Thursday, June 9, 2011

Congress’s Recent Attempts to Promote Small Modular Nuclear Reactors Fall Short

Leave it to the government to attempt to promote something innovative, and end up regulating it to death.

The House and Senate are considering bills that are meant to help development of small and modular nuclear reactors (SMRs). These new reactors could provide all of the attractive qualities of large reactors—such as being safe, emissions-free sources of electricity—but at lower upfront costs with greater flexibility. Unfortunately, the two bills—the Nuclear Energy Research Initiative Improvement Act of 2011 (S. 1067) and the Nuclear Power 2021 Act (S. 512 and H.R. 1808)—would have the opposite impact.

These bills would smother the private-sector initiative that has driven SMR development in recent years. Instead of embracing this new and innovative approach to nuclear energy development, these bills would subject the SMR business to the same government-depressed trajectory that plagues traditional reactors.

A Better Approach

Congress could allow small and alternative reactor technologies to move forward by doing the following:

Reject additional loan guarantees. Proponents of loan guarantees argue that high upfront costs of new large reactors make them unaffordable without loan guarantees. Presumably, then, a smaller, less expensive modular option would be very attractive to private investors even without government intervention. But loan guarantees undermine this advantage by subsidizing the capital costs and risk associated with large reactors. A small-reactor industry without loan guarantees would also provide competition and downward price pressure on large light-water reactors.

Reject subsidies. They do not work. Despite continued attempts to subsidize the nuclear industry into success, the evidence demonstrates that such efforts invariably fail. The nuclear industry’s success stories are rooted in the free market. Two examples include the efficiency and low costs of today’s existing plants and the emergence of a private uranium enrichment industry. On the other hand, government intervention is the cause of the industry’s failures, as illustrated by the government’s inability to meet its nuclear waste disposal obligations.

Build expertise at the NRC. The NRC is built to regulate large light-water reactors. It simply does not have the regulatory expertise to efficiently regulate other technologies, and building that expertise takes time. Helping the NRC to develop that expertise now would help bring new technologies into the marketplace more smoothly.

Establish a new licensing pathway. The current licensing pathway relies on reactor customers to drive the regulatory process. The problem is that the legal, regulatory, and policy apparatus is built to support large light-water reactors, effectively discriminating against other technologies. Establishing an alternative licensing pathway could help build the necessary regulatory support on which commercialization ultimately depends.

More Harm Than Good

It seems that some Senators are making a real effort to help move SMRs forward with S. 1067 and S. 512/H.R.1808. Unfortunately, their efforts would do more harm than good.

In the process of attempting to help SMRs, in practice, these measures would smother the very market forces that have driven the success of SMRs to begin with.

Read full Heritage Foundation article here.

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