Back in November, the US Department of State and the Slovak Ministry of Economy co-hosted the inaugural Project Phoenix Workshop and Launch Event in Bratislava. More than 15 countries from Europe and Eurasia region were there to discuss the goal of building out new nuclear energy capacity – specifically US small nuclear reactors (SMRs) in Eastern Europe and Eurasia.
It is argued that these SMRs differ from larger reactors by requiring less fuel, offering more flexibility in location and having the ability to be prefabricated and shipped. Project Phoenix aims to deploy SMRs in Europe and Eurasia, thereby helping countries eventually turn completely away from Russian energy and nuclear know-how. But there are multiple problems with the US scheme. Here are just a few:
- The SMR technology is unproven and isn’t cost-effective.
- The West is dependent on Russia for multiple stages of the nuclear fuel cycle.
Nevertheless, the US is pushing the narrative that the deployment of SMRs will help liberate countries from Putin’s designs for a neo-Soviet empire. The question confronting those Eastern European and Eurasian countries in attendance at the Project Phoenix event is exemplified by Armenia. It draws 40 percent of its energy from its Soviet-era Metsamor nuclear power plant, but has already been issued multiple lifetime extensions. Areg Danagoulian, an associate professor of Nuclear Science and Engineering at MIT, taps into the American narrative as he writes on the Armenian decision:
Meanwhile the Armenian government has been busy exploring replacement alternatives, such as possibly US-built small modular reactors (SMRs), seen as a viable replacement. Armenian officials have also entered in discussions with Russia about the possibility of replacing the Soviet-era VVER-440 reactor with the much larger and more modern Russian VVER-1200 design. While the US option is not easy—mainly because of the lack of readiness of most SMR designs—the Russian option is particularly fraught. Armenia is reluctant to further increase its energy dependence on Russia, given Putin’s campaign of neo-Soviet expansionism. This is further exacerbated by the technical and economic difficulty of hosting a 1200-megawatt electric VVER-1200 unit on a grid that on average consumes only about 1,000 megawatts.
This is a route that the US hopes many Eurasian countries choose, and they’ll no doubt get the Europeans to eventually play along (the Czech Republic, Poland, Slovakia, and Slovenia are slated to get the SMRs first – maybe by the mid 2030s), but let’s look at the problems with this plan.
In a story reminiscent of Boeing, here’s what happened with a SMR company in Utah, from the Union of Concerned Scientists:
NuScale Power Cooperation, the first company in the United States to secure approval for the design of a small modular nuclear reactor (SMR), ended its contract with the Utah Associated Municipal Power Systems (UAMPS) on Wednesday. The companies cited rising costs as the reason for terminating the contract.
Throughout the development process, NuScale made several ill-advised design choices in an attempt to control the cost of its reactor, but which raised numerous safety concerns. The design lacked leak-tight containment structures and highly reliable backup safety systems. It also only had one control room for 12 reactor units despite the Nuclear Regulatory Commission (NRC) typically requiring no more than two units per control room. Additionally, the company led efforts to sidestep critical safety regulations, including requirements for offsite emergency response plans to protect nearby communities. But NuScale’s justification for all this regulatory corner-cutting—that the design is “passively safe”—was undermined when concerns about its passive emergency core cooling system arose late in the design certification process.
Nevertheless, SMRs are at the vanguard of Western strategy. More from Undark:
Respected thinkers such as former U.S. president Barack Obama, French president Emmanuel Macron, and Microsoft co-founder and philanthropist Bill Gates have toasted the idea of small modular reactors, or SMRs, as a potentially reliable, almost-emissions-free backup to intermittent renewable energy sources like wind and solar. Advocates claim that because SMRs will be smaller than the giants that currently dominate horizons, they will be safer, cheaper, and quicker to build. Although SMRs will have only a fraction of the power-generating capacity of traditional nuclear power reactors, proponents envision that they will, one day, be assembled in factories and transported as a unit to sites — like Sears’ mail-order Modern Homes of the early 1900s…
But SMRs are just as likely to face similar delays and cost overruns. Currently, there are just two existing advanced SMR facilities in the world that could be reasonably described as SMRs: a pilot reactor in China and Russia’s diminutive Akademik Lomonosov. More small reactors are under construction in China, Russia, and Argentina, but all of them are proving even more expensive per kilowatt than traditional reactors.
The US SMR companies rely heavily on subsidies to be economically competitive, and even that wasn’t enough for NuScale, which secured $4 billion in federal tax subsidies. Similarly, Project Phoenix is being carried out in cooperation with the U.S. Department of Commerce’s Small Modular Reactor Public-Private Program, and will no doubt lean heavily on the public side of the ledger.
Last year, the US Export-Import Bank and US International Development Finance Corporation issued “letters of interest” to invest up to $4 billion in Poland’s SMR development projects, and similar letters have also been offered for Romanian projects.
Project Phoenix is partnering with the Three Seas Initiative (3SI) – “a politically inspired, commercially driven platform for improving connectivity between thirteen EU Member States allocated between Baltic, Adriatic and Black seas.” Led by the US, Germany, and the European Commission, 3SI has an investment fund advised by Amber Infrastructure Group, which promises “an attractive return to the investors.” The Three Seas Fund was created under Luxembourg law, which means it’s liable to a subscription tax of 0.01% of the fund’s net assets and is exempted from the payment of the capital gains tax, income tax, and wealth tax.
Started in 2019, 3SI has made a lot of investments, but little actual infrastructure has been built, none of which is a SMR. Involved parties continue to iron out “ultimate return on investment calculation.”
Even if funds like 3SI find a way to marry attractive returns to cost-effective SMRs being built, there’s another big problem with the US plan, though: how will they do it without Russia?
Nearly 50 percent of the world’s uranium enrichment is done by the Russian nuclear energy firm Rosatom, whose subsidiary Tenex is the only company in the world commercially selling Haleu – a high-assay low-enriched uranium that could be a key fuel source for SMRs. More from OilPrice:
Firstly, Rosatom is a major exporter of nuclear fuel, providing the U.S. with 14 percent of its uranium in 2021. Meanwhile, utilities across Europe purchased around a fifth of their uranium from Rosatom, and they have been unable to diversify their uranium sources since cutting other energy ties with Russia. Rosatom also provided 28 percent of the U.S.’s enrichment services in 2021.”
Further, Rosatom is not just limited to Russia, holding ownership of several nuclear plants around the world. By the end of 2021, one in five nuclear plants worldwide was either in Russia or was Russian-built. Rosatom has repeatedly stepped in to help finance nuclear plants in countries that want to expand their nuclear power sectors but don’t have the money to do so. Many of these plants fall under a build-own-operate model, relying on Rosatom for their operation.
The EU, despite 13 sanction packages against Russia, has yet to target its nuclear industry. And according to Euratom Supply Agency, the EU increased imports from Russia of nuclear fuel and services for the bloc’s Russian-designed reactors again in 2023 compared to 2021. Five countries – Bulgaria, the Czech Republic, Finland, Hungary and Slovakia – bought 30 percent more conversion services from Russia and 22 percent more enrichment. Even RFE/RL admits the challenges for the US:
Westinghouse, an U.S. nuclear power company, is already seeking ways to offer alternative fuel in Europe, but it will take some time to get all the licenses and approvals. In addition, there are concerns that fuel from the United States might be more expensive, and it is unclear how Westinghouse would handle the waste-management system.
Nonetheless, Germany, which worsened its energy predicament last year by shutting down its remaining six nuclear power plants, continues to push for EU countries to end their relationship with Russia’s nuclear industry. If this sounds familiar to the rejection of Russian pipeline natural gas in favor of US LNG, well, it is. And the same players are pushing the envelope. Here’s Robert Habeck, the German economy and climate minister:
“Across the EU, we must keep making ourselves independent from Russia.” Habeck added, “The nuclear sector is still outstanding. It is not justifiable that this area is still given preferential treatment. Nuclear technology is an extremely sensitive area, and Russia can no longer be seen as reliable partner within it.”
The only option European countries who rely on Russia for nuclear fuel would be to shutter their plants like Germany did, because despite US-led programs like Project Phoenix and the Three Seas Initiative, there’s no one else prepared to step in and fill Russia’s role for conversion services and enrichment.
And even if the US is able to convince European countries and a few Eurasian ones to go with its SMR technology, the only supplier able to provide the fuel on a commercial scale is Russia’s Tenex. Despite all the money the US is throwing around, little progress is being made, and the reliance on Russia is even causing delays for a company founded by one of the world’s richest individuals:
[Bill] Gates has gone so far as to invest a chunk of his fortune in a firm he founded, TerraPower, a leading nuclear innovation company. Gates’s TerraPower has an even longer way to go, although it too is cashing in on subsidies. The U.S. Department of Energy has pledged up to $2 billion in matching funds to construct a demonstration plant in Wyoming. Yet TerraPower recently announced it’s facing delays of at least two years because of difficulties securing uranium fuel from its lone supplier: Russia.
The Senate’s recent border and Ukraine spending package contained more than $2 billion in funds for uranium processing as the Biden administration is “gravely concerned” about Russia’s dominance in the field. It seems a little late in the game to be waking to this reality, but that’s where the US is. US Energy Secretary Jennifer Granholm is now calling on Congress to ban uranium supplies from Russia and throw more money at domestic enrichment, but estimates are that it would take at least five years of heavy investment for the US to end its dependence on Russian imports of enriched uranium.
Meanwhile, the US imported $1.2 billion worth of Russian uranium last year – an all-time high. Russia is also considered the world leader when it comes to the export of nuclear plant development. It can not only build a plant and provide the fuel, but it often trains local specialists, deals with safety questions, and disposes of the waste. It has recently built or is building reactors in Türkiye, Egypt, Argentina, and has been making a major push into Africa. Rosatom is constructing a Center of Nuclear Science and Technologies in Rwanda, and Ethiopia, Nigeria and Zambia have signed similar deals with Rosatom. Countries such as Ghana, Uganda, Sudan and DRC also have cooperation agreements with Rosatom. There are at least 50 countries that have some level of nuclear cooperation with Russia.
The case of Turkiye is illustrative. Ankara had been trying to get a nuclear power plant built for 50 years before signing a deal with Russia in 2010 to build the Akkuyu plant in Turkiye. Back in the 1990s Ankara had bids from Westinghouse + Mitsubishi, AECL, and Framatome + Siemens but had to cancel because it was going to cost more than the Turkish government could afford at the time.
Türkiye eventually pivoted to Russia’s build-own-operate model because it was an arrangement Ankara could afford. Under this arrangement, Russia financed, built, and is delivering the fuel to Akkuyu, which began operations last year. Russia will also handle the waste. For the moment Rosatom owns 75 percent of the shares in the plant, although it reserves the right to sell a project share of not more than 49% to other investors’, thus keeping the controlling interest of 51 percent.
Türkiye will buy a fixed proportion of the power at a fixed price of 12.35 ¢/kWh for 15 years. The proportion will be 70 percent of the output of the first two units and 30 percent of that from units 3 and 4 over 15 years. The remainder of the power will be sold by the project company on the open market. After 15 years, when the plant is expected to be paid off, the project company will pay 20 percent of the profits to the Turkish government.
Turkish nuclear engineers are also receiving training from the Russians. As the Bulletin of the Atomic Scientists says: “Given the costs for the construction, operation, and maintenance of the plant, as well as for the management and transport of the waste, this was considered ‘an economically well-negotiated agreement’ by nuclear energy policy experts. In short, it was a good deal for Turkey.”
So it’s clear why these types of deals are attractive to countries.
On the other hand, the US argument is for a more expensive, unproven and less safe technology. Oh, and you end up relying on Russia anyways.
If the US gets its SMR designs ironed out, and really wants to move forward with deploying the reactors, there is another country with a big (and rapidly growing ) presence in nuclear conversion and enrichment (assuming the US doesn’t do it itself) that could possibly help the West replace Russian services. There’s another problem there, however. China is also on the enemy list.