Fourth Quarter 2019

In Western’s 2012 Q2 letter we discussed a few historic natural disasters (notably, the 1900 Galveston hurricane) that acted as “black swan” events to alter the course of history around their geographic location. One question posed in the letter revolved around whether the 2011 Fukushima nuclear reactor meltdown in Japan – precipitated by a historically devastating earthquake and the resulting tsunami – would have long-term ramifications across the global power generation industry. Only a year out from the disaster, the extent of long-term damage to the global psyche regarding nuclear power was not yet knowable. Today, almost nine years later, the answer is very clear. Short of some unknown catalyst occurring in the future and changing the current arc of history yet again, nuclear power generation is not long for this world.

While the 2011 meltdown of several reactors within the Fukushima Daiichi Nuclear Power Plant might turn out to represent the final nail in the coffin for atomic energy’s role within our power grid, the far more important black eye for nuclear power occurred in 1986. Over the course of roughly 90 minutes in the middle of the night on April 26, reactor No. 4 at the Chernobyl Nuclear Power Plant near Pripyat in the former Soviet Union (today’s northern Ukraine) went from producing stable power to exploding in an uncontrolled blast that would prove to be the worst nuclear accident in history. The details surrounding Chernobyl’s disaster make for a fascinating story, and HBO’s recent documentary series Chernobyl is a realistic retelling of the hours and days and years surrounding the event. Suffice it to say that natural disaster was not involved. Design flaws and an escalating series of human errors sealed Chernobyl’s fate that night.

The first nuclear power plant to be connected to a power grid opened in the Soviet Union in 1954. Sixty-five years later there are about 450 reactors operating around the world. Not coincidentally, the construction and startup of nuclear facilities peaked in 1986, the same year Chernobyl blew up, and has been in steep decline since. Due to the dearth of new facilities coming on line, almost two thirds of the world’s reactors are now over 30 years old. Since it is generally accepted that the useful life of a nuclear facility is about 60 years, the world’s total supply of nuclear reactors should only drop over time.

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