America needs to stage a come-back in nuclear energy exports

On July 24, the U.S. International Development Finance Corporation (DFC) issued a landmark decision. By ending its moratorium on nuclear exports financing, the corporation reversed a long-standing policy that had put the United States at a strategic disadvantage in funding nuclear energy projects overseas. Long considered the global leader in nuclear reactor technology, the United States has been ceding its competitive position to the likes of Russia and China over the past three decades.

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America needs to stage a come-back in nuclear energy exports

The economic, environmental, and geopolitical consequences of America’s shrinking role in the nuclear power sector are manifold and pose a significant threat to American interests both at home and abroad. President Donald J. Trump established the Nuclear Fuel Working Group (NFWG) in July 2019 in an effort to revive and expand the atrophying nuclear energy sector – directing a complete review of United States nuclear energy policy to help find new ways to revitalize the industry.

One of the NFWG’s critical recommendations was to end the prohibition on funding nuclear power exports, which had been the policy of the Overseas Private Investment Corporation (OPIC) since the 1970s. These development financing restrictions were grandfathered into OPIC’s reincarnation, the DFC. The July 24 announcement correctly re-categorizes nuclear power as a safe, reliable and carbon-free source of electricity.

Prior to OPIC’s prohibition, the United States supplied some 90 percent of the West’s nuclear reactors under the auspices of industrial heavyweights such as Westinghouse and GE. Today, the United States has zero nuclear projects under construction overseas. Westinghouse declared bankruptcy in March of 2017, and GE has not built a nuclear reactor in 25 years. This absence from the market has had a number of deleterious indirect effects on U.S. nuclear production capacity. In the nuclear industry, the learning curve and economies of scale are the main value drivers. The more you build, the more you learn and the cheaper your plants become.

By contrast, Russia has been accelerating its nuclear export programs and improving economies of scale, technology, and relations with recipient countries. Today, Russia accounts for two-thirds of the globally exported nuclear power projects under construction, with 36 reactors in the pipeline in 12 countries. America’s other geopolitical rival, China, is also emerging as a global player with a dozen proposed projects across the developing world from Argentina to Pakistan.

In addition to the institutional knowledge derived from continued nuclear exports over the past several decades, Russian and Chinese vertically integrated SOEs like Rosatom and CNCC enjoy considerable financial backing in the form of generous intergovernmental loans, which represent an advantage unavailable to their American competitors.

The United States can no longer afford to rely on its passive containment strategy of attempting to dissuade potential buyers from working with China and Russia. Instead, we must develop our own aggressive nuclear export policies that offer better nuclear technology at affordable rates.

One example is the Lithuanian nuclear project at Visaginas, which was planned to replace a decommissioned Soviet era plant. After years of talks with Westinghouse and GE, it was impossible to finance the project without the help of export credit agencies. Since no such assistance was available, the venture was eventually scrapped. Lithuania ended up importing over 80 percent of its electricity.

To fill the void, neighbouring Belarus turned to Rosatom to build its own plant. Construction of the Astrovets project commenced despite an energy crisis between Russia and Belarus in 2007 that halted oil supplies and underscored Belarus’s need to reinforce its domestic energy security. The plant will become operational this month and is expected to lessen the country’s energy dependence on Russia by reducing gas imports by 5 billion m³ per year.

Lithuania, frustrated by construction of a Russian-made plant next door and the mothballing of its own, had no other option but to side with anti-nuclear groups opposing the project. The campaign to stop the project was based mainly on fears of a major accident and growing Russian influence. The strategy didn’t work. The UN nuclear watchdog, IAEA, held that safety concerns were unfounded. Because nuclear fuel can be imported from other sources – unlike Russian gas – Lithuania’s claims that Russia would use electricity as a geopolitical lever failed to convince Brussels and its neighbors Latvia and Estonia – who were also the victims of decades of Soviet occupation – to boycott electricity imports from Belarus.

The Astrovets case demonstrates that the U.S. strategy of “containing” Russia’s nuclear energy exports has clearly failed, and that the threat of sanctions or trade restrictions has proven a poor deterrent. A better strategy would be to adopt a proactive approach to what is left of the U.S. nuclear industry. Government regulators should offer buyers competitive options. Rather than protest projects like Astrovets, the United States should provide alternatives to Russian-made nuclear plants by extending generous financial packages to Poland and other Central European countries.

U.S. national interests should not be ignored in the global nuclear energy game. It’s time to turn the tables on the electricity market power play in Europe. A massive new nuclear build in Eastern Europe based on cutting-edge American technologies would reshape the electricity trade balance and reduce dependence on imports of Russian natural gas. A new, proactive nuclear financing policy is the key to America reclaiming its role as a global leader in this safe, reliable, and green technology.

Joseph Adam Ereli was the U.S. State Department spokesman, U.S. the ambassador of the United States to the Kingdom of Bahrain from 2007 to 2011. He subsequently was the Principal Deputy Assistant Secretary of State for Education and Cultural Affairs.