in

The ‘other’ nuclear energy is a powerful climate solution. Is its time coming?

The Shortlist

Share this email

OUR BEST IDEAS, QUICK AND CURATED | NOVEMBER 4, 2022

View in browser

Edited by Barbara Tierney
Senior Editor, New York

This week, why the case for nuclear fusion is growing stronger. Plus, how a labor shortfall could affect plans to upgrade US infrastructure, and a McKinsey partner and former international sailing champion shares her favorite podcasts.

Illustration of a circular red fusion reaction

Power problems. Nearly one-third of the globe’s CO₂ emissions currently come from power generation. Many governments and utilities are trying to change that, which has helped renewable-power sources such as wind and solar to become cost-efficient and well established. But those zero-carbon alternatives have clear limits—generating electricity when the wind blows or the sun shines, not necessarily when the grid needs it.

No carbon. What if a technological breakthrough in another area could help the power sector decarbonize—and help prevent the worst effects of climate change? The potential exists, in nuclear-fusion energy. In a recent article, senior partner Miklós Dietz and his colleagues discuss how fusion could supply power and provide flexibility for zero-carbon electricity grids . This is different from nuclear fission, which releases energy by splitting atoms. Fusion creates energy by combining atoms, typically hydrogen isotopes. Unlike wind and solar power, nuclear-fusion energy is dispatchable, meaning it does not rely on environmental or other external variables to generate power. The process of producing fusion energy is remarkably clean, creating no carbon emissions or long-lived nuclear waste from spent fuel.

Really hot. Nuclear fusion has long been considered a too-distant clean-energy solution, given the complexities of heating, and containing, plasma to more than 100 million degrees. But recent technological advances have made it worth considering, both by policy makers and investors. Three things have happened. The development of enabling technologies has allowed fusion to break new barriers. There’s been a sea change in the orientation of fusion research programs. And investment in private fusion funding has greatly accelerated.

Clean disruption. Leaders in business, financial management, and government can start to plan for opportunities by first understanding how the development of a working fusion machine could disrupt energy investments. The potential upside could be great enough to make it worthwhile to evaluate whether fusion should have a place in corporate or national energy plans. A fusion-heavy grid would imply major shifts in investment over the next 30 years, including a partial shift away from wind and solar with battery storage and toward fusion machines. Such a grid will also require policy changes for the licensing of facilities.

Another contender. The vision in this area doesn’t need to be confined to scientific breakthroughs alone. It will also take support by government, and investors, to provide incentives and investments that will allow an industry to grow. That, by the way, is a path being traveled by another clean-energy contender, hydrogen. More than 680 large-scale hydrogen projects have been announced globally, amounting to $240 billion in direct investments, which could abate about 20 percent of human-driven emissions by 2050 if the world remains on its current global-warming trajectory.

Off the charts

Sticking with the P/E pack

Weighted average and median price-to-earnings (P/E) ratios rarely diverge significantly—and when they do, the gap soon closes. For a broad range of companies, median P/Es were relatively stable not only during 1997–2002 (the run-up of dot-com stocks) and 2020–22 (the heart of the COVID-19 crisis) but also during the nearly two decades in between. In fact, since the late 1980s, median P/E multiples have rarely moved outside a tight band of between 15 and 17 times earnings. The arithmetic mean from 1990 through June 2002 sits almost precisely in the middle: 15.9.

Chart of stock price multiples from January 1990 to June 2022

Check out our chart of the day here.

More on McKinsey.com

Will a labor crunch derail plans to upgrade US infrastructure? | A widening labor shortfall in the US construction sector extends far beyond jobsites. Because it varies by location, it demands tailored solutions.

How machine learning is helping the fight against money laundering | Money laundering has been an ongoing challenge for compliance, monitoring, and risk organizations, with the bad guys seemingly always a step ahead. Recent enhancements in machine learning are helping to change that.

Building greater resilience in vaccine manufacturing | The COVID-19 pandemic has highlighted the need for resilience in vaccine manufacturing. Five considerations can help national public-health leaders plan.

INTERVIEW

WHAT WE’RE LISTENING TO

Helen Mayhew

Helen Mayhew, a McKinsey partner based in Sydney and a leader of QuantumBlack, AI by McKinsey, helps organizations use advanced analytics to create business value. Passionate about sailing, Helen is a former world champion and was a training partner to team Great Britain at the Olympics. She fell in love with Australia after sailing the famed Sydney to Hobart yacht race.

I have always loved podcasts, but life during the pandemic brought my enjoyment to a whole new level. During lockdown, first in London and then in Sydney, podcasts became a portal to the outside world—and also a form of escapism. Now that the world is (mostly) back to normal, I still love to learn about how technology is changing the world or to dive into people’s life stories. Here are a few of my favorites:

One of the most exciting things about working in tech is the speed of change—the constant evolution and acceleration of what is possible. Azeem Azhar’s Exponential View dives fearlessly into the big conversation about how technology is affecting business and society, trying to separate hype from reality. He discusses hydrogen’s role in decarbonization and asks whether collective intelligence beats the market. The podcast is taking a hiatus at the moment, but there are more than 160 produced episodes to choose from.

There is a fantastic complementarity between the Masters of Scale podcast, which explores the ideas behind some of Big Tech’s most notable success stories, and How to Fail with Elizabeth Day, which focuses on the exact opposite: what failure teaches people. One of my favorite episodes was with Brené Brown, who speaks so powerfully about the positive impact of leading with humility and vulnerability. Her own podcast, Brené Brown’s Dare to Lead, inspired by her book of the same name, is also consistently thought-provoking. A recent two-part episode with Adam Grant and Simon Sinek is fantastic on the current shifts that we are seeing in the workplace, from the reality of hybrid models to quiet quitting and beyond.

As a former international sailor, I’ve always been intrigued by the mindset it takes to be at top of your game. The High Performance Podcast interviews world-class athletes and provides a glimpse into the lives and perspectives of the very best. Among my favorites are interviews with Ben Ainslie (sailing, of course), Jonny Wilkinson (rugby), and Tom Daley (diving).

Macroeconomic and political podcasts can be gloomy, so I try to find happier offerings, such as Reasons to be Cheerful with Ed Miliband and Geoff Lloyd, which takes a dogmatically positive perspective on ideas that would benefit society, from the environment and education to healthcare and philanthropy. For more general reflections on what happiness and purpose mean to people, I love the Happy Place podcast with Fearne Cotton. I was touched by an episode with Richard E. Grant on grief, when he reveals the mantra given to him by his late wife: “Try to find a pocketful of happiness each day.”

And finally, not only because it’s iconic but also because it was always on BBC Radio in our kitchen growing up: Desert Island Discs (particularly the archives). You can listen to the life stories of everyone from Margaret Thatcher to Maya Angelou, interspersed with their favorite tracks of all time. And who can resist the theme song, with its imagined backdrop of sun, sea, and sand? Sublime.

Share this What We’re Listening To

BACKTALK

Have feedback or other ideas? We’d love to hear from you.

Tell us what you think

Follow our thinking

Share these insights

Did you enjoy this newsletter? Forward it to colleagues and friends so they can subscribe too. Was this issue forwarded to you? Sign up for it and sample our 40+ other free email subscriptions here.

This email contains information about McKinsey's research, insights, services, or events. By opening our emails or clicking on links, you agree to our use of cookies and web tracking technology. For more information on how we use and protect your information, please review our privacy policy.

You received this email because you subscribed to The Shortlist newsletter.

Manage subscriptions | Unsubscribe

by "McKinsey Shortlist" <publishing@email.mckinsey.com> - 02:29 - 4 Nov 2022

Archives

in

info@learn.odoo.com

When the next pandemic is here, will healthcare leaders be ready?

Webinar: Sangoma 3rd Party Integration: All You Should Know

The ‘other’ nuclear energy is a powerful climate solution. Is its time coming?

Sticking with the P/E pack

WHAT WE’RE LISTENING TO

Helen Mayhew

Archives

in

info@learn.odoo.com

When the next pandemic is here, will healthcare leaders be ready?

Webinar: Sangoma 3rd Party Integration: All You Should Know

The ‘other’ nuclear energy is a powerful climate solution. Is its time coming?

﻿Sticking with the P/E pack

﻿WHAT WE’RE LISTENING TO

﻿Helen Mayhew

Sticking with the P/E pack

WHAT WE’RE LISTENING TO

Helen Mayhew