February 2, 2011 | Backgrounder on Energy and Environment
Abstract: More and more companies—in the U.S. and abroad—are investing in new commercial nuclear enterprises, chief among them, small modular reactors (SMRs). The SMR industry is growing, with many promising developments in the works—which is precisely why the government should not interfere, as subsidies and government programs have already resulted in an inefficient system for large reactors. Heritage Foundation nuclear policy experts explain how the future for small reactors can remain bright.
Small modular reactors (SMRs) have garnered significant attention in recent years, with companies of all sizes investing in these smaller, safer, and more cost-efficient nuclear reactors. Utilities are even forming partnerships with reactor designers to prepare for potential future construction. Perhaps most impressive is that most of this development is occurring without government involvement. Private investors and entrepreneurs are dedicating resources to these technologies based on their future prospects, not on government set-asides, mandates, or subsidies, and despite the current regulatory bias in favor of large light water reactors (LWRs).
The result is a young, robust, innovative, and growing SMR industry. Multiple technologies are being proposed that each have their own set of characteristics based on price, fuel, waste characteristics, size, and any number of other variables. To continue this growth, policymakers should reject the temptation to offer the same sort of subsidies and government programs that have proven ineffective for large LWRs. While Department of Energy cost-sharing programs and capital subsidies seem attractive, they have yet to net any new reactor construction. Instead, policymakers should focus on the systemic issues that have continued to thwart the expansion of nuclear power in recent years. Specifically, the federal government needs to develop an efficient and predictable regulatory pathway to new reactor certification and to develop a sustainable nuclear waste management strategy.
Small modular reactors share many of the attractive qualities of large reactors, such as providing abundant emissions-free power, while adding new features that could make them more appropriate for certain applications, such as providing power to rural communities or for dedicated industrial use. SMRs are not yet positioned to take the place of traditional large LWRs, but they represent an important growth area for the commercial nuclear industry.
Indeed, should the promise of small modular reactors be realized, the technology could transform the nuclear industry. That is because these attributes would potentially mitigate some of the financial and regulatory problems that nuclear energy has recently faced. SMRs potentially cost less (at least in up-front capital), are more mobile and multifunctional, provide competition, and can largely be produced by existing domestic infrastructure.
Lower Costs Up Front. Large reactors are very expensive to license and construct and require massive up-front capital investments to begin a project. Small reactors, while providing far less power than large reactors, can be built in modules and thus be paid for over time. For example, estimates for larger reactors range from $6 billion to $10 billion and must be financed all at once. The Babcock & Wilcox Company’s modular mPower reactors, alternatively, can be purchased in increments of 125 megawatts (MW), which would allow costs to be spread out over time. Though cost estimates are not yet available for the mPower reactor, its designers have stated that they will be competitive. This should not be used as a reason to refrain from building larger, 1,000-plus MW reactors. Each utility will have its own set of variables that it must consider in choosing a reactor technology, but given that one of the primary justifications for government subsidies is that the high costs of large reactors puts unacceptable strain on utility balance sheets, an option that spreads capital outlays over time should be attractive.
Safe Installation in Diverse Locations. Some designs are small enough to produce power for as few as 20,000 homes. One such reactor, Hyperion Power’s HPM (Hyperion Power Module) offers 25 MW of electricity for an advertised cost of $50 million per unit. This makes the HPM a potential power solution for isolated communities or small cities. The Alaskan town of Galena, for example, is planning to power its community with a small reactor designed by Toshiba, while Fairbanks is looking into a small plant constructed by Hyperion. In addition, Western Troy Capital Resources has stated that it will form a private corporation to provide electric power from small reactors for remote locations in Canada. Public utility officials in Grays Harbor, Washington, have spoken with the NuScale Power company about powering the community with eight small nuclear plants; and Hyperion Power has reported a high level of interest in small nuclear reactor designs from islands around the world.
Using a small nuclear reactor could cut electricity costs in isolated areas since there would be no need for expensive transmission lines to carry power to remote locations. SMRs could also potentially be integrated into existing energy infrastructure. SMRs could be built into old coal plants, for instance. The reactors would replace the coal boilers and be hooked into the existing turbines and distribution lines. According to the Nuclear Regulatory Commission, these modifications could be completed safely since small reactors will likely be easier to control during times of malfunction.
Multi-functionality. SMRs can be used in a variety of applications that have substantial power and heat requirements. The chemical and plastics industries and oil refineries all use massive amounts of natural gas to fuel their operations. Similarly, small reactors could produce the heat needed to extract oil from tar sands, which currently requires large amounts of natural gas. While affordable today, natural gas prices vary significantly over time, so the long-term predictable pricing that nuclear provides could be very attractive. SMRs may also provide a practical solution for desalination plants (which require large amounts of electricity) that can bring fresh water to parts of the world where such supplies are depleting. Perhaps most important, is that SMRs have the potential to bring power and electricity to the 1.6 billion people in the world today that have no access to electricity, and to the 2.4 billion that rely on biomass, such as wood, agricultural residue, and dung for cooking and heating.
Competition. While competition among large nuclear-reactor technologies currently exists, small reactors will add a new dimension to nuclear-reactor competition. Multiple small technology designs are set to emerge on the market. Not only will competition among small reactors create a robust market, it will also provide an additional incentive for large reactors to improve. If smaller reactors begin to capture a share of the nuclear market and the energy market at large, it will drive innovation and ultimately lower prices for both new and existing technologies.
Domestic Production. Although the nuclear industry necessarily shrank to coincide with decreased demand, much of the domestic infrastructure remains in place today and could support the expansion of small-reactor technologies. Although the industrial and intellectual base has declined over the past three decades, forging production, heavy manufacturing, specialized piping, mining, fuel services, and skilled labor could all be found in the United States. Lehigh Heavy Forge Corporation in Bethlehem, Pennsylvania, could build the forges while Babcock & Wilcox could provide the heavy nuclear components, for instance. AREVA/Northrop Grumman Shipbuilding broke ground on a heavy components manufacturing facility last June. Further, a number of companies are expanding manufacturing, engineering, and uranium enrichment capabilities—all in the United States.
If SMRs Are So Great, Where Is the Construction?
While some designs are closer to market introduction than others, the fact is that America’s regulatory and policy environment is not sufficient to support a robust expansion of existing nuclear technologies, much less new ones. New reactor designs are difficult to license efficiently, and the lack of a sustainable nuclear waste management policy causes significant risk to private investment.
Many politicians are attempting to mitigate these market challenges by offering subsidies, such as loan guarantees. While this approach still enjoys broad support in Congress and industry, the reality is that it has not worked. Despite a lavish suite of subsidies offered in the Energy Policy Act of 2005, including loan guarantees, insurance against government delays, and production tax credits, no new reactors have been permitted, much less constructed. These subsidies are in addition to existing technology development cost-sharing programs that have been in place for years and defer significant research and development costs from industry to the taxpayer.
The problem with this approach is that it ignores the larger systemic problems that create the unstable marketplace to begin with. These systemic problems generally fall into three categories:
How to Fix a Broken System
At the Global Nuclear Renaissance Summit on July 24, 2008, then-NRC chairman Dale Klein said that a nuclear renaissance with regard to small reactors will take “decades to unfold.” If Members of Congress and government agencies do not reform their current approach to nuclear energy, this will most certainly be the case. However, a new, market-based approach could lead to a different outcome. Instead of relying on the policies of the past, Congress, the Department of Energy, and the NRC should pursue a new, 21st-century model for small and alternative reactor technologies by doing the following:
Transitioning to a New Era of Nuclear Power
It is an exciting time for the nuclear industry in the United States and around the world, but that excitement could quickly dwindle if Congress and the White House do not usher in a new path forward for nuclear energy. New technologies have the potential to revolutionize how people produce and consume energy, but if the same bureaucratic approach is taken, it will create the same problems of dependency and stagnation that led to the demise of the commercial nuclear industry decades ago. Congress and the Administration have the opportunity to create a robust, competitive market for nuclear power and should implement the necessary reforms to make this happen.
—Jack Spencer is Research Fellow in Nuclear Energy in the Thomas A. Roe Institute for Economic Policy Studies, and Nicolas D. Loris is a Research Associate in the Roe Institute, at The Heritage Foundation.
Small Reactor Designs
A number of companies are developing or have already developed small reactors; each has unique features and varying megawatt capacity. These companies include NuScale Power, Hyperion Power Generation, Toshiba, PBMR, Ltd, General Atomics, Babcock & Wilcox, General Electric, and TerraPower. While the following list is not comprehensive, it provides a general description of SMR activity.
Jenny Mandel, “Less Is More for Designers of ‘Right-Sized’ Nuclear Reactors,” ScientificAmerican, September 9, 2009, at http://www.scientificamerican.com/article.cfm?id=small-nuclear-power-plant-station-mini-reactor(January 20, 2011).
Stephen Heiser, “Western Troy To Try Its Hand at Small Nuclear Reactors,” Nuclear Street, August 18, 2009, at http://nuclearstreet.com/blogs/nuclear_power_news/archive/2009/08/18/western-troy-to-try-its-hand-at-small-nuclear-reactors-1222.aspx# (January 20, 2011).
Stephen Heiser, “Grays Harbor Washington Considers Going with Small Reactors,” Nuclear Street, August 20, 2009, at http://nuclearstreet.com/blogs/nuclear_power_news/archive/2009/08/20/Grays-Harbor-Washington-Considers-Goining-With-Small-Reactors-1850.aspx# (January 20, 2011).
Mark Clayton, “Backyard Reactors? Firms Shrink the Nukes,” The Christian Science Monitor, December 29, 2008, at http://features.csmonitor.com/environment/2008/12/29/backyard-reactors-firms-shrink-the-nukes (January 20, 2011).
Rebecca Smith, “Small Reactors Generate Big Hopes,” The Wall Street Journal, February 18, 2010, at http://online.wsj.com/article/SB10001424052748703444804575071402124482176.html (January 20, 2011).
Robert Bryce, “Nukes Get Small,” Energy Tribune, July 16, 2008, at http://www.energytribune.com/articles.cfm?aid=948 (January 21, 2011); Hyperion Power, “Hyperion Power Generation,” at http://www.hyperionpowergeneration.com/about.html (January 21, 2011); and Kevin Bullis, “Small Nuclear,” Technology Review, November 10, 2005, at http://www.technologyreview.com/energy/15865/?a=f (January 21, 2011).
Hyperion Power, “Community Applications,” at http://www.hyperionpowergeneration.com/product-com.html (January 21, 2011).
Press release, “AREVA, Northrop Grumman Break Ground on AREVA Newport News Facility, Marking Concrete Step in U.S. Nuclear Energy Revival,” Northrop Grumman, July 22, 2009, at http://us.areva.com/home/liblocal/docs/Press%20releases/2009/AREVA_Northrop_Gruman_Newport_News_7_22.pdf(January 21, 2011).
Dan Yurman, “NRC Rule—No Rabbits Out of a Hat,” The Energy Collective, September 25, 2009, at http://theenergycollective.com/djysrv/30832/nrc-rule-no-rabbits-out-hat (January 21, 2011).
Prepared Remarks of NRC Chairman Dale E. Klein, Global Nuclear Renaissance Summit, Alexandria, VA, July 24, 2008, at http://www.nrc.gov/reading-rm/doc-collections/commission/speeches/2008/s-08-030.html (January 21, 2011).
Jack Spencer, “Conditions and Policy Reforms Must Accompany Loan Guarantee Boost,” Heritage Foundation WebMemo No. 2789, February 3, 2010, athttp://www.heritage.org/research/reports/2010/02/conditions-and-policy-reform.
Commissioner William C. Ostendorff, “Small Modular Reactors—Challenges and Opportunities,” Nuclear Regulatory Commission, June 28, 2010, at http://www.highbeam.com/doc/1G1-230098692.html (January 21, 2011).
Nuclear Regulatory Commission, “Potential Policy, Licensing, and Key Technical Issues for Small Modular Nuclear Reactor Designs,” March 28, 2010, at http://www.nrc.gov/reading-rm/doc-collections/commission/secys/2010/secy2010-0034/2010-0034scy.html (January 21, 2011).
Jack Spencer, “A Free-Market Approach to Managing Used Nuclear Fuel,” Heritage Foundation Backgrounder No. 2149, June 23, 2008, at http://www.heritage.org/Research/EnergyandEnvironment/bg2149.cfm.
NuScale Power, “Overview of NuScale’s Technology,” at http://www.nuscalepower.com/ot-Scalable-Nuclear-Power-Technology.php (January 21, 2011).
Hyperion Power Generation, “Clean, Safe, Affordable Power: Where You Need it, When You Need it,” at http://nomoretowers.org/Documents/Hyperion%20Nuclear%20Power%20Generation.htm (January 21, 2011).
“Hyperion to Build First Small Nuclear Reactor at US DOE Complex,” Platts, September 10, 2010, at http://www.platts.com/RSSFeedDetailedNews/RSSFeed/HeadlineNews/Nuclear/8939538 (January 21, 2011).
Press release, “Shipping and Power Experts Join Forces to Explore the Potential for Nuclear Power to Propel Future Generations of Commercial Tankers,” Hyperion Power and Lloyd’s Register, November 15, 2010, at http://www.hyperionpowergeneration.com/news/press-Lloyds.pdf (January 21, 2011).
“Energy Multiplier (EM2) Quick Facts,” General Atomics, http://www.ga.com/energy/em2/pdf/FactSheet_QuickFactsEM2.pdf (January 21, 2011).
Mike Freeman, “Company Has Plan for Small Reactors,” The San Diego Union-Tribune, February 24, 2010, at http://www.signonsandiego.com/news/2010/feb/24/company-has-plan-for-small-reactors (January 21, 2011).
Rebecca Smith, “General Atomics Proposes a Plant that Runs on Nuclear Waste,” The Wall Street Journal, February 22, 2010, at http://online.wsj.com/article/SB10001424052748703791504575079370538466574.html (January 21, 2011).
“McDermott B&W Unit to Unveil Small Nuclear Reactor,” Reuters, June 10, 2009, at http://www.reuters.com/article/rbssOilRelatedServicesEquipment/idUSN1011888520090610 (January 21, 2011),and World Nuclear Association, “Small Nuclear Power Reactors,” at http://www.world-nuclear.org/info/inf33.html (January 21, 2011).
Katherine Ling, “Company Calls New Small Nuclear Reactor a ‘Game Changer,’” The New York Times, June 10, 2009, at http://www.nytimes.com/gwire/2009/06/10/10greenwire-company-calls-new-small-nuclear-reactor-a-game-45123.html (January 21, 2011).
Tom Lamar, “TVA Interested in the B&W mPower Small Modular Reactors,” Nuclear Street, November 12, 2010, at http://nuclearstreet.com/nuclear_power_industry_news/b/nuclear_power_news/archive/2010/11/12/tva-interested-in-the-b_2600_w-mpower-small-modular-reactors-111204.aspx (January 21, 2011).
GE Hitachi, “Advanced Recycling Center—Solving the Used Nuclear Fuel Dilemma,” Technology Update, 2009, at http://www.gepower.com/prod_serv/products/nuclear_energy/en/downloads/Advanced_Recycling_Center_Technology_Update_-_GEA17804.pdf (January 21, 2011).
Press release, “GE Hitachi Nuclear Energy’s Advanced Recycling Center Recognized for Its Potential to Make Energy out of Used Nuclear Fuel,” General Electric, October 14, 2010, at http://www.genewscenter.com/Press-Releases/GE-Hitachi-Nuclear-Energy-s-Advanced-Recycling-Center-Recognized-for-Its-Potential-to-Make-Energy-out-of-Used-Nuclear-Fuel-2bae.aspx (January 21, 2011).
Katie Fehrenbacher, “TerraPower: How the Traveling Wave Nuclear Reactor Works,” Gigaom, February 15, 2010, at http://gigaom.com/cleantech/terrapower-how-the-travelling-wave-nuclear-reactor-works/ (January 21, 2011).
Karl Burkart, “Bill Gates Bets on Next-Gen Nuclear,” Forbes.com, March 24, 2010, at http://www.forbes.com/2010/03/24/nuclear-power-innovation-technology-ecotech-bill-gates.html (January 21, 2011).
Shigeru Sato, “Toshiba, Bill Gates’ TerraPower May Develop Reactor (Update 1),” Bloomberg Businessweek, March 22, 2010, at http://www.businessweek.com/news/2010-03-22/toshiba-bill-gates-s-terrapower-may-develop-reactor-update1-.html (January 21, 2011).
Peter Behr, “A Reactor that Burns Depleted Fuel Emerges as a Potential ‘Game Changer,’” The New York Times, February 23, 2010, at http://www.nytimes.com/cwire/2010/02/23/23climatewire-a-reactor-that-burns-depleted-fuel-emerges-a-72189.html (January 21, 2011).