Rod Adams: [00:00:00] My view is fission is the new fire and we are just at the very early stages of learning how to use it beneficially for human development, but it's an amazing tool. 

Nearly all of them said we can't invest in nuclear. It's because nuclear was on a list of sectors to be avoided.

It was kind of in between pornography and cannabis. 

All of that electrification is driving an increase in demand.

Compared to the size of these companies, investments are small, compared to the size of a really emerging nuclear market, the signals are big, they're loud. 

All of the Navy's cores that we've used since 1955 are stored in a single building in the Idaho desert.

The state of Texas Virginia, Tennessee, Alaska, Wyoming, they all want to be nuclear leaders in one form or another.    

Andrew Kazlow: Welcome to The Diligent Observer, the first podcast exclusively focused on helping angel investors make better bets. I'm your host, [00:01:00] Andrew, and today I'm excited to share an episode from our first deep dive season focused on angel investing in nuclear energy. When three respected VCs Mentioned nuclear on this show within a month, late last year, I realized that something unique was happening.

So, I've spent the last 90 days going deep, interviewing nuclear experts, analyzing deals, and just trying to understand what this all means for angel investors. Over five episodes, we'll explore what works, what doesn't, and why, through conversations. With some of the most experienced voices in nuclear energy.

The season will culminate in the release of the nuclear energy investing playbook, which you can pre order today using the link in the show notes, or get it completely free by subscribing to the diligent observer and referring at least one friend.

My guest today is Rod Adams, managing partner at Nucleation Capital and former nuclear submarine [00:02:00] officer. With three decades in nuclear energy and two decades hosting the Atomic Show podcast, Rod has watched this industry from every conceivable angle, from operating reactors to founding one of the first SMR companies in 1993 to now managing a nuclear focused investment fund.

In this episode, we explore why institutional investors seem to be changing their stance on nuclear energy. Examine which reactor companies are truly investable and dissect some recent deals like Microsoft's commitment to restart Three Mile Island. I hope you enjoy learning from Rod as much as I did. Rod, thanks for being with me today.

Rod Adams: Thanks for inviting me. Glad to be here.

Andrew Kazlow: Okay. So Rod, I'd love to start with just getting a better sense for your background. You have been working in this space for a long time. So give me the quick story on Rod Adams and how you got to the seat that you're in today.

Rod Adams: [00:03:00] Yeah, judging by your face, I've probably been in this space longer than you've been alive. But anyway, I've been a nuclear fan since I was very young. My father was an electrical engineer for Florida Power and Light Company, and Florida Power and Light started building nuclear plants back in the mid to late 60s, which I was alive by then.

He was the guy that took us from work home and he wasn't involved directly in the nuclear plant, but was always interested. So, I got interested. I told my high school guidance counselor that I wanted to study nuclear. He said, well, that's good. If you want to go to school for free and study nuclear, I recommend the Navy.

got appointed to the Naval Academy, graduated from the Academy and went into the Navy Nuclear Power Program. I was late enough that I was part of the second to last class of graduates from the Academy. They got interviewed directly by Admiral Rickover himself, the founder of the Navy Nuclear Program.

So after my entry into the Navy Nuclear Program, I went to the nuclear [00:04:00] power training pipeline, trained in a operational prototype in upstate New York, then went to submarines and served as a Junior Officer on board the USS Stonewall Jackson, went to graduate school in Monterey, studied systems technology.

And then went to my department head tour as the engineer officer on board the USS Von Steuben. Following that tour, I went to shore duty, and the US went to war in the Persian Gulf. It was the Gulf War number one, early 1990s. During the time I was at the academy teaching, I decided that I really liked nuclear and 

thought that the biggest problem that nuclear had was we were building plants that were too big, too complicated, and too expensive. Started trying to figure out ways to build them cheaper and more effectively to use that amazing heat source that I learned about on board a [00:05:00] submarine. Came up with a design, started a, left the Navy, left active duty, uh, went into the Navy reserves, started a small company called Adams Atomic Engines.

To build small modular reactors and we were formed in 1993. So we thought that we had seen a way to develop nuclear that was simpler and safe can't be safer because it's hard to beat what the record we have today but as safe with a lot fewer components. It was a gas cooled reactor with a direct cycle gas turbine using a pebble bed modular reactor.

Many of those factors are in play today with today's micro and very small reactors. The Chinese are operating the pebble bed reactor today that was very similar. To what we envisioned as the heat source for our plant. But by 1996 or so, we had run out of runway, couldn't attract anybody. [00:06:00] The price of natural gas to compete against nuclear had continued to fall since 93.

And we started to put the company to sleep. I got a job managing a factory, building plastic products, but understanding fabrication and supply chain and the importance of the economy of mass production. There's more ways to scale than to build bigger and bigger stuff. You can build more and more stuff to achieve scale.

But I got an opportunity to go back in the Navy, back on active duty in 99, remained on active duty through 2010, retired as a commander, and part of the time I'd spent on active duty, I'd learned a lot about the Navy's nuclear power program from a back headquarters point of view, financing. I was their requirements officer, understood their budgeting and that kind of stuff.

And that didn't dissuade me at all from considering the [00:07:00] new, smaller, simpler manufactured reactors, built-in series could be a way to do nuclear, and broaden its it's a market applications. My view, one of the biggest problems that the nuclear industry in the US has had is it they simply had a single product, very large reactors that was being sold to a single class of customers, large monopoly utilities with defined territories and pretty good size market capitalizations, compared to their competitors in electricity production. And that particular market

has a herd mentality, quite frankly. They either are all buying or none of them are buying. And when they all buy it really stresses your supply chains and makes it hard to deliver products on time because your factories are sized for a certain production rate. And then all of a sudden [00:08:00] the production rates doubled or tripled.

It's not well known, not well remembered that during the late 1970s, we're building reactors pretty fast and getting orders. On I think the peak order year was 20 new reactors ordered in a year and 10 reactors delivered. The supply chains got stressed building that many large pressure vessels and steam generators and reactor cooling pumps got hard and the deliveries were late. Which when you start being late, your customers start getting a little bit reluctant to keep ordering.

And again, something not very well remembered, orders for the nuclear power plants in the US stopped, essentially stopped, in 1974 and started getting canceled because of delays and cost overruns and reduced growth in demand. The, uh, Arab oil embargo of [00:09:00] 1973-74 had a big impact on electricity demand growth, and suddenly utilities had more capacity on order than they needed, so they started cancelling.

That was five years before Three Mile Island, which some credit is having, you know, stopped the nuclear build out, but that's not really true. We stopped ordering, stopped new construction starts by 1974. There were some issues with building big reactors even back then. I'm not trying to say that we should, there's no reason to build big reactors today.

What I'm trying to say is that there's a much broader universe of energy customers than just large monopoly utilities. And some of those energy customers need a lot of smaller power plants. They just can't necessarily put 1,000 or 2,000 or 4,000 megawatts to work. And when [00:10:00] you're building just 1,000 and above megawatt power plant or reactors, that makes a power station, single power station, usually a couple thousand megawatts, because it's not really smart to build just one on a site.

Okay, 

Andrew Kazlow: So I want to come back to this trend towards smaller, more modular. So let's put a pin in that. Well, first off, thank you for your service 30 plus years. Incredible. The last few years you have transitioned out of the operator role, developing these technologies, building these companies, Working on these into more of an investment seat.

I'd love if you could expand on the story for how you decided to spin up nucleation capital and what the last few years have been like. 

Rod Adams: Sure. Well, the transition really started in 1994 when I was trying to get Adams Atomic Engines off the ground. One of [00:11:00] the things that we decided to do was to start publishing a newsletter. To help people understand more about the history, the politics, and the technical potential of nuclear energy. And that newsletter started off being called Atomic Energy Insights.

And I quickly realized after a couple of months that the acronym AEI was already taken by something called the American Enterprise Institute. And I didn't really share that much philosophy with them, so I wanted to change. So we changed it to Atomic Insights. During that time I was also making a lot of visits to it,

colleges around the country talking to uh, nuclear engineering programs and going to student conferences just to start getting people thinking about these smaller reactors. And one of the students said, Hey, Rod, your newsletter is great. But it should be on the web. And by that time, I was already kind of an older guy at age [00:12:00] 35, compared to the students.

And my response was, okay, what's the web? So anyway, started writing Atomic Insights with all those same thought processes in 94, moved it to the web, and kept going on Atomic Insights, kept my observation of the industry, of the politics, the economics, some of the competitive landscape of the industry, and took a couple of little breaks along the way, but essentially, Atomic Insights has been published now for, as you mentioned, 30 years.

In 2018, I was writing about The Possibility of Advanced Reactors and mentioned that the industry had enough startups in advanced reactors to start making it interesting and that it was time, because some of these startups have been around for a number of years and already ticked a lot of the early boxes necessary to [00:13:00] develop a new product and I said it's time for investors to start getting interested.

As a writer and an observer of the space, some investors headquartered in Silicon Valley said, we've been studying nuclear and we really like the potential, but we really want to partner with somebody who's got the deep industry and technical knowledge, because we know a lot about investing and we know a lot about technology and startups and those kinds of things.

 you know, and We've learned about nuclear, but they weren't really insiders. And I'd been going to conferences and meeting people and talking to people and interviewing people on my podcast for a lot of years. So I'm really kind of one of those, people that move from the announcing booth back down to the field, to be a, in this case, not to be a coach, but to be an investor.

So my partners and I founded Nucleation Capital. Initially had a different name, Einstein [00:14:00] Capital, moved it to Nucleation to as a nucleation, by the way, is for those of you technical audience, it's the point where you go from really small bubbles to great big, giant bubbles. And frothy boiling is the point of nucleation.

The temperature's all risen to the boiling point, but it needs some more, just a little bit more energy to start bubbling. And that's the point of nucleation. And Within the nuclear field, the departure from nucleate boiling. Nucleate is a little bubbles and that's actually good for heat transfer in a Light-water reactor if you get to departing from nucleate boiling, it's not so good. But from an investing point of view, it is good.

You know, you want things to start getting really bubbly. So, we founded Nucleation Capital. We initially spent couple of years going around to institutions, the typical venture capital investor base. And Nearly all of them said we can't invest in [00:15:00] nuclear. It's because nuclear was on a list of sectors to be avoided.

It was kind of in between pornography and cannabis. Or maybe just above nuclear weapons and below fossil fuels. And that was kind of the list that nuclear energy was on. There's good historical reasons, not just because of concerns about safety or whatever, but from an investment point of view, nuclear has been a bad investment.

There's been real hard problems where big companies, Long Island Lighting, the whoops, Washington Public Power System, Santee Cooper, have all been gone to bankruptcy and Westinghouse even went into bankruptcy all because of failed nuclear projects. I mean, we understood why the big guys were avoiding it.

But nuclear energy, nuclear business has changed. [00:16:00] Some of these smaller companies with smaller reactors and more focused on constructability and manufacturability, they don't have the same big risk as mega projects. And so it's a different risk profile completely. But the institutions that hadn't at that time, three years ago, four years ago, hadn't really made the transition to say, wait a minute, nuclear's got some real public support, got some government support, those kind of things.

So what we did was we found that there was a new software as a service technology operated by AngelList and your listeners, your uh, company, your customers may have heard of AngelList. But AngelList has a offering called a rolling fund, which allows, accredited investors to join in a fund that then brings together a bunch of investors and makes invest [00:17:00] investments from that fund.

Now, unlike a traditional venture fund, we don't go out and soft circle a bunch of people and bring them all in at once, then have this fund that we then invest over a short period of time. We've got dedicated investors who come in and say, I'm going to put in X number of dollars for a period of time.

And every quarter, I'm going to make an investment to you guys. And for us, we like to encourage people to subscribe for eight or more quarters, but we'll take them for shorter. Our minimum ticket is $5,000 per quarter, for a four quarter subscription, $20,000. And that's a moderate amount of money, but if you're an accredited investor,

it's within your typical investment. And of course we have bigger people. We have all the way up to about $250,000 per quarter in our base of investors, roughly a [00:18:00] hundred LPs right now. We've been investing for, I think we just are finishing our 13th quarter. So just over three years, we've got 13 companies in the portfolio now, and we're probably going to close on two or three this quarter, because there's getting to be more and more exciting stuff happening.

Our fund has grown about 50% in the last couple of months, simply because of the change in dynamic based on some of the very large, well capitalized energy customers who run data centers and other pieces of the economy saying, we want clean energy. We want to be able to go to our customers, our investors, our employees and say, we're really building our ability to use clean energy and our energy hungry facilities, but we really need it all the time.

And we're not going to play the [00:19:00] game of, well, if 10MWh is generated in Texas on a solar plant, and we use 10MWh at night in California, we're not going to say that those two are matched up because they aren't. They're getting interested in nuclear. So we've got announcements just in the last two months of Microsoft helping Constellation restart the Three Mile Island project

unit 1 nuclear plant. Three Mile Island unit 2 was the one that had a problem, but unit 1 operated until 2019, and so they're, they're helping them start it, and they did it. The reason that Constellation said, yeah, we'll do that, is that Microsoft came and says, we want to buy power from that plant.

We'll give you a 20-year power purchase agreement, and we're going to pay. You know, Nobody's actually made it public, but somewhere in the neighborhood of $110,000 a megawatt hour over 20 years. You start running the numbers of that, [00:20:00] that plant's going to produce 7, 000 megawatt hour, no, seven, seven terawatt hours per year.

Run those numbers and realize just how big a commitment that is. And it's for consolation. Yeah, we'll do that. It's going to be hard, but we'll do it because it's going to be worthwhile. Then you had Amazon. First of all, built or bought a data that's right next to a nuclear plant. But then they said, okay, we're also going to invest in X-Energy.

Direct investment, a venture investment, and we're going to go up with Energy Northwest and pay for them to do some feasibility studies, some frontend engineering, FEC, frontend engineering design, and that's between that, Amazon's making almost a billion dollar investment compared to the size of these companies, investments are small, compared to the size of a really emerging nuclear market, the signals are big, they're loud. That's what's happening in advanced [00:21:00] nuclear.

That's what's happening in the smaller reactors, because again, these are something that can be delivered and hopefully be delivered with a manufacturing type cost curve. The big guys are interested in smaller reactors because they need the reliability that comes from multiple units.

Andrew Kazlow: So Rod, one of the terms that I have heard a lot as I've started to research this space is this term nuclear renaissance. It sounds like some of these big investments are contributing to that, at least in our current 2024, 2025 timeframe. What are the other macro factors that you see driving this renewed interest in nuclear energy?

Rod Adams: First, I'm going to kind of give you a funny viewpoint. The nuclear renaissance, the words nuclear renaissance were kicking around really loudly. In the time frame of around 2005 [00:22:00] to 2008. So, 15 years ago. And there was a lot of orders it would, there was a lot of effort. The NRC received applications for 24 large reactors

issued combined operating licenses after spending, after the company's invested several hundred million dollars per license back in that time. And that was called the nuclear renaissance. Right now, if you say nuclear renaissance to most nuclear advocates, they'll kind of cringe and say, we don't want to talk about the renaissance because that last one kind of fizzled out.

But I remind them that if you go back and look in history and try to figure out when the renaissance started, there's about a 50-year spread between one source and another. So it was took a while for things to happen and to get enough momentum to really get going. So I say that we're just in the early stages of a renaissance.

Yeah, that was something that thing happened [00:23:00] 15 years ago, but we're still in the stages. So some of the big things that have happened. The European Union, after a lot of deliberation and conflict and arguments has added nuclear energy into what they call their sustainable development taxonomy. So nuclear accounts is green and can be financed with financial instruments that are dedicated to going towards environmentally friendly sustainable energy, which it is.

And it's clean and it's sustainable. There's enough fuel to last us several billion years. Uh, there's papers I can point to that say that the fuel for nuclear is inexhaustible. It may not be officially renewable because you actually do break a few atoms along the way. But today's reactors only use 5% of the potential energy.

All that stuff that people call waste can be recycled into new fuel and can be recycled again. [00:24:00] So yeah, you break some atoms along the way and you do reduce the total amount of actinides, but it can, they're going to last longer than any human cares about. It's sustainable.

And by being sustainable, it means it can actually produce enough energy to power itself. We have examples in the world of nuclear-powered enrichment plants and nuclear-powered conversion and nuclear-powered fabrication and nuclear-powered transport that if you go to France because they have electric trains, they have electric recycling facilities, and all, most of their electricity is nuclear. 

You can continue doing that. All right, so those are drivers. The demand for clean electricity from large customers is a driver. The idea that we're going to be electrifying everything is a driver. You're moving away from direct burning of fossil fuels for [00:25:00] heat. Not just in, in homes, but even in industrial applications.

Rod Adams: People are charging their electric vehicles often at night, logically enough, you come home from work, you plug your vehicle in, the sun's already set, so you're not charging them with solar power, you're charging at night. Oh, well, maybe, you know, people say, well, we'll store the solar power in a battery and then charge the batteries from batteries and you start to realize just how lossy that is from an engineering point of view.  

All of that electrification is driving an increase in demand. And remember, go back to what I told you, stopped the first build out of nuclear back in the 70s was a flattening demand curve. The electric utilities had the habit from World War II on to the early 70s of having electricity demand rising at about 5 to 7 percent every year, reliably.

And they could keep building new capacity because they knew there'd be new customers and new need for it. Well, for the [00:26:00] last 10 years, 15 years in the US, electricity demand has been flat. No growth. So there's not much interest. And of course, there's also been really cheap gas. And you put those together,

there hasn't been much interest in nuclear, but now there's those things and something that's not going to be talked about very loudly or very often. I'm seeing as an investor and as somebody who goes and talks to these new customers, I'm seeing an awful lot of founders and backers of nuclear companies, these nuclear startups that are coming directly out of

the natural gas and oil business. And what they're telling me is, a lot of their drilling opportunities are starting to get played out. They're starting to see kind of a, not immediate, but an ending to some of their growing and continuing to increase production. And they're moving into nuclear because they [00:27:00] see it as a growth opportunity.

The state of Texas has just issued a lengthy report that I was reading before we got on about wanting to become a nuclear leader, not just a nuclear leader within the United States, but a world nuclear leader and building a world leading nuclear industry. Now, they're not the only state that said that.

Virginia, Tennessee, Alaska, Wyoming, they all want to be nuclear leaders in one form or another. I think there's even West Virginia wants to be a leader in the coal to nuclear transition. So lots of things driving and starting to excite people. And then finally, from an investor perspective, we've had a couple, three of these small reactor companies have gone public. And they've received some rather interesting reception from the public markets.

Now, there's [00:28:00] been some ups and downs, and all three, Oklo, NuScale, and Nanonuclear are trading at close to double or more than double their initial offering price, which was within the last year. So that's saying that, hey, there's other interest in this sector. Now, all of those are certainly early investment, free revenue, really risky.

Don't ever invest without getting good advice and doing your own research. But I just wanted to say that, that's one of the things that says there's opportunities here. And of course, you know, we've been investing in private companies in a way that makes it possible for people who see a vision for the future and they want to participate, they want to get in on

the ground floor. 

I did an interview with Jose Reyes, the founder of NuScale. I interviewed him for the atomic show podcast back in 2008. I've been, keeping up with him and being interested in [00:29:00] his activities ever since 

when people say, hey, NuScale just lost their first project, they're going to be terrible, everything's going to crap, and the price of NuScale dropped below $2 a share. It's trading at $21 a share right now.

Andrew Kazlow: Rod, what are some of the things that you think could cause this modern portion of the nuclear renaissance to fizzle out like we saw in 05 to 08? Putting on your bear hat, what are the that could kill this momentum?

Rod Adams: Well, one of the things that can't kill it are lower natural gas prices, because gas prices can't get much lower than they are today. Although, you know, of course, this wintertime has gone back up, but heck, this summer in the Permian Basin, the gas prices often went negative. In other words, gas producers in the Permian Basin were paying people to take the [00:30:00] gas off their hands.

And why would they do that? Well, they were actually oil producers that had this associated natural gas and they can't flare it anymore. They needed to have somebody move it away. Cause if you keep gas on site, it's an explosive hazard. But gas has been really cheap.

Gas in the Northeast has been well under $2 per million BTU, which in nominal dollars, not inflation adjusted nominal dollars. That's less than they were in 1990. That's incredible. So they can't get much lower. They're going to be low for a little while. Of course, one of the drivers that might help nuclear is if we start not improving productivity anymore and we continue building more and more export terminals that take cheap US gas and sell it in Asia or Europe for much higher prices than what we're paying today. That's going to kind of equalize, the prices will get [00:31:00] closer together. Obviously, that means US prices have to go up. Those prices probably will come down a little bit. An accident event will be a hard thing.

Some people say that an accident anywhere is an accident everywhere in the nuclear world. I think we've got to convince people that that's not right, because there's accidents in industries all the time. The nuclear industry is very careful, but we're humans, there are going to be some events. But one of the things that people should know about nuclear accidents is, although they get lots of publicity, and people get reminded about their names all the time, you know, we keep saying, look at all these accidents, well, it's still the same three

that we've been talking about for 15 years. And before that, there were two that we've been talking about for 30 years. And before that, there was one that we talked about for 40 years. In other words, the one for [00:32:00] 40 years, the one from 30 years, and the one from 15 years ago are the same three.

That's a long time for a very good sized, impactful industry to go without accidents. And when we did those accidents, Chernobyl was the only one of them that actually caused any fatalities. Although there was predictions of millions of people, the actual numbers by studied over many years is less than 50.

People were killed or got long term cancer related stuff from Chernobyl. Nobody got hurt. No public, no private property outside the gates of the power plant was damaged at Three Mile Island. And at Fukushima, the one in Japan, where it was caused by a 45-foot high tsunami crashing into the plant, flooding out the diesels, [00:33:00] that event caused no fatalities, none.

Some people give credit because the Japanese government awarded one family, some compensation because a worker who was a long term smoker, was at the plant and eventually got lung cancer. But he got lung cancer within five years or so of the event. And so it just, you can't, it doesn't make sense to relate that radiation exposure when 

Andrew Kazlow: Oh, and Rod,  just one comment as an observer, kind of learning about the space, I'm reading kind of the history of the development of nuclear power at a fundamental level. I mean, the first reactors are less than a hundred years old. Like all of this technology has developed within the last century.

 So remarkable that those events you're talking about are the only ones that we're discussing in a technology that relative to all the others that are out there is in its [00:34:00] infancy.

Rod Adams: Well, my still extant mother was born in 1933. In other words, she's still living. Nuclear fission was not proven to exist or not even discovered as something that would exist nature until 1938-39. So he was already a kid by that time. So that's, and That's when we first figured out, it's like learning combustion happens.

My view is fission is the new fire and we are just at the very early stages of learning how to use it beneficially for human development, but it's an amazing tool. I point out to people, the submarine that I served on, the thing that inspired me to get all excited about nuclear had a fuel core. that was small enough to fit underneath an office desk.

That was the whole fuel core. [00:35:00] It had as much uranium as my body weight, before I just lost a few pounds. but it was a hundred kilograms. So that was the total fuel amount. It was installed on the boat in 1980 and was removed from the boat in 1994 when the boat was decommissioned.

 It So it powered the boat for 14 years, a 9,000 ton submarine. And it still had about 60% of its fuel left at that point. It would be removed because the boat was being decommissioned. and We could live and work right next to this power plant. I used to cross over several, multiple times a day.

We had a little tunnel that went right through the reactor compartment. I could look down and open the window and see the plant. It's just fascinating. Never had a problem breathing. And we had plenty of water to drink from the ocean. And we created our own air from the ocean by splitting the [00:36:00] hydrogen and oxygen.

We had refrigerationand some entertainment, of course, we're still my age again, we use Betamax as our entertainment.   

This is the world I lived in. I I came aboard and I came up for air and the Gulf war was happening. I knew that whole thing was fighting over oil. And of course, part of my early inspiration was watching the whole world go crazy

when the Arab oil embargo happened and we were standing in line or sitting in line for gasoline. That just shows you what our dependence on energy was. Anyway,

Andrew Kazlow: Amazing.

Rod Adams: The industry is new. We've been learning a lot during the time we have been building, there have been a lot of really bright people going into the national labs and to university programs and thinking about ways to do things better.

For more information, visit www. FEMA. gov And that's the companies that we're investing in. Some of these companies are startups that have been around for a decade or more, [00:37:00] doing a lot of groundwork. The foundation building is not always visible to people outside. 

Andrew Kazlow: Rod, I wonder if you could go one layer deeper kind of stepping from the macro trends to the ecosystem itself. Walk me through your taxonomy of the major players, the major sectors in the nuclear energy space. From big mega companies to kind of these smaller startups as if you were explaining it to a new investor interested in your fund.

Rod Adams: Okay. The big companies that are in the space are actually the descendants of the four big companies that were building reactors during the 1970s. The four companies backed in was Westinghouse and General Electric, then Babcock and Wilcox, and Combustion Engineering. Those were the companies that built big reactors.

And They were the ones [00:38:00] who were building these big reactors and seeking economy of scale by building bigger and bigger machines. And They were achieving some economies as long as they built the machines in a reasonable period of time for not much cost overrun, but then they started to have some problems because they were building big machines and quite frankly, it's easier to trip somebody up than it is to help them forward.

And there were people that were interested in tripping us up. And although most of the ones that were waving signs and making a big deal about being opposed to nuclear energy were called themselves environmentalists or part of the environmental movement. My belief has been developed over the years that a lot of that opposition was stimulated and funded by people that had financial interests in slowing nuclear down.

You know, everybody benefits from cheap, clean [00:39:00] energy, but the fact is that people that sell dirty, expensive energy, don't want to lose their markets to clean, cheap energy. So, And they have a fair amount of power and wealth, and certainly the ability to use some tools taught to them by a guy named Edward Bernays, who was one of the first guys that talked about PR and propaganda.

There are some really good works as to how you do that. convince people to do things or to not do things. So, the descendants of those companies are still in the nuclear business. You still got General Electric, they're called GE Vernova.

Then Westinghouse, still a big player, and Westinghouse purchased combustion engineering. So, the company that's Westinghouse today is both of those companies from the early days. And the company was Babcock and Wilcox is now called BWX Technologies. [00:40:00] So BW is Babcock and Wilcox. The X is advanced nuclear is essentially what that X and T, so BWXT is still involved. And BWXT is not really thinking about building big plants.

Although they're a parts supplier to Westinghouse and General Electric, they have contracts with both of them from companies that are in Cambridge Ontario to supply steam generators, pressure vessels, those kinds of things. Westinghouse, it mostly contracts out some of their manufacturing.

They're not the same big integrated manufacturer. They were back in the 70s. They're mostly a design firm, but they have big ones, the AP1000. They have a small modular reactor called the AP300, and they have a micro reactor, which is a 15 megawatt reactor that is, they call it a nuclear battery called the eVinci.

So they're broadening their product [00:41:00] offering. Like I've suggested, GE Verona has the BWRX 300, which looks like it's going to really capture some players in the utility market. Ontario Power Generation, OPG, has got a plan to build four of them at their Darlington site. Then you've got, TBA, a Polish industrial group are all looking at the BWRX 300.

There's Estonia. It's got interest in that. And then there's a whole bunch of others that are kind of followers. And then BWXT has the component supply that they're doing. But they also have a reactor called the banner. BWXT Advanced Nuclear Reactor Banner. And that's looking like they're some of their early customers are gonna be mining companies in Wyoming.

And it's actually kind of mining that most people haven't heard of. It's called Trona. And Trona is an ore that you get [00:42:00] phosphate out of. So, Wyoming happens to have the world's largest supply of Trona, and it's an energy intensive process, and they're interested in it. Those companies are interested in essentially big reactors and small reactors and in between.

There's a bunch of startups that have advanced reactor development. They're looking at various types of coolants, different types of reactor designs. You have high temperature reactors that are cooled by gas and the fuel is got, it's a coated particle fuel that has much higher temperature capabilities.

When you're operating a reactor, you want to make sure your fuel doesn't get damaged. And in a light water reactor, the way you make sure your fuel doesn't get damaged is you keep it covered with water. And you keep water flowing over it. But another way to do it is to make your fuel capable of getting really hot without any damage.

And that's what the triso coated fuel [00:43:00] particles do. is make, make it. So if you can get really out without getting damaged, There's quite a few companies that are basing their reactor designs on this triso coated particle that was developed in the 60s in Germany and then refined through a very detailed testing and development process in the US from about 2003 to 2022, 2023, 20 years worth of investment in making this as what DOE says, the most robust nuclear fuel on the planet. Got companies that are doing metal alloy reactors that are cooled by a liquid metal, either sodium or lead. 

Again, there's some of the large ones. One of the more famous ones of that is the, Natrium Reactor.

Natrium is Latin for sodium. Uh, Natrium Reactor is the one that's designed and will be built by [00:44:00] TerraPower, and TerraPower is famously the biggest investor is Bill Gates, Nathan Myhrvold. Bill Gates is partner in Westin and Microsoft is also a big investor. And they've got some other investments from like the Breakthrough Energy Institute.

But the big companies are not ventures. So we don't invest in the big companies. That's just, you know, at least not from a fund point of view, a lot of the smaller companies are ventures and have really interesting ways to address the market, ways to build their advanced reactors, the way that they're setting up their factory production and getting their first license through the NRC.

That's, I haven't really mentioned that you have to go through a regulatory process. It's really not that much more difficult than getting an airplane design certified or getting a new drug on to the market. There's just a lot of paperwork and steps. Over time, the NRC has established [00:45:00] a notion that they're very reluctant to approve anything, but that's changing.

And that there's changing both by philosophy, but also by direction from Congress. Now, there's also a lot of interesting areas outside of just reactor development that we're interested in as investors. Historically, and it's famous, people say, well, what do you do with the waste from a nuclear reactor?

That's been thrown down as a Trump card and people say, well, that'll stop all conversation, but it's not. You know, We've been handling nuclear waste and storing it safely for 70 plus years. Not a single person anywhere in the world has been harmed by accidental exposure to nuclear waste from a nuclear reactor.

Now, there have been some instances of people being harmed by radioactive material. It's definitely dangerous. It's just like, I got lots of stuff in my garage that are dangerous. You don't drink my chlorine that's in the garage.

You stay away from some of the bug [00:46:00] killers that I got out there. You definitely don't go and light a match next to the gas cans in my two cars in there. 

So we've been handling this stuff for a long time. It doesn't take up much space, it's very compact. I told you a little bit how small the core, or my reactor was. And oh, by the way, all of the Navy's cores that we've used since 1955 are stored in a single building in the Idaho desert.

That's a pretty decent sized building, but it's not much bigger than a Walmart. That holds all submarines, aircraft carriers, the cruisers that we had. So we put the waste in a cooling pool, sit there for four or five years, and we put it into a container. Now, most of that waste handling is not done by ventures, but there is

a venture that said, you know, this permanent waste thing that everybody's worried about trying to build these large mines and put all the waste in a single location, like Yucca [00:47:00] Mountain, which by the way, never was built. People think that Yucca Mountain is all sitting there in the desert. They dug one of the numerous tunnels that they needed to do just so they could get access to all of the cores that they needed to drill and get samples for rocks and history and science

that they spent $10B doing. But that's all that exists out there. There's nothing out there. So it's, it's really dumb for people to keep saying, why don't you put it in Yucca Mountain? Well, you still gotta build the thing, you still gotta get it there. This company that we've invested in called Deep Isolation says, our friends over in the oil and gas industry have gotten really, really good at drilling deep holes then turning the drill bit and going horizontally for a long way.

In some cases, 15,000-ft, so that's 3 miles down laterally. So they have figured out that if you put waste canisters in these long laterals, it's really [00:48:00] easy to get "deep geologic isolation" at thousands of feet deeper than you can do if you were doing a manned accessible mine. And you can do these in various locations around the country for a very modest amount of money. Drilling a single hole and lateral is $20M, $10M,

I don't know what the numbers are today, but we're getting better at it. And so all of the drill bits and all of the casings and improvements and the sensing is being transferred into this technology for putting waste underground. And hopefully we don't put all of it underground.

There's an awful lot of reusable material. But, there's stuff that's really left over. So we like the waste disposal. A lot of what the nuclear business does, and the things that take a long time are quite frankly paperwork. And just doing processes and stuff. Guess who's really good at that kind of stuff?

It's called artificial [00:49:00] intelligence. So, we've got an artificial intelligence company that really understands the nuclear industry and how they can use artificial intelligence to streamline processes and make things easier for operating plants. So, they've got a revenue stream now and the application processes for new designs and new development,

they can do an awful lot with artificial intelligence to streamline the creation of the applications and to make sure they can figure out what all the references they need to look at are and what all the rules are, how they all interact, because it's not easy. I spent three years trying to figure that stuff out and things like there's a 4,500 page set of guidance instructions

to tell a reactor applicant how to apply for a reactor license, 4,500 pages long. But the AI can read that stuff and figure it all out and put the connections together. So [00:50:00] we're also, we're interested in other components where some of these companies are doing some interesting things with salt.

So different ways of manufacturing salt-based fuels. There's a lot of interesting stuff going on outside of the direct reactor developers, things that are going to support what they're doing. And so we're, we spent a lot of time looking at those as well.

Andrew Kazlow: Rod, anything else you would encourage an investor interested in this space to think about or research as they consider starting to deploy capital in this space,

Rod Adams: Energy is not a fad. We will always need a lot of energy to drive our society. And if we want continued increasing in prosperity, we need to continue increasing the amount of energy that we put to it. The whole old notion, you know, driven by some people that really maybe not have the human interest at heart, that we could [00:51:00] somehow get by with energy conservation and energy efficiency. It just doesn't work. That's not what's going to make us prosperous and enable humanity to flourish. So if you think about that as your kind of investment thesis is that we need a lot of energy.

And I also am absolutely convinced that we need to slow down and perhaps eventually reverse our contribution of CO2 in the atmosphere. It is causing problems. There are things happening in the climate and in the weather today that would not be happening if we didn't have quite so much energy being retained by the greenhouse that's above our atmosphere. The temperature increases that might have occurred early

were kind of hidden from us because the oceans are really big and deep [00:52:00] sink. But eventually the sink gets full.

And we had, this year, two hurricanes two weeks of each other, and they were big. you know, They caused an awful lot of damage. Now, yeah, you can't blame any single event of the weather on changes in the climate. But you can look at probabilities and predictions and see that when you start doing the curve and you figure out what it's doing, you shift the curve up, and suddenly stuff that was way in the tail before is no longer in the tail.

It's sort of in a more probable situation. So we need clean energy and we need to recognize that nuclear is clean energy. It fills up a lot less space than most other power sources. It can run all the time. Some of these new advanced reactors, by the way, can achieve even higher [00:53:00] utilization because they can be refueled.

Without shutting down the reactor, they can be refueled online. Some of the pebble bed reactors have a refueling, the molten salt reactors can be continuously refueled. You know, this is, and then some of the medical reactors are breeder reactors that actually convert materials like uranium 238, which is not particularly fissile, not fissile at all, but it can convert it into a material that can be fission so they can operate at longer, longer lives by converting some of the material into fuel. So all those things are happening and they're happening pretty fast. They're happening at a nuclear pace of fast. The nuclear industry doesn't move all that fast, and it can be frustrating for people that are used to investing in software and applications and bitcoin mining and stuff. Things aren't 

Andrew Kazlow: gonna 

Rod Adams: move that fast.

Andrew Kazlow: I wrote down a great quote that you have on that topic. From your website, it says, "Sometimes people who love tech can't [00:54:00] understand why it takes so long to make changes in the nuclear world, but blue screens of death would have a completely different meaning for us." I loved that quote.

It's 

Rod Adams: it's true. We, and We take a lot of care. Sometimes people complain about the care we take, but we do have a very high safety record. You look at Iowa World and Data, they compare the safety records of various energy sources, and nuclear is right up there with ground based solar. If you start putting solar on your roof, the safety record drops quite dramatically because, you know, roofing is a, is a challenging industry.

It is safe enough. When I say the word safe, I'm not claiming that there's never going to be an accident. That's silly. I'm claiming that the accidents will be few and most of them will be mitigated by the various layers that we have. [00:55:00] The reason three mile didn't cause any harm or death was we had a second layer.

A very big, thick second layer, called a containment dome that kept radioactive material out. Again, radioactive material is dangerous, but we know how to handle it. We know how to stay away from it, and we can sense it pretty easily. There are, in fact, some applications that can be run on smartphones, that can give you warning if there's radiation, because the camera in a smartphone can detect radiation, because you have to get the software to make it work.

Andrew Kazlow: Rod, what's the best way that our audience can follow you in your work? I know your podcast is probably the best thing, but how can our audience follow you?

Rod Adams: Both the podcast and Atomic Insights are decent ways to look at what I've done in the past. I'm not updating those very frequently anymore. I am pretty active on Twitter, [00:56:00] @Atomicrod. I've just created a Blue Sky account, again, @Atomicrod, and plan to be keeping those microblogs up. I'm pretty active on LinkedIn, and post things.

Bottom line is I'm much more interested in short, but frequent communications. Than in spending a lot of time doing some of the long form stuff. so I will still write for those occasionally. We do have a blog at Nucleation Capital and that's a good thing to follow my partners do a good job of keeping that up to date.

I do write some there, but the best things are the microblogs. I've started my Twitter account in 2006.

And I think that 68,000 posts on Twitter. Ciao. Pretty active.. 

Andrew Kazlow: Well, Rod, this has been fantastic, thank you so much for sharing a few minutes of your day with us. I very much look forward to following your work [00:57:00] and tracking the space.

Rod Adams: Yeah. And if anybody has any direct questions and of course, please be gentle with me. It's just rod@nucleationcapital.com. 

Andrew Kazlow: Thanks, Rod.

Rod Adams: All right. Bye. 

Andrew Kazlow: Thanks for listening to this episode of The diligent observer. I'm your host, Andrew Kazlow. And if you're looking to make better bets as an angel investor, subscribe for more at thediligentobserver.substack.com.