Courtesy of Clay Montgomery on Twitter
The DoE finally released their Deconversion RFP, a few weeks ago. It didn't get much attention, but it's hugely important because it shows progress towards the critical second part, the Enrichment RFP. They divided the RFP document into two parts, for Deconversion and for Enrichment, because they will be supplied by disparate companies with very different capital requirements. But, together, these RFPs will become the new map of the future US nuclear fuel supply industry and their release is about to make the winners obvious.
https://energy.gov/ne/articles/us-department-energy-issues-haleu-deconversion-request-proposals…
"DOE plans to issue a second RFP later this year, which focuses on acquiring, storing, and transporting enriched uranium hexafluoride gas to the deconverters." - US DoE
The DoE has worked quietly on this plan for about 3 years. See how that sentence implies the second RFP is about facilitating deconversion? It's a pathetic attempt at obfuscation.
What are they trying to hide?
Welcome to my World!
The lack of available uranium enrichment capacity in the West is the biggest problem facing the nuclear power and uranium mining industries today. It's the bottleneck that utilities are waiting to see resolved before they step-up their uranium supply contracting game, in earnest. They require the US government to fix this bottleneck and they don't want to be bound to a lot of legacy contracts, signed before this new, incentivized public-private framework is installed.
Deconversion (UF6 to UO2) is actually a minor step in the fuel chain that's currently done by the existing fuel assembly fabricators, Westinghouse, GE-Hitachi and Framatome. But, isotope enrichment requires huge new infrastructure, which has yet to be financed or built. It's the most expensive part of the whole nuclear fuel supply chain, by far. It's ironic that uranium price volatility was the major factor that delayed the Enrichment RFP. But, most enrichers refuse to assume that risk and the DoE was careful not to shut-out potential suppliers because of foreign ownership, size or ability to raise capital. What matters is their ability to economically deliver enriched uranium product, which has been established by technology readiness demonstrations that have been in development for years, such as GLE's test loop in North Carolina, and the DoE's centrifuge cascade, built and operated by Centrus Energy in Ohio.
So, the DoE is hoping they can quietly install this new framework to fund multiple, huge, new enrichment capacity construction projects to save the US nuclear industry from itself. Pay no attention to the precarious state of the current industry, due to decades of poor leadership and reliance on cheap Russian LEU imports. And, BTW, the other company that will be hired to rebuild the US nuclear fuel industry to replace the Russian imports, is a tiny, pre-revenue, Australian technology company that's not even on Wall Street's radar!
The pressure from Congress and utilities on the DoE to get these RFPs released and awarded is enormous. I spoke to Mike Goff about it in August, and he insisted they will be released by the end of 2023. Dr. Goff is the Principal Deputy Assistant Secretary for the US Department of Energy's Office of Nuclear Energy. The Deconversion RFP announcement seems to confirm this, "DOE plans to issue a second RFP later this year". The release of the Deconversion RFP didn't attract much attention because much less money is involved, but it's important because it shows progress toward the second part, which is much more complicated and important. The deadline for the Deconversion proposals is the end of January and the timing for awards on the Enrichment RFP will also be as fast. But, there's a lot more money at stake.
There is a third part, for uranium conversion (U308 to UF6) infrastructure BTW, which also needs major expansion. But, that was another RFP, already awarded to Honeywell's ConverDyn, last year. They skipped competitive bidding entirely on that, showing how urgent the problem is. Only ConverDyn was in a position to respond quickly enough to that, anyway.
The enrichment problem is too big for any one of these companies to handle alone and Congress will not allow that anyway. Mike Goff agrees. So, while only Centrus has experience building and operating the only US-owned and sourced centrifuges required to produce higher enriched uranium for the military, that cascade is too small (16 tubes) and the tech is too old to scale to the 1200 centrifuges required for the commercial needs. Centrus will certainly get an award to scale to 120 (or maybe 240) centrifuges, but that will still require LEU feedstock supply and their Russian imports will end. My conversations with Centrus indicate they have no intention of ever using foreign-sourced LEU in the DoE's cascade. The DoD won't allow it and neither Urenco nor Orano have centrifuges licensed to provide it.
It takes a lot more centrifuges to produce LEU than to just boost LEU to HALEU. Scaling back the American centrifuge plan to just boost LEU was a clever way to keep the domestic technology alive until Congress appropriates funding. But, only 16 tubes on that factory floor built for thousands looks silly and 240 tubes will still look silly. What was the problem? The large centrifuges cost way more to build than what Urenco and Orano use and cheap fuel from Russia was easy and addictive. But, using the commercial sector to finance the military's cascade didn't work and now Congress has to fix this mess or admit that they gave away another large and critical industry to Russia and China. The last time the cost of building 1200 large centrifuges was estimated, the number was $3.5 Billion, but that was in 2017 and would have only been the first installment.
What's the solution? Lasers! Laser enrichment is more energy efficient and will lower the major cost component of nuclear fuel (it's not the uranium). But, reducing the required capital investment for building a huge new enrichment plant is where lasers will really shine. The DoE has been studying those numbers since 1976. Urenco and Orano are building more centrifuges. But, they've never supplied a military cascade before, or any competitor for the emerging HALEU market, either. What's needed is a new entrant that can handle the big problem of LEU production, at scale, with new technology, and that is not entangled with Europe. That's Silex and their GLE partnership with Cameco. The largest nuclear plant operators, Constellation, Duke Energy and Dominion, have already released public statements about their intent to partner with GLE. They have sent teams of engineers to see GLE's demonstration loop in Wilmington, NC. Cameco hired an independent nuclear engineering company (probably BWXT) to evaluate the technology, before acquiring half of GLE, last year. But, all of these major players are waiting for that Enrichment RFP.
Is the Australian/Canadian ownership of Silex a problem? No. The DoE actually has a mandate to diversify fuel supply risks by funding multiple projects. Silex already operates under the security umbrella of the expanding AUKUS Initiative. Remember that Cameco already acquired Westinghouse, a US company, and the largest fuel assembly maker in the world.
The DoE is intentionally opaque. But, it helps to look at their history. Laser enrichment technology began at the Los Alamos labs back in 1976 and they produced educational videos about the economic opportunity of recycling depleted UF6, using laser enrichment. The DoE also required USEC (Centrus' original name) to develop it further. USEC's bankruptcy required finding a new home for the technology, so it was sold to the Australian start-up, Silex. But, the DoE still needs this technology to solve the huge depleted UF6 problem that they own. Look at the acres of depleted UF6 tanks shown in this video from 1976. Only laser enrichment is efficient enough to recycle that material, and it's already converted to UF6. Remember that the conversion shortage is even more acute.
https://youtube.com/watch?v=WG54YNKiKZY&t=2s…
The media only listens to the DoE Secretary. But, she's just a political appointee, building her resume by delivering the White House narratives on "renewables". Recently, Granholm has been forced to talk about nuclear, but only for export. Everyone now agrees that the US should at least try to regain this global industry that we gave away to Russia and China. But, building a complete domestic fuel industry is a critical requirement for that. Scaling the DoE's Centrus cascade, only to be fed LEU from Russia or Europe, is not going to fly. And domestic LEU supply is even more important than HALEU, because it's required by the existing commercial nuclear fleet. GLE is not just the only domestic solution for LEU supply, and depleted UF6 recycling, it's also the DoE's best hope to avoid another political fiasco. A foreign-owned company incorporated and operating exclusively in the US under the AUKUS Initiative, is more politically tenable than Urenco or Orano, which have histories of nuclear technology proliferation and licensing restrictions against military use. The South China Sea is a real problem for Australia and they will need fuel for their nuclear-powered submarines, as well.
I expect the release of the Enrichment RFP to boost the shares of Centrus, Silex and Cameco, immediately. But, the real fireworks will be when the DoE announces the contract winners. The time in between should be short because the participants already know what's in it. That was the purpose of the HALEU Consortium, created last year, to keep all prospective bidders in the loop.
I also think the Enrichment RFP release is likely to precipitate some mergers and acquisitions, even before the awards. Cameco wants to purchase more of Silex's shares in GLE, before the market drives the Silex share price up. Cameco does not usually talk about GLE, unless prompted. That's because they still have the option to purchase another 25% of GLE from Silex, up to 75% of the GLE shares. But, the price they must pay depends on the market price of SLX shares. So, it's not in Cameco's interest to brag about GLE, until their purchase option is done.
Listen to Judge Merrifield, USNIC, testify to the Congressional committees working to fund the DoE's fuel enrichment programs. He explains that only 20% of US commercial needs can be produced in the US now and that even the HEU fuel for the planned 6-8 AUKUS nuclear submarines are at risk if construction does not begin soon.
https://energy.senate.gov/hearings/2023/11/full-committee-hearing-to-examine-opportunities-and-challenges-associated-with-advanced-nuclear-reactor-commercialization…
Considering the history, the winners in the upcoming Enrichment RFP contract awards are becoming obvious. Centrus Energy will get a contract to expand the DoE's cascade and use more of that empty floor space. They will continue to operate and expand the major source of domestic HALEU, but they will also need GLE to provide commercial quantities of LEU to feed that cascade, from recycled UF6.
Urenco-USA will probably win a contract, also. They are already expanding their centrifuge cascade in New Mexico by 15% to produce LEU+ (enriched up to 10% U235). But, Urenco is owned by the governments of Britain, Germany and France, and a new laser technology entrant is required.
#uranium #nuclear $SLX.AX $LEU $CCJ
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