U.S. Regulatory Clusterf*ck

Briton Ryle

Written By Briton Ryle

Posted June 11, 2024

Back in March, Congress voted 365-36 to pass the Atomic Energy Advancement Act to get the U.S. back into the nuclear power game.

A couple of weeks ago, on Wednesday, May 29, the White House hosted a summit focused on “fixing” domestic nuclear initiatives. The summit was meant to lay the groundwork for theNuclear Power Project Management and Delivery” working group. This group will advise a new federal initiative to support building new grid-scale nuclear reactors. 

Yeah, the government doesn’t move very quickly.

Still, it might sound like “Hey let’s build some new nuclear reactors” should be a pretty simple goal to achieve. It’s not, for a bunch of reasons…

For starters, the know-how to build utility-scale nuclear reactors is sort of lost. Only three new reactors have been completed since 1996. Two of those just came online a couple of weeks ago…

Parent company to Georgia Power, Southern Company (NYSE: SO) got approval for the Vogtle Units 3 & 4 in 2009. Construction took 15 years and cost $35 billion. Twice as long and twice as expensive. Though most of the overruns came from Unit 3 – because engineers and workers alike were learning on the job. At one point, a bunch of rebar had to be pulled and replaced because it was installed wrong. 

Unit 4 came in under budget after everybody figured out how to build a nuclear reactor. 

The second hurdle is regulation from the Nuclear Regulatory Commission. If you want to talk about regulatory red tape, the NRC is the poster child. 

It stems from the fact that Americans had an irrational fear of nuclear power. The NRC responded with codes for construction that border on ridiculous. 

For instance, the rebar used in a nuclear containment structure must be tracked from the mine to the manufacturer, who in turn has to be specifically certified by the American Society of Mechanical Engineers and the manufacturing process has to meet NRC quality assurance standards. 

And that’s just for rebar!

Pretty obvious that if reactors aren’t being built, it’s tough to find an approved rebar maker. 

Pressure Vessels

Pressure in a utility-scale reactor is a different matter. There’s a lot more pressure in a big reactor, so NRC standards for steel and concrete make these among the most costly components for building. 

Which is why the Small Modular Reactor (SMR) nuclear reactor technology that we’ve discussed a few times (here and here) sounds so compelling. Smaller reactors mean less pressure, which lowers building costs, making the power generated more cost-effective…

Except the NRC doesn’t see it that way. 

As an example, a company we’ve discussed, NuScale (NYSE: SMR), wanted to build a cluster of 12 small reactors that would generate 50 megawatts of power. Again, the appeal of the smaller reactors is they generate less pressure. 

The NRC checked its archaic standards and said nope, your pressure vessels must be 20 TIMES LARGER!

The added cost, multiplied by 12, meant that NuScale had to ball up that plan and toss it in the bin. It has now submitted a plan for 6 SMRs that would produce 77 megawatts. Bigger reactors that create more power are the only way the company could absorb the added costs from outdated regulation. 

Pretty dumb. 

No doubt the very important sounding Nuclear Power Project Management and Delivery working group will make recommendations about NRC regulations. But lord knows how long it will take to get them implemented. The government provided it could work pretty fast during Operation Warp Speed – maybe we’ll see another “all hands on deck” situation to clear the way for new nuclear power regulations…

After all, there’s a lot of money at stake. Bill Gates has poured at least $1 billion into TerraPower, and OpenAI co-founder Sam Altman is backing Oklo (NASDAQ: OKLO). They can definitely afford some fancy steak dinners and bottles of Bordeaux with NRC executives. 

Bottom line: I still like NuScale (NYSE: SMR), but I’m not gonna hide the risks from you. 

Enriched Uranium

Another part of the nuclear power problem is the enriched uranium needed for fuel. Sadly, enriched uranium is another one of those inputs that America outsourced to the globalized economy. 

And Russia dominates the enriched uranium supply chain. Whoops!

However, there is hope for a secure domestic supply of enriched uranium and we’ll talk about that next time…


Briton Ryle
Chief Investment Strategist
Outsider Club

X/Twitter: https://twitter.com/BritonRyle

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