Change NRC cost recovery rule for small reactors
26 June 2009
In a widely read OP ED published in the Wall Street Journal on June 25,
Bob Metcalfe, a well-known entrepreneur and venture capitalist,
complained about the high costs and astronomical risks of the design
certification process at the U.S. Nuclear Regulatory Commission (NRC).
He points out there are at least five start-ups, some funded with20
venture capital, that are facing design certification costs of as much
as $50-100 million each. Most of these costs, which the NRC must
recover by law, will be driven by the fact that the new designs are not
light water reactors. Hence,the NRC will have to spend considerable
time moving up a steep learning curve at the applicant s expense. For
investors, that s a lot of money and a lot of risk and all the while
the product is not moving
towards a market.
Metcalfe is right, and his complaint needs a solution
Mr. Metcalfe is absolutely right that the NRC's reactor design
certification step is likely to be the place where the development of
small reactors meets its fate. In an interview I conducted with NRC
former chairman Dale Klein (left) June 16 in Atlanta, GA, at the annual
meeting of the American Nuclear Society, he said that developers of
small reactors will have to meet the same tests for safety as the big
baseload plants.
To be successful the firms promoting small reactors must do more than
make sketches. There are the same serious issues with safety systems
and reliability that the vendors of large system have to address. These
issues apply with equal vigor under our regulations to small reactors.
This is consistent with a speech he gave in 2008 when he said that
small reactors had the NRC's attention and he called on the nuclear
industry to work with
the NRC to identify the key issues that would
need to be addressed in the design certification process for them
The start-up firms that are developing new nuclear reactors in the
range of 100-300 MW simply do not have $50-100 million to pay for NRC's
review. Even billionaire Bill Gates, who's foundation is paying for
development of a "Traveling Wave" reactor, may find he has limits when
it comes to paying for government oversight.
The NRC has an important role in making sure nuclear reactors are safe.
Congress needs to look at the cost reimbursement issue and make changes
so that innovation in the nuclear industry isn't killed off by the way
the NRC gets its funds.
A modest proposal in five easy pieces
There are lots of ideas floating around about what to do about
Metcalfe's complaint. Here are five easy pieces for immediate action.
First, change the formula by which the NRC recovers costs from small
reactors for design certification reviews. Instead of requiring the
start-ups to pay for all of the costs, require them to pay for a
complete application. In other words, hold them accountable for getting
their design docketed by the NRC. This requirement will insure the
NRC s limited time, and stretched to the limit workforce, will not be
wasted by stock speculators with kitchen table top
sketches. Once the docketed application was in hand, the NRC would
turn to a new line item appropriat
ion to pay for most of the design
certification costs.
Second, establish a line item appropriation to fund the NRC to conduct
the design certification reviews of new reactors that are docketed and
which meet certain technical criteria. Examples include power (less
than 500 MW), the benefits of simplified design and below grade
installation, in terms of reduced risk of coolant and core damage
accidents, less fuel handling due to longer period of burn up of
initial fuel load, and so on.
Third, the message to large reactor vendors, who will complain that
this is a subsidy to their competition, is that they are well
positioned to help sell and service these reactor designs once they are
certified by the NRC.
While this proposal would significantly cut regulatory costs for
start-up investors, they still face daunting challenges getting their
products to market and that includes building or leasing manufacturing
capacity. The large reactor vendors are in a position to form joint
ventures with small reactor firms to supply manufacturing capacity and
sales/distribution support in return for a combination of equity and
profits.
Fourth, the small reactors should consider forming a trade group to
promote their interests which includes legislative proposals like this
one. The cost of a lawyer and an engineer in Washington, DC, for a year
probably could be had for less than $500,000. These firms should also
for
m technical and regulatory working groups to provide input to the
NRC on how it could streamline the current reactor design certification
process for their innovative reactors without compromising safety.
Fifth, take the show on the road to the large reactor vendors. Convince
them that there are potential profits to be had through joint ventures
for manufacturing, sales, and services. Investors in small reactors
want the fastest path possible to a return on investment. That means
they don t want to pay for or wait for small reactor vendors to build
their own infrastructure or global marketing organizations. For
instance, Mr. Metcalfe, the venture capitalist, if he did invest in one
of these firms, would want to cash out from his position in five years.
What NRC and Congress can do now
There is also something for the NRC to do. It should start talks now
with the small reactor firms and with its congressional appropriations
committee to explore an alternative form of funding so that American
innovation and export earnings don t die on the vine because of the
current cost recovery law.
The Congressional Budget Office (CBO) should be asked to calculate the
cost of the change in NRC s funding formula and also the benefits in
terms of tax revenues from new businesses that would become profitable,
along with their payrolls and high economic multiplier effects, once
the reactor designs were certified for=2
0sale.
Energy Sec. Steven Chu could weigh in with a real commitment to the
Next Generation Nuclear Plant (NGNP) making it a test bed for
applications for small reactors, e.g., process heat, hydrogen
production, as well as electricity. There is also work which is needed
on fuel types, materials, and balance of plant, e.g., new types of
turbines, that would benefit from government funded R&D. Small reactor
vendors could work with the Idaho National Laboratory (INL) through
Cooperative Research and Development Agreements (CRADAs) to move their
R&D agendas ahead.
This isn t a complete package, but there ought to be enough ideas for
the small reactor start-ups to stop publishing OP EDs and start doing
something to advance their interests. Their investors will likely thank
them if they do.
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Idaho Samizdat ~ http://djysrv.blogspot.com