June 19, 2009 | WebMemo on Energy and Environment
After years of policy wrangling and bureaucratic delays, the Department of Energy (DOE) has identified the four companies approved to receive federally backed loan guarantees to help finance the construction of new nuclear reactors in the U.S. All of the recipients have one thing in common: strong international connections. With protectionist sentiment on the rise, the DOE should be commended for recognizing the critical role that the global nuclear industrial base must play in reestablishing the U.S. nuclear industry.
Access to Global Supply Chains Critical to U.S. Nuclear Renaissance
America's first orders for nuclear power plants will depend on global supply chains and free trade. Any tariff or regulatory barriers to trade in nuclear components drive up the costs associated with building new reactors. Given the already high capital costs inherent to nuclear power, protectionism could inflate the cost of new projects enough to stop the nuclear renaissance before it begins.
Thus, ensuring access to global goods and services is critical to reinvigorating nuclear energy in the U.S. and the domestic nuclear industrial base. The U.S. currently lacks the industrial capacity to support a substantial expansion of domestic nuclear power; however, as new orders for reactors increase, incentives for investors to rebuild production facilities in the U.S. will rise. New U.S. and world demand for nuclear components will give a healthy boost to the financial outlook for the industry, attracting the significant investments necessary to expand international capacity and provide the impetus to start rebuilding America's commercial nuclear industrial capacity.
Rebuilding America's Nuclear Industrial Base
While the U.S. commercial reactor business faded decades ago, the U.S. did not abandon the nuclear sector altogether. Instead of building new plants, the U.S. commercial nuclear industry turned to making its existing plants run more efficiently and safer. So while other countries may lead in new plant construction, America excels in operating them.
Moreover, the United States remains a leader in researching and developing nuclear technologies. America's vast national laboratory system and private sector expertise provides the resources and a scientific foundation for the U.S. to again compete as a global leader in the commercial nuclear world.
Moreover, while building commercial reactors in the U.S. stopped, building reactors altogether did not. As commercial construction waned, the nuclear components industry consolidated to meet government demand for nuclear aircraft carriers and submarines, as well as other federal requirements. These companies are now reengaging in the commercial nuclear business and will likely be at the forefront of a resurgent U.S. nuclear components industry.
Securing U.S. Access to International Markets
The U.S. should keep the momentum moving behind the growth of a strong and efficient U.S. nuclear industry. America's policymakers should keep U.S. markets open and encourage lower trade barriers around the world. The DOE should be commended for recognizing the important contribution that foreign companies will make in expanding nuclear power in the U.S. Going forward, the Obama Administration should:
These reactors will be among the first new nuclear power plants ordered and built in America in three decades. The DOE wisely selected companies using different technologies and will operate in both regulated and unregulated markets--a move that better enables market forces, rather than government dictate, to determine the best and most competitive way forward for the industry.
Having access to foreign reactor designers, utilities, component manufactures, and financing ensures that America's nuclear renaissance is safe and competitive and brings the best value to consumers. U.S. policymakers should resist protectionist forces to help bring about America's nuclear renaissance.
Jack Spencer is Research Fellow in Nuclear Energy in the Thomas A. Roe Institute for Economic Policy Studies and Daniella Markheim is Jay Van Andel Senior Trade Policy Analyst in the Center for International Trade and Economics at The Heritage Foundation.
Jack Spencer, "Congress Must Implement CSC Treaty to Reinvigorate U.S. Nuclear Industry," Heritage Foundation WebMemo No. 1658, October 9, 2007, at http://www.heritage.org/Research/EnergyandEnvironment/wm1658.cfm.
Jack Spencer, "Competitive Nuclear Energy Investment: Avoiding Past Policy Mistakes," Heritage Foundation Backgrounder No. 2086, November 15, 2007, at http://www.heritage.org/Research/EnergyandEnvironment/bg2086.cfm.
Jack Spencer, "The Problem with Increasing Energy Loan Guarantees," Heritage Foundation WebMemo No. 2277, February 6, 2009, at http://www.heritage.org/Research/EnergyandEnvironment/wm2277.cfm.