The steam engine, the assembly line, the internet –most major transformations in economic systems are driven by innovations in technology or organizational principles, innovations that lower the costs of goods or increase their supply.
The green energy transition, however, is driven by aspirations, specifically the aspiration to stabilize the world’s climate and avoid the resulting disruptions of human societies. While these aspirations are massively important, the green energy transition lacks a direct economic driver and that is its weakness. Aspirational transitions must be driven by governmentally imposed incentives and sanctions, not inherent economic advantages. The green energy transition is driven by governmental incentives and sanctions suppressing the use of cheap and abundant fossil fuels in favor of more expensive, non-emitting resources.
For that reason, the green energy transition has always depended on energy users, which is all of us, believing that the increased costs and risks flowing from green energy are not excessive when compared to the anticipated cost and disruption of climate instability. But economics have always been a headwind pushing against the political consensus needed to sustain the transition. Those headwinds include additional energy expense for consumers, both direct expense and expenses embedded in the goods and services they buy. They also include the societal cost when jobs and economic activity migrate to different jurisdictions to avoid higher energy costs that are governmentally imposed.
In the United States, for example, the growth economies are now in states that have not mandated utilities to purchase expensive renewable portfolios or constrained the use of fossil fuels either directly or by blocking natural gas pipeline expansions. In addition, as the world enters a new phase of global conflict, the cost of suppressing international economic competitiveness in the name of net zero has international security implications. As we are seeing today in the United States, the federal and state governments will upend the green energy commitments when cost become too painful or political winds shift.
If these factors were not enough, an economically driven transformation, artificial intelligence, is turning the energy economy on its head. Just as the industrial revolution provided powerful new means to transform energy into work, AI presents a powerful new means to transform energy into usable and highly valuable intelligence. With AI, information that would have required platoons of analysts tens of thousands of hours to create can be generated in seconds. For example, AI can instantly sort through millions of patient records and compile a statistical analysis of the outcomes achieved by thousands of patients with specific health histories and symptoms and have them on a doctor’s desk in seconds. AI will generate tremendous economic value, but at the cost of equally tremendous electrical consumption. It's a Seller’s Market.
And that consumption is transforming the energy economy. A single data center can demand as much power as the largest generating unit on a utility’s system and often represents ten years or more of the generation resources that a utility was planning to build pre-AI. Where utilities once competed to supply new businesses with all the electricity they requested as quickly as lines could be built, they are now rationing capacity for data centers, delaying making firm power commitments to them, and requiring tens of millions of dollars of upfront cash deposits to weed out projects. Where utilities once served all new and old customers at average rates, they are now seeking to create special rates to pass the higher cost of new generation assets on to data centers directly.
Green energy, in the form of traditional renewables like solar and wind, just can’t keep up with the level of new demand from AI. The issue is one of scale. A solar farm, at ten acres a MW, and a standard 25% capacity factor would need to be the size of Manhattan two and a half times over (40,000 acres) to replace the energy consumed by single 1,000 MW data center. All of the US offshore wind projects under construction in 2024 would only support two and a half 1,000 MW data centers. And wind and solar are intermittent resources whose output will disappear when the sky is overcast, or the air is still. Based on NREL cost numbers, enough back-up battery storage to supply a 1,000 MW data center for 24 hours would cost on the order of $7 billion.
Because of these factors, the current green energy transition faces extremely challenging headwinds as AI-driven demand for electricity escalates. Without significant technological advances in renewable energy or storage, the economic imperative of AI usage will likely take precedence over current green energy policies.
In the short term, the only scalable solution is natural gas fired generation, and that is what hyperscalers are most often turning to in the short term. Longer term, nuclear is the only scalable non-emitting technology sufficient to meet AI’s 24/7 need for electrical demand without carbon emissions. Only nuclear can support the data center boom without permanently sinking the green energy transition.
The challenges of deploying new nuclear are great, as recent experience with new nuclear projects in Georgia and South Carolina attest.
The nuclear renaissance of the last decade is over. To capitalize on the potential of nuclear, a reformation is now in order – one that will safe and deployable nuclear technologies, and the supply chains and public acceptance needed to deploy them. This reformation must encompass:
Licensing and permitting reform which will require streamlining the Nuclear Regulatory Commission's approval processes, adopting risk-informed regulations that focus resources on the most safety-critical aspects rather than exhaustive documentation of every component, and allows flexibility in the field during construction.
Supply chain reconstruction will be essential, as the domestic nuclear manufacturing base has atrophied over decades of limited construction. The industry must rebuild capacity for manufacturing specialized components, training a nuclear-certified construction and operations workforce, and establishing quality assurance programs that meet nuclear standards.
Technological advancement will involve factory-built small modular reactors (SMRs) and novel nuclear technologies that promise to highlight safety while reducing construction complexity, capital costs per unit, and construction risk and timeline.
Construction innovation must address the project management failures that plagued recent projects like Vogtle and V.C. Summer. Effective modular construction techniques must be combined with construction-friendly regulation to reduce financial and schedule risk. The industry must develop nuclear-specific project management expertise, efficient construction practices and effective cost and schedule controls. The nation’s has deep experience in using effective modular construction techniques to build major naval vessels. This expertise must be rigorously applied to the civilian nuclear industry.
Public acceptance initiatives because a new narrative is needed that communicates the remarkable safety record of the nuclear industry in the United States, Europe, and other western countries. The industry must address safety concerns through sustained and unapologetic communication about nuclear safety, community engagement, and demonstration of the effectiveness of modern passive reactor safety systems and new reactor designs. If initial deployments are effective, success will breed success.
Financial structure alignment to make new nuclear deployment economically. Deploying nuclear at scale will require access to large amounts of extremely patient capital and effective utility regulatory frameworks will be required.
If a comprehensive reformation strategy succeeds in creating a mature, efficient, and predictable nuclear construction industry and supply chain, nuclear power can fulfill its potential of meeting exploding energy demands while limiting greenhouse gas emissions growth.
At the moment, it seems clear that only nuclear can save the clean energy transition.
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