Chief Executive Officer
Power Production Economics in Estonia (0:45)
0:45-11:27 (Kalev Kallemets provides an inside look at Estonia’s political climate and how the country aims to tackle energy challenges)
Q: What’s your background? I know you were in parliament at some point, you’re Estonian, but where did your initial interests begin?
A: Kalev Kallemets grew up in Estonia in a family who valued social responsibility. His father was the manager of a Soviet agriculture production unit and Kalev witnessed firsthand how ineffective Soviet thinking was. He developed a sense of social responsibility for people and his nation, believing that those who have the ability to learn new technologies and discover new solutions should deploy them. Kalev is proud of Estonia’s current start-up culture. He uses Estonia’s electronic personal identification system as an example of the country’s innovation, sharing how he registered his son’s name in just 30 minutes and signed him up for kindergarten instantly.
Kalev’s interest in politics started in high school after reading Milton Friedman’s Capitalism and Freedom. He started studying economics at the university level, even spending some time at the Mises Institute in Alabama and translating some books by the Austro-British economist Friedrich Hayek. Those studies, and his involvement in the Estonian Reform Party’s Youth Council, eventually made him a prime candidate for a seat in Estonian parliament sitting on the economics committee. In that role, he voted to legalize same sex partnerships in Estonia, a close vote that he is proud of. Kalev also discusses the growing trend of fear or rejection of others in democratic countries today.
Kalev did his academic thesis on government-owned utilities in Estonia. In 2008, an agreement was made by the prime ministers of Lithuania, Latvia, and Estonia to explore a nuclear new build project in Lithuania to replace the RBMK reactors in Ignalina, Lithuania that the European Commission had recently deemed unsafe. Kalev investigated how nuclear energy makes economic sense and found that it made perfect sense. The old reactors operating in Western Europe were fundamentally money making machines. He developed a good relationship with Sandor Liive, who later became the co-founder of Kalev’s start-up Fermi Energia.
Kalev began promoting the idea of a nuclear power plant association, like an NGO, which was fairly well accepted by the public. There was some political in-fighting in Lithuania at the same time as the Fukushima nuclear disaster and some expensive nuclear new builds elsewhere in Europe caused Eesti Energia to invest in a new oil shale furnace instead. With rising CO2 prices in Europe, that this solution is uneconomical. In 2009, Kalev took a nuclear economics course in Munich that inspired him to enroll in PhD studies in energy economics in Estonia, specifically oil shale economics. Last year, 85% of the power generation in Estonia was from oil shale.
Interconnected Energy Markets in the Baltic States (11:27)
11:27-24:09 (How the Baltic States share energy infrastructure and how that impacts power generation planning and development)
Q: What is the relationship of the Baltic countries from an infrastructure perspective?
A: Lithuania, Latvia and Estonia are currently inseparable and currently connected to Northwestern Russian and Belarussian power grid systems. By December 31, 2025, these three countries will be desynchronized from those systems and connected to the continential European power grid system. Because these countries share a common infrastructure, they also share a common energy market. While there are separate pricing areas, the prices across all Baltic markets have been very similar over recent years. With more interconnections being built between each of the countries, this trend will continue. Estonia also has more than 100 megawatts capability of physical cables connecting to Finland, but the connections are insufficient to cover the full energy consumption of the country. Despite the appearance of support for nuclear power, Finland is actually in power deficit until even as far out as 2040 because they will completely phase out coal like many other Western European countries. There is currently a binding target of 80% reduction of CO2 emissions by 2050 in Europe and a likelihood that the EU will target complete climate neutrality from all sources, meaning absolutely no net emissions from any source even beyond the electricity sector, including transportation.
Kalev’s experience also includes working in the private sector for a privately owned oil shale company, as well as serving as the Deputy Director of Geological Survey and developing mineral policy in the Ministry of Economic Affairs. This gave him hands-on experience in working out policy. Last summer, Estonia had discussions of a new nuclear new build project. In preparation for the new project, Sandor Liive, Kalev’s future co-founder at Fermi Energia, sent four people to study nuclear engineering in Stockholm and work with Scandinavian utilities. Together, they discussed NGOs and how to promote nuclear power, but realized that the real need was for megawatts, not policy.
Estonia considered the possibility of developing a business for the deployment of SMRs (Small Modular Reactors), technology which is in the licensing process in the United States and Canada. There is a false assumption that nuclear power requires billions of euros in investment. Kalev likens his work at Fermi Energia to real estate investment and development: highly intellectually challenging and risky, but inexpensive in its early stages. Fermi Energia has six founders: four PhDs, a former CEO of an Estonian utility company, and a groundbreaking physicist. The team realized the need for a clear and formal feasibility study, not for economic purposes, but for governmental policy ones. The feasibility study, which includes input from Estonia’s neighboring countries, will be presented on January 28, 2020 in Tallinn, Estonia.
Transitioning from Oil Shale to Nuclear (24:09)
24:09-35:37 (Why the energy markets are changing across Europe and how it impacts power reliability)
Q: It’s almost as if you’ve discovered that there is a pent-up demand for this and you are about to unlock Pandora’s box of new opportunity.
A: A few cooperating factors have supported nuclear power as a solution to Estonia’s future power problems. CO2 prices have gone from 15 to 27, meaning power generation from oil shale has decreased by 50% in the past year. Of the 6,000 people currently working in oil shale, 900 of those people. This change is raising awareness of climate change and the need for a new source of power. These factors have even influenced environmentalists in Estonia, once vehemently opposed to nuclear power, to rethink their position. He discusses the challenge of using social media and public forums to have rational discussions about nuclear power, instead preferring to share data one-on-one. Due to the success of the oil shale industry, Estonia has been the power generation source for other countries. There are immediate and continuous consequences that come with a lack of reliable power. Industrial leaders have been shareholders in power production even before nuclear power.
Bret and Kalev discuss the importance of speaking to societal values at large, in particular those necessary for successful industry. For example, nuclear power in Finland was supported by Finnish companies and municipalities in order to mitigate the risk of a loss of power. Kalev explains that this public ownership structure for nuclear new builds in Finland may have also reduced the likelihood of backlash and mistrust, even after Fukushima. Kalev views it as his job to bring together a similar coalition of stakeholders for a nuclear new build in Estonia. There will be a reckoning in Europe about how nuclear power is perceived. There are coal phase outs happening in the Netherlands, Germany, Finland, United Kingdom, Belgium and France at the same time that many nuclear power plants are shutting down. The EU is currently gathering national climate and energy plans. Many of the plans promise to develop interconnections to secure energy supplies, but it’s necessary to have capacity behind those interconnections. It’s mathematically impossible for Norway and Sweden to supply all of Europe’s power. Kalev sees it as “highly likely, extremely likely, 100% likely” that there will be blackouts in the European Union in the near future.
Future of SMR Deployment in Europe (35:37)
35:37-44:10 (Kalev defends molten salt reactor technology and explains how deployment of SMRs in Europe will change the energy landscape)
Q: What have you learned that made you think differently about your approach?
A: Fermi Energia started with a keen interest in molten salt reactors, but molten salt reactors are more complicated than current light water reactors in terms of physics and thermo-economical management. Kalev still believes that the development of molten salt reactors is imperative for the future and encourages governments like Canada and the United States to continue supporting molten salt reactor R&D, licensing and testing programs. Kalev highlights the 40-billion euro market for hydrogen that is currently being produced from methane, citing that it has to be all replaced by 2050 with non-fossil energy and arguing that light water reactors aren’t as fit for that need.
Given the challenge of power generation within the European Union, Europe will need to deploy hundreds of SMRs. Kalev will start moderately with just the two 300 MW units planned in Estonia. His innovative business model provides a service to government-owned utility companies, reducing both the site and political risks of nuclear SMR deployment. Power supply must be secured at the same time as moving towards climate neutrality. Strong democracies are needed to move society forward. This vision for the future includes pioneering a business model innovation for hundreds of other companies. Kalev wants Europe, his home, to be successful and believes SMR technology has the potential to embrace private capital driven energy deployment, rather than murky fossil fuel deals that have to be done by politicians or utilities that have to be controlled by government owned companies. Capitalism is the way forward.