America Risks Missing Out On A Global Nuclear Power Revival

This guest post is co-authored by Madison Freeman, research associate for energy and U.S. foreign policy at the Council on Foreign Relations, and Sagatom Saha, an energy policy analyst and graduate student at the Princeton University Woodrow Wilson School of Public and International Affairs.

The 2011 Fukushima disaster in Japan was a huge blow to the global nuclear power industry. After the meltdown, electricity generation from nuclear dropped 11 percent globally, and has yet to recover. In developed countries, including the United States, lingering fears have motivated early plant retirements and cancellations of proposed projects.

However, nuclear power is seeing a revival in emerging economies, which are seeking nuclear energy technology from abroad. China and Russia are racing to dominate this space and win geopolitical leverage through potentially predatory state financing and full construction and operation packages. The United States, which used to lead in nuclear technology exports, has fallen behind because of restrictive export regulations. To get back in the game—and secure economic and security advantages that the growing export market presents—the United States should simplify export controls and invest in innovative nuclear technologies. To begin the task, the White House should turn to Saudi Arabia, which is looking to develop its own nuclear energy program.

We’ve collected a series of essays and articles exploring nuclear’s growth in the developing world, the commercial and national security concerns connected to Russia and China’s growing control, and policy options for the current administration to revitalize America’s domestic nuclear industry without sacrificing safety and security.

A New “Half-Life”

Though nuclear power is projected to stagnate in OECD countries through 2040, it is also expected to grow nearly fivefold in non-OECD countries in the same time period, with the Middle East and Asia accounting for much of the growth.

In the latest issue of the Washington Quarterly, Laura Holgate and Sagatom Saha explore the forces driving this growth. Among them is the growing need to combat climate change and local pollution, they write:

“For many developing countries, the dangers that climate change pose are catastrophic. The 46 most polluted countries and the 146 cities with the worst air quality are all in the developing world. [...] While China and India expectedly dominate the list, countries in the Gulf, Southeast Asia, and Sub-Saharan Africa also populate it. These nations may see China’s and India’s fates—economic growth at the expense of public health—as an obstacle to bypass.”

Notably, ten countries accounting for about 40 percent of global energy demand—including three without reactors—incorporated nuclear into their Paris climate pledges. Holgate and Saha also expect innovative designs, like the nearly-commercial small modular reactor (SMR), to bring nuclear to untapped markets.

Nuclear has been traditionally limited to the world’s wealthiest nations because today’s reactors have high upfront costs and generate far too much power for smaller electricity grids. SMRs stand to eliminate both of these barriers:

• First, each module of an SMR only generates about 50 megawatts (MW), so SMRs can be sited on virtually any grid anywhere.
• Second, SMRs are scalable—that is, additional modules can be added over time as power needs grow and financing becomes available.
• Third, SMRs have lower construction costs and benefit from economies of scale as they can be uniformly mass produced in a central factory and transported by truck or rail.

For developing countries, the dangers that climate change pose provide a pressing need for zero-carbon power, and new nuclear designs provide a viable option. Even in a future with far more wind and solar, nuclear reactors could benefit—rather than suffer—from renewables’ explosive growth (see a 2017 Greentech Media article for an explainer on synergies between nuclear and renewables).

Moscow’s Nuclear Diplomacy and Beijing’s Nuclear Belt and Road

However, this rising demand in the developing world has complicated geopolitical impacts, because the construction of a nuclear reactor begins a long-term relationship between supplier and buyer, which the supplier can exploit for strategic ends. As Madison Freeman writes in Defense One, Russia and China are poised to exploit their emerging dominance in the international nuclear energy market, presenting significant national security risks for the United States.

Russia is currently the largest player in the global nuclear reactor market, with Rosatom, its state-owned nuclear company, securing 60 percent of recent sales. By offering favorable financing from Moscow, Rosatom is able to significantly lower costs to countries interested in building reactors, while developing strategic leverage over a country’s economy and energy systems.

Russia has a habit of “wielding energy as a geopolitical weapon,” as a recent Economist article explores. In fact, the risks are already evident (see Sagatom Saha’s 2017 Foreign Affairs essay exploring Budapest’s growing affinity for Moscow, a shift underpinned by nuclear exports).  

Now China is taking steps to expand its nuclear exports. Beijing sees nuclear exports as a potentially powerful component of its Belt and Road Initiative (BRI), which aims to economically and politically integrate China with Europe, Africa, and the rest of Asia through major infrastructure projects. Under BRI, Beijing has already earned a reputation for using predatory lending practices to secure military infrastructure, and China could similarly exploit debts accrued from reactor projects to make security gains.

China and Russia’s growing role in the commercial nuclear trade creates a major security problem for the United States not only because of the geopolitical dependencies it creates, but also because of the two countries’ lower safety and nonproliferation standards when compared with the United States. Only by expanding its own nuclear exports can America help ensure the highest possible standards for security and provide greater transparency into how countries are using nuclear technologies.

The Pains of Atomic Commerce

The United States has led in creating global nuclear norms and exporting nuclear reactors since the inception of nuclear power in the 1950s. Exporting nuclear technology served as a diplomatic tool to build goodwill and strengthen ties with other nations, as well as creating a broader market for U.S. companies to sell their products.

However, the United States now lags behind its geopolitical rivals, Russia and China. U.S. nuclear companies find it nearly impossible to compete against government-backed competitors motivated more by political goals than profit. The state-owned nuclear companies of China and Russia are directly lobbied for by top leaders, and their projects are given major financial support by state banks. Without this form of state support, U.S. companies find themselves at a disadvantage as they try to sell their product to foreign governments.

In addition, U.S. nuclear exports are severely limited by a restrictive and inefficient export control process. The time required to obtain export approval has become increasingly lengthy, swelling to an average of 400 days. Policymakers could take several steps toward reforming the nuclear export control process, and recent reports from Third Way and the Nuclear Innovation Alliance have laid out potential approaches to doing so.

U.S. companies cannot export nuclear technologies to countries without an established nonproliferation commitment, commonly referred to as a 123 Agreement, signed between the two countries. While maintaining nonproliferation standards is critical to safeguarding global peace, the United States has been unnecessarily slow in negotiating these agreements. Other countries like Russia and China have been more proactive in securing nuclear agreements in countries where demand for nuclear power is likely to grow.

Despite the barriers it faces, the U.S. nuclear industry is still regarded as the leader in nuclear technology, and can compete if given a fair playing field. The Trump administration has pledged to revitalize the U.S. nuclear energy industry— to do so, it can guide its companies by streamlining and clarifying the export process and by supporting technological innovation.

In particular, the United States should promote innovation in its advanced nuclear designs. U.S. companies currently lead in developing advanced nuclear technologies, but China and Russia are investing heavily in this space. To avoid falling behind, the United States will have to support the development of these technologies, including small modular reactors (SMRs), which may prove more resistant to meltdowns and cheaper to operate.

Supplying Saudi

America already has a significant opportunity to get back in the nuclear game—one of its allies could provide a credible chance for U.S. suppliers to re-establish themselves in the market.

Next year, Saudi Arabia will hand out contracts for two nuclear reactors, the first of sixteen overall that Riyadh plans to construct by 2040. The Kingdom has its own reasons, including those previously discussed, in pursuing clean energy options like commercial nuclear. Saudi Arabia has the ninth highest ambient air pollution in the world, and power demand is growing by 7 to 9 percent annually, raising the prospect of even more fossil fuel-driven pollution. Preserving crude for export rather than consumption would also protect crucial revenues. Saudi Arabia should be concerned that warming in the Middle East is expected to exceed twice the world average, potentially making the region uninhabitable into the midcentury and accelerating the impetus for reducing electric power emissions.

Still, it would be unwise to take Riyadh at its word that its nuclear program would be a purely peaceful endeavor. It could also serve as a path for nuclear weapons development. Crown Prince Mohammed Bin Salman has said as much, stating that his country would pursue nuclear weapons if Iran were to develop them.

But like the broader commercial market, the United States cannot prevent harm by sitting out, writes Sagatom Saha in Defense One:

“The Kingdom has already received bids from companies based in the United States, but also in France, China, Russia, and South Korea, demonstrating a global willingness to supply nuclear technology. If the United States does not build them, another country will step in.”

Active U.S. involvement in the Saudi nuclear project could help reduce the risk of nuclear proliferation. In another essay in the Washington Quarterly, Nicholas Miller and Tristan Volpe offer in-depth policy tools through which the United States, by serving as the Kingdom’s nuclear supplier, can prevent weapons development.

By supporting U.S. nuclear companies in their bids to Riyadh, Washington could help boost the U.S. nuclear industry. What is happening in Saudi Arabia will happen in emerging economies globally as long as environmental, technological, and economic trends continue along their current path. A nuclear revival will either be a boon or burden depending on the policies that America adopts. Washington can take the opportunity to leverage decades of U.S. operational and regulatory experience exporting reactors or continue to cede ground to competitors.

Further Reading:

• Laura Holgate and Sagatom Saha, America Must Lead on Nuclear Energy to Maintain National Security, The Washington Quarterly
• Madison Freeman, How Russia, China Use Nuclear Reactors To Win Global Influence Defense One
• Sagatom Saha, Russia’s Nuclear Diplomacy, Foreign Affairs
• Sagatom Saha, The US Must Build Saudi Arabia’s First Nuclear Reactors, Defense One
• Suzy Hobbs Baker, Ryan Fitzpatrick, and Matt Goldberg, Getting Back in the Game: A Strategy to Boost American Nuclear Exports, Third Way
• Matt Bowen, Enabling Nuclear Innovation: Part 810 Reform, Nuclear Innovation Alliance
• Timothy A. Frazier, The Role of Policy in Reviving and Expanding the United States’ Global Nuclear Leadership, Columbia Global Energy Center
• Nicholas Miller and Tristan Volpe, Abstinence or Tolerance: Managing Nuclear Ambitions in Saudi Arabia, The Washington Quarterly