In the climate space, every idea sits somewhere along the hype continuum. Some command outsize attention. Others fly under the radar despite big potential. And a rare few hit the sweet spot, earning exactly the buzz they deserve.
But how do you tell which is which?
In this episode, Shayle teams up with Akshat Rathi, senior reporter for climate at Bloomberg News and host of the Zero podcast, to sort it out. Akshat and Shayle run through a list of hot topics and place each one on the hype continuum. They cover topics like:
- Using DERs to meet load growth
- Co-locating generation with data centers
- Infrastructure bottlenecks like generation, transmission, and transformers
- The role of venture capital and the Paris Agreement in shaping markets
- A grab-bag of other topics like sodium-ion, advanced geothermal, and advanced nuclear
Resources:
- Catalyst: The new wave of DERs
- Catalyst: When to colocate data centers with generation
- Zero: The Device Throttling Our Electrified Future
- Zero: The Gas Turbine Shortage Might Be a Climate Problem
Credits: Hosted by Shayle Kann. Produced and edited by Daniel Woldorff. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor.
Catalyst is brought to you by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform, by visiting energyhub.com.
Catalyst is brought to you by Bloom Energy. AI data centers can’t wait years for grid power—and with Bloom Energy’s fuel cells, they don’t have to. Bloom Energy delivers affordable, always-on, ultra-reliable onsite power, built for chipmakers, hyperscalers, and data center leaders looking to power their operations at AI speed. Learn more by visiting BloomEnergy.com.
Transcript
Tag: Latitude Media: covering the new frontiers of the energy transition.
Shayle Kann: I’m Shayle Kann and this is Catalyst.
Akshat Rathi: I have been reporting on gas turbines, which are currently, as my editor put it, the Labubu of climate solutions.
Shayle Kann: That’s a first. I get it. That seems right.
Akshat Rathi: Very high in demand and there’s a year’s waiting list before you can get the one you want.
Shayle Kann: Coming up: just a whole bunch of things with Akshat Rathi from Bloomberg.
I am Shayle Kann. I lead the early stage venture strategy at Energy Impact Partners. Welcome. Alright, so this week is a fun one. My friend Akshat Rathi is a senior reporter at Bloomberg News and also the host of his own podcast called Zero. So he covers climate and energy stuff at Bloomberg and he has an interesting different perspective on the world from me in that he, one, is more plugged into this sort of high level government stuff. We talk, for example, in this podcast about Paris, the Paris Accord, which I don’t think I’ve really ever talked about on this podcast before. And also he has a more global perspective. He’s based in the UK himself, but he’s also looking at global dynamics in a way that I’m admittedly, and I have said this before, always a little bit too US centric or US and Europe centric and things that I tend to see and talk about. So he and I got to chatting and thought it’d be interesting to compare notes. So we do it through a fun game show style approach and we covered a whole bunch of interesting things. So this is a fun one. Here’s Akshat.
Akshat Rathi: Shayle, welcome to Zero.
Shayle Kann: Thank you Akshat. Welcome to Catalyst.
Akshat Rathi: Well this is a different kind of podcast and we are making it across an ocean, but with similar politics in the background. Yeah,
Shayle Kann: I mean I have a question for you. You’re in London, right?
Akshat Rathi: Yep.
Shayle Kann: Okay, and you work for Bloomberg Green and one thing that I have found is that in the US places where green or clean or climate is in their name, have been having an interesting set of discussions around nomenclature. Is that true for, I mean Bloomberg is obviously based in the US but so I’m curious how you see it from the Bloomberg perspective, high level, but also in the UK and in Europe.
Akshat Rathi: So Bloomberg News is a global news organization, but yes it is US headquartered. I would say there isn’t that much muzzling of terms as it’s happening in the US government, but there’s certainly a backlash on the politics here. So there is a party called the Reform Party that’s on the rise over here doing in the polls better than the main two parties, labor and conservatives, and they are against net zero. So we’re usually a step behind America, but then eventually catch up.
Shayle Kann: Well in this case I’m not sure I want you to catch up, but we’ll see what happens. Alright, so this is going to be fun. What’s our plan here?
Akshat Rathi: So we are going to do something different where we’re going to go through a number of topics that our producers have selected where we’re going to say whether we think it’s under hyped, overhyped or hyped just right and explain our positions for why we think. So let’s start with meeting load growth for electricity, which is a hot topic everywhere, but specifically within that, what do you think about distributed energy resources? What are they and where do you land?
Shayle Kann: So distributed energy resources is like a grab bag category of a bunch of different things. I would say the way I define it is anything that you deploy at a customer site. So it’s sitting behind the meter, the customer side of the meter that either generates energy stores energy or shifts load. So canonical examples generates energy, think rooftop, solar stores, energy, think powerwalls and batteries, home batteries, batteries of buildings, shifts, load, think smart thermostats where you can shift it and there’s a broader array of things that fall within that, but they get grouped together and is distributed energy resources. On the question of DERs for meeting load growth, which is the question here, is it overhyped under hyped or hyped just right. I think my argument here would be in the circles that I travel in which are pretty wonky energy tech circles, it’s becoming increasingly hyped because we’re just starting to see this wave of announcements that are inexorably coming where there are going to be partnerships between hyperscalers or data center operators and third parties who do aggregations of DERs to deliver capacity to get data centers on the grid and things like that.
That’s coming, no question. And so it’s starting to bubble up into the hype world, but I think that is my world is a pretty small portion of the world and broadly I think even in data center universe, it has not really been considered very much yet. Mostly it is we’re going to build a data center, can we get grid capacity? If not, can we build a big gas turbine? And so my argument is because of all that, it is still under hyped as of today.
Akshat Rathi: Yeah, that’s an interesting perspective. I would say in my world, which is a little bit broader because I talked to policy folks and I talked to big businesses and I talked to VCs, is that it actually used to be more hyped because it was one way in which everybody was justifying having all these big renewables goals being set up because look, don’t worry about it. I know it is variable, but we’ll have these technologies that are just going to come online within the next few years and they’ll make it easier to manage this variability in renewables. At that time it was pretty hyped. Now I would say it’s under hyped. It’s not something people talk about that much, but those solutions are actually starting to bubble up. So we had the CEO of octopus energy, which is the largest utility here in the UK on the pod and this year they’ve launched a BYD lease program where you can just pay monthly to get a BYD electric car and they would give you 12,000 miles of free range in a year as long as you make sure that you put your car into the charging port whenever you’re home because they’ll use the car for a virtual power plant essentially.
That sort of thing is now becoming very frequent. I get text messages from Octopus Energy saying, Hey, 12:00 PM to 2:00 PM today, free electricity, use all you want. And so I feel like now those technologies are here and they can actually be put to use and so they’re kind of under hype because you could actually now see those things out there.
Shayle Kann: Yeah, I think that DERs are a second. We’re in a second wave now, right? I’ve talked about this before on the pod, but there was a wave of excitement around DERs, which I think is what you are referring to maybe a decade ago. And at that point it was like, oh, we’re going to decentralize the grid and maybe this is going to disintermediate utilities and none of that happened. But I think what is interesting that’s different is the frame of the question here, which is it over under hyped or hyped just right for the purpose of meeting load growth and that was not a thing we cared about a decade ago when DERs first emerged. So I think this second wave that we’re seeing now, DERs as a solution to managing load growth is interesting. It’s one of the things that makes it more attractive now alongside a bunch of other factors, as you mentioned, like the rise of EVs and EV chargers as a significant DER source of capacity is another one. Okay. But we’re on the same side here. We both think it’s currently under hyped. Let me ask you another one that I’ve talked about a little bit before on this pod, which is putting co-location with generation. So basically putting generation, largely gas, onsite with data centers as far as meeting the load growth challenge. Do you think that is overhyped, under hyped, or hyped just right?
Akshat Rathi: I think it is hyped because I have been reporting on gas turbines, which are currently, as my editor put it, the Labubu of climate solutions.
Akshat Rathi: That’s a first. I get it. That seems right.
Akshat Rathi: Very high in demand and there’s a year’s waiting list before you can get the one you want. And so sure in principle if you could get a gas turbine, you would build it close to where the data center is, but can you even get a gas turbine?
Shayle Kann: Yeah, there is that. So you think it’s hyped just right because it is a thing that would happen a lot, but the supply chain bottleneck is the rate limiter. I think that is generally true. I do think as I’ve talked about a little bit before on my pod, I think it is a little bit overhyped the degree to which, not to say that we don’t need a ton of new generation and not to say that we don’t need a ton of new capacity on the grid, but the degree to which that capacity needs to be co-located with the data center to me is a little bit overhyped. We will see it happen. It’s already happening in some places. You’re seeing this in the US we have the XAI, Colossus data center has a bunch of gas turbines. Meta is building a big facility that’s going to have a bunch of gas and a number of these projects will, but I think it’s going to end up being the minority of new data centers, not the majority of new data centers. I think the implications from what you would see in the news is that every new data center is going to come equipped with a bunch of gas turbines. Again, not to say that we won’t build a ton of new gas generating capacity, I just don’t think it’s all going to be co-located with the data centers.
Akshat Rathi: Yeah, I mean the reason we are bringing this up is because building the grid has been so hard. The goal would be with co-location, you don’t have to wait for a grid connection to come through before you can build your data center. Ensure if you can pay really high prices for the gas turbines, which some tech companies can, then you might be able to do it, but most places won’t.
Shayle Kann: Also, there’s an interesting embedded question in that too, which is at some point will costs matter? Well, no, actually two questions at some point will costs matter and at some point will uptime not matter quite as much because if you have the same uptime requirements for your AI data center as cloud data centers have historically, and you want to front run your grid connection by installing generation, you can’t just build gas turbines. You have to build a lot of infrastructure because you have to have really, really high reliability. So you’re going to build your gas turbines, you’re going to oversize some batteries that’s going to be really high CapEx. You might add additional layers to your UPS system. There’s a lot that you would build and that comes at a real cost. Now where we are in the cycle right now, the reality is that the total embedded energy cost in compute is small compared to the CapEx of everything else, but mostly the chips. So maybe energy cost doesn’t really matter even if you’re deploying a bunch more CapEx into that stuff. But there’s an interesting question of will that ultimately matter, which would dictate the degree to which this equation of speed to power versus cost of power shifts a little bit. I think inevitably it will shift. I just don’t know when that is.
Akshat Rathi: There’s also the chance that these guys would go and build the power capacity where the grid connection is available, which there are many parts of the world where there is grid connection available. So yeah, I think it is a little too hyped with co-location for data centers. Some will get it, but most people won’t. Let’s come to the next topic, which is following on from trying to build the grid here at Zero. We’ve done a series called Bottlenecks because we are seeing these bottlenecks to build the grid, especially in Europe and North America, show up in so many places. There’s so many bottlenecks that it’s not just about permitting and politics but about actual objects. So where is generating capacity on your hype meter,
Shayle Kann: On the hype meter as a bottleneck, right? So the question is basically: are we overly- overhyped would mean we’re too worried about it? Under hype would mean we’re not worried enough about it. I think that the long lead times for gas turbines in particular is very well established and reported and understood by everyone, which I guess argues that it’s hyped because people do appreciate that that is a real challenge. There also, though, has been a lot of good data to suggest that generating capacity in the next few years is not the dominant bottleneck. There is enough capacity in enough places to deliver the kind of load growth for the next few years that the grid will need. So I think this will get to the next one where I think there is a real concern, but I would say generating capacity to me might be a little bit over hyped that the queues are long if you want to build new gas turbines, but I don’t think that is going to be the rate limiter on load growth at least through 2030.
Akshat Rathi: I think that is right. We spoke to a utility CEO, the NextEra CEO in the US who said if gas turbines are going to be that expensive, that’s just going to make solar batteries so much more attractive and we’ll build those instead. So there is certainly no reason to think all forms of generating capacity is in a bottleneck and so all sorts of other things could be built, but there are other challenges in bottlenecks which are much more severe to me that we need to worry about.
Shayle Kann: So that maybe gets to the next one, I think, which is transmission deliverability basically is the way to put it. Do you think that is over-hyped, under hyped as a bottleneck?
Akshat Rathi: I think it’s super under hyped. Let me give you a European example, which is that the Netherlands has 12,000 businesses waiting for an electricity connection that companies like ASML, which is the Netherlands biggest company, most valuable company isn’t able to build extra factory because it cannot get an electricity connection for the next few years.
Shayle Kann: And is the Netherlands in the same situation as the US where we just basically stopped building new transmission lines years ago? I mean not zero, but effectively zero for the past few years. Is that the situation in the Netherlands or in Europe in general, or is it different there?
Akshat Rathi: No, it’s not that severe because a lot of European countries are interconnected and they have been building more interconnections between them. It’s more like there are places around Europe where there is more generating capacity and there are demand centers which are typically further away from those generating capacity that aren’t getting the power supply as it’s needed. So the transmission hasn’t been able to keep up with the demand that is showing up.
Shayle Kann: Maybe I should know better, but I don’t think of the Netherlands as having been a big data center hub historically. Do you know?
Akshat Rathi: No, I don’t think so. I mean it certainly has some industry, a lot of it is oriented towards electricity, high end manufacturing. But no, I don’t think it’s a big data center hub,
Shayle Kann: Which I mean is even more concerning If you think about the context of there’s this big long queue to get grid connected in a market that hasn’t yet seen the boom in very large load interconnection requests that we’re seeing in lots of other places.
Akshat Rathi: There is the aspect of DERs, like distributed energy resources that is affecting the grids in Europe. So the Netherlands has the highest per capita rooftop solar in the world, which for a European country it’d be like, oh, that’s odd, but that’s what you get. You get cheap solar panels and you get some policy available and you’ll deploy a lot of solar panels, but it’s causing real problems at the transmission and distribution network locally because the grid has been built over the last a hundred years and many of the objects of the grid are much, much older. So that brings us to the next topic, which is transformers. Transformers are this object that sit between generation between a power plant and your home because they have to make sure that the voltage at which power is delivered is just right for the devices that you’re going to attach to it. And where do you land on whether transformers are overhyped under hyped, just right hyped?
Shayle Kann: So again, if the question is overhyped under hyped as a bottleneck to load growth to meeting load growth, then I think that they’re overhyped. I want to clarify, transformers are incredibly important and there is a bottleneck and the lead times are very long and I’ve witnessed it firsthand both from the utility side and the load side. It is a problem. I don’t think it is the rate limiting factor. Even today with long lead times, it’s an annoyance to get anything built, things will still get built and certainly those lead times for transformers are still shorter than they are for gas turbines. But I do think we also will see a lot of new transformer manufacturing capacity come online in the next few years. The lead times are going to come down and I think we’ll see a wave of new technology. I’m an investor in a company called Heron Power, which is building solid state power electronics. I think stuff like that is going to revolutionize that sector, but even in the absence of things like that, I don’t think it is going to be the thing that stops the load growth from getting met. So I’m going to say overhyped on that one.
Akshat Rathi: I would go under hyped if I look at the non data center crowd because transformers are needed for everything. And in my reporting I’ve come across many, many projects like housing projects that are completely on hold for 18 months because they’re missing this one object that they need before they can power the area. And so it is affecting a lot more people, but the people who can afford to pay for it can jump the queue and get the object, then yes, they can get there. And then on the manufacturing side, again, my reporting says these companies are very conservative, they will invest, but only if they have surety that there will be demand for transformers for 20 years or so, which they’re not yet. Sure there will be.
Shayle Kann: No, I totally agree with that. And it’s already evident in the fact that we’ve had these long lead times for transformers back to, I dunno, 2021, 2022. It’s not a new thing and it has been persistent for longer than I think a lot of people expected in part because of the conservatism of that industry who to be fair to them, they’ve gone through cycles before where they’ve overinvested and then been underutilized and so on. And so they’re reticent to do that. Again, I think that the expansion of capacity is not entirely going to come from the incumbents though I think there’s going to be a wave of upstart companies, whether they’re doing traditional oil filled transformers or solid states stuff like Heron is doing. I think they’re going to fill in a lot of the supply gap in the next few years, even if the Hitachis of the world expand capacity slower than you would want them to. Okay, so that’s bottlenecks. Let’s take a diversion for a second here. You had a thing that I have no context on, but you want to talk about this that’s relevant to my day job, which is you wanted to talk about VC as a for scaling climate tech. What do want to– you’re going to grill me on something here. I just don’t know what.
Akshat Rathi: I would happily grill you on many, many topics, but this one I wanted to put us on the hype or under hype because it’s your business, but from the perspective of venture capital helping scale climate solutions, I think VC is overhyped because that model might work in America and I don’t know if it’s working because there are not that many companies that have really been VC oriented big climate champions right now, but rest of the world are building climate solutions and a lot of those companies aren’t VC-backed. Your BYD wasn’t a VC-backed company while it became an electric car giant. So to me that is one model. It can work in certain cases and it’s not working in so many cases that perhaps it’s time to look at other forms of ideas that would allow maybe existing companies to pivot towards climate solutions, which also can happen.
Shayle Kann: I think what we’ve broadly seen historically is that venture capital, particularly venture capital in the US I will say plays an outsized role relative to the dollars that go into it plays an outsized role in getting new technologies into commercialization from the lab to the market. And usually there’s one or two pioneering companies that are venture backed that do that and are the first. So if you want to talk about BYD, what would BYD be if Tesla hadn’t been Tesla? It’s an interesting question. If there had never been a Tesla, would BYD still be what it is today? Would it have scaled as quickly or was the existence proof of a company like Tesla the thing that caused BYD and the Chinese government to deploy a lot of capital into it? You’ve seen versions of that I think a lot of times.
Akshat Rathi: Yeah. One other example would be CATL, which is the largest battery company. What would it be if LFP lithium iron phosphate had not been invented in America and then first commercialized by A123, which is a venture backed company
Shayle Kann: That’s right. Now that’s a good example of, there is a separate question that I think is a good question, which is do the investors, the venture investors and the companies that they invest in reap the full reward of that invention and commercialization And A123 is a perfect example of that company went public and then went bankrupt pretty quickly. So maybe the answer to that is no, although some early investors did make some money on it. So I don’t know that that is a different question and that’s one that I grapple with all the time. But if you’re just taking the big step back 30,000 foot ecosystem view, I still think it is true that again, relative to the dollars deployed because where are the dollars actually getting deployed? They’re getting in total volume. They’re either getting deployed into the BYDs and CATLs of the world or they’re getting deployed in infrastructure. The real money goes to building big solar projects and things like that. But on a sort of impact to dollars invested ratio, I would still claim venture capital plays an outsized role.
Akshat Rathi: I would just point back on one thing which is there’s a phrase that Dan Wang, this guy who wrote breakneck used, which I liked, which is America is good at going from zero to one creating something that didn’t exist. But China is good at going from one to hundred, really giving you the solution at the cheapest price possible. But a lot of that zero to one in America happens because of the level of science funding and the talent that it has and the basic sciences and the research which in the current administration is going to go down or is going down already. And so there is a risk that thing that VC enables, which is translation of this immense amount of basic science into a usable product becomes harder.
Shayle Kann: Yes, I agree with that and I think it is incumbent upon the US to do everything that we can to maintain that position as the part of the world that is best at going zero to one and then arguably competing for the one to 100 as well. But I don’t think it’s a foregone conclusion that we will. I’m saying historically it is clear to me that that is true. Looking forward, we’ve got work to do there.
Akshat Rathi: I have another weird one that I’ve picked for you, which is what do you think about the hype on the Paris agreement helping shape businesses towards climate solutions hype, under hype or
Shayle Kann: Just hyped? Right. So I don’t think I have a good answer to this one because to be totally honest, I don’t hear about or think about the Paris agreement at all. Basically zero. So maybe that tells you something. It’s certainly in my world it’s not hyped, I can tell you that, but I couldn’t tell you whether it should be hyped or not. Do you have a view, are there things that are downstream of the Paris agreement that are affecting my world that I just don’t know came from Paris? Or is it just sort of a, it’s there and it’s a big geopolitical thing but it’s not really affecting business?
Akshat Rathi: Yeah, I would say this is the bit, as a journalist that I find fascinating. I see many worlds and the Paris agreement actually works as I’ve seen across all these worlds. But some people have very strong views and other people have no views. So let me explain. In climate diplomacy Paris Agreement is this document that was agreed on in 2015 by all countries in the world, which is in principle voluntary, but sets a goal of 1.5 or two degrees Celsius warming that all countries must keep to. It was 25 years in the making. That’s how long it took to come to a conclusion. And then what you got was a volunteer agreement. And a lot of the people in diplomacy are happy and sad at the same time. We have something but it’s not good enough. And they think about it a lot. We meet at COP meetings every year, which we are going to do in Brazil next month in November at COP 30 and we’ll talk a lot more about those words and the people in that world continue to be frustrated by Paris. But Paris’s impact on businesses is actually quite big because it has become translated into government policy and then government policy gets translated into all forms of directions that businesses are taking, which they may not always explicitly tell you it is because of Paris. They’ll say it’s because of government policy and every government has its own policy, but its tentacles have far reaching impact even if most people don’t see the direct connection.
Shayle Kann: I believe that, and I also think probably I’m colored by the fact that I’m in the US where our relationship to Paris has been fraught and back and forth over the years as opposed to Europe where it’s been consistent and so probably the policies have had more time to take hold. But it is interesting your point that people either have very strong opinions about Paris or no opinions. I’m clearly in the latter camp there. Alright, we’re short on time, but I think we should do a quick grab bag of additional, we could just do a few technologies and decide whether we think they’re overhyped under hyped or hyped just right. Alright, so let’s start with a battery chemistry, sodium ion batteries, overhyped under hyped. Hyped, just right.
Akshat Rathi: So I know you’ve done a couple of episodes so you probably have a better, more informed view on this. My view is that as somebody who’s written about batteries for the last decade, getting new chemistries out to a commercial use case is really hard when companies do that, kudos to them. But given the pace at which lithium ion chemistries have fallen in price and the amount of manufacturing capacity that’s been built around the world, if I look at Bloomberg NEF projections, sodium ion will make an impact, but such a sliver even after 2030 years that I feel like today sodium ion is overhyped because people think it could make a big difference, but really it may not.
Shayle Kann: I think it’s hyped just right largely, first of all, I don’t think it’s that hyped to be honest. People talk about it, but I think for all the reasons you described and everybody having had the same history that you’re talking about, people are reticent to go all in on this is the next big battery chemistry apart from clickbaity articles. But I think there is a degree of hype that is warranted largely because it seems pretty clear that some of the big Chinese manufacturers, CATL included, are investing a lot in sodium ion and are actually deploying. I mean, your point about getting new battery technologies into the field is true. They’re doing it though in China. And so it’s coming. The question to me is sort of the one you’re alluding to, what portion of the market does it take up? And the last version of a big chemistry shift, which is a smaller chemistry shift than this one that we saw was the rise of LFP. And that has been a huge deal, huge deal. Will sodium ion be the next wave of the same type of a thing or is it going to be a more niche solution, lower energy density and so on? I don’t think we know that yet, but it’s coming from CATL and its cohort, so let’s just see what happens.
Akshat Rathi: The next one is advanced geothermal where you land on under hype hyped just right.
Shayle Kann: So in the US advanced geothermal is very hyped. I would say it’s hyped for a bunch of reasons. Some of them legitimate success of companies like Fervo Energy sort of pioneering it. But also there’s a political lens to that because our new administration, our Secretary of Energy in particular, Chris Wright is super bullish on geothermal in general. He likes geothermal and nuclear. And those are the two sort of overlapping clean energy things that I think he’s full throated in support of. And so as a result of that, it is highly hyped that may be warranted, let’s see where it goes. But it’s very early days. Fervo is hoping to have its first a hundred megawatts of its first big project online sometime next year. So I guess my argument here would be it’s somewhere in the hyped just right to maybe slightly overhyped stage in the US. I’m curious though from your more global perspective, the degree to which advanced geothermal has talked about.
Akshat Rathi: So this is one where typically the rest of the world is following the US on its hype cycle, and so clearly there’s a lot more talk about advanced geothermal because US has shown some success already and surely being able to apply shale drilling type technology could make many other parts of the world which don’t always have great geothermal resources, suddenly more valuable. The difficulty I feel like is that it’s overhyped because the level of other types of talent and infrastructure that you need to deliver on advanced geothermal exists in the US but will take a long time in other parts of the world to build. So engineers who can manage shale type drilling or a study of the subsurface that would allow you to do it in the right way, all of that just takes a long time. And I don’t think that expertise exists in the rest of the world quite as much. And so we are going to see not as many projects built as many people think there might be.
Shayle Kann: It’s an interesting point because one of the reasons that it is so attractive in the US is that we do have all of this expertise from oil and gas that is being leveraged for advanced geothermal. But of course we are a country that has that expertise, has the resources, has been drilling, has been doing horizontal directional drilling for a long time, invented it in fact. So yeah, that’s a good point. Okay, last one. Continuing on the same vein of technologies that secretary of Energy, Chris Wright likes advanced nuclear over hyped, under hyped, hyped, just right.
Akshat Rathi: Yeah. It’s got the similar vibe as advanced geothermal in that in principle, wouldn’t it be nice if we could build small modular nuclear reactors because then we could make many of them and try and then lower the price of nuclear, which has been going up and up and up in Europe and North America. And again, the hype is following on from America where countries like the UK are now asking Rolls-Royce to make a small modular reactor. But the reality is the only countries that have functioning civilian small modular reactors are Russia and China and the countries who have been building nuclear, not just domestically but also around the world are Russia and China
Shayle Kann: And South Korea, if you want to include,
Akshat Rathi: Oh, South Korea
Shayle Kann: APR-1400s, right?
Akshat Rathi: Agreed. Yeah. South Korea too. And so to suddenly imagine that a new technology will unlock nuclear in Europe and North America to me is overhyped.
Shayle Kann: I think there’s an interesting question we’re heading into in nuclear world, which is sort of between, I don’t know what to call advanced nuclear and not advanced nuclear, but let me just, I’ll frame up two groups. Group one says we have a couple of technologies that are kind of the front runners from large OEMs, so this would be the AP 1000 from Westinghouse and maybe the BWRX-300 from GE Hitachi, which is an SMR, that’s a 300 megawatt reactor. Those are the furthest along, they’re bankable OEMs. Forget all this other noise. We need to go deploy as many of those as possible. And then the other argument is there’s a whole bunch of new technologies coming from a whole raft of companies that could be deploying SMRs or micro reactors or whatever, and some of those need to go win as well. And I don’t think it’s clear yet which direction we head if either.
One thing I do worry about is that I personally think in the long run, nuclear probably ends up looking like gas turbines look today, which is in the gas turbine world, there are basically three OEMs that control 70, 75% of the market. It’s an oligopoly essentially, and I don’t see a really strong reason why it would be different in nuclear. So we need to get through this winnowing. We need to cull the herd a little bit to get to the point where we’re deploying enough number of individual reactors to get down that cost curve, and that’s going to be a messy process to get there. I guess my answer is that I think advanced nuclear, if I broadly define it, to include all of those things seems hyped about right to me, but I worry that we’re overhyping too many individual technologies reactor types companies relative to what we actually need to do in that market.
Akshat Rathi: Yeah, that’s an interesting one. I mean on gas turbines, yeah. It’s Siemens, GE, and Mitsubishi, which are the three giants to the extent where China has been trying to make a gas turbine manufacturing industry, and it’s not really succeeding because it’s just so specialized and the supply chains are so tight, and the supply chain also ends up being one where the same parts are used by jet engines, for example. So real complications, nuclear to me, it’s hard to see if it comes down to those three, especially with the kind of political layer attached to nuclear where transfer of fuel and which country can build in which country is tightly coordinated by the IAEA, the International Atomic Energy Agency, that makes it much harder for me to see just the sort of market forces that drove gas turbine M&A happening in nuclear.
Shayle Kann: Does that argue in what you’re saying for there actually being more OEMs than there are in gas turbines?
Akshat Rathi: I think there’ll be national champions and more of them, whereas Siemens, GE, and Mitsubishi are more than national champions. They assure their countries support them, but they also have such large customers in other countries.
Shayle Kann: It’s interesting, I could see an argument for what you’re describing, sort of pushing in the reverse direction, which is that actually it’s going to be getting through the gauntlet of being a nuclear reactor OEM is going to be so hard because of all the additional layers that even fewer companies are going to get through it. Adding the national lens to it maybe complicates it a little bit, but I could see that being an argument for maybe there aren’t three, maybe there’s really one or two, rather than there being 30.
Akshat Rathi: Well, you’re imagining a more peaceful world than I think we are going into, but I hope you’re right.
Shayle Kann: Alright, I think we covered a bunch of stuff here. This was fun. Thank you Akshat for doing this with me.
Akshat Rathi: Yeah, this is great fun. Thank you for suggesting the idea.
Shayle Kann: Akshat Rathi is a senior reporter at Bloomberg News and the host of the Zero Podcast. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today’s topics. Latitude is supported by Prelude Ventures. This episode was produced by Daniel Woldorff. Mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I’m Shayle Kann, and this is Catalyst.
