Why Does AI Need Small Modular Reactors?


Why aren’t big tech firms willing to gamble their AI data centres on the electricity grid you and I use?

The Labor Party must be in an absolute panic over their energy policy. Renewables are falling apart. And nuclear power is surging around the world instead.

It’s now only a matter of time before Albanese’s biggest legacy is that he stood in the way of clean, cheap and reliable energy. Power that didn’t need impossible energy infrastructure and storage projects.

But Labor won’t be the only ones with egg on their face. Just as Elon Musk has been busy humiliating NASA, big tech has been busy solving the energy transition’s challenges.

And they’re using the DIY approach we predicted in Strategic Intelligence Australia back in April:

Companies hire their own staff. They own their own buildings. They control their own machines. So why don’t they produce their own electricity?

The answer is simple: scale. The bigger the power plant, the cheaper its energy. It’s not economical for a firm to build a power station just to power its own operations.

There are some exceptions, of course, such as big industrial complexes and some mine sites.

But most such examples are still reliant on some sort of grid. And even many isolated industrial sites rely on long distance connections to existing grids. It’s still cheaper than building an independent power plant.

What if this “hub and spoke” style of electricity system is about to change, radically?

I expect large companies, cities and mid-sized towns will have to produce their own electricity in the future.

They need to in order to survive the energy system that is crumbling around them. This would revolutionise the way our electricity grid works.

For decades, a functioning electricity grid was a prerequisite of being a developed country. Sufficient electricity supply was taken for granted in wealthy nations.

Businesses didn’t question whether there would be enough cheap power to run their operations.

This is changing. Carbon emissions are now the priority over providing enough power for the country. At least at the political level.

The result is not surprising. Energy grids around the world are no longer fit for purpose. They experience shortcomings that make industry and a high standard of living uneconomical. The subsidies used to disguise this only transfer the burden elsewhere. And all of this is going to get worse in coming years as the mistakes of net zero are exposed.

The German Court of Auditors recently pointed out that the country’s grid was on course for disaster. The German economic minister’s response was to lose his temper and declare it was already common knowledge and therefore unhelpful. This implicitly means the German government is deliberately and knowingly delivering a dysfunctional power system.

Those who want to secure enough energy for their future need to take action now (instead of lobbying for subsidies or voting differently in elections).

Conveniently, a new option is on the cusp of being available.
One that brings solutions to the challenge of supplying cheap, clean, stable, reliable, controllable electricity inhouse and within reach.

It’s not about a technological revolution. Merely one of adjusting the scale of energy supply to match users’ demand.

In the future, energy consumers will be able to provide their own energy so well that they can remove the middleman of the crumbling energy grid altogether and seize power for themselves.

And one simple tech trend is going to force the issue, whether the experts like it or not.

That tech was of course the combination of small modular reactors (SMRs) and Artificial Intelligence (AI).

AI’s voracious data centres use astronomical amounts of energy. Their rollout has already rewritten official grid projections, upending how much electricity we need to generate.

So, how do data centre companies secure that much power?

Just as we predicted in April, the link between AI data centres and SMRs has begun to play out…

AI fills out the SMR order book

Google recently ordered six or seven SMRs from Kairos Power.

Oracle is planning to use three SMRs to power one of its data centres.

Equinix, a major data centre operator, already paid US$25 million to SMR company Oklo.

Standard Power, another data centre operator, has put in its SMR order too.

Amazon and Microsoft have contracted for power from existing larger nuclear plants.

It’s not just big tech, of course. The Finns are looking to use SMRs to supply heating. And Dow Chemicals for its operations.

At the end of September, the count for SMR orders stood at 200. SMR related stocks are flying. And AI data centres triggered the surge.

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But all this begs a very awkward question: why aren’t big tech firms willing to hook up their AI to the electricity grid you and I use?

Why does AI need its own
parallel power system?

Is AI planning to take over the world? If we can’t pull the plug, it’d stand a better chance…

But then why would other industrial firms and energy users go to the expense and hassle of providing or securing their own SMR power supply too?

What do SMR buyers know about the electricity grid and future availability of power to make them bother with their own private solution?

It must be something extraordinary to suddenly require setting up their own sources of electricity supply, independent from the grid.

Can you think of anything which might make this necessary?

Google explained that nuclear provided “a clean, round-the-clock power source that can help us reliably meet electricity demands.” Which implies what about the regular electricity supply? Is it not going to be clean? Is it not going to be round-the-clock? Will it not meet our electricity demands?

These SMR projects won’t start providing power until the 2030s – when many governments have promised to decarbonise grids anyway. So it can’t be a matter of clean energy, can it?

And large-scale nuclear power projects are booming everywhere…except Australia. They should provide cheaper power than SMRs do. So this isn’t about nuclear, per se. Nor cost…

The answer is of course too painfully obvious to say out loud. But let me put it like this: At least we’ll have AI when the lights go out…

By the way, energy isn’t the only parallel economy developing out there. Whenever governments crack down on something, they only create alternatives. Be it money, free speech, or cigarettes, you always end up with a black market.

And, right now, Australia is facing a pivotal moment — an entirely parallel economy is emerging in our midst. It could revolutionise how we live our day to day lives. Those who prepare have everything to gain. The rest of us could be like data centres without their own SMR — powerless.

Regards,

Nick Hubble Signature

Nick Hubble,
Editor, Strategic Intelligence Australia

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Nick Hubble found us at Fat Tail Investment Research in 2010 after a stint inside Wall Street’s most notorious bank, Goldman Sachs, during the 2008 GFC. That’s where he saw the true nature of the investment banking business. Since then, he’s been the editor of the Daily Reckoning Australia and the UK-based Fortune & Freedom and Gold Stock Fortunes.

He’s delighted to work as Investment Director and Editor for Jim Rickards’ Strategic Intelligence Australia. Here he helps turn Jim’s big-picture views into specific actionable advice and ideas for Australian investors.



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