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Is U.S. Confrontation with China Threatening U.S. Nuclear Competitiveness?

Is U.S. Confrontation with China Threatening U.S. Nuclear Competitiveness?

The United States has created neither the market conditions nor the regulatory environment to maintain U.S. global nuclear leadership.

The Trump administration may be undermining one of its top energy and national security priorities—civilian nuclear power—by putting it in the crossfire of its current confrontation with China while not creating a conducive economic and regulatory environment for nuclear power at home.

U.S. global leadership in civilian nuclear power is crucial for advancing a number of national security goals, including ensuring adherence to the non-proliferation regime and maintaining the technological superiority of our armed forces. The Trump administration’s announcement in October to significantly limit nuclear exports to China—particularly next-generation technologies—recognizes that nuclear energy has a strategic and national security value, but that decision creates complications.  

U.S. nuclear power is in decline while China and Russia are ramping up—and subsidizing—their industries. A policy that limits our struggling nuclear industry’s access to the fastest-growing nuclear power market in the world is only half a policy if it does not simultaneously support advanced nuclear technologies here in the United States. At present, U.S. policy cuts the industry off at the knees, effectively weakening our national security posture against a range of complex threats. Further, by restricting nuclear cooperation, the new regulations put additional limits on our ability to influence the future safety and security culture of the Chinese nuclear industry.

There is no question that Donald Trump’s complaints about China are on target. The cutoff of nuclear exports is just one element in the Trump administration’s dispute with China on a range of problematic behaviors including mercantilist trade policies, IP theft, cyber malfeasance and aggressive activities in the South China Sea. Particularly salient is the indictment against China General Nuclear Power Group (CGN) for conspiring to steal U.S. nuclear technology.

But as the success of U.S. nuclear firms such as Westinghouse and its state of the art AP1000 reactor in China suggest, nuclear commerce with China can work in some circumstances.

The administration’s new regulations allow continued export of the AP1000, of which three of four Chinese plants have come online, and common nuclear components that are readily available from multiple sources. The regulations, however, restrict the transfer of any advanced nuclear technologies—including so-called Generation IV technologies and small modular reactors—which promise to be the industry’s future. This technology is not applicable to nuclear weapons—where China is already self-sufficient—but instead is potentially applicable to naval propulsion systems, floating power plants and a host of new applications in a growing global market for nuclear power.

In a world where the risk of great power conflict is returning, the administration is justified in ensuring U.S. industry does not support a potential adversary. It is fair to ask why U.S. nuclear companies need to work in China at all. There are two main drivers: First, China has the largest market for nuclear technology. Second, it has a conducive regulatory environment for developing new technologies—obviously benefitted by a national decision to make its nuclear industry a strategic priority.

Comparatively, the United States has created neither the market conditions nor the regulatory environment to maintain U.S. global nuclear leadership. There is only one American-designed nuclear power plant under construction outside the United States, while China and Russia are supplying about two-thirds of the international market. Domestically, the United States has not broken ground on new reactors since 2013. Two of those four reactors—all AP1000s like those already operational in China—have since been abandoned and the other two have struggled with significant delays and large cost overruns. Twelve U.S. reactors are scheduled to close early over the next ten years.

With limited electricity demand growth and cheap, plentiful natural gas and increasingly competitive renewables, the market in the United States for new nuclear reactors is almost non-existent. This situation could change in the 2030s when a number of reactors are scheduled to close and new technologies will likely be commercially ready, but the industry needs to last that long to take advantage of the opportunity.

On the regulatory side, the Nuclear Regulatory Commission (NRC) permitting processes are primarily designed for older, large, light water reactors. While the NRC has been updating to regulate IV nuclear technologies and recent advances in small modular reactors show progress towards modernization, some innovators have felt compelled to look outside the United States for commercialization opportunities.

Before the ban was announced on October 11, multiple U.S. nuclear companies working on advanced nuclear technologies had Department of Energy authorization for projects in China, including construction and testing of new reactors. Total losses under the new regulations are expected to run into the billions of dollars and thousands of jobs.

An administration official conceded that the restrictions could hurt the industry, noting, “We understand the US industry may suffer in the short term … we believe that in the long term this policy will benefit” the industry. However, to paraphrase John Maynard Keynes, in the long run, without a market for its technologies, the U.S. industry might be dead.

As our colleague Robert Ichord has argued, the United States should manage the nuclear industry as a strategic asset because of the significant national security and clean energy benefits.

To ensure U.S. nuclear power leadership, the United States must develop the other half of its policy to confront the Chinese challenge by creating alternate growth opportunities at home and abroad. The recently signed Nuclear Energy Innovation Capabilities Act (NEICA) is the first part of a long-term strategy for moving toward advanced nuclear reactors and supporting capacities. But a more serious approach would be to formally acknowledge the domestic industry as a national security asset and provide support, including ensuring the survival of the existing fleet, increasing funding for the development of new projects, and providing more support for testing and demonstration of new technologies.

Meanwhile, international cooperation with China is still in our best interest. Through cooperation and technology sales, the U.S. imparts its top-notch nonproliferation and safety culture everywhere it works. Limiting ties with China and cutting all ties with CGN doesn’t just limit our influence in China’s growing nuclear culture, but also well beyond, as CGN has growing global contracts in many countries.

At his meeting with Trump at the G20, Xi Jinping promised new protections for intellectual property and an end to coerced tech transfer. This is essential for U.S.-China trade, and nuclear should be included. Given that the Chinese are already developing a number of Generation IV technologies, the administration should put an emphasis on nuclear trade with enforceable and reciprocal terms that safeguard intellectual property and punish cheating with stiff penalties. Additionally, the administration should consider a whole-of-government effort to encourage foreign nuclear sales more broadly along the lines of the Foreign Military Sales program.

Ultimately, the Chinese will have an advanced nuclear power sector with or without us. To have a healthy nuclear industry, however, we must come to terms with the realities of the global market and make a commitment to nuclear power at the highest levels of government.

Randolph Bell is the director of the Atlantic Council Global Energy Center. Follow the Global Energy Center on Twitter @ACGlobalEnergy.

Robert A. Manning is a senior fellow in the Brent Scowcroft Center for Security and Strategy. Follow Robert on Twitter @RManning4.

Image: Reuters.