A modernized approach to nuclear energy

Building a better nuclear industry requires global allies

The US Department of Energy (DOE) wants to help colonize space, and they want to do it with nuclear energy. Late last month, DOE released a notice that they are seeking information about the challenges and feasibility of using reactors to power future missions. The goal is to design a microreactor — with greater than 10 kilowatts of capacity and weighing less than 3500 kg — that can provide energy without refueling for at least 10 years.

The DOE’s press release includes a quote from Dr. John Wagner, associate laboratory director of Idaho National Lab’s Nuclear Science & Technology Directorate, on the need for collaboration to solve such a huge scientific and technical feat:

“The prospect of deploying an advanced reactor to the lunar surface is as exciting as it is challenging, and partnering with the most forward-thinking companies in the private sector and national laboratory system will help us get there.”

Dr. Wagner is right. Bringing the best companies to the table will no doubt aid in that process, and there are sure to be many excited at the prospect. After all, developing a reliable energy source is one of the first key steps towards a future of human habitation of Mars.

But despite all the excitement surrounding space colonization, there are still very real energy challenges to deal with here on Earth. Challenges nuclear can help us overcome. The toughest of them all, climate change, is an issue of perhaps greater complexity and certainly greater importance than space colonization. The threat of a warming climate has spurred excitement in the nuclear industry in recent years in an attempt to make reactors cheaper, safer, and more efficient. The Nuclear Regulatory Commission is currently reviewing two design certification applications for new reactors. Assembly has begun on the International Thermonuclear Experimental Reactor, the world’s largest fusion nuclear reactor. And investors are pouring billions of dollars into research and development of better reactor technology.

And while experts in the US have acknowledged the value of collaborating with the best minds in the industry for a martian reactor, decades-old regulation is styming that same collaboration on earth-side technology. Passed in 1945 and amended in 1954, the Atomic Energy Act (AEA) legalized and gave life to the nuclear energy industry here in the US. But within its pages exists a stipulation that prevents-outright granting a license to operate a nuclear reactor in the US to foreign-owned entities.

This may have made sense when the US was at the forefront of reactor design and fears of proliferation still remained high after World War 2, but the nuclear industry in the US has languished for decades. Foreign countries like France and South Korea — both US allies — have much stronger nuclear industries and expertise. It’s time to re-examine the role they can play in jump-starting our own nuclear industry.

Haunted by the Ghosts of Nuclear Past

The Atomic Energy Act was the first real legislation passed in the US regarding nuclear energy. The law lays the groundwork for commercial production, including the enrichment and disposal of nuclear fuel, licensing of facilities, and safety protocols. It is the framework that supported and enabled the growth of nuclear power this country experienced in the sixties, seventies, and eighties. One key aspect of the law, however, has not aged well. Section 103d stipulates that

“No license may be issued to an alien or any corporation or other entity if the Commission knows or has reason to believe it is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government. In any event, no license may be issued to any person within the United States if, in the opinion of the Commission, the issuance of a license to such person would be inimical to the common defense and security or to the health and safety of the public.”

Essentially, Congress outlawed licensure of nuclear power plants to foreign-owned, controlled, or dominated (FOCD) entities. Coming less than a decade after the end of World War 2, it makes sense that US policymakers would be wary of foreign interest in the nuclear industry and afraid of the potential for nuclear weapons proliferation. But the nuclear industry is no longer the nascent sector it used to be.

As you can see below, nuclear electricity production didn’t really start to grow until the 1970’s. Before then, there were only a handful of reactors in places like the United States, Great Britain, and the USSR.

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Worldwide growth in nuclear energy

Since the 1970’s, however, nuclear energy has grown to account for over ten percent of total worldwide electricity production. Not only has worldwide nuclear energy use grown, but so did the global market and supply chains for nuclear energy. Since the first commercial US reactor came online in the late 60’s, the United States has been regarded as a leader in nuclear systems. We have also, however, relied heavily on external partners like Japan, the UK, South Korea, and France to lend expertise and manufacturing capabilities. Despite that, none of these partners are allowed to license plants in the US because of FOCD restrictions. Not only does this economically punish the nuclear industry, but it’s also the only such rule that exists for any US energy system.

Foreign investment in US energy systems

Foreign investment is a major aspect of energy development around the world, and increasingly important for green technology. According to the Financial Times fDi Intelligence database, renewable energy was the third largest sector for foreign direct investments in 2019. Total greenfield investment — projects where a company creates a subsidiary to operate in a foreign country — totaled $307 billion. The only sectors that received more investment were real estate and the coal, oil, and natural gas sectors. The US is reported as the top country for foreign direct investment into renewables.

Foreign ownership of energy production in the US is also not a new idea outside of the nuclear industry. In 2018, a German company, Innogy SE, acquired 2,000 MW of wind projects in Pennsylvania. These projects were purchased from EverPower Wind Holdings, a US company. Royal Dutch Shell, a company based in the Netherlands, owns a vast oil and gas refinery infrastructure in the US along with multiple wind and solar farms. Likewise, British Petroleum owns various oil, gas, wind, and solar assets in the US.

Imagine what that kind of support could mean for nuclear energy. Two recent examples highlight the counterproductive nature of FOCD licensing restrictions to nuclear development in the US. In 2007, Nuclear Innovation North America (NINA) — a US company — entered a 90/10 relationship with Japanese owned Toshiba to build two Advanced Boiling Water Reactors. The ten percent involvement of Toshiba triggered an initial review, and led to restrictions on their involvement in the project, such as the creation of a completely separate committee to oversee safety concerns at the plant. Towards the end of the application process, and following concerns of viability after toe 2011 Fukushima disaster, NINA pulled out of the project. Toshiba then offered to fund 100 percent of the remaining application process. They were ultimately granted the opportunity. The application was approved in 2016, but the process created delays, increased costs, and fueled uncertainty around future foreign investments in US nuclear energy.

Another investment project, this time led by Unistar Nuclear Operating Services (UNOS) — a 50/50 venture between French-owned EDF and American-owned Constellation Energy — ran into similar problems. UNOS wanted to build a French reactor design at the existing Calvert Cliffs nuclear plant in Maryland. Over the course of the application, the cost of securing federal loan guarantees became too large for Constellation Energy, leading EDF to buy out their share of UNOS. Without Constellation, the license application now belonged to an entirely foreign entity. Despite the United State’s close alliance with France, and frequent cooperation on nuclear technology, the FOCD restriction precluded UNOS from license approval. UNOS was given nearly 3 years to find an American-owned partner for the project but was unable to do so. Because of this, the project was ultimately shut down.

These projects could have created jobs, economic growth, and helped reduce the US carbon footprint. There is no reason for such a barrier to clean energy technology to exist today. In a world of global markets, where the United States’ closest allies could also be great nuclear partners, there is no reason for the FOCD limitation to outright ban foreign licensure of nuclear energy technology. It is time to modernize section 103 of the Atomic Energy Act to bring it in line with the modern energy sector.

There is evidence that opinions on this matter are shifting. Just last week the US International Development Finance Corporation (DFC) announced changes to reverse an Obama-era ban on investments in foreign civil nuclear projects. This will make it easier for US companies to secure financing to build in foreign markets, helping to grow demand for their technology.

NuScale, a company based in Portland, Oregon, is one of the companies that currently has a design certification application under review by the NRC. They are developing a small modular reactor, which is smaller than a traditional nuclear reactor but can be fabricated off-site and shipped to the plant. These features made it possible for NuScale to design a reactor that is safer and conceptually less-expensive than currently operating reactors.

NuScale hopes to have their design certified by the end of the year. According to CEO John Hopkins, they already have agreements with foreign countries to build their reactors. He has also said,

“The proposed DFC changes would go a long way to help NuScale compete against companies that are foreign government-owned or supported,” and that it would “significantly level the playing field.”

Eliminating the ban on foreign licensing of nuclear reactors also does not mean there would be a lack of oversight. The US Committee on Foreign Investment (CFIUS) exists exactly for that purpose. Their role is to review and investigate potential investments from foreign entities to ensure they are not a threat to US security. Just this year, the US Treasury implemented regulations expanding CFIUS’s ability to oversee energy investments and potential national security issues.

Expanding markets for US nuclear manufacturers to foreign countries — and let’s not forget planets — will help to foster innovation and investment. Likewise, granting that same opportunity to foreign countries and allies will expand our capacity for low-carbon energy production here in America.

As we turn our gaze skyward in the pursuit of conquering the heavens, we should not neglect our problems here at home, or the neighbors who can help us solve them.

CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.