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U.S. Nuclear Sector Set for Major Transformation

Authored by Jack Spencer via RealClear Politics,

The silver lining of this month's United Nations COP28 global warming conference is the growing consensus that nuclear energy is critical to meeting national carbon dioxide reduction goals.

Denying the world access to clean, affordable fuels like gas, oil, and coal is a real problem. But recognizing that nuclear energy must play a pivotal role in our energy future is a major step forward-one that should enjoy widespread support, regardless of one's views on CO2 reductions.

But to go big on nuclear requires thinking big on nuclear energy policy, and that means questioning the subsidize-first mentality that has defined U.S. energy policy for decades.

The goal should not be to build a few nuclear power plants. Rather, we should strive to create an economically sustainable, competitive, innovative and uniquely American nuclear industry.

This will require a realignment of responsibility. The government's role should be to protect public health and safety. The private sector's role should be to operate a competitive commercial nuclear sector.

That means getting rid of the subsidies, rethinking regulation and getting Washington out of nuclear waste management. Washington should have a regulatory role, but not its current role as Nuclear CEO.

The reason is simple: Governments are not good at business, because they make decisions based on politics rather than on good economic sense. This never yields a successful industry.

Some argue that nuclear energy requires more governmental control, suggesting that nuclear presents more financial, technical, and political risks than other industries.

But all big projects have financial risk. Private oil refineries can cost billions of dollars, and projects like skyscrapers, liquid natural gas export terminals and other large industrial projects all require massive capital outlays. Companies and individuals regularly take big financial risks.

Then there is technological risk. But nuclear is not really that different from other industries. With 440 nuclear reactors operating globally, technical risk for existing technology is relatively low. Industry knows how to build and operate nuclear plants.

Possible technological risks with new designs are not beyond the realm of those posed by innovation in other cutting-edge businesses, such as fracking or offshore energy exploration. e. Beyond that, as it pertains to nuclear energy, there is a vast federal research infrastructure in place that the private sector can access to help mitigate that risk.

Political risk, however, is real and uniquely high when it comes to nuclear energy, and it exacerbates financial and technical risk calculations. Any justification for government intervention is based on mitigating government-imposed risk.

But here is the problem.

When government intervenes to mitigate a risk that it has created, it adds another layer of political risk. Worse, it creates dependence, distorts capital flows, incentivizes rent-seeking and lobbying, and forces firms to allocate resources to satisfy politicians and bureaucrats rather than improve its business.

This creates misalignments between responsibility and authorities and undermines economic efficiency.

Even worse, politics often changes, making it difficult to build a sustainable business model around political preferences. At best, this approach could yield a couple of reactors or keep some firms above water, but it won't produce a robust, competitive, innovative nuclear industry. Failure is likely.

The major question is: How does America minimize political risk and allow the private sector to manage other risks, so that a robust industry can emerge?

It will require changing the Department of Energy's role, bold regulatory reforms, and solving the problem of nuclear waste management.

We need to get the Energy Department totally out of the nuclear commercialization business. The problem is not that people are not doing their jobs, the problem is the nature of government.

The Department should not be funding grants, loans, or demonstration projects. Nor should it be attempting to improve operations or economics of existing plants or new technologies. The private sector can do these better than government.

The Energy Department has an important role to play in nuclear research and scientific discovery, but it needs to get as far from any commercialization or commercial operations as possible.

What about regulation?

Worthwhile attempts are being made to improve the Nuclear Regulatory Commission. An efficient, predictable, and affordable regulatory process for new reactor technologies is essential.

But America needs to think bigger.

For example, states could be authorized to take a larger role in nuclear power plant regulation. The Atomic Energy Act of 1954 already allows states to regulate some nuclear materials. That should be expanded. States could regulate existing reactor technology, and the NRC could focus on new technologies. Not all states will use this opportunity, but some will.

This is a reasonable proposition because U.S. utilities have been safely operating large light water reactors for over 50 years. America should not be regulating large light water reactors as new, scary technology, because it is neither new nor scary. The regulatory burden should be significantly lifted on those reactors.

NRC personnel should not be the only ones who can review permit applications and other regulatory review work. Private firms should be able to compete for this business. They would lighten the NRC's load and likely do a quicker job at lower cost.

Lastly, companies should be allowed to build reactors outside the existing NRC regulatory regime if they obtain their own liability insurance against accidents. In exchange they would forgo participation in the federal Price-Anderson program that currently provides liability coverage.

Some might question whether private insurers would cover a nuclear reactor absent a government backstop. But given outstanding safety records of existing reactors and promises that new technologies are safer, this should be an option. Insurance comes in many forms, and no one can predict what could ultimately emerge.

Either way, the insurance industry is extraordinarily sophisticated and does a tremendous job at pricing risk. It will be effective at ensuring that only the safest nuclear plants are built.

Finally, there is the question of what to do with nuclear waste-or, more accurately, spent nuclear fuel.

The federal government took responsibility for managing the nation's spent nuclear fuel in 1982. By removing responsibility from the spent fuel producers, the 1982 Nuclear Waste Policy Act removed any incentive for the nuclear industry to integrate spent fuel management into its long-term business planning and left it instead to Washington bureaucrats. It should surprise no one that the plan has failed.

Reforms are needed to reconnect the nuclear industry to waste management. Reforms would allow for a private spent fuel industry to emerge that would drive innovation in reactor technologies and spent fuel processing. They would allow the nuclear industry and communities to engage in real negotiations, bound by legal contracts, to build and operate spent fuel management facilities.

There is no question that these proposed reforms are a major departure from the status quo, but they are reasonable, not radical. They would foster good governance and economic progress in the industry. As COP28 representatives discuss how to reduce carbon while raising global living standards, nuclear energy should be on the front burner.


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