By Josh Freed, Todd Allen, Ted Nordhaus, and Jessica Lovering
In a February 17 article, our colleague Michael Shellenberger calls for a massive, state-directed consolidation of the nuclear sector in developed economies. A single state-sponsored nuclear behemoth, consolidating the nuclear divisions of Toshiba, Westinghouse, General Electric, Areva, and EDF would deploy a single standardized light-water reactor design in the United States, Japan, Great Britain, and western Europe and compete with Korea, China, and Russia for export markets abroad. To assure demand for the new conglomerate’s product, low-cost public loans would encourage utilities in developed economies to build the new standardized reactor.
As we discussed in a previous post, Shellenberger’s analysis is based upon a mischaracterization of the drivers of nuclear costs around the world. His follow-up proposal is further problematized by a misreading of recent developments in both the aviation and nuclear industries. In this post we consider what might be learned from the aviation industry, the geopolitical reasons why consolidation is unlikely, and how US policies and institutions will need to change in order to revive the nuclear industry.
A Cautionary Tale
The explicit model for Shellenberger’s proposal is Airbus, which competes with Boeing to divide the global market for wide-bodied aircraft. But if anything, Airbus offers a cautionary tale for the kind of problems an international industrial nuclear consortium might face. Many of those problems began with the huge bet that Airbus and its member companies made on the A380.
The A380 was designed and built to take well-established aviation technology and scale it up, in order to capture economies of scale associated with carrying more people around the world on fewer planes. But Airbus massively misread the changing aviation market, designing an aircraft a third larger than a 747 to serve the traditional hub and spoke design of international air travel at precisely the moment greater fuel efficiency and longer ranges for smaller aircraft were disrupting that model, allowing cheap point to point international air travel that had historically not been feasible.
If anything, Airbus offers a cautionary tale for the kind of problems an international industrial nuclear consortium might face.
Boeing by contrast anticipated that market and designed a new aircraft from the ground up to take advantage of it. The 787 may not have broken with jet propulsion technology, a fact that Shellenberger invokes in order to claim that it represented an incremental evolution of jet airplane design. But in multiple ways, the 787 represents precisely the sort of radical break from traditional aviation technology that Shellenberger rejects.
Where the A380 was a third larger than a 747, the 787 was a third smaller than Boeing’s flagship.[i] The jet engines for the 787 were radically redesigned, with a hybrid electric jet propulsion system that dramatically improved fuel efficiency. The chassis was entirely built from carbon composites, the first large aircraft ever to be built primarily of carbon, not aluminum.
The 787 has sold well and is now widely accepted to represent the future of long distance air travel. The A380 has seen poor sales and has mostly been purchased by state sponsored airlines, most famously Emirates. It is difficult to say to what degree Airbus’ consortia ownership contributed to its failed bet on the A380. But if there is an aviation analog to the approach to nuclear deployment that Shellenberger is advocating, it is Airbus and the A380, not Boeing and the 787. That, if nothing else, should give nuclear advocates pause when considering the sort of centralized, state-led, multinational nuclear consortium that Shellenberger is calling for.
The Geopolitics of Nuclear Energy
There are multiple further challenges that agitate against the sort of multinational nuclear consortium that Shellenberger advocates. The various geopolitical imperatives that have driven nations to invest in substantial nuclear energy capacities have also historically driven nations to endeavor to indigenize their nuclear industries and supply chains.
Most reactor fleets around the world started with licensing established reactor designs. Almost all, one way or another, can be traced back to early US light-water reactor designs. Japan bought and built reactors from GE and Westinghouse, later leasing these designs. France’s large fleet of reactors trace their origins to a Westinghouse design. While Korea initially built Canadian heavy-water reactors and French pressurized water reactors, its standardized reactor fleet is based on a pressurized reactor from Combustion Engineering, an American firm.
The primary focus in all of those nations was then to indigenize the designs they had licensed and develop domestic supply chains such that their energy security could not be compromised by geopolitical competitors — that, after all, was the reason that most nations went nuclear in the first place.
Shellenberger argues that those imperatives no longer hold. Russia and now Korea are building and even operating reactors in other countries. China is an investor in the proposed European Pressurized Reactor in Great Britain and is clearly ramping up its domestic nuclear industry with one eye squarely on the export market. And Great Britain has decided to allow state-owned foreign companies to build planned new reactors rather than rebuild its domestic industry.
But once a nation has relinquished those geopolitical imperatives, it is unclear what else would motivate the kind of consortium that Shellenberger envisions. If Korean or Chinese companies are already producing standardized reactors based upon well established technologies, mature supply chains, and experience gleaned from multiple previous builds, what reason is there for the United States, Great Britain, and France to make large public investments to reinvent that particular wheel?
Absent some meaningful technological innovation, it’s not clear what Airbus Nuclear would have to offer that its competitors didn’t.
The only ostensible reasons — safety and jobs — could as easily be achieved without the creation of a new consortium. Any foreign firm would have to go through the same licensing process in Great Britain or the United States as would the new consortium and would be subject to the same regulatory oversight during construction and operations. And any deal to have foreign firms build new plants in developed nations could include domestic content or manufacturing requirements to assure that there are substantial local employment benefits.
Moreover, it is not clear what comparative advantage such a consortium would bring in export markets. China, Korea, and Russia already have first mover advantage and aren’t burdened by the sorts of complications that a multinational Airbus style consortium would have to navigate among its members before negotiating with its export targets. Absent some meaningful technological innovation, it’s not clear what Airbus Nuclear would have to offer that its competitors didn’t.
Shellenberger does suggest that the member nations would also make large shared investments in “alternate” reactors. But if one accepts the basic premise of Shellenberger’s argument, it is hard to imagine why they would. He argues that technological innovation in reactor designs impedes learning-by-doing and that alternatives to light water reactors are unlikely to bring significant cost benefits. Why then invest in research and development for alternative reactors?
Innovate or Die
If Shellenberger’s proposal doesn’t hold up very well under scrutiny, it does help clarify the choice that nuclear advocates and policy-makers today face. The industry is in crisis. That crisis, at bottom, is the result of the industry’s inability to adapt to changing economic, institutional, and technological realities. Shellenberger argues that we can turn back the clock on those realities. Our view is that we cannot.
In a world in which fossil fuels are cheap and abundant, not costly and scarce, nuclear will need to be substantially cheaper to build than it has historically been even under better circumstances. That sort of cost decline will not be possible so long as reactors are water-cooled and operated at high atmospheric pressures, requiring enormous containment structures, multiply redundant back-up cooling systems, and water cooling towers and ponds, which account for much of the cost associated with building light-water reactors[ii].
Nor will it be possible so long as nuclear reactors must be constructed on site one gigawatt at a time. At one GW scale, the only way to get learning-by-doing is to basically commit a substantial share of national generation to a single reactor type and design, as France and Korea have done. And as we note above, there are few places, if any, where there is likely to be sufficient geopolitical reason to do so.
At 10 MW or 100 MW, by contrast, there is ample opportunity for learning by doing and economies of multiples for several reactor classes and designs, even in the absence of rapid demand growth or geopolitical imperatives.
Radical nuclear innovation must be informed by markets, end users, and modern fabrication and manufacturing methods.
A radical break from the light water regime that would enable this sort of innovation is not a small undertaking and will require a major reorganization of the nuclear sector. State-led development of advanced designs, bringing together large incumbent firms and scientists from national laboratories failed in United States, France, Britain, Japan, and Germany in the 60’s and 70’s. It will likely fail as well in Korea, China, France, and Russia today.
What will be necessary is not new physics. The basic physics of virtually all nuclear fission technologies has been well understood and demonstrated by America’s national laboratories since the late 1950’s. Rather, radical nuclear innovation must be informed by markets, end users, and modern fabrication and manufacturing methods. This is centrally a job for entrepreneurial engineers, not scientists at national laboratories, technocrats at the Department of Energy, or division heads at Westinghouse or General Electric.
Public policy that empowers nuclear innovation and entrepreneurship will need to support engineers and start-ups, not direct them. Such a shift would be major, but not unprecedented. The era of cheap genetic decoding became a reality when decades of federal research and development was handed off to Craig Ventor, an entrepreneur who used technologies and basic science pioneered by federal scientists to develop a better and cheaper way to decode the human genome. This made possible the modern biotech sector, which was further enabled by important changes in the way that the FDA licensed and tested new drugs, and by changes to the federal tax code and to patent law that incentivized public institutions to get research out of their laboratories and into the hands of entrepreneurs and venture capitalists.
NASA over the last two decades has undergone a similar transformation, creating policies and incentives to support a diverse and growing commercial space industry where space flight was once the sole province of NASA and its large contractors.
A strong federal program will support early innovation at universities to spawn new entrepreneurs, open up the national laboratories to provide start-ups with technical advice, test facilities, and test beds, reform NRC licensing for advanced reactors, and provide advanced market commitments and other competitive grants for companies that demonstrate that they can build reactors at economically competitive costs.
None of these measures, individually or in sum, are any guarantee that we will develop cheap, economically competitive advanced nuclear reactors. But there is little reason to think that large light-water reactors have much future outside of a few rapidly growing state-led economies in Asia or that continuing, incremental innovation in light-water design is likely to change that.
Today, there is a growing advanced nuclear sector in United States that is ready to transform the nuclear industry if we are willing to give it the chance. Innovation, in nuclear technology, business models, and the underlying structure of the sector, not revanchism, is what will be required to save America’s nuclear industry.
[i] Note: Several different metrics for size (passengers, length, weight) give different comparisons. http://www.telegraph.co.uk/travel/news/Boeing-Dreamliner-787-Airbus-A380-and-the-jumbo-jet-How-do-they-compare/
[ii] Black & Vetch Holding Company. Cost and Performance data for Power Generation Technologies. National Renewable Energy Laboratory (2012).
Josh Freed is the Vice President for Clean Energy at Third Way. Todd Allen, Ph.D., is a Professor at the University of Wisconsin College of Engineering and Senior Visiting Fellow at Third Way. Ted Nordhaus is the Co-founder and Executive Director and Jessica Lovering is the Director of Energy at The Breakthrough Institute.