Invest Like the Best with Patrick O'Shaughnessy
· Scott Nolan
[00:00:00] S1: Take that one piece at a time. So on the reactor side, everyone thinks of the cooling towers. You have cooling towers in other industrial processes too, but everyone thinks of the cooling tower. Which all it is, is steam cooling off, hot water cooling off so that it can be reused as a coolant at the start of the cycle. So lots of industrial processes do that, but nuclear is known for it. That's typically about a gigawatt-scale reactor. Often in the US, an AP1000 Westinghouse gigawatt-scale reactor design, which we can get into the technical of what type of coolant they use and what type of fuel, which might be interesting. But the thing to think about in my mind is that's a big reactor. That's a gigawatt-scale. I think the interesting buckets are around the size, because they link to applications and markets. And that's grid. So you want to go battle it out on the grid. You need gigawatt-scale because it moves the needle on the grid and you're getting the scale that can bring your cost down as low as possible, at least for now. And that's a good format. On the other end of the spectrum, you have micro reactors where you're saying there's a stranded community that's doing diesel generators. This is both bad for the environment and not that cheap. We can beat them on cost. And so you go micro reactor, think one megawatt-scale, not gigawatt, megawatt. And then you have the middle, which is 100 to 300 total megawatts SMR, where SMR is small modular reactor. And all three buckets have different approaches on the technology side, but I think that all three are going to be important. And so if gigawatt-scale is for the grid and megawatt-scale is for remote communities or government installations, then the middle scale, I think, is going to find its niche behind the meter with data centers over the next five to 10 years.
· Patrick O'Shaughnessy, Scott Nolan
[00:00:00] S0: Where one unit could be dedicated to one data center, like something that doesn't interrupt the cost that I'm paying as a rate payer in whatever district I'm in, even if there's a data center there. Something that's more cordoned off. [00:00:00] S1: Yeah, exactly. So think of it as like the ultimate behind the meter thing. It's just an island. Imagine a fence around a few hundred acres, you've got a data center and you've got its nuclear power plant there or whatever other form that they might have Peaker plants, natural gas, turbines, maybe even solar in some cases. Okay, that's all cordoned off. It does not even touch the grid. It's not impacting the grid. It's not doing anything to the communities. Rate costs completely separate. I actually think there's a huge opportunity to improve communities through this. If you have a data center putting billions into both the compute and the power production, let's say they're even 50-50 on power production and compute. Can we increase that power production 10%, which is only a 5% project increase? And in the case of a gigawatt data center, bring an extra 100 megawatts to a community. That's huge. That would plummet utility prices for that community. So I think at a minimum, we're going to see people going behind the meter, or not disconnected from the grid. And ideally, we see them actually feeding the grid and feeding baseload. [00:00:00] S0: That reminds me of your BYOE concept. Maybe just spell that out in a little bit more detail.
· Patrick O'Shaughnessy, Scott Nolan
[00:00:00] S0: That reminds me of your BYOE concept. Maybe just spell that out in a little bit more detail. [00:00:00] S1: It was just the concept of, we're doing all this investment in the grid for the first time in decades. Private companies are making the investment. They will make the investment with bringing their own power, bring their own energy, BYOE. And they're going to be doing that investment anyway. Their biggest worry is probably something like, will I be allowed to build this data center in this community? Over the last year, I think that's been the start of a discussion. And if they want to get to the right answer on that, and they can tell a community, hey, we're going to be over here on this unused land. Are you OK with us being here and running a bunch of compute and being net positive to your grid? Can we just plug in and give you some extra power in return for inviting us to be your neighbor? To me, that's a complete no-brainer for everybody. At a slight cost increase during a time when hyperscalers – building data centers are all about speed to power, and they want to be online as fast as possible because this is a contest. So who can get to the greatest scale first? That is a very low cost compared to the advantage of deploying quickly in a community and being invited there versus being rebuffed. So I think total no-brainer. And the modern data centers can do completely closed-loop cooling. So the water issue is not an issue. It's really just this power thing.
· Patrick O'Shaughnessy, Scott Nolan
[00:00:00] S0: What would be the explanation for these new advanced reactors ultimately not working? What keeps you up at night? Because this is kind of out of your control – you're not designing these advanced reactors yourself, you're helping them achieve their mission. But they need to be successful. What do you think, if you had to handicap the reasons why they might not be, are the most likely? [00:00:00] S1: I'd say number one is they don't have fuel to operate. That's a showstopper. So we're trying to eliminate that risk. And then part two is they're too expensive. I think the physics will work. I don't think anyone's too worried about that. You have dozens of incredible companies with great engineers who are trying to solve the advanced reactor problem. And typically, they'll pick a form factor that is of the right size to focus on a certain market, whether that's microreactor for remote or SMRs for data centers or very large gigawatt-scale for the grid. And SMRs, I think, ultimately have the plan of being cheaper than the gigawatt-scale construction projects for the grid. But there's many reactors that are trying to solve the reactor cost side of it. And the question is going to be, is their energy production cost low enough? But for these advanced reactors, it's not just a fuel availability problem in question, it's a cost question. The fuel can be half of their total cost. And I think long-term enrichment will be half of the fuel cost.
· Patrick O'Shaughnessy
[00:00:00] S0: For General Matter specifically, I'd love to hear at three levels how you're thinking about building this thing. The product level, the business level, and then the company itself. So starting with the product, how have you figured out what the market wants or needs? You're enriching uranium. Uranium is the key fuel source for different parts of this taxonomy for creating energy. There's lots of different kinds of things that you could provide to your customer. What has the journey been like to figure out what the actual product is going to be?
· Scott Nolan
[00:00:00] S1: Yeah, so this goes all the way back to understanding the fuel cycle or the fuel supply chain for nuclear. So there's five steps. You mine uranium out of the ground. You then convert it into a gas. You then enrich it. You then deconvert it back into a solid. And the enrichment step is really a refining step, a separation step. Then you turn it back into a solid. And then you form fuel pellets. Five steps to go from ore in the ground into a little pellet, into a fuel rod, that goes into a reactor. The U.S. has good capability across the board except in enrichment. It's the one area that we don't have any commercial scale capability. There's some R&D capability, but nothing that's commercial scale or commercially competitive with Russia and Europe. And so we decided, let's hone in on the enrichment step. That's the bottleneck. That's the thing that's leading to these – what we call the nuclear fuel cliffs, where there's three cliffs. Cliff one is the HALEU supply chain. This is the same problem we heard from all the SMR companies. We don't have a source of HALEU. HALEU is the fuel that they need. HALEU is uranium that's enriched to about 20 percent U-235, which is the fissile material. They want it enriched a little bit higher to 20 percent, because it helps the reactor be smaller. So that's the first cliff is HALEU for advanced reactors. They have none. If there's no reliable supply in the next few years, it's going to make it very difficult for them to scale up. So far, they have small amounts from the DOE to prove that their reactors work the way they think they will and to do first deployments, but not to scale to where it really moves the needle on the grid. The second nuclear cliff – the nuclear fuel cliff is 2028, when the U.S.'s ban on Russian uranium imports goes into full effect. January 1st, 2028, we are through an act of Congress no longer allowed to import Russian uranium.