How to Reinvigorate US Commercial Nuclear Energy
Sixty years into the civilian nuclear age, the United States must decide whether it wants to reestablish leadership in this important technology market, or watch its role continue to diminish.
December 2017 marked the sixtieth anniversary of commercial nuclear energy in the United States, which began with the opening of the Shippingport Atomic Power Station in Pennsylvania. It also marked the seventy-fifth anniversary of the scientific birth of nuclear power, when Chicago Pile-1, built as part of the Manhattan Project and located in an abandoned squash court underneath Stagg Field in the middle of the University of Chicago campus, achieved the first controlled, self-sustaining nuclear chain reaction. Over these years, US policies and innovations successfully underpinned the growth of global commercial nuclear trade, while addressing the threat of non-peaceful applications of commercial technologies.
Today, the global nuclear enterprise comprises mature and growing global markets and a diversity of international suppliers. Trade policies focused principally on nonproliferation, which evolved and were implemented incrementally over decades, can no longer provide the basis for US industrial engagement and competition. The United States no longer monopolizes leadership and influence in global nuclear energy markets, and if current trends continue unabated, its role will continue to decline.
We believe that global nuclear energy markets are too large an opportunity, the potential strategic and economic benefit of US involvement in these global markets too broad, and the potential implications for future US domestic nuclear energy deployment too significant to be ceded to global competitors—at least not without thoughtful and complete strategic analyses of, and debate over, the potential consequences.
The global civil nuclear energy supply chain is a mature industrial enterprise servicing not only existing but a growing number of new markets. With an estimated value of $2.6 trillion over the coming 20 years, this supply chain includes new reactor development and construction, myriad fuel cycle services for existing reactors, power generation equipment, professional services, training, reactor life extension, and decommissioning services. Where once the market action was taking place mostly in the United States, now the markets are principally based elsewhere, with 440 commercial power reactors operating in 31 countries. State-owned enterprises in Russia, China, and Korea provide the majority of new reactors, with India gaining strength through its own domestic market. Flagship US technology providers are subsidiaries of foreign industrial giants or operate as closely aligned strategic partners. Where once US industry held the vast majority of nuclear-qualified manufacturing (so called N-stamp certification, issued by the American Society of Mechanical Engineers to indicate a level of quality assurance appropriate for nuclear applications, or similar quality certification), it lost its majority in 2010.
Despite the globalization of the commercial nuclear trade and declining US nuclear power plant exports, the United States is still home to the largest nuclear generating capacity of any single nation, and the sheer size of its fleet has enabled a relatively robust domestic supply chain for reactor and operations services. But China will likely surpass the United States in number of reactors deployed within 20 years, and the sustainability of the US supply chain may be threatened if the recent trend of premature closure of domestic commercial nuclear power plants continues.
Meanwhile, nuclear deployment business models are emerging that would have been difficult to imagine in past decades. Korean enterprises are supplying the first nuclear power units in the Middle East, to the United Arab Emirates (UAE). These systems are based on US technology and use US engineering and management contractors. A planned nuclear renaissance in the United Kingdom is to be supplied in part by European reactor technology, built by an international workforce, and financed in part by Chinese investment. Russian technology is capturing strategic global market share using so-called build-own-operate business models backed by Russian state financing, assuring a lengthy Russian presence where these systems are sold (as with Korea and the UAE reactors). US leadership in the development of norms of global nuclear trade involving quality, safety, operations, and nonproliferation, as well as its own experiences in deployment, has paved the way for these competitors. For example, the Russian state-owned enterprise Rosatom is leveraging commercial nuclear market leadership to pursue broader advanced manufacturing and technology leadership, while Korea followed the early market model of the United States and used nuclear trade to enhance a broader manufacturing base. (Korea recently announced a phase-out of new domestic nuclear energy builds, even as it aims to maintain its growing export presence and efficiency and complete domestic reactors already under construction.)
International consortia and partnerships are displacing US dominance in the international nuclear energy trade and are instances of increasingly familiar trends of manufacturing specialization that drive transnational sourcing in many manufacturing markets. These partnerships and sourcing approaches are creating exceptionally cost-competitive and reliable nuclear deployments in the global market that significantly outperform US efforts. Where the first reactors to be ordered and built from scratch in the United States since the Three Mile Island accident in 1979 are behind schedule and projected to cost over $11,000 per kilowatt hour, if they are finished at all, Korea and Japan have recently built reactors at a cost in the neighborhood of $4,300 per kilowatt hour. The elements of this stunning difference in cost have not been completely quantified, but likely can be attributed to factors including differences in regulatory approach, labor costs, and availability of public-private financial vehicles. Less tangible, but perhaps equally important, is that international supply chains (including professional and construction services and management) have had several decades to develop knowledge, capability, expertise, and mature designs that result in cost and construction risk reduction, while US construction supply chains have largely atrophied.
Yet US private capital totaling $1.3 billion from dozens of companies is beginning to trickle into the development of advanced nuclear power systems, formerly the realm of only a few state-sponsored efforts. Compelling global market potential is the draw. Entrepreneurs are attracting venture capital as they line up to develop systems that can meet the growing appetite for clean energy for a world with a changing climate and a population that could reach 10 billion by 2050. The US Department of Defense is also once again assessing the feasibility of land-based nuclear power plants, mostly small “micro-reactors,” for military base electricity needs, and this could provide another market for private vendors and innovators. These opportunities offer a sharp contrast to the rather uniform landscape of nuclear energy development and deployment of the 1960s, when the basis of present US export policy was established.
The advanced reactors envisioned by today’s US-based private-sector innovators are targeted to overcome many of the operational challenges of existing systems through the use of such features as passively safe designs, simpler system architectures, advanced monitoring and controls, and more robust nuclear fuels. They are also being designed to provide both baseload power to the electrical grid and zero greenhouse-gas process energy and electricity for growing industrial energy needs in the manufacture of steel, fertilizer, bulk commodity chemicals, and other energy-intensive applications. These integrated systems are being designed to operate within a dynamic energy grid alongside fossil and renewable energy systems, and could provide new approaches to providing increasingly valuable grid stabilization services to help overcome intermittency challenges of wind and solar energy. For entrepreneurs, these new integrated systems provide avenues to dramatically expand global markets for nuclear energy. Our colleagues at Idaho National Laboratory have estimated the global market potential for nuclear could grow from a total of $2.6 trillion over 20 years to over $4 trillion if reactors were integrated as clean energy sources into industrial processes. US innovators may hold a key competitive advantage in developing these integrated nuclear systems if research continues to mature in areas such as advanced catalysts, high-temperature nuclear reactors, and other technologies that enable a more efficient use of nuclear-grade process heat for a variety of manufacturing industries. Such systems may provide the differentiator that makes the next generation of US advanced reactors and services more desirable than the stand-alone electricity producing reactors that dominate production in the global market.
The United States finds itself in a dramatically different competitive position and market context than at the birth of the industry. The global market has changed, the domestic market has changed, global public attitudes have changed, and norms of global trade have changed. Amidst such ferment, the future of the US domestic nuclear energy market is uncertain at best. In the past five years, premature closures have been announced for or completed at 11 sites in 10 states, totaling 14 reactors and almost 14,000 megawatts of baseload electricity. A flagship US product designer and supplier, Westinghouse, has gone bankrupt. Two of the four nuclear reactors under construction in the United States have been cancelled because of substantial cost overruns. Meanwhile, foreign nuclear markets expand. Our view is that the strategic importance of a US domestic commercial nuclear energy industry, serving domestic and international markets, and its relations to supply chains serving US nonenergy markets and foreign markets, needs to be actively debated among US policy-makers. A decline in the US domestic nuclear energy industry and coincident decline in the nation’s commercial nuclear export presence has potential broad national strategic implications in the economic, defense, regional geopolitical, and energy realms. Yet the strategic consequences of a continued erosion of the US competitive position in nuclear energy has not been quantitatively assessed in context with global market trends. Clearly identifying, and where possible quantifying and prioritizing, the elements of strategic value of both domestic and export industries, across the breadth of the nuclear supply chain, for commercial nuclear energy is essential for charting a practical and efficient path to realizing the strategic potential of US industrial leadership in global commercial nuclear energy markets.
With this in mind, we present six strategic principles for assessing the US position in the global market. These principles can aid in understanding the relative importance, and possible cost-benefit, of a variety of strategic considerations, and help assess whether, and how, to address the US competitive position in global nuclear energy markets.
Globally, nuclear energy will be a necessary element of national energy infrastructures, and therefore markets will likely continue to expand. Reliable, zero-carbon-emission electricity and energy for industry are key to human well-being and societal stability, and technical and industrial leadership in assuring an energy-rich future will be rewarded economically and politically. As we have emphasized, there are strong reasons to expect that global demand for nuclear energy will expand well into the future, and that demand for servicing the existing fleet will continue for decades. In many instances, countries adopting nuclear will do so as a means of ensuring their security through access to reliable and diverse energy sources while simultaneously building a skilled technology-based workforce. The global market size and potential—for new capacity and operation of existing capacity—is likely substantial and should be a focus of future national policy.
Considerable financial gain can be realized across the broad supply chain that comprises commercial nuclear energy. The potential financial reward for investing in nuclear energy has been drawing private-public investment and spurring international industrial partnership models and private-sector innovators similar to those found in many other global industrial markets. The markets encompass new construction and technology, industrial applications, manufacturing of components, operations and other professional services, and decommissioning. Importantly, the export opportunities afforded global growth in nuclear energy (for example, Saudi Arabia’s recent announcement that it would procure 17.6 gigawatts of generating capacity) should not be viewed solely in terms of providing a new reactor or reactor system. Various nodes of the total supply chain, such as individual components, advanced fuels, intelligent and autonomous control systems, and operations expertise, may provide market niches, competitive positions, and, eventually, national strategic value. This may be particularly true when, as may often be the case in the future, US companies are competing with state-owned foreign enterprises in nationally controlled markets, and advanced components and approaches offered and manufactured by US companies can be integrated into non-US technology platforms. For innovators and existing suppliers, the opportunities across the broad supply chain may include a breadth of components, materials, and services supporting various advanced reactor designs.
Tapping the breadth of global markets in nuclear technology supply chains could also be one avenue to help reenergize domestic manufacturing expertise and exports. Restoring balance of trade and creating middle-class jobs are key objectives for an expansion of US manufacturing, with the US Department of Commerce estimating that 5,000 to 10,000 domestic jobs are created for every $1 billion in exports. By this estimate, manufacture and export of advanced reactors, nuclear power system components, fuel cycle services and materials, and other components and services for even a relatively small portion of the multitrillion dollar trade in nuclear power could produce tens of thousands of US jobs. If the United States then leads in innovation to expand these markets to include industrial integration of commercial nuclear technologies as we have described, the potential market and associated manufacturing and professional services jobs base could plausibly achieve an export base on the order of $100 billion within a decade or so, with commensurate job growth. This opportunity has not gone unnoticed by economic competitors of the United States. For example, in 2012 the United Kingdom developed a Nuclear Supply Chain Action Plan with similar job-creating objectives, even as its own domestic nuclear industry was flat. Economic opportunity associated with US market position in global nuclear energy should be a key strategic national objective, and innovators in the United States will need mechanisms, such as financing vehicles, modern export policies, and technology development and demonstration support, that match the global trade reality of today—not of decades past—to successfully engage the global markets.
Engagement and leadership in the global commercial nuclear energy market will be key to a cost-effective future for US domestic nuclear reactor construction. As previously summarized, new reactor construction in the United States is inefficient and too expensive. This may in part reflect a focus on large gigawatt-sized systems in markets not demanding many of them, and in part a long-term atrophying of the supply chain, including nuclear construction experience. The domestic market alone likely will not provide sufficient opportunity in the short-term to exercise such supply chains to the point of efficiency. But the global market will. Developing international partnerships, transnational supply agreements, and strategic partnerships based on national specialization will enable US suppliers to dominate in portions of the supply chain where they are most competitive, and partner for other portions. This type of global focus can create a path to achieving deployment costs in the United States that approach global averages, and it may offer opportunities for new technology offerings from US companies that are on the near horizon, such as small modular reactors and micro-reactors, and associated supply chains.
US engagement internationally is still important to nuclear security and safety, but it is just one lever in a broader field of credible policy and engagement options. International engagement and innovation by the United States has been and will likely continue to be influential in assuring that nuclear energy technologies are used for peaceful purposes and maintain the highest safety standards. International agreements and nuclear export protocols are as important as ever, but they require a fresh examination of present export rules and constraints, financing policy for export industries, and other policies that affect the ability of US industry to compete for global export markets. Current export rules, including those associated with Section 123 of Atomic Energy Act and the Department of Energy’s Part 810 regulations, grew out of a much different time and competitive and strategic context. The rise of other technology suppliers with a strong stake in the global market, such as Korea, China, and Russia, requires that the United States consider other levers to influence norms and practices for assuring nonproliferation and safety. These might include financial, trade, and multilateral partnership mechanisms not related to nuclear trade. Nonproliferation-focused regulations need to be placed in a current-day context that balances economic and strategic benefit with economic and strategic cost. Export control policies may no longer be the most effective mechanisms for pursing nonproliferation objectives.
National nuclear infrastructures have been and will continue to be critical national assets for the United States. Past investments in nuclear research and operations infrastructures, tied in part to commercial reactor and fuel cycle research and development and including talent, academic programs, materials, and facilities, are also important strategic assets for the future. They provide national capabilities to respond to nuclear accidents, monitor and assess proliferation threats, support domestic defense industry supply chains, and provide training and education that is applied across a range of energy, health, manufacturing, and other industries. A stable industry, coupled with a steady investment in advanced nuclear research, development, and demonstration (in physical science, engineering, and manufacturing) tied to commercial nuclear deployment, would help exercise and enhance these capabilities and therefore provide some national security and strategic benefit, including workforce resilience and capacity that benefits a range of industries.
Simply stated, nuclear technology is very different from other energy technologies and carries substantial strategic implications. The potential costs of continued erosion of national technical and human resource infrastructure related to nuclear technologies should be closely evaluated, and if possible quantified, and the implications considered as national policy is developed.
Geopolitical advantage is as much a part of the nuclear technology equation as ever. Sixty years ago, the geopolitical factor driving the United States to engage internationally in nuclear energy and technology was principally tied to nonproliferation concerns. Today, geopolitical considerations also should factor into the benefits of prolonged presence and regional influence that come from supplying nuclear technology to other nations. Nuclear systems are generally designed to operate in excess of 60 years, during which time fuel cycle services, professional and operational services, upgrades, and other needs are generally met by the supplier nation. The Russian enterprise Rosatom, for example, is successfully marketing its build-own-operate business model to Turkey. This approach includes technical, service, and financing packages. The result of such arrangements is substantial, long-term influence of the supplier country on the buyer. These bilateral relationships tend to deepen over time through expanded applications in academic, industrial, and service sectors, such as medicine. The strategic benefits of such prolonged engagements for the United States, and the costs of ceding them to competitors, ought to be a major consideration in US nuclear energy activity and policy. Such influence can be gained through engagement in the broad nuclear supply chain; not simply through new reactor sales.
The strategic implications for the United States of loss of leadership in international nuclear trade are troubling. The potential benefits to reasserting leadership may be compelling, and the global market appears to offer real opportunities for doing so.
Other observers have proposed a range of actions to reestablish US leadership in global commercial nuclear energy and address the nation’s strategic interests, including modernization of export policy, investment in advanced nuclear research, creation of financial mechanisms to better compete with state-owned foreign competitors, and expansion of workforce training programs. But any serious effort to identify and assess the necessary policy actions must build first on an in-depth assessment of potential US competitiveness in global nuclear energy markets.
To date, no such assessment exists, but it could be conducted by an appropriate interagency working group inside the government, or by an independent external organization such as the National Academies. This assessment must consider the entire global supply chain (not only reactor development and sales), including US competitiveness and potential prospects in various links of that supply chain, and should then define required changes to national programs and investment strategies that will enable emerging US commercial innovators to compete in international markets and provide a strategic national return in the context of the principles we have outlined here. Development of such a national supply chain strategy would be the first logical step in implementing a clear, outcome-focused investment and policy approach that can guide both public and private-sector strategies to take US leadership in commercial nuclear energy into the next 60 years.