Russia is racing ahead of the US on nuclear diplomacy
Getting serious about nuclear is a big new opportunity for the incoming administration
Two recent news items struck me:
Nuclear power was one of the few issues to garner very strong bipartisan support at Chris Wright’s DOE confirmation hearing.
Russia and Vietnam signed a new deal to cooperate on nuclear power.
These related events are especially timely since advanced nuclear deals are gathering momentum, driven by Big Tech’s hunger for computing power. As excited as everyone seems to be about the surprise surge in US electricity demand, the real battle for future nuclear markets will be, not in California or Texas, but in Asia. While increases are projected for US electricity needs, they pale in comparison to the more than 2x jump in East Asia and 3x in South Asia by 2050.
Sadly, the United States — although home to many of the most promising next generation nuclear models — is very poorly positioned to seize this market opportunity. Anyone in the White House hoping for “energy dominance” should be focused on this problem.
Three ways the US is losing to Russia (and China too)
Claims of a coming nuclear renaissance — or any meaningful leadership role for US nuclear technology — will have to fix many, many barriers. It’s well known that we expect advanced nuclear companies to navigate a nightmare regulatory maze and a gauntlet of 25 offices across 8 federal agencies. Yet if we’re going to compete in global nuclear markets we also have to grapple with these facts.
1. US nuclear diplomacy is lagging (45 to 12).
My colleagues along with Third Way tracked all nuclear cooperation agreements by the US, Russia, and China. (Since not all agreements are the same — and some are pure bullshit — we’ve split them into hard and soft MOUs using the methodology created by Jessica Jewell.) Here’s a snapshot:
The main takeaway: For meaningful nuclear agreements, the score is Russia 45, USA 12.
2. US financing for nuclear exports is pathetically small.
Russian and Chinese nuclear exports will be backed by loans from big state-owned banks. That’s not the American model so we don’t need to do the same thing. But we aren’t even using the existing financing tools we have. The US Export-Import Bank can help fund some aspects of nuclear exports, but it’s limited. The US Development Finance Corporation could be a major player and bring in private investors, but the agency is hamstrung by short-sighted policy decisions. Until July 2020, DFC had a literal ban on nuclear. Thankfully that’s now gone.
To actually finance future nuclear deals, the agency will need more relevant staff and a bigger lending envelope. The upcoming DFC reauthorization could help by increasing the maximum liability to $120 billion (or more) and fixing an arcane budget scoring snag that blocks the agency from making equity investments of any real size. Without solving for the financing of reactors, we aren’t going to be dominating anything.
3. We’re not leveraging our multilateral tools either.
For more than half a century, the US government used the multilateral development bank system that it helped create to extend US influence and support pro-market reforms. The World Bank was a major weapon for the US and allies to provide an alternative to the Soviet economic model. But we’re completely ignoring this lever on nuclear.
If you read this Substack, you’ll know I’m bemused that the World Bank still bans nuclear investment and its official energy policy has a standing prohibition on creating internal capability on the technology. Changing both of these would be a big help. Even if the Bank never invests a dime in a reactor, revising its exclusion list would encourage the 21 other agencies that copy the list to reconsider too.
It’s also beyond ridiculous that the Bank has no expertise on a major energy technology. This willful blind spot means it has no clear way to help clients make sound short-term investment decisions or smart long-term infrastructure planning. IMO, it borders on malpractice since reactors operate for many decades (and Russian nuclear deals have multi-decade fuel tie-ups).
The World Bank has also often been a positive force for open competitive procurement and to level the playing field for firms. Yet the Bank’s stubborn refusal to engage in nuclear decisions winds up enabling secret contracting in backroom deals. This benefits Russian and Chinese state-owned companies and… no one else. Not citizens who need energy. Not buying countries that need more technology options to provide energy security. Not US firms that need fair competitive markets. And not the United States which hopes to use energy technology to support allies and promote economic growth.
Is the White House for Energy Dominance or not?
If the US is at all serious about competing in advanced nuclear markets, we have to start by tackling these multiple ways that we’re already falling behind.
The US must build more nuclear power plants in the US to grown the supply chains, train people, and get credibility with potential customers in foreign countries.
Really interesting piece Todd. Agree that excluding a clean and reliable source of energy doesn't make sense unless it's driven by concerns over dual use and the WB not wanting to accidentally fund military applications?