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Focus on Regulation

DOE Advisory Board Approves Draft Report on the Future of Nuclear Power

During its quarterly meeting on September 22, the U.S. Department of Energy’s (DOE’s) Secretary of Energy Advisory Board approved a Draft Report of the Task Force on Nuclear Power (Draft Report), as reported by Platts Nuclear News Flashes.   The Draft Report, which has a special focus on non-light water “advanced reactors,” now heads to Secretary Moniz for his review.  In its Draft Report, the Task Force recognized that nuclear energy is vital for achieving a planetary reduction of carbon dioxide emissions, but found that two things must happen for nuclear power to remain competitive: first, the overnight cost of financing a new plant must decrease, and second, “electricity markets must recognize the value of carbon-free electricity generation based on the social cost of carbon emissions avoided.”

According to the Task Force, the cost issue is primarily a problem for advanced reactors; as current light water reactor designs would not require significant additional support “assuming market imperfections are resolved.”  The team nonetheless acknowledged that overnight capital costs (OCCs) for light water reactors can and should come down in America, noting that while new U.S. plants have an OCC of greater than $5,000/kWh, South Korea has managed to keep such costs at $2,500/kWh.  For advanced reactors, the Task Force concluded that the federal government should launch on an aggressive program to promote the technological readiness of advanced reactors, with the program separated into four phases.

The Task Force’s suggested advanced reactor program would first focus on down-selecting those technologies with the best chance for exceeding light water reactors on cost, safety, and performance; then on construction and operation of test reactors; before finally moving onto the licensing and construction of commercial prototypes.  The government’s cost share (the program assumes private sector involvement) is estimated in the Draft Report to be over $5 billion per reactor technology type, with the government paying most of the costs for the earlier phases.  Although expensive, the Task Force countered that other technologies, such as wind and solar, have benefited significantly from government support, and such support is similarly justified for advanced reactors as long as there is a reasonable chance of success.

To further assist the development of advanced reactors, the Task Force supported a phased licensing process at the U.S. Nuclear Regulatory Commission (NRC), as well as recent DOE-NRC efforts to establish design criteria for advanced reactors.  The Task Force estimated that the best opportunities for time savings and regulatory certainty could come through improving the earlier-end NRC design review process, preferably through guidance.  The Draft Report also suggests that any program to speed the development of advanced reactors allow for greater contracting flexibility in the types of assistance offered, less adherence to the Federal Acquisition Regulations, access to DOE technical expertise, and the ability to hire and fire project staff on commercial terms.

The Task Force’s recommendation regarding electricity markets was clear – recognize nuclear power financially for its climate change benefits.  In terms of how to do so, it offered three levers: (1) price CO2 production at a level linked to the federal government’s Social Cost of Carbon (estimated to be around $41 per metric ton of CO2); (2) convert renewable-portfolio standards to low-carbon portfolio standards, with New York’s Zero-Emissions Credit program as an example; and (3) redesign regional transmission organization policies and procedures.  The Task Force defended government involvement on the grounds that current markets do not accurately price the harms from greenhouse gasses.

Only time will tell whether the bold measures outlined in the Draft Report will be adopted by Secretary Moniz or the country.  However, as we have noted in an earlier post, the promotion of nuclear power, and advanced reactors in particular, is increasingly a bipartisan initiative, although no single means to do so has emerged.  This Draft Report can go far in developing a clear path forward.  In particular, the Task Force’s embrace of the Social Cost of Carbon, already adopted in New York’s recent Zero-Emissions Credit initiative, could prove influential for policymakers.