US-based Centrus has had two distinct business lines over the past decade: marketing to US utilities low-enriched uranium (LEU) purchased from Rosatom's Tenex, France's Orano, and other suppliers, and developing AC100M "American Centrifuges" at a plant in Piketon, Ohio, for use producing high-assay low-enriched uranium (Haleu). Following Russia's February 2022 invasion of Ukraine, how Centrus plans to shift its business has become a key variable in the Western nuclear fuel market. Centrus CEO Dan Poneman, who previous to his job at Centrus worked as Deputy Secretary of Energy at the US Department of Energy (DOE), sat down with Energy Intelligence's Jessica Sondgeroth to discuss what's next for Centrus, and how it hopes to change to supply the nuclear fuel market. A shortened and edited version of their conversation is below.
Q: You recently received regulatory approval from the US Nuclear Regulatory Commission (NRC) to introduce uranium to the AC100M American Centrifuge Plant. Where you are now with the demonstration project?
A: It's a very exciting moment. We have completed our operational readiness review. We have completed the construction of almost everything. We still have to finish the construction of a storage area for the Haleu that gets produced. And we have some modest testing. But all of that is subsequent to the NRC approval — which we received last week — to bring uranium gas into the machines, and that is the critical-path item. The next thing we will be able to do is actually start operating the machines and produce product, which will be later this year. This will be the first new US technology, US-owned facility, to begin uranium enrichment since 1954.
Q: That's a long time.
A: 70 years.
Q: In terms of Technology Readiness Level, where would you put the project now?
A: We are at TRL 8 now and will reach TRL 9 by the end of this year when we begin production.
Q: I hear levels 6 and 7 are the hardest to overcome.
A: We're very happy with this technology. We have 3.5 million hours of run-time, testing-wise. We have worked through a number of issues over the years. We are very excited about and confident in the technology.
Q: Haleu also requires deconversion. What are Centrus' plans for deconversion of the material you'll be enriching?
A: It's still under consideration. As you know, there's no approved packaging of Haleu in the form of uranium hexafluoride [UF6], so there is an industrial logic to taking the UF6 that comes off the cascade and converting it into solid uranium oxide, which has a package approved for shipment, before you have to ship it anywhere. We're looking at technology options for that. We have not made a final decision.
Q: Do you have a timeline for when you expect to make a decision on that?
A: I think it would be soonish.
Q: In the immediate term you require LEU, and going to production of LEU would be a huge regulatory hurdle...
A: No. 4.95% [U-235] is typically how one thinks about the feedstock to make Haleu, because it's available as a commodity. So the special sauce, so to speak, is going from 4.95% to 19.75%. But our license allows us to go up to 20%, and by definition 4.95% is within the parameters of 20%. So if we chose to, if we had the right kind of demand signal, we could produce LEU alongside Haleu at our facility and do so well within the bounds of our existing NRC license.
Q: As for a demand signal, you're in early talks with a lot of advanced reactor vendors, but they obviously have stuff to do before they can purchase Haleu. How will you be able to get a sufficient demand signal from these companies when they're simultaneously looking for a clear signal on the availability of fuel supply from you and other Haleu suppliers?
A: The key to making a project bankable is having firm long-term offtake agreements with creditworthy offtakers. That's why the US government is a very good offtaker. So I think the business models are still evolving in this new advanced reactor community, and obviously startup companies don't have huge existing order books. They obviously don't have huge balance sheets, and investor ratings, and so forth. Therefore what is happening is they are lining up their contingent commitments, and we are trying to line up a contingent ability to supply.
But it's a classic chicken and egg. Nobody wants to order 10 reactors without a guaranteed fuel supply. And nobody wants to invest in a guaranteed fuel supply without 10 reactor orders. This is why governments exist: to bridge gaps like this when there's a national security imperative, both in terms of supply-chain resilience and in terms of climate targets. That's why I'm very happy that the government, including the US Congress, is now beginning to make investments of a scale that can meaningful meaningfully contribute.
Q: Today you mentioned $2.4 billion as a number you're looking at...
A: It's not the number we're looking at. This is the number that the House Subcommittee for Appropriations has marked up. [This passed out of the subcommittee on Jun. 22.]
Q: And is that sufficient to bridge that gap?
A: It depends how the government invests that money, but that would make a very important contribution.
Q: Supposing government in this quantity, more or less, what is your long-term view of the Haleu market, 5 to 10 years from now?
A: I think that if this market is going to move, it's going to have to move at scale. The DOE looks to an overall demand for Haleu of 40 metric tons by 2030. That's ambitious but it's not out of reach. I think that would be achievable. From a decision to proceed, we could actually build another cascade of 120 machines in 42 months. And another cascade every six months after that. So within 48 months from now, if we had a decision today, we could be producing 13 metric tons of Haleu per year. And that would be a very meaningful contribution. Once this fuel conundrum is addressed, I think the sky's the limit.
Q: Centrus has contracts to take supply from Rosatom's Tenex through 2028. What does the Centrus business model look like post-2028?
A: We still have some supply after that from France, and some other things, but our strategic purpose is and has been to pivot. You'll notice the contract with Tenex is called TSA, and the "T" in TSA stands for "transition": that 2011 contract was always intended to be a transitional contract between the days in which we used to produce, and the days in which we would be producing again. So our aim, our intention, our strategic priority, is basically replacing our imports with our own production. Now, that does not mean that, like any company, we will not retain a trading arm. We could do that. But I think every person in the company is bent and focused on returning to production.
Q: What do you envision will happen to that Russian material going forward? Utilities are already self-sanctioning, but in the event there are actual sanctions?
A: Look, this is a very special market in which memories are very long.
Let me just tell you a very short story. In 1975, there was an expectation that there would be a huge wave of new reactors getting built in the United States. And so it was anticipated there would be a big shortage of enriched uranium. It didn't turn out that way because of Three Mile Island, but it was expected. At that time, the United States, which was providing lots of fuel to other countries, told Brazil, "Hey, our firm commitment to give you enriched uranium — we're going to have to carve that back and make that a conditional commitment." Why am I telling you this story? Because in 2014, 39 years later, I was hosting a Brazilian delegation at the Department of Energy, where I was working. I said "We'd like to supply your fuel." They said, "What about what you did to us in 1975?"
That's all by way of saying that you can't completely destroy your commercial reliability and expect people are going to just waltz back in. I think that we've learned a lesson. The Germans learned a lesson about natural gas, everybody learned a lesson from Covid, and now people are taking energy security and resilience and supply chain seriously.
Once we are established, once we've got that beachhead, I'm not actually that worried that we're not going to be able to sustain it and in fact grow it.
Q: One suggestion I've heard is that if Russian nuclear fuel is completely removed from the Western market, it could just flood the Asian market, and that could eventually balance the global market in its own way.
A: It's kind of like squeezing a balloon. If you squeeze it in one place, the air's just going to move to the other side of the balloon. And that's why when people talk about sanctions, they really have to be thoughtful about the consequences. Because what you say [about Russian nuclear fuel going elsewhere] could in fact happen, and if that were to happen, then this material will end up getting recycled from those Asian markets back to the United States. Contracts that US companies signed before the Ukraine War, when the prices were very low, would be lost. That fuel would then be sold in Asian markets at a much higher price. And then if it ends up all coming back around to the US market, except that now the price is going to be $150/$160 instead of $50 or $60, then that's going to be problematic for US customers. As people think about sanctions, they have got to be looking at the whole world market and how the knock-on effects are going to shake through.
Q: Do you support the waivers through 2028 that are part of a proposal in Congress to ban Russian nuclear fuel imports?
A: I think it's clear — and this has been the formal position of the Nuclear Energy Institute — that we should wean ourselves off of that dependence at the same rate that we replace it with new capacity. You can't build an enrichment plant in three weeks. It takes five or six years to build a new enrichment plant, and so I think we need that time to wean ourselves off of those imports.
Q: When it comes to the other innovative enrichment technologies being proposed, what's your view of what the enrichment market looks like from the supply side perspective?
A: I can only comment knowledgeably about our own technology. and I, I would never presume speak on behalf of any other company. This company [Centrus, formerly Usec] did invest a lot in laser isotope separation about 20 years ago, and like many other things in life, it's harder than it looks. There are very attractive aspects to it, but any enrichment technology faces a lot of challenges in terms of scaling up. And therefore I wish everybody luck, but I think the thing to watch for is the transition from concept — and theoretical and bench-scale success in separation — and scaling up to an industrial scale. Because the devil really is in that scaling-up process.
To be clear, I view this a lot like Boeing airplanes. They were operating 707s when they were developing 727s; they were operating 727s when they were developing the 737, 747, and on and on. I don't view this as a static thing, but I think that the centrifuge design has been shown to be very robust and generally successful. For example, it's significantly more efficient than the gaseous diffusion designs that the old US plants and the old French plants had. After Fukushima basically brought enrichment prices way down, it was the Paducah plant, which still had the old gaseous diffusion technology, that could no longer compete. And so the market will select the most successful technology.
Q: Given the amount of security and confidentiality in some of these new enrichment technologies, how can end-user utilities differentiate between them without security clearances?
A: This is a really interesting question. You could just look at it as a black box and see what comes out on the other end and how much you charge for it. That's the very simple way. But one of the interesting things about the US Department of Energy Loan Program is that for those companies that are looking for investment capital from private markets for advanced technologies that are sensitive, like this one, the loan program actually not only provides technical expertise, but the people of the Department of Energy have security clearances.
Investors don't like technical risk, but investors don't necessarily understand technology as well as DOE and they especially don't understand technology that is black boxed to them because it has dual uses and therefore is classified.
Therefore, the best thing that I think an investor can do if they are not satisfied by just investing in a "black box" technology, is to the extent there could be some imprimatur from the US Department of Energy, if the US Department of Energy gives some kind of vote of confidence, whether in the form of a loan guarantee or a grant, a private investor could take comfort from the knowledge that the people making those technical judgments are doing so on the basis of all the appropriate knowledge that they need. And one of the wonderful things about DOE, which I love as an organization, is that its reputation for intellectual rigor and honesty is completely well-deserved and universally respected.
Q: Thinking globally again, we've seen Chinese enrichers test the international market for uranium enrichment. What's your view of a future Chinese enrichment supply?
A: I would not view that differently than I would view other business with China. They did enter the uranium enrichment market about 10 years ago for a while before the market went down too far. You'd have to talk to the utilities, but let's just say that after those experiences China is still not a huge factor. Of course, they're building a lot of nuclear plants themselves, and their highest priority is going to be satisfying their domestic demand. But to your earlier point, if the world ends up drastically short of uranium because of some of these other supply disruptions, then I think you're going see them present, back in the market. And we'll just have to see if they're successful.
Now that people are thinking about nuclear fuel not as a mere commodity, like shoes or toys, but as a strategic critical-path item for their national survival and ability to advance their geo-strategic interests, I don't think US customers are going to be viewing purchases from China the same as they view purchases from an American supplier or European supplier. I think they'd be more likely to be looked at like the Russians, for obvious reasons. And if you look at some of the discussions going around in Congress, and the discussions around semi-conductors and the concerns about the US dependence on semiconductors for national security, I think some of those very same policy considerations are going to operate on this topic as well.
Q: That covers most of my questions. Any final thoughts?
A: I think there's one other thing to talk about, which is that this is a unique moment. My last book was about two existential threats: the threat of nuclear annihilation and the threat of climate annihilation.
Q: Fun topics!
A: Well it's what keeps me up at night. I think that we're at the cusp of actually advancing a nuclear policy in this country that can help tackle the climate problem without aggravating the weapons problem. We have to do that in a way that we can leverage the fact that the United States still has an ongoing inexorable requirement for enriched uranium to advance our national security missions: both creating tritium for our nuclear weapons and creating naval reactor fuel for our submarines and carriers. And the kind of historic cooperation between the nuclear navy, on the one hand, and [on the other hand] the commercial nuclear sector that was so successful under President Eisenhower and Admiral Rickover, launched the whole commercial nuclear industry in this country, which then helped support the nuclear navy, which then provided navy veterans to support the commercial industry. It created a virtuous feedback loop, where national security supported our energy needs, and our energy industry supported our national security needs.
That's a wonderful system. It's produced thousands, if not hundreds of thousands, of incredible jobs and careers. It has protected our nation, it's defended our freedoms, defended our allies. It has provided half of our clean energy. And it is a robust model and I think it's a model that we should continue to embrace.
Q: Especially if the US government is going to try to switch all of the world's research reactors to Haleu.
A: You know, I didn't mention that, but that's the third thing. To talk in bureaucratic terms, within the [DOE's] National Nuclear Security Administration, you have what's called NA10, the defense programs. They need un unobligated low-enriched uranium to make tritium. And NA20, which is the nonproliferation program, they need Haleu to wean the research reactors, as you just mentioned, from HEU [highly-enriched uranium] to Haleu, and then you have naval reactors, which will need it for the submarines and carriers.
Then on the other side of the house, you've got the [DOE's] Office of Nuclear Energy, which needs it [Haleu] for Gen-4 and the Advanced Reactor Development Program. And then the fifth piece of the puzzle is this American Assured Fuel Supply, which is like a strategic petroleum reserve except for enriched uranium. People now realize we only have six cores-worth in that assured supply, so if the crisis that you have suggested actually were to arise, it sure would be nice to have something of greater scale in the form of a strategic reserve.
