In today’s issue:

  • We’ve realised the energy transition won’t be realised
  • How long do you choose to pursue the unreachable?
  • Nuclear power is a binary question with binary winners

Japanese has a lot of homonyms. Words that sound exactly the same, but have two completely different meanings. Like “realise,” for example.

On the one hand, “realise” means discovering something is true. On the other hand, it means “accomplish” or “bring something to fruition”. Which is ironic because you can realise that something won’t be realised.

More than a year ago, I wrote a series of reports, and conducted a series of interviews, which became a book. It was about how the energy transition to net zero could not be realised. The claims were focused on physics and geology, not ideology or politics.

The Leading podcast, with Rory Stewart and Alastair Campbell, recently invited Dieter Helm on. And the energy policy analyst delivered the realisation that the energy transition won’t be realised in much the same fashion and for much the same reasons as my book.

It’s good to see politicians catch on. But it also means it’s now my job to try and stay one further step ahead again. What realisation is going to drop next?

And the conclusion I’ve come to is a little awkward. Because the increasingly obvious future shortfalls of the energy transition have created a choice. Do we really want to try and achieve something that is obviously out of reach? Or try something different?

Amongst those who believe carbon emissions are the evil of our time, attention is turning to nuclear power. For all the reasons you probably know about already. Although there is this new angle to consider.

Nuclear power’s big advantage is that we don’t need to build the grid or energy storage that renewables require. It avoids the part of the challenge that is proving so difficult.

But we still need that grid and storage if we have a lot of renewables included in the energy mix alongside nuclear.

So, can nuclear compete in the world that our politicians are pitching? Where a mix of energy sources such as nuclear and renewables all feature?

It certainly sounds good. Why not diversify your energy sources?

I’ll tell you why…

Cheap energy for an expensive grid

Let’s go back to the beginning of the energy transition.

Energy experts claimed renewables were cheap, cheapest and getting cheaper all the time. But this fallacy rested on a series of assumptions. Low interest rates, for example.

Renewables are near free at the margin. You don’t have to refuel them like coal, gas or nuclear. But they cost a lot to build. And that means a lot of debt financing. Which might be almost free when interest rates are bizarrely low during a pandemic. But when they’re normal, the costs go up.

Another cost of renewables is the energy storage that turns their intermittent energy into energy on demand. Conveniently, this is not directly related to the cost of producing renewable energy. It is only related to the cost of an energy system with a lot of renewables in it.

This allows economists to avoid attributing the cost of energy storage to the cost of renewable energy. A sly trick which Dieter Helm exposed in his report for the government.

But there’s another way to fudge the cost figures. At small amounts of renewables, the rest of the grid just adjusts for renewables’ intermittency. Meaning that gas has to produce less when renewables produce more.

The trouble is, that means the cost of keeping backup gas power in place doesn’t fall on renewables’ shoulders. It falls on the gas power plant’s shoulders. Or the government, if it protects the gas plant. Again, we don’t attribute the cost of problems created by renewables to the cost of their energy.

The last big cost we face from a renewables-based system is also not directly related to renewables. It is the energy grid that moves their power around.

Under a non-renewables-based grid, we build power stations where power is needed. But renewables are built where there is wind and sun. Then we move the power to where it is needed. This means a vastly larger grid.

Because it is usually sunny and windy somewhere, a renewables grid with lots of interconnections becomes more viable. It is less likely to deliver an overall shortage. A bigger grid also reduces the amount of energy storage needed.

As I’m sure you’ve guessed, the cost of building a renewables capable energy grid is expensive. I calculated it’s the biggest infrastructure project in history, by a large margin. But is that cost attributed to renewables? Nope.

Well, it can be. It depends how you do the maths. And you can imagine how the government prefers the maths to be done. Which is therefore how it gets done.

By the way, all this is currently becoming a political scandal in Australia. The government’s energy research organisation was caught doing all the above in its attempts to try and make nuclear look expensive compared to renewables.

But what does the truth really mean for nuclear?

A nuclear-based energy mix like France’s doesn’t need to build a terrifyingly large electricity grid. It doesn’t need vast energy storage capacity. Or have gas power plants waiting as backup for bad weather. Or so many of the other costs.

If we go nuclear, we don’t need half the grid that’s currently being tendered for by huge infrastructure companies. We don’t need the cables, the pylons or the energy storage that are making investors rich. We don’t need so much of what is driving the stock market and political campaign finances.


It’s not that simple. Because politicians are not pitching a nuclear-based energy mix. They are promoting one where nuclear plays a role. And this is flawed.

Nuclear is a binary option

Don’t worry, this isn’t a finance course about derivatives. The binary option I’m referring to is whether to go nuclear or not. And my point is that a 25% target for nuclear power doesn’t make much sense. Because it still leaves us with the bill to build an impossible amount of energy infrastructure and storage to make renewables look viable.

The whole point, and benefit, of nuclear power is that it does away with the need to build the largest infrastructure project in history.

It saves extraordinary amounts of costs which are only incurred because of renewables, but which are not attributed to the cost of renewables in cost comparisons.

Why go 25% nuclear if you’re still going to incur those costs? You can’t run the country on 25% of its energy demand, after all. You still need the renewables to function.

Does a nuclear fleet providing 25% of demand reduce this challenge? Not by much given the grid must still be built alongside huge amounts of energy storage. It’s only once nuclear dominates the energy mix that the costs associated with having renewables fall.

Furthermore, nuclear power itself makes a lot less sense when it is paired with large amounts of intermittent energy. Remember, renewables capacity must be several times larger than demand. Renewables only occasionally run at full capacity.

But if nuclear is only running at some small share of its capacity while the wind blows and sun shines, its cost per unit of electricity produced skyrocket. That’s because the fixed costs of nuclear are very high. The fuel costs are low.

If you want to pair a form of energy with renewables, you want the opposite. You want the marginal cost of fuel to be a large share of the total cost. That’s because, when you can dial up and down the amount of energy being produced to make up for renewables’ shortfall, your operating costs go up and down in a corresponding way too.

A gas plant that’s only running half the time only incurs most of its costs half the time too – the gas is or is not being used up. But the bulk of nuclear’s costs are fixed. The cost of running a nuclear plant at idle are very high.

If renewable-produced energy gets priority use, relegating the rest of the energy mix to supply only when there’s renewable energy shortfalls, nuclear makes no sense. It doesn’t solve the problem of dangerously high costs. It merely creates another problem of dangerously high costs.

Nuclear power investors are hoping for their horse to get a run in a race that has no reward for second prize. If they win, the payoff could be enormous. Not to mention the benefits of evading the energy transition.

But how confident should we be?

My argument is that the world will have to turn to a different form of energy. As the consequences of a failed energy transition emerge, anyone who wants cheap, clean and reliable power will have to stage a revolution.

Until next time,

Nick Hubble
Editor, Fortune & Freedom