John Berry is co-founder and managing director of ethical fund manager and KiwiSaver provider Pathfinder Asset Management.
OPINION: A reliable energy supply is as essential to our global economy as a reliable air supply is to our bodies.
Energy production must be affordable, safe and reliable, otherwise our modern world cannot function.
Germany depends on Russia for a third of its natural gas, which is problematic given that Russia is reacting to Germany’s support for Ukraine.
Russia is choking off supply and there are talks the taps could close in the coming Nordic winter. It would be a social and economic disaster for Germany.
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In the UK, renewables generate more energy than fossil fuels, but solar is not so useful at night or wind generation on calm days.
New Zealand has a similar challenge with hydropower generation during drought and low lake levels.
For those who want to align values with investment, there is little disagreement about avoiding nuclear weapons. Nuclear energy is a much more complex and divided issue.
This was highlighted earlier this month when European Union lawmakers voted controversially to classify certain future natural gas and nuclear production as “green” investments.
Safety is the first risk that comes to mind with nuclear power. Disasters have been caused by tsunami, human error and building quality standards.
Recently, South Korea was embroiled in a scandal when thousands of counterfeit parts were discovered at its nuclear power plants.
In terms of affordability, nuclear power plants are relatively cheap to operate. However, and this is a big problem, their construction takes a long time and is extremely expensive. They also require careful and costly dismantling at the end of their life.
There are serious concerns about cyber weaknesses, terrorist attacks, and the need to store waste safely pretty much forever.
On the positive side, nuclear has low carbon emissions, which is essential in a world concerned about climate change. Coal generates more than a third of the world’s electricity but generates massive emissions.
Burning coal for electricity generation is also responsible for millions of deaths worldwide. In terms of deaths per unit of energy produced, it far exceeds deaths caused by nuclear or renewable energy.
Nuclear has never quite delivered on its promise of cheap and completely safe energy. More advanced technologies and processes have always been at the forefront of reality.
This is happening right now as a new generation of small modular reactors (SMRs) are being developed by listed companies like Rolls Royce in the UK and NuScale in the US.
While SMRs will produce only 20% of the energy of a conventional nuclear power plant, they are expected to be built relatively quickly and cheaply on a production line rather than on site. This should bring efficiencies like making toasters in a factory rather than building each one individually in everyone’s kitchen.
I have a hard time with nuclear as an energy source given the fears over safety and waste storage. Yet it is part of the mix as decarbonizing global energy is a priority over the coming decade.
There is no point converting the world’s cars to electricity and then burning coal to power them.
We need our world to decarbonize to limit the impact of climate change, but we also need global energy sources to be affordable, safe and reliable. More coal-fired power generation is not the solution.
The technology must provide a solution, and quickly, either a scale-up of battery storage for wind and solar, or failing that, a new generation of safe and low-cost SMR nuclear power plants. I know which option I prefer.
– This commentary is general information only – it is always a good idea to seek professional financial advice for your personal situation.