https://www.atlanticcouncil.org/wp-content/uploads/2020/01/Nuclear-Finance-final-web-version.pdf
Introduction:
International cooperation and the co-financing of nuclear reactors.
It is critically important for global safety standards, nonproliferation agreements,
and geopolitics that the United States play a leading role in the export
of nuclear energy technologies. However, the domestic reactor fleet has struggled due to the deregulated US electricity market, inexpensive gas, and subsidies for renewables, which—in turn—has hampered US nuclear exports, since it is challenging to export a product that lacks a domestic market.
However, building new reactors and bringing first-of-a-kind reactors to
demonstration involve high capital costs and financial risk, for the purchasing
party as well as the vendor.
If the United States is to play a role at all in building new nuclear plants, it must address the challenges inherent in financing new nuclear builds; one mechanism to do this is through partnering with close US allies to co-finance new nuclear projects.
If the United States and its allies fail to make their nuclear exports competitive, they will likely cede the mantle of global leadership in that area to Russia and China, where nuclear companies are state owned, easily able to finance nuclear exports, and already exploring
emerging markets for nuclear exports.
A 2017 policy paper by US think tank Third Way argued, “France, the UK, Korea, Japan and Canada are all nuclear exporters who share [US] safety, security and democratic values.
While individually we will all struggle to compete with Russia and China, we can cooperate to put together appeal-ing financing deals.” It is critical that the United States work to co-finance nuclear exports with allies, since US suppliers “can only sell nuclear power fuel or equipment abroad subject to a civil nuclear cooperation agreement,” known as a Section 123 agreement.2 Furthermore, since nuclear agreements establish decades-long diplomatic relationships, diplomatic stability is key.
It should ideally not be subject to policy changes, like the 2018 restrictions on civil nuclear technology exports to China.
An international co-financing scheme between the United States and its allies is one way of competing with state-owned nuclear enterprises in Russia and China.
The financial aspect is merely one component of international cooperation that fits into a broader framework that includes regulatory harmonization, diplomatic agreements, standards for safety and nonproliferation, research and development (R&D),
and reactor demonstration.
However, this issue brief focuses specifically on international co-financing as a way of
bringing down transaction costs for the United States and its allies, even if the allies in question ultimately become market competitors.
As of October 2019, thirty countries were “considering, planning or starting” nuclear power programs.
Many of these are not members of the Organisation for Economic Co-operation and Development (OECD), and they are interested in acquiring civil nuclear Advanced nuclear technologies, like small modular reactors (SMRs) with capacities up to 300 megawatts
(MW), are often especially appealing in emerging markets where the need for reliable zero-carbon energy is pronounced, but current grid structures cannot support large
light-water reactors (LWRs).
Growing demand in traditional and emerging markets for advanced reactors represents
an opportunity for the United States to export new nuclear technologies and regain a global leadership position.
Russia and, to a lesser extent, China have identified these emerging nuclear markets, in OECD countries and especially in non-OECD countries, as opportunities not just to
sell their technologies, but to enter into long-term diplomatic and financial agreements.
This issue brief examines the nature of cooperation between the United States and its allies to finance nuclear reactors, and it also looks at how international governing
bodies like the International Atomic Energy Agency (IAEA) have facilitated co-financing efforts.
This issue brief argues for the importance of US involvement in nuclear exports, with co-financing as a key method for lowering the costs associated with being a vendor of nuclear technologies, especially in markets where Russia and China are working to build nuclear reactors.
Finally, this brief makes recommendations for ways in which the United States can streamline its export-financing mechanisms and reclaim its authority as a global leader in exporting nuclear technologies.
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