Hydrogen, Nuclear and the Clean Energy Quest

NuScale and PlugPower have recently been making headlines, reviving memories of a conversation I had with a friend almost a year ago. Back then, he was rightfully enthusiastic about the developments in the Small Modular Reactor (SMR) sector. Being the skeptic I am, I opined that SMRs might be the most expensive way to produce electricity if any company succeeded. Fast forward a year, and the market leader NuPower experienced a setback, with a major contract being abandoned.

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PlugPower, too, is grappling with the realization that its product might not be sustainable amidst plummeting capital. Despite my inclination to be proven wrong in these scenarios—for the sake of the climate—I can't ignore the challenges these ventures are facing.

Nuclear power has long piqued my curiosity, especially considering India's achievements in nuclear power generation and the future promise of thorium-based reactors which the country was supposed to be a leader in. During my Ph.D., I delved into the subject for a class project and was pleasantly surprised by the high (>90%) capacity factors these plants operate at. What is weird about nuclear power, though, is it is the only technology that has become more expensive over time, primarily due to increased licensing and insurance costs for nuclear facilities

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Nevertheless, one cannot dismiss nuclear power in the clean energy future. No country has successfully transitioned to clean energy without incorporating clean firm energy—either from geothermal, hydro or nuclear sources. While solar and wind contribute significantly, the current cost of batteries means they can't shoulder the entire burden of transitioning economies to 100% renewable energy on their own, at least not yet.

Returning to SMRs, Paul Martin has extensively covered scaling and its consequences on cost. Conventional nuclear plants are built too large to benefit from scaling, yet haven't lived up to the promise of 'free' electricity. SMRs, on the other hand, don't benefit from vertical scaling. The initial idea was that they could enable fast manufacturing of high-volume components, potentially lowering costs. However, the reality in this sector is proving otherwise. While cheaper pipes can be manufactured in large quantities, the advantage of larger pipes for transporting materials remains.

Despite these challenges, I always strive to understand what drives clean technologies, fueled by individuals who genuinely believe in their potential. Jigar Shah , the Director of DoE Loan Programs Office suggested that SMRs could replace current coal plants, utilizing the technical expertise of existing coal plant workers. The intent makes sense, but the issue lies in government subsidies. Energy is essential, but is SMR essential? Unlike fossil fuels, which have been subsidized for their essential role in energy, SMRs may not warrant similar support. What are subsidies for then? I think they should be reserved for two aspects: one, the essentials, and second, ones with potential for significant cost reduction, and future profits.

This brings us to PlugPower, facing a similar fate. Most claims from hydrogen proponents, including those from PlugPower, lack a thermodynamic foundation. The hydrogen economy seems to be experiencing a gradual collapse, one sector at a time. However, hydrogen is undeniably essential. I believe government subsidies will significantly bring down hydrogen costs over time. Some components, such as pumps, compressors, and pipelines, have reached price parity, but stack components still have a long way to go, constituting 40-60% of total costs, depending on the technology used.

Considering the essential role hydrogen plays in human survival—our caloric intake depends on fertilizers made using hydrogen—government subsidies could play a crucial role. However, it's essential to manage expectations about the cost of production. A target of 5 $/kgH2 seems reasonable. Elon Musk's 'Idiot Index,' the ratio of the cost of the product to the cost of raw materials, comes to mind. The goal is to approach 1 with each technological innovation, but you can't make hydrogen cheaper than the natural (fossil) gas or electricity it is made from (Idiot Index <1), as Michael Liebreich rightly points out.

Combining nuclear power with hydrogen production gives rise to 'pink hydrogen.' On the surface, it sounds promising. Hydrogen requires a high capacity factor to become cheaper, and nuclear operates with a high capacity factor to recoup its high capital expenditure. However, here's where my 'What Else' alarm goes off. Electrifying everything feasible is the fastest way to decarbonize. We have an abundant source of extremely low-carbon electricity in nuclear power, that should feed the grid rather than diverting it to hydrogen production. Encouraging nuclear power is judicious, primarily due to its low-carbon intensity and the scale of each plant. Though costly and delayed, extending the lives of existing plants is crucial. Making a significant amount of hydrogen to replace 'black hydrogen' is also imperative. But combining the two is wasteful digression from decarbonization.

I foresee more such news in coming years from SMR, DAC and Hydrogen world. While I make predictions, I am usually happier being proved wrong than right. If they do succeed (without negative implications on the climate), it is great for the fight.

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