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Stable Grid, Stable Prices

Kalev Kallemets

Tuesday, November 8, 2022

Chris Keefer  0:00  

Welcome back to Decouple. Today I'm joined by returning guest Kalev Kallemets. Calif is the CEO of Fermi energy. Yeah. And we have had quite an exciting week here in Ontario, which I think Khaled is probably quite excited about. Kelvin I met up about a month ago and he was passing through Ontario and wanted to bend my ear once again on my personal favorite topic, which is that of the nuclear secret sauce. And so we scheduled this conversation and what a week for it to occur within just earlier this week, the Canada infrastructure bank announced a $1 billion of funding for the West's first small modular reactor at the Darlington site right in my backyard and Ontario, Calif. Welcome, welcome to Decouple I'm excited to debrief with you to hear your reactions and, you know, really to, to pick your ear again to challenge some of my cognitive biases. It's always great to have you on.


Kalev Kallemets  1:00  

Yeah, hello, Chris. And hello, everybody.


Chris Keefer  1:03  

So I hear you're on vacation right now. You're saying a CEO never never really gets a vacation. Thank you for making the time on your time off for our listeners, but just catch us up. How have you been doing the last little while I heard you, you might have got a little bit of frostbite recently.


Kalev Kallemets  1:19  

Me Well, in Estonia, very little but but been very busy also for us. And we are also in doing some fundraising not in that volumes as his or Canadian friends, but But definitely, also might for my company, things are looking up and the general general principles that I'm about to explain to your listeners, I think is really central about how we how well we have been doing in terms of getting customer and also investor onboarding.


Chris Keefer  2:03  

Okay, before we get to the serious stuff, no, I'm serious. I want I want to share the Frostbite story. I thought it was pretty interesting. And it gives us a sense of kind of the realism of your life, how serious it is how serious you take your commitments to your your project. So if you don't mind, if I can push you on that? Share that story with the listeners?


Kalev Kallemets  2:24  

Yeah, I don't feel anything with my right foot toe anymore, because I was on military exercises. In the night, a member of Estonian National Guard or the defense league since I'm 14 years old, and we had another regular three week exercises. And now we're taking onboard Ukraine military lessons, so to fight the enemy in the night, which means that we have very little of sleep and have to accommodate ourselves in the sleeping packs. And was choosing choosing a little bit wrong equipment, this time, wrong socks and got really, indeed frostbite. And yeah, got very little, like three hours of sleep in the night. And we had to do patrols in the in the night using night vision goggles and drones. And so we're using taken on board or the lessons from Ukraine.


Chris Keefer  3:27  

You live in interesting life, my friend. So yeah, again, we're gonna get in, I think, to me, it sounds like from our conversation earlier, you're wanting to share kind of your business model your vision of how to make nuclear viable, particularly, you know, your brand of nuclear, small modular reactors, how to get those deployed. I've heard you characterize as a bit of a, I don't know, bring up a controversial name, but kind of an Elon Musk of nuclear project management or nuclear financing. That's dropping a big controversial name in there. I think everyone's going to be very, very interested in hearing your take and you know, however much of it you're willing and able to share, but again, first off, just to get some of the small talk out of the way. Your reaction to today's announcements are not today's announcement, but the the announcement earlier this week of the Canada infrastructure bank making this this historic investment in the BW RX 300 projects at the Darlington site right here in Ontario, Canada. Yeah, of course,


Kalev Kallemets  4:28  

the Canadian Canada is a tier one nation and having what I described on the last call, we had, like a really cohesive country were in a strongest province, the nuclear is very well represented and has a solid cohesive industry, not to like large but sufficiently large but at the same time quite cohesive. I was able to observe that a month ago at at a recent conference, and at the same time, it is providing clear political and industrial benefit, in a sense that it does not provide so much in United States, where nuclear the benefit of nuclear gets diluted. And as we observed in Illinois, even the the role of nuclear energy is not so well appreciated by the industry had to do a lot of persuading that the politicians would recognize the inherent and deep value of nuclear energy in providing price stability. And the price stability is all that I'm going to talk about right now and how relevant it is both in terms of how I'm trying to pursue the business through through private angle, but also I think, from the angle of, let's say, let's say making from the public perspective, public policymaking and public policy aim of having price stability, as a guarantor of political stability, political success and industrial success. So I think it's very, very right. Suitable announcement, very important, I think, globally,


Chris Keefer  6:17  

you know, again, we've dropped this term and multiple episodes, and even just three or four times already this episode, but this, this idea of the nuclear secret sauce in the history of civilian nuclear energy, many, many countries have have done an amazing job deploying reactors on budget and on time, and for me, it's almost like a relay race where, you know, really, things kicked off in the US were in the 60s, you know, nuclear plants are getting built in four years time on budget on time, competitive with coal, the baton, you know, has been passed, you know, Canada was doing very well in the 70s. And 80s, France did extraordinarily well in the 80s and 90s, Sweden around that time, as well, Japan and the 90s, South Korea in the early 2000s, China presently. And for me, it's this question of, okay, what were the preconditions? What were the factors at play, that enabled that that are so vital to understanding because the nuclear renaissance doesn't come along very often. And when it does, we need to make sure that we take advantage of it, and we deploy all the lessons that we possibly can learn from prior successes, so that we don't screw it up, because it's a terrible opportunity to waste. Nuclear is really, really difficult to do well, right. And we have lots of examples of it not being done well, particularly in the West in the 21st century, and that has made policymakers quite gun shy about venturing into nuclear, for reasons beyond the typical fear, uncertainty and doubt, which have so gripped the sort of, you know, the cultural zeitgeist of the last, you know, 30 or 40 years, you know, the things I've identified, and I think finance is one of the key things we're going to focus on. But what I what I focused on just kind of as a brief intro to this concept of the nuclear secret sauce, you have, you know, the human factors, I think, are what I want to start with, because I feel like they're the most neglected, you know, having a workforce that is intimately familiar with nuclear construction, with the high levels of certification that go into, you know, nuclear weapons or manufacturing nuclear parts, that is really vital. You know, alongside those human factors, having the supply chain ramped up, ideally, you know, ramped up specific to the design and wants to employ. So I mean, those are kind of two features, human factors supply chain design is clearly important, right. I think design has probably been over emphasized at the expense of those other features. But you know, and design with a good operational history is is essential. Government support is key, you know, in South Korea, Anti-nuclear president came in and essentially wrecked one of the world's premier, nuclear, nuclear nuclear countries. And so what's what I'm finding really fascinating about living where I am right now, is that these ingredients of the nuclear secret sauce are all lining up remarkably well, in Ontario, especially with the announcement of the life extension and probable refurbishment of the Pickering nuclear station. We I think, have the most pro nuclear government in the West. In the West, right. Yep. On the federal level, you know, we weren't sure. Well, we were sure that that they weren't very pro nuclear, because they listed nuclear alongside tobacco gambling firearms in their green bond framework. But now the federal government has joined the provincial government in this historic announcement and his ponied up a billion dollars, which is a lot of money. I keep comparing it to the amount of money we spend every year in subsidies for wind and solar contracts in Ontario, which is 3.1 billion per year, but it is a significant chunk of change and something I think a lot of folks in the industry had sort of given up on this idea that the state would come forward with a significant amount of funding. That's a real game changer, obviously, because of our Canada refurbishments. We have a supply chain and human factors that are completely lined up. I'm thinking we're ready to cook something pretty amazing here in Ontario. You know, obviously, we've had this gift of, you know, advocacy that has, I think really helped to deliver the political pressure that has led to this federal announcement, this federal government has been incredibly reluctant. And let's face it quite Anti-nuclear in a lot of their policies at best kind of schizophrenic or contradictory. But your your thoughts on this nuclear secret sauce, and particularly, the private financing route, are again, kind of in conflict or contradictory to some of my sort of political biases. But again, I do really try and pride myself on engaging in a bit of cognitive dissonance. And for that, you know, I'm very grateful to have you as a friend and looking forward to you expanding on this idea of the nuclear secret sauce, and particularly, I guess your ideas about finance, but feel free to take it any direction you'd like my friend.


Kalev Kallemets  10:56  

Yeah, since we spoke, I give a lot of thought about and about your, your, let's say corner of the of the aisle so to say or how you look at it, that there should be a national policymaking and based on national policymaking, there is a push for this wonderful energy source that is called nuclear energy. And obviously, there is a definitely, even with the government, or let's say private initiative, as we have it in Estonia, there is a major role for the for the for the government in any case, for in the picture of nuclear energy, but what I will talk about is come back to what is relevant goes that route that you described, and envisage kind of the new major policia determine push for new nuclear, or let's say what I am proposing and executing in Estonia providing private capital access. The key, I think, in both cases, in the Decarbonization story, is price stability, because what I'm going to disk describe to you is, what is the situation that we are having, not only in Europe, but you're gonna experience the same in let's say, your continent, American continent very much in the coming years, do some of the some of the impacts in the gas pricing, oil pricing you are experiencing already now. So the reality is that, okay, in 2022, the likely capex going to oil and gas, compared to 2019, is declining, is declining substantially. And if you're in the fossil business, it's very simple. If you're putting less money in, you're getting less oil out. That's very, very simple. And and if we're doing going to decarbonize and under decarbonizing the investments, even if we would get the same PDU value out of the non-fossil technologies, and we're definitely not there, we're definitely not in the lead times are substantial. When, unfortunately, to renew. With renewables, we're definitely not getting said the same oil equivalent energy, primary energy out of the system, for the same billion dollars that we are investing, and with the nuclear unfortunate story is that lead times are are substantial. So what we fundamentally are going to have, if you're going to disinvest, essentially fossil fuels, is that the prices are going to be volatile, and the prices for electricity, and we need to electrify for Decarbonization, prices for electricity, even in regulated markets. When we are going to have higher penetration of renewables. The prices are going to be volatile. It's fundamentally the nature of renewables because they are intermittent. And you need to back them up with Yeah. dispatchable capacities dispatchable. Yeah, either natural gas or nuclear. And the unfortunate reality is that renewables crisis they are obviously fearing nuclear and they're pushing for for gas. And that's what the real replacement of coal has been in America's in UK, even in Australia, even in China, so This means that if the gas consumption is going to increase globally or even to stay level, and the coal is going to drop, and the oil is going to drop to send some production, then the, because the gas is somewhat interlinked with in terms of corporate and in terms of resource itself as well, then I don't think it's very easy to maintain production rates, and therefore, you will have less volume at the market. And at the same time, demand being robust. And, and this is going to take place over coming decades. And which means fundamentally, it's going to be unstable. And what is what we see in Europe as well on stability in terms of co2 pricing. So, you have with so, even in, in regulated market circumstances, you objectively is are going to have volatile prices in on regulated markets, like we have in Europe, North Pole, there are yes, there is the amount of the volume, unpredictability, then the price unpredictability of the backup, but then you have also the unpredictability of whether you will have dispatchable at all supplying to for you to be able to provide to customers, final electricity customers, firm price, long term contracts, that you're able to provide physical delivery of electricity at certain price. And here, I see a very strong sweet spot for nuclear to provide those long term fixed 15 years, fixed price contracts, at a price much lower, much lower than renewable plus gas could potentially ever provide. And so this, this is I think, the secret sauce. And I would go a little bit into the details. What I see are the reasons really why the volatility is going to be this decade and next decade. Very, very substantial.


Chris Keefer  17:32  

So to sum it up, I mean, is your your version of the finance part of the secret sauce, power purchase agreements? Is that too simplistic? No, no,


Kalev Kallemets  17:41  

it's not too simplistic. It's absolutely so, we expect more than 60% for sure of or SMR power generation for next 15 years to be covered with fixed price PPAs which enables us at all to have financial project have clear offtake reduction of market risk, but also and providing to let's say banks certainty that they would have their debts paid back whatever the market does, and but at the same time, what is very important, it does very important, it provides already be before the construction, clear political signal to decision makers in the society at large, but the political class specifically that the industry is interested in that project. It is providing national, public good. So it's irrefutable, irrefutable, and we haven't missed though now more than 500 gigawatt hours of power generation of first unit already covered with those mo use for PPAs. And so that is a very important tool.


Chris Keefer  19:09  

So when we were when we were talking in Toronto, about recording this episode, the model that you brought up, and this isn't the carbon copy of what you're doing, but you talked about Finland and Finland is an extraordinary country. It has a green party that is pro nuclear energy. The only one in the world, as far as I understand right now. It's got a pretty thriving Ecomodernist community. It's a very well educated country. I mean, maybe I'm fetishizing it a little too much. You get a little cardboard box on your baby stuff. When you leave the hospital. It's there's a bunch of famous things that come out of Finland need a master's degree in education and pedagogy to teach kindergarten for God's sakes in that country. Still a lot of trust in their in their social institutions and things like that. But you were, you know, the durability of support for nuclear energy in Finland, even with the Chernobyl accident. You mentioned an underlying reason behind that and I think that was They have financed their nuclear projects to date in alongside all of these other reasons of being a society that's highly educated and trusts, you know, in its in its institutions and and as experts walk us through that model, what it's called and whether or not I guess you're kind of building off that or inspired by that. Yeah,


Kalev Kallemets  20:17  

it's called after me image of Mangala. In Finland, where one hydro plant was, was built together by two wood pulp companies that absolutely hate each other, and are competing tooth and nail for against each other, like Quebec and Ontario hockey teams, but in hydro energy they're cooperating. And the Mon cola is essentially mutuality, where they are both shareholders, but together with them are 14 Other major industries in Finland. And then municipalities, which are owning the district distribution network in their municipalities like municipality of lofty Wanda, and so forth. So so if the power is produced, it is distributed at cost to the shareholders of the of the company, the company, the only use would employ me that is owner of the old Toyota plant, they are not making any profit zero, ever. Yeah, all the profit is gonna be made by the shareholders. But the challenge is that the shareholders had to be up making upfront substantial investment into the power generation sources. And the challenge for us in Estonia is we can't do monka we don't have companies that are founded in 1654 or something like that. So, while we have some big companies and even owned by Estonian domestic capital, not that much, that is not sufficient. But the overcome that challenge is that you have the P base, and we pay essentially, with the P base, you have almost the same certainty of offtake. And the reasoning of the political, political theorist of the project, and certainly what what is relevant with the mongkol model is that because the society and the shareholders received the power at cost, then the benefit of the nuclear power is specific, not general, not diluted in the into the grid, but it is specific to those shareholders, those municipalities, those companies that are making the profit. And so this means that they are interested, it is their vested interest, not one company, but many, to defend it, to understand it, explain it, and to defend it. And this is the way this is the way we are aiming also in Estonia, not only that we would have in my company, we have already 1200 shareholders and I want to be there to be maybe 60,000. So representing maybe about six 7% of the population. It's not so bad, then, but essentially, I want essentially, majority of histone and industrial companies having PP with the nuclear power plant, receiving benefit of the low cost, reliable price, electricity, low carbon, that nuclear is going to provide for next 60 100 to 100 years, and then they are going to defend it. And we overcome that major problem of nuclear energy which we have seen in Europe, in Belgium, Sweden, Spain, and Germany, of total stupidity, of phasing out nuclear, while providing huge benefit to the society. And also the reality that nobody loves a big company. Especially if there are so badly run like EDF or, or what have you, then they don't, their utilities are universal, not very much love. And if their own nuclear power plants are owned by this big municipality, which is also very poor at communication, then they social trust is being lost. The benefit sharing is not equal in the society. And the public does not support nuclear. And this is in long term is the biggest problem of nuclear. Not that even even understanding how it works or not even the not even the what's a safety issue or so. But I think that the benefit sharing is very important in the society, more important than people publicly want to speak about.


Chris Keefer  24:58  

Right now. I think that's fast. donating. And, you know, I haven't done a detailed survey of nuclear power plant ownership around the world. But, you know, the availability bias I have is that, you know, Bruce Power, which is publicly owned, but privately operated, that private operator is made up. Not quite the majority, but about 40% of that is a municipal workers pension fund. The unions who operate the plant, I believe, have a 4% ownership stake in the in the plant. So we have a little bit of that here, with our private public partnership. Of course, the other plants are owned by, you know, a company whose sole shareholder is the province of Ontario. But yeah, I mean, when you told me about that, that model from Finland, I was, I was really fascinated by it, because as you're mentioning, I think there were the large players, I think, even an awful lot to have been some industrial companies, but it also extends to municipalities and other other entities that aren't necessarily just kind of, you know, what some on the left might think of as just like Big Bad companies, like when I tell people who are on the left and critical of nuclear energy that, hey, you know, all our assets are publicly owned. And the one that's privately operated is almost majority owned by pension funds and unions. It does give them pause, it does give them pause. I think I think this is a this is a very interesting ingredient in our in our secret sauce that we're cooking up today.


Kalev Kallemets  26:23  

Yeah. So it's, I think that what is really bad in Europe is like, the multi energy utilities. Like, like laundry, where nuclear is really just making money, how they call it, and not treated very well. And it's, it dilutes, I mean, if you're just putting nuclear to degrade, it dilutes it, you don't see the benefit. So the benefit has to be specific for that to be felt.


Chris Keefer  27:00  

Right. I appreciate that. Mark Nelson, I think use the great analogy of The Giving Tree when talking about French nuclear, and how it's, it's really been used to, you know, give so much to society, but but nothing has been sort of given back and they've been chopping branch after branch after branch off of this highly productive apple tree, shall we say, until there's nothing but a stump left. And hopefully, they're able to get that fleet back on line in time for this winter. But you know, in Sweden as well, I understand there's a pretty high tax on nuclear just for being nuclear. It's made uncompetitive, so when we're constantly told that wind and solar are cheaper or cheaper, I do want to dig a little bit more into you know, that that is a factor. And, and creation of deregulated markets that reward certain electricity production differently. And so you know, how much of a departure is is a power purchase agreement, strategy from from the sort of deregulated markets that have become the norm, I think through through much of Europe, through much of the US and in some parts of Canada.


Kalev Kallemets  28:03  

Actually, the PPAs are a tool that was developed to finance renewables. I'm just taking, taking the playbook from them. And instead of having like, normally, for solar park or wind park, you would have like two, three pays, and then the banks would be very, very careful. What is the counterparty risk with this PPA, whether the counterparty of this risk of this PPA would really credible able to take 10 year contract seven year contract, and actually pay for the volume that it has contracted. And so what the renewable companies have always loved is like having Amazon and, and Microsoft and Google and companies like that with their balance sheet behind the behind the PPA, but how I'm thinking about it if you haven't got like, essentially your whole national industry involved in the pay structure not not 10s Not hundreds but 1000s of PPAs. So then, essentially, you have the national economy risk, not not the individual company risk, we still have certain risks, but it's as good as it gets. And what is important also in the context of current energy crisis that we have in Europe, look, that crisis we have is so severe that not only in this year, but next year, as well and the year after that, that this is a problem for the banks. If your national industries are going to decline. If your national industries I are going to bankruptcy. This is a huge bloody problem for banks holding the depth of those companies, because they're not going to see their money. And we're not gonna see a lot of money. So, this makes banks rather interested in well, what is the solution here? Right. So, there is a good match, I think of providing nuclear energy, price stability. And what what banks would like to have is to survive a multinational industry and economists such


Chris Keefer  30:21  

listen, I mean, we check in pretty frequently with some of our German friends and guests such as Noah Rettberg on the state of Yeah, on the state of affairs there and on the sort of deindustrialization that's, that's occurring. But it's it's too it's happening too fast to keep up with to be honest. I mean, can you give us a little update on your your take on what's going on in terms of the deindustrialization of Europe, I think what you just said there is so vitally important that the banks now have a huge interest, because they've got a bunch of debt caught up in these industrial companies, which are going under because energy is so expensive, and unreliable or just frankly unavailable. So maybe catch us up a little bit there to flesh out that argument for us, for those of us lucky enough to not be, you know, in a, in a society of just cratering industry.


Kalev Kallemets  31:06  

Yeah. So the prices of gas in Europe have really dropped, thanks to whether we really have in Central Europe, it's still five degree degrees plus, while we are in October, so global warming is absolutely happening. Yeah. So, but the big news of today is the largest chemical company on the planet, I think the S. F. Pass announced that they are gonna reduce by industry, their company footprint in Germany on a permanent basis. So they this is quite, quite the major announcement. And the next year's next year is gas price. There is, yeah, there have been significant reduction in spot prices, but the next year gas price. So Cal 23, is 130 euros per megawatt hour. So that is that is still six times higher than it was was a year ago, well, not year ago, year ago, it was already up there putting starts started to decline and decrease pipeline capacity supplies already in early August. So he was preparing for this war quite early. So and know that but the reality is that this war is going to last quite long, potentially maybe into the second half of next year, then then it is very unlikely that the Russian gas supplies will return in any number and Europe itself is is wants to shut down old gas imports from from Russia. And Russia itself is doing blowing up its pipelines. So I think that we need a lot more LNG, which puts a lot of purchasing pressure on the on the global LNG markets. Where is the LNG coming from from it's coming from America? And so it depends a little bit on the weather in Asia and Europe, what is going to be the price measure. But essentially, what I'm hearing very much is the volatility is going to be there for long term. And what banks don't like what businesses don't like, is volatility. And nuclear is not volatile. If you're not in France, then if you have well maintained plant plants, like in Finland and Sweden, Sweden, but elsewhere in Europe, then your reliability generating all the time power. And this is what is so valuable to businesses to have price stability. And that is the reason why Finnish companies have invested into the even despite all cloth are going 15 year OTA over time have continuously invested into the Olkiluoto.


Chris Keefer  34:09  

So there's obviously a global nuclear renaissance emerging here and I try not to abuse that term. Definitely Renaissance has been thrown around probably more often than it should have. And, you know, Renaissance is can always be aborted. I'm curious, again, you're you're operating out of a country with no existing nuclear program. The challenges there, I mean, I've talked about, I guess a bit globally about how I think in Ontario, we're finally have assembled all the ingredients and we're kind of ready for a breakout. I think the limitation in Ontario is really going to be the on the human factor side. We have an incredibly skilled workforce, but just how much can we ramp it up? I mean, there's nowhere in the world maybe probably not even China that can can do anything similar to the French Mesmer plan. And a big part of that is just demography. There's not enough people who have the skills in the skilled trades that are able to work on the He's on these projects. You know, I hope we can refurbish the Pickering nuclear station care of the other refurbishments at Darlington and Bruce, build this SMR. at Darlington maybe build some more enhanced CANDU sixes helped Romania finish reactors over there, assist, you know, Estonia with building its first reactors. I mean, that's a tall order, there's a lot that could happen. And when I look at that secret sauce, obviously finances more constrained, I just gave a talk to Hong Kong business group yesterday morning. And I was quoting, the gearing and Rosen swag report where they were saying between 2010 and 2020, the world experienced the cheapest capital that it had seen, really, in 4000 years. And all sources of primary energy had drops from peak to trough by 90%, we had an easy decade these last 10 years, you know, no doubt things are tricky on a number of levels. You know, from the perspective, just the energy requires energy to build all these big projects that requires capital capital is getting more expensive interest rates are going up. But my real take is that human factors will be the limitation to a truly ambitious build out. And that's what's going to restrain the velocity, but tell me as someone planning very seriously on deploying nuclear very quickly, and very soon, what you see is some of the constraints to to actually putting shovels in the ground and getting this these plants built, you know, what do you want to see built in Estonia? Have you guys selected a design? How many? It looks like you're well on the way in terms of these power purchase agreements? Just update us on where you're at and what your what sort of your, your some of your timelines and targets are?


Kalev Kallemets  36:33  

So our timeline that we have officially also announced they still have power generation by Christmas of 2031. That is what they stone customers need. What what are all customers or investors need? Absolutely. All society needs it. So we have submitted a request for proposals to three, lightwater SMR vendors, we're going to make our choice public on Eighth of February, in 2023. And with that, we go to the project development agreement of front end engineering and, and planning. So yes, you're right, Chris, actually, human resource is the longest lead item. It's not the RPS that we have many facilities in Europe, and also in globally that can be ramped up to manufacture or PVS, generators, turbines. This is I don't think this is really so much of a problem, the manufacturing capacity, there can be additional hundreds of millions or billions of investments going into those facilities to upskill new welders, this is possible, but what I do think really and very seriously, is the limitation is to have volume of projects and projects actually play staffed organized in quality required by Rickover quality record required by nuclear management systems, quality required by Nuclear Regulation for a very good reason. To maintain high nuclear safety, high investor and public confidence on a permanent basis, we cannot have either failure in preparation of the projects, execution of the projects construction process, we can't have any failures and the operation as well. There is zero tolerance, any failure anywhere is a problem for the whole industry. So we have to be very, very rigorous in the quality of the execution. And it takes a lot of work. It requires high quality of staff, it requires master thesis, master thesis guys, PhD people, girls and boys. And in the volumes that we have not executed from the from the universities in that volume. last decades. We and this year, you're absolutely right. This is the long lead item. And we have to ramp investment into the educational system. I could explain how we have done it in Estonia going coming from zero but it make my makes it may take some time. But you're absolutely right. We have to get the volume of people and quality to the system to have like really 30 gigawatt, 40 gigawatts of deployments. Going globally, either large or small, doesn't make a difference, but we have to get the gigawatts out there.


Chris Keefer  39:52  

I think what you said there is so important like there can be no tolerance for failures in this renaissance in the preparation in the construction, obviously in the operation. And that's why I'm often quite puzzled by the lack of serious debate that occurs in how we plan this out. You know, there's obviously a lot of different proposals before us a lot of different designs a lot of different scales and sizes. And I do find that there's this culture of suppression of debate. And you know, the same kind of all of the above ism that we see, when talking about so called clean energy in general, you know, well, we can just do it all guys, you know, we got to build so much, we got to double triple our grid, let them build the wind, let them build the solar, let them build the micro hydro, let them build the unicorn, unicorn fart collectors, it doesn't matter. It does. It does. You know, we have goals, we have limited timelines, limited resources, you know, there's climate implications. There's also these geopolitical and geo security implications, which in some ways are much more urgent, particularly right now. And so I mean, again, that's why I like having you on, I think the audience broadly understand some of my biases. You know, and I do take pride with what's happened here in Canada, because a lot of folks I think, have said, you know, government's never going to fund nuclear, again, we've got one of the reasons we need to go the SMR route is because it's going to be private investors. And it was, as a result, in part of the advocacy that myself and my organization have done, that we started to make it possible, again, to even imagine that government, and particularly a truly anti nuclear government would have an about face like this and put a billion dollars forward. You know, and so I do want to have these debates. And you know, I think I'm known and maybe sometimes pigeon holed is having strong opinions, I do want to emphasize that I'm open to having them challenged. And that's why I maintain, you know, very fruitful friendships with people like yourself, who challenged again, some of my cognitive biases, you know, on that subject of, you know, what scale do we choose? I do want to go there in a bit more detail. But on this on this human factors train, I do think we need to dwell on this a little bit more, you know, we did have an episode with Francois Bakshi, who was a French EDF engineer around in the 70s and 80s. During the deployment of the Mesmer plan, it was a fascinating conversation again, what were the preconditions? And, you know, when you look at the 1950s, I mean, in the same way that coding is all the rage nowadays, and all the kids want to go into coding, nuclear, was it in the 50s, you know, and it truly is an absolute miracle that we went, you know, from, you know, again, all of our other sources of energy, basically being fusion, shall we say, coming from the sun, either, you know, short term storage of the sun, and firewood, or long term and fossil fuels and these other sources, to harnessing the strong atomic force that was, I think, incredibly inspiring to young people who wanted to change the world. And it drew the brightest minds into nuclear engineering. And we had a plethora of experiments and designs and a more regulatory, permissive regulatory environment that allowed, you know, real experimentation to occur. I mean, we have to face it, we're in frankly, different times. And I think what you said in terms of these long lead times on the human factors are just essential for us as advocates to be bringing to the forefront and attention of our governments. I had a meeting with the Minister of Ministry of Labor, actually, just earlier this week. And they were talking about, you know, what kind of immigration should we be prioritizing, you know, into into Canada. I mean, we are in the enviable position of being a wealthy country that attracts immigration, I do fear that we're stealing, you know, a very limited resource in developing countries who need their own skilled trades people. But absolutely, that's, that's part of what is needed. So, you know, rant, I guess, a little bit over there. But I do want to just kind of emphasize that, but let's, let's pivot back to again, scale. I mean, clearly, Estonia is a country of, I think, just over a million. Forgive me, if I'm screwing up your geography again. But it is interesting to me that Poland is making an announcement. You know, when I talked to Adam Blazowski, he was like, listen, I mean, the government is pursuing large nuclear projects, in terms of the tenders coming from the Minister of Energy. You know, private entities are welcome to pursue small, you know, smaller designs. Tell me a little bit more, again, your thoughts specific to scale? And then I will tell you a bit more about my reactions to the Darlington announcement here. Here's the Canadian.


Kalev Kallemets  44:11  

Yeah, I believe that we in Estonia, we are aiming for 1200. And I think we can execute. We have scheduled that deployments, and I think we can execute both human resource and and and the capital in a manner for the SMR deployment that we would have potentially in four years after the first one is actually started power duration had 1200 deployed. So I do think also SMRs can be deployed quickly. So so it's it's a it's a reality that in aircraft industry, where the aircraft design is ready, then the scaling happens in a good condition. happens quite quickly that you are delivering hundreds of airplanes a year. So if the so I think that it is, but I don't think it's going to happen for 10 designs, it's going to happen maybe four or five designs. So I don't think that more than three advanced reactor designs aren't gonna be actually executed, given the given the challenges that they do really realistically had, and given the market sizes that realistically are in OECD countries. So. But I think that the biggest challenge is having a multitude of projects actually maturing to the stage where when the site is determined state studies are performed, and the licensing is performed. And the really the placing the preliminary order for the long lead items can be done, and then the financial investment decision, final investment decision can be done. So I think the biggest bottleneck is having maturity of the projects and the quality of the projects due to that stage. But And the key there for for all of those projects, I think is the value that they bring to actually to the customers, specifically through the with the price stability. And yeah, sorry, I went again, to the price element, though, I would like if you if you would mind that. And I would touch why in this decade, we really will have this substantial price volatility that we have experienced last 12 months in Europe, for sure. But we are going to experience for next 12 years. And and that is gonna, I think convince a lot of public that. Oh, this renewable story was great. hydrogen storage is great, but the prices are horrible. Right, right.


Chris Keefer  46:55  

Go ahead. Yeah, absolutely.


Kalev Kallemets  46:57  

Yeah. So what we what we have, what I mentioned also to you on the last podcast is we have 75 gigawatts of coal capacity in Europe, that is aging, and where political face of decisions have been made Ireland, Denmark, Germany, of course, Czech Republic, Romania, everybody, but also the aging, physical aging, and also running the minds running out at this absolutely zero possibility to make any new take any debt to reinvigorate invest into new mines in Europe, zero possibility. And also for coal internationally, it's very hard to get any money from Western banks, maybe Chinese, some, but from Western banks Forget it. But there's the same challenges with gas and oil. So equinor, the European largest oil and gas company they have committed but in eight years, in eight years 50% of their capex is going to go non-fossil, what does it mean? It means that less money is going to get get go to gas and oil, which means inevitably, that the production is going to decline, which inevitably means that you have less volume to produce to the market, which means that the prices are going to be either just very, very high or volatile, let's say at best if the consumption is going to decline, but I don't see that consumption, actually, they cannot apply decline, because they need to replace the coal, the coal, what we are going to also have is renewable aging. So a lot of the fleet was done in the 2000 2000 2010. And so next decade, in the 20s, a lot of this slate is gonna start to age, and we need to replace that or reinstall it. And the reality of wind instalments is that do reach European 40% renewables we should be installing 32 gigawatts of wind. The reality 2021 was 70. Exactly half of that goal. So we're definitely not going to achieve that. That's absolutely certain. So the last Wind Blade manufacturing plant in Germany was closed this June. So, and the Germans are gonna say they're quadrupling the wind, it's almost it's all lies. It's like the Canada and Canada and Germany renewed this renewable hydrogen. It's a total lie. So what on top of it? No one in the West. And we see that with the LNG that Americans are saying and the Qataris are saying, we are going to increase LNG production or many terminals, but we want 20 year contracts. We want certainty that yes, you're going to be our customers. So not in 10 years, not in five years, but for 20 years, because we have a mess, you're essentially asking us to make 10 billion investments into additional energy facilities. But, but of course, the Germans are not signing up to that. Right. So if you don't have that situation, then the actual investment into new LNG capacities is not going to increase in the scale that is necessary to replace old Russian gas. And then on top of that, we have the Chilean geopolitical situation. Or let's say, rather a situation where autocrats are getting are still very bullish. So the Russia, Iran, Venezuela, they're the China now, there is totally one man state. And of course they are there, in their view, absolute existential fight with America, with the West with democracy. They feel that democracy is indeed the ease existential danger to those autocrats. They have the fossil fuels, they have the raw materials. And so you understand there is a bit of a problem, we being the customers, for solar, or the rare, rare earth metals, or any metals coming from China. So if we're gonna disconnect Decouple from China, economically, resource wise, electronic, electronic equipment, and we see that already with the semiconductor, if we're going to Decouple from China, we will have meaningful reductions of Chinese metal supplies, or solar PVS, or the permanent magnets from People's Republic of China, that is hell bent on how to say, having full sovereignty, or what they call the island of Taiwan, which is their province in coming five years, which is the next term of the Xi Jinping, then there's going to be price volatility. And at the same time, we are going to have high interest rates, which are a bit of a problematic for high capital good investments, which is essentially all energy investment. So this means that the price volatility of this decade will be very substantial. And when when when you want to escape that volatility, there is not too many places to go, especially if you want to go decarbonize so you go nuclear, so hello,


Chris Keefer  52:38  

that was that was a very expansive overview of geopolitics. I've been reading Peters I hands book, the end of the world is just the beginning. A little bit hyperbolic, I think, in terms of some of its predictions of the US backing off on its kind of global naval hegemony. But nonetheless, very interesting. Take. Okay, well, that was a, it was quite a summary of, I think a lot of geopolitical and economic tendencies. I've been reading Peters, I haven't, the end of the world is just the beginning. His thesis around the incipient deglobalization occurring around the world, which is a little bit hyperbolic, I think, particularly with his predictions of the end of US Naval hegemony. But nonetheless, quite interesting, and particularly, you know, some of his thinking on demographics, I think is probably influenced both of us in terms of our concerns about human factors being a key rate limiting step for this nuclear renaissance. I did while I still have you here in our closing few minutes want to sort of, I guess, ask you to critique or see what your thoughts are on my thoughts on this announcement. The Darlington the Darlington project. So again, I mean, thrilled my my theory of change has has been that we need to advocate that we need to be very active in politics, and we need to convince government of the need to make these kinds of significant financing and it got I'm stuttering your financing arrangements as a part of this nuclear secret sauce. What is interesting is, you know, there is a plan, I believe to build not just one but probably three more of these BW x three hundreds at the Darlington site. And this is the only licensed site in North America with an approved environmental assessment that's ready to build on. In Canada we have a federal environmental impact assessment policy, which means that even if, say Bruce Power wanted to build new reactors on an existing nuclear site that is extraordinarily well monitored from an environmental perspective, they have to go through something like a seven to nine year environmental impact assessment process. So how the the preciousness of the Darlington site for us to move forward quickly on our electrification goals on simply having an abuse on the grid on our higher order. Maslow's hierarchy of needs. As things like climate change, is is abundant. But we only have one place, we can do that. And it is licensed for 4800 megawatts. And it seems like the path dependency is towards building 1200 megawatts of the x 300. Now, we are a tier one nuclear nation, there's significant interest from around the world, in small modular reactors, we have smaller grids in Canada, which you know, cannot accommodate our larger CANDU reactors. I'm all in favor of us exploring this technology. But given the facts I've mentioned, you know, personally, I am worried. I'm also a little bit obviously of a proud Canadian, you know, proud of our of our of our technology, I mean, we're one of the few countries in the world that produced its own indigenous reactor design, fuel, etc, that has survived and even thrived. In the modern world, very few countries can see that. And it does feel like there's an element of a poisonous kiss towards our existing technology that can do almost a techno suicide, which I think is someone who is also, you know, nationalistic and proud of your country, I guess I'm asking whether or not you can feel this kind of empathetic pull that I'm feeling where I feel like we may be on the verge of losing, not just, you know, our reactor design, the CANDU. But also, I mean, the entire supply chain, the entire nuclear industry is a candle nuclear industry. And so it's, you know, I'm certainly hopeful that we'll be able to bring a lot of the GE high tachy supply chain into Canada, but certainly at present, the fuel certainly isn't manufactured here. And none of the components are. So you know, this was a an announcement that, you know, gotten mixed reviews. For me, I was both thrilled to see our advocacy, really paying dividends literally. But also, you know, I do have concerns and I do hope that there is enough room, for a not say all of the above, but you know, all of the best approach, and that Canada has room in terms of, you know, having those nuclear secret sauce ingredients assembled and enough human resources critically, to pursue both new SMRs and new, say, enhanced CANDU sixes. But that's kind of a tension that I'm feeling. So again, I'm wondering, you know, I'm curious to hear your thoughts on on the thesis that I'm advancing here,


Kalev Kallemets  57:19  

look at an there is no technological miracle, to nuclear or any other business, let's say that in aircraft or carpet business, it's not good enough to have a wonderful design. But the specific design needs to be driven by a very good team. If the team is not executing the sales or the, say, project delivery, in a manner that provides confidence to the customers, it is not successful. So I can't, I mean, there isn't so much any more ingredients than just, you know, having a good design, but I definitely think condo is a good design. So before 2010, when I was involved in the Estonian and you know, promoting nuclear, I was very much in favor of Estonia deploying new candles, when I was visiting your company, that ACL of learning about candles and whether candles are exportable because they were the only mid range like 60 100 megawatt range that potentially would have been suitable for Estonia. And clearly Romania, Argentina, many countries have deployed candles so you could potentially export candle technology. And there is more proliferation safe than then many other designs because there is indeed no enrichment. So therefore there has many, many benefits were controls can be had, and could be also more candles deployed, it's been proven to be very, very safe design. But at the same time, I would not neglect that, that even the SMRs. Let's say two three designs could provide many gigawatts to Canada, and also in certainly in Ontario to Ontario is a 16 million population. And about the same, let's say, larger than Sweden, but Sweden has had four nuclear power plants where they had more than close to 10 gigawatts of capacity installed. So I think you could have a new site, many new sites in Ontario to decarbonize your transportation. Last time I was there, I saw very few electric cars compared to what is present in Europe. You definitely need to decarbonize lot of the industry as well, all the fertilizer business in Saskatchewan, all the ammonia needs to decarbonize. And this is absolutely the reality that we have in October 20 degrees in Berlin, this is not normal. So the climate change news will be horrible. This decade, even worse next year, worse year, a decade after that. So it's really a massive problem that we are destroying our planet, because we are not going to get it back. And so it's very, very unfortunate. So I'm all by all means supportive of large nuclear even supportive of renewable if it could be executed well without subsidies. But it's unfortunate that reality is providing so much price volatility, that the volatility itself is a huge social problem. And, and huge problem for families. This price volatility, and people are not understanding that. And there is still too much talk about, oh, yeah, we're gonna do kind of load shedding. And we're going to do four following when there were lower prices and stuff. This is total nonsense. It's. So there is a lot of work to be done in the intellectual front, but also in the project execution front. So by all means, I applaud your Defense of Canada acknowledging


Chris Keefer  1:01:32  

all right, well, so much more I'd like to talk to you about and we'll have to have you back soon. But good luck with everything that you're involved with. I'm very interested in following your project along I do think it's very innovative and thank you for sharing with me and with the audience. Everything that you've learned because every time I talk to you your your nonstop I see your mind just clicking away, constantly innovating and thinking through new ideas. So thanks for sharing some of those with us today here on Decouple


Kalev Kallemets  1:02:00  

Yeah, you're welcome and, and everybody, let's do more nuclear. Amen.



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