By JP Mangalindan
May 3, 2011

FORTUNE — At WIRED‘s Disruptive by Design Business Conference today, Bill Gates discussed the current state of energy and potential technology replacements for oil and coal.

Gates suggested there’s much more potential for nuclear energy, despite the recent disaster with Japan’s Fukushima reactor. As he sees it, nuclear has a “factor million” of energy creation compared with coal. And as he quipped, “coal plants kill, but they only kill a few at a time, which is highly preferred by politicians.”

Really, the Fukushima reactor incident in his opinion is evident of just how little nuclear technology has improved over time and how ripe the technology is for innovation and investment.

“They had a design which worked on a submarine,” he said.  “Then they went to generation 2 and got shut down due to Three Mile and coal in particular. There wasn’t much design after that.” Fukishima, Gates pointed out, was an older second-generation reactor based off 1960s design. Put side-by-side with future fourth-generation plants, the difference is night and day. (Note: Gates is an investor in TerraPower, a nuclear reactor design startup.) Fourth generation reactors have better ways of dealing with “afterheat,” heat created by leftover radioactivity in a reactor, and could circumvent the problem completely.

Another important tool that will prove helpful with nuclear innovation is software simulation, which will help plants anticipate scenarios like earthquakes and tsunami-like waves. There is “no way humans can predict these things.” It’s Gates’ hope that one of several fourth-generation nuclear plant designs will get built by 2020, and that by 2030, that particular design will be emulated with hundreds more built.

He also addressed other potential forms of energy creation, including hydrogen and solar. On the former, Gates was lukewarm at best about its potential as a mainstream source.

“I’ve never understood that [hydrogen],” he said. “It was never a solution to anything, just a potential way to store energy. . . It’s just a chemical, and it’s a really nice chemical, but all of our applications are per volume-type applications. And it turns out it’s actually quite flammable. A hydrogen flame is very, very hot, but invisible.”

Gates broke down solar into three trends: utility girds in deserts, installations on office roofs and commercial spaces, and panels on residential roofs.

“If you want cute, go for stuff on the roof,” he said. “If you’re interested in the problem, go for the [grids] in the desert.” Still, solar has a very long way to go, part of which has to do with battery capacity. If you’re getting say, 50% of energy through solar, you have to deal with factors like stashing enough energy away for the evening and even dealing with two-week periods in the desert where sunlight goes missing entirely. According to Gates, accommodating such scenarios is a “factor of 100″ more demanding than any battery technology we have today.

So if solar is such an infant technology, does that mean the Gates home is solar panel-free?

“Oh, we like to do ‘cute’ like everyone,” he told the conference. “I did say rich people can do whatever they want.”

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