Exploring the Impact of Domestic Regulation on Civil Nuclear Exports
Over the next decade, U.S. firms should be positioned to take advantage of the growing global demand for nuclear technology and services in order to expand U.S. manufacturing capability and to ensure continued U.S. influence over nonproliferation policies and safety practices around the world. The short-term (i.e., through the end of this decade) outlook for new reactor builds in the U.S. market remains uncertain, in contrast with Department of Commerce estimates for the international market for nuclear equipment and services—between $500 and $740 billion over the next 10 years. This substantial investment in civil nuclear deployment represents an important opportunity for the U.S. private sector, as well as for U.S. policymakers who seek to preserve a domestic industry that is indispensable to U.S. national security, electricity reliability and affordability, and air quality objectives.
Civil nuclear power is expanding rapidly across the globe as nations develop the electricity infrastructure necessary to drive economic growth. For example, the World Nuclear Association reports that China plans to have roughly 50 commercial reactors in operation by 2020, up from 3 in 2000. In addition, many countries in East Asia and the Middle East are seeking to enter the nuclear energy market for the first time. The International Atomic Energy Agency (IAEA) estimates that as many as 15 new nations could have nuclear generating capacity within the next two decades, added to the more than 30 countries that have it today or have had it in the past.
The economic rationale for adoption of civil nuclear power varies from one nation to the next. For some governments, it is a matter of providing reliable, affordable electricity to millions of citizens who do not have it. For others, civil nuclear expansion will displace fossil fuels, such as petroleum and coal, which will allow those countries to improve their air quality and balance of payments, either by reducing imports or by freeing up domestic resources that can then be exported. For instance, the proposed Saudi nuclear program, which is estimated to cost over $110 billion by 2030, will displace much of the Kingdom’s current use of oil for electricity generation.
For the U.S. domestic industry, however, it is no longer the 1980s when U.S. commercial interests dominated the civil nuclear landscape. Today, U.S. companies face significant competitive challenges, despite the fact that much of the world’s nuclear manufacturing and supply capability still relies on designs and technologies developed in the United States. The global scope of the civil nuclear industry makes it likely that U.S.-headquartered firms will face increasing competition from foreign firms throughout the production network and across the life cycle of installations. Moreover, foreign ownership interests in U.S. companies (e.g. Westinghouse) and joint ventures with foreign interests (e.g. GE-Hitachi) are increasing.
Russian, French, Japanese, and South Korean firms have become major providers of technology and services. They have already gained a competitive advantage vis-à-vis U.S. companies in the production of large civil nuclear reactors, in part because of generous government-backed export incentives, including turnkey services and fuel take-back programs. Other reasons often cited by market observers include an onerous approval process within the U.S. government that disadvantages U.S. exporters. Still, some commentators point to the fact that the United States essentially has not built a new reactor in the past 30 years as being the primary factor. In any case, the advantage gained by foreign competitors is reflected by the fact that U.S. nuclear exports have remained relatively flat over the past several years, despite the growth in the global demand for civil nuclear technology.
Comparing the U.S. Regulatory Process with its Competitors
U.S. nuclear suppliers are subject to strict export regulations. Depending on the type of nuclear export, licensing is overseen by the Department of Energy (DOE), Department of Commerce (DOC), Department of State (DOS), or the Nuclear Regulatory Commission (NRC). Each agency or department enjoys different regulatory authority, and exports are subject to a review process that can take roughly 90 days to over a year to conclude, again depending on the type of export and which government entity is involved.
For example, the NRC holds jurisdiction over issuing Part 110 licenses (10 CFR Part 110), which control the import and export of nuclear reactors, equipment, components, and materials. Unlike other nuclear exporters, such as Russia and France, the NRC requires the negotiation of a bilateral nuclear cooperation agreement, or 123 Agreement, in order to obtain a Part 110 license for “significant nuclear exports”. Such agreements typically outline the parameters of current and future transfers, including restrictions on the retransfer and reprocessing of traded material. Negotiating and receiving congressional approval for 123 Agreements can take several years, and in some cases, has taken over a decade.
For its part, the National Nuclear Security Administration (NNSA) within DOE is responsible for granting Part 810 authorizations (10 CFR Part 810), which apply to technology transfers and technical assistance involving any part of the nuclear fuel cycle. Similar to Part 110 licenses, a Part 810 specific authorization requires a nonproliferation assurance from the recipient country’s government that the transferred technology will be used only for peaceful purposes and will not be retransferred without prior U.S. consent. As with the 123 Agreements, these government-to-government assurances can tack on months, if not a year or more, to the licensing review process.
Foreign competitors clearly have streamlined procedures, compared to their U.S. counterparts. Japan’s Ministry of Economy, Trade and Industry (METI) and Russia’s Federal Service for Technical Export Control (FSTEC), for instance, oversee all export licensing, which eliminates inefficiencies created by the involvement of multiple government agencies and departments. Moreover, the timeline for acquiring an export license is much faster in Japan, South Korea, and Russia, where regulations require applications to be processed within 15-90 days.
As an example of the type of impacts that can occur, R&D, engineering, technical services, and other facets of the U.S. production network are likely to be performed overseas if barriers to export are relatively higher in the United States than in other markets. Indeed, the potential losses in employment and U.S. competitiveness may extend well beyond the value of lost exports; this is further explored in a forthcoming CSIS report, “Restoring U.S. Leadership in Nuclear Energy: A National Security Imperative.”
Further, if U.S. participation in the global market is substantially obstructed by bureaucratic hurdles that other major suppliers of nuclear technology do not face, and if that translates into an increase in foreign influence over global safety and non-proliferation standards at the expense of the United States, our government should be aware of that fact. Policymakers should begin to focus on the domestic regulatory regime after 123 Agreements and other government-to-government assurances are in place, and should seek to answer the following crucial question with stakeholder input: “If bureaucratic reform is needed, what is the best way forward?”
Mike Wallace is director of the Nuclear Energy Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Scott Miller holds the Scholl Chair in International Business at CSIS. Dave Banks is senior fellow and deputy director of the Nuclear Energy Program at CSIS. Alayna Rodriguez is a research intern with the Nuclear Energy Program at CSIS.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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