From Shipyards to Scale: A Conversation with Jake Jurewicz, CEO and Co-Founder of Blue Energy

[Music] Greetings. I'm Dan Ponteman and welcome to our newest episode of "Atomically Speaking." Before we dive into our podcast, I want to say a quick word about the nuclear energy and national security coalition or Nensk where I serve as co-chair alongside my friend and esteemed colleague Admiral Rich Mies. Nensk is a bipartisan coalition that brings together former government officials and experts to discuss the relationship between nuclear energy and national security. If you want to learn more about Nensk's work, you can visit our website at nensc.org. You can also follow Nensk on LinkedIn where we share updates, commentary and upcoming opportunities to engage. For anyone interested in the intersection of nuclear energy, security and geopolitics, I'd really encourage you to check us out. Today we are visiting with Jake Jarowitz, co-founder and CEO of Blue Energy, where he's working to deliver the world's first project-financeable nuclear power plants using modular construction and gas to nuclear conversion. He's spent over a decade across energy, climate and infrastructure, including in leadership roles at Exxlon and in climate tech. He studied nuclear science and physics at MIT. Jake, it's great to have you. Thanks Dan, but I appreciate the time. It's always interesting when we find Brainiacs like you, who went to MIT and so forth to hear a little bit about your journey. So when you were building blocks to do into it that you'd be interested in science when you've got to be a grownup or how did that all happen? I was definitely that funny kid and first and second grade who knew they wanted to be an engineer at a really young age. I distinctly remember in third grade when they would take all the whole class to go to the library and pick out a book to read. I was willing to always pretty much exclusively pick out the books that were just big cross-sectional illustrations of power plants and oil oregs, just big mechanical systems. So yeah, I guess that stuck. My father's an architect so I grew up around construction. I think it was just sort of in my DNA. I used to love those illustrations too. They're their whole books full of blown apart submarine, the power plants fascinating. That's great. And Blue Energy, once the name, once the concept, why did you found it? Yeah, so to kind of give the whole story that kind of explains the arc of why Blue Energy because we're a bit of a unique company. So I grew up in the construction industry. As I said, I used to work for my father as a construction grasp and grown up. And then did my new clenching during a physics degrees at MIT. Then two years in fusion research and development with the team that later became Commonwealth Fusion Systems. And then did my thesis work on this concept of shipyard manufacturing applied to nuclear fission? Basically looking at the best practices in North Sea, offshore oil and gas platform structures and manufacturing and seeing if they could be applied to the 181,000 and some of the other lightwater actors that were coming out studying the Vogue Project while it was being built, Vogue 3 and 4. And then joined X-Alion Corporation spent six years in the corporate strategy team at X-Alion, working on all things early stage energy technology development, sparring the investment, did a lot in batteries, hydrogen, advanced nuclear, accident tolerant fuels, CCUS grid-edge technologies with transmission of distribution companies. But got to spend a lot of time understanding the situation with the current nuclear fleet, how to what the operating costs were, what the financial model and economics were, had the privilege of working on looking at some of the new nuclear opportunities really early on with some of the Gen 4 reactors and some of the new SMRs that were coming out. And then when we split X-Alion and constellation apart, I left and started a development company that did behind the meter load development in Texas that turned into a data center project with the Kursou team. Got to know Kursou really well. And at the same time joined a startup out of the UK, mostly as an excuse to move my family over to the UK and learn about the European energy sector after spending so much time in the US, I moved just in time for Russia to invade Ukraine and the energy crisis kicked off across Europe. And as an American from the Midwest, to customs below, electricity and gas prices and then living in Northern Britain and watching my gas bill essentially go above $40 per MmbQ. Wow. And just seeing 40% of the UK going to energy poverty, I thought, this is a very singular moment in time. Europe is going to make a big shift to our energy security, the world is going to rethink what energy sovereignty means. This is before Jack TPP came out. A lot of people forget. And so I was living in Edinburgh. There happens to be a nuclear shipyard 20 minutes outside the city that fabricates for the US Navy and the Royal Navy for the nuclear subs that also happen to have startup incubator. And I thought this is very serendipitous and kind of revisited this old research project, MIT and thought, all right, we had the talent basis here. There's never been more political will to revisit nuclear. There's never been more economic demand for it. So we found it blue energy to revisit this concept of how do we pre-fabricate nuclear plants using existing oil and gas, fab yards and shipyards. And this could build a nuclear plant the way we're now seeing LNG plants get built, offshore wind, offshore oil and gas. This is what frustrated me when I was at Excellent was there were so many companies focused on designing a better Maustrap, a better reactor, which is exciting as engineers. It's compelling. It's easy to get excited about a better Maustrap. But there wasn't anybody focused on what was the core issue that was preventing our M&A team and our corporate development team or our finance team from actually moving forward on the nuclear, which was how do you address cost over a run risk and schedule risk. How do you control costs and schedule in such a way that you could attract financing building a nuclear. That was the problem we found a good energy to solve. Okay, well that is a compelling premise because I think many of us in this space are focused on execution. There's a lot of talk about enough talk and now we need action and we've been challenged. I was in a conversation just this morning when some of us is nobody talks about execution risk on an LNG plan. So we this industry has got to get to that place. So what is the approach and strategy of will energy to actually solve this problem? Yeah, so I always like to approach problems this way and say what can we borrow what can we learn from adjacent energy sectors? Where has this worked well? LNG is a really good example of this but the other side is offshore land, oil and gas. What are the power plants we do get built that we finance all the time? What do they have in common? When solar natural gas, they all are roughly basically they're all prefabricated in a factory they're brought to a site and bolted to the ground. There's when you look at the contracting structures, there's a lot less on site work and there's a lot less therefore on site risk and uncertainty on the costs of building a project. I think LNG is the best example that I've seen. So the way you've seen recent LNG projects you've built, they've actually designed plants, they've architected them in such a way that they can prefabricate entire functional blocks of the plant and what I mean by that is they're not just prefabricating structural steel which is what we saw with Voguele 3 and 4. They're prefabricating 2,000 time mega blocks that have full mechanical, plumbing systems installed. They are pre-commissioning them and testing them off site before they even ship them to the site and they're barging them to the site, sometimes over-hotion and rolling them off on these things called SPMTs which are basically big industrial robotic roomboats that can lift arbitrarily heavy things. They're used to move things around in shipyards and fab yards and they're able to stitch them together, almost like a formula one team will come and like change the wheel on a car. It really reduces the amount of on-site construction work. You still have to do earth moving, you can soak it with some foundations and there's on-site bolts and integration that's to be done. They've moved 70 to 8% of the capex off-site into a controlled environment, a more factory-like environment where they can control labor costs, steel costs, labor productivity, they can invest in automated fabrication, welding, they can set up projects. It's a factory environment. That is what we're missing in nuclear. Right now we are still so reliant on on-site in the field manual work that is prone to risk, prone to cost overrun. Well this is fascinating because I've actually seen both in reality and in video exactly where you described me and these things are in the LMG site. It's enormous. And I don't know hundreds of miles of piping and the wiring and then it's just like a giant Lego thing which it's actually amazing that we have moving equipment big enough to move this massive things that they've purchased. But how then does this work? So they are now according to the nuclear energy agency on the order of 120 small reaction designs and of course are going to have the fleet of 8000 and so forth. So how does blue energy plug into this? Do you say this is my model and I assessed the following 17. reactors could be susceptible to this approach and then you try to hire them or they get them to hire you as a consultant or what is the model? Yeah, so we looked also to the LNG sector and like what is the business model? Who are the companies playing in the space? And there's a role for the OEMs if you just describe. There's a lot of new OEMs that are popped up who are designing new reactors. But then there's a dismissing piece of the developer and you see you need a developer because the developer is the entity that can take the risk on going and finding land, getting the permits, getting the off-take, controlling the design engineering execution, then going out and building out the project. You see that all the time in wind and solar, it's a very cookie cutter. But in the LNG case, you see companies that are much more vertically integrated where they will go and find the land get the off-take and then they take a lot more ownership of some of the design in the engineering, specifically for the construction execution. And we think that's what you need in nuclear. Yes, we need developers. It's necessary, but it's insufficient. You need a developer that takes a much more vertically integrated approach to owning the responsibility of the construction execution in such a way that you can move more of the contracts into a fixed price environment such that you can attract the financing and move it forward. So this is what Polinergy does. I call us, we're a technology-enabled developer. We play the role of a developer, but we take on a lot more ownership of the design engineering, construction execution, the regulatory approvals necessary within our state execute on this. So we work with OEMs. We went and deloganced on number of the reactor vendors you mentioned, downselected amongst the parties that had both the technical characteristics and the commercial characteristics necessary to enable something to be project financed. We have downselected to a small number of parties and we have a primary partner that we're moving forward with. That will be our OEM partner, who is also familiar with this model of what the relationship looks like between the developer and the OEM. And then we are going out and completing out the detailed engineering design for these sites, getting the off-take and financing the project. Okay. So this is, you're going to downselect to one partner. To move forward to submit a construction permit application, you've got to downselect to one partner. And then to own the amount of risk that you're describing, don't you need extensive access to their IP, their proprietary information and how does that work? That's right. Yeah. Signs of NDA with you or something and then transmit the information along with the risk. Yeah. So a lot of what we're doing is reactor agnostic. So we are moving forward with one partner for projects and we are seeking compliant and make long-term relationships with key partners, but we'll maintain relationships with a few reactor vendors that are compatible with this approach. But that's for exactly right. In order to move through the nuclear regulatory commission process, you do need to have access to all that proprietary information. The OEM owns their intellectual property. We are essentially a customer of theirs. We're purchasing their product. And with that, we get the IP license. We have our own intellectual property that we add to that to deliver the product that is the power plant, a delivered project. But how can you afford to own the risk you're a startup? Yeah. Presently you don't have a big balance sheet and so forth. Right. How can you counter-party look to you to absorb the risk if you're a startup without the classic utility scale balance sheet? Yeah, again, this was where we were really inspired by what would have happened in the LNG space. So traditionally people assume, oh, you just need a company within a enormous balance sheet who people would trust as the buyer of these large expensive products called nuclear reactors. But let's actually look at the landscape right now. The nuclear industry is a little bit in a gridlock because you have regulated utilities who can rate-based nuclear plants and therefore can borrow a lot of money and investment grade. But they have a limited ability to do that particularly after how VC summer went. Now, Vogo went. There's a lot of cost over unrest. There's a lot of risk that they don't want to put onto the rate there. There's a lot of political pressure at the state level about doing that. So they can't take infinite risk and put infinite risk onto the rate there. Having worked for Axelon for a team to utility, I understand just how much political pressure there is, they have a limit on that. Then you have the IPPs. There's a company's also with big balance sheets, but their shareholders also don't have the risk appetite to take cost over unrest on development. A lot of them don't even do development. The ones that operate a lot of nuclear plants, their shareholders would have a lot of concern with them taking on the cost risk of putting in an equity into the development of a nuclear project that didn't have some sort of cost over unrest. So the IPPs. Independent politicians. Yeah, sorry. Independent power producers, the deregulated power companies and the regulate power companies are stuck. Then everyone says, "All right, why doesn't the government do it?" Well, the government also has a limit on what they're willing to do. It's a matter of policy and what the administration is willing to do. But they have a unique capability because they're at the biggest balance sheet in the world. But they have their own taxpayer limitations. The government doesn't want to take winners. This has been a long story for multiple administrations. What is the limit of what DOE or what fellow government is willing to do to take the risk on building a big, expensive piece of infrastructure? So there's stuck. Then everyone turns to the hyper scalars and says, "Oh, these are the biggest companies in the world, multi-trillion dollar companies. Why don't they take the risk?" They don't have an infinite willingness to pay for power. They have to run competitive businesses. They are not willing to take infinite risk and say, "I will sign a blank check on whatever the price of power is for this nuclear plant." They have a limit. They have to pay a lot for power, but not an infinite amount. So then who solves this problem? Exactly. And this is where we're able to borrow from the LNG space on an analogous example of how this was solved. So despite the fact that we are a startup who does not have a big balance sheet, the way that we solve this problem is we are allocating the risk on the build to the parties who are in the best position to take it. We need an off-take agreement at a fixed price for a power purchase agreement, say, 15 or 20 years with one of those hyper scalars and investment grade entity. That's check number one. Then what we need to do is design the plant architecture and the construction execution plan, like an LNG plan, which means that we are going to design it to be fully prefabricated off-site using these existing oil and gas fabrics and shipyards who build these LNG plants into these big, large, 2,000 ton super modules. With each of those modules, instead of, let's call it, it's five big Lego pieces that might make up the plant. As opposed to the 10,000 Lego pieces that might make up a nuclear plant today with the traditional build approach. You can break it into just five big Lego pieces. Each one, you can get a fixed price contract on, or contract with a lot more cost protection on it because it's being built in a fab yard by a company that has a big balance sheet that is willing to say, "I will stand behind cost and schedule because I already have labor on site. I know my labor productivity. I'm constantly buying steel. I have a roof over my head. It's a factory-like environment. I have all the cranes and equipment. But I'm not taking risk on labor procurement or equipment procurement. Instead, I have a fixed base of cap-ex at these fab yards and shipyards. And I'm trying to get the highest utilization factor out of them, which is why they regularly will assign fixed price contract structures for what can be built in their yard. Once it leaves the yard, then it's someone else's problem. So you can get fixed price and guarantees on that big chunk of the plant. You can stitch together, say, five of these big chunks of the plant together, each with its own contract like this, such that there's very little daylight in between those contracts. You bring, you barge all those modules to the site. You take title to them when they show up at the site. And then what remains is the earth moving and stitching things together. There's still a little bit of work that has to be done, but it's much smaller and as a percentage of the total cap-ex. So even if you don't put a fixed price on that, you can go to the bank and say, "Hey, I've got 70 to 80 percent of the cap-ex of this project is on some form of fixed price contract." Yes, the last 20 percent might be cost plus with the EPC, but you can control that with putting enough contingency in. So you go and you create an SPV, you bring in project equity from a big infrastructure fund, you get a lot of, you are able to debt finance a lot of those fixed price contracts, you have to structure all the guarantees in such a way that everybody feels comfortable about having everything interfaces with one another, but you can project finance. That's project finance. That is actually how some LNG terminals got built. How could you pass one with built this way? All right, let me just try to simplify this and see if I've got it. So just to soon take your example, you got five humongous chunks. The OEMs of those chunks would provide a guarantee and then for the stitching together, which, stitching together, it's one thing when it's a voice-cutting uniform, it's another thing that's good power plant, right? So it's still significant, but with the backstopping of 80% with big balance sheet OEMs. You could project finance the last 20% and the guarantee and the backstop is in the project itself You were able to project finance the whole project so that the trick is so in LNG Some people call this its synthetic EPC in off-for-wind. It's called a multi-contracting approach It's very analogous and off-for-wind. You know a few big Lego pieces coming together the what's important To the debt community The banks who are going to debt finance this is confidence in The nature of those contracts the fixed price nature the guarantees the warranties behind them on the schedule and Anything like backed by liquidated damages. I won't say that we have all this all today I'm saying this is a playbook that we've seen work well in the LNG space that we are confident Can be applied to slow modular actor space which requires being very thoughtful about How you organize those contracts those suppliers the construction logistics which flows all the way down Even how you make decisions about the interface points so you can stitch things together Which does affect ask the detail design of the plant and consequently also affects the regulatory analysis process So it's all integrated. It's inextricably linked in the case of nuclear You have to be thoughtful on nuclear regulations. You could be thought upon constructing execution It has to be done in a context of The safety analysis report for the particular reactor from the OEM and it's to be done in the context of the site that you choose So you can't actually barge these things in and execute a construction process in this way If you do all those things right as has been done in the LNG case before You can project finances. So yes, you can attract significant debt and you can attract significant project equity that is all Recourse to the project. Okay, and Jake how long have you been at this when would you Energy created we were founded just under three years ago. Okay, the reason I ask is A lot of these OEMs who are designing your act have been at it for quite a while and it sounds to me like it would be at least useful if not imperative that there's a back and forth In which you're providing your insights on how the modularization that you're describing to me works for them But they've already been working on this so either they were going to have to retrofit how they're doing things Or you're going to have to be early enough in their glide paths that there's some interactive dialogue in which they can optimize their design and deployment yep schedule with your Philosophy so help us understand how that dynamic does it mean you have to sort of Find among these 120 designs, you know the three that happened to have stumbled into something compatible with your approach or How do we think about that? Yeah, we we definitely had to rule out some designs because they were just two from a technical standpoint There were there would be too hard Three-tab and margin in this particular manner So that did eliminate some We had to limit some because they simply if we're going to follow this Project financing strategy we need an OEM partner who does have a balance sheet who can stand behind guarantees on fast, you know Everything all the ingredients to maintain a capacity factor knowing fuel costs knowing operations of maintenance ensuring steam quality and steam supply But yes, yes, there have been a lot reactor vendors who have been at this a while But only in the last three years have we seen the market and the demand pull materialize more nuclear in the way that it has today We've never seen this much demand pull. Yeah, a Lot of those OEMs even though they've done a lot of design You know most of their design focus is on the reactor equipment safety system a lot of them are still spending time thinking through the detailed design How do you actually execute the balance plant the civil structure that all this resides in? How does the steel the reinforced concrete the steel composite structure interface with one another interface with the earth? Interpreter you know how much excavation has to happen? What does that mean the context of size and the grade one requirements with the NRC all that actually is still being figured out Even for the more mature designs that's a place where we're able to plug in think at a very timely point right now. Okay, so You got for the sake of argument five big chunks. So it's not five different OEMs. It's probably right Yeah, because I'm just using an illustrative example. Okay, so let's let's pivot this is a fascinating. Let's pivot to scale and Speed this is something we're all in our industry talking about constantly And it's not just AI the vertigleness increase in electricity demand a lot of its AI But a lot of its air conditioning and emerging markets and so on so presumably Case one you got to demonstrate success on case one. Yep How does blue energy how do you Jay think about the model and how does the scale so once you do this once? Yep how do we scale and What would you in the best of all possible worlds? assess the upside potential of this model to deliver how much power on what kind of time? Schedule yeah, great question This this also went into the thinking and the founding of the company the business strategy So you're gonna start a company everything is it's all about how you get the first one done And even when you talk to other countries who are interested in the equipment power they will say we'd love the second one Everybody wants to be in line for the second very few parties want to be in line for the first The data centers and hyperscales right now represent an excellent each head market to be that first customer because they need the power They have their own strategic need to diversify their energy mix in their portfolios They need to think about fuel mixed diversity especially in the context of taking a lot of gas price risk and a lot of that So there's a there's a there's an excellent incentivized customer with you know AAA rating great off-taker The service at to help get that first one over the line Once we get that first one over the line and we can demonstrate to the world This is the first time that the world is ever project financed a nuclear plant We didn't rely on ratepayers. We didn't rely on taxpayers to backstop all the risk We were able to do this purely with commercial finance the way that we do win solar natural gas for the last 20 years That is something that can scale it very quickly because that can unlock the 300 plus billion dollars in drytoward that's out there and constantly being raised by infrastructure funds around the world It also means that you can deploy capital into emerging markets with the right project financing partners because That is a you've solved the core risk of how do you build it on time and deliver it? Then you're just thinking about right who's my counterpart? E risk and development risk and that region which is something that we've solved before for other time our generation of element So we scouted out different countries to think about which would be the best place to start and within those countries We scouted out you know what would be the best specific sub region to start in so we landed on the US because US has a mature regulatory environment and Particularly in places like Texas you have a lot of political appetite It's a very business friendly environment. It's very permitting friendly environments and interconnection friendly environment There's a lot of data centers getting built in Texas, but served as an excellent place for us to start There are other states as well that I think are in you know quickly building up their Load and an and profile for nuclear, but we want to start somewhere where we can move it relatively quickly because There's a lot we know with Thinking about things like Nimbus and other permitting requirements. We want to be able to boost through that as best we could because it was about Demonstrating quickly. This is a new method of how we build and how we finance new nuclear once we have a demonstrated That's a huge view risker for taking it to other markets in the US other markets around the world. This becomes the world's first fully deliverable turnkey project financeable firm generation asset that can be sold to US allies You know countries in Eastern Europe countries in Southeast Asia and we aren't Waiting to build a new factory. We're using the existing Fab yards and shipyards which there's over 200 around the world that have been serving the oil and gas industry serving even some of parts of the nuclear Navy We can tap into that supply chain to build this very quickly and scale it up very quickly Building things in parallel. So you know, how can we do a lot of this is thinking about how do you parallelize this is both Building and serial there will be some choke points I think the new furniture is going to deal with that I'm going to deal with which is reactor pressure vessel forges There's a limited capacity and on heavy forges at the moment There's going to be some limitations on fuel supply until we're able to scale that up That's all I just a matter of investment and scaling it up It'll take a few years and then we'll be in a position to really rapidly deploy new nuclear capacity All over the world. I'm going to press you on this because we're on that at a time in the best case if your dreams were fully realized and Understanding that once you demonstrate this there might be one or two others who are going to come into the space and try to replicate your success presumably, right? how fast can the US build more reactors and Can we reach for example the quadrupling of installed nuclear capacity that president has called for by 2050? I think that's very cheap I think like the saying a lot of people overestimate what can be done in two or five years, but we underestimate what can be done in ten And the main constraint on nuclear today is Demonstrating to the financial community and All the other stakeholders in supply chain partners involved that there is a project financial way to build a new career capacity. Once you're able to do that, you can create liquidity and fundability in the financial markets for new career equipment. It makes it much easier to finance a long lead equipment to place order books on all the forages and all the big factors that need to build these things. They can get the price signal they need to expand capacity. The main constraint in the short term will be demonstrating the first one. The D-Riskit, giving that to COD, the commercial operation date, to show the world. A, we just built a plant in half the time the market thought was possible. And we did it with 70 to 80 percent debt financing that they didn't think was possible. Then, the next constraint will be forages. It'll be how can we build enough reactor pressure vessels feed this? Because there are only a few forages around the world right now. Next to feed the market. That includes light water reactors as well as some genfort reactors. They're all going at the same avatators and forages. Then, I think you need to see those order books show up. When you go to those forages, they need about three years to scale up their capacity. That will require additional investment. I think that's a role that the federal government can play to help frontrun some of that manufacturing capacity investment, especially here in the US. And then, we're able to really scale this up because the majority of the plant and the majority of what costs so much in a nuclear plant isn't the reactor pressure vessel. It's all the structural steel and the civil work that makes up the balance of plant, the reactor building, the civil structure that can tame a vessel. That's the stuff that we can build much faster and much lower costs using these fabulous insurance. We've been talking with Jake Gerowitz, co-founder and CEO Blue Energy, fascinating conversation. Appropriately, we are at zero week where downstairs they have the innovation agora. And I'm sure Jake is going to be sharing his exciting business model down there as well. Jake, we always end with the same question we give people a chance to put themselves in the shoes of a national security counsel staffer advising the national security advisor. And if you were in that seat, this is after all the coalition for nuclear energy and national security, what would be the one message you would want the national security advisor to take away from his meeting with you? There is nothing more consequential for national security and for global peace, I think, really, than the West having an exportable nuclear power product that we can deliver turnkey that provides firm power, fuel security, energy sovereignty and energy abundance at the level that's needed by every economy, not just for AI, but for air conditioning in Southeast Asia. Because if we don't do that as the West, Russian and China are going to do it. And if Russian China starts selling reactors to their neighbors, it will change the geopolitical landscape. Well said, and sobering note, but an appropriate note on which to end because we, as the poet John Dunn said, no man is an island entire of himself. And we are not in a vacuum. It's a competitive landscape out there and it would be well to have people understand it as you just so eloquently described. Thank you, Jake. That was fascinating conversation and good luck. Thank you. Appreciate it. Thank you.