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DOE Loans Are Only the Beginning for Much-Needed Investment in Nuclear

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The Department of Energy’s announcement for up to $12.6 billion in loan guarantees for advanced nuclear is great news for dozens of US companies developing cutting-edge nuclear power technologies struggling to find support in the US market. While the loans are a promising start, there are several policies that have been left out of the conversation, which could jump-start the commercialization of much more disruptive advanced reactor designs.

Last week, the Department of Energy announced a major investment in advanced nuclear power, a draft solicitation for up to $12.6 billion in loan guarantees across four categories of innovative nuclear energy technologies: front-end fuel cycle innovation, advanced nuclear reactors, small modular reactors, and upgrades or uprates to existing reactors.

These loans are great news for the dozens of US companies developing cutting-edge nuclear power technologies that are struggling to find support in the US market. From TerraPower’s travelling wave reactor, to GE-Hitachi’s integral fast reactor, to Transatomic’s waste-burning molten salt reactor, there’s no shortage of groundbreaking engineering going on in the US nuclear industry. The DOE’s announcement shows that the Obama administration is serious about tackling climate change and that nuclear power will play an important role.

The Advanced Nuclear Energy Projects loan guarantee is significant in that it funds two areas that don’t get a lot of press but could have an outsized impact on America’s nuclear future: front-end innovation and uprates and upgrades. The front end of the nuclear fuel cycle has a lot of opportunity for innovation and can move much faster than licensing new reactor designs. Uprates, where the nameplate capacity or maximum power output of a plant is increased through equipment upgrades, provide more concrete benefits. A Breakthrough analysis found that from 1996 to 2012, the United States added 4.6GW of nuclear generating capacity just through uprates, all without building a single new plant.

Despite what the title Advanced Nuclear suggests, the loan guarantees also can be used for equipment upgrades on existing reactors that are “not operating and cannot operate without such improvements.” While not as exciting as building next-generation nuclear plants, preventing the closure of existing zero-carbon energy can forestall just as much carbon emissions at a much cheaper price. Might part of the loan be used to resurrect plants such as San Onofre or save floundering plants threatened with closure?

While many groups, including the Breakthrough Institute, have been calling for such an investment, we have also highlighted other policies that could help fast-track the commercialization of safer and cheaper advanced nuclear reactors.

The DOE first offered loan guarantees for nuclear power in 2005, with Congress authorizing up to $17.5 billion. And in 2011, the Obama administration called to raise that amount to $36 billion. However, demand for these loan guarantees failed to materialize. While the pair of new reactors under construction in Georgia did get a loan guarantee of $8.3 billion, another plant in South Carolina decided to stick with commercial financing rather than jump through DOE’s hoops. This experience suggests that such loan guarantees are perhaps not needed for conventional nuclear power, but might be very much in demand for truly groundbreaking designs.

Lessons can be learned from the recent DOE funding opportunity for the commercialization of small modular reactors (SMRs). While the solicitation was open to any type of SMR, most assumed the DOE would choose a more traditional light-water design, as they eventually did, even though some advanced SMR designs were submitted (such as General Atomics’ gas-cooled fast reactor). Relatedly, the rules for the Advanced Nuclear loan guarantee appear biased against the more disruptive advanced reactors in which China, Russia, and India are investing billions: molten salt, fast breeder, high-temperature gas-cooled reactors, lead-cooled and sodium-cooled fast reactors, or even fusion.

For example, applicants for this loan guarantee must have already filed or obtained regulatory approval, a significant obstacle for many reactor developers. The Nuclear Regulatory Commission is not currently reviewing application for any Generation IV reactor. Furthermore, almost all applicants must provide the specific project location for their build, another obstacle when most utilities aren’t even building traditional light-water reactors. Among the rubrics for determining a potential project’s merit, the DOE lists both “technical readiness” and innovativeness as compared to existing commercial technology, which significantly narrows the field of nuclear reactor technology.

As Breakthrough has argued in the report How to Make Nuclear Cheap, the DOE should be supporting nuclear innovation through parallel policies. They could fund testbeds where reactor developers can build prototypes and experiment in a safe environment, or fund an initiative within the NRC to accelerate the licensing process for innovative nuclear power concepts, or invest in advanced steels research and manufacturing facilities to build up the domestic nuclear supply chain.

With the recent funding award of up to $452 million for two small modular reactor developers, Babcock & Wilcox and Nuscale, one wonders if these guaranteed loans are targeted towards the eventual deployment of these SMRs once they finish licensing approval. That’s not such a bad idea when at least two more nuclear reactors are going to retire in the US in the next five years- in addition to 60 GW of coal power that we’d hope to replace with a zero-carbon baseload option like nuclear- and small-modular reactors could replace these even faster.

So while the loan guarantee may not get us the most exciting advanced nuclear reactors, it’s a big step in the right direction. By developing the domestic nuclear supply chain and re-investing in the existing reactor fleet, the DOE can keep the domestic nuclear innovation ecosystem alive and well.

Jessica Lovering's picture

Thank Jessica for the Post!

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Discussions

Bob Meinetz's picture
Bob Meinetz on Oct 8, 2014 3:44 pm GMT

Jessica, in conversations with many in the molten-salt reactor community, I’ve repeatedly come across the claim that “Big Uranium” (the uranium industry) is using political muscle to block, directly or indirectly, investment in thorium cycle technology.

It does seem that DOE is doing a lot of “conspicuous overlooking” of potential in this promising area. Your thoughts?

Michael Keller's picture
Michael Keller on Oct 8, 2014 6:39 pm GMT

Seems to me the proposed DOE loan guarantees are symptomatic of a profound problem.

Conventional nuclear plants (including conventional SMR’s) are not capable of competing in the US marketplace, yet the DOE continues attempting to prop-up a nearly dead horse with billions and billions of dollars. Worse, according to their charter, the DOE is charged with helping develop energy, not the implementation of commercial energy projects. Yet, that is exactly what the DOE loan guarantees are, with the clear intent of picking the winners in the marketplace, although they are actually trying to continue the existence of economic losers.

If nuclear power is to move forward, then more advanced and competitive approaches are required. Not only is the DOE essentially absent in providing support for such efforts, they are clearly engaged in outright discrimination against smaller US firms from which innovation commonly springs.

In the final analysis, I believe the DOE is actually implementing deeply flawed directions from their political masters (that would be the Obama regime), with the driver being “global warming”. Politics and optics trumps all, with no sound economic analysis ever employed. As one sage once observed “It’s only money and it’s not even ours”. That appears to be the DOE motto.

 

Jeffrey Miller's picture
Jeffrey Miller on Oct 8, 2014 6:44 pm GMT

Jessica, very informative article and a good, if small, step in the right direction by the DOE. As a follow up to Bob’s question, how do we get to the point where the DOE is willing to support the more innovative Gen IV technologies in the ways that you outline:

“fund testbeds where reactor developers can build prototypes and experiment in a safe environment, or fund an initiative within the NRC to accelerate the licensing process for innovative nuclear power concepts, or invest in advanced steels research and manufacturing facilities to build up the domestic nuclear supply chain.” ?

These three steps are obviously desirable if one’s goal is to encourage nuclear innovation. You can’t build a nuclear reactor in your garage so we need to provide an environment where people can build and tinker with prototypes if we really want to encourage innovation. So why isn’t the DOE doing these things? Is it, as Bob suggests, because established nuclear companies don’t welcome dramatic changes in their industry because these changes could disrupt their business models? Is it because of political resistance? Risk aversion by the DOE? Other reasons?

I’m convinced that if we were to do what many of the start-up nuclear companies want to do – build smallish ~100MW, standardized modular reactor cores in large quantities in a factory and then ship them to the site –  we could lower costs dramatically. The question is how to we get there – how do we get the DOE and the NRC on board with a program like this?

 

Stephen Nielsen's picture
Stephen Nielsen on Oct 12, 2014 1:55 am GMT

Most people equate loan guarantees with subsidies and taxes. I could drive a Maserati if tax payers were cosigning and paying my insurance bill. Sweet deal for the well connected muckity mucks at Exelon, Entergy or nulclear research programs. By comparison RE research is much cheaper.

Jessica Lovering's picture
Jessica Lovering on Oct 14, 2014 9:04 pm GMT

I agree that subsidies have a bad reputation, but the truth is that the government has always invested in risky technologies for the public good (think railroads, public health initiative, highway system). Renewable energy appears cheaper because it is also benefiting from much more direct subsidies: investment tax credits, production tax credits, feed-in-tariffs, renewable portfolio standards, loan guarantees, etc. Important to note than the previous round of loan guarantees for traditional nuclear power were under-subscribed. The two AP1000s in South Carolina are being built without loan guarantees because they got better rates through private banks.

 

Jessica Lovering

Senior Energy Analyst

The Breakthrough Institute

 

@J_Lovering

Jessica Lovering's picture
Jessica Lovering on Oct 14, 2014 9:12 pm GMT

Yes, there are many promising GenIV nuclear technologies, but I don’t think the DOE in intentionally ignoring any in particular. The DOE does fund a large amount of R&D around molten salt reactors at universities and national labs around the country. The main reason that MSRE was shut down in the 1960s was that the sodium-cooled fast reactor was seen as more promising and given priority. Thorium-fueled molten salt reactors still have some technical challenges that need to be overcome, which is why there’s lots of research being funded.

 

Jessica Lovering

Senior Energy Analyst

The Breakthrough Institute

 

@J_Lovering

Bob Meinetz's picture
Bob Meinetz on Oct 14, 2014 9:21 pm GMT

Thanks Jessica, I was not aware MSRs had any domestic funding at all. Do you know specifically which universities / labs are working on them?

Jessica Lovering's picture
Jessica Lovering on Oct 14, 2014 9:22 pm GMT

That’s a great question, Jeffrey. From talking with people at DOE and some national labs, it seems like they don’t have the *authority* to build and test reactors on site. Specifically, national labs are allowed to build nuclear reactors only if they have absolutely nothing to do with generating electricity. And OMB has limited the ability of labs to spend money on projects that fall more in the realm of commercial technologies. These are potentially easy fixes though; the Obama Administration and DOE could grant labs the authority to host prototypes or design and test their own commercial reactors.

 

Jessica Lovering

Senior Energy Analyst

The Breakthrough Institute

 

@J_Lovering

 

Jessica Lovering's picture
Jessica Lovering on Oct 14, 2014 9:27 pm GMT

Per Peterson at University of California Berkeley has a program designing a high-temperature salt-cooled reactor: http://pb-ahtr.nuc.berkeley.edu/

And a similar program at MIT led by Charles Forsberg: http://web.mit.edu/nse/people/research/forsberg.html

Michael Keller's picture
Michael Keller on Oct 14, 2014 10:15 pm GMT

At the risk of irking some in the university community, they are pretty much out-of-touch with the practical world. The world of small business is where a lot of that kind of expertise resides; obtained by actually building and running real stuff. Yet the DOE is essentially absent in providing help. Of course, the cynical might observe the DOE continues the practice of buying votes in academia for the Democratic Party by distributing money.

Bob Meinetz's picture
Bob Meinetz on Oct 14, 2014 10:32 pm GMT

Jessica, it appears that both programs, though using molten salt as a coolant, use pebble fuel with an enriched uranium core (non-breeding).

Proliferation risk, dependency on relatively expensive uranium, inability to recycle nuclear waste, and safety are still significant issues with these technologies compared to LFTRs. And the $7 million DOE awarded to MIT is, in my opinion, an order of magnitude less than what is needed to jumpstart a new nuclear technology.

Materials and moderator-durability challenges exist with LFTRs, but none are discouraging India and China from vigorously funding LFTR research. That would suggest DOE’s lack of support is for reasons which are more political and/or financial than scientific.

Jeffrey Miller's picture
Jeffrey Miller on Oct 14, 2014 10:59 pm GMT

It’s interesting that the adminstration and DOE could grant labs the authority to host prototypes or design and test their own commercial reactors. It would be great if they did so. It’s encouraging that small companies and labs are designing new reactors, but without the ability to actually build them and see how they operate and experiment with ideas on how they can be improved,  real progress will be slow. People learn by doing and one of the big problems with nuclear is that it is almost impossible, outside of the DOE, to experiment.    

Jessica Lovering's picture
Jessica Lovering on Oct 14, 2014 11:15 pm GMT

The TRISO pebbles can also be made with Thorium, that’s what China is using for the first phase of molten salt (TMSR-SF). The demonstration plant of the TMSR-SF won’t be complete until 2025 at the earliest. The very first liquid fueled plant in China won’t be finished until 2025, with a demonstration plant planned for 2035.

We’re starting with fuel pebbles because there’s a lot of experience using pebbles and an existing supply chain for producing them. 

And yes, China is investing heavily ($350M) in molten salt, but the US DOE is collaborating on this project, with a specific knowledge-sharing agreement. Why should the US pursue a costly parallel research program, when we can collaborate with the Chinese and they foot the bill? Can you imagine a bill passing congress to spend hundreds of millions to commercialize a technology that won’t be ready until 2040?

Currently, the only advanced reactors operating in India (and China) are sodium-cooled fast reactors. India’s development of molten salt designs is still experimental and mostly aspirational. There’s still a lot of R&D to be done for liquid-fueled reactors, and I think it will go faster if countries collaborate and focus on pragmatic step-wise solutions.

 

Jessica Lovering

Senior Energy Analyst

The Breakthrough Institute

 

@J_Lovering

Bob Meinetz's picture
Bob Meinetz on Oct 15, 2014 12:40 am GMT

Jessica, no I can’t imagine such a bill passing congress, but I’m having a hard time imagining any bill passing congress these days.

Thanks for your answers, they all make sense. The DOE’s priorities are inconceivable to me, however. ORNL spent five years constructing the original MSRE; with the knowledge we’ve already gained we could have a test reactor operational in two and be gathering data. Somehow in 2014 it’s taking three superpowers twelve years to put a test together?

Last year, DOE’s renewable energy budget was $1.7 billion, almost twice nuclear’s budget ($889 million) for clean energy, and it makes up one-fifth as much U.S. generation. Whether wind and solar will ever make a significant contribution in the fight against global warming is doubtful.

Something is very wrong at the top.

Stephen Nielsen's picture
Stephen Nielsen on Oct 15, 2014 7:39 am GMT

When is the Summer project now set to start building? 2019?  2020? Companies that build big ticket items like this know nuclear construction politics and know that they can max their profits if taxpayers are footing their bill. Negotiations are ongoing… and a lot can happen in four or five years

Bob Meinetz's picture
Bob Meinetz on Oct 15, 2014 8:48 am GMT

Stephen, construction on Summer began a year and a half ago, and the project is scheduled to be operational 2018-2019.

Stephen Nielsen's picture
Stephen Nielsen on Oct 15, 2014 1:17 pm GMT

Right on time, right? As I suspected would be the case (because it always has been in the past), the cost overruns and delays have begun. 

 http://www.world-nuclear-news.org/NN-Cost-of-Summer-AP1000s-increases-03...

I fully expect that taxpayers will get stuck before everything is said and done.

Bob Meinetz's picture
Bob Meinetz on Oct 15, 2014 3:37 pm GMT

Stephen, as much as nucleophobes try to portray it that way, this is not a phenomenon limited to nuclear.

Cape Wind has been delayed for six years; the price has gone up from original esimates by 328%, and will cost ratepayers 2x the price of nuclear.

What do Cape Wind and Nuclear Power Have in Common?

https://www.physicsforums.com/threads/what-do-cape-wind-and-nuclear-powe...

Michael Keller's picture
Michael Keller on Oct 15, 2014 4:18 pm GMT

We are not talking about experiments, but moving innovative technology forward. That ability requires practical knowledge, a commodity generally in short supply in academia.

Your assessment of large companies also has issues. By their nature, large organizations are ponderous and have trouble with innovation because individuals tend to be rather well removed from reaping the fruits of their efforts. Also, the “new” designs of Westinghouse and Areva are hardly new, being just re-treads of a mature technology (light water reactors).

Smaller organizations (businesses) tend to be more nimble, with the entrepreneur having a direct financial stake in success. That is why small businesses tend to be key sources of innovation.

Ever heard of Microsoft? Started in a garage.

 

Michael Keller's picture
Michael Keller on Oct 15, 2014 4:30 pm GMT

I am quite familiar with how the US government squanders stupefying amounts of taxpayer money on efforts that are fundamentally paybacks for those supplying money to politicians running for office.

Incidentally, the US government “inventing” horizontal drilling is myth perpetrated by oxygen-wasting bureaucrats – a wily Texan oilman and his small company did.

Michael Keller's picture
Michael Keller on Oct 15, 2014 4:40 pm GMT

Small point. About a week or so ago, the folks building the reactors in South Carolina announced a delay of about a year and costs drifting upward another billion or so dollars.

Contrast that with the construction of combined-cycle power plants that get built quickly, cheaply and startup as planned. Reasons are pretty simple:(1) lot less steel, concrete, pipe, wire, etc.; (2) absence of legions of government bureaucrats and their minions slowing everything down to a crawl (time = money).

Michael Keller's picture
Michael Keller on Oct 15, 2014 4:59 pm GMT

I seriously doubt the government labs could design a commercial power plant, as they do not possess the necessary expertise and most certainly could not pull it off in a cost effective fashion. However, they do have the expertise to develop and test complex design elements; pretty much the reason the labs exist in the first place. Commercial companies generally do not have that kind of expertise, as their focus is implementation, as opposed to R&D. The focus on the short term “bottom line” tends to be an issue in the US.

Stephen Nielsen's picture
Stephen Nielsen on Oct 15, 2014 6:02 pm GMT

1. You can’t tell me that the people building these things aren’t happy as clams when a delay (possibly engineered by themselves) occurs – they work longer and get paid more

2. Nuclear needs to be regulated – It’s an inherent property of the energy source.  Why the hell does wind need to be regulated? – It’s NIMBY garbage and entirely political.

3. Large scale and big money is what attracts government gremlins. More and more RE is local, small scale and easy to build right down to individuals – this is something that should be encouraged

4. I am not a “nucleophobe” because I don’t want Mr Taxman in my pocket

Bob Meinetz's picture
Bob Meinetz on Oct 15, 2014 9:06 pm GMT

Stephen, nuclear does need to be regulated. The inherent property of nuclear is that it’s extremely powerful, and with that power comes responsibility.

Wind doesn’t need to be regulated for the simple reason it generates very little power. For that reason, developers have to build hundreds of them to have something that’s useful. The result takes up a lot of space, and it’s something many people consider an eyesore.

Maybe they don’t bother you; I suppose John D. Rockefeller felt the same way about oil derricks. But the life cycle of wind turbines goes something like this: they work for a decade or two, they’re not as profitable as people were led to believe, they wear out, no one wants to pay to get rid of their rusting hulks, they become part of the landscape (for all practical purposes) forever. Despite improvements in technology, I assure you promises for San Gorgonio Wind Farm in the 1980s were every bit as enthusiastic as current ones. Now the desert around Palm Springs, CA is a garbage dump.

What was once another exciting new wind project: Broken Promises: the Rusting Wind Turbines of Hawaii

VC Summer Nuclear Generating Station will be generating reliable power for forty years after hurricanes have reduced Cape Wind to rusty matchsticks.

Bob Meinetz's picture
Bob Meinetz on Oct 15, 2014 8:58 pm GMT

Michael, coal plants are even cheaper. They’re also dirty, they maintain our reliance on fossil fuels, and they add carbon to the atmosphere. Fossil fuels – both coal and gas – are responsible for roughly 12,000 deaths in the U.S. every year from respiratory disease; nuclear is responsible for roughly zero.

Global warming deniers don’t seem to mind, but they’re a dying breed.

Michael Keller's picture
Michael Keller on Oct 15, 2014 9:49 pm GMT

In the US, large new nuclear plants deliver power at a price about 2.2 times that of a natural gas plant, with coal about 1.3 times that of natural gas. Small nuclear plants are about 3 times that of natural gas.

Nuclear is pretty safe, as long as they don’t break, like Chernobyl, Fukushima, Three Mile Island. Therein lies the rub. Reactors need to be much safer and cost effective than the 1950’s technology of conventional reactors. Ditto for spent fuel. Modern technology can accomplish these goals, but the US government provides little help, preferring instead to spend vast sums of money on a technology that is well past its prime.

FYI In my opinion, man turning the planet into a sauna is speculation, with the actual physical data completely at odds with climate models forecasts of Armagedden. I would not use climate warming as a justification to deploy conventional nuclear power; nuclear needs to win on economic merits or go to the scrap heap of obsolete technologies.

Michael Keller's picture
Michael Keller on Oct 15, 2014 9:57 pm GMT

No regulation for wind you say? Tell that to the birds & bats who get killed every year, including large numbers of eagles and hawks while the wind turbine owners are immune to the laws with which everyone else must comply. Try shooting an eagle and see what happens. Wind turbines are also truly delightful to be around, unless of course you’d like to sleep soundly in your bed.

You are right about the more or less useless value of wind turbines for power generation.

Nathan Wilson's picture
Nathan Wilson on Oct 16, 2014 3:59 am GMT

I’m not sure what metric you are using when you say nuclear is not sufficiently safe.  Given that the most popular alternative kills 10,000 American each year (fossil fuel), and Fukushima and Three Mile Island combined have killed a total of zero people, I dispute your claim.

Regarding nuclear costs, I would note that the fleet average cost (combining new and old, paid-for plants, and assuming the fleet is built and replace over a period of 60 years) is the same or better than the alternatives.  It is unfortunate that the free market does not like to spend money on infrastructure which will confer most of it benefits upon our children and grandkids, but the fact remains that the nuclear option need not cost more than continued fossil fuel use.

Nathan Wilson's picture
Nathan Wilson on Oct 16, 2014 4:27 am GMT

Yes, these are called Organically Cooled Reactors.  Being flammable, I suppose oil is in the same group as sodium (with every little flamming leak bringing discrace upon the industry), but I would prefer sodium, since it can support fast spectrum with actinide disposal and breeding for inexhaustible energy.  

But I really like the molten salt cooled reactors, with pebble or other TRISO type fuel.  The safety case for these is so compelling that they are about the only kind of reactor that I would envision being used in densely populated areas for co-generation with district heating (gas-cooled pebble bed reactors are similarly safe, but will likely cost much more).  Also, their high temperature heat output is promising for thermo-chemical hydrogen production.  They are also well suited to the addition of thermal energy storage (with the same solar salt which is used in CSP plants), so they would work well in a solar PV dominated grid.  And they are a stepping stones to LFTRs.

Nathan Wilson's picture
Nathan Wilson on Oct 17, 2014 9:29 pm GMT

Haven’t you followed the story of SpaceX?  They have proven that vigorous young companies can walk in and eat the big emcumbents’ lunch.  Of course it works best in a growing market  (which nuclear is in developing nations), and it requires technically savy leadership and a funding source which is committed.

The other secret of SpaceX’s success is that all the high technology they needed for their product was available almost off-the-shelf from the same suppliers that the government and big companies use.  I suspect that things are not too different in the nuclear industry.

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