Nuclear power stirs up some powerful emotions in people, either because of fear or misunderstanding (or both). However, there's no getting around the fact that nuclear power is the absolute safest form of power generation in operation today, the most reliable low-carbon base load power generation source, and still not reaching its maximum potential. But if it's ever going to approach its full potential we'll have to address the most pressing issue with the technology: used fuel storage.
Well, say hello to a rather robust solution developed by General Electric (NYSE:GE) and nuclear partner Hitachi. The PRISM sodium-cooled fast reactor, a Generation IV reactor in development (only Generation III reactors are in use today), is capable of consuming spent nuclear fuel and unused plutonium feedstocks to produce grid-scale amounts of clean, low-carbon electricity. In fact, the PRISM could reduce the volume of used nuclear fuel in storage in the United States by 96% -- and supply 10% of the nation's electricity in the process.
The reactor design recently took a big step toward global deployment with a little help from the U.S. Department of Energy. What happened? And what are the implications for investors?
The DOE tapped GE Hitachi Nuclear Energy to lead a research and development project aimed at supporting advanced reactor technology development. Advanced reactor designs have existed for decades, but few (or none, depending on your definition of "advanced") have been licensed and commercialized.
The most important part of the DOE deal in the near term is the multimillion-dollar investment from Uncle Sam that will be used to provide an updated safety assessment of PRISM with Argonne National Laboratory. Why does it need to be updated? Two reasons:
- The last safety assessment was conducted in the early 1990s during the unofficial moratorium on nuclear technology in the United States following the Three Mile Island incident in 1979 and the Chernobyl disaster in 1986. Of course, a lot has changed since then in terms of global energy demand and new risk characterizations.
- For PRISM, there are no "modern next-generation probabilistic risk assessment methodologies," which consider how complex systems work together to quantify and characterize risk factors. In other words, it's a good idea to take a deeper look into the design limits and process metrics for the new reactor now that it's 2014.
While providing an updated safety assessment might trigger little more than a shoulder shrug from investors, this is actually pretty big news.
Why does it matter?
Four major metrics are considered for new nuclear projects: safety, environmental impact, efficiency, and economics. The lengthy review process means it can take 10-15 years to move a new nuclear construction project from paper application to approval to start-up, but that process can take even longer with a new reactor design. You can imagine that safety is ranked significantly higher on the score sheet than the other categories, so modernizing the safety assessment will be a critical step in securing global licenses that would allow General Electric to build new power plants and begin tackling the world's used nuclear fuel stockpiles.
The recognition and investment from the DOE only represent a piece of the growing momentum to commercialize PRISM. A separate research and development project that began with the DOE in 2013 to develop a new insulation material for the electromagnetic coolant pump of the advanced reactor should reach a successful end in 2015.
General Electric also has its eye trained on the United Kingdom, specifically the Sellafield site that stores the country's plutonium stockpile. The company and country have determined that a PRISM fleet could consume the stockpile and provide enough electricity to power the United Kingdom for 100 years.
That was too good to pass up, apparently, as the United Kingdom's Nuclear Decommissioning Authority announced in January 2014 that PRISM was a "credible option" for managing the plutonium stockpile. Again, that might not mean much to investors, but the announcement was made on the global stage and was more than fanfare. In July 2014, General Electric Hitachi and Iberdrola Generación Nuclear, a global generator that owns 3.4 gigawatts of nuclear power in Spain, entered into a memorandum of understanding to collaborate on pushing the United Kingdom to utilize PRISM reactors.
What does it mean for investors?
Considering that PRISM has the potential to change the game in the efficiency, safety, and economics of nuclear power worldwide, it's encouraging to see the technology progressing. Investors should consider that closing the nuclear fuel cycle, that is, recycling used nuclear fuel in a safe and reliable way, represents a massive global opportunity. The market is significantly larger, as the platform could be used to absorb the waste generated by all globally approved reactor designs. The platform also monetizes a very large cost facing the nuclear industry. Couple the two together and it could help turn the tide in how the world thinks about nuclear energy.
Of course, General Electric is a huge company, so benefiting from the growth of any single portfolio or technology will be difficult for investors. PRISM technology will also take at least another decade to deploy commercially, notwithstanding an unprecedented expedited build out (which isn't how the nuclear industry rolls). Despite the "innovation dilution factor" at General Electric and the lengthy deployment timeline, PRISM could represent a true paradigm shift for global energy production -- perhaps enough to really make a difference for shareholders. Who wouldn't want a piece of that?