Why No Longer Paying for Nuclear Waste Disposal Could Be Great News for General Electric

Workers inspect a railcar transporting used nuclear fuel. Source: Energy.gov.

A recent ruling by the D.C. Circuit Court of Appeals just added to the uncertainty surrounding the United States' growing pile of nuclear waste. The court sided with the National Association of Regulatory Utility Commissioners and the Nuclear Energy Institute over the Department of Energy regarding fees that were collected to pay for disposal of nuclear waste. As mandated by the Nuclear Waste Policy Act of 1982, atomic power companies were required to deposit one-tenth of a cent into a federal disposal fund for every kilowatt hour of nuclear energy produced. That may sound minuscule, but the fund swelled to over $30 billion and raked in approximately $750 million each year.

Beginning Friday, nuclear producers such as Exelon (NYSE: EXC  ) will no longer be required to contribute to the fund. Removing the cost will have a meaningful impact in the short term, though it could cause more problems further down the road when waste has to be dealt with. Luckily, there is a silver lining -- and it may represent an enormous opportunity for General Electric Company (NYSE: GE  ) and Babcock & Wilcox (NYSE: BWC  ) .

No excuses, DOE
While the decision may sound devastating for citizens residing in states with nuclear waste, it could actually motivate the Energy Department to finally develop a long-term plan for disposing of the material. Believe it or not, the United States government is operating without any concrete plans for solving the problem, which stands at over 70,000 metric tons of radioactive waste and grows at approximately 2,000 metric tons each year. The appeals court revoked the right of the DOE to collect disposal fees because, as correctly argued by power producers, the department hasn't lived up to its decades-old promise to dispose of the waste.

There's no excuse for not having a plan in place for such an important problem. Sure, the average commercial nuclear reactor in the United States is 33 years old, and most will probably operate for 60 years after being granted an extension. But having 27 years left to develop a solution doesn't address the generation of over 70,000 metric tons of nuclear waste created to date.

The plan to store nuclear waste at Yucca Mountain hasn't turned out so well. Source: Wikimedia Commons.

The appeals court ruled that the DOE can only collect fees once work on the frozen Yucca Mountain nuclear waste storage site in Nevada resumes (not very likely), or once Congress officially rejects the Yucca Mountain project and the DOE comes up with a better plan. Hopefully, the renewed attention to the lack of a disposal plan from the ruling, along with halting the inflow of $750 million per year, will motivate the department to develop a solid long-term plan for disposing of the waste.

Short-term pain, long-term gain
In the meantime, the absence of fees is meaningful for Exelon and its shareholders. Consider that the company produced 142,000 gigawatt hours of electricity from nuclear in 2013, which means it paid $142 million in disposal fees despite storing 14,400 metric tons of spent nuclear fuel across its sites. The payments are equivalent to nearly half of the company's expected capital expenditures in renewable energy projects in 2014 and 13% of the dividend for the year. As they say, a tenth of a penny saved is a tenth of a penny earned. 

The real good news comes from the long-term possibilities. The Yucca Mountain fiasco showed the government the hard way that geological repositories are more complicated (and likely unrealistic) than they seem on paper. I think the only realistic long-term solution will be next-generation nuclear reactors being developed by companies such as General Electric and Babcock & Wilcox, which is helping the Bill Gates-backed start-up TerraPower.

Source: TerraPower.

Generation IV reactors are designed to consume used nuclear fuels and produce electricity -- with General Electric and Babcock & Wilcox pursuing safer operating measures (lower pressures, novel coolants, and the like). In fact, GE's Advanced Recycling Center, or ARC, can reduce the volume of used nuclear fuel produced from older reactors by 96%. The company has proposed using an ARC to dispose of the United Kingdom's entire plutonium stockpile, which would produce enough energy to power the nation for the next 100 years. Why can't a similar plan be proposed in the United States, albeit for used nuclear fuels? Meanwhile, the reactor design from TerraPower and Babcock & Wilcox could be powered for over 60 years by a single fuel loading of used nuclear fuel.

Foolish takeaway
The Energy Department should develop a long-term plan that supports the development and commercialization of novel reactor designs from General Electric, TerraPower, and Babcock & Wilcox. Not only could existing funds be used to expedite the launch of Generation IV reactors, but the money would be an investment (advancing technology, generating clean energy) rather than an expense (sealing off an underground tunnel system for 1 million years). It would likely be considerably cheaper in the long run, too. Similarly, it's would take considerable risk away from producers such as Exelon that are currently storing nuclear waste. It's your move, DOE. Choose wisely.

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Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 19, 2014, at 7:35 PM, LazyReader wrote:

    I am not a big fan of proliferating nuclear reactor than runs using sodium. Anyone whose ever taken basic chemistry will know that sodium has a propensity to react with just about everything. Almost every nation with the tech has promoted the used of sodium cooled fast breeder reactors and they all failed miserably. If sodium comes into contact with water it explodes, and it burns when in contact with air. This was the case at the Monju Nuclear Power Plant prototype in Japan. And France tried it and Japan and Germany and the US. It's not a wise idea. When safer, non reactive salts can be exploited like LFTR for example.

  • Report this Comment On May 20, 2014, at 4:49 PM, SteveK9 wrote:

    Like most commentary this is presented as an urgent problem with a huge amount of waste. It isn't urgent, and the amount of waste is small (that is the thing with nuclear, fuel has a million times the energy density ... small amount of fuel, and small amount of waste). We could store the fuel on site for decades more, until we come to our senses. Burning it in fast reactors is indeed a likely final outcome.

  • Report this Comment On May 21, 2014, at 8:49 AM, JGaryL wrote:

    Suggesting that advanced reactors eliminate the need for a geologic repository is wrong. All reactors produced byproduct wastes that remain toxic for thousands of years. The wastes coming from fast reactors may have fewer transuranics, but there will still be long life fission products that need to be isolated from the environment for extended periods. The greater than class C waste produced also has to be isolated for very long periods of time. Advanced reactors retain all of the headaches inherent with any radioactive waste disposal program, and add a layer of operational complexity. It took the utility industry more than 20 years to learn how to operate light water reactors profitably. The development of lower cost fuel alternatives is now challenging their operation. In this environment it is very hard to imagine any way for fast reactors to become competitive in the energy marketplace.

  • Report this Comment On May 21, 2014, at 11:19 PM, TMFBlacknGold wrote:

    @JGaryL

    Thanks for your comment. I didn't mean to suggest that advanced reactors would eliminate the need for geologic repositories. From the article:

    "In fact, GE's Advanced Recycling Center, or ARC, can reduce the volume of used nuclear fuel produced from older reactors by 96%."

    I've also explained in a prior article (linked in the sentence quoted directly above) that remaining waste would still need to be sent to geologic repositories, just that less volumes would be sent.

    There is indeed growing pressure on the nuclear industry, but smaller modular reactors could offer one solution and are beginning to gain traction throughout the industry. I'm more of a technological optimist I suppose -- guess we'll find out in the next few decades what worked and didn't!

    Maxxwell

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