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In 1973, nuclear power supplied 5% of the total electricity consumed by American homes. Since then, capacity has outgrown overall consumption to supply more than 19% of the nation’s current electricity needs. While that may be considered a bright spot for nuclear supporters, it doesn't come without caveats. As nuclear production has soared, so, too, has the pile of radioactive waste.
Want a little more clarity?
Every year, the average nuclear power plant creates 20 metric tons of used nuclear fuels, or UNFs. The country’s waste has added up to 67,500 metric tons over the past 40 years and will grow to a maximum of 120,000 metric tons over the lifetimes of all currently operating reactors. That could make a lot of radioactive zombies. Luckily, industry leaders General Electric (NYSE: GE ) and Hitachi (NASDAQOTH: HTHIY ) have formed the GE Hitachi Nuclear Energy alliance to stave off the irradiated living dead and turn nuclear waste into a safe and lucrative business.
Not your grandfather’s reprocessing
Today, several countries reprocess UNFs to recover useful materials and significantly reduce high-level waste. In fact, reprocessing can increase the ultimate energy produced from a unit of uranium by 25% and reduce high-level waste volumes by 80%. While there are serious advantages to being thrifty with wastes, the industry is by no means maxing out the efficiency scales.
The World Nuclear Association estimates that less than one-third of all UNFs produced to date have been reprocessed. To understand why that number is so low, consider that worldwide reprocessing capacity sits at just 4,000 metric tons -- not all of which is even operational. Worse yet, the world produces more than 8,500 metric tons of UNFs every year.
Enter GE Hitachi. Engineers at the alliance have created the Advanced Recycling Center, or ARC, which turns the idea of UNFs reprocessing on its head -- notice that the "R" stands for "recycling" and not "reprocessing."
The ARC combs through waste with advanced electrometallurgical reprocessing technology to safely separate waste into three groups: (1) uranium for re-use in power generation, (2) fission products for stabilization and geological storage, and (3) high-level waste known as transuranics, or elements heavier than uranium.
Closing the loop
The third group is where things get interesting. Engineers have designed the ARC to be combined with a small, modular, and sodium-cooled reactor, named the PRISM reactor, which is powered by those dreaded transuranics. The reactor consumes all transuranics from the separation process, thus eliminating the most radioactive waste and closing the nuclear fuel cycle.
The entire unit from GE Hitachi would generate revenue from selling uranium separated by the ARC, electricity produced by a PRISM reactor, and services surrounding the collection and disposal of UNFs. The small and modular design of the PRISM reactor reduces construction time from 60 months for larger reactors to just 36 months, which greatly improves the economics of the most costly part of nuclear energy. And finally, units could be co-located with plants in operation today, solving reprocessing capacity problems and making transporting high-level radioactive wastes a thing of the past.
Does Uncle Sam want a zombie atomic-calypse?
It’s too bad the United States, which holds about a quarter of the world’s UNFs, has skirted the issue of reprocessing for fear of contradicting its international non-proliferation policies. Here's how much nuclear baggage your state is carrying:
Exelon (NYSE: EXC ) and Duke Energy (NYSE: DUK ) , which primarily store their waste in Illinois, Florida, and the Carolinas, are the nation’s biggest contributors. Of course, that comes naturally, as the nation’s largest producers of nuclear energy. It also makes the two companies the obvious industry partners for building the first full-scale ARC facility right here in the United States. And that puts all of the attention on government agencies.
The case for an American ARC program
The United States isn’t expected to lighten its stance on proliferation, but it may be slowly modernizing its nuclear policy. The Department of Energy is sponsoring a $450 million program encouraging the design and implementation of small modular nuclear reactors that "have the potential to be licensed by the Nuclear Regulatory Commission and achieve commercial operation around 2025." In late 2012, Babcock & Wilcox (NYSE: BWXT ) received the first award in the program, estimated at $227 million, for its proposed 180 MW mPower reactor. The company has already agreed to send two units to the Tennessee Valley Authority by 2021.
GE Hitachi’s PRISM reactor weighs in at 311 MW -- just above the program's ceiling of 300 MW -- and still requires licensing from the Nuclear Regulatory Commission. Will it be the next reactor to gain funding? The industry may not be ready to invest in a commercially unproven technology such as a sodium-cooled reactor. Nonetheless, the company has an interesting selling point for utilities reaching saturation for UNFs storage:
Today, in the U.S. there are approximately 100 nuclear power reactors in operation. Assuming that they each produce 20 tons of UNF a year for 60 years of operation, the current fleet will produce 120,000 tons of UNF. Twenty-six ARCs are capable of consuming the entire 120,000 tons of UNF. Additionally, they are capable of producing 50,000 MWe and avoiding the emission of 400,000,000 tons of CO2 every year.
Foolish bottom line
What would a fleet of 26 ARCs mean for the United States? Here are a few statistics to get Uncle Sam’s pulse going:
- Increase national nuclear capacity by 50%.
- Supply 10% of the nation's electricity.
- Increase world nuclear capacity by 13.5%.
- Represent a greater nuclear capacity than every country other than France (63,000 MW).
Because of its unique ability to run on transuranics, costs to build the first full-scale ARC -- consisting of a fully equipped recycling facility and one PRISM reactor -- could be pulled from currently existing waste-management funds. You may not be aware of it, but one-tenth of one penny per kWh of electricity generated by nuclear power plants is set aside for future UNFs disposal. Today, the country's fund sits at $25.8 billion.
That could represent a serious down payment on an American ARC armada. In the end, it's up to government officials to institute a program and bring GE Hitachi’s innovation to the market. (Sorry, free market supporters -- the government controls all UNF disposal programs.) Do you think the United States -- or the world -- needs this technology? Let me know in the comments section below.
Wondering what GE's PRISM reactor means for you? Then you'll want to consider how the business fits into the company's complex energy portfolio. To help, we're offering comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE today. To get started, click here now.