Powering big data with small modular reactors

In this week’s brief, we look at investments by big tech to expand small modular nuclear reactors, what is driving the acceleration of global electricity demand, and work to electrify cars and buses.

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Amazon goes big on small modular nuclear reactors: Via its Climate Pledge Fund, Amazon anchored a $500M fundraising round in US nuclear developer X-energy as part of a collaboration to deploy small modular reactors (SMRs) and provide low-carbon electricity to power its data centers. Citadel, Ares Management Corporation, NGP, and the University of Michigan also participated in the round. Amazon and X-energy plan to bring over 5 gigawatts of SMR-generated power online by 2039, enough to supply 4 million homes. X-energy's technology uses helium gas as a coolant and can be scaled into larger power plants, with the first Xe-100 SMR being developed at a Dow manufacturing site in Texas. Amazon also signed an agreement with Energy Northwest to invest in developing four SMRs at the Columbia Generating Station in Richland, Washington, which has the potential to produce enough power for 770,000 homes and help power Amazon's operations, including its Amazon Web Services cloud computing platform.

Google orders small modular nuclear reactors: Google has ordered six to seven small modular nuclear reactors (SMRs) from Kairos Power, a seven-year-old start-up, to provide low-carbon electricity for its energy-hungry data centers, becoming the first tech company to commission new nuclear power plants. The SMRs have a total capacity of 500 megawatts, which will help Kairos bring its first commercial reactor online by 2030 and additional reactors by 2035. Kairos's SMRs offer a simplified, inherently safe design, faster construction, and flexibility in deployment location compared to large-scale nuclear plants.

Global electricity demand forecasted to rise faster than expected: The International Energy Agency (I.E.A.) has reported that global electricity demand is rising faster than expected, making it harder for countries to cut emissions and maintain climate goals. Over the next decade, the world is expected to add the equivalent of Japan's annual electricity demand to grids each year, driven by surging power needs for new factories, electric vehicles, air-conditioners, and data centers. To stem global warming, countries must build low-carbon electricity sources twice as fast as they're currently doing between now and 2035 to meet their climate targets. With rising temperatures worldwide, power used for home air conditioning units is a major contributor and is expected to rise by an amount greater than the entire Middle East's electricity use today, requiring an extra 697 terawatt hours by 2030. 

Private market investors fuel energy transition: Private markets are becoming a significant force in energy-transition investing, with alternative asset management, including private equity, private debt, real estate, and infrastructure, showing more exposure to low-carbon energy assets than fossil fuels. According to BloombergNEF (BNEF) research, about 70% of the $487 billion in alternative assets analyzed is invested in infrastructure funds that finance projects such as wind farms and charging networks. A separate analysis by MSCI Inc. found that private capital funds have consistently outperformed on their renewables investments compared to oil and gas holdings, with funds that exited renewables holdings in 2023 making 1.6 times their initial investment.

General Motors maintains commitment to electric vehicles: Mary Barra, the chief executive of General Motors, remains committed to the company's goal of phasing out combustion engine cars in the United States by 2035 despite slow sales of EVs. G.M. has fixed its battery-manufacturing problems and expects to start making a profit on its EVs by the end of the year, making it the only US automaker aside from Tesla to achieve this feat. The company has introduced a new EV model, the Chevrolet Equinox, which sells for less than $30,000 after a federal tax credit and has seen a 60% increase in EV sales in the third quarter, largely due to new models like the Equinox and an electric Chevrolet Blazer. To drive down sticker prices and increase profit margins, G.M. invested over $4 billion in EV production, including retooling a plant in Spring Hill, Tennessee, and building a large battery factory nearby. The company's latest EVs can travel over 300 miles on a charge, and EVs now account for 9% of the new car market. Despite Tesla selling five times as many EVs as G.M., analysts believe that G.M.'s main competition is other established automakers like Ford and Hyundai, and that the company's goal is to beat them in the market rather than Tesla.

Chinese EV manufacturer dominates with low-cost hybrid: China's top carmaker, BYD, has been dominating foreign rivals in the Chinese market with its affordable plug-in hybrid vehicles, such as the Qin L, which starts at around $14,100. BYD posted its fourth straight month of record global sales in September, with 419,430 vehicles sold, and has become the number one carmaker by sales in China, surpassing Volkswagen. The company's success can be attributed to its focus on making fully electric vehicles and plug-in hybrids, which accounted for 53% of the Chinese market in September. BYD's in-house production of batteries and chips has helped lower costs, making it one of the few profitable EV makers in China with a 24% increase in net profit in the first half of the year. 

Leader of SC Johnson works to tackle plastic waste: According to the United Nations Environment Program, nearly 40% of the world's plastics are used in packaging, with 85% ending up in landfills. Fisk Johnson, the CEO of SC Johnson, has been actively working to address the plastic waste crisis. He went scuba diving to witness the issue firsthand, funded research on the health impacts of microplastics, and advocated for regulations on consumer-goods companies to recycle plastic waste. As the fifth-generation leader of SC Johnson, a major manufacturer of plastic-packaged products, Johnson acknowledges the paradox of plastic being both a useful material and a significant pollutant. Under Fisk Johnson's leadership, the company has introduced sustainable packaging options, such as Windex bottles made from recovered coastal plastic and alternatives like silicone and compostable Ziploc bags. Johnson argues that regulations and fees on companies using plastics are necessary to level the playing field and allow companies like SC Johnson to remain competitive while making environmentally friendly changes.

Forests move from carbon sink to source: A new study has revealed that global carbon emissions from forest fires have increased by more than 60% over the past two decades, posing a significant risk in the fight against climate change. The study, published in Science, used machine learning to categorize the world's forest ecosystems into 12 categories and found that burning boreal forests, primarily in Canada and Siberia, are the largest contributors to carbon emissions from forest fires. Forest fires' increased frequency and severity also threaten forest resilience, leading to higher tree mortality and slowing down a forest's capacity to rebound. Last year, wildfires in the boreal forests of Canada produced more carbon emissions than the burning of fossil fuels in all but the three largest polluters: China, India, and the United States.

The Philippines eyes the potential for scaling green investments: Philippines President Ferdinand Marcos Jr. emphasized the potential of the nation's green bond market to expand further, particularly in sectors such as renewable energy, green buildings, and sustainable agriculture. President Marcos also highlighted the need for investments in blue bonds to protect coastal communities in the Philippines, which is hit by an average of 20 typhoons yearly. Despite the potential, the Philippines has issued a relatively small amount of green bonds, totaling $3.1 billion over the past six years, compared to the global total of over $580 billion issued this year.