Image credit: DPA
by Richard Norris
Table of Contents
- The Greening of the Military
- Too Cheap to Meter
- The Mystery of Capital
- How to Close a Nuclear Power Plant
- Crumbs from the Defence Table
- End Notes
- About the Author
- Canadian Global Affairs Institute
When unidentified combatants appeared in eastern Ukraine in 2014, their menacing presence was incongruously referred to as “the little green men.” Leprechauns they were not. However, these men may have a greener legacy than anyone guessed at the time, because their actions could inadvertently lead to a resurgence of nuclear as a reliable low-carbon energy source.
In the depths of the 2020 COVID-19 lockdown, an intriguing webinar on modular nuclear reactors (MNR) and small modular reactors (SMR) presented a surprising but compelling logic.
In the 2014 Donbass conflict, the Ukrainian ground forces were brought to a juddering halt by an overwhelming set of precision surface-to-surface missile strikes which took out their fuel dumps and fuel-logistics lines. Since at least the Second World War, a standard mode of operation has been to use infantry and armoured brigades in the vanguard, with long supply lines moving the vital fuel up to the front. This mode of operations was rendered obsolete, according to the speaker, “within about 5 minutes of the start of the Donbass offensive.” Which obviously got people thinking. Hard.
Thus, the conclusion was about electrification of the logistics and infantry support powered by small modular (and likely mobile) nuclear reactors. The electrification of the armed forces was not just another greenwashing PR stunt, but a reaction to a new kind of threat.
In a separate discussion, Lt.-Gen. Eric Wesley, deputy commanding general, U.S. Army Futures Command, noted: “The short version is a recognition of the need to have power sources very close to one’s energy demand, and these should be small, compact, mobile and distributed. If we could reduce the fossil fuel consumption by transitioning our wheeled vehicles [to electric motors], you can reduce the volume of travel on your supply route to only [move] fossil fuels for the much heavier vehicles.”1
Of course, small mobile nuclear reactors have been around for over 60 years, running nuclear-powered submarines and aircraft carriers. Expanding this technology away from abundant sea water for cooling to mobile land-based systems requires research and development.
In 2016, the U.S.’s Defense Science Board (DSB) identified energy as a critical aspect and highlighted concern over increasing energy needs and the limitations of intermittent sources. The DSB review concluded that, “the U.S. military could become the beneficiaries of reliable, abundant, and continuous energy through the deployment of nuclear energy power systems.” In 2020, the Pentagon awarded three small contracts on SMR design work.2
In May 2021, the Pentagon launched the more comprehensive Project Pele, with the goal of designing and building a small, truck-mounted portable nuclear reactor in a five-year timeframe.3,4 The private company Holos5 recently unveiled its prototype truck-mounted system.6
In the civilian realm, Russia has launched and put into service the Akademik Lomonosov nuclear-powered ship, which has been operating since December 2019 in the Russian Arctic.7 More recently, both the U.K.8 and France9 have announced support for development of civilian small reactors. The U.K.-backed Rolls-Royce project is the size of a couple of football fields, but is nonetheless modular in design and can be factory-built.
The current civilian enthusiasm for SMRs has been driven by the slowly dawning realization that increased demand requiring low-carbon and reliable energy will need more nuclear power. However, because of the high-profile accidents at Three Mile Island, Chernobyl and Fukushima, nuclear power has been out of favour in most OECD countries for decades. Environmental activists have been very successful in creating a generation’s worth of negative public opinion.
In addition to the environmental questions, a significant argument against nuclear power plants is that they are expensive to build and operate. This is true, but it is not the whole story.
Hinkley Point C in the U.K. has been in the works for years – it is designed to be a 3.2 GW plant with two evolutionary pressurized reactors (EPR). The decision to add Hinkley Point C to the A and B sites was made in 2008 and first power is expected in 2026. Clearly, an 18-year timeline to build a single nuclear plant is not going to help the energy transition in any meaningful way.
In addition, the cost is high and increasing – currently slated to be around £23 billion.10 To justify this capital cost, the electricity will be sold at £92/MWh and this can be made to look expensive when compared to alternatives that can produce electricity at about one-third that cost. However, simply comparing the cost of generation is a mistake, as it says nothing about the reliability of the source or the system’s resilience. Robust baseload is extremely valuable, as Europe found out in September 2021 when the wind stopped blowing and global gas prices increased by over 300 per cent. With the phase-out of coal, and nuclear being an afterthought, expensive gas was generating over 70 per cent of electricity in the U.K. The £92/MWh started to look like good value compared to gas prices that were significantly north of this. In a crisis, Asian buyers will outbid Europe for uncontracted gas cargoes. In addition, the value of reliable low-carbon baseload was made clear.
In stark contrast to the West’s experience of construction cost inflation, the Chinese are planning on increasing their current fleet to go from 47GW capacity to 75GW in the next few years,11 but have also massively increased their ambition to adding 150 new reactors in the next 15 years, which would be “more than the rest of the world has built in the last 35 years.”12
To understand how this can happen, we can look at the French model. In the 1980s, as a reaction to the oil price shocks of the 1970s and to the realization that there was no French North Sea, France embarked on a massive build-out of nuclear generation. In the two decades from 1976 to 1996, France expanded nuclear capacity from almost zero to 63GW. France now has 56 reactors which provide over 70 per cent of its electricity, peaking at 80GW in winter. This is roughly two times greater than in the U.K., because France uses almost no natural gas in heating. This fleet has been quietly chugging along, producing the lowest carbon electricity (along with Scandinavian hydro) for many decades.
France achieved this through standardization: Design one, build many. France chose a 900MW pressurized water reactor as a one-size-fits-all solution. It’s a sure-fire business solution to keeping costs down and now China is doing the same with the Hualong One and Two technologies, a domestically developed third-generation reactor design.
Few reactors are being built in developed economies. And in the face of 40 years of environmental protests, bespoke (almost experimental) designs are being built as one-offs, with the inevitable cost inflation built in. These reactors are also subject to ever-changing and ever more stringent rules and regulations.
Robust regulations are understandable because the public is afraid of nuclear power plants. However, some experts note that lessons learned from Chernobyl and Fukushima are costly and unnecessary because these reactor designs are in no way typical of nuclear reactors in France or the U.K.13
To envisage a significant role for low-carbon nuclear power in the net-zero future, we must be looking at a design-one, build-many model.
Traditionally, you would use an amalgam of environmental and political levers – street protests and “Nuclear Power – No Thanks” stickers on VW camper vans; maybe get some celebrities to help influence things.
However, there is a much better way of closing nuclear plants and that is to build wind and solar resources. But as with all things energy related, be careful what you wish for.
Electricity generation from wind and solar is weather dependent. This means that the more you build, the lower the marginal value of the electricity being generated. If you add on preferential access to the grid, you create a pricing mechanism with significant volatility. When wind and solar are not generating, prices need to rise to incentivize flexible generation to power up. When wind and solar are generating, the price that all generators receive tends to zero (or indeed, it can actually go negative – where generators have to pay to play).
Nuclear is inflexible in the sense that daily weather-related fluctuations in the supply/demand balance don’t affect nuclear power plants. So nuclear is the steady baseload – but with increased wind and solar, there will now be periods in which the price received for that power is much lower than it would have been in a more stable system. So, the revenues for the nuclear plants are reduced overall, which cuts into the thin operating profit margins, which in turn can negatively impact maintenance. Unlike gas, nuclear can’t ramp up production when prices spike to offset these losses.
The closure of the two reactors at Indian Point in New York was, on the surface, eco-political in its origin with then-New York governor Andrew Cuomo leading the charge. But by the time the movement to close it had gathered a head of steam, it was already on the wrong side of profitability. Thus, there was no incentive for the plant owner to fight to keep it open.
Reiner Kuhr describes the dynamics of this pricing problem in an edition of Robert Bryce’s Power Hungry podcast.14
On the face of it, the closure of Indian Point is a big environmental win, before unintended consequences are considered. In this case, it means more gas-fired power is required and consequent increased emissions.
So, when I read comments encouraging France to “up its game” in rolling out more wind and solar, I see the economic destabilization of the world’s best low-carbon electricity grid. More wind and solar in France will lead to more gas-fired power (just like in the U.K. and Germany, and soon Belgium) and increasing emissions in France, but also in neighbouring countries who rely on imports of low-carbon electricity from France’s nuclear fleet.
A civilian program alone would be subject to the vagaries of public opinion, environmental pressure groups and incumbent lobby groups, both fossil and renewable. Thus, development could be very slow or indeed not happen at all. However, given this strategic imperative for the military, considerable resources are being put into the development of SMRs, which bodes well for extensive civilian use.
The standard argument against small modular reactors is the “small” bit. There are obvious economies of scale of building bigger reactors, as well as economic constraints when they get too big. However, SMRs have several advantages:
- Where the military leads, civilian use will benefit. The massive research and development push for military use will leave significant crumbs on the table. In fact, a symbiotic civilian-military development will actually increase the economies of scale, learning by doing, etc.
- There is the cookie-cutter approach to costs – design-one, build many; and just as the French did with their PWRs and the Chinese are doing with their Hualongs, so the SMRs will be able to be built at scale and with costs managed, despite being small, by design.
- Some SMRs have been in use in nuclear-powered subs and aircraft carriers for over 50 years, so this is not early-stage tech, but a refinement of existing technology.
- An expansion of this tech into sea freight – which is currently powered 100 per cent by oil (and marine fuel oil is about as polluting as one can get) – will address one hard-to-abate sector that is responsible for 2.5 per cent of global GHG emissions.
Of all these though, the military’s purposeful momentum is of greatest importance. Given the military applications and backing, don’t bet against modular nuclear reactors becoming an integral part of net zero ambitions in many countries.
The little green men who appeared in eastern Ukraine and Crimea in 2014 may end up having greener credentials than one imagined.
1 Sydney J. Freedberg, Jr., “Do Soldiers Dream of Electric Trucks?” Breaking Defense, April 22, 2020, https://breakingdefense.com/2020/04/do-soldiers-dream-of-electric-trucks/.
2 Aaron Mehta, “Pentagon Awards Contracts to Design Mobile Nuclear Reactor,” Defense News, March 9, 2020, https://www.defensenews.com/smr/nuclear-arsenal/2020/03/09/pentagon-to-award-mobile-nuclear-reactor-contracts-this-week/.
3 Paul Bierman, “The U.S. Tried Portable Nuclear Power at Remote Bases 60 Years Ago and It Didn’t Go Well,” The Conversation, https://theconversation.com/the-us-army-tried-portable-nuclear-power-at-remote-bases-60-years-ago-it-didnt-go-well-164138.
6 James Conca, “U.S. Air Force Base to be First to Deploy New Nuclear ‘Microreactor’ – Soon Every Town Could Have one,” Forbes, November 1, 2021, https://www.forbes.com/sites/jamesconca/2021/11/01/us-picks-eielson-air-force-base-for-the-air-forces-first-nuclear-microreactor/.
9 Staff, “Macron Says France Will Construct New Reactors,” World Nuclear News, November 10, 2021, https://world-nuclear-news.org/Articles/Macron-says-France-will-construct-new-reactors.
10 Holly Watt, “Hinkley Point: The ‘Dreadful Deal’ Behind the World’s Most Expensive Power Plant,” The Guardian, December 21, 2017, https://www.theguardian.com/news/2017/dec/21/hinkley-point-c-dreadful-deal-behind-worlds-most-expensive-power-plant.
11 James Conca, “China Will Lead the World in Nuclear Energy along with All Other Energy Sources, Sooner than You Think,” Forbes, April 23, 2021, https://www.forbes.com/sites/jamesconca/2021/04/23/china-will-lead-the-world-in-nuclear-energy-along-with-all-other-energy-sources-sooner-than-you-think/.
12 Dan Murtaugh and Krystal Chia, “China’s Climate Goals Hinge on a $440 Billion Nuclear Buildout,” Bloomberg, November 2, 2021, https://www.bloomberg.com/news/features/2021-11-02/china-climate-goals-hinge-on-440-billion-nuclear-power-plan-to-rival-u-s.
13 Sarah Kramer, “Here’s Why a Chernobyl-style Nuclear Meltdown Can’t Happen in the United States,” Business Insider, April 26, 2016, https://www.businessinsider.com/chernobyl-meltdown-no-graphite-us-nuclear-reactors-2016-4.
14 Robert Bryce, “Power Hungry,” Podcast, https://robertbryce.com/episode/reiner-kuhr-adjunct-professor-at-university-of-massachusetts-lowell/.
Dr. Richard Norris has over 30 years energy related experience in both industry and finance, including roles with large and small oil companies, as well as roles in debt and equity financing. He is currently managing director of Pandreco Energy Advisors, whose clients include IOCs, banks and public policy centres. He writes and presents extensively on the relationship of energy, economics and society.
Until recently Richard was a Consulting Partner with Helios Investment Partners where he co-managed energy investments in Africa.
Richard started his career as a Reservoir Engineer at Elf Aquitaine, (subsequently Total), covering geostatistics, upstream operations, reserves, new ventures and economic strategy over a ten-year period in France and Angola. Subsequently he established the Technical Director role at BNP Paribas in its European oil and gas structured finance group. Following almost a decade in banking he became General Operations Manager for Geopetrol managing assets in SE Asia and Yemen and followed by being named CEO and President of the TSX listed Candax Energy.
Richard holds a PhD in Petroleum Engineering and an MSc in Petroleum Geology from Imperial College London as well as a BSc in Geology.
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