Charlie Krauss: What the Enron Egg Says About AI’s Nuclear Courtship

It’s Charlie here, muckraker-at-large. I want to thank Yves for inviting me to contribute. My stable has been overflowing with blue-blooded bovine ordure and, given that Lambert will soon be departing for greener pastures, I’m here to provide some ferment to keep Naked Capitalism’s garden growing.

So let’s put on the waders and look at the reincarnation of Enron. Yes, ladies and gentlemen, the self-proclaimed “smartest guys in the room” are back, though fortunately for us, this time as farce rather than tragedy.

I won’t rehash the Enron scandal. Plumb NC’s archives and you’ll find details. Needless to say, it was a monumental grift that exposed how energy-market liberalisation rolled out the red carpet for fraudulent financiers to exploit consumers.

https://x.com/Enron/status/1886842908713660728

The new Enron gag is spinoff from the Gen-Z pranksters behind the Birds Aren’t Real movement. Despite clearly stating in the fine print of Enron’s rebooted website that the project “represents first amendment protected parody and performance art,” the stunt struck a nerve that stunned more than a few mainstream news organisations. The Gray Lady managed to see through the stunt last month but kinda missed the punchline.

The vehicle driving the satire is the so-called Enron Egg. It’s supposedly a retail-sized nuclear reactor dressed up in Jobs-esque couture. The five-minute stage pitch was watched more than 1.8 million times on X and dissected by a nuclear engineer. The joke lands because the tech gobbledygook delivered in the spot is hard to distinguish from the reality around us. Think Jonathan Swift’s A Modest Proposal but written for a Silicon Valley VC set pouring into small, modular reactors (SMRs).

Readers will be aware that the SMR hype-cycle has entered overdrive in recent years, with a string of squillionaires from Sam Altman to Jeff Bezos, Bill Gates and Peter Thiel all flogging investments in various technologies. For the uninitiated, SMRs are designed to produce less than a third of the power output compared with a traditional reactor. Theoretically, they could be deployed more quickly because of standardisation and factory assembly.

The International Atomic Energy Agency has been predicting they are just a decade away from commercialization for at least 20 years. Most recently, there’s been an uptick in attention because some equity traders believe SMRs could close the energy gap separating us from a bright-and-shiny AI future.

Defying the research of shortsellers, companies including NuScale (up 758% in the last 12 months despite just lukewarm commitments to field a first-of-a-kind test sometime in the next decade) and Centrus (a Department of Energy revolving door up 159%) have benefitted from the hype, as has Santa Clara, CA-based Oklo Energy, whose board is led by Sam Altman and until recently included new Secretary of Energy Chris Wright.

The hopium-fueled run up in valuations two industries known for perpetually over-promising and under-delivering. The latest data from the World Bank continues to support Robert Solow’s quip that “you can see the computer age everywhere but in the productivity statistics,” suggesting almost an inverse relationship between economic growth and data-centre concentration. Meanwhile, nuclear projects once forecast to become too cheap to meter, are congenitally over priced and behind schedule in western economies.

I’m not alone in my wariness watching the emerging AI-SMR bromance. Read John Ketchum, the CEO of Nextera Energy, the utility which owns several nuclear plants across the U.S. Here’s what he told investors in a call late last year:

We have been following SMRs for a very long time. We actually advise a couple of Fortune 100 companies on SMRs today. But here’s what we see. We’re very close to the SMR market. We look at them all. We know we do technology reviews around them. We do financial reviews around them. A lot of them are very strained financially. There are only a handful that really have capitalization that could actually carry them through the next several years…we’re just not bullish SMRs. It’s so far out in the future from a viability standpoint at scale. It’s — we’re prioritizing other generation resources at this time. And I think renewables are, as I said in my prepared remarks, are here for the long haul.

Those comments build on a separate Department of Energy estimates that SMRs will be more than 50% more expensive on a per-kilowatt basis than traditional nuclear reactors. To top it off, the International Energy Agency has challenged the assumption that AI-driven data centres will drive power demand and more than air conditioners or desalination plants:

Data centre electricity consumption was estimated in 2022 to be in the range of 240 to 340 TWh, around 1% to 1.3% of total electricity consumption…In the base case, data centres account for less than 10% of total electricity demand growth at the global level, which is roughly on a par with demand growth for desalination, and less than a third of the demand growth for both EVs and space cooling in the buildings sector. Therefore, growth of electricity demand for data centres is projected to be rapid, but the level looks set to remain relatively small in the context of overall global demand growth.

Now, I myself lean pro-nuclear and might even be willing to pay a premium for its clean, 24/7 power. It’s the queen of industry, supporting a royal court of productive economic activity – chemistry, construction, electronics, metallurgy – that any developed nation needs. The strongest argument in favour of perpetuating nuclear power is that we’ll still be needing the skilled labour it demands to administer our legacy atomic complex well into the future.

Nuclear’s biggest problem these days isn’t the long-lasting waste, or Nimbyism or the highly-concentrated and fragile fuel cycle. Increasingly, it’s capitalism itself – particularly the financialized flavour we practice in the west.

It starts with the cost of capital. Whereas China and Russia – the two countries building the most reactors – subsidise financing at roughly 3%, western private equity expectations are around three times higher. Those usurious overnight cost of capital has led to a situation where there’s too little nuclear competition where it’s needed the most (financing) and too much where it is’t needed at all (design).

Take those pesky SMRs. While China and Russia are actually building and deploying a handful of models, Americans and Europeans are waging a paper-engineering war over technological standards. At last count, there are more than 80 designs duking it out for supremacy, none of which has a clear path to commercialisation. It’s quite literally fiddling while Rome burns, with the nuclear industry plucking IP strings while throwing in the towel on climate-change mitigation.

Queue the Enron Egg.

The spoof works precisely because it seems scripted by artificial intelligence. “Uranium zirconium hydride,” “heavy water,” and “high-assay-low-enriched uranium (HALEU)” are all real and theoretically could act as discrete elements in an SMR design – though not together or in the ways described. The words are slopped together like simple code, shibboleths mined from a nuclear safeguards glossary, with the express intent of appealing to high finance. There’s no connective tissue in between.

In an interview a year ago to John Hopkins Magazine, Peter McIndoe, one of the people credited with founding Birds Aren’t Real, explained why the movement began:

Birds Aren’t Real asks us to shift our understanding of how to communicate with people who believe conspiracies by understanding those theories as being more about belonging than belief. It’s less about the truth or what people believe in, but more so what draws them to their beliefs in the first place and what they’re getting out of them… The movement also asks us to consider how to educate people about media literacy. It seems right now that a lot of what we’re doing in that realm is pretty ineffective, especially in middle America, where I’m from. With the rise of AI, it’s even more important.

The Enron Egg is the flip side of the same coin. It’s absurdist performance art that magnifies the irrational beliefs which have become the common currency of American society. Heads: middlebrow theorists enraptured by conspiracy. Tails: coastal elites enthralled by techno-fetishism.

Even the orthodox economists are beginning to ponder the consequences of handing the nuclear kingdom’s keys to Silicon Valley. Here’s John Bates Clark Medal winner Daron Acemoglu predicting the future for the pink paper [Highlights mine]:

The critical state of US institutions became much clearer after Biden’s cynical pardons, sending a signal to millions that his administration’s defence of democracy was a charade. The damage to democracy thus began even before Trump ascended to power the second time…This set the scene for a series of catastrophic governmental failures. With morale gone and key personnel fired, the US state was ill-equipped to deal with emergencies. When new pandemics arrived, the response was haphazard, and unpreparedness cost tens of thousands of lives. The few remaining independent media sources uncovered a glaring and dangerous lack of oversight of critical infrastructure, including nuclear reactors and cyber security…But the real extent of the damage became clear only with the tech meltdown of 2030. Economists and historians have now shown that a lot of this was the outcome of institutional failures and growing concentration in the industry. After Trump lifted all roadblocks ahead of AI acceleration and cryptocurrency speculation, there was initially a boom in the tech sector. But within a few years the industry had become even more consolidated than before, and both insiders and outsiders came to realise that only companies favoured by the administration could survive.

Now, I’m just a humble muckraker, ladies and gentlemen, but there seems to be a rapid accumulation of night soil on the Capitol Grounds. Even former nuclear regulators are beginning to ask What is Going On? It would be a shame if the deepening Silicon Valle-AI nexus got buried. There’ll be more than enough to ferment to keep Naked Capitalism’s gardens green. I’ll be here to help spread it around. Stay tuned.