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Gulf investors should wake up to the attractions of small ‘nukes’

There is no sign of any large-scale investment in small modular reactors

A small modular reactor being completed in China – Gulf investors would do well to take note Luo Yunfei/China News Service/VCG via Reuters Connect
A small modular reactor being completed in China – Gulf investors would do well to take note

Shares in American nuclear companies are going, well, nuclear, the Financial Times reported recently, as US investors sense the potential of a new synergy between the atomic industry and Big Tech.

The likes of Amazon and Google have decided that their long-term strategies for artificial intelligence will need so much electrical power that they have to set up their own small, dedicated power plants near the planned data centres, and are signing deals with US nuclear companies to accomplish that.

Two things stand out from this. One, the big AI companies – officially among the most eco-aware corporations in the world – are unconvinced that renewables such as solar and wind will supply their power needs. They are too variable and there are too many storage problems to be reliable.

Second, the nuclear technology that the tech giants are betting on is not the ill-starred gigantic power plants of the Chernobyl, Fukushima or Three Mile Island variety, but small modular reactors (SMRs).

I’ve never seen one of these things, but from what I read they are a kind of Ikea pack of nuclear kit, manufactured, delivered and assembled in your very own home – or at least your very own data centre.

The stocks that soared last week are not exactly household names – Cameco, Oklo, NuScale, Constellation Energy and BWX Technologies. But they are the potential nuclear unicorns that could bridge an essential gap in the energy transition by helping wean the world off hydrocarbons and onto something less damaging to the environment.

Isn’t this exactly the kind of thing the big investing institutions of the Middle East should be putting their money into?

You would certainly think so, bringing together as they do the sectors of energy and technology that are core drivers of the diversification strategies in the Arabian Gulf, especially in the UAE and Saudi Arabia.

But there is no sign of any large-scale investment by Gulf countries in SMRs. The official line from both the UAE and Saudi Arabia is that they are “aware” of the potential of SMRs and “exploring” the potential, but no commitment as yet.

In two countries sitting on vast reservoirs of oil and gas, maybe this is only to be expected. But it does not fit with the “cutting edge” nature of investments by the future-minded sovereign wealth funds of either country.

The UAE, in particular, has shown an enthusiasm for nuclear on a grand scale. The fourth reactor at Barakah came on-stream earlier this year, and the Korean-built facility is generating 25 percent of the Emirates’ power needs. But there are no firm plans for SMRs beyond MOUs with some technology providers.

In Saudi Arabia, the need is perhaps even more acute. Under the Vision 2030 diversification plan, the kingdom aims to stop burning oil to generate power altogether by 2030, replacing it with a mixture of renewables and natural gas.

It is a worthy and ambitious plan. Saudi Arabia uses an enormous amount of oil in domestic energy production – around one-quarter of its domestic oil consumption goes on power and desalination, Bloomberg has estimated. If it can reduce that figure it will help it meet the 2030 commitment as well as freeing up more oil for export.

SMRs could assist in generating extra power to help meet the target, even if it might take beyond 2030 to fully accomplish it.

Saudi Arabia has nothing against nuclear technology in principle. An international tender has been out for offers for some time, and the kingdom recently inched closer to winning its preferred partner – the US – when it signed protocols with the International Atomic Energy Agency to facilitate the award of its first nuclear contract.

But nothing yet on SMRs, which – smaller, cheaper, less onerous to plan and develop and with lower fuel requirement – could be commenced and made operational far more quickly.

Like US investors, Saudi Arabia and the UAE could find valuable synergies in AI and nuclear.

Both have made AI a big part of their national diversification strategies. Now they need a strategy to power that ambition, while continuing to advance the energy transition.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia and is a media adviser to First Abu Dhabi Bank of the UAE