Report on Draft RFP 89243223RNE000031 and Implications for Silex Systems/GLE
Background: The Department of Energy (DOE) released a draft Request for Proposals (RFP) on June 5, 2023 to acquire High-Assay Low Enriched Uranium (HALEU) enriched to 19.75-<20% U235. All enrichment and storage must take place in the U.S. The contract will be hybrid FFP and FFP with economic price adjustment. The base period of performance is 10 years.
The key objectives are to establish domestic HALEU production, support the HALEU Availability Program and nuclear fleet, and promote supply chain resilience/diversity. The RFP specifies NRC licensing and regulatory compliance for facilities/activities. Proposals will be evaluated based on technical, management, and pricing criteria. Multiple awards possible.
Policy drivers like the Russia-Ukraine conflict increase the need for domestic enrichment capacity and supply chain diversity, creating an opportunity for new technologies and suppliers. However, the challenges of demonstrating and commercializing new enrichment technology like SILEX are substantial, especially given the lack of proven experience and performance at scale. For Silex Systems/GLE, the viability of their proposal and technology ultimately depends on balancing these factors.
Implications and Analysis for Silex Systems/GLE:
Opportunity: The global situation strengthened the case for domestic HALEU capacity, diversity from Rosatom. This tailwind provides an opening for Silex/GLE despite technology risks. Policy support for innovation also motivates considering new options.
Challenges: SILEX remains unproven on a commercial scale after 30+ years, posing major cost, schedule, and viability risks relative to established technologies. Key concerns include:
1. Capital intensity and lack of demonstration: Significant investment and uncertainty to reach commercial viability. Disadvantages Silex/GLE on experience/capabilities. Requires a compelling, realistic plan to address.
2. Established technologies favored?: RFP evaluation focuses on experience/capabilities, favoring proven technologies/suppliers. Silex/GLE likely rates lower without commercial demonstration. Strong plan to address risks needed but uncertainty remains.
3. Feasibility and instilling confidence: Challenging as SILEX is unproven commercially. Needs to demonstrate technical capabilities, mature NRC licensing/compliance planning, risk management, applicable experience, and potentially partnerships. Recent examples include accident-tolerant fuels and SMRs.
4. Cost/schedule overruns and performance risks: High given lack of proven technology/experience. Could significantly impact competitiveness/viability without careful management. Major deviations may not be supported despite policy goals. Staged deployments could reduce risks.
5. Proliferation risks: Laser enrichment may be easier to conceal, raising proliferation concerns. Must satisfy regulators and balance risks, especially commercially. Could disadvantage versus centrifuges.
In summary, Silex/GLE faces substantial barriers to commercializing SILEX and competing despite motivations for new technology. Demonstrating an ability to navigate technical requirements, satisfy regulators and contain risks is essential to improving viability but challenging given lack of proven performance. Meaningful uncertainties remain, requiring acceptance to support innovation.
With policy flexibility and assuming staged/risk-managed deployment, SILEX/GLE may be viable if their proposal can: address experience gaps with plans/partnerships, prove resources to meet requirements, detail risk-based cost/schedule estimates, and show applicability to other sectors. But reaching full demonstration depends on continued support and surmounting obstacles inherent in new nuclear technology. Overall, this opportunity and RFP seem poised between the promise of new technology and the challenges of demonstrating and commercializing it amid complex regulation.
*** I also asked it questions about some of the issues it raised re the RFP and Silex. Below are a couple of the follow-up responses it gave (with all the same caveats outlined above) ***
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Here is an expanded discussion of the NRC licensing and regulatory requirements specified in the RFP, along with an analysis of how well positioned Silex/GLE may be in addressing these and other RFP criteria:
NRC Licensing and Regulatory Compliance:
The RFP specifies that all enrichment activities and facilities in proposals must meet U.S. Nuclear Regulatory Commission (NRC) licensing and regulatory compliance. This requires:
1. Licensing of enrichment facilities: NRC licenses facilities under its Part 70 regulations on Domestic Licensing of Special Nuclear Material. Licenses require detailed applications demonstrating safety, security, environmental protection, and establish requirements like performance testing, record-keeping, reporting, inspections, etc. New laser enrichment facilities would face additional scrutiny to approve a new technology at a commercial scale.
2. Compliance with safety and safeguards regulations: Including Part 70 on Domestic Licensing of Special Nuclear Material, Part 76 on Certification of Gaseous Diffusion Plants, and Part 95 on Facility Security Clearance and Safeguarding of National Security Information and Restricted Data. These establish safety standards, material control/accounting, classification, and security standards for enrichment facilities to prevent accidents, ensure safety, and avoid diversion/misuse of technology/materials. Compliance require in-depth analyses, planning, standards, procedures, training, documentation, reporting, and implementation subject to inspection.
Silex/GLE Positioning to Meet these and Other RFP Requirements:
- Experience and Past Performance (Criteria 1 & 3): As discussed, Silex/GLE likely rates lower here given the lack of proven technology and commercial-scale experience. Their proposal would need to instil high confidence in ability to satisfy these stringent, complex regulatory and safety/security standards to offset this disadvantage. SILEX's long development may work against them unless they can prove lessons have been learned and risks mitigated.
- Project Approach (Criterion 2): Silex/GLE would need to demonstrate a mature, well-developed, and feasible plan for navigating the multi-year NRC licensing process and implementing commercial production while meeting all regulations. Their approach and planning must address technical, safety, security, and risk elements in significant depth and account for technology viability risks. Less than a full, evidence-backed demonstration of how they would achieve this could jeopardize their competitiveness.
- Small Business Utilization (Criterion 4): Less relevant here, but partnerships with other nuclear/security entities could boost confidence. Reliance solely on themselves poses more unknowns.
-Price (Criterion 5): Difficult to determine without insight into costs/uncertainties around their technology and NRC activities. Their price would need to account for these risks, and major variances could signal flaws in understanding the requirements or viability. A policy priority on diversity may provide some flexibility, but avoids disproportionate premiums.
In summary, while the geopolitical factors create an opportunity for Silex/GLE and their novel technology approach, demonstrating an in-depth, mature understanding of the technical, safety and security requirements, especially commercial-scale NRC licensing, seems essential to improving the viability of their proposal and competitiveness. The level of detail and evidence provided around navigating the multi-year licensing process, safeguards, risks, and technology viability may significantly impact the view of their ability to meet requirements and ultimately balance policy priorities. An inability to instill confidence in these areas could pose substantial obstacles even if selected for the opportunity. Overall, their positioning depends on proving sufficient capabilities and experience with these special nuclear material and radiological challenges.
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Here is an expanded discussion of the RFP's Price criterion and implications for Silex/GLE:
The RFP specifies that proposals will be evaluated on price to determine whether proposed costs are reasonable. The Total Evaluated Price consists of:
1. The firm-fixed-price (FFP) for the base period (CLIN 1) - This covers initial activities in the first year, including applications for permits and licenses. For new technologies like SILEX, this FFP would need to account for the additional time/resources to develop applications given lack of directly applicable experience. Underestimating could signal lack of understanding.
2. The average FFP across option years 2-8 (CLINs 2-8) based on a minimum quantity of 25 MT HALEU. This average FFP would need to reasonably account for the costs to operate a commercial-scale enrichment facility over 5-10 years, especially given additional uncertainties for unproven technology.
While price is less important than technical and risk factors, significant issues include:
1. Price realism and potential for deviation: Major variances in actual costs or timeline could signal flaws in their understanding of technical demands, oversight, or viability. This threatens competitiveness even if selected. Price may need to build in adequate contingency and account for risks.
2. Challenges determining reasonable price range: Especially for new technology. Policy goals provide flexibility but avoiding a disproportionate premium depends on mitigating viability concerns. More speculative prices decrease confidence.
3. Difficulty containing costs: Once selected, costs and timeline for first-of-a-kind nuclear facilities frequently expand. This is problematic without price ceiling and risks jeopardizing objectives.
Implications for Silex/GLE:
1. CLIN 1 FFP: Must account for additional time/resources for new technology to develop applications. Underestimating suggests lack of experience and maturity in planning.
2. CLINs 2-8 Average FFP: Must reasonably accommodate commercial-scale operation for 5-10 years given technical and oversight uncertainties. Lower confidence in speculative prices. Higher prices require greater assurance of managing risks.
3. Justifying and containing proposed and actual costs: Silex/GLE would need to defend costs, show adequate contingency, and ability to operate as planned if selected. Cost escalation threats viability and competitiveness.
4. Balancing new technology and commercial risks: Proposed prices will be evaluated for both realism in achieving policy goals with new technology and viability as a business opportunity. An disconnect between support for innovation and requirements for normal commercial risk acceptance threatens both.
In summary, the RFP's focus on price for selection and oversight poses additional challenges for proposals involving unproven enrichment technology like SILEX. Care must be taken to avoid speculative prices and prove sufficient understanding of the commercial and technical uncertainties involved, including during regulatory approval and operational phases. For Silex/GLE, a balanced approach that considers policy goals and normal commercial viability demands will be needed in developing and defending a price range that builds in adequate contingency for managing risks of escalating costs and schedules while also providing value. Overall, this may be difficult to achieve without continued partnership and risk-sharing over the demonstration timeline.
(20min delay)