The US Nuclear Regulatory Commission has posted a Policy Issue Information document dated March 28, 2010 titled POTENTIAL POLICY, LICENSING, AND KEY TECHNICAL ISSUES FOR SMALL MODULAR NUCLEAR REACTOR DESIGNS. The document number is SECY-10-0034. It is a fairly typical redundant, bureaucratically phrased work, but it contains a number of important statements, planned processes, and issue prioritization. It should be in the library and perhaps in the brains of all of the leaders of the efforts to design, build and market small nuclear power reactors in the United States.

On one issue that is near and dear to my heart, the staff members demonstrated that they do not understand the process of financing a major technology development program because they deferred any action on a review of the annual licensing fee. At its current level, the fee is an impenetrable financial barrier for a reactor designed to produce 10 MWe. That power output is sufficient to supply electricity and heat to approximately 5,000 - 10,000 American households, depending on the geographic location and weather. It is the size that the Alaskan village of Galena is investigating in partnership with Toshiba.

The fee is currently $4.5 million per year per reactor, with no provisions for adjustment based on size or complexity of the reactor or its safety systems. For a 10 MWe reactor operating at a capacity factor of 50%, which might be typical for a system in a remote location where it will be the primary power source and need to respond to hourly load fluctuations, that fee would require the customers of the plant to pay an additional 10 cents per kilowatt-hour to the US government for the service of being regulated.

That single, externally imposed part of the project cost is more than the current average wholesale cost of electricity in the continental US. It alone halts any further consideration of a development project because it is a continuous expense that cannot be controlled or mitigated and would place the financial payback at an extreme sovereign risk. Here is what the staff recommended to the commission on the annual fee issue in the enclosure to Policy Issue Information document number SECY-10-0034.
5.0 Financial Issues for Small Modular Nuclear Reactors
5.1 Annual Fee for Multi-Module Facilities
Scope: Generic
Importance: Medium
Issue Paper: FY 2011
The 104 power reactors currently licensed to operate have licensed power limits ranging from 1,500 to 3,990 MWt. SMRs are expected to have capacities ranging from 30 to 1,000 MWt. As discussed previously, some of these SMRs may not generate electric power, but instead may be used to generate process heat for industrial applications, such as the production of hydrogen or bitumen recovery from oil sands. Current regulations governing annual fees for power reactors require the same fees from a commercial nuclear reactor designed to produce electrical or heat energy regardless of capacity. SMR developers have identified concerns with this fee structure because of the significant adverse effect on SMR economics.

Although the Commission’s regulations allow granting exemptions to the fee requirements if the licensee can justify the reduction in the annual fee, the Commission has issued an advanced notice of proposed rulemaking (ANPR) in March 25, 2009, stating that it is considering whether to amend its regulations to establish a variable annual fee structure for power reactors based on the reactor’s licensed power limit contained in operating licenses (including COLs). The ANPR raises issues such as the following:
  1. Whether a variable annual fee structure should be based on either the licensed thermal or electric power limits of the power reactor.
  2. What the ranges should be for each group or category of reactors if a variable annual fee structure is established.
  3. Whether a variable annual fee structure should account for the various configurations made possible by the modular reactors, including single or multiple modules feeding steam to one steam generator or a combination of the application of process heat and electricity production at one facility.
  4. Whether and how the fee structure should account for a COL that is issued for a set of modular reactors located at a single site where the licensee can construct, install, and operate each reactor module over a long period of time, depending on the licensee’s needs.
The comment period ended on June 8, 2009, and in SECY-09-0137, the NRC staff recommended establishing a working group to analyze options and suggested methodologies for setting fees for nuclear power reactors, including SMRs. In an SRM dated October 13, 2009, the Commission approved the recommendation. Depending on the working group’s recommendation, a proposed amendment to the rule may be presented in a future fee rule. This issue is applicable to license applications for new, first-of-a-kind SMR designs, including the NGNP. Although resolution of this issue before submittal of a license application may be more important to an SMR license applicant trying to support its business case at the design certification stage, the staff believes that resolution of this issue need not occur until after a licensing application is submitted because it concerns activities that will need to be addressed during an operating license review. However, the likely timing for subsequent Commission papers on this issue provided above is based on the effort associated with the ANPR. The NRC staff will review information submitted as part of the ANPR, including white papers concerning this issue that it receives from DOE and potential SMR applicants, discuss design-specific proposals to address this matter, and determine whether a proposed amendment to the rule is appropriate. Should it be necessary, the staff will propose changes to the Commission’s regulations following the process for processing the ANPR.
I added some emphasis to the above quotes in an attempt to show just where the gulf between a risk averse bureaucrat and a risk averse private investor lies. Please understand - I have been working as a Washington, DC based bureaucrat since 2001. I have served on numerous "working groups" over the past 8 years. I know what they can and cannot accomplish and I have a pretty good feel for the way that group members treat timelines.

Note: The deadline for commenting on the ANPR was in June of 2009 and the document that is indicating that the staff "will review" the information submitted is dated March 28, 2010. I wonder when the review will start?

Risk averse bureaucrats work hard to ensure that they cannot be blamed for any mistake. One of the best ways to guarantee success in that effort is to defer any action or decision into the distant future. Risk averse private investors seek assurances that they are not wading into a morass and seek at least a reasonably high probability of financial payback in a reasonable period of time.

A financially onerous rule that must be changed by a process where an assigned working group has not even been formed qualifies as a risk to be completely avoided. Before an investor could be convinced that the issue has been "mitigated", there would have to be a completed working group report with solid recommendations for change and a reasonable assurance that the changes will be approved and implemented - at the very minimum. Most investors, with plenty of other opportunities for investments with higher probabilities of reward, would insist on a rule that has already been issued for a fee schedule that imposes an acceptable burden.

Aside: Just in case you do not understand just why this is such a big deal to me, consider the fact that major utilities, state, and local governments are currently spending millions of dollars to try to recover their contributions to the Nuclear Waste Fund. The fee in that case is a mere 0.1 cents per kilowatt-hour, 1/100th of the 10 cents per kilowatt-hour that this "per reactor" fee would impose on small reactor operators.