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May 19, 2021 at 5:00 am ET
A new generation of advanced nuclear reactor designs is emerging from a combination of private sector innovation and federal government policies. These reactors are poised to play a critical role in meeting mid-century climate goals. However, a new report by the Nuclear Innovation Alliance, “Unlocking Advanced Nuclear Innovation: The Role of Fee Reform and Public Investment,” finds that the user fee model at the Nuclear Regulatory Commission is a barrier to the nuclear innovation essential to global decarbonization.
The NRC is required by current law to recover around 90 percent of the cost of its operations through user fees. This fee structure hampers efficient and timely licensing of advanced nuclear energy technologies and imposes burdensome costs on early-stage startups and other innovators. NRC’s efforts to modernize its licensing system yield public benefits that should be paid for by public investment. Dependence on fees also limits NRC’s capacity to conduct its own independent research and to pursue international engagement. The Nuclear Innovation Alliance’s report finds that reforming the user fee model and increasing public funding at the NRC can catalyze rapid innovation, strengthen the regulatory system and ensure the United States is a 21st century leader in nuclear energy.
Advanced nuclear energy enjoys bipartisan support because of its many benefits. Advanced reactors can reduce carbon emissions, prevent mortality from air pollution and produce less waste. While conventional nuclear energy in the United States has a strong record of safety, advanced reactors have design features that can further reduce the risks and consequences of potential accidents.
Perhaps most importantly, the smaller sizes of advanced reactors mean that a significant portion of the plants can be built in a factory-like setting. This enables them to be built more efficiently and with less risk, with all-in costs that are competitive with other carbon-free generation sources. New reactor designs can restore U.S. competitiveness in international markets while ensuring the United States has the influence to shape global norms of non-proliferation and safety.
In the last several years, bipartisan legislation has expanded research and development at the Department of Energy, driven regulatory modernization at the NRC and created public-private partnerships for demonstration projects. With continued federal support, U.S. companies could offer cost-competitive reactor designs to U.S. and global markets by the late 2020s and early 2030s. Successful demonstration projects depend on timely and efficient NRC licensing reviews. This is where the current fee model poses problems.
NRC is now required to charge fees to review a licensing application. Fees are almost $300/hour for staff time, creating tremendous costs for applicants. The first design certification for a light-water small modular reactor cost more than $70 million in fees. Historically, the large sizes of conventional nuclear units and predominantly investor-owned utility customers may have made such large fees manageable. However, many advanced nuclear innovators are startups targeting customers like municipal utilities or even industrial users. Fees come very early in the project lifecycle, well before a project earns revenue. Thus, these fees can pose large barriers to entry for the private-sector innovators of advanced fission and fusion reactors.
While the financial burden on nuclear innovators can discourage innovation, the more pressing challenge of the cost recovery model may be that it limits NRC’s resources to address all the activities it needs to conduct in the next several years. By 2027, NRC expects it could issue six or more operating licenses for advanced reactors and will be reviewing at least seven more license applications. However, under the current system, it is difficult for NRC to hire or train staff ahead of time. Without fee revenues from licensing applications, NRC cannot prepare to review those applications expeditiously. Without additional public investment, NRC cannot conduct enough of its own independent research and international engagement. This slows nuclear innovation and the adoption of advanced reactors to mitigate climate change.
Congress has a clear role to play to ensure that NRC has sufficient resources for upcoming staff reviews, capacity building, research and international engagement. Fees are used to recover NRC’s costs, but ultimately Congress still sets NRC’s appropriations. In 2018, Congress encouraged licensing modernization at the NRC with the Nuclear Energy Innovation and Modernization Act. Under this law, initial reforms provided NRC with “off-fee” resources to conduct critical rulemakings, like a new dedicated licensing pathway for advanced reactors called Part 53. However, more resources are needed to continue licensing modernization efforts, to ensure sufficient staff and capacity for review of upcoming applications, to conduct independent research and to foster further international engagement.
NIA’s report explores several options for fee reform. Most importantly, Congress should increase public funding for licensing modernization efforts like Part 53 and for research and international activities. Congress should also consider other options for fee reform for new license applications, such as fixed fees, flat fees, fee deferral or excluding certain activities from fees altogether. Two similar regulatory agencies enable innovation with better fee models that could inform a redesign of NRC’s: The Federal Aviation Administration does not charge fees for safety analyses, enabling rapid innovation for drones and rockets. The Food and Drug Administration is funded by a mix of fees and public money, which has enabled it to scale up and provide timely reviews for new drugs.
Importantly, NIA’s report notes the United States is competing for global nuclear energy markets and the current fee system could put American innovators at a disadvantage, especially in competition with foreign state-owned enterprises.
Historically, the NRC has been seen as a global model for independent nuclear regulation. A strong, independent regulator is in the interest of the industry and the public. Increasing public investment and reforming licensing fees will catalyze American leadership in next generation nuclear power.
Judi Greenwald is executive director of the Nuclear Innovation Alliance. Jeffrey S. Merrifield is a former NRC commissioner and current partner, Pillsbury Winthrop Shaw Pittman LLP. Stephen Burns is a former NRC commissioner and current senior visiting fellow, Third Way.
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