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Electrification 2.0

Edgardo Sepulveda

Monday, April 11, 2022

Dr. Chris Keefer  0:00  

Welcome back to Decouple. Today I'm joined by many times returning guests Edgardo Sepulveda regulatory economist, used to list yourself as just a regulatory telecoms economist. I noticed in your most recent bios, you're also I think, very deservedly referring to yourself now as a regulatory and electricity economists, you've certainly been putting the work in recently Edgardo. We're here today to discuss your most recent special contribution to the voices of nuclear newsletter, and we're gonna have a link attached in the show notes for people to have a look at. But I wanted to bring you on. Because, I mean, you've been really formative in my thinking, particularly around this question of the challenge of electrification as our kind of the cornerstone, I guess, of our net zero approach to climate change. And so your, I guess, catchphrase of you know, this period of electrification 1.0 From when we originally built out the grid, and now we've had this Emery Levin's inspired soft energy path period of of kind of stagnation or negative growth in electricity. We're now into this need for an electrocution 2.0. So, without much more ado, Edgardo Welcome back looking forward to really breaking this down with you.


Edgardo Sepulveda  1:20  

Great. Happy to be you said seventh time, Chris. Yeah, happy to be on.


Dr. Chris Keefer  1:26  

I know, I can't count for the seventh


Edgardo Sepulveda  1:28  

time. Pretty excited for two reasons. First of all, I get to kind of highlight some of the work that I've been doing at my website, ie D carb.org, where I compiled you know, 50 years worth of data, electricity data for 30 countries. And so I was very pleased when, when voices of nuclear which is a, a very large and influential not for profit advocacy group out of out of out of France, and has been playing in that European venue for for quite some time and very influential when Myrto Tripathi who's been on the show before, saw some of the work that I was doing out of IDI carb, and invited me to prepare a newsletter for voices of nuclear. And so that's a my first European publication. It's also my first publication in French because I wrote it in English but voice of nuclear live, why didn't you Claire has probably even a bigger following. In, in, in, in France and Belgium and other Francophone countries. And so it was translated into French. So that's my first energy oriented French language. Think peace. And so I'm very happy to be able to get into it here with you, Chris. And to talk about some of the kind of things I've been looking at including, you know, looking at the historical contribution towards decarbonisation, that nuclear is played in the advanced economies, and some of the kind of drivers that we would want to see to be able for that very important legacy to continue into the future.


Dr. Chris Keefer  3:38  

Beautiful, beautiful. I mean, I'm gonna let you go this little bit, because we're talking about your piece. But, you know, what I was struck by is the many, many hours of work you've put into data analysis and kind of disaggregating, the OECD 30 into the nuclear countries and the non nuclear countries. And you know, you've really given us very concrete, well researched numbers, in order for us to make claims and backup claims about nuclear his role in decarbonisation, and seeing how it compares to other technologies, like wind and solar and hydro, etc. So let's let's walk through the piece, I'm going to try and interrupt you a few times sure fit nice and fluid and entertaining. But I'll let you kind of steer the architecture of of this interview.


Edgardo Sepulveda  4:25  

Cool. Yeah. Happy to do so. And then what I'll do is I'll just go through sort of an order as the piece was presented again, it's this is this is let's call it a kind of like a mid level piece. Ultimately, I am in parallel working on an academic piece that will show all of this statistically with regression analysis and the whole kind of robustness checks that are required in the context of academic pieces that have to be peer reviewed. And but this is this is sort of some of the preliminary work to that, which is sort of more accessible to a lay audience that doesn't have to look at regression estimates, and T stats. But but also at the same time that is robust, right, because one of the things that we often see, especially in the Twitterverse is, you know, comparing, you know, the performance of one jurisdiction for an hour, and saying that this proves, you know, that that, you know, for example, that renewables can power the grid, right. And so that's is cherry picking. And it's short, and it's a, it's a one off, what's important this look at this, you know, given the importance of the transition, we have to be thinking about robust datasets that are looking at the wide experience, and over a significant amount of time, which is sort of what I did was, I compiled data, again, 50 years of data, over 30 countries, to make sure that I had a solid, evidence based basis to be able to start studying this work. And the other thing that I did was, I was particularly careful to separate out the different types of, of generation technologies. So in all of the charts that you'll see on Ed carb.org, and in this particular piece for four voices, nuclear, I separated out into sort of, into the fossil fuels. So it's coal, oil and gas, I also have biomass, they're separate nuclear, hydro. And then I also separated out wind and solar, because one of the things that is often gets done is that people when they refer to renewables, they often lump in hydro. So it's important to kind of like biomass and biomass. Exactly. So it's important to be able to when you're making claims, and and and using the data. Well, one should separate what is what is renewables and what isn't renewables? So that's all thrown on?


Dr. Chris Keefer  7:21  

And that that biomass, that biomass inclusion, I mean, there's regulatory games played in the EU to basically write biomass off as being carbon free, it's not accounted for, because apparently, those emissions which go up the chimney and you know, matter of minutes and take 60 years, or 40, tries to That's right, maybe, maybe refix, if the land use patterns stay the same, not to mention the soil changes from clear cutting forests and whatever I mean, it's, it's preposterous and that's really what lies at the heart of this. I mean, I'm preaching here, but this problem and this, like horribly, useless, or confusing or misguiding term of of renewable. Yeah.


Edgardo Sepulveda  8:01  

So look, the biomass is interesting. And, and in and I, again, I go into how I particularly treat biomass, it's not a huge, it's not a huge, except for a couple of countries is not a big significant driver, but I do include the emissions from biomass in the in the, in the in the graphs and the analysis. So so the first thing that that I did was, is I looked at these 30 countries, and again, it's a third, it's a big 30 countries. So it's the United States, it's Germany, it's France to the UK, it's Japan, it's Korea, it's Australia, New Zealand, it's basically the rich advanced countries that have been members of the OECD, for for many years. And again, it's only it's only 30 countries, but they do account for like 60% of the world economy, and 50% of the electricity. So they're very large countries, it doesn't include either China or Russia or India. Those are not members of the OECD. And plus the data on them is is is is less, is not as good and doesn't go far as back. But again, having said all that, the first thing I wanted to do is I want to say look, what's the sort of intuitive way to be able to look at the contribution that nuclear is played over the last 50 years? And so what I did is I divided the 30 countries that were part of the sample into 17 that now have nuclear and 13 that do not right. So you basically it's a it's a comparison of, you know, blue states versus red states, right? It's, you know, it's the Real Madrid and Barcelona. It's basically two sets of countries that have very little in common Common between each other, or, or within each group, except that they're one of them is in our nuclear states. And the other ones are non nuclear. Right? And so, and then I'm not picking and choosing, I'm not being able to say, look, here's France, here's Denmark, here's Spain, I am choosing a full 17 set of countries in nuclear, and, and 13. In in that are non nuclear. And basically, what I found out was that nuclear countries, unsurprisingly, have much lower emissions started reduction of emissions much earlier, and reduced their emissions intensity over those 50 years by more than three times, those of the non nuclear countries. And so, again, you know, for for those of us who think that nuclear is very important in terms of decarbonisation, into the future, it's also important to show based on evidence that it has been an important component and the most important component of decarbonisation in the past. Right. And so that's what this does. And it basically shows that starting from the 19, from 1970 71, the countries that rolled out nuclear, generally rolled it out in 1970s, and 80s. And started reducing their, their emissions intensity from from from Day Zero. compared what


Dr. Chris Keefer  11:32  

what was it what was interesting is, is the nuclear 17 started with higher emissions. And I'm guessing that's because in aggregate, they had less hydro. And so they started a comparative disadvantage and got got way lower is that when I read it,


Edgardo Sepulveda  11:45  

that's exactly it. Right? So So you're starting, I mean, one of the one of the, you know, conceptually back in the 70s, one of the reasons that like the French, for example, did it in the same thing that even in Ontario, Canada, we had run out of hydro resources, right. And so your options in the 1970s were nuclear, or more coal, I mean, gas was just beginning or oil or oil, or oil, or oil. That's exactly it. And so OPEC and OPEC, that's exactly it. Those are the choices that time. And so what we see is that the non nuclear countries from the 70s onwards actually increase their emissions throughout the 70s, and the 80s. And most of the 90s, compared to the non nuclear countries, like the France like the Ontario, you know, like the Czechs, you know, like the Finns started decreasing their emissions as soon as nuclear started rollout. And, and, and part of the kind of strategic rationale, in terms of rolling out nuclear at the time was about, you know, energy independence, energy security. And when you don't have hydro, you know, your your only baseload firm power is nuclear, that, you know, especially if you don't have to import your oil or your or your coal, from, you know, when, you know, from outside of your own borders. And so, so that, you know, this is not going to surprise anyone that has followed, you know, the history of energy transitions over the last 50 years. But there's a whole bunch of people out there that just don't know, the legacy and how much how much emissions reductions have been contributed to by the rollout of nuclear across the West, right across the developed economies. So that's sort of one thing in terms of showing at a sort of, you know, pretty good level. What is obvious, and what is statistically has already been shown to be the case that, that that nuclear displaces fossil fuels. The other part that I thought was super interesting was the the International Energy Agency about two or three years ago, started crunching out some numbers about, you know, emissions avoided, right. So if we if we turn from the idea is, has the rollout of nuclear reduced emissions? The answer is yes. Have countries that have rolled out nuclear lowered their emissions more than countries that haven't? The answer is yes. And so then an interesting question is Well, how much more emissions would we have had had we not rolled out nuclear? And how does that compare to had we not rolled out wind and solar, right, so these are the avoided emissions? And this gives you a sort of scale of of the past contribution To Decarbonization, which can also give you a sense of the scale going forward in terms of those two technologies. And so, again, using this, you know, leveraging this database that I put together for the car, one of the things that I was able to do was, again, this is in Figure three of the voices of nuclear newsletter that just came out last week was just to give you a sense of some of the numbers that are out here. So if you remember your your electricity or electricity numbers 101, do you remember what a petawatt hour is? A pedo? out a petawatt hour are 1000 trillion watts? That's right. That's right. It's 1000 petawatt, right, with a P. And so I calculated that these 30 OECD countries have generated 300, native 380 petawatt hours of electricity in the last 50 years. So it's a very large, significant 380, petawatt hours,


Dr. Chris Keefer  16:11  

and how much carbon has that? Well,


Edgardo Sepulveda  16:13  

that has well, that has generated 178 Giga tons of carbon. So all of that all of that generation, for all of those countries that account for about 60 or 70%, of global electricity. They have generated 380 petawatt with all technologies, right, like nuclear, hydro, or coal, whatever. But that has resulted in 178 Giga tons of carbon. So that's a very significant,


Dr. Chris Keefer  16:52  

and for and for reference, like to make these numbers accessible to, you know, myself as of a few years ago, or those who are not, you know, as familiar with these big numbers. Globally, humanity puts out 50 Giga tons of co2 per year cumulative of all sort of GHG. That's right, every sector Yeah. So that that 50 is a really useful, important number. And I think up until the year 2000, we'd put out a fuck was called on a giga ton, like a trillion tonnes of co2. So far, and that means by by putting out 50 Giga tons per year, we're putting out a nother trillion tons in 20 years, we're doubling our historic emissions in 20 years, which is insane, like industrial revolution till the year 2000 1 trillion, and another trillion in 20 years. Like it gives you a sense of just, you know, how much fucking carbon we're putting in the atmosphere. It's bonkers. Yeah,


Edgardo Sepulveda  17:44  

yeah. And


Dr. Chris Keefer  17:45  

how much have we have we? Yeah, the electricity sector in all those countries and OECD 30 has put out essentially three and a half years of global annual carbon emissions.


Edgardo Sepulveda  17:55  

That's right. That's right. Because again, it's, it's a subset, it's, it's, you know, it's not, you know, it's not the energy sector as a whole. It's just the electricity sector. And then it's not the whole world, it's just those 30 countries, but it gives you a sense, right, like, in terms of the amount, the size of the electricity grid, for all of these countries. And, and then out of the sort of, out of the three out of the 380, petawatt hours, right. Nuclear has contributed to, again, just in terms of generation is, is about 80, petawatt hours, right? So, so nuclear, you know, if you calculate, you know, getting out my handy calculator here, you know, it's, it's, it's, it's, you know, it's about 20%. So, over over the life of these countries, in 50 years, nuclear has accounted for about 20% of all electricity generated. You know, on the other hand, wind and solar has, has contributed nine petawatt hours. So that is nine divided by three ad. That's 2%. Right. So it's, it's generally


Dr. Chris Keefer  19:19  

I mean, to be fair, wind and solar are, you know, much they're coming along much later. That's exactly


Edgardo Sepulveda  19:24  

it. But but in terms of, if you think about cumulative, if we think about cumulative contribution, right, over the long term, you know, it's a relatively modest and even now, right, it's, they're generating even now generating much less, because of all the legacy nuclear that is still on the grid right across these countries. But what I was able to do is I was able to apply on a country by country basis, their particular kind of emissions intensity, and calculate over the year what would happen happen if we took away first of all, if I took away nuclear, and made up that difference with the carbon fuels that are actually in the grid in a national grid for that particular country for that particular year, and then do the same for, for, for for wind and solar to try to figure out, what would be the kind of avoided emissions if nuclear did not exist. And, and if wind and solar did not exist. And so basically, what I calculate is that, you know, for, for wind for nuclear, it's about 57 Giga tons. Right?


Dr. Chris Keefer  20:37  

So that's over a year's, like, you know, the years,


Edgardo Sepulveda  20:41  

more than years worth more than a year's worth of total emissions right now, and about four years worth of total electricity emissions, electricity sector emissions for the entire world. Right. So if you count the Chinese Yeah, cuz


Dr. Chris Keefer  20:56  

I, because I feel like we always overestimate because I mean, the focus is so much on electrification, it's like the way to decarbonize so much of our economy. And I think we tend to overestimate the percentage of our emissions that are related to electricity in Canada, we have just been reviewing the numbers and the electricity sector. I mean, we have a lot of hydro, but it's only 8% of our country's emissions, whereas, you know, our oil and gas sectors 25% or transport sectors 25%. You know, buildings are 13%. So, I think that's important to put in context, when you when you do realize that globally over the course of nuclear existence, it's offset a full year of our annual GHG emissions. And when you understand that, that is essentially, you know, 1/20, of doubling all of our historic emissions that we did from the Industrial Revolution till about the year 2000. Right, like, that's exactly bonkers. Yeah,


Edgardo Sepulveda  21:42  

yeah, no, no, it's huge. And, you know, we'll see today we're, you know, we're recording on April 4, which is going to be when if it hasn't already done, so the annex three report from IPCC will come out. And, you know, we'll see what they have to say about sort of different pathways to reduce our overall emissions, right. And in Canada, where we're recording as well. We know that the federal government released last week, their, you know, emissions reduction plan as well. So, so people are thinking about this, they're talking about it. And, you know, one of the reasons that I did this was to try to base some of these discussions on data rather than ideology. And so I'm naive enough to think that that may be actually has some impact, but hey, we can do what we can do. And so So anyway, so I wanted to show that I wanted to update some of those numbers, I wanted to do two things. In that first part, which is very numbers driven, which is a nuclear has contributed decomposition, nuclear countries have contributed more than the non nuclear countries, and the emissions avoided by the application of nuclear are 1020 times greater than those wind and solar, partly because it started earlier. But also partly that even now, current emissions avoided by nuclear are much larger than those of wind and solar, in these 30 OECD countries. So that's sort of the number, I think,


Dr. Chris Keefer  23:26  

I think, I think it really points towards as well, like, I've been thinking a lot about the, you know, Emmet Penney is, you know, nuclear plants as industrial cathedrals, you know, John Constable, talking about how we're sort of living off the fat of historic infrastructure, building historic energy conversions that have resulted in, you know, what underpins, like, what's the difference between the developed world and the undeveloped world, it's the fact that we have infrastructure, we have railroads, we have bridges, we have roads, we have power plants, we have water treatment centers, these are all vital bits of infrastructure. We're not really renewing them very well, in the OECD. We're not building a lot of new stuff. And particularly when it comes to the energy generation and the electricity generation, we're going to need to achieve our you know, what I think are quite delusional net zero by 2050 goals. I wish they weren't delusional, but you know, based upon the action that our governments are taking, you know, we need to build this infrastructure. And we've been sort of freeloading on what what, you know, our foremothers and forefathers gave us in the 70s and 80s, particularly with nuclear, and we're gonna see if we're up to the challenge of of, you know, redoing what, what they did, yeah, living up to their expectations for our future generation. Well,


Edgardo Sepulveda  24:33  

and for sure, and that gets to perhaps the more interesting kind of like narrative and political discussion that I include in the second part of the paper, if the first one was very much data driven. The second one really talks about, you know, some of the things like two elements basically, that I think have been overlooked in the energy debate, generally and specifically in the nuclear space, which are two Important factors that I think have driven the development that drove the development of nuclear in the 60s 70s and 80s. That, that, that, you know, that kind of get overlooked now in the context of kind of like, technology, options and the such. So I wanted to highlight them now in this piece in the voice of nuclear newsletter. And that is that one has to do with electrification. Right. And, and the second has to do with kind of going back to the discussion, you and I first had way back, Chris in in March or April of 2021, about sort of regulation and markets and, and, and the kinds of institutional factors that kind of drive nuclear. So let me get to the first one first, you'll see in figure in again, in the, in the newsletter, one of the things that I do, and one of the things that people kind of that are very much present oriented or want to look at the present and forecast to the future, is that often the case people don't have a sufficiently historical background. And to, to look at themselves in the present without thinking about what is the recent past, and what is the the historical past. Because one of the things that I've always thought was interesting is that we we in the electricity in the energy sector, kind of get ourselves tied up in knots about, you know, how hard it will be to decarbonize and how hard it will be to double or triple our electricity in 30 years. And how it's like, it's like, it's, it's such a heavy lift. It's as if we haven't done it in the past. And so what I wanted to do was, is I want to show that, in fact, we used to do this all the time. And for those who is who look at the numbers from a not so distant past, we used to do this all the time. And so what I did was in this in this newsletter, is I went just back to the 60s, right to the 1960s. And, and looked at how fast the electricity sectors in all of these countries, so I'm not gonna cherry pick, you know, Korea versus Australia versus, you know, versus turkey or versus, you know, Italy, I'm looking at the countries as a whole. And what we were seeing at the time, was that the electricity sectors in the 60s, and even in the early 70s, were growing at six or 7%, year in year out. And that growth,


Dr. Chris Keefer  27:53  

what was the seek? What was the secret sauce? Right, that's, I guess that's what you're gonna get to,


Edgardo Sepulveda  27:58  

it was gonna get me basically, what happens is that from, you know, from when Edison turns on his his pearl streets, you know, generation plant in the 1880s, we had this phenomenal growth in electricity, that, that over those 60 or 70 years basically grew by six or 7%, year in year out, which basically meant that it was doubling every 10 years, maybe every 15 years. Right. So the electricity sector in the West was doubling in the 40s, in the 50s. And in the 60s, basically every decade. And so the idea that, you know, for example, no one in the 60s had to go out and have a demand study or a forecasting study. Because everyone knew, in their bones, because they had seen it over the last 5060 years. That, that it was going to grow at 6%. So for example, when, like when the when the French were rolling out the mesurer plan, they weren't concerned about forecasts, I mean, obviously, they did the forecast, but their forecast was that electricity will grow at six or 7% year in year out, and it will continue to do so into the future. When we roll this


Dr. Chris Keefer  29:24  

justifies building these, these long return on investments, huge bits of interest.


Edgardo Sepulveda  29:28  

That's exactly right. In Ontario, when we rolled out nuclear, we knew that it was going to continue to grow at six or 7%. And so we knew that we would have sufficient demand in the future to be able to justify today's investment. Right? So it's the old you know, like the movie like build it and they will come that is to say, we were we were building with a view to expanding demand into the future. Right. And that certainly,


Dr. Chris Keefer  29:56  

is that which is the situation we should face now, which is


Edgardo Sepulveda  29:58  

a situation we should face So, so then what you get is you get into the 80s. And you have a series of structural factors, right? And ideological factors, right, you had the discussion, you know, with a, you know, with Mark Nelson about him, you Levin's. So you have this structural factor first, which is to say that as a result of the intro in the industrialization as a result of the, you know, the the the energy shocks of the 1970s for a series of structural factors, suddenly, after decades of us have basically doubling the grid every 10 years, every 15 years, we've got a situation of, of stability, and ultimately, now, in many countries in the West stagnation or decline, like there's a bunch of countries that I looked at that have actually seen absolute declines in generation in the last 15 years, right, where you actually, we actually have these


Dr. Chris Keefer  31:02  

are the Amory Lovins, right? These are the Amory Lovins decades of the 70s and 80s. And like part of part of Emory's argument was, for instance, well, if we build a lot more electricity, we could use, you know, electricity for heat, but, you know, efficient from an efficiency perspective, converting electricity to heat, particularly in the era before heat pumps, that was, you know, poor use of energy from a pure sort of thermodynamics perspective. However, you know, had we done that, and, you know, as France has done, and I mean, as Quebec did with, you know, a huge overbilled of hydro. They have decarbonize heating to a large degree, which is now what we need to do. You know, what, while they can be sympathetic to, you know, on on a certain level to like, well, yes, I mean, the megawatts and we should, we should be efficient, we shouldn't waste energy. This really did set us back from the perspective of being ready to decarbonize, we weren't thinking about it in the 70s and 80s. And 90s, I guess, but we could have had that electricity infrastructure in place, right, which would suit us so well, in our decarbonisation efforts right now? Well, that's exactly that that vehicle fleet or the heating?


Edgardo Sepulveda  32:05  

Yeah. And so, I mean, so, so one structure was that, you know, we started did the industrialized so the, the, the, the electricity required to power our factories, that was growing exponentially during the 40s 50s. And 60s, we needed less of that, right. So as manufacturing capacity decreased as a result of, of, of our, of the changing of our economies, we needed less, less electricity, we also out, you know, offshored, some of that right, to other countries. And so, and also, we just hit a hard a hard wall of fossil of carbon fuels, of fossil fuels whereby, for example, you know, when we're in the 30s, and 40s, when we're rolling out the electricity grid, to, for example, to rural areas. What we were displacing for example, was, you know, human muscle that would otherwise be you know, washing, you know, washing the clothes for Ryder or, or pumping the water, right. But so that's an that's a, an easy win in terms of replacement of energy, right? But, but when we hit transportation, electricity was hitting against a highly efficient if polluting gasoline. And so it's so in the 60s and 70s, when we were able to roll out the electricity grid, to everywhere and, and displace, you know, human muscle and other kind of inefficient forms of energy. We also were hitting against the wall of fossil fuels, for example, in cars, for example, in heating, whereby, you know, you were trying to displace another form of energy that simply was was not economically doable. So in the future,


Dr. Chris Keefer  34:18  

which leads to Amory which leaves the Emory out Levin's argument that you know, every house should have a coal fired furnace, for instance, because you know, that coal is a superior fuel from an energy perspective to generate heat that's right to to heat your house versus electric. That's right. Resistance.


Edgardo Sepulveda  34:31  

Right. And so so it wasn't making sense. But so in the future, what we're doing and what politically and from a regulatory perspective we're trying to do is we're trying to we're trying to separate n n n and reduce that wall of fossil fuel. So that electricity actually goes over it and starts to expand again beyond that economic constraint of of this highly efficient energy use. That is Also very polluting, so So the growth that we're gonna get in the future for the electricity sector is not going to be organic. And as much as that it's going to be a natural progression, it's going to be policy driven. Right. And that's the important part is that we've hit the end of the organic phase. And we have hit that for last 34 years. So when people say, Look, we're going to double the grid. People who don't know, the 50s 60s and 70s, are going to say, that's an impossible task. We haven't grown a single Iota in the last 3040 years, how do you expect it to double? Well, your timescale is too short, we can double and we have


Dr. Chris Keefer  35:39  

what's Yeah, and what's what's fascinating here is, as you were just saying, this is going to be policy driven, right, pure kind of market market motivation around just making profit. And not considering, you know, the externalities of pollution and carbon and climate change. Say that, hey, electricity is not the best way to power, transportation, it's not the best way to heat. It's more profitable, it's thermodynamically, maybe easier to use fossil fuels, but we're saying no market, you know, we're prioritizing environmental and social concerns arising out of climate change. And so we're going to force a an energy that is, I guess, less thermodynamically favorable, through policy to decarbonize the sectors. That's right,


Edgardo Sepulveda  36:23  

that's right. And that's what you know, for example, for those of us countries that have a you know, like a carbon tax, or a carbon fee, and Levy, and all these kinds of renewable portfolio standards, this is we've got understand that this is not an organic, organic, you know, process, there's going to be some part of that, but it's mostly policy driven. And, and, and, in fact, and


Dr. Chris Keefer  36:45  

then started to keep interrupting but but I think the other key point here is if we're if we're using electricity to do things that electricity is not really quite as good at but that we're forcing because it's, it's better for the climate, we better make sure that the elec the generation sources that we're using for electricity are the most efficient in the sense of, you know, have the highest energy return on energy invested, they have to be the best kind of source of electricity, we have the best capable of replacing fossil fuel services, right. So that that's a favorite, like the most favorable thing. And so using wind and solar intermittently, and making hydrogen to fill in the gaps of intermittency like that energy return on energy invested as Lee gearing just put in two podcasts ago, it's so important, because we're doing something that's not really favorable, that doesn't make common sense, but we're doing it for climate, you know, we need to be very careful about which technologies we decide to use in order to achieve those goals. And I mean, that's so much of what the Decouple mission about is, it's supposed to be about sort of an empiric assessment of which technologies, which are the best decoupling technologies to reduce their ecological impacts on the world. You know, and I think often that leads to sort of accusations of well, you're being a nuke bro. But I mean, honestly, in terms of being transparent, my interest is in identifying those technologies are the best E R. O. E, is that we can do these things and to do it for climate, I remain a climate hawk.


Edgardo Sepulveda  38:06  

Right. Yeah, no, no. And look, and again, it's this is not a, you know, this is this is we've got to understand what we're getting into that where I mean, look, not that not that there wasn't policy driven, you know, electrification, when, you know, the electricity companies were giving away you know, you know, kitchen ranges and washing machines and the such to try to get people to use more electricity. But that organic growth is now over. And one of the reasons that we have such a hard time decarbonizing is because the policies have been insufficiently firm. Because there's political pushback has been insufficient and firm to be able to actually go over that hump of what is organically very difficult to do is to replace your, your, you know, your internal combustion car with an electric car, etc, etc, etc. So there's a whole bunch of reasons. So this is this is not a critique of why we're doing it. It's the recognition that the mechanism, the underlying mechanism for the increase in the grid is going to be different now than it was in the past. But separate from that,


Dr. Chris Keefer  39:23  

but another like another. Another key component here, though, is that you know, our demand flatten because as you're saying, we used to use a lot of electricity for our manufacturing and our industrial processes. We de industrialized with a globalized economy, kind of neoliberal race to the bottom for, you know, labor and poor labor standards, low wages, low environmental standards, and that electricity growth was just offshore to China. Those emissions were just offshore to China and other developing economies do indeed, I know that you're looking just the OECD, but I mean, we do a lot of we do a lot of self congratulatory sort of, you know, we our emissions have gone down but when you factor in the Has offshored emissions and the emissions that come from all the products that we no longer manufacture here but import? I mean, we have a lot less back slapping and self congratulations to do them. Yeah, yes, the well in China


Edgardo Sepulveda  40:11  

and China's growth in electricity is is now six or 7%. Year over year, right? Like, China is doubling their grid, like even now, like over the last 10 years over the last 20 years. Like every decade, China has doubled the amount of electricity that they're generating, right? So they are where we used to be in the 50s and 60s, where it's just normal to double your grid. Right? Like when a when a Three Gorges Dam is just a small little, you know, it's gonna meet demand, right? Like, you don't have to think about where's the man come from in China? Chinese planners don't have to have that question. They know that they're going to be growing the same way that we knew we're going to be growing in the 50s and 60s and


Dr. Chris Keefer  40:58  

Matt organic, and that organic in that organic


Edgardo Sepulveda  41:00  

phase. And now we're pushing through the organic phase into the into the policy driven phase. And that's one of the reasons so but again, so one of the reasons I want to do that is to separate that organic phase from that policy driven phase. And also, the other thing is, is that it's really not that hard to do, we used to do this all the time, we used to double our grid in Canada in Ontario, every 10 years. And so the idea that we're going to be doubling our grid, and in 25 years or 30 years, everyone goes, Oh, this is impossible. It's never been done before. Well, they're just not looking far enough back, because they were only focusing on the last 20 or 30 years, we basically have stagnant grid. Right. So that's, that's the other thing that I wanted to kind of bring to the attention of the reader. And then the fourth thing, which I'll be very, very brief on is just, you know, a summarizing of the discussions that you and I have been having over the last year, about how important how important regulation is how important markets are. And, and, and and how important it is for nuclear to have the kinds of institutional arrangements that promote a de risking a very long lived, very capital intensive, reliable nuclear energy is and how the move in the last 20 years, which has been truly a policy experiment. Most of the time, again, for people who are a historical most of the time, we've had different mechanisms in the OECD countries to figure out what kind of generation assets are going to be used the planning of the grid, the experiment is over the last 20 years where we've allowed ideology in terms of the idea that wholesale clear and markets should be the main mechanism via which we we plan for and generate electricity is a real experiment that I don't think it's actually going to be able to help us in terms of decarbonisation. And so it's just a call to kind of make sure that while we can kind of tweak those markets at the margin, we have to have a real deep rethink of whether those institutional arrangements that have been developed under different circumstances over the last 20 years are really fit for purpose to meet our our Decarbonization objectives, and that those markets. In the past were not responsible for Decarbonization. Decarbonization occurred under different institutional arrangements. And so that's what that last section of my pieces about is to have a make sure that you


Dr. Chris Keefer  44:06  

listen, this is. And this is what I have been referring to as the secret sauce. I mean, the secret sauce for how to build nuclear on budget and on time really reflects the broader secret sauce of how to grow your grid by 5% per year. Right. And that seems to be through, you know, regulated markets. And also, as we've been talking in our most recent episode on the green bond framework, access to cheap capital in the form of triple A rated government bonds which OECD countries have been able to offer because they're rich, wealthy countries, right? But that's what has derisk the capital and made building these massive infrastructure projects affordable in a way that they have not been in the sense of like Hinkley Point where it wasn't government backed and they had interest rates of nine 10% and two thirds of the final cost of the nuclear plant our interest payments to vulture capital. Well,


Edgardo Sepulveda  44:51  

that's right. And so you've got a combination of that you've got to have the risk capital that the risk patient capital, and you have to have You know, relative certainty that when you build it, you will actually have sufficient demand to actually, you know, for it to be worthwhile and for, for for, you know, for the bondholders to be repaid through revenues, right, like through the revenues have come from the bonds, right. So it's a combination of both.


Dr. Chris Keefer  45:23  

If I can just ask you one quick question. I mean, we've been living in this last, you know, 15 years, maybe 20 years, Lou Gehrig, Lee gearing was saying like, this is the cheapest capital has ever been really, in the last 4000 years, right. Interest rates have been so historically low, I guess, since the 2008 financial crisis, like that was the time to really build nuclear and build these big infrastructure projects, access to cheap capital, this was crazy. I mean, are you fearful that with this hyperinflationary cycle that we seem to be stepping into interest rates are gonna go through the roof, and we've missed our golden opportunity for these secret sauce preconditions to build our grid in this way? And in terms of capital being cheap and available? Yeah, well, look, I


Edgardo Sepulveda  46:00  

mean, capital, I mean, look, if it becomes expensive for nuclear becomes expensive for everything, right. So we're not talking about a comparison to what could have been, you know, the best way time to build nuclear 10 years ago, you still gonna be thinking about, you know, you know, nuclear versus wind versus solar versus hydro versus whatever. Right. But, I mean, so, certainly, that's important, you know, the out of market, the auto market revenues, that wind and solar had been receiving through all kinds of subsidies, whether it's the, you know, the feed in tariffs in Europe, the renewable portfolio standards, you know, in the United States, you know, and all the tax expenditures in the in the, you know, in the, in the context of the, the production tax credits, or the investment tax credits, you know, all of these things. You know, the market, as you know, Chris has been kind of used as a cudgel, to kind of discipline nuclear, but at the same time, there's very little commitment amongst many governments to the free market when it comes to nuclear, right. So, for example, in the context of a free in the context of a market, you know, the Germans would never have actually shut down nuclear because, you know, the nuclear was still kind of profitable, right? That's a political decision, as it is, for example, the shutting down of nuclear in Belgium, yet, at the same time, they're still throwing in billions of euros to the financing of wind and solar. So there has to be a comment. I'm gonna ask you a question. A combination of those two, what


Dr. Chris Keefer  47:41  

is your question about? Go on, I want us to question about because even you talk in the paper about these out of market mechanisms, right. Again, we had the organic growth and then out of market mechanisms to incent, you know, we need this percentage of renewables by this date, right, gonna give you this, you know, zero emissions tax credit or renewable standards purge the building of wind and solar. And I want to that was to spur growth in the sector to add renewable capacity. But I want to explore how that is different than the out of market mechanisms of you know, the the secret sauce time of adding and building our grid by 5% per year that were favorable to nuclear. I mean, has that rewarded private capital more like, what was the difference in this out of market mechanisms, like de risking capital getting low interest capital to build these big mega projects? How is that different than what's been done in terms of out of market mechanisms for for renewables? Well, I mean, within the wholesale markets?


Edgardo Sepulveda  48:32  

Well, I mean, first of all, they were, look, until about 20 years ago, there was no out of market, there were no out of market revenues, because there was no market. Right? So that's the first thing you got to realize is that there was no market and so, you know, these are generally centrally planned, regulated industries were, you know, it was the the either the state owned or privately owned utility, that that with, you know, different levels of, of, of consultation or direction from the government, you know, would plan the grid, they would probably put out some kind of like, you know, Integrated Resource Plan or something along those lines, five year 10 Year 20 year plans, and they would plan the grid. And so, there was no need for the state or advocacy groups to try to pressure that company and impose on it things that it normally would not otherwise do in the form of a renewable portfolio standards, because what basically what a renewable portfolio standard does is that, you know, the state of California says, forces, policy driven forces the the investor owned utilities to do something that they may or may not want to do necessarily of their own volition. And so it's a it's a mandate, right? It's it's regulation. And so in that context, those that kind of intervention for policy purposes just simply didn't exist, not for environmental reasons. There are other. There are other reasons, perhaps, but it just didn't exist. And so it was basically done by, you know, the end. So there was no, there was no need for those kinds of out of market revenues. Because what you're doing is you're you're, you're imposing certain kinds of standards, that normally would not necessarily be the case, but you'll have to compensate that, right. And the way you compensate that is through, for example, those those investment or production tax credits that funded by the federal state by the federal government in the United States, or, you know, the


Dr. Chris Keefer  51:00  

Yeah. So during electrification 1.0. During that organic growth of the grid, we didn't have wholesale markets. Rather, these big regulated monopolies are state owned enterprises would build something and they'd be sort of by the regulator given a guaranteed rate of return on that asset. That's what that was, I guess what was criticized by Levin's which was just this is just feeding these utility fat cats. They're just building power plants that we may not even need. But it was a model that worked at making making sure these power plants got built. And it did it really efficient. That's


Edgardo Sepulveda  51:30  

exactly it. And in fact, I mean, these regulated monopolies in the 30s, and 40s, and 50s, and 60s, couldn't build fast enough. Like in Ontario, we had blackouts in in the 40s. Because what had happened was that we had hydro, we were like 195%, hydro in the 40s, we had this huge surge of electricity demand during the war for the war factories. And then in the 1940s, and 50s, because we hadn't invested enough. We couldn't, we couldn't, we couldn't we had started having blackouts, which is when we start thinking about coal and nuclear, right, it was in those early years, because we were running out of capacity. So it's not as if, in the 40s and 50s. And 60s, were you know, these public utilities or private monopolies were foisting, you know, capacity at the ad, the poor, suspecting public, that didn't know what the hell to do with this power. It was being driven organically by this huge demand by people wanting electricity by people wanting electricity, to be able to run their washing machines to be able to do their ranges, you know, to have air conditioning, refrigeration, etc. Right? So there was no, there was nothing. There was no foisting on it. What happens is that growth model, organic six 7%, year over year that eventually essentially doubled the grid hit a wall in the 70s and 80s, because of the structural changes, and so you see that you see that demand expectations, were still like this, and then suddenly you start to go down. And that's when I hit


Dr. Chris Keefer  53:21  

the wall of the hit the wall of the big bald forehead of Amory lence in terms of ideologically right. And this was the era prior to that, right where we like, what you're just describing with the organic growth phase, like we built the largest operating power plant in the world as their nuclear power plant in the world, which is Bruce right, we build large candles in sequence on the same site. I mean, eight units at Pickering. Right, eight units at op Essary. At at Bruce Power. I mean, this this, that's what that's what's required. That's how you do. Yeah, but Sir, I interested


Edgardo Sepulveda  53:52  

I look at during that time, there's always an expectation, right. Like, were you there was no one saying in the 60s? You know, can you check your your demand forecast? Because I don't think we're gonna need that power. Like, no one was saying that. Right. But now,


Dr. Chris Keefer  54:11  

and we shouldn't be we shouldn't be saying that. Now this question about electric power is


Edgardo Sepulveda  54:15  

one the electric power, right, because this is the question now because right now, opponents, for example of any kind of large scale generation now saying you don't have the demand. Right, we won't have the men don't don't build sightsee in in Vancouver and BC, because we won't have the demand. Don't build muskrat falls because we won't have demand don't build this and this and this because we don't have demand. Because a that goes to the philosophy of the megawatts is that you don't need the demand. But also realistically, that actually has been the case for the last 30 or 40 years where we haven't seen demand growth. And so the question is, are we going To be able to persuade policymakers that actually demand needs to grow or not. Because if we cannot decide that, then people are going to say, what are we going to build, you know, for more candles, when we're not going to have, we're not going to meet them.


Dr. Chris Keefer  55:19  

Which is why Darlington beaten game get built. But that's exactly in terms of right, which in terms of whether this, it's not the total energy didn't grow. But we de industrialized, you know that that energy went over to China and these other countries, we need to reindustrialize. Obviously, if we're serious about building this new infrastructure, that's going to require reindustrialization, even more energy. But as you were saying, We just stopped, you know, in terms of the growth, we stopped using electricity to do these functions, and we relied on fossil fuels. Like, if you look at emissions from transportation, I mean, they've gone up a lot. That's exactly oil and gas, which are more convenient and right.


Edgardo Sepulveda  55:55  

So when someone says to you, where's the demand coming from? We haven't had it in 20 or 30 years, the demand is not going to come from places that already are electrified, it's from places that had not been, you know, previously electrified, right. So for example, like heating, like transportation, etc, etc, etc. So, so and


Dr. Chris Keefer  56:14  

you know, like, you and I, you and I have been studying a little bit, I think the Canadian 2030 emissions reduction plan, right? Which completely Erech it recognizes, hey, we're gonna need to there's one sentence we need to double our grid, I think quoting the clean energy Canada report, right, double or triple the grid electrification, pathways power, Christina has put that out, you've put out analysis on that. But it completely avoids this question of like, well, what are the facts? The power we're going to come from? Exactly, you know, yep. Yeah. No one wants to talk about it. This is this is the question. Yep. Yeah, it's the elephant in the room ocean, and how do we how do we deliver that? We deliver it with bonds to fund it. And we and we create the market? I mean, I guess we destroy the wholesale market, and we move back to a regulated system.


Edgardo Sepulveda  56:53  

Well, yeah. Or used to do? Yeah, I mean, look, I mean, the elephant in the room is that there's a lot of lip service. I mean, we're now at a situation where, where the soft energy, megawatt efficiency First, don't build things, but rather economize is is is now continues to be the dominant theme in energy planning. In many provinces, that is now hitting against the hard constraint of the actual need to decarbonize through electrification. And that narrative debate. As as reflected, for example, in the in Canada's emissions reduction plan is in full display. There are inconsistencies in that plan. Because the the the the secret sauce that you refer to the idea of double or triple of the generation assets are hardly ever mentioned. They focus on efficiencies, they focus on micro grids, they focus on all the things except the hard, difficult, citing planning, financing of of generation assets, that are actually going to be able to provide the sufficient power to fully displace in an inorganic matter. What is ultimately the organic matter of fossil fuels, right? So that's what you need.


Dr. Chris Keefer  58:24  

And they confuse and this happens all the time they confuse energy carriers for energy sources. So we're gonna have a hydrogen economy. That's right. Hydrogen doesn't isn't manna that falls from the heavens, right? You got to strip it from from methane, you've got to you know, cracking electricity from h2o, you know, it's, it drives me nuts, Edgardo. We're coming up on an hour. This this, I mean, this is this is amazing. But let's let's move to certain sort of closing comments so that we don't overwhelm people. I mean, I mean, crazy high yield. For me what we've covered so far, this has put, you know, an end in terms of this beautiful podcast journey. You know, this is synthesizing so much in terms of, you know, what's come before us, particularly, that Amory Levin's episode with Mark Nelson, which, you know, to get a better context for what Edgardo and I are talking about right now. I mean, you gotta you gotta hit up that and it's Mark Nelson, man, it's entertaining. So a review it. But let's, let's, let's wrap up. I mean, what do you what do you have in terms of a closing statement or sort of a synthesis or summary of everything we've covered at Garden?


Edgardo Sepulveda  59:21  

Well, look, I mean, I'm trying to remember who it was, was it was it one of my economists heroes? I think it may have been Keynes or was a Galbraith. Anyway, one of the economists, historical economists used to talk about and I'm gonna mess it up, but it talks about that, that there are that many bad ideas now are sort of, you know, the historical legacy of some dead economists who kind of thought about things and, and, and they're kind of like zombie, zombie ideas that have to be kind of killed, and that just won't refuse to go way until the reality hits him on the head. And one of the ones that I wanted to focus on here beyond sort of all the benefits of actual, you know, emissions reductions in practice, legacy, huge amounts of reductions as a result of electricity is the very idea that that that that growth is difficult, that growth is bad. And that growth is not possible. Because we haven't seen growth in the electricity sector in 20, or 30 years in the West, or 40 years in the West, which is what most people's actual lived experiences like. And so and I think that that kind of growth expectations where you don't have to necessarily have to have an understanding of the demand, but just have it noted in your bones the same way that that planners of the electricity sector, nude in their bones in the 50s and 60s, that if they build it, they will come that there will be demand as a result of this organic need for electricity. across the West, as you were electrifying farms, as you were delivering from for example, mostly women who were you know, washing, you know, clothes by hand, etc, etc, etc. So all of these things, were organically driven, but people knew it in their bones that if they built it, they would come. And so the idea of the the risk that are we going to need this, that wasn't an issue that clouded people's judgments, visa vie the need for electricity, we need to


Dr. Chris Keefer  1:01:42  

if we take it seriously, it shouldn't cloud people's judgments. Now,


Edgardo Sepulveda  1:01:46  

that's exactly it. That's what I wanted to say is that we really,


Dr. Chris Keefer  1:01:48  

if we really believe in our hearts that we need to do this, and we really care and this is for our children. And we want to stay as low as possible. Instead of three degrees, we want to degrees at 2100. This is this is the big boy pants that this is what we need to know we need. And these these ideas, we need a new new generation of policymakers that that you know, are bathed in the ideas that you're sharing right now and are not stuck in the last 30 years of zero growth, stagnation, decreasing growth and stuck in the ideologies such as that of Amory Lovins in the soft path which which bind their thinking and which limit their actual seriousness and ability to enact serious policy on how we're actually going to get to get to net zero.


Edgardo Sepulveda  1:02:28  

Fantastic. You finish you finish that summary. Well. So that's it. That's it. That's it. Now I was getting I was getting, I was getting too, too flowery. And so I'm glad that you brought that home.


Dr. Chris Keefer  1:02:41  

Well, I'm free, I'm happy that you are not too annoyed by my tendency to jump in and proselytize here. But you get me all fired up at goto started out. And once again, I mean, this this is I mean, I think this is, you know, a new field and I'm a girdle pilled you bring a lot to the podcast, lots of my understanding. You know, I'm about to head to Ottawa and do some pretty major political advocacy, I call it lobbying, I found that I don't need to register as a lobbyist because I, you know, contrary to maybe some people's assumptions that I might be a shill, I don't take a penny for any of the things that I do on the podcast or politically with Canadians for nuclear energy. So I'm not a lobbyist don't have to register as one. But I'm gonna go and hopefully, pass along this straight talk and try and inspire this kind of this thinking that's needed for electrification. 2.0. So Edgardo, thank you again for arming me for that struggle. And I think arming everybody listens to this podcast. And hopefully, some of these people listening to this podcast are in politics or in government, or will be soon so that we can actually steer some sensible policy make the changes we need to do and do something serious about climate change. Yeah,


Edgardo Sepulveda  1:03:50  

yeah, we'll put it in the show notes. So it's voices of nuclear.org. That's where my piece is. My Twitter is at at E underscore r underscore Sepulveda, the IDI carb website with all of this background information and data. We'll put that in the show notes as well. Thank you again for having me on. It's been very enjoyable. And again, thanks again for Myrto and the rest of the gang. It was for nuclear for inviting me to put together this piece and have it published.


Dr. Chris Keefer  1:04:25  

All right, good. We're all lucky to have you. Thank you again for coming on the podcast consultant. Decouple economic adviser. I'm sure we'll be talking again soon my friend like Chris, take good care.



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