison Hilly, founder and Executive Director of the Green Nuclear Deal Campaign where she explains step by step how nuclear waste works:
![Twitter avatar for @MadiHilly](https://substackcdn.com/image/twitter_name/w_96/MadiHilly.jpg)
TL;DR:
Uranium is solid, not a green goo that flies away when properly stored after use;
It's easily contained and has tiny waste since it's extremely energy dense;
Its radioactivity diminishes by 99% after 40 years of its use.
I encourage you to take a look at the thread. I went down a very interesting rabbit hole that would not fit this newsletter about nuclear waste.
How cost-effective is nuclear power?
To calculate the cost of electricity, the conventional method is levelized cost of electricity (LCOE). It calculates the average net present cost of electricity for a generator during its lifetime.
There are, however, arbitrary measures that can change the outcome of this measure. For example, a discount rate of the cost of capital can change due to geography, cost of labor, subsidies, social cost, and other aspects. That discount rate is an important weapon usually applied by policymakers to make it more or less viable to invest in a new energy generation project.
That aside, a study from Lazard shows that Nuclear can be cheaper than subsidized solar and as cheap as a good chunk of subsidized onshore wind - not to say that it's cheaper and not intermittent.
Nuclear, the antihero
I can't remember the last time I saw DiCaprio or Greta Thunberg calling on Putin to say that what he's doing is anti-humanitarian. More than ever we need activists and strong voices to help us solve the energy crisis.
All of that leaves me with the question: how can I help? If there's anything I can do to make it go away as soon as I can, I will. And if I can make a dime out of it, even better. That's why well-aligned incentives are a beautiful thing in capitalism.
I, for one, am going to start investing in uranium ETFs. Because guess what, they're up - way up - since its last bottom 3 months ago.
Why is that?
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Talk soon,
L.