Jigarnomics – The Absurdity of U.S. Nuclear Fission Energy Finance Policy
By Aidan Morrison @quixoticquant
By Aidan Morrison
Introducing @quixoticquant
Aidan Morrison @quixoticquant has taken #EnergyTwitter by storm. With his permission I am reprinting a particularly insightful and incisive essay on energy policy finance in the USA. This thread is consistent with my professional experience in the US energy project finance sector, practicing with some of the largest energy finance law firms in the nation. Aiden’s original twitter thread is here. Reprinted with permission.
Jigarnomics 🤯
This Decouple pod with @JigarShahDC is 🤯. I've never been so relieved to finally understand what's going on with US nuclear, and shocked/appalled at how much of it comes down to the attitudes and delusions of one man.
Quick thread on 'Jigarnomics'.
Jigar is seized with the importance of 'capitalism'. So American. But Jigar's capitalism is completely weird.
The state invents the deep tech.
The private sector scales it.
With an even-handed shower of subsidies from above because... that's what makes Jigar's garden grow.
He spits on the success of countries like Korea, France, Russia with (relatively) thriving nuclear exports, because they involve large, vertically-integrated, state sponsored enterprises. Dangerously non-capitalist.
Extremely agitated by the Barakah example.
But most bizarre, is when pressed to describe his vision for how US-style, free-est market capitalism can and will work better, he proudly exclaims that he doesn't have one! US capitalism simply must triumph! Articulate a plan for how? Never. That's basically communism.
The strangest thing about Jigarnomics is that he's so far from classic small-gov ideals. He relishes certain cases for gov involvement in shaping/influencing markets, and technology.
He basically claims the private sector is incapable of deep-tech innovation. And he has no hesitation justifying the role of the Loans Program Office, which he directs. For some reason, the private market doesn't give certain sectors a 'fair shake'. Government can and should step in to fix that. But he seems vehement, fixated on the idea that no underlying logic, design, or plan could be involved in guiding that investment.
It has to be an agnostic shower of subsidies. Guided by nothing but the 76-step application process. First come first serve. The intellectual missing link is identifying why certain industries/objectives can't be done well by private markets alone.
Not Jigar's jam apparently.
He even thinks solar and nuclear builds are just as hard. Won't distinguish between them at all.
To have sensible,involvement of the state, I think it's essential to have a clear idea about the 'market-failure' you're trying to address.
For me, massive infrastructure projects can/do have returns to scale, concentration, natural monopolies etc that justify intervention. I work a few blocks away from this bridge. Built in the 1920s when 🇦🇺's population was a tenth today's.
The market couldn't do this. We'd end up with a hundred little cable ferries, half a dozen different smaller causeways maybe. A tangle of road-connections. No ships.
It's just freaking obvious that with infrastructure, having a plan and opinion about how much you need, and where it should go, is essential. And often the right size is too big for the market.
So the state steps up.
This is actually more true in energy, including renewables, than many people are willing to admit.
The big, core, trunk infrastructure is essentially centrally planned. Regulated monopolies. A vision/idea/policy at least about how much and where. But Jigar is glowing with pride about how much he's berated the nuclear industry in the past few years for being too pessimistic, too passive, in asking for government leadership.
He's 'slapped them silly' to get them to wake up.
He's also the school-teacher in the yard, and has told the children to stop squabbling. Bad-mouthing each other's technology.
He knows that actually we need as much of everything as possible. No 'optimal mix' required. Only open-throttled tech-agnostic subsidy showers.
Ultimately, he shows his hand pretty clearly in terms of what he think is wrong with nuclear.
He thinks the designs are awesome. USA all the way. It's just not taking off because the industry hasn't figured out how to make it 'scale'.
His poster-child here is @elonmusk with Tesla and Space-X.
Batteries and motors were always there, Tesla figured out out how to package them in a fast car. The US government figured out rockets. Now Space-X has made it cheap. This is the Jigarnomics formula for nuclear. It's also clear that he thinks his financial-model for selling solar-as-a-service is relevant experience.
So I think it's clear why the US nuclear industry, brow-beaten by Jigar, has come up with 'SMRs' as the magic-fix-for-everything. They're attempting what Elon did with electric cars:
Focus on one critical, perceived weakness, and fix it.
It's fine for a car to be 3X the price, 2X the weight, 1/2 the range... IF and only if...
You paint it red, make it look fast to the eye, feel fast under foot.
And in the nuclear industry, that means coming up with a story about making a reactor that is...
Financeable
That's basically it. (The faster safer stuff is mostly BS)
It's a finance-above-economics-above-engineering mentality to nuclear.
And basically because of this narrow, almost consumer-goods oriented view that 'capitalist' scalability means prioritising 'financeability' above every other economy of scale, concentration, etc, we have SMRs. Meant to be the Tesla Roadster of nuclear. Now I'm even more angry about how this single-minded obsession with SMR's has hijacked the debate about nuclear in Australia. And maybe thrown it off-course.
Jigarnomics
Subsidies all round. But not to address any underlying market failure, in a strategic, directed way… Not to achieve an objective of national significance... (Dunno... decarbonisation?) Like the space race, or Manhattan project, that gave birth to things like rockets and nuclear power.
Just in the "whoever steps through these 76 steps of a grant process wins" kinda way. Thus the directed, purposeful, state-led efforts that discovered nuclear technology are scoffed and mocked as unsuitable to 'scale' up energy infrastructure, which has a natural obvious case for state leadership by its nature. Because be like Tesla.
Jigarnomics. 🤯
Jigar is far and away the worst guest ever to appear on the Decouple podcast. I really don’t know how Dr Keefer kept his cool. Jigar struck me as perhaps the most arrogant prick to serve in our wonderful government. Who on earth appointed this guy?
The Ambassador Bridge connects Detroit, MI, USA with Windsor, ON, CA. It was privately built and owned.
The real problem is risk. Mega projects need mega dollars. No private group would risk the investment if the return was subject to the whims of the government.
The high capital cost for Nuclear and the high risk mean that private businesses would be reluctant to invest. The significantly lower cost of SMRs make them a better alternative.
NASA continues to finance schemes that are overpriced failures (Artemis) vs Starlink that is used to finance SpaceX.
Tesla suceeded because the government is pressuring everyone to be 'greener', not because batteries and motors already existed. An electric car in an area that is powered by coal is absurd.