The 300 billion dollar question
“Big or small we need it all.” Representatives of the US and Canadian authorities are challenging the nuclear industry to deliver on commercialization with fresh urgency
It was the last panel of Reuter’s SMR and Advanced Reactors 2023 conference. The ballroom at Hyatt Regency Atlanta was still plenty full, but the attendees are already plotting their escape — a beeline to the airport, or maybe a crisp post-conference beer.
Julie Kozeracki, Senior Advisor to the US Department of Energy’s Loan Programs Office (LPO) was about to snap all the wandering minds of the conventioneers back to their full attention.
“I have US$300 billions in loan authority,” she declared. And yes, she emphasized lest there be any confusion, that is “billion with a B.”
“The plan is to build 200GW of new nuclear. What do we need to get there? By the way, we are already behind.”
You can almost hear the crowd perk up. What is this US$300 billion in LPO money, and how can nuclear get in line?
A wake-up call and a call to action
The LPO money, explained Kozeracki, has to be committed by September of 2026 and dispersed by 2031.
“Nuclear is off track. We do not have time to waste. I encourage us to focus on building customer momentum,” said Kozeracki to the room full of freshly-alert nuclear industry professionals, “You are behind if you haven’t selected a site. You are behind if you haven’t thought about constructibility. You need to move today.”
The next two years are going to be critical, agreed her Canadian co-panelist Justin Hannah, Director of the Nuclear Energy Division at Natural Resources Canada.
“It’s like 10 minutes in the morning getting ready for work is a lot more valuable than 10 minutes at night,” Hannah explained.
Of course it is not as simple as putting up your hand to get that LPO money.
“There are some nuclear applications in the LPO pipeline, specifically the manufacturing communities seeking to expand their capacity with an eye to the nuclear market,” said Kozeracki, “but we have a lack of signed contracts. We need committed orders from customers so we can see a path to repayment.”
“If Julie can’t find a home for that money south of the border we are happy to take it,” joked Hannah, perhaps a reference to the fact that the most solid partnership for new-build SMRs is centered around Ontario Power Generation’s (OPG) plan to put a BWRX-300 on its Darlington site by 2028. Those contracts — not the MOUs or letters of intent the industry loves so much — are signed.
“People outside this room don’t believe these timelines.”
“How does the industry convince its customers it’s not going to be Vogtle all over again,” asked Kozeracki. The nuclear industry has “a huge credibility problem to be solved.”
No new design, unusual coolant or smaller size is going to allow the industry to magically go around the elephant in the room — the “exorbitant” cost overruns at Plant Vogtle, and even more ruinously, the project abandonment at VC Summers that fills utility customers with dread.
The key learning from Vogtle and Summers is that the designs were not ready when those projects were committed, and that’s what got them tied up in regulatory and design issues. By the way, a $12 billion loan from the LPO was what got Vogtle over the line, along with a team that had to “run through a wall” to get the pair of AP1000s from Westinghouse back on track. It’s going to be attention to these lessons-learnt that will reassure customers, not a new technology.
In preparing the “Pathway to Commercial Liftoff: Advanced Nuclear” report for the US D.O.E. and in attending conferences like the one we were at, Kozeracki said she found too many nuclear people geeking out with each other about nuclear, and a disturbing lack of what she calls “customer-centricity”.
“People outside this room don’t believe these timelines,” she said.
One Team One Goal: The Integrated Project Delivery approach
One way the industry is trying to avoid a painful replay of Vogtle on a smaller scale is by moving away from the “Engineering, Procurement, Construction” (EPC) approach to an “Integrated Project Delivery” (IPD) model for project delivery. It is what is being used at the BWRX-300 builds, said Hannah, with partners OPG, TVA (Tennessee Valley Authority) and Poland’s Synthos Green Energy coming together to pool resources to finalize the design and bring it to a higher level of maturity prior to construction.
“The intent is to create a structure that incentivizes common goals and objectives and eliminate the situation where peoplere are focused on fulfilling their end of the delivery plan and it becomes very fraught with contractual disputes. Everyone loses once you go down that pathway.”
The IPD is a “shared pain shared gain” approach. If one member of the consortium is lagging, the others are incentivized to pull them back up. “This is something we will see more of,” said Hannah.
In terms of what the government can do to help encourage stakeholders to take the first-of-a-kind plunge, Kozeracki raised the possibility of Cost Overrun Insurance as a risk backstop. Tiered grants are another way to incentivize first and early movers. The problem is, it is critical to avoid “onesies and twosies” projects, but nothing happens if everybody’s waiting to go fourth. Industry needs to work collaboratively with the D.O.E. to figure out how to make it work.
“In the United State we have a ‘private sector led, government enabled’ system,” said Kozerack, “this is why we need more specific input on what the industry needs from the government.”
“Big or small, we need it all”
The fresh urgency of the messages delivered by Kozeracki and Hannah might have something to do with a slew of recent reports underlining the huge amount of electricity markets need to achieve decarbonization goals, and the high actual costs of renewables-dominent grids. For instance, the financial advisory firm Lazard recently updated their widely-known Levelized Cost of Energy (LCOE) estimates to account for firming intermittency, resulting in far higher LCOE for renewables.
“The value nuclear provides to the grid is recognized,” said Kozeracki, “it doesn’t need to compete with cheap solar. It needs to compete with other ‘clean firm’: solar paired with long-duration storage, geothermal, gas with carbon capture. Out of all of those, nuclear is the only one we know from past experience can come down in price at scale.”
“Once you look at the system-level cost lens, it changes the discussion completely,” said Hannah.
The realization that nuclear is not just needed, but in relatively large amounts, is also causing governments to pivot from their previous laser-focus on SMR and advanced reactors. In short, “the arithmetics doesn’t work without large reactors.”
“We called [Canada’s nuclear development strategy] the SMR roadmap for a reason,” said Hannah, “we were not contemplating large until more recently.”
A December 2022 report from IESO found that Ontario, Canada’s most populous jurisdiction, will need 18 GW of nuclear above and beyond their existing CANDU capacity to account for load growth and electrification.
“That opened the discussion: Large or small, we need them all.”
ANGELICA’S TAKE
I have long been frustrated by the “tunnel vision” focus on Small Modular Reactors, both by the US and Canadian governments and by the nuclear industry at large. The SMR concept has its place, and I’m excited by a number of excellent concepts. But making nuclear small does not solve nuclear’s existing problems, and keeping nuclear small will prevent the technology from reaching its full decarbonization potential.
I would therefore like to affirm and cheer the pivot by the US and Canada back to a more balanced approach that includes what I like to call our BBRs — Big, Beautiful Reactors — in the conversation. A reminder that there is a 7.2GW pipeline of new nuclear with active Combined Licenses that is being slept on right now, mostly projects with AP1000 reactors, the same make-and-model as Unit 3 and 4 at Plant Vogtle. Why are we not turning around and building Turkey Point Unit 6 and 7 in Florida to capitalize on the supply chain we built up for Vogtle? Go get that LPO money!
The industry — whether small or large nuclear — is being challenged. The support is there, to the tune of $300 billion in the US alone, but they have to be rigorous and get solid contract signed to get it…easier said than done. I wonder at the end of the day how much of that $300 billion in loans will be given out to nuclear projects. Meanwhile, here is a tweet striking a cautiously optimistic tone by Jigar Shah, Julie Kozeracki’s boss:
https://twitter.com/JigarShahDC/status/1655279631962894336?s=20
Yes, we need more large nuclear. Much more. Yet, the cost and time of an NRC operating license in the USA is still an overwhelming burden. I do like that the loans are for signed contracts. We need to replace the closing coal plants!
Affordability should be a top rank quality of electricity generating technologies, right alongside energy security; pollution free; dispatchable.
GE Hitachi's BWRX-300's LCOE in 21021 was stated at $44/MWh to $51/MWh which may have risen by 10% to 15% to compare with the Lazard 2023 bar chart figures. IMO BBRs will never be able to compete with the BWRX-300, which begs the question why bother with BBRs when they are not able to deliver electricity in its most affordable form?
Apart from a significant affordability advantage the BWRX-300 [SMRs] have over BBRs, there are also other advantages:
The build programmes for SMRs are between 2 and 4 years compared to 6 to 10 years for BBRs.
SMRs are much more investable as commercial money markets will not hesitate to raise the investment capital, whereas government money and all the attendant ill-publicity and extra costs associated with BBRs need not enter into the formula for SMRs.
Although we all know the likelihood of accidents to Gen III+ BBRs are disappearingly small, the smaller source term of SMRs is a huge advantage in allaying the concerns of politicians and public and the 'fire power' of financed anti-nuke NGOs.
The 'safety radius' (EPZ) for SMRs at ¼ mile (the boundary fence) compares to a 10 mile EPZ radius for BBRs. Whilst the PR advantages for politicians, vis a vis the electorate, are huge, there are also massive savings in costs to be gained.
Can Angelica or anyone think of advantages BBRs have over SMRs?