Ep15: Inside Diablo Canyon Nuclear Power Plant | BG2 w/ Bill Gurley & Brad Gerstner

Open Source bi-weekly convo w/ Bill Gurley and Brad Gerstner on all things tech, markets, investing & capitalism. This week they sit down with Maureen Zawalick (Vice President at Diablo Canyon Power Plant) to discuss the importance of nuclear power, the history and future of Diablo Canyon Power Plant, the role of AI in the nuclear industry, the cost differential of nuclear energy in the US and China, Gen 4 reactors, regulation, litigation, & more. Enjoy another episode of BG2. Timestamps: (00:00) Intro (04:14) Maureen Zawalick | VP at Diablo Canyon (06:13) The Need for Diablo (10:07) The Importance of Nuclear Power (15:50) License Renewal and the Future of Diablo (18:39) Hope for Expanding Nuclear Power (25:22) Nuclear Waste (30:29) Cost Differential: US vs China (38:56) Factors Contributing to Cost Differential (45:07) Implications of China’s Nuclear Leadership (47:42) Nuclear Energy and AI Supremacy (50:58) The Innovation Gap and Gen 4 Reactors (57:27) Overcoming Challenges (01:03:45) A Call for Government Support Available on Apple, Spotify, www.bg2pod.com Follow: Brad Gerstner @altcap https://x.com/altcap Bill Gurley @bgurley https://x.com/bgurley BG2 Pod @bg2pod https://x.com/BG2Pod **** Shownotes: US Navy Nuclear Propulsion Program 2020 https://www.energy.gov/sites/default/files/2021-07/2020%20United%20States%20Naval%20Nuclear%20Propulsion%20Program%20v3.pdf ITIF.org - How Innovative Is China in Nuclear Power https://itif.org/publications/2024/06/17/how-innovative-is-china-in-nuclear-power/ NYTimes - Nuclear Power Can Save the World https://www.nytimes.com/2019/04/06/opinion/sunday/climate-change-nuclear-power.html Reuters - Constellation talking to Pennsylvania on Three Mile Island restart https://www.reuters.com/business/energy/constellation-talking-pennsylvania-three-mile-island-restart-sources-say-2024-07-02/ Julie Dewahl - Nuclear Past Present Future https://juliadewahl.com/nuclear-energy-past-present-future Breakthrough Institute - China’s Impressive Rate of Nuclear Construction https://thebreakthrough.org/issues/energy/chinas-impressive-rate-of-nuclear-construction Next Big Future - US Nuclear Cost 5-10x More Than China https://www.nextbigfuture.com/2023/11/us-nuclear-reactors-cost-5-to-10-times-more-than-china.html Energy.gov - Newly Signed Bill to Boost Nuclear https://www.energy.gov/ne/articles/newly-signed-bill-will-boost-nuclear-reactor-deployment-united-states Advanced Nuclear - Nuclear Commercial Liftoff https://t.co/I156PormsH LA Times - Loan to keep Diablo Canyon nuclear plant open https://lat.ms/3TJF9Tx South Korea Builds Nuclear Plants Quickly and Cheaply https://brief.bismarckanalysis.com/p/south-korea-builds-nuclear-plants?utm_campaign=post&utm_medium=web Nuclear Power in South Korea https://world-nuclear.org/information-library/country-profiles/countries-o-s/south-korea Westinghouse Electric's Chinese 'Trojan Horse' https://www.forbes.com/sites/kenrapoza/2016/05/17/westinghouse-electrics-chinese-trojan-horse/ Friends of the Earth sues DOE over Billion Dollar Award to Diablo Canyon https://foe.org/news/lawsuit-doe-diablo-canyon/ Revitalizing America’s Nuclear Energy Supply Chain https://www.thirdway.org/blog/revitalizing-americas-nuclear-energy-supply-chain Idaho Natl Laboratory - Recommendations to Improve the Nuclear Regulatory Commission Reactor Licensing and Approval Process https://inldigitallibrary.inl.gov/sites/sti/sti/Sort_65730.pdf 5 charts to explain why nuclear power is making a comeback https://www.semafor.com/article/05/17/2023/nuclear-power-comeback-charts Podcast - The cost of nuclear - Catalyst w/ Shayle Kann https://apple.co/47noXNk RIC 2024 Opening Session - Remarks by NRC Chair Christopher T. Hanson https://www.youtube.com/watch?v=pLnVoB_ha58 A One-on-One with NRC Chair Christopher Hanson https://youtu.be/ThPIfFqeKRQ?si=Lo8txUlURFuAN4YE Bill Gates on Bipartisan Support for Nuclear Power https://www.youtube.com/watch?v=2FSVg6heBiE Podcast w/ PG&E CEO Patricia Poppe https://apple.co/3zjEqB9 Germany Reacts to Trump's UNGA Speech https://www.youtube.com/watch?v=FfJv9QYrlwg #BillGurley #BradGerstner #Bg2Pod

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Brad Gerstner?

  Take Diablo Canyon. They built two nuclear reactors here. You know, this site was provisioned for six.

• 0:07Bill Gurley?

  Yep.

• 0:08Brad Gerstner?

  For six reactors. I could imagine if you had four more reactors sitting here. If you could land them at the right price. You could have one reactor for Meta, one for Amazon, one for Microsoft, one for Nvidia. You could have the data center sitting right next to them.

• 0:36Brad Gerstner?

  Bill, man, I couldn't be more excited to be here. We're sitting in, you know, probably your three wood distance from two nuclear reactors that are banging out two and a half gigs of clean power. We just had an incredible day with Maureen Zawalick down here at Diablo Canyon. You know, it's just this beautiful nuclear facility on the central California coast. It is really great to be here. You know, when you look at this facility, you read about the positive impact on the local economy. Of course, it's the type of dense baseload power we so desperately need in California. You know, I think you said on a previous pod, somebody showed up with a value proposition

• 1:21Brad Gerstner?

  of fission today. You know, it'd blow all of our minds. And here we were about ready to decommission this plant in 2016. Which, as Elon has said, is incredibly brain dead. You know, I was pretty, I was pretty excited to see this weekend. I was watching ESPN Game Day. I think it was at Texas A&M. And I see somebody holding up a sign, "I love nuclear." Like, college kids are now holding up signs that say, "I love nuclear." So it's, it's good to finally get down here and put on our analyst hat, dig in, ask a lot of questions, and, you know, be able to share it with everybody.

• 1:55Bill Gurley?

  Yeah, and one thing, you know, two things, I think, that are a little bit different about the podcast we're gonna do today. One, you know, I think it's important to recognize, we're obviously not nuclear experts. You know, we come at this from outside. That being said, the second point I would make is you and I have gone extremely deep in the past week or two and been given phenomenal access to a lot of people that have been in and around the industry for a long time and including getting access today at what is really remarkable. I mean, just to see it up close and the scale and how well-run it is, it's just super impressive. And so I qualify, I'm certain that we're

• 2:36Bill Gurley?

  going to get some feedback from some people like, "Why are you guys talking about nuclear?" And my only, my only qualification I would offer to everyone is if someone comes at us with something that's different from what we said or that's added to the discussion, next time we're up, we'll talk about it and we'll bring that into the discussion.

• 2:54Brad Gerstner?

  You know, absolutely. I mean, I think you and I talk about it pretty much on every pod. We're analysts.

• 3:00Bill Gurley?

  Yeah.

• 3:00Brad Gerstner?

  As analysts, the one thing we're reasonably okay at is we ask questions, we dig in, we find our way to experts, we find our way to information. And frankly, the more digging we did about Diablo and about nuclear, it's just so clear that it has to be part of the energy constellation future of the United States.

• 3:20Bill Gurley?

  I think that's true.

• 3:21Brad Gerstner?

  It's clean, it's dense, it's the exact type of energy that we need. So why don't we kick off with a little bit of background today? We'll weave in some discussion about Diablo. We're going to talk to Maureen Zawalny. We're going to talk about China's emerging advantage here, right? Like, why are they on such a fast path and a cheap path to nuclear? Hone in on those costs and then some of the things that we believe we got to do in order to get the United States back on the nuclear track and maybe end with a little bit of that positivity.

• 3:49Bill Gurley?

  That'd be great. And one, and one thing I wanted to share with the audience, we, I think we've uncovered some really amazing documents, research, pieces of research, podcasts, that kind of thing. So we're going to put a list of those together in the show notes. And if anyone wants to follow the journey we've been on and go a little bit deeper than what we're going to talk about today, those will be available.

• 4:14Brad Gerstner?

  Maureen, it's great to be here. Maureen Zawalick, Vice President here at Diablo Canyon. It's just been an incredible day. Thank you for having Bill and I here. You know, maybe just a little background on Diablo Canyon. You know, it took 10 years to build this, you know, starting in 1970. It cost $16 billion to build both reactors. It went online in 1985. It's the state's single largest power station. It generates about 8% to 9% of total energy, about 20% of all the renewable energy in the state, at a cost of about $0.06 per kilowatt hour. So, very cheap relative to the power that we import in the state. It's been an extraordinary day going around,

• 4:58Brad Gerstner?

  and I think one of the things we'd love to start with is just a little bit of the history, your history here at Diablo.

• 5:05Speaker 02

  Well, great. First of all, thank you for coming. And it's always great to get people here that have not been here before and putting eyes on it and looking at the facility, seeing the security around it, the safety around it, and so forth. And so, I've been out here for 30 years, and I've raised my children here in the community, and I've had various different positions out here. We are the largest private employer in the community. And what is just amazing and just something I like to highlight a lot is the strong safety culture we have out here, the strong use of standards, and the history of the excellence in safely and reliably operating this nuclear power plant.

• 5:45Brad Gerstner?

  Well, given how safely you operate it, I appreciate you letting us into the control room. No, it's just the simulator of the control room.

• 5:53Speaker 02

  Yes.

• 5:53Brad Gerstner?

  But that was very evident today. The fact of the matter is, the history of the last 10 years has not been smooth sailing here at Diablo Canyon. Tell us a little bit about, like, what took you on the path of decommissioning this 2.5-gig facility and kind of where you are today?

• 6:11Speaker 02

  Great question. So, you know, 10 years ago, 8, 10 years ago, the energy equations and the need for Diablo had very different assumptions and inputs. What I mean by that in the 2015 timeframe, 2016 timeframe, you know, we weren't talking about AI. We weren't talking about data centers. We weren't talking about the electrification goals of the state and of the country. We didn't have geopolitical things going on, like the Russian invasion in Ukraine. So that has like a, you know, a squeeze on some of our supply for nuclear fuel and uranium. And so you have all of that. Then you add on the drought and the climate stuff going on and the severe heat and the wildfires. And what I mean by wildfires is that's impacting

• 6:55Speaker 02

  our bringing in energy to California and affecting our transmission lines of importing in energy. So you don't have all that back in 2016. Now, fast forward to 2020, August, rolling blackouts, seeing just peak demands on the system and on the grid in California. And really relooking at that needs analysis, is Diablo needed, given now all these new factors? You run all those numbers and, you know, what we're seeing, it's very hard to pull off the largest clean energy producer, the largest energy producer in California. That's about 9% to 10% of Californians. So the projects to replace,

• 7:38Speaker 02

  the renewable projects to replace Diablo have not made the progress that I think the state thought it would back in 2015, 2016.

• 7:46Brad Gerstner?

  So this is things like offshore wind?

• 7:48Speaker 02

  Correct. Offshore wind projects and so forth. We need a mix of it all for not only California, but for the country. We need a mix of solar and wind, hydro and clean nuclear energy to meet the goals that we have of this country and of this state.

• 8:05Brad Gerstner?

  Yeah.

• 8:05Bill Gurley?

  I think a lot of the people in our industry have kind of been on a pro-nuclear bandwagon past five years.

• 8:15Brad Gerstner?

  Yeah.

• 8:16Bill Gurley?

  And that appears now to be something that's kind of tipped across the US. Take us back to prior to that starting to happen. What were the forces that were pushing for decommissioning?

• 8:29Speaker 02

  So the forces for the main force was the projections by the Energy Commission and other energy advisers was showing that there wasn't a need for Diablo. That was the main driver. So there are a number of things that were going on in 2016. And what was important was that we were being used for a bridging strategy to get to have those other renewable projects come online to replace us in 2024 and 2025. So here we are. Unit 1's current license expires November 2 of 2024. And it'll be really interesting to look at what's going on November 3 and 4 with our grid had we taken Unit 1 off. So we're right there, right?

• 9:14Speaker 02

  Unit 2's current license expires in August of 2025. But we've put in for a 20-year license renewal application with the federal regulator, the Nuclear Regulatory Commission. Even though the state's only asked us for 5, we've done that to make sure we maximize the optionality for the state and seeing the progress of those other projects coming online to replace Diablo.

• 9:37Brad Gerstner?

  It's inconceivable to me. I mean, we're just in the generating facility. This is an extraordinarily efficient operation for the production of very dense baseload power. You know, Elon Musk recently said, with respect to Germany, that it's utter madness to take plants like this offline. You know, when you look at the shift over the last 10 years, you know, characterize your own view. Obviously, you're an interested party here. But given the state's increasing needs for baseload power and the alternative, you know, the fact that some of these things have come online slower, I assume you would agree it would be utter madness to take Diablo offline.

• 10:19Speaker 02

  And I would, and I would from being an engineer and a scientist who loves to work in facts, you know, that, you know, nuclear's capacity factors, you said efficient, you know, the capacity factors, Diablo's, you know, upwards of 90%, right? And we have had our units run at 93, 94%. You can't mess with those numbers. We're available 24/7, 365 days a year, rain or shine.

• 10:46Bill Gurley?

  Yeah.

• 10:46Speaker 02

  And so much needed if you need to store some of that energy or need that energy for, you know, the high demand that we see in extreme conditions. I mean, this, today, right now, you know, it's, we're under restricted maintenance operations by the state because it's in the hundreds of degrees in the majority of the state.

• 11:05Bill Gurley?

  Yeah.

• 11:06Speaker 02

  And the demand is going to be so high. We don't want to have what happened in August of, you know, 2020 happen again. I mean, that's about people's...

• 11:13Bill Gurley?

  Rolling blackouts.

• 11:13Speaker 02

  Rolling blackouts. That's about people's lives. That's people in hospitals. I mean, you see the tragedies in Texas going on, right? You know, we need to be doing something about it. So it would be utter madness and scientifically wrong. And I say that from 35 years in the industry as a nuclear engineer with confidence.

• 11:33Bill Gurley?

  Right. Can you talk about the, how the potential timeline for Diablo? Because you mentioned earlier that the state had talked about five years, but you're applying for 20. How far theoretically could it run? Or how long theoretically could it run?

• 11:51Speaker 02

  Sure. So the current licenses for all United States nuclear power plants, your original license is for 40 years. Okay? Then there's a process that we're in right now to renew it for 20 more years. And just about every nuclear unit in the United States has submitted for that, except for a few of us. We had previously submitted, but part of the decommissioning or the shutting down agreement in 2016 was to pull that application back. And then there's about a dozen plants that are going for subsequent license renewal applications that go 20 more.

• 12:22Bill Gurley?

  From 60 to 80.

• 12:23Speaker 02

  Yeah, so go 80 years. And so the NRC has these processes because just like renewing your driver's license, you have to do on a periodicity. You want to be looking at the licenses and the components and so forth at every nuclear plant. So they have that opportunity as a safety regulator to approve those phases.

• 12:41Bill Gurley?

  This is something you educated me on today. I think I was under the perception that there was some kind of finite life to one of these facilities because of something about nuclear I didn't understand. But I'm walking away now thinking that the plant is upgradable and maintainable, and it's just a matter of keeping it in tip-top shape, meeting all the safety standards, and then reapplying for these licenses.

• 13:05Speaker 02

  Yep, absolutely. We run this station, you know, to excellence and performance. As I said, from a safety perspective, from an operational, from a maintenance, engineering, everything that it takes. We are in the highest compliance ranking of the Nuclear Regulatory Commission, and we have achieved many evaluations by an industry group that evaluates all nuclear power plants in the world of excellence, performance in operation and safety and reliability. So we run this plant very well, and that's what made it such a fairly easy call from the state of California of, hey, what would it take? What's the point of no return? Could you keep operating Diablo Canyon? And that was the legislation of Senate Bill 846 in

• 13:49Speaker 02

  September of 2022, because we're regulated by both the federal government and the state government. So the state government think the California Public Utility Commission, they just approved in December of 2023 our new expiration dates, which is 2029 and 2030. State Lands Commission, you got to see the intake and the discharge. We have, you know, leases with them, so that they just extended it to for five more years or up to 2030. And then State Water Resource Control Board, we had to get the continued exemption for things like once-through cooling that has been required because of the way our system is designed or our plant is designed.

• 14:26Brad Gerstner?

  But just to be clear, you know, it's up to, you know, the current governor could extend the plant's useful life for an additional 15 years beyond 2030, assuming the federal 20-year extension comes through, which you expect to come through. Now, of course, at any point along the way, they could say, we have excess power generation. All of a sudden, we had a breakthrough in solar or wind, and we don't need Diablo anymore. But there's an opportunity over the next two years, Bill, for, you know, Governor Newsom to extend the operating license, you know, here in the state on Diablo, which seems to me, given our present power needs and what we see inflecting up. We've talked a

• 15:09Brad Gerstner?

  lot about, you know, what's happening in AI. I'm sure you've had the hyperscalers down here talking to you. You guys talking to, you know, Patty at PG&E about their power needs. But if we're going to build data centers in the state of California, as I was walking around here today, I was thinking to myself, they ought to be building data centers right here. You have plenty of excess land and plugging them into these incredible, you know, power generating machines that we have. So that's the opportunity right now for Diablo is to extend for another, you know, 15 years beyond 2030.

• 15:41Speaker 02

  We will stay ready for that call if we get that call.

• 15:44Brad Gerstner?

  Yeah. Do you want to get that call?

• 15:46Speaker 02

  Absolutely want to get that call.

• 15:48Bill Gurley?

  I mean, tell me if I'm wrong, but what's the argument for decommissioning nuclear ahead of coal? Like, there's no argument, is there?

• 15:56Speaker 02

  I think it gets, you know, down to the energy policies and how you define, you know, renewable versus greenhouse gas free, you know? And Senate Bill 350, I believe, is the number from 2015. And at the very end of that, that bill, they changed the word greenhouse gas free to renewable and excluded nuclear and large hydro. So we need a mix of renewable.

• 16:20Bill Gurley?

  Who's they?

• 16:21Speaker 02

  The, yeah, I mean legislators, yeah. Which is fine, because again, that's what was known in 2015 timeframe. Very different equation and formula that we are navigating through with all the things I mentioned earlier.

• 16:34Bill Gurley?

  Well, that's where I go to, you know, some of the smartest people in our world, whether it's Elon or Patrick Collison or, you know, Steven Pinker is not in our world, but a very smart individual. They're all, they would, I think they would all argue you take coal and gas off before you take nuclear off.

• 16:53Speaker 02

  I would say, and to reverse it or flip it is just go after as much carbon free as you can.

• 16:58Bill Gurley?

  Totally agree.

• 16:59Speaker 02

  And work on that, you know, the latter part there. But again, going for the 20, or applying for the 20-year license renewal application, which is the NRC's process. That's what they approved. So like in the state of New York, Indian Point was a plant was applied for the 20-year license renewal, NRC process, got that approval. And then the state decided, hey, we have enough renewable and that, and we don't need The nuclear power plant. And after about 10 years or so, I don't have the exacts. But I mean, that is, we are governed and regulated by both the state and the federal government.

• 17:32Brad Gerstner?

  It's hard to believe, it's hard for me to see a future. Okay, when you have China, who's adding six to eight new fission reactors per year. It's gonna add upwards of 25 or 30 over the course of the next, you know, five or six years. Is expected to surpass the United States in nuclear power production by 2030. You've been around this for 30 years. The United States has been preeminent in nuclear technology. We built most of our plants in the 70s and 80s. You know, by the 90s, we basically had stopped building new plants. We were talking about decommissioning all of the plants that we had. As you look at the political environment today, not just in California, but you spent a lot of time around the world, right?

• 18:17Brad Gerstner?

  Advising, interacting with your operating peers in lots of other countries. Where are we in terms of that pendulum in the United States swinging back and forth? Are you, you're clearly more optimistic than you were in 2016 when they passed the legislation or you entered the agreement to shut down Diablo. But is there hope, is there a future for shifting the gears back into expanding fission, you know, baseload power production in the United States?

• 18:52Speaker 02

  Absolutely, and I think Diablo Canyon is the case study. And what I mean by that, on a micro level, what I call that when I consider what the need of, what Secretary Granholm and COP28 has said, that we need triple the amount of nuclear for our environmental and climate policies. So I say, "micro level for Diablo Canyon," because what we did in a year and a half, two years, is what is needed to keep that pendulum swinging and the momentum needed to build out traditional more nuclear and preserving the current 94 units we have. If we count the new Vogtle 3 and 4 that came online, which is outstanding, right? And so we can't have any of the current 94 shutting down, let's preserve that.

• 19:34Speaker 02

  There are some other initiatives, Palisades, a plant in Michigan, that they're looking to restart. And they're really looking at a lot of the stuff we did. We call it "team pivot" or pivoting from decommissioning. And getting that call from the state in 2022 to continuing to operate. And that's, you know, hiring over 300 people in an efficient, speedy time, working, communicatively, coordinated and transparent with our regulators on what needs to be done.

• 20:04Bill Gurley?

  Yeah.

• 20:04Speaker 02

  Just lots of examples there that I think can be used on a macro level to keep that momentum going that we're showing that can be done here at Diablo Canyon.

• 20:17Bill Gurley?

  One thing, another thing I learned today that I was really impressed by, I wonder if you could share with the audience, Maureen, is that there are both, both national and worldwide communities where you share best practice with other operators. And I'm thrilled to know that that's true. Yes. I didn't know that that was true. Can you talk more about that?

• 20:40Speaker 02

  Yeah, absolutely. In fact, we're here at Diablo Canyon Simulator, and that came after the unfortunate event at Three Mile Island in 1979, and also the formation of the Institute of Nuclear Power Operations. And I think what you're asking about is a fundamental thing in nuclear, in our nuclear industry, is anything that happens anywhere happens to all of us. And we're a culture of continuous improvement, a culture of self-aware and self-correcting, and we want to learn from each other. So we share information. You don't see that between the airline industries.

• 21:15Bill Gurley?

  Right.

• 21:15Speaker 02

  I heard an example recently, even with hospitals, even the same hospitals in different units, we value that. We have, you know, something happens with a certain motor, or a pump, or a generator, or a human performance item, you know, we, it's called operating experience. We all own that. We enter it into a system called corrective action program, get the learnings from it, make adjustments we need to, to, you know, how we operate, train, do maintenance, and so forth. And that's just a continuum as we seek.

• 21:49Speaker 02

  Excellence and again, safe and reliable operations.

• 21:53Brad Gerstner?

  That's great. One of the things Bill and I spent a lot of time talking about today is the cost differential around the world from, you know, building, you know, Vogel versus what they're building AP1000s for in South Korea as an example. When you think about the state of the supply chain in the United States, when you think about that talent network that, you know, that you were, you're a part of, right, that you have to go tap into when you want to hire people, you know, there's a certain amount of that that we got to tap into just to keep the 94 reactors online. But if we want to start building more reactors, more Vogels, and we want to drive down the

• 22:35Brad Gerstner?

  costs, right, of scaling up these level three and now advanced nuclear reactors, do we have the talent, do we have the supply chain, do we have the capability, what needs to be done, what do you wish was different today?

• 22:51Speaker 02

  Well, that's a great question. It did take a Herculean effort to get the human resources and the other resources we needed, but we did it. You know, we had a mantra around here, what needs to be true to hire the people we need to start, restart up our, you know, senior reactor operator license classes, to get operators, you know, trained and qualified and proficient can be upwards of, you know, three, four years, you know, what do we need to do that? But, but we did it. But on a macro level, on a bigger scale for the US and on supply chain, I can't emphasize enough, it's, it's a collective effort and, and you have to also fold in there the financial part of it and the regulatory model of it.

• 23:36Speaker 02

  We are a, you know, a highly regulated industry and, and, and that's good, you know, we're running a nuclear reactors and nuclear power plants, you know, but there were ways that we were able to put in more innovation or processes or tools to navigate through a 3,000-page license renewal application, for instance. So there needs to be that kind of thinking, that kind of breakthrough thinking on, you know, how do we get there? And I worry sometimes that there might be a group over here trying to do it in a group over here, and then they're competing, and then it's just not going to come to fruition.

• 24:15Speaker 02

  Like, how do we do that on a national energy policy level to move forward? I'm very encouraged by the, you know, the Civil Nuclear Credit Program that we qualified for, by the DOE, the Advance Act. I mean, it's a bipartisan discussion now, so I think that's been a huge step. So I have hope. But you need to have that breakthrough and that what needs to be true thinking to collectively get that done.

• 24:42Brad Gerstner?

  Another thing, Bill, that was amazing to me today, you know, I've heard a lot about nuclear waste, right? Spent fuel rods. And we had the chance to go by the safety facility where you store these spent fuel rods. And there are two things that struck me as pretty extraordinary. One, and maybe you could just share, like, you know, what is the space required for the spent fuel rods in the United States? And this is, given that we have a moratorium, we could reprocess 90% of this, but we don't, like France does. So even in the case where we don't reprocess any of these fuel rods, I think you said,

• 25:23Brad Gerstner?

  you gave an incredible fact about the total space that would be occupied from all the spent fuel rods, from all 94 of the nuclear plants. And I just thought sharing that information would be interesting.

• 25:35Speaker 02

  Yeah, absolutely. So absent of having a federal facility to take all of the spent nuclear fuel from all the commercial nuclear reactors, each of the individual utilities or sites have their own independent spent fuel storage installation. We all have an acronym, Isthse, that you saw today. I took you up there. And our pad is, has enough capacity for all 40 years of the original license, and we have enough for 60 years collectively on site, or over 60 years, including the spent fuel pools, the wet storage. You roll up all of that footprint, and you got to see it's very small, and you take all of the over 100 units in the United States, it would fit in the size of a Football fields up to the goalposts.

• 26:19Brad Gerstner?

  Yeah.

• 26:19Speaker 02

  And that's the total of the spent nuclear fuel. Now you start reprocessing that and you have, again, a federal policy change from the Carter administration to allow for reprocessing like France does. You can get about, you know, hear numbers between 80, 90% of, you know, isotopic, you know, use of being able to use it again. So.

• 26:41Brad Gerstner?

  That's extraordinary. Single football field and we could actually reprocess 90% of that.

• 26:47Speaker 02

  And that would help a lot on like your supply chain question.

• 26:50Brad Gerstner?

  Right.

• 26:50Speaker 02

  With where the market is right now with enriched uranium product and so forth.

• 26:54Bill Gurley?

  Yeah. One thing I would just highlight is really I was blown away by the operational excellence. You know, you can see it in everything that's going on here. And I do think Diablo was this kind of massive turning point for the industry, for the nuclear industry in the U.S. There was so much. I think people were committed to decommissioning this thing that many of us believe is the cleanest, most resourceful source of power you could have. And, and as you stated, now we have a lot of momentum bipartisan support for the industry writ large. So anyway, I think we all owe you thanks for what you guys have done here. It's pretty impressive.

• 27:39Speaker 02

  It's an incredible team out here that are dedicated, committed to those excellent standards. They're community members, you know, they teach Little League, you know, they're, you know, we contribute so much with volunteer hours. There's so much pride out here and there's generations of people out here in their footprint, which is you can't walk around San Luis Obispo and say you work at Diablo Canyon and say, oh, do you know? I mean, it's just, it's incredible.

• 28:04Bill Gurley?

  That's great.

• 28:05Brad Gerstner?

  You know, I also recently listened to a podcast with Patty Poppy, the CEO of PG&E.

• 28:10Speaker 02

  I know her.

• 28:11Brad Gerstner?

  It was great. Your boss, your boss. For everybody else, the CEO of PG&E. And it was great to hear her support for Diablo Canyon. It was great to hear her support for, frankly, a lot of innovation.

• 28:26Speaker 02

  Yeah.

• 28:26Brad Gerstner?

  Right? Whether it's grid innovation, whether it's two-way, you know, charge and discharge with cars, whether it's undergrounding of power transmission lines, which we talked a lot about today, leads to higher efficiency, you know, less, you know, lower cost to retail customers. So it does feel like there's a lot of upside in Diablo's, you know, kind of the tip of that spear. Thanks for having us. We're certainly, you know, going to put the word out to the governor and others. I would love to see this place extended for 15 years. It's the type of optionality that we need in the state. And frankly, a huge portion of the incremental bid for power is coming out of Silicon Valley.

• 29:11Speaker 02

  Yeah.

• 29:12Brad Gerstner?

  Right? Power is the primitive for AI. And that's why China is heads down in this race. And they're taking our technology, right? And they're, you know, they're improving it. And it's high time, I think, that the United States got, you know, back on board. And with leaders like you, you know, at the front of the pack, I think we're in a good place. So thanks for being with us today.

• 29:36Speaker 02

  Thank you for being here. It's been a great day.

• 29:38Brad Gerstner?

  Before I kick in with a little bit of background, I do want to thank the incredible team at Diablo. Maureen Zawalick, you know, who is one of the incredible leaders here. And, you know, a startup founder, Trey Lauderdale. You know, after we talked about nuclear on Pod 6, he reached out to me, said, hey, I think there's incredible opportunities here to make it even more efficient leveraging AI. He's got a partnership here with Diablo. And so thanks to them for having us down here. It's been a great day.

• 30:07Bill Gurley?

  And to give ourselves a little bit of credit, one advantage you have as an outsider is you see things with a fresh set of eyes. And so maybe, maybe for the audience, we will uncover a few tidbits that they will. Find useful as they think about this.

• 30:22Brad Gerstner?

  Yeah, I mean, listen, I have to say that I'm embarrassed how little I focused on this issue up until a few years ago. The truth is, the United States has been a global leader in nuclear power for 50 years.

• 30:33Bill Gurley?

  Right.

• 30:34Brad Gerstner?

  Okay, we commissioned our first nuclear electricity generating plant in 1957. The majority of American plants are built in the 70s and 80s. We have 94 plants today online, representing 31% of the world's total nuclear energy production. It's 20% of total US power production and nearly 50% of US clean energy production. It's large, it's at scale, we've been leaders. The problem is that it represents the effects of investments and efforts in an installed base that largely stopped in the 1990s, right?

• 31:15Brad Gerstner?

  China's on track, on the other hand, to bring on more capacity in the next 10 years than we've brought on in the last 40 years. They're expected to pass us in terms of total power generation from nuclear by 2030 or thereabouts. Our supply chain is atrophying. However, there does seem to be some growing bipartisan recognition that we got to get this back on track. And that's a key reason, you know, we wanted to come down here today. So, so as you look at this, Bill, what are some of the things that we ought to just set as a baseline about nuclear?

• 31:53Bill Gurley?

  Well, one thing, one thing that I would say is super important, especially because we have an audience that includes entrepreneurs. We're going to talk first about level three fission.

• 32:04Brad Gerstner?

  Yes, yes.

• 32:05Bill Gurley?

  There's level four, which is a different type of cooling technique. There's one plant in China doing that. There's SMRs, which are small modular reactors, which, which a lot of startups are excited about. And then there's obviously eventually fusion, which is a big unknown about the timeline. But, but for the next window until we stop, we're just talking about level three fission, which is a big scale. That's what's operating here at Diablo. That's what's operating in the majority of nuclear plants around the world. So, you know, a couple of ways you could go through things. First of all, you know, we have been through this roller coaster of emotional beliefs about nuclear energy.

• 32:50Bill Gurley?

  And many people tie that way back to association with the bomb and this inability to think about these two things separately. We had the Three Mile Island incident, Chernobyl, Fukushima, and all these things have an impact on people's perceptions of nuclear. I would argue, based on the research I've done, the healthcare impact of all three of those disasters is tiny compared to the healthcare impact of coal or other technologies that nuclear competes with. But people's perception, the media overplayed those things as well. And it's only been recently that the public sentiment has started to swing back in favor of nuclear.

• 33:34Bill Gurley?

  Most of the brightest people in our industry, you know, that Elon, Patrick Collison, like I see a pro-nuclear bias. And, you know, and I'm a huge fan of people like Steve Pinker, who's one of the great thinkers in our world. He's got a huge pro-nuclear bias. But a lot of people weren't on that page. Now, more and more people are on that page.

• 33:56Brad Gerstner?

  I mean, what's amazing is even in Japan, where, you know, after Fukushima, they took all 30 nuclear reactors offline. I think they have 75% approval rating for people wanting to put those reactors back online because I think there's a recognition in the world, okay, that it's clean, it's the type of dense, always-on nuclear power that you need. And the facts are just undisputable. It's safe.

• 34:21Bill Gurley?

  Well, and this goes back to that statement, I think I actually stole it from Joshua at Lux, but if this were discovered today, people would be like, oh, my God, climate change is solved. But if we let it go through this place where it was associated with these negative things that I don't think were accurate, but Now, hopefully, we're moving to a place where people are open minded. So you could also look through a bunch of different countries. So France is, most people know this, seventy-five percent of their energy from nuclear. They've, they've been the one that stayed in there the longest, leaned in the hardest. You have Germany, which I think people think of as the ultimate disaster, where they've taken all their plants, they've decommissioned everything.

• 35:05Brad Gerstner?

  Yes.

• 35:06Bill Gurley?

  And, and because of some of the, the, the things that have played out in the European market, they're now a net importer of fossil fuel energy. And, and, you know.

• 35:17Brad Gerstner?

  Disastrous. They got sold a bill of good by the Greens. Merkel decides to shut down all the nuclear power plants. You can see how it just falls off a cliff and goes to zero. And instead, you know, they're getting fossil fuel, you know, produced energy. They're, they're less secure, both from an energy perspective. I mean, remember at the start of the Russian invasion of Ukraine, we had all the conversations as to whether or not people were going to freeze in Germany during the winter, et cetera, because they had taken all these plants offline.

• 35:44Bill Gurley?

  Unbelievable. And, and one thing we've learned through this process is, you know, the, one of the silliest things you could possibly do is decommission because you've already paid for the damn thing. Once you turn one off, as Marina shared with us, it's a lot harder to bring it back. We're gonna, we're gonna see if that can work.

• 36:01Brad Gerstner?

  Right.

• 36:02Bill Gurley?

  And so anyway, and, and, and there's a fourth country we should talk about. So you already mentioned China.

• 36:07Brad Gerstner?

  Yeah.

• 36:09Bill Gurley?

  One of the amazing, well, let me, let me dive deep on China and then I'll mention the fourth country. So this is publicly available data, so people can go get it. We recently brought on two new plants in the US, Vogtle three and four in Georgia. And the total cost of that was about thirty billion for 2.2 gigawatts. It turns out over thirteen billion dollars per gigawatt. The plants in China that are the equivalent level three fission plants right now are coming on board at, at 2.5 billion per gigawatt.

• 36:43Brad Gerstner?

  Right.

• 36:43Bill Gurley?

  So thirteen to 2.5.

• 36:46Brad Gerstner?

  Right, right.

• 36:47Bill Gurley?

  And that's a shocking delta.

• 36:49Brad Gerstner?

  Yes.

• 36:50Bill Gurley?

  One of, I would say the single most surprising thing to me of all the discussions I've had in the past two weeks was everyone that's in this industry is how few people are shocked by that.

• 37:02Brad Gerstner?

  Right, but let's talk about that a little bit. When you look at the cost differential, which I think is one of the biggest problems today with US nuclear. And you know, I want to decompose as to why you think there's such a delta. But let's just talk about what it is, you know. You know, Vogel had a bunch of stuff as they were going through COVID. So let's say that that is more expensive than what a run rate AP 1000. This is the type of of Gen 3 nuclear reactor that they're building in South Korea, in China, and at Vogel, right?

• 37:33Bill Gurley?

  Since you mentioned Korea, that's the fourth country. So let me just real quickly go there. So Korea, so a lot of people look at the China data and they go, oh, that's China. You know, authoritarian government like, and they're able to dismiss it because it's different. South Korea is a democracy, a friend of the United States. They're at the same delivered price point as China. And they're doing it at scale and they're starting to export their technology.

• 38:03Brad Gerstner?

  Yes.

• 38:04Bill Gurley?

  So in some ways, just because I think it's easier for Americans to wrap their head around it as a data point. The South Korea data is more interesting than the China.

• 38:15Brad Gerstner?

  Right, so so let's talk about it. Let's break it, break this down a little bit because both the South Koreans and the Chinese, right, are building on technology that they procured from the United States, from Westinghouse, under tech transfer licenses over the course of the past, you know, 20 or 30 years, okay? Now they're building a lot of indigenous technologies on the back of that technology. And yet, building the exact same technology, even though it was invented here, it costs us, give or take, four times as much as what they're spending to build in South Korea or China. So. Give us your best guess.

• 38:58Brad Gerstner?

  What are the big buckets that are costing, you know, this cost differential in the United States? And whether or not there's anything that we can do about it?

• 39:07Bill Gurley?

  And I want to come back to later. I'll answer your question, but I want to come back to the, the built on our technology thing. Because I think there's some important things to talk about there. So I went out and talked to a whole bunch of people. And I was able to talk to one individual who had worked both in the regulatory part of our government and, and at a, at a producer, who, who I think had a really good lens on all this. And I'm gonna, I'm gonna leave him anonymous. But, but he brought up, he brought up four things. So the first was regulatory. So the separate federal and state environmental permitting processes in the US is onerous, lengthy, probably 10 years for a nuclear plant, PowerPoint, expensive.

• 39:52Bill Gurley?

  Most people don't know this. You have no reason to know this, but the NRC is a fee-based regulatory. So you literally pay per hour to have them come regulate you.

• 40:02Brad Gerstner?

  Right, right.

• 40:02Bill Gurley?

  And so those costs are extremely high. The second thing is litigation. So multiple special interest groups, particularly environmental groups, will sue to stop any development whatsoever.

• 40:14Brad Gerstner?

  Right.

• 40:14Bill Gurley?

  So there's no chance of a deployment or an attempted deployment without fending off, you know, inbound litigation that you have to deal with in the US. The, the third is, is passage of time without us doing anything. And so everyone talks about learning curves. We're so far off the learning curve because these two new plants were the first in 30 years. So there's no repeatable process, which you now have in China and there. And, and then that's all before you look at other things. I would say labor, cost of steel, cement. Those things can be higher here than there. And so it's a whole big litany of stuff added up.

• 40:59Bill Gurley?

  And none of those factors apply in China.

• 41:02Brad Gerstner?

  Right, right. If we could boil that down, the way I Kind of got my head around it is one, if you just look at the length of time. So now they're building these AP 1000s in South Korea and in China in about seven to eight years. And in the United States.

• 41:18Bill Gurley?

  Six, I think six.

• 41:19Brad Gerstner?

  Maybe as fast as six. In the United States, it's not 10. It's more like 12 to 15.

• 41:24Bill Gurley?

  Yeah.

• 41:25Brad Gerstner?

  Okay, so it's taking us twice as long to bring one of these plants online. Time equals money.

• 41:31Bill Gurley?

  And you and I talked about this, but a, a, a modern, large, multi-gigawatt vision facility is a large piece of infrastructure.

• 41:43Brad Gerstner?

  Exactly.

• 41:43Bill Gurley?

  It's not like you're building a.

• 41:45Brad Gerstner?

  Right.

• 41:46Bill Gurley?

  Even a rocket engine, it's more than that. It's this.

• 41:48Brad Gerstner?

  You look at the South Koreans or the Chinese building a highway, an airport, a hospital, a school.

• 41:54Bill Gurley?

  A subway station.

• 41:55Brad Gerstner?

  Subway station.

• 41:56Bill Gurley?

  Have you seen these videos?

• 41:57Brad Gerstner?

  Yes.

• 41:57Bill Gurley?

  Go on, if you haven't, go on YouTube and look at China's new subway station. Unbelievable.

• 42:03Brad Gerstner?

  And so the US, you know, the first thing is just our regulatory environment causes it to take a much longer period of time and time is money. Secondly, then, we don't have a scale up or scale out operation going on, right? Two facilities over the course of the last 20 years compared to six to eight of these in a repeatable process coming online in China. That means supply chain. That means talent chain. That means that regulators are constantly talking with the operators. You know, you just have the type of system that you need to drive down costs. And in fact, if you look at these gen three and gen four reactors coming online,

• 42:46Brad Gerstner?

  even in the United States, they always cost more in that first plant. But by plant five, it was cut in half. By plant 10, it was cut by 70%, right? So cost comes down as you ramp up scale production. Think about, you know, the, the roadster was a lot more expensive for Tesla to build, right? Than the model three, um, once you are producing a million of these cars. So, you know, we need to get to a place where we also have scale production. And then the third, what everybody tends to focus on. It's kind of this labor differential. I would put that in a third bucket. But it's like a third, a third, a third, and this adds up. It seems to me, the first two, right, we can tackle. Right?

• 43:28Brad Gerstner?

  You can consolidate the regulatory environment in the United States so that you reduce the time to bring one of these things online. And I also think that if you clustered some of these, if we wanted to get back to building more of these reactors, there's no reason to think that if we had a scaled cluster of reactors, five to 10 reactors, that you wanted to bring on over a 10-year period of time, that you wouldn't drive down the overall cost of the reactor.

• 43:52Bill Gurley?

  Perhaps. There's not a lot of proof points of us building, either at a federal or state level, big projects at very low cost in modern history.

• 44:04Brad Gerstner?

  Yeah.

• 44:05Bill Gurley?

  There were some, there's famous thing.

• 44:08Brad Gerstner?

  But if you think about infrastructure, most of it is one-off. Right? You build a bridge somewhere, then you build a bridge in a different city. And it seems like the other issue is the South Koreans are not only building them for themselves, they're building them for export.

• 44:22Bill Gurley?

  Right.

• 44:22Brad Gerstner?

  Right? And again, that just gets back to the scale mentality of building these plants. But to be clear, the idea that we're going to bring the cost of building one of these things down by 70%, which is kind of the target needed to make this competitive in the open market with gas and everything else, I think is very, you know, it's hard to see.

• 44:43Bill Gurley?

  And this is a good point. The landed price points in Korea and China are very similar to the landed price points of other renewables and things, just on a capex bill.

• 44:55Brad Gerstner?

  Right.

• 44:55Bill Gurley?

  But ours isn't because ours is 3 or 4x the global best.

• 45:00Brad Gerstner?

  Right.

• 45:01Bill Gurley?

  I want to talk, I'm going to go back to the South Korea thing because you brought up the IP issue. I'm not convinced that it's helping us any to sit around and cry about whether China or South Korea used our IP. And if anything, I think, and I've mentioned this on the pod before, I think this anti-Chinese mentality is a little nuts.

• 45:26Bill Gurley?

  Because if you look at low-cost EVs, if you look at their subway stations, if you look at, they're, they're, they're leading us in many areas. And we have this holier-than-thou, you know, attitude that, that America is the best and that we're the leader and we're being passed. Like, like, I would say landed cost of energy is the data point you should measure most. And if they're 4X where we are, I would say we should have the alarm bells ring, go on, what the hell is going on? Why are we so far behind? And I think it's a little bit of a crutch to lean on and say, oh, they built it on our technology. Right. One of the things I learned about the, the Korea situation. So they're trying to export it.

• 46:10Bill Gurley?

  Westinghouse, who was the company that, that originally designed Level 3 vision in the US, is suing to try and prevent them from delivering to Czechoslovakia. And, you know, we, we talked to Maureen about how the different nuclear plant operators all share and that we're kind of all in this together, right? And if climate change is a global problem and we all want it solved, like, we should want everyone to win. Like, like, we shouldn't be jealous that China is doing that. And so for me, you know, I, I ask all the AI bots, you know, do you think there's any chance we would license something from South Korea? Right. They all said, no, there's no chance we would do that.

• 46:54Bill Gurley?

  And that's the kind of a mental blocker, like Trump derangement syndrome or something like. If, if Korea could help us deliver a planet, Right. 2.5 billion per gigawatt? Right. Why wouldn't we want that? Right. Like, and so I just. I mean, we invited TSMC into Arizona to help us build chips. I know. But if you have this attitude, they took it from us, then you don't get into that right mindset. So I, I just think that's an important kind of thing to think about. We would all be better off if nuclear energy were cheaper for everyone on the planet. Right. And, and, and a lot of the political disagreements that lead to war, a lot of people believe are tied to energy cost and energy availability. So you might reduce that as well.

• 47:35Brad Gerstner?

  I think one of the reasons we're so focused on China is what started this conversation for you and I was when you model out the need for data center capacity over the course of the next five to 10 years, you realize for the first time in really two decades, the US's need to grow its baseload power generation is going to go up significantly, significantly faster than it has over the course of the last two decades.

• 48:07Bill Gurley?

  And this has become a standard topic of discussion in Wall Street. Everyone's talking about this.

• 48:13Brad Gerstner?

  And energy, reliable, always on energy, right? In fact, most data centers want to build right next to the source of energy.

• 48:22Bill Gurley?

  Right.

• 48:23Brad Gerstner?

  That is the primitive to AI. And we do believe that AI supremacy really goes to national security. So the reason I believe that we're seeing finally some bipartisan movement in Washington and around the country frankly on this issue is people realize how inextricably these things are tied together. So the reason I'm worried about China taking the lead in nuclear is not just that they have more nuclear power plants than the United States, but what it enables them to do down the line around AI and everything else. Because if you are the low-cost power provider in the world, right, then you're going to

• 49:05Brad Gerstner?

  be able to build bigger data centers that power bigger AI clusters, et cetera. And I'm not certain that that leads to better AI, but there's a reasonable enough chance that you don't want to give them that unilateral option.

• 49:17Bill Gurley?

  I think even if you, if you, if you don't take that lens, you know, you say to yourself, if we can't fix this problem, but other countries can, maybe through, through being imported by South Korea, then it becomes a competitive weapon for those countries. And, and, you know, just as you might put a manufacturing plant in Mexico or Vietnam or Czechoslovakia, like, there's no reason why a data center can't live there as well. And quite frankly, it's easier to drop a fiber optic cable from Mexico to America than it is to move goods by truck.

• 49:57Brad Gerstner?

  So should we be trying to build? You know, cooperate with the Mexican government and build AP1000s just over the border in Mexico?

• 50:05Bill Gurley?

  I think we should be open-minded to the fact that the world needs this technology and that it's if they get it, it's good too. If Czechoslovakia gets it, it's good too. This was my main point about like, I just don't think having an attitude that, oh, that's ours, or I don't even don't love the, it's a race and they're winning. I think everyone should be winning in this area. Like, once again, if you care about global climate change, like, it's a global problem, everyone should. I mean, it wasn't that long ago that with this same kind of anti-China attitude, we sat here and said, oh, we're gonna clean up our pollution, but look at those guys that were pointing our finger.

• 50:48Bill Gurley?

  Now we wake up and their landed costs of nuclear energy is one-fourth of ours. And like, who are we pointing the finger at? Like, you know?

• 50:55Brad Gerstner?

  Yeah, I think there is, I was reading, I think I got the name correct, Professor Brungiano from MIT, the director for the Center of Advanced Nuclear Energy Systems. You know, he said China's now the de facto world leader in nuclear technology. Right? And it's not because they're smarter, they're better, but it's simply because they made it a national priority. Right? That they were going to build these plants. And when you do that, you innovate. Right? And when I look at the moratorium that has largely existed in the United States over the last two decades, you tell me, if you had the Elon Musk of the United States working on fission over the course of the last two decades,

• 51:39Brad Gerstner?

  right, we'd be light years ahead of where we are from an innovation perspective. And maybe that's a decent segue to talk about, you know, what some of these Gen 4 advanced nuclear reactors look like. Because you and I, again, are talking about Generation 3 or Generation 3 Plus reactors. The AP1000 is kind of the standard reactor that's, you know, that's being built today. But whether you're talking about terra power, these alternative sources of cooling that are being built, I think we have five or six or seven of these that are authorized under kind of the developmental, you know, regime in the United States that are hoping to come online over the course of the next five to seven years.

• 52:24Speaker 03

  For the first time in four decades, an American company broke ground on a next-generation nuclear power plant in the U.S. The company behind the new technology is TerraPower, and it's backed by billionaire Bill Gates. Nuclear power is carbon-free, which means it doesn't emit the greenhouse gases scientists link to climate change. And Gates is building a plant in Wyoming at a cost he estimates will be $10 billion. TerraPower's new reactor uses liquid sodium rather than water for cooling, which the company says makes nuclear power cheaper, safer, and more efficient.

• 53:00Brad Gerstner?

  If we all agree that the 94 reactors that we have currently online, we should keep online. The question I have, Bill, is should we be looking to build more of the Gen 3 fission reactors? Or should we leapfrog and be, you know, there seems to be a lot of energy, at least in Silicon Valley and, you know, in Washington, Bill Gates, behind these Gen 4 reactors. Where would you spend your time and energy?

• 53:25Bill Gurley?

  So, I mean, my first reaction would be it shouldn't be an either-or. Like, we should be doing both. And I think that's what's happening, so that's fine. I would also say if, one of the big issues for both Level 3 and for what we could call the futures technologies is utilities having the gumption to put the CapEx and invest. If you study, and I heard this from multiple people that I talked to, utilities are inherently conservative.

• 53:59Brad Gerstner?

  Yes.

• 54:00Bill Gurley?

  Like, Wall Street investors think of them as these stable things you buy that don't, don't move around a lot, but just have a set...

• 54:07Brad Gerstner?

  I think the CEO of PG&E recently said, who owns Diablo, recently said on a podcast they have no interest in investing in SMRs. They said, "We're going to let risk capital invest in small nuclear reactors."

• 54:19Bill Gurley?

  Right.

• 54:20Brad Gerstner?

  And if they work, right, then we'll consider it, but we're not going to be the risk capital.

• 54:23Bill Gurley?

  It affects both of them. And, and maybe that's changing. You know, when I first heard about Constellation Energy Group, which operates a bunch of nuclear reactors here in the U.S., I reached out to them and they said... I asked them, are you doing anything new? Are you innovating? Are you doing a new plant? They said, no, no, no. Like, we just operate these old ones. Now, there's a rumor that they're talking to Three Mile Island about restarting that. And so, maybe they're, these changes in attitude are gonna tip them in. If, I say this with a ton of confidence, even though it's unprovable. If these utilities could snap their fingers and have vision level three online at

• 55:04Brad Gerstner?

  Competitive rates.

• 55:06Bill Gurley?

  Korea and China price points. I think they'd be turning them on.

• 55:09Brad Gerstner?

  Of course.

• 55:09Bill Gurley?

  So, there's a huge difference between 2.2 or 2.3 and 13. Like, there's just a huge difference. So, if that problem were solvable, I think they'd be investing more. But I don't know if that's solvable. I really don't.

• 55:24Brad Gerstner?

  To answer my own question, or perhaps push you a little further on this. So, if you listen to Gates talk about the reason for alternative to Gen 3 power plants, is they effectively said, the Gen 3 design was a massively complex engineering solution to the safety challenges of the plants that came before it. Okay? And so, rather than designing with perhaps elegance, right? Like passive cooling, they came up with very complex and expensive, right? Engineered solutions to those problems. Now, the great thing about the engineered solutions is they work. Right? We know they work.

• 56:05Brad Gerstner?

  They're repeatable processes, and we've driven down the cost in some of these other places. But if you look at the Gen 4 reactors, right? They're much more modular. You know, some of them can be produced in factories. A lot of them have sodium or alternative, you know, mechanisms for passive cooling. Is that perhaps, you know, again, when we think about the cost of driving down these plants, it does seem to me that we can't magically snap our fingers and make labor costs in the United States go down. We can't snap our fingers and make, you know, say, we're gonna scale this up and make all the regulatory stuff better. So, a leapfrog would be Just build a smaller, simpler plant.

• 56:46Bill Gurley?

  Yeah. I mean, China, there's a, there's a new plant in China, I probably can't pronounce it right, Shidao, that is level four, but it came on at a price way above Vogel. So like,

• 56:58Brad Gerstner?

  Yeah, but any new plant, any novel thing is going to be a lot more expensive on unit one than it's going to be on unit 10.

• 57:04Bill Gurley?

  You know, they used to call, I've heard people refer to modern day semiconductor investing as a sport of kings.

• 57:11Brad Gerstner?

  Right.

• 57:11Bill Gurley?

  Because you're 50 million to first take.

• 57:13Brad Gerstner?

  Right.

• 57:13Bill Gurley?

  If that's a sport of kings, this is a sport of emperors. You may be multi billions.

• 57:20Brad Gerstner?

  Yes.

• 57:20Bill Gurley?

  To first revenue. And so, good, good thing we have Bill Gates like emperors that want to make this stuff work. Yeah, let's dive in on SMRs for, for a second. So I'm sure, you know, the at least high level pitch you would hear from all of the SMR vendors is, one of the reasons that level three fission is so expensive is it's a huge infrastructure project and the US isn't good at those anymore. And if you could build this thing in a factory and then ship it and deliver it where it's used. And there's talks of, oh, I could take an old coal plant and put an SMR in there, several of them.

• 58:00Brad Gerstner?

  Yes.

• 58:00Bill Gurley?

  And now the transmission lines are all in the right place and I get, and, and to what you just said, and then I can repeat it, then the first unit might not be competitive, but the 100th unit might be. Because I could get into more of an automation, factory thing and get out of this infrastructure build problem that we're no good at in the US. That is the argument.

• 58:22Brad Gerstner?

  Yep.

• 58:22Bill Gurley?

  I think another super valid argument is the Navy, you know, and, and one of the links we will provide is a 92 page PDF on the miraculous success of the naval nuclear program, which are in essence, SMRs.

• 58:38Brad Gerstner?

  Exactly.

• 58:39Bill Gurley?

  That already exist on 100 different vessels.

• 58:42Brad Gerstner?

  Right.

• 58:43Bill Gurley?

  Some submarines, some carriers in the US Navy. And the track record is phenomenal.

• 58:49Brad Gerstner?

  Yeah.

• 58:49Bill Gurley?

  The costs are pretty interesting, especially since they've never been applied to a, at a commercial level. And so, there's reason to believe in this. The problem, I think the overwhelming problem is that the utilities aren't really.

• 59:08Bill Gurley?

  They're not acting like, say, Google and Amazon are buying Nvidia clusters where, "Oh, we're going to put them up," and they're more conservative. They want the startup to bear most of the risk. There's an agreement called a power purchase agreement where the utility says, "Oh, yeah, I'll buy it from you if you can deliver it to me at this price."

• 59:30Brad Gerstner?

  Right.

• 59:30Bill Gurley?

  Where they know their margin. And the startup's completely on the hook for whether they can get there or not. And we've already had one colossal miss with a startup called NewScale that had one of these agreements in place, and they got time to qualify. And the utility went, "I'm out." And NewScale had to start laying people off. And it's just tough. And the other tough part, the NRC, which we haven't talked much about, but the Regulatory Commission here in the US is fee-based. And all the people that are playing in this market I've talked to say, "You're probably 60 million to first approval." Just on fees, the startup's going to pay to the NRC to tell them what they're doing is okay.

• 1:00:14Brad Gerstner?

  Right.

• 1:00:15Bill Gurley?

  Once again, sport of emperors.

• 1:00:16Brad Gerstner?

  Yes. Well, and that brings us back to, you know, why did you and I really amp up this conversation? Because of Nvidia, because of Meta, because of Google, because of Microsoft? The power needs that they have.

• 1:00:32Bill Gurley?

  And maybe those companies are the ones that need to kind of...

• 1:00:35Brad Gerstner?

  I mean, if they're spending $250 billion a year on capex associated with AI, that is emperor-level spending.

• 1:00:42Bill Gurley?

  And maybe they need to be the ones underwriting the risk on the SMR.

• 1:00:45Brad Gerstner?

  And I also think what they can do, Bill, how about this? Why don't the hyperscalers form a consortium? Okay? And they go to Washington, and they say, "Hey, we'll put up X amount in order to build some AP1000s."

• 1:01:02Bill Gurley?

  Yeah.

• 1:01:02Brad Gerstner?

  Right? Or daisy-chain a bunch of these SMRs together.

• 1:01:06Bill Gurley?

  Yeah.

• 1:01:06Brad Gerstner?

  Right? I'm talking about a new type of project in partnership with Washington DC where there's a mutual need. They have the capital, public-private partnership, to get this going. Because honestly, as I sit here today, take Diablo Canyon. They built two nuclear reactors here. You know, this site was provisioned for six.

• 1:01:27Bill Gurley?

  Yeah.

• 1:01:28Brad Gerstner?

  For six reactors. I could imagine if you had four more reactors sitting here. Right, if you could land them at the right price. You could have one reactor for Meta, one for Amazon, one for Microsoft, one for Nvidia. You could have the data center sitting right next to them. It does seem.

• 1:01:46Bill Gurley?

  By the way, I ran some math on the Diablo dollars just because it's interesting. So in the mid 80s dollars, the plant was built for 5.5 billion. So right around 2.4. Unfortunately, in today's dollars, that's 6.4. But 6.4 is still half of 13, which is Vogtle. And so, yeah, just interesting.

• 1:02:10Brad Gerstner?

  I mean, you know, again, we know the reasons why they're not coming online at that price. So the question is whether or not you can change those dynamics through some of the things that we talked about. I do think these Gen 4 reactors, there's room. You know, I, like you, believe it's an all of the above strategy. We should have the large Gen 4 reactors, but we also should do the small modular stuff. We basically have 100 floating SMRs in our naval fleet. You know, just imagine if you just took those ships and dropped them on land and, you know, set some transmission lines up again. What's great about those reactors is, you know, again, part of what we need to do is get the flywheel going on the marketplace.

• 1:02:55Brad Gerstner?

  Not everybody needs, not every situation needs 1.5 gigs.

• 1:03:00Bill Gurley?

  That's true.

• 1:03:00Brad Gerstner?

  Right, 100 megawatts out of a small nuclear reactor may be a perfect fit for some of these smaller solutions.

• 1:03:07Bill Gurley?

  Well, let's talk about possible solutions. Not that we get to decide. And I'll start with, on the Level 3 side, and then let's go to the SMR side. But, you know, the first thing that popped in my mind when I see how far behind China and Korea we are is, like I said, I'm shocked no one's shocked. But if someone inside of Washington is like, oh my God, we have to fix this.

• 1:03:38Bill Gurley?

  The first thing that comes to my mind, and maybe this could be applied to both SMRs and Level 3 scale out, is we could choose to do something more like a Manhattan Project or a NASA project, and you hinted at this already, where you get the best and brightest people, you put them somewhere on the side, you give them the ability to do things they couldn't do before.

• 1:04:03Brad Gerstner?

  Right.

• 1:04:04Bill Gurley?

  Like reimagine the NRC.

• 1:04:05Brad Gerstner?

  Yep.

• 1:04:06Bill Gurley?

  From the ground up.

• 1:04:07Brad Gerstner?

  Mm-hmm.

• 1:04:08Bill Gurley?

  You know, you give them a goal, like the Manhattan Project and NASA had, to deliver nuclear at a competitive rate in the US.

• 1:04:18Brad Gerstner?

  Right.

• 1:04:19Bill Gurley?

  You know, and come hell or high water.

• 1:04:21Brad Gerstner?

  Yeah.

• 1:04:22Bill Gurley?

  Now, we haven't done one of those things since those two that I mentioned, but we were pretty successful when we did those.

• 1:04:27Brad Gerstner?

  Yeah.

• 1:04:28Bill Gurley?

  You know, and I think when you have an industry that's this important to the country and this highly regulated, it is kind of an exception where you say maybe the free market's not doing it.

• 1:04:39Brad Gerstner?

  Yeah, I mean, it's pretty clear to me that because of the regulation, which again, I'm sure we could regulate this industry better, but you're happy the industry has a lot of regulation, okay? It's incredibly safe. But given that burden of regulation, it does drive up the cost relative to alternative solutions, and the United States is just incredibly lucky. We have an abundance of natural gas. So left purely to market forces, if you don't subsidize any of this stuff, we wouldn't have any solar, we wouldn't have any wind, we wouldn't have, you know, we're not going to have the investment required to bring on these new plants. So I do think it has to be a partnership where the government is willing.

• 1:05:21Brad Gerstner?

  Now, listen, what we're doing in the IRA with CHIPS, we've decided building CHIPS in the United States is a strategic priority. You and I have debated whether or not that will be successful. We happen to both be on the same side of the agreement that that's going to be very challenged in the United States, but the United States-

• 1:05:40Bill Gurley?

  Day in the recent week, including Intel stock price.

• 1:05:43Brad Gerstner?

  But the United States government is absolutely committed, you know, to that path. I think nu- Nuclear is at least as important.

• 1:05:50Bill Gurley?

  But they didn't go as far as we're talking about. They just did loan programs and stuff. I'm saying if you did a Manhattan Project or NASA scale thing where you're trying to redo everything, not just provide loans or incentives. And by the way, there is, I think, an imperative, just as a quick side, to at least make sure nuclear is not disadvantaged relative to wind and solar. It has operating efficiency and this durability and this always-on piece that make it so much better than those. And right now, I think it actually has less incentive programs. And I'm not sure that's smart.

• 1:06:32Brad Gerstner?

  If you look at, you know, I saw this mashup the other day on Twitter. You know, it's Trump and Biden and Elon and Bill Gates, folks on both sides of the political divide, right? The one thing that's very clear right now is that both sides of the political divide have come together on this issue.

• 1:06:51Speaker 04

  Take nuclear power, biggest source of clean energy. There's no question that there are benefits.

• 1:06:57Speaker 05

  Our nuclear energy sector produces clean, renewable and emissions-free energy.

• 1:07:02Speaker 06

  In Germany, they closed the nuclear power plants. They have to keep coal burning. They said no to clean energy, and they said yes to fossil fuels. And we in California, we have a nuclear power plant called Diablo Canyon Nuclear Power Plant. 9% of clean energy. So why would we shut it down?

• 1:07:20Speaker 07

  There's a new effort to increase the amount of energy obtained from nuclear power. It's a better form of energy because it doesn't have greenhouse gas emissions.

• 1:07:30Speaker 08

  It's crazy to shut down nuclear power plants. I can't emphasize enough, please do not shut down the nuclear power plants. Please reopen the ones that have been shut. This is total madness to shut them down. Total madness.

• 1:07:43Brad Gerstner?

  Think about where we were just, you know, like Marines shared with the state just 10 years ago. I mean, there was a moratorium. They were decommissioning plants. So I think we do have a lot of forward progress. And I think we need to come up with that statement of principles. No more decommissioning. Bring online the plants that we've decommissioned that are easy enough to bring online. Right? Figure out whether or not, I think there's a startup, maybe called The Nuclear Company, that's trying to build six or seven of the AP1000s. You know, maybe there are some companies that we can get behind that are going to go cluster build some of the Gen 3 reactors. You know, maybe there are things the government can do to streamline that process, provide some credits, make that process work.

• 1:08:27Brad Gerstner?

  And then I think, you know, letting the market work by removing some of the regulatory burdens. We've already done this through a lot of legislation at the federal level to let these Gen 4 reactors at least come online, experiment, see whether or not they're going to work. That feels like a pretty good solution.

• 1:08:43Bill Gurley?

  I think it's tough, you know, on the NRC front, two of the links we're going to provide are a presentation from the head of the NRC and a podcast with the head of the NRC. And one thing that becomes very apparent is like, he's like considers it a win that we've gone from a negative reduction to just keeping everything online.

• 1:09:04Brad Gerstner?

  Right.

• 1:09:04Bill Gurley?

  And we're sitting here staring at China going, why aren't we doing this?

• 1:09:07Brad Gerstner?

  Right.

• 1:09:08Bill Gurley?

  So they're just not in that mindset. And they've been around a long time. And I don't, I think there's, red tape is red tape. And I just think that, you know, you're probably at a place where you might want to send a bunch of people off in a room and like zero base it, you know?

• 1:09:26Brad Gerstner?

  Well, I think this is, I mean, again, companies get built where markets are created. There's a lot of growth domestically in China, so there's a lot of this stuff coming online.

• 1:09:37Bill Gurley?

  But they don't have the history of red tape that we have.

• 1:09:39Brad Gerstner?

  I agree with that. In South Korea, they're exporting. Well, we have export controls in the United States, which are preventing a lot of these companies from building and exporting. So like, again, we could change those export controls and perhaps build a domestic export industry, you know, for nuclear. Why do you do that? Because it builds the supply chain, it builds the resilience that benefits you domestically.

• 1:10:03Bill Gurley?

  I'm a little skeptical, like, I uncovered...

• 1:10:06Brad Gerstner?

  Shocking.

• 1:10:07Bill Gurley?

  I uncovered this document from... From the Idaho National Laboratory, I think it's called, which is a separate nuclear arm of the US government from the NRC. And they recommended 30 things to change about the NRC.

• 1:10:23Brad Gerstner?

  Yeah.

• 1:10:24Bill Gurley?

  And I'm sitting here thinking, wow, that's a lot of things you would change. And people can go find this document. But my guess is, even if Congress got behind this document and said, "You should change these things," what would happen is, over five years, they'd change 20% of them. They wouldn't change all of them. And I don't think the impacts, we're at a 4x cost. I don't think you get there, you know? And so, you know, I mentioned this earlier, but Josh Shapiro, the Pennsylvania governor, who is, everyone praises because this bridge went down on I-95, and he got it back up in 12 days.

• 1:11:00Brad Gerstner?

  Yeah. How'd he do it?

• 1:11:01Bill Gurley?

  Well, he took all the regulation and lawsuits off the table.

• 1:11:05Brad Gerstner?

  Suspended it, yeah.

• 1:11:06Bill Gurley?

  And so, we have to recognize that one of the reasons we can't build infrastructure, and the California high-speed train thing is where it is, is because we've indoctrinated ourselves in red tape, both with regard to regulation and litigation.

• 1:11:22Brad Gerstner?

  Right.

• 1:11:23Bill Gurley?

  And if you want to go build this next-generation Level 3 plant, I think you've got to rewrite the regulation from zero ground up. Like, make it thinner and tighter. And two, I think we've gotten to the point where we got to say, "This is so important, you can't sue these people." Like, the government's doing this.

• 1:11:43Brad Gerstner?

  And that, to me, seems perhaps even more important, Bill, because in South Korea, their national regulation and the regulatory body that oversees it all is modeled on the US. Okay? So, like, that, to me, doesn't explain why we have this massive price differential. But I do think the litigation environment, all the other things, the fact that we have this dual level of litigation. And then, you know, ironically, you know, here at Diablo Canyon, you say, you know, "Why, you know, what was one of the leading forces that caused this place to get decommissioned in the first place?" It's groups like... Euphemistically called Friends of the Earth, right?

• 1:12:24Brad Gerstner?

  Who sue them at every different stage, who turn public support, you know, against them ironically. Right? If you decommission Diablo, you know what the state does? It imports more coal-produced power.

• 1:12:37Bill Gurley?

  We know this.

• 1:12:38Brad Gerstner?

  You know, and yet Friends of the Earth are, you know, are lobbying for this.

• 1:12:41Bill Gurley?

  And that doesn't exist in China.

• 1:12:42Brad Gerstner?

  Right.

• 1:12:43Bill Gurley?

  So to a certain extent, you know, you've built your own problem.

• 1:12:46Brad Gerstner?

  Well, listen, I would much rather deal with the downsides of, you know, a free system. Where, you know, you have the market competing, but I will say that when you have this much regulation, right, the government has chosen to be involved. You no longer have an unfettered market, right? So market forces break down. Clearly, they've broken down here. And I think now we see the strategic priority to get, you know, to get behind this. It's been a heck of a learning.

• 1:13:16Bill Gurley?

  Let me, let me riff on one other thing you said before we wrap up. On, on the SMR front, I like your idea of these people getting together. You know, we've talked about Facebook's Open Compute Project where they open sourced all the elements of their data center. And we heard from Maureen that a lot of these operators get together and share best practices. And it strikes me that creating an IP-free world for these people to live in is beneficial to the utilities. It should give them more confidence in what they're doing. I wonder if, I ask all the AIs, has anyone tried to commercialize the learnings of the Navy?

• 1:13:59Bill Gurley?

  And they said, no, everywhere I looked, they said, no. And so maybe there's an opportunity there, right? The government, why, why not take some of the...

• 1:14:07Brad Gerstner?

  That would be the coordinating function, if the government could create kind of that open source standard for the AP1000, right?

• 1:14:13Bill Gurley?

  Or for the SMR one, maybe, by leveraging what's been done in the Navy and, and maybe getting these hyperscaleers behind it. And maybe that's a mini version of a Manhattan Project. But, but, but boy, it seems like there's an opportunity there.

• 1:14:27Brad Gerstner?

  Yeah.

• 1:14:28Bill Gurley?

  And, and if, the reason, and I... People will be very upset that as a capitalist, I'm suggesting this. The reason to make it IP free is to get everyone working on the same platform, to remove single source dependency risk, and to get the utilities confidence that this thing's gonna be successful and gonna go forward and to get everyone behind it. So it's do the Linux, you know, of SMRs.

• 1:14:54Brad Gerstner?

  And by the way, you know, again, this is about buying time, right? Like if we telescope way out, and I think Elon's thought about this as much as anyone. He said, ultimately, the sun's the source of all of our power, right? The problem is, we don't have the technologies today to store it as efficiently as we need to in order to provide all of our energy, okay? So I don't know whether it's 25, 50, 75 years, but we're going to have to bridge these technologies. We have a clean energy that we invented, right? That currently is powering, you know, is 20% of our total base load power, 50% of our clean energy. If there's one thing I've taken away from what we've studied over the course of the last 10 weeks,

• 1:15:38Brad Gerstner?

  is that we have 94 plants in this country, and we should not be decommissioning any of them. They all have much longer useful lives than I ever thought about. At 70, you know, 60, 70 years old, they still run safely, provided that you do the proper maintenance and all this stuff to these plants, which frankly is new news to me.

• 1:15:57Bill Gurley?

  Yeah, me too.

• 1:15:58Brad Gerstner?

  And I think terrific news. And it's also very clear that we can build more. I mean, Vogtle, yes, we had big cost overruns, but we have the capacity in this country to build more of these Gen 3 reactors. We have a lot of vibrancy and activity going on, on the Gen 4 side. We've got a lot of bipartisan support now in Congress. And so, you know, I come out of this a little bit more optimistic. But in the state of California, you know, we are sitting here at Diablo. I would love to see Governor Newsom, in the course of the next 24 months, announce that he's gonna extend this, extend the license here for another 15 years. I mean, this seems to me to be a crown jewel. Of California's leadership on things like AI,

• 1:16:41Brad Gerstner?

  our ability to produce this type of energy. It makes no sense. Take this off the table and let's get to working on what we need to do next in order to reduce our dependency on fossil fuels and frankly, drive up the power generation in the state that we're going to need to power, you know, the economy and AI.

• 1:17:00Bill Gurley?

  Yeah, and I just, I would, I would urge those that care that if you want to really meaningfully keep up with China and Korea, that one, we should quit vilifying them and start respecting the fact that they're executing at a level above and beyond us. And then two, consider some type of Manhattan Project-like approach where you get out of the current environment. You get a lot of smart people thinking from first principles. You maybe borrow from what the Navy's done and consider open source or IP-free solutions to get everybody on the same page.

• 1:17:43Brad Gerstner?

  Yeah, well, next week or the week after, we'll be back to regular programming. But this is one of the things you and I wanted to do. We wanted to take some deep dives on some topics that interested us along the way. So.

• 1:17:55Bill Gurley?

  And I would encourage people that disagree, and I'm sure many will, to reach out.

• 1:18:00Brad Gerstner?

  You're going to hear from them.

• 1:18:02Bill Gurley?

  I know, I know.

• 1:18:02Brad Gerstner?

  You're going to hear from them.

• 1:18:04Bill Gurley?

  Share your point of view and we will, we will bring that data into the discussion.

• 1:18:09Brad Gerstner?

  But I, but on the flip side, I want to see more of those game day posters saying, I love nuclear. I'd love to see people energized around the topic. I'd love to see the presidential candidates talking about the topic.

• 1:18:21Bill Gurley?

  Well, I'm headed to Ann Arbor this weekend, where I suspect game day will be.

• 1:18:26Brad Gerstner?

  Will we see, will we see some more signs?

• 1:18:28Bill Gurley?

  So maybe I can, I can show up with the sign. We'll see if I have time to do that.

• 1:18:33Brad Gerstner?

  All right, man. Have a good time. Great seeing you.

• 1:18:35Bill Gurley?

  Take care.

• 1:18:45Brad Gerstner?

  As a reminder to everybody, just our opinions, not investment advice.