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A Story Worth Going Nuclear Over?

March 28, 1979, was a very big day with very big consequences.

The year had already begun on a significant note, with the U.S. and China commencing diplomatic relations on January 1. The Iranian Revolution finally pushed Shah Mohammad Reza Pahlavi into exile on January 16. And the waning USSR performed a scheduled underground nuclear test the following day.

Though it didn’t know it at the time, the U.S. was going to experience its own nuclear test – one of a very unplanned nature at a little location called Three Mile Island (TMI) near Harrisburg, Pennsylvania.

Early in the morning on Wednesday, March 28, this commercial nuclear power plant experienced a mechanical glitch. Without warning, water was cut off to the steam generators responsible for removing heat from the facility’s core reactor.

And, to make a technical story short… removing heat is kind of a big deal in safely operating a nuclear power plant.

Even so, the problem could have been resolved simply enough thanks to Three Mile Island’s backup safety systems and procedures. Except that a valve got stuck, readings went wrong, and consequent staff assessments made things worse still.

The result was a partial meltdown that became the most serious recorded nuclear accident in U.S. history.

As the United States Nuclear Regulatory Commission explains:

… its small radioactive releases had no detectable health effects on plant workers or the public. [However], its aftermath brought about sweeping changes involving emergency response planning, reactor operator training, human factors engineering, radiation protection, and many other areas of nuclear power plant operations. It also caused the NRC to tighten and heighten its regulatory oversight.

It also led to the decades-long downfall of Three Mile Island.

But that might be changing… and soon.

Lights Out for Three-Mile Island

You may have missed it, but the news just broke this week that Three Mile Island owner Constellation Energy (CEG) just signed a 20-year contract with none other than Microsoft Corporation (MSFT).

We’ll get into the details in just a minute. But first, it’s worth appreciating what a dramatic turn of events this is for nuclear energy.

It’s understandable that the American people reacted negatively to the Three Mile Island incident. There were so many crossed wires at the plant, from the plant to the government, from the government to the press, and from the press to the public.

The USSR’s Chernobyl disaster hadn’t happened yet, but people were still aware of the dangers of unprotected radioactivity. So pregnant women and young children were advised to leave within a 20-mile radius. And the city of Harrisburg – and surrounding areas – suffered weeks and even months of lost revenue as tourism came to a screeching halt.

But it wasn’t just the locals who started questioning the value of nuclear energy. The accident made national news, leaving the entire country wondering whether it was worth it.

This isn’t to say the industry crashed and burned as a result. In fact, the number of nuclear power reactors climbed from 71 in 1980 to 112 a decade later.

However, most of those new additions would have already been in the works as 1979 dawned. A single facility, from planning to completion, can take over a decade to build.

Despite that massive investment, eight U.S. nuclear power reactors had shut down by 1998, with more to follow from there. And while the nuclear industry seemed like it was once again gaining ground in the increasingly environment-aware public conscience during the 2000s…

Japan’s Fukushima Daiichi disaster on March 11, 2011, brought those hopes to a painful halt. When the area experienced a tsunami-triggering earthquake, multiple nuclear reactors at the plant were severely damaged.

And unlike at TMI, people did die as a result of radioactive contamination.

The resulting global horror from the whole ordeal was understandably intense. Though not always necessarily well-informed. This was, after all, a 9.0 earthquake followed almost immediately by a 43-46 foot wave.

It was an unprecedented nature-born disaster – which the larger industry once again turned into a learning experience to strengthen against even the nearly impossible. Nonetheless, here in the U.S., there are only 54 nuclear power plants running 94 reactors today.

Ninety-four going on a probable 95, that is. Because Three Mile Island, which was completely shuttered in 2019, could be reopening in 2028.

Why Microsoft Wants in on the Nuclear-Power Action

The details go like this…

Constellation will spend approximately $1.6 billion to get the plant back on its figurative feet. And Microsoft will purchase the resulting energy for its artificial intelligence (AI) power generation between 2028 and 2048.

This has been a big area of focus for us here at Wide Moat Research. As I said in the June issue of our Wide Moat Letter:

The most recent report on U.S. power consumption published by consulting giant McKinsey now expects to see 50 GW of power consumed by data centers in 2030. To put that into perspective, 50 GW can power roughly 37.5 million homes.

That’s a 57% increase from McKinsey’s estimate last year. The fact is, just about everyone has underestimated the speed at which the major technology companies are building out their AI systems.

[…]

I hesitate to use the phrase “sure thing,” because nothing is ever certain in investing. But if trends hold, it’s a near certainty that energy demand from data centers will increase in the years ahead.

If everything goes through as planned – and, to be clear, Constellation needs to obtain government permissions first, which could take several years – the deal would create an estimated 3,400 jobs, resulting in more than $3 billion in state and federal taxes.

That’s according to the TMI operator, with Pennsylvania Governor Josh Shapiro seeming to agree. He’s now urging regulators that be to fast-track the approval process.

All this enthusiasm makes me wonder if we could be in store for a larger movement back into nuclear power.

For one thing, despite its scary associations, it’s actually a very viable and very effective power source. To quote the U.S. Office of Energy, it “protects air quality by producing massive amounts of carbon-free electricity.”

That means no greenhouse gas emissions or resulting pollution.

Nuclear is the largest source of clean power in the United States. It generates nearly 775 billion kilowatt hours of electricity each year and produces nearly half of the nation’s emissions-free electricity. This avoids more than 471 million metric tons of carbon each year, which is the equivalent of removing 100 million cars off of the road.

Speaking of cars, we know the electric vehicle (EV) push is faltering right now. And if Trump wins the upcoming presidential elections like I think he will, it’s going to falter even more.

So why not champion other ways of cleaning up the environment?

The Power Has to Come From Somewhere

Nuclear power becomes even more intriguing in light of the massively increasing amount of energy modern society uses. Just look at the rising implementation of cryptocurrency.

According to RMI.org:

Bitcoin alone is estimated to consume 127 terawatt-hours… a year – more than many countries, including Norway. In the United States, cryptocurrency activity is estimated to emit from 25 to 50 million tons of C02 each year, on par with the annual emissions from diesel fuel used by U.S. railroads.

And, for the record, those findings were from January 30, 2023… over a year and a half ago. You’d better believe today’s figures have risen from there.

Meanwhile, YaleEnvironment360 – a Yale School of the Environment publication – reported earlier this year that “AI use is directly responsible for carbon emissions from non-renewable electricity.” As experimentation and demand grow, “legislators, regulators, activists, and international organizations now want to make sure the benefits aren’t outweighed by AI’s mounting hazards.”

Could nuclear power be the solution?

The market certainly thinks it could be. The Sprott Physical Uranium Trust (SRUUF) has climbed some 76% in the past two years.

And if a global company as enormous as Microsoft is looking at nuclear…

Then I have to wonder who else will get on board next.

Regards,

Brad Thomas
Editor, Wide Moat Daily


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