Recent announcements in the world of nuclear power might make you think that new nuclear technologies are close to deployment in North America. But look closely and you’ll find that progress is actually painfully slow, weighed down by regulatory challenges.

Today’s guest argues that all those rules and regulations need to be overhauled.In this episode, Shayle talks to Bret Kugelmass, CEO and founder of nuclear reactor developer Last Energy. He’s also the host of the podcast Titans of Nuclear. They cover topics like:

  • Small modular vs micro vs traditional reactors
  • The state of SMR and nuclear development in North America
  • Why utilities are disincentivized to build nuclear
  • Places that are currently seeing a lot of construction, like China and Poland
  • Building with existing components vs developing new designs
  • The U.S. Nuclear Regulatory Commission’s certification and licensing process
  • Overhauling the bureaucracy and the institutional design of the Commission itself

Recommended Resources:

  • Catalyst: Will advanced reactors solve nuclear’s problems?
  • Canary: Small modular nuclear reactors: The race is on to actually build them
  • Canary: A small modular nuclear reactor just got U.S. approval — a big milestone

Full Transcript:

SPEAKERS

Shayle Kann, Brett Kugelmass

Shayle Kann 

 This week, it’s fission, not fusion, but that’s splitting atoms. I’m Shayle Kann, I invest in revolutionary climate technologies at Energy Impact Partners. Welcome. So I usually feel like I have a pretty good bead on where the general market sentiment and momentum is with regard to any particular technology in climate tech. It’s one of my great strengths, if I may be so bold. But lately, I’ve actually had a hard time pinpointing what’s happening in the world of nuclear, specifically, nuclear fission, especially in the US, and even more especially with small modular reactors. On one hand, there have been some big milestones, it appears, among them the first ever SMR designed to be certified by the Nuclear Regulatory Commission. Another one where there’s a big commercial contract to deploy an SMR in Canada. On the other hand, other designs have been rejected, there have been a series of well-informed and pretty strong critiques of the Nuclear Regulatory Commission process. Oh, and that first project from the company whose design was was certified looks likely to cost a whole lot more than initial expectations, which has become a familiar story in nuclear. So it’s confusing. And it’s hard to tell what it means in terms of this market, and whether it’s really starting to hit a tipping point where we’re going to see a lot more nuclear built in the US or even globally. So let’s see if we can figure it out. For this one, I brought on Brett Kugelmass who is the CEO of Last Energy, which is a small modular nuclear tech company itself. But he’s also a chronicler of all things nuclear and a real student of the field. He has a whole podcast on it himself that’s called Titans of Nuclear that’s worth a listen. Before we get to it, I will add this: one of my favorite things about the nuclear industry is the opinions. They are prominent, and they are strong. And as you will hear, Brett is definitely an emblem of that. He throws some real grenades in this conversation. I don’t necessarily agree with all of them and you’ll probably hear that come through. And I suspect that given his opinions, and given how this industry is structured, we’ll have plenty of listeners who have their own views, some of which will diverge substantially. Those thoughts are always welcome. Listen to the end, if you’d like to get in touch with us if you can’t help yourself, which I’ve found to be true in every nuclear conversation. But at a minimum, I hope this conversation gives you a sense of what a strongly held opinion in small modular nuclear world sounds like. Here’s Brett. Brett, welcome to Catalyst.

Brett Kugelmass 

Yeah, thanks for having me.

Shayle Kann 

Let’s talk about small modular nuclear reactors. My suspicion is that most people who listen to this podcast have at least some passing familiarity with what SMRs are, but for everybody else’s benefit, and just to make sure we’re all on the same page, can you just run through a quick definition of SMRs as you think about it, and maybe just contextualize it a little bit in the in the broader nuclear fission world?

Brett Kugelmass 

Sure. Yeah. I’ll try to I’ll tell you what SMR should be theoretically and then the Frankenstein monstrosities that most of them have turned into as well. So if you look at the whole, like span of nuclear technologies you have, I mean, at some point, they came up with this generation 1, 2, 3, 4 stuff to help divide them up.

Shayle Kann 

I’ve always wondered where SMRs fit into the generation number nomenclature?

Brett Kugelmass 

I mean, I hate to criticize that generation nomenclature, because I think Todd Allen, who’s one of my mentors and the department head at University of Michigan, I think he helped come up with it, but I think it has run its course and doesn’t really make too much sense anymore. Now, you hear a lot of people talk about traditional reactors, and you know, maybe you could say some of them that were built, you know, 40 years ago or Gen2s, and then the ones that have been built in the last 10 years or more Gen3 pluses. But let’s just call them traditional reactors, irrespective of when they were built. And then there’s two other categories that people bandy about now, and that’s SMRs and then there’s advanced reactors. And the problem still with those categorizations is that they don’t really tell you that much because, you know, I was about to get into the SMRs, S stands for small, M stands for modular, and most of them that are thought of as the SMRs in this generation are neither small, some of them are bigger than the original reactors, and they’re not modular – they are using traditional construction techniques that maybe have little bitty bit of modularity built into them.

Shayle Kann 

Yeah, let’s let’s talk about let’s put it in megawatt turbines for a minute. So small – it’s in the eye of the beholder to some extent, right. So you, so what defines small to you? And then what are the size of some of the SMRs that are being designed right now?

Brett Kugelmass 

Yeah what I would think of as small as probably like less than 50 megawatts. You can think about like a megawatt per is like 1000 homes. So if I say 50 megawatts, you can think of oh, 50,000 homes in America that would power. And that’s what I would call small. But the industry started with small being like 200, or 300 megawatts, which is only slightly smaller than the original fleet of reactors that we built out, which was 500/600 megawatts. And now, those very models have climbed up to 400, 500, 700 megawatts, and they’re still calling themselves SMRs. And because some of the companies that have done that were originally affiliated with SMRs, it’s hard to use the word SMR for anything that small at this point.

Shayle Kann 

And the whole premise behind SMRs as a category, as I understand it was basically like, Look, if you build these reactors in a mechanism such that you can – they’re rinse and repeat, they’re more manufacturable than they are engineering projects, you can deploy them faster, the cost curve should be steeper, right? Instead of everything being one off you’re going to start to see the types of cost curves, learning curves that we’ve seen in all these other industries, like solar and batteries, and all this kind of stuff and it approaches that sort of a world. It’s hard to imagine that when you’re in the 500 megawatt plus scale,

Brett Kugelmass 

Exactly, exactly. I mean, the theory is correct. Like we should build small modular reactors, but we should actually build them small. And we should actually build a modular,

Shayle Kann 

So when we talk about small modular reactors for the next 40 minutes, or whatever it’s going to be, what definition do you want to use? Because what we want to talk about is what’s happening in this sector. But I think that is inclusive of some of this bigger stuff, right? Even if we don’t necessarily want to call it small modular anymore.

Brett Kugelmass 

I’d say most of the real projects, the things that actually have legs that have made their way through development, or permitting or licensing or contracting are the category of SMRs but they’re not really small, and they’re not really modular. So I don’t know what we should call them. Maybe we’ll just refer to specific companies names from this point forward instead of categories. And we can just kind of like run through what’s actually happening in the world.

Shayle Kann 

Yeah, I think we should do that. And we should, we should specify sizes as we’re talking about it, because it is a relevant metric. Alright, so let’s start by talking about the development of SMRs, or whatever we want to call that’s actually happening in the world. I think we’re gonna spend most of our time today focused on the US just because it’s where we are. And there’s some interesting activity to discuss, though. I suspect, you’ll tell me the US is probably not where most of the action is. So let’s let’s at least start with a global perspective. Where is where are SMRs getting developed and built globally? And how much?

Brett Kugelmass 

Well, there’s virtually nothing actually being built globally, anywhere, for anything other than the traditional reactors. There’s a lot of press announcements, there are companies building stuff that we can get to that later. And then everything else is very theoretical on paper, announcing MOUs, announcing partnerships with vendors or suppliers. But you know, people have maybe announced, you know, land deals, but not even really, none of them are really contracted there. I mean, almost everything in the new nuclear sector is just PR announcements with very little substance behind it.

Shayle Kann 

And you’re saying the new nuclear sector because there is nuclear getting built in the world, but it’s, you’re saying it’s traditional reactors. this is like what’s China building, for example? And so given that, you would think, Okay, well then, problem solved: SMRs. Let’s build smaller stuff that is modular. But as you just said, we’re not building any of that really yet. Why is that? Is it just the market is new? And we’re not at that stage yet? Or is that taking longer than it should be as well?

Brett Kugelmass 

They’re always building nuclear so that at any given time, they’ve got like, I don’t know, 10 or 20, things literally being built on your way. And I think they announced that they want to do hundreds more, and they probably will also. And then you’ve always got like 30 projects or so. I think maybe you know 50 now technically on paper where there’s literally cement being poured, equipment being installed. Vogel after 10-15 years is finally coming online in Georgia here in the US. You know, across the world, you have various states have gigawatt-scale reactors coming online finally, usually after 10-15 years construction. I mean, that is the main problem with the nuclear industry, people can, you know, wage all these criticisms or say that, “Oh, that doesn’t get built because people don’t like it,” it’s not true. The only reason that we don’t have 10 times as much nuclear, as we do today, both installed, but also being built is simply because the way that we have decided to build them is terrible. Just overly complex construction, like awful financial incentives, usually the backing by governments, which the industry insists upon, ends up removing all true commercial incentives and makes these projects just drag out forever and ever and ever.  Well, let me further divide up what the market actually looks like into all of the, let’s say, next generation projects. So you have, you know, I think what we’ve been referring to as SMRs. And this would be the category of like the GE x300 Project, NuScale, Rolls Royce, these are all traditional technology, for the most part, but at the 300 or 400-plus megawatt scale. And then you got maybe 50 different projects that are usually smaller, though some of them are also up to a gigawatt in size that use some sort of advanced quote, unquote, advanced technology, some different combination of fuel, chemistry, moderator, coolant, componentry. And those are your different categories. The ones that are most realistic, even by their own admission by the way, to be built in the next five to ten years, are the ones that use the traditional proven reactor technology, and don’t introduce some sort of physics, chemistry or material science innovation. And then all of those others, by their own admission, probably won’t come online until the mid 2030s, if ever.

Shayle Kann 

And that’s just a function of the state of the science and engineering of the new approaches, or is it something else?

Brett Kugelmass 

I think it’s something else, I mean, listen there, physics is great. Like I’m sure mathematically on paper, everything they say will work as they said. And by the way, we used to build all these like variety of technologies back in the 50s and 60s, like we built 50 different reactor types here in this country. I have no doubt that the reactor will work. It is the rest of the power plant that touches that reactor, and the components involved in the reactor itself, that when push comes to shove, when you actually build physical things in the real world, when it’s not just on paper, the littlest things trip you up. And then when you surround that with the bureaucracy and the inspection of the nuclear industry, that every little thing that’s off parameter settings, requires years of investigations and 1000 different people checking and looking at it to make any decision moving forward, it just kills projects. So let me give you an example. If you were to introduce even one even just one material science change, let’s say that because of your reactor physics or your reactor chemistry, your normal 316 stainless steel or 304 stainless steel doesn’t work. So you go and you work with a metallurgist, or you work with another company that has some other sort of steel alloy, and you get it to work, you get it to work in a lab. Great, Okay, when push comes to shove in reality, you’ve now got to develop welding codes, you need insurance standards around those welding codes, you need to train up a workforce that knows how to do those welding codes. And then they have to do every weld bead across millions of inches of welding perfectly. If there’s any screw up at any point, maybe five years down the road, that one little millimeter that they messed up is going to cause some corrosion issue, which will cause some pressure issue, which will cause some operational malfunction, which is going to take your plant down for years. So it’s like even one small change to chemistry and material science absolutely, fundamentally destroys your business proposition. And the utilities are not ignorant. They know this. They’ve been through this before. So it’s not just they’re an old conservative fuddy duddy industry, they insist we will not deploy a technology if it has any change to chemistry, material science, component industry and component innovation, period, end of story. And so that’s why I say it’s not the obvious reason why these next generation systems aren’t going to come online. It’s not it doesn’t have anything to do with the reactor physics. It has to do with the practical implementation.

Shayle Kann 

Okay, so given that and shifting entirely to North America now, I’d say there’s two announcements over the past few weeks that have gotten a fair amount of attention on a positive side. I think both related to as you said, this sort of using the traditional reactor in a new design that we’re calling SMRs whether or not we decide they should ultimately be SMRs. So one announcement is GE Hitachi, the other from NuScale. So I guess for each one, I’m gonna have you just walk through, like what the announcement is and what it means. And then and then I want to talk about what if anything, these portend for like, because I think the thing, the thing is industry is betting on is that at some point that dam breaks, and you go from having zero of these in construction, or operating to a whole bunch. And at some point, we end up back where we were in the 50s, where we have, you know, 50 reactor designs, or maybe one reactor design, but we’re doing 50 of them either way. At some point the dams got to break, because otherwise, one-off projects every decades is just not gonna cut it. So let’s talk about these two announcements and whether they provide any meaningful signal about what’s coming next. So we’ll start with GE Hitachi, can you just walk through that one?

Brett Kugelmass 

I mean, you tell me like I see these and I know the NuScale better but I see these announcements, and I just don’t see any substance to them whatsoever. And a lot of these are the same announcements that they recycle. Like, every two years, you’ll see these headlines and like, new people get excited about them. And then the old people are like, Wait a minute, I heard this and like nothing. There’s no substance to it. So you tell me what happened with GE. And I’ll tell you, I know a little bit about the NuScale one, but these are so insignificant from my perspective.

Shayle Kann 

So the GE one is GE Hitachi signed an agreement. Now what that agreement means I’ll admit to not knowing but they signed an agreement to build what they call an SMR in North America. It’s a commercial contract with Ontario Power Generation and two other companies. And It claims the project will be the first SMR deployed in North America, beating out NuScale, which we’re going to talk about in just a minute.

Brett Kugelmass 

Okay. Now I know you’re talking about it. Okay. So yeah, the OPG. So they held a contest a while back, and they were going to pick from three different technologies that submitted proposals, and they said they’re gonna move forward with them. This actually does have real substance to it. They are gonna move forward. I’m sure the utility will spend tens of millions of dollars doing feasibility studies. Where it goes from there, listen, I just don’t know, I don’t know how you’re ever going to get through the Canadian Nuclear regulator. I mean, on my podcast, Titans of nuclear, I interviewed the whole regulatory leadership there and they’re even more conservative than the US. And they want to work with us, which I think is a disaster. Like, the only thing worse than in terms of progress than one regulator looking at your design is to looking at at the same time. It just resorts to the lowest common denominator. They always say instead of getting straight answers, there was like, oh, talk to the other regulator. So I just, I don’t know, everything in nuclear progress comes down to regulations, and I just don’t see it happening. But it is that it is good progress that they got some commercial deal in place.

Shayle Kann 

Okay. And you’ve alluded to regulators, which is where the NuScale announcement comes in. And so the NuScale announcement is the NRC, the the Nuclear Regulatory Commission, which is the regulator in the United States, much maligned by the industry, I would say, licensed the first quote unquote, SMR ever. And…

Brett Kugelmass 

nope, nope, nope,

Shayle Kann 

…placing the first design…Okay, I already know I’m gonna get something wrong.

Brett Kugelmass 

Nope. No license, no license whatsoever. A license is actually something you can hang your hat on. They got a certificate. Do you know what a certificate is?

Shayle Kann 

I have a couple certificates. I suspect they’re not the same as what you’re describing. No,

Brett Kugelmass 

They’re the exact same as what I’m describing. So you know how when you finish your eighth grade Spelling Bee contest and they give you a certificate? That’s what it is, versus like a college degree. I mean the certificate has absolutely no legal standing. NuScale has done a great job….

Shayle Kann 

Wait, can you describe what it is? what did NuScale get?

Brett Kugelmass 

Nothing. Nothing. Zero

Shayle Kann 

This the first of this kind of nothing, right? Yes. Okay. And is it a precursor to something?

Brett Kugelmass 

Sure. Sure. Yeah. Okay. So is your eighth grade Spelling Bee certificate. It’s a precursor….and I’m not actually kidding here, they have not even started a license application. The license application is going to go on for five to 10 years. They’ll promise four and it’ll go on for five to 10 years, and it will cost them between $500 million and $1 billion dollars before they get to start building anything. And they haven’t even started that yet. The certificate is worth nothing.

Shayle Kann 

Is it a core part of the….actually maybe this is a better way to ask this question. Walk me through the NRC process as it exists today. Say your NuScale. So you’re somebody who’s developing an SMR reactor, new SMR reactor, or new system, what is the process that you have to go through? And then I guess in that context, we can say where does this milestone fall along the process.

Brett Kugelmass 

Yes. So if you want to build something you can go between, there’s two different schemes that you can go in front of the NRC for. The Part 50 or the Part 52, and these are just two different licensing paradigms that have been set up over the last few decades. And in order to get a license, you have to submit a license application. It is at minimum in the US it’s at minimum four years worth of work. No one has done it for less than $1 billion. No one has spent less than $1 billion in licensing fees and gotten one of these. And actually, no one in the entire history of the NRC has gone through the whole process from start to finish and turned on a reactor. In 48 years not a single entity has gone through this process.

Shayle Kann 

Can I just jump in for one sec. What is Vogel?

Brett Kugelmass 

Vogel is not turned on yet. When Vogel gets turned on it will be the first in all of human history to have gotten start to finish through the NRC licensing process. Every single other nuclear installation in this country was grandfathered in from the Atomic Energy Commission, the predecessor agency to the NRC. So part 50, part 52 license – several companies have gone through it and spent a billion dollars including Westinghouse, GE, EDF, few others, they spent a billion dollars and they never actually built anything because it took too long and the projects just became too expensive by that point. But Vogel will be the first.

Shayle Kann 

And so then, as you’re going through that process, what is certification of a design? Where is that in the process?

Brett Kugelmass 

Certification is a, like we said, it’s a certificate. It’s like a piece of paper that says congratulations, you’re proficient. You know, we’ve looked at your work, and we think it’s great. And it makes everyone feel happy and gives investors confidence. But you’re still at least five hundred million dollars and 4 to 10 years away from actually getting a license, which allows you to build and turn on a reactor.

Shayle Kann 

And do you attach any significance to the fact that this was the first SMR designed to get certified?

Brett Kugelmass 

It’s not small, it’s not modular,

Shayle Kann 

You just don’t want to call it an SMR.

Brett Kugelmass 

I think it’s great that they’re doing it. I think they’re pushing through legal malaise and regulatory malaise. I think that’s always a good thing. I think they’re bringing a lot of excitement and interest into the space. They have a they are bringing forth innovations, for sure. So I think this is all good. It’s just not like the hard part is getting a license. And they haven’t even started that yet.

Shayle Kann 

And as you say, it’s not small and it’s not modular. Maybe helped me dig into that a little bit. As I understand it, new skills reactor is like a 50 megawatt reactor.

Brett Kugelmass 

Not anymore. So that’s that’s the other thing that we forgot to bring up: the things that they got the certificate for are deprecated designs. So everything that you’re seeing is for something they submitted years and years and years ago, and they’ve totally thrown in the trash at this point also. So it’s for a 50 megawatt reactor – they’re not building a 50 megawatt reactor, they have no intention of ever doing that. They’ve shifted up to a 77 megawatt reactor. And they gotta go through this whole process again, even just to get a certificate, which still has no weight.

Shayle Kann 

So they’re going to have to recertify this new reactor, basically,

Brett Kugelmass 

Or they just go straight to a license. Once again, the certificate thing has no legal merit. It’s just a way to spend time with the regulator to get them comfortable and familiar with your technology. Like I said, I still think it’s a good thing that they’re doing it, but it doesn’t show the progress as they’re trying to advertise. That’s more of a marketing hiccup on their end, or maybe not even hiccup, a good marketing strategy on their end. But if you talk to any of their technical folks, their engineers, none of them will tell you what you’re seeing online.

Shayle Kann 

The NRC process is also an area where there’s been news, news and opinions and all this kind of stuff. I’m sure you have your own. At some point congress or the president said to the NRC, “we need you to overhaul your process” for exactly the reason you described, nobody’s ever gone through it end to end, it costs a billion dollars and we need nuclear. So what was that directive? And then what has the NRC done in response?

Brett Kugelmass 

Yeah, so this is a weird thing because most of these types of agencies sit in the executive branch. When the NRC was created in 1975, it was actually set up as an independent agency. So the president can’t really tell them to do anything. So it has to be Congress. Congress passed a law saying they had to clean up their act, because once again – by the way, I just want to say, I’m not criticizing the people at the NRC. The people are smart and great and I’ve spoken to a lot of them. And I think they’re, you know, in the meanwhile, all my criticisms are against the institution itself. And a lot of these seems critiques could be held against many government institutions, not just the NRC uniquely, but we’ll focus on the NRC here. Alright, so Congress set them up, independent agency president can’t tell them what to do. Congress has to tell them what to do. Congress told them to expedite it and they didn’t. Instead, they wanted them to streamline it, especially for these newer reactor designs. And they took all of the old regulations, the regulations that drive up the costs to $1 billion, make it take 10 years. And then they added 1200 pages of new regulations.

Shayle Kann 

And do you have a sense of how and why that happened? I mean, again, to your point…

Brett Kugelmass 

It’s an institutional problem. It’s not a people problem is an institutional problem.

Shayle Kann 

Can you just say more? what does that mean?

Brett Kugelmass 

So it was set up as a single mandate organization, not a dual mandate organization. So dual mandate organizations like the FDA, we know penicillin kills some people, but we’re able to look at the cost benefit analysis and say antibiotics are better than they are worse so you’re allowed to commercialize penicillin and other antibiotics. And they’re allowed to consider that. The NRC, the way it set up was a single minded organization safety, not considering any other externalities. So if there isn’t even the remote chance that one person might get injured in a million years, they are legally not allowed to push your design forth. Like they can only say no, institutionally. That’s how it set up.

Shayle Kann 

So what you’re saying is that in order for things to really change, you know, Congress telling the NRC to expedite won’t matter if the NRC remains, by design, entirely focused on safety with no other considerations. So what would have to change is the institution of the NRC. Congress would have to say, actually, we’re going to change the mandate of the NRC,

Brett Kugelmass 

I think you’d have to overhaul so much more, because there’s like other cultural issues, too. I mean, there’s another thing like so there’s like rulemakings, and everything that have been built up over time. And so you’d have to pick apart all those too. Any single person, you could be an administrative assistant at the NRC at any point, can raise a safety flag on any project and shut that project down for two years. This could be someone with no technical training whatsoever. If they come across a piece of paper on anyone’s desk anywhere in the NRC and they say, this doesn’t look safe to me – remember, no technical training whatsoever – that can set off a two year investigation that could cost the company, hundreds of millions of dollars and delay projects, that is written into the institution itself. So yeah, you’d need a serious overhaul or branching or splitting off or a new agency being created. There are a lot of ways you could do this. But it’s going to have to be drastic.

Shayle Kann 

Okay, so given all of that, like, let’s step back, it seems like what you’re saying is that the recent sort of small raft of announcements that we’ve seen, maybe there’s some others that you think are important that I haven’t alluded to, besides this GE Hitachi commercial agreement and the NuScale, design certification. It sounds like you’re saying we shouldn’t take a whole lot from those, like, it’s not a signal of the momentum suddenly building where it wasn’t before or the dam breaking whatever metaphor you want to use.

Brett Kugelmass 

I think the momentum is building for many reasons. But yeah, I wouldn’t take those particular announcements as a signal.

Shayle Kann 

Okay, so how is the momentum building?

Brett Kugelmass 

So social and political support for nuclear has never been stronger. It is coming out of the woodworks, like from all different angles. People who have never even spoken to anyone from the nuclear industry are putting their like political and like careers on the line in support for nuclear. I think it’s probably a combination of social forces and most of this had a tipping point about two years ago, where all of a sudden, it became like part of the zeitgeist, it became in vogue to say you were in support of nuclear. I think a lot of this has to do a lot more with energy security, and then even potential climate concerns as well, where people are just not seeing the progress that they were promised across other technologies and they’re seeing many of the downsides and are all of a sudden, like, naturally revisiting their previous notions, their misconceptions around nuclear and just giving it a tabula rasa like, Okay, ready to go, why don’t we explore this. And then once you hear like one or two people in your ecosystem say it a few forward-thinking people that you affiliate with maybe on a few other topics as well, it becomes more ok for you to then say it in the public sphere. And then this builds and builds and builds upon itself. And yeah, it hit a tipping point a couple years ago. So now you can go almost anywhere in the world, and most places, even in this country, and say, Hey, I think we should build more nuclear and people say, I agree, let’s do it. Why aren’t we doing it?

Shayle Kann 

So I agree with you anecdotally on that. I do think that their public sentiment seems to have have turned, I guess the question is, what does that manifest in? Like, what does that need to turn into in order to shift from like, now we all publicly agree that we need to build more nuclear, but we still have this intractable problem of getting reactors certified and built?

Brett Kugelmass 

Oh, we don’t have that problem. We have that problem in the US globally. We do not have that problem. Like with money.

Shayle Kann 

I mean, in the US?

Brett Kugelmass 

Well, I don’t know. I think that’s probably an intractable problem here.

Shayle Kann 

Interesting. Okay. So your outlook is just fundamentally bearish on nuclear in the US specifically and bullish in the rest of the world?

Brett Kugelmass 

Once again, I do think once it’s proven out in the rest of the world I think things will drastically change here just because of proof points and examples abroad, and we’re gonna look like idiots. And there’s a lot of pride that we have as Americans about being the first and being the best and I think that can definitely overwhelm some, like, institutional inertia that needs to be overcome.

Shayle Kann 

Where do you look at as the bastion of the next-gen nuclear in the world?

Brett Kugelmass 

I think the most activity we’ve seen anywhere, like once again, including with our own companies in Poland. You know, there’s like a confluence of circumstances there between sustained political and social support, their energy security issues bordering Ukraine are ever present, the fact that it’s mostly coal, but yet still part of the EU and so they’re being like penalized for having so much coal, but they also want to shift off coal too. The fact that it is an incredibly productive and growing and industrializing country. I think Poland will probably lead the way in terms – and they’ve got like, four major projects underway: Westinghouse building gigawatts of reactors out there, NuScale paired up with KGHM, the copper company, GE paired up with Synthos the chemical company, and then my company Last Energy. I mean, we’ve announced almost 20 deals out there now that we’ve signed in or are starting development activities on…

Shayle Kann 

Let’s talk about cost for a minute. You know, this is one of these areas like so the cost of nuclear of nuclear power, as delivered is all over the place. From what I can tell there are places where you’re like, oh, nuclear is super cheap energy, and then there’s other places and situations where nuclear turns out to be quite expensive energy. Oftentimes, you hear folks point to the regulatory processes a big part of the reason for that both the literal cost of getting certification for a reactor, but also the cost that that the regulatory process imposes on the system itself and the engineering costs and so on. Is that your view as well that like the the fundamental driver of high cost nuclear is regulatory? Or do you think that it is a function of the reactor designs and the systems themselves?

Brett Kugelmass 

Both. So I would say the proximate cause is regulatory but the root cause are market incentives driven by the industry, the nuclear industry itself to self-impose those costs, mostly in a rent-seeking behavior and acting through regulatory capture. I can break that down if you’d like. So we go back in history, these plants used to be as cheap as you can imagine. And by the way these are plants that are still operating today. So my favorite examples, point each one into, you know, they’re each about 550 megawatts. So you know, you have an 1100 megawatt – a gigawatt system – broken down by two plants, that in 2020 dollars, was $733 million. That’s less than $1,000 a kilowatt. That is your capex. And we already know that the nuclear opex is already cheaper because your fuel as a percentage of energy is negligible. And then now you also have the capex being like the cheapest in the world. So here we have real – those plants in Wisconsin are still operating today. So here we have real living proof. Oh, and they were first of a kind, right? So no real experience: no real experience, they built two plants. They were some of the best ever built in three years. We could just build those, by the way. If we just like went into those facilities, looked at the blueprints and schematics and built them exactly how they were built, we would decarbonize the entire planet. Every human being would have energy that’s like five times cheaper than they’re paying today. And that is with 1968 technology that is still operating today.

Shayle Kann 

What does that roughly translate to until in terms of cost per kilowatt hour in terms of LCOE?

Brett Kugelmass 

Well, it depends. And this is where some of that regulatory capture rent-seeking behavior has driven up the operational costs far beyond where they need to be. But if you just built those and also had like, 1960s operating costs, you’re talking like $15 a megawatt hour, or 1.5 cents a kilowatt hour? You can’t get better than that.

Shayle Kann 

Okay, so you’re saying there’s precedent historically, for very, very cheap nuclear that works for a long time? This is I guess one of the things I don’t really understand, though. I don’t see any of the new designs even targeting $1,000 A kilowatt. So why?

Brett Kugelmass 

Because new chemistry, new material science, new physics is extremely expensive.

Shayle Kann 

Okay, so why can’t we build more of the old stuff at that price?

Brett Kugelmass 

We should, we absolutely should, we should build 10,000 Point Beach ones and twos.

Shayle Kann 

But we’re not because – even forget the US regulatory stuff, right? Think globally.

Brett Kugelmass 

The industry incumbents starting in 1968 and working all the way up to 1978 because of the way that the market was set up, they weren’t allowed to get paid based on cheap and efficient power plant design. They actually got Imbert reimbursed more if they would build it slow and expensive, because the way the market was set up on this cost plus model. And so that went on in this country till the 90s. But what you saw from 1968 to 1978, was a ten-fold increase in price for the exact same product delivered, because that was a ten-fold increase in the profit that the companies were allowed to make if if the public utility Commission’s essentially lock you in at a fixed profit, like I’m gonna say, like 5%, or 10%, or whatever you build. So that that is how market incentives and market design influenced the behavior and the incumbents. And then it got out of control by 1978 – by the way, this is a year before Three Mile Island – 200 contracts were canceled. So the nuclear industry was absolutely destroyed. And then the industry actually transformed from companies that build power plants to companies that sell safety systems to existing power plants, cannibalizing their economics, and that rent-seeking behavior. And so all you have now, all the incumbents, the people with the IP or the people theoretically, with the IP, or the knowledge to build, these plants don’t want to build plants cheap, because that’s not what they were trained to do. And most of them are dead anyway, people actually had any experience building plants. So we killed an industry there market design, and then the industry has been stagnated for 40 years. And so even though we have living proof of like the perfect design in front of us, we can’t get out of our own way.

Shayle Kann 

Alright, so what’s gonna happen, like paint me, you know, most likely next five/ten years in nuclear development?

Brett Kugelmass 

Yeah, so I’ll tell you what we’re doing and then I just hope a bunch of people will copy us and then it’ll just accelerate how this all plays out. But we’re doing is we’re taking that standard design, no new innovation on components. No new change the material science, physics, chemistry, like we learned our lessons from like industry professionals who know about operating power plants, and then we just shrunk it down as small as we could so we could build it actually modularly, build it in a factory setting. There will still be cost overruns on the first few units but because we’ve reduced the capex to under $100 million, those are tolerable overruns and then as you get better and build more, the costs come down and down. And then you get into a habit of building thousands of really small, in our case, 20-megawatt power plants. And then you get to increase the power after you’ve proven yourself after you’ve built one hundred 20-megawatt power plants you can build one hundred 200-megawatt power plants, then maybe even one hundred 2-gigawatt power plants. And so this is like our like defibrillator to the industry. This is our plan to resuscitate an industry that is hanging on for dear life and get everything back on the right track.

Shayle Kann 

Okay, so final question for you. We’ve been talking about traditional reactors, we’ve been talking about quote unquote, small modular reactors, all of those still in the tens of megawatts scale. There is another category that it says probably even earlier stage, which I guess some people call micro reactors, which are nuclear reactors that are very small and maybe better suited for off-grid applications, defense applications, some of them are sort of planning on behind the meter applications on the grid in the long term. We’re gonna sit in this whole universe and is there any reason to think that their regulatory pathway would be any cheaper any different from from the rest?

Brett Kugelmass 

Yeah, so that’s what we’re calling ourselves now, because the term SMR was just like so bastardized by these large, not modular projects, we have decided to adopt the other terminology micro reactors, which you brought up. Most other micro reactors use some sort of new chemistry, if you will, material science, a new fundamentally new reactor and then can go even much, much smaller, maybe down to like one megawatt, but some are up to 10, or 20 – 20 is our size. And yes, many of those applications I think are great. And I think it’s a great way to break into the market too, whether it’s remote or defense, because the energy costs that are higher, like you can sell your power for higher, which means that even though you’re smaller, and might not have the same economies of scale of size, that’s Okay, you can still like keep a pretty good profit margin. So I think yeah, micro reactors are a great path to go, and then you know, our differentiator is simply that we’re the only micro reactor company using proven technology.

Shayle Kann 

All right, Brett, let’s talk about in nuclear world. You have a whole podcast on it. So obviously, you found plenty to talk about, but this was fun. Thank you so much for doing it.

Brett Kugelmass 

Thank you for having me. Glad to shed some light on what’s happening around the world.

Shayle Kann 

Brett Kugelmass is the CEO of Last Energy. As always, send us your questions, or in this case your missives about nuclear. Or tell us what else we should cover on this show. You can leave us a voicemail:

SPEAKERS

Shayle Kann, Bret Kugelmass

Shayle Kann 

 This week, it’s fission, not fusion, but that’s splitting atoms. I’m Shayle Kann, I invest in revolutionary climate technologies at Energy Impact Partners. Welcome. So I usually feel like I have a pretty good bead on where the general market sentiment and momentum is with regard to any particular technology in climate tech. It’s one of my great strengths, if I may be so bold. But lately, I’ve actually had a hard time pinpointing what’s happening in the world of nuclear, specifically, nuclear fission, especially in the US, and even more especially with small modular reactors. On one hand, there have been some big milestones, it appears, among them the first ever SMR designed to be certified by the Nuclear Regulatory Commission. Another one where there’s a big commercial contract to deploy an SMR in Canada. On the other hand, other designs have been rejected, there have been a series of well-informed and pretty strong critiques of the Nuclear Regulatory Commission process. Oh, and that first project from the company whose design was was certified looks likely to cost a whole lot more than initial expectations, which has become a familiar story in nuclear. So it’s confusing. And it’s hard to tell what it means in terms of this market, and whether it’s really starting to hit a tipping point where we’re going to see a lot more nuclear built in the US or even globally. So let’s see if we can figure it out. For this one, I brought on Bret Kugelmass who is the CEO of Last Energy, which is a small modular nuclear tech company itself. But he’s also a chronicler of all things nuclear and a real student of the field. He has a whole podcast on it himself that’s called Titans of Nuclear that’s worth a listen. Before we get to it, I will add this: one of my favorite things about the nuclear industry is the opinions. They are prominent, and they are strong. And as you will hear, Bret is definitely an emblem of that. He throws some real grenades in this conversation. I don’t necessarily agree with all of them and you’ll probably hear that come through. And I suspect that given his opinions, and given how this industry is structured, we’ll have plenty of listeners who have their own views, some of which will diverge substantially. Those thoughts are always welcome. Listen to the end, if you’d like to get in touch with us if you can’t help yourself, which I’ve found to be true in every nuclear conversation. But at a minimum, I hope this conversation gives you a sense of what a strongly held opinion in small modular nuclear world sounds like. Here’s Bret. Bret, welcome to Catalyst.

Bret Kugelmass 

Yeah, thanks for having me.

Shayle Kann 

Let’s talk about small modular nuclear reactors. My suspicion is that most people who listen to this podcast have at least some passing familiarity with what SMRs are, but for everybody else’s benefit, and just to make sure we’re all on the same page, can you just run through a quick definition of SMRs as you think about it, and maybe just contextualize it a little bit in the in the broader nuclear fission world?

Bret Kugelmass 

Sure. Yeah. I’ll try to I’ll tell you what SMR should be theoretically and then the Frankenstein monstrosities that most of them have turned into as well. So if you look at the whole, like span of nuclear technologies you have, I mean, at some point, they came up with this generation 1, 2, 3, 4 stuff to help divide them up.

Shayle Kann 

I’ve always wondered where SMRs fit into the generation number nomenclature?

Bret Kugelmass 

I mean, I hate to criticize that generation nomenclature, because I think Todd Allen, who’s one of my mentors and the department head at University of Michigan, I think he helped come up with it, but I think it has run its course and doesn’t really make too much sense anymore. Now, you hear a lot of people talk about traditional reactors, and you know, maybe you could say some of them that were built, you know, 40 years ago or Gen2s, and then the ones that have been built in the last 10 years or more Gen3 pluses. But let’s just call them traditional reactors, irrespective of when they were built. And then there’s two other categories that people bandy about now, and that’s SMRs and then there’s advanced reactors. And the problem still with those categorizations is that they don’t really tell you that much because, you know, I was about to get into the SMRs, S stands for small, M stands for modular, and most of them that are thought of as the SMRs in this generation are neither small, some of them are bigger than the original reactors, and they’re not modular – they are using traditional construction techniques that maybe have little bitty bit of modularity built into them.

Shayle Kann 

Yeah, let’s let’s talk about let’s put it in megawatt turbines for a minute. So small – it’s in the eye of the beholder to some extent, right. So you, so what defines small to you? And then what are the size of some of the SMRs that are being designed right now?

Bret Kugelmass 

Yeah what I would think of as small as probably like less than 50 megawatts. You can think about like a megawatt per is like 1000 homes. So if I say 50 megawatts, you can think of oh, 50,000 homes in America that would power. And that’s what I would call small. But the industry started with small being like 200, or 300 megawatts, which is only slightly smaller than the original fleet of reactors that we built out, which was 500/600 megawatts. And now, those very models have climbed up to 400, 500, 700 megawatts, and they’re still calling themselves SMRs. And because some of the companies that have done that were originally affiliated with SMRs, it’s hard to use the word SMR for anything that small at this point.

Shayle Kann 

And the whole premise behind SMRs as a category, as I understand it was basically like, Look, if you build these reactors in a mechanism such that you can – they’re rinse and repeat, they’re more manufacturable than they are engineering projects, you can deploy them faster, the cost curve should be steeper, right? Instead of everything being one off you’re going to start to see the types of cost curves, learning curves that we’ve seen in all these other industries, like solar and batteries, and all this kind of stuff and it approaches that sort of a world. It’s hard to imagine that when you’re in the 500 megawatt plus scale,

Bret Kugelmass 

Exactly, exactly. I mean, the theory is correct. Like we should build small modular reactors, but we should actually build them small. And we should actually build a modular,

Shayle Kann 

So when we talk about small modular reactors for the next 40 minutes, or whatever it’s going to be, what definition do you want to use? Because what we want to talk about is what’s happening in this sector. But I think that is inclusive of some of this bigger stuff, right? Even if we don’t necessarily want to call it small modular anymore.

Bret Kugelmass 

I’d say most of the real projects, the things that actually have legs that have made their way through development, or permitting or licensing or contracting are the category of SMRs but they’re not really small, and they’re not really modular. So I don’t know what we should call them. Maybe we’ll just refer to specific companies names from this point forward instead of categories. And we can just kind of like run through what’s actually happening in the world.

Shayle Kann 

Yeah, I think we should do that. And we should, we should specify sizes as we’re talking about it, because it is a relevant metric. Alright, so let’s start by talking about the development of SMRs, or whatever we want to call that’s actually happening in the world. I think we’re gonna spend most of our time today focused on the US just because it’s where we are. And there’s some interesting activity to discuss, though. I suspect, you’ll tell me the US is probably not where most of the action is. So let’s let’s at least start with a global perspective. Where is where are SMRs getting developed and built globally? And how much?

Bret Kugelmass 

Well, there’s virtually nothing actually being built globally, anywhere, for anything other than the traditional reactors. There’s a lot of press announcements, there are companies building stuff that we can get to that later. And then everything else is very theoretical on paper, announcing MOUs, announcing partnerships with vendors or suppliers. But you know, people have maybe announced, you know, land deals, but not even really, none of them are really contracted there. I mean, almost everything in the new nuclear sector is just PR announcements with very little substance behind it.

Shayle Kann 

And you’re saying the new nuclear sector because there is nuclear getting built in the world, but it’s, you’re saying it’s traditional reactors. this is like what’s China building, for example? And so given that, you would think, Okay, well then, problem solved: SMRs. Let’s build smaller stuff that is modular. But as you just said, we’re not building any of that really yet. Why is that? Is it just the market is new? And we’re not at that stage yet? Or is that taking longer than it should be as well?

Bret Kugelmass 

They’re always building nuclear so that at any given time, they’ve got like, I don’t know, 10 or 20, things literally being built on your way. And I think they announced that they want to do hundreds more, and they probably will also. And then you’ve always got like 30 projects or so. I think maybe you know 50 now technically on paper where there’s literally cement being poured, equipment being installed. Vogel after 10-15 years is finally coming online in Georgia here in the US. You know, across the world, you have various states have gigawatt-scale reactors coming online finally, usually after 10-15 years construction. I mean, that is the main problem with the nuclear industry, people can, you know, wage all these criticisms or say that, “Oh, that doesn’t get built because people don’t like it,” it’s not true. The only reason that we don’t have 10 times as much nuclear, as we do today, both installed, but also being built is simply because the way that we have decided to build them is terrible. Just overly complex construction, like awful financial incentives, usually the backing by governments, which the industry insists upon, ends up removing all true commercial incentives and makes these projects just drag out forever and ever and ever.  Well, let me further divide up what the market actually looks like into all of the, let’s say, next generation projects. So you have, you know, I think what we’ve been referring to as SMRs. And this would be the category of like the GE x300 Project, NuScale, Rolls Royce, these are all traditional technology, for the most part, but at the 300 or 400-plus megawatt scale. And then you got maybe 50 different projects that are usually smaller, though some of them are also up to a gigawatt in size that use some sort of advanced quote, unquote, advanced technology, some different combination of fuel, chemistry, moderator, coolant, componentry. And those are your different categories. The ones that are most realistic, even by their own admission by the way, to be built in the next five to ten years, are the ones that use the traditional proven reactor technology, and don’t introduce some sort of physics, chemistry or material science innovation. And then all of those others, by their own admission, probably won’t come online until the mid 2030s, if ever.

Shayle Kann 

And that’s just a function of the state of the science and engineering of the new approaches, or is it something else?

Bret Kugelmass 

I think it’s something else, I mean, listen there, physics is great. Like I’m sure mathematically on paper, everything they say will work as they said. And by the way, we used to build all these like variety of technologies back in the 50s and 60s, like we built 50 different reactor types here in this country. I have no doubt that the reactor will work. It is the rest of the power plant that touches that reactor, and the components involved in the reactor itself, that when push comes to shove, when you actually build physical things in the real world, when it’s not just on paper, the littlest things trip you up. And then when you surround that with the bureaucracy and the inspection of the nuclear industry, that every little thing that’s off parameter settings, requires years of investigations and 1000 different people checking and looking at it to make any decision moving forward, it just kills projects. So let me give you an example. If you were to introduce even one even just one material science change, let’s say that because of your reactor physics or your reactor chemistry, your normal 316 stainless steel or 304 stainless steel doesn’t work. So you go and you work with a metallurgist, or you work with another company that has some other sort of steel alloy, and you get it to work, you get it to work in a lab. Great, Okay, when push comes to shove in reality, you’ve now got to develop welding codes, you need insurance standards around those welding codes, you need to train up a workforce that knows how to do those welding codes. And then they have to do every weld bead across millions of inches of welding perfectly. If there’s any screw up at any point, maybe five years down the road, that one little millimeter that they messed up is going to cause some corrosion issue, which will cause some pressure issue, which will cause some operational malfunction, which is going to take your plant down for years. So it’s like even one small change to chemistry and material science absolutely, fundamentally destroys your business proposition. And the utilities are not ignorant. They know this. They’ve been through this before. So it’s not just they’re an old conservative fuddy duddy industry, they insist we will not deploy a technology if it has any change to chemistry, material science, component industry and component innovation, period, end of story. And so that’s why I say it’s not the obvious reason why these next generation systems aren’t going to come online. It’s not it doesn’t have anything to do with the reactor physics. It has to do with the practical implementation.

Shayle Kann 

Okay, so given that and shifting entirely to North America now, I’d say there’s two announcements over the past few weeks that have gotten a fair amount of attention on a positive side. I think both related to as you said, this sort of using the traditional reactor in a new design that we’re calling SMRs whether or not we decide they should ultimately be SMRs. So one announcement is GE Hitachi, the other from NuScale. So I guess for each one, I’m gonna have you just walk through, like what the announcement is and what it means. And then and then I want to talk about what if anything, these portend for like, because I think the thing, the thing is industry is betting on is that at some point that dam breaks, and you go from having zero of these in construction, or operating to a whole bunch. And at some point, we end up back where we were in the 50s, where we have, you know, 50 reactor designs, or maybe one reactor design, but we’re doing 50 of them either way. At some point the dams got to break, because otherwise, one-off projects every decades is just not gonna cut it. So let’s talk about these two announcements and whether they provide any meaningful signal about what’s coming next. So we’ll start with GE Hitachi, can you just walk through that one?

Bret Kugelmass 

I mean, you tell me like I see these and I know the NuScale better but I see these announcements, and I just don’t see any substance to them whatsoever. And a lot of these are the same announcements that they recycle. Like, every two years, you’ll see these headlines and like, new people get excited about them. And then the old people are like, Wait a minute, I heard this and like nothing. There’s no substance to it. So you tell me what happened with GE. And I’ll tell you, I know a little bit about the NuScale one, but these are so insignificant from my perspective.

Shayle Kann 

So the GE one is GE Hitachi signed an agreement. Now what that agreement means I’ll admit to not knowing but they signed an agreement to build what they call an SMR in North America. It’s a commercial contract with Ontario Power Generation and two other companies. And It claims the project will be the first SMR deployed in North America, beating out NuScale, which we’re going to talk about in just a minute.

Bret Kugelmass 

Okay. Now I know you’re talking about it. Okay. So yeah, the OPG. So they held a contest a while back, and they were going to pick from three different technologies that submitted proposals, and they said they’re gonna move forward with them. This actually does have real substance to it. They are gonna move forward. I’m sure the utility will spend tens of millions of dollars doing feasibility studies. Where it goes from there, listen, I just don’t know, I don’t know how you’re ever going to get through the Canadian Nuclear regulator. I mean, on my podcast, Titans of nuclear, I interviewed the whole regulatory leadership there and they’re even more conservative than the US. And they want to work with us, which I think is a disaster. Like, the only thing worse than in terms of progress than one regulator looking at your design is to looking at at the same time. It just resorts to the lowest common denominator. They always say instead of getting straight answers, there was like, oh, talk to the other regulator. So I just, I don’t know, everything in nuclear progress comes down to regulations, and I just don’t see it happening. But it is that it is good progress that they got some commercial deal in place.

Shayle Kann 

Okay. And you’ve alluded to regulators, which is where the NuScale announcement comes in. And so the NuScale announcement is the NRC, the the Nuclear Regulatory Commission, which is the regulator in the United States, much maligned by the industry, I would say, licensed the first quote unquote, SMR ever. And…

Bret Kugelmass 

nope, nope, nope,

Shayle Kann 

…placing the first design…Okay, I already know I’m gonna get something wrong.

Bret Kugelmass 

Nope. No license, no license whatsoever. A license is actually something you can hang your hat on. They got a certificate. Do you know what a certificate is?

Shayle Kann 

I have a couple certificates. I suspect they’re not the same as what you’re describing. No,

Bret Kugelmass 

They’re the exact same as what I’m describing. So you know how when you finish your eighth grade Spelling Bee contest and they give you a certificate? That’s what it is, versus like a college degree. I mean the certificate has absolutely no legal standing. NuScale has done a great job….

Shayle Kann 

Wait, can you describe what it is? what did NuScale get?

Bret Kugelmass 

Nothing. Nothing. Zero

Shayle Kann 

This the first of this kind of nothing, right? Yes. Okay. And is it a precursor to something?

Bret Kugelmass 

Sure. Sure. Yeah. Okay. So is your eighth grade Spelling Bee certificate. It’s a precursor….and I’m not actually kidding here, they have not even started a license application. The license application is going to go on for five to 10 years. They’ll promise four and it’ll go on for five to 10 years, and it will cost them between $500 million and $1 billion dollars before they get to start building anything. And they haven’t even started that yet. The certificate is worth nothing.

Shayle Kann 

Is it a core part of the….actually maybe this is a better way to ask this question. Walk me through the NRC process as it exists today. Say your NuScale. So you’re somebody who’s developing an SMR reactor, new SMR reactor, or new system, what is the process that you have to go through? And then I guess in that context, we can say where does this milestone fall along the process.

Bret Kugelmass 

Yes. So if you want to build something you can go between, there’s two different schemes that you can go in front of the NRC for. The Part 50 or the Part 52, and these are just two different licensing paradigms that have been set up over the last few decades. And in order to get a license, you have to submit a license application. It is at minimum in the US it’s at minimum four years worth of work. No one has done it for less than $1 billion. No one has spent less than $1 billion in licensing fees and gotten one of these. And actually, no one in the entire history of the NRC has gone through the whole process from start to finish and turned on a reactor. In 48 years not a single entity has gone through this process.

Shayle Kann 

Can I just jump in for one sec. What is Vogel?

Bret Kugelmass 

Vogel is not turned on yet. When Vogel gets turned on it will be the first in all of human history to have gotten start to finish through the NRC licensing process. Every single other nuclear installation in this country was grandfathered in from the Atomic Energy Commission, the predecessor agency to the NRC. So part 50, part 52 license – several companies have gone through it and spent a billion dollars including Westinghouse, GE, EDF, few others, they spent a billion dollars and they never actually built anything because it took too long and the projects just became too expensive by that point. But Vogel will be the first.

Shayle Kann 

And so then, as you’re going through that process, what is certification of a design? Where is that in the process?

Bret Kugelmass 

Certification is a, like we said, it’s a certificate. It’s like a piece of paper that says congratulations, you’re proficient. You know, we’ve looked at your work, and we think it’s great. And it makes everyone feel happy and gives investors confidence. But you’re still at least five hundred million dollars and 4 to 10 years away from actually getting a license, which allows you to build and turn on a reactor.

Shayle Kann 

And do you attach any significance to the fact that this was the first SMR designed to get certified?

Bret Kugelmass 

It’s not small, it’s not modular,

Shayle Kann 

You just don’t want to call it an SMR.

Bret Kugelmass 

I think it’s great that they’re doing it. I think they’re pushing through legal malaise and regulatory malaise. I think that’s always a good thing. I think they’re bringing a lot of excitement and interest into the space. They have a they are bringing forth innovations, for sure. So I think this is all good. It’s just not like the hard part is getting a license. And they haven’t even started that yet.

Shayle Kann 

And as you say, it’s not small and it’s not modular. Maybe helped me dig into that a little bit. As I understand it, new skills reactor is like a 50 megawatt reactor.

Bret Kugelmass 

Not anymore. So that’s that’s the other thing that we forgot to bring up: the things that they got the certificate for are deprecated designs. So everything that you’re seeing is for something they submitted years and years and years ago, and they’ve totally thrown in the trash at this point also. So it’s for a 50 megawatt reactor – they’re not building a 50 megawatt reactor, they have no intention of ever doing that. They’ve shifted up to a 77 megawatt reactor. And they gotta go through this whole process again, even just to get a certificate, which still has no weight.

Shayle Kann 

So they’re going to have to recertify this new reactor, basically,

Bret Kugelmass 

Or they just go straight to a license. Once again, the certificate thing has no legal merit. It’s just a way to spend time with the regulator to get them comfortable and familiar with your technology. Like I said, I still think it’s a good thing that they’re doing it, but it doesn’t show the progress as they’re trying to advertise. That’s more of a marketing hiccup on their end, or maybe not even hiccup, a good marketing strategy on their end. But if you talk to any of their technical folks, their engineers, none of them will tell you what you’re seeing online.

Shayle Kann 

The NRC process is also an area where there’s been news, news and opinions and all this kind of stuff. I’m sure you have your own. At some point congress or the president said to the NRC, “we need you to overhaul your process” for exactly the reason you described, nobody’s ever gone through it end to end, it costs a billion dollars and we need nuclear. So what was that directive? And then what has the NRC done in response?

Bret Kugelmass 

Yeah, so this is a weird thing because most of these types of agencies sit in the executive branch. When the NRC was created in 1975, it was actually set up as an independent agency. So the president can’t really tell them to do anything. So it has to be Congress. Congress passed a law saying they had to clean up their act, because once again – by the way, I just want to say, I’m not criticizing the people at the NRC. The people are smart and great and I’ve spoken to a lot of them. And I think they’re, you know, in the meanwhile, all my criticisms are against the institution itself. And a lot of these seems critiques could be held against many government institutions, not just the NRC uniquely, but we’ll focus on the NRC here. Alright, so Congress set them up, independent agency president can’t tell them what to do. Congress has to tell them what to do. Congress told them to expedite it and they didn’t. Instead, they wanted them to streamline it, especially for these newer reactor designs. And they took all of the old regulations, the regulations that drive up the costs to $1 billion, make it take 10 years. And then they added 1200 pages of new regulations.

Shayle Kann 

And do you have a sense of how and why that happened? I mean, again, to your point…

Bret Kugelmass 

It’s an institutional problem. It’s not a people problem is an institutional problem.

Shayle Kann 

Can you just say more? what does that mean?

Bret Kugelmass 

So it was set up as a single mandate organization, not a dual mandate organization. So dual mandate organizations like the FDA, we know penicillin kills some people, but we’re able to look at the cost benefit analysis and say antibiotics are better than they are worse so you’re allowed to commercialize penicillin and other antibiotics. And they’re allowed to consider that. The NRC, the way it set up was a single minded organization safety, not considering any other externalities. So if there isn’t even the remote chance that one person might get injured in a million years, they are legally not allowed to push your design forth. Like they can only say no, institutionally. That’s how it set up.

Shayle Kann 

So what you’re saying is that in order for things to really change, you know, Congress telling the NRC to expedite won’t matter if the NRC remains, by design, entirely focused on safety with no other considerations. So what would have to change is the institution of the NRC. Congress would have to say, actually, we’re going to change the mandate of the NRC,

Bret Kugelmass 

I think you’d have to overhaul so much more, because there’s like other cultural issues, too. I mean, there’s another thing like so there’s like rulemakings, and everything that have been built up over time. And so you’d have to pick apart all those too. Any single person, you could be an administrative assistant at the NRC at any point, can raise a safety flag on any project and shut that project down for two years. This could be someone with no technical training whatsoever. If they come across a piece of paper on anyone’s desk anywhere in the NRC and they say, this doesn’t look safe to me – remember, no technical training whatsoever – that can set off a two year investigation that could cost the company, hundreds of millions of dollars and delay projects, that is written into the institution itself. So yeah, you’d need a serious overhaul or branching or splitting off or a new agency being created. There are a lot of ways you could do this. But it’s going to have to be drastic.

Shayle Kann 

Okay, so given all of that, like, let’s step back, it seems like what you’re saying is that the recent sort of small raft of announcements that we’ve seen, maybe there’s some others that you think are important that I haven’t alluded to, besides this GE Hitachi commercial agreement and the NuScale, design certification. It sounds like you’re saying we shouldn’t take a whole lot from those, like, it’s not a signal of the momentum suddenly building where it wasn’t before or the dam breaking whatever metaphor you want to use.

Bret Kugelmass 

I think the momentum is building for many reasons. But yeah, I wouldn’t take those particular announcements as a signal.

Shayle Kann 

Okay, so how is the momentum building?

Bret Kugelmass 

So social and political support for nuclear has never been stronger. It is coming out of the woodworks, like from all different angles. People who have never even spoken to anyone from the nuclear industry are putting their like political and like careers on the line in support for nuclear. I think it’s probably a combination of social forces and most of this had a tipping point about two years ago, where all of a sudden, it became like part of the zeitgeist, it became in vogue to say you were in support of nuclear. I think a lot of this has to do a lot more with energy security, and then even potential climate concerns as well, where people are just not seeing the progress that they were promised across other technologies and they’re seeing many of the downsides and are all of a sudden, like, naturally revisiting their previous notions, their misconceptions around nuclear and just giving it a tabula rasa like, Okay, ready to go, why don’t we explore this. And then once you hear like one or two people in your ecosystem say it a few forward-thinking people that you affiliate with maybe on a few other topics as well, it becomes more ok for you to then say it in the public sphere. And then this builds and builds and builds upon itself. And yeah, it hit a tipping point a couple years ago. So now you can go almost anywhere in the world, and most places, even in this country, and say, Hey, I think we should build more nuclear and people say, I agree, let’s do it. Why aren’t we doing it?

Shayle Kann 

So I agree with you anecdotally on that. I do think that their public sentiment seems to have have turned, I guess the question is, what does that manifest in? Like, what does that need to turn into in order to shift from like, now we all publicly agree that we need to build more nuclear, but we still have this intractable problem of getting reactors certified and built?

Bret Kugelmass 

Oh, we don’t have that problem. We have that problem in the US globally. We do not have that problem. Like with money.

Shayle Kann 

I mean, in the US?

Bret Kugelmass 

Well, I don’t know. I think that’s probably an intractable problem here.

Shayle Kann 

Interesting. Okay. So your outlook is just fundamentally bearish on nuclear in the US specifically and bullish in the rest of the world?

Bret Kugelmass 

Once again, I do think once it’s proven out in the rest of the world I think things will drastically change here just because of proof points and examples abroad, and we’re gonna look like idiots. And there’s a lot of pride that we have as Americans about being the first and being the best and I think that can definitely overwhelm some, like, institutional inertia that needs to be overcome.

Shayle Kann 

Where do you look at as the bastion of the next-gen nuclear in the world?

Bret Kugelmass 

I think the most activity we’ve seen anywhere, like once again, including with our own companies in Poland. You know, there’s like a confluence of circumstances there between sustained political and social support, their energy security issues bordering Ukraine are ever present, the fact that it’s mostly coal, but yet still part of the EU and so they’re being like penalized for having so much coal, but they also want to shift off coal too. The fact that it is an incredibly productive and growing and industrializing country. I think Poland will probably lead the way in terms – and they’ve got like, four major projects underway: Westinghouse building gigawatts of reactors out there, NuScale paired up with KGHM, the copper company, GE paired up with Synthos the chemical company, and then my company Last Energy. I mean, we’ve announced almost 20 deals out there now that we’ve signed in or are starting development activities on…

Shayle Kann 

Let’s talk about cost for a minute. You know, this is one of these areas like so the cost of nuclear of nuclear power, as delivered is all over the place. From what I can tell there are places where you’re like, oh, nuclear is super cheap energy, and then there’s other places and situations where nuclear turns out to be quite expensive energy. Oftentimes, you hear folks point to the regulatory processes a big part of the reason for that both the literal cost of getting certification for a reactor, but also the cost that that the regulatory process imposes on the system itself and the engineering costs and so on. Is that your view as well that like the the fundamental driver of high cost nuclear is regulatory? Or do you think that it is a function of the reactor designs and the systems themselves?

Bret Kugelmass 

Both. So I would say the proximate cause is regulatory but the root cause are market incentives driven by the industry, the nuclear industry itself to self-impose those costs, mostly in a rent-seeking behavior and acting through regulatory capture. I can break that down if you’d like. So we go back in history, these plants used to be as cheap as you can imagine. And by the way these are plants that are still operating today. So my favorite examples, point each one into, you know, they’re each about 550 megawatts. So you know, you have an 1100 megawatt – a gigawatt system – broken down by two plants, that in 2020 dollars, was $733 million. That’s less than $1,000 a kilowatt. That is your capex. And we already know that the nuclear opex is already cheaper because your fuel as a percentage of energy is negligible. And then now you also have the capex being like the cheapest in the world. So here we have real – those plants in Wisconsin are still operating today. So here we have real living proof. Oh, and they were first of a kind, right? So no real experience: no real experience, they built two plants. They were some of the best ever built in three years. We could just build those, by the way. If we just like went into those facilities, looked at the blueprints and schematics and built them exactly how they were built, we would decarbonize the entire planet. Every human being would have energy that’s like five times cheaper than they’re paying today. And that is with 1968 technology that is still operating today.

Shayle Kann 

What does that roughly translate to until in terms of cost per kilowatt hour in terms of LCOE?

Bret Kugelmass 

Well, it depends. And this is where some of that regulatory capture rent-seeking behavior has driven up the operational costs far beyond where they need to be. But if you just built those and also had like, 1960s operating costs, you’re talking like $15 a megawatt hour, or 1.5 cents a kilowatt hour? You can’t get better than that.

Shayle Kann 

Okay, so you’re saying there’s precedent historically, for very, very cheap nuclear that works for a long time? This is I guess one of the things I don’t really understand, though. I don’t see any of the new designs even targeting $1,000 A kilowatt. So why?

Bret Kugelmass 

Because new chemistry, new material science, new physics is extremely expensive.

Shayle Kann 

Okay, so why can’t we build more of the old stuff at that price?

Bret Kugelmass 

We should, we absolutely should, we should build 10,000 Point Beach ones and twos.

Shayle Kann 

But we’re not because – even forget the US regulatory stuff, right? Think globally.

Bret Kugelmass 

The industry incumbents starting in 1968 and working all the way up to 1978 because of the way that the market was set up, they weren’t allowed to get paid based on cheap and efficient power plant design. They actually got Imbert reimbursed more if they would build it slow and expensive, because the way the market was set up on this cost plus model. And so that went on in this country till the 90s. But what you saw from 1968 to 1978, was a ten-fold increase in price for the exact same product delivered, because that was a ten-fold increase in the profit that the companies were allowed to make if if the public utility Commission’s essentially lock you in at a fixed profit, like I’m gonna say, like 5%, or 10%, or whatever you build. So that that is how market incentives and market design influenced the behavior and the incumbents. And then it got out of control by 1978 – by the way, this is a year before Three Mile Island – 200 contracts were canceled. So the nuclear industry was absolutely destroyed. And then the industry actually transformed from companies that build power plants to companies that sell safety systems to existing power plants, cannibalizing their economics, and that rent-seeking behavior. And so all you have now, all the incumbents, the people with the IP or the people theoretically, with the IP, or the knowledge to build these plants don’t want to build plants cheap, because that’s not what they were trained to do. And most of them are dead anyway, people who actually had any experience building plants. So we killed an industry there market design, and then the industry has been stagnated for 40 years. And so even though we have living proof of the perfect design in front of us, we can’t get out of our own way.

Shayle Kann 

Alright, so what’s gonna happen, like paint me, you know, most likely next five/ten years in nuclear development?

Bret Kugelmass 

Yeah, so I’ll tell you what we’re doing and then I just hope a bunch of people will copy us and then it’ll just accelerate how this all plays out. But we’re doing is we’re taking that standard design, no new innovation on components. No new change the material science, physics, chemistry, like we learned our lessons from like industry professionals who know about operating power plants, and then we just shrunk it down as small as we could so we could build it actually modularly, build it in a factory setting. There will still be cost overruns on the first few units but because we’ve reduced the capex to under $100 million, those are tolerable overruns and then as you get better and build more, the costs come down and down. And then you get into a habit of building thousands of really small, in our case, 20-megawatt power plants. And then you get to increase the power after you’ve proven yourself after you’ve built one hundred 20-megawatt power plants you can build one hundred 200-megawatt power plants, then maybe even one hundred 2-gigawatt power plants. And so this is like our like defibrillator to the industry. This is our plan to resuscitate an industry that is hanging on for dear life and get everything back on the right track.

Shayle Kann 

Okay, so final question for you. We’ve been talking about traditional reactors, we’ve been talking about quote unquote, small modular reactors, all of those still in the tens of megawatts scale. There is another category that it says probably even earlier stage, which I guess some people call micro reactors, which are nuclear reactors that are very small and maybe better suited for off-grid applications, defense applications, some of them are sort of planning on behind the meter applications on the grid in the long term. We’re gonna sit in this whole universe and is there any reason to think that their regulatory pathway would be any cheaper any different from from the rest?

Bret Kugelmass 

Yeah, so that’s what we’re calling ourselves now, because the term SMR was just like so bastardized by these large, not modular projects, we have decided to adopt the other terminology micro reactors, which you brought up. Most other micro reactors use some sort of new chemistry, if you will, material science, a new fundamentally new reactor and then can go even much, much smaller, maybe down to like one megawatt, but some are up to 10, or 20 – 20 is our size. And yes, many of those applications I think are great. And I think it’s a great way to break into the market too, whether it’s remote or defense, because the energy costs that are higher, like you can sell your power for higher, which means that even though you’re smaller, and might not have the same economies of scale of size, that’s Okay, you can still like keep a pretty good profit margin. So I think yeah, micro reactors are a great path to go, and then you know, our differentiator is simply that we’re the only micro reactor company using proven technology.

Shayle Kann 

All right, Bret, let’s talk about in nuclear world. You have a whole podcast on it. So obviously, you found plenty to talk about, but this was fun. Thank you so much for doing it.

Bret Kugelmass 

Thank you for having me. Glad to shed some light on what’s happening around the world.

Shayle Kann 

Bret Kugelmass is the CEO of Last Energy. As always, send us your questions, or in this case your missives about nuclear. Or tell us what else we should cover on this show. You can leave us a voicemail, the number is 919-808-5832 that’s 919-808-5832 or you can email us at catalyst at postscriptaudio.com. You could also tag us on Twitter. If you liked the show today, go over to Spotify or Apple podcasts and leave us a rating and review.

Catalyst is a co-production of Post Script Media and Canary Media.

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