December 14, 2009 | WebMemo on Energy and Environment
The Senate is considering two bills that are meant to help small and modular nuclear reactor development. Unfortunately, the Nuclear Energy Research Initiative Improvement Act (S. 2052) and the Nuclear Power 2021 Act (S. 2812) would have the opposite impact.
Together (or individually), these bills would smother the private-sector initiative and free-enterprise spirit that has driven small and modular reactor development in recent years. Instead of embracing this new and innovative approach to nuclear energy development, these bills would subject the small and modular reactor business to the same government-depressed trajectory that plagues traditional reactors.
The Nuclear Energy Research Initiative Improvement Act (S. 2052)
S. 2052 would authorize $250 million over five years to support the emergence of small and modular nuclear reactors. While the spirit of the act is laudable, its approach is mostly counterproductive. The essence of the act is to mandate that the Department of Energy (DOE) develop a five-year plan to "lower effectively the costs of nuclear reactors."
There are several problems with the act:
The Nuclear Power 2021 Act (S. 2812)
S. 2812 creates a DOE program to develop and demonstrate two small and modular nuclear reactor designs. In essence, it authorizes the DOE to dictate who will make up America's small, modular reactor business for the foreseeable future.
This is the wrong approach because:
Not All Bad
However, the bill does contain some good provisions. In addition to raising the profile of small reactors, both bills attempt to address (though unsuccessfully) one legitimate government function: licensing.
The long-term success of nuclear power, regardless of reactor type, will depend on an efficient regulatory regime. This is especially true for small and alternative reactor types. The lack of regulatory structure for these reactors represents a major barrier to market entry. Though neither piece of legislation fixes this problem, both recognize it.
A Better Approach
Congress could allow small and alternative reactor technologies to move forward by doing the following:
Reject Additional Loan Guarantees. Loan guarantee proponents argue that high upfront costs of new large reactors make them unaffordable without loan guarantees. Presumably, then, a smaller, less expensive modular option would be very attractive to private investors even without government intervention.
But loan guarantees undermine this advantage by subsidizing the capital costs and risk associated with large reactors. A small reactor industry without loan guarantees would also provide competition and downward price pressure on large light water reactors.
Avoid Subsidies. They do not work. Despite continued attempts to subsidize the nuclear industry into success, the evidence demonstrates that such efforts invariably fail.
The nuclear industry's success stories are rooted in the free market. Two examples include the efficiency and low costs of today's existing plants and the emergence of a private uranium enrichment industry. On the other hand, government intervention is the cause of the industry's failures, as illustrated by the government's inability to meet its nuclear waste disposal obligations.
Build Expertise at the Nuclear Regulatory Commission (NRC). The NRC is built to regulate large light water reactors. It simply does not have the regulatory expertise to efficiently regulate other technologies, and building that expertise takes time.
Helping the NRC to develop that expertise now would help bring new technologies into the marketplace more smoothly.
Establish a New Licensing Pathway. The current licensing pathway relies on reactor customers to drive the regulatory process. The problem is that the legal, regulatory, and policy apparatus is built to support large light water reactors, effectively discriminating against other technologies.
Establishing an alternative licensing pathway could help build the necessary regulatory support on which commercialization ultimately depends.
More Harm Than Good
It seems that some Members of the Senate are making a real effort to help move small, modular reactors forward with S. 2052 and S. 2812. Unfortunately, their efforts would do more harm than good.
In the process of attempting to help small, modular reactors, in practice, these measures would smother the very market forces that have driven the success of small, modular reactors to begin with.
Jack Spencer is Research Fellow in Nuclear Energy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.