Nuclear innovation: investing in a new atomic age

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WATCH: Investment manager Luke Ward discusses the long-term prospects of nuclear in his Disruption Week webinar

Could two nuclear technologies – advanced small modular reactors and a process that mimics the sun – reignite interest and investment in the sector?

Nearly seven decades ago, a senior US government official gave a radio interview that came to haunt him and the wider industry. Lewis Strauss, chairman of the Atomic Energy Commission (recently portrayed by Robert Downey Jr in the film Oppenheimer), predicted that within children’s lifetimes, nuclear power would become “too cheap to be metered, just as we have water today that’s too cheap to be metered”.

His comment stoked expectations, fuelling visions of nuclear power as a universal energy source. Ford even unveiled a concept car powered by a portable reactor.

“The west built out lots of nuclear reactors and people remained optimistic about the technology for about three decades,” says investment manager Luke Ward.

“Then the Chernobyl meltdown significantly changed the calculus. Greater regulation and growing public opposition led operators to build fewer but more powerful plants. However, that sacrificed the economies of scale required to keep costs down. 

“It’s striking that the most recent reactors built in the US, UK and Europe have led to the bankruptcy or nationalisation of the companies charged with building them, due to massive budgetary overspends.”

Nuclear fission accounts for just 10 per cent of global electricity production today. However, climate change concerns have put it back on the agenda as a low-carbon alternative to fossil fuels.

“Renewables like solar and wind are great, but they will struggle to replace all our fossil fuel infrastructure, leaving a big gap in our decarbonisation ambitions,” says Ward. “Nuclear could fill that using technologies that are already proven to work at scale.”

Modular reactors

This has led to revived interest in small modular reactors (SMRs). The technology has powered submarines and aircraft carriers for decades. But now established companies such as Rolls-Royce and startups, including Oklo and Bill Gates’ Terrapower, are attempting to roll out ‘advanced’ versions as a civilian power source.

SMRs would deliver a fraction of the output of traditional nuclear reactors. But by being smaller, simpler and safer, they would offer several advantages:

• Manufacturers would build them to standard designs in factories rather than on-site to customised specifications. This should result in more scalable and capital-efficient business models
• Operators could install as many units as necessary to better meet their specific demand
• New use cases would become possible and more locations practical

“Mothballed coal power stations could be revamped to house these modular reactors as you could repurpose their infrastructure and electrical grid connections,” says Ward.

“The reactors’ small size also makes specialised industrial uses possible, such as powering a data centre or replacing fossil fuel furnaces as a heat source at steelworks.”

Baillie Gifford has yet to invest in this sector but is getting to know some of the companies involved as they prepare to bring their prototypes to market.

Nuclear fusion

Ward has, however, invested in a company pioneering another type of nuclear innovation.

As its name suggests, fusion produces energy by fusing atoms together rather than splitting them apart. It’s how stars convert hydrogen into helium, releasing heat and light in the process.

“Fusion is what we’d hoped fission would be,” explains Ward. “It has all the high power benefits, but without the highly radioactive and long-lived waste.”

Until recently, efforts to create fusion power on Earth used more energy than they produced. But in the past year, scientists using high-powered lasers in a US government lab briefly achieved net energy gains – albeit only enough to power a household iron for about an hour.

It could be decades before fusion becomes a commercially viable energy source. But one company is already putting its principles to profitable use.

Wisconsin-based SHINE Technologies started by using fusion-created neutrons to offer a specialised imaging service. It provides aerospace and other customers a way to detect flaws in mission-critical components.

More recently, the firm has begun creating medical isotopes. It sells these to pharmaceutical companies, which use them to detect disease and destroy cancers.

These isotopes are worth millions or even billions of dollars per gram.

“Unlike other fusion companies, which are trying to leap straight to energy production, SHINE is focusing on making money from the steps along the way. By selling higher gross margin products today, SHINE has an easier path to profitability and can build a strong foundation on which to continue funding longer-term research and development.”

SHINE’s next target is to use fusion to help reduce and recycle nuclear waste that the fission industry has created over the last few decades. If it succeeds, not only will it help fund its ultimate fusion power goal, but it will also make fission a more practical interim solution.

Optimistic outlook

While SHINE is currently Baillie Gifford’s only nuclear-focused investment, Ward says that conversations with its chief executive Greg Piefer and other company founders are helping him consider further opportunities.

“Not all these companies are directly relevant to our clients today but they could have a significant impact five to ten years from now,” he says. “We’ve seen that happen in other industries we’ve invested in.

“By speaking to the entrepreneurs involved we can learn more about the competitive dynamics, the challenges to achieve scale and why it might be worth pursuing one growth opportunity before another.”

And while nuclear energy may not become “too cheap to meter” in our lifetimes, Ward believes it has the potential to play a much bigger role in our energy mix.

“From the outside, it can seem that nuclear innovation has been going backwards, and no progress is being made,” he says.

“But the more I look at the companies driving change, the more reason I find to be optimistic that it could be a better, cheaper resource for civilisation and not the highly costly, contentious one it has been in the past.”

Watch Luke Ward’s Disruption Week interview at the top of this page, and read more about Baillie Gifford’s investment in SHINE Technologies via this link.

Read about more disruptive innovation

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