3 Trends Supporting General Electric's Bid for the United Kingdom's Plutonium

Plutonium has been safely stored in the United Kingdom for decades. But what happens next? Image source: National Nuclear Security Administration/ Flickr.

Seascale is a small town in the United Kingdom with a population of less than 2,000 people. You couldn't tell from its scenic landscapes, but the nearby Sellafield nuclear reprocessing facility holds 123 metric tons of plutonium separated from used nuclear fuel. That's nearly half of the total volume of separated plutonium worldwide -- and the United Kingdom is keen to dispose of it.

After the 2011 shutdown of a $2 billion program to recycle the plutonium into mixed-oxide, or MOX, fuel that can be consumed in slightly modified nuclear reactors already in use, the government reevaluated its options. In 2014, the country's Nuclear Decommissioning Authority, or NDA, narrowed its focus to three technology options for clearing its plutonium stockpiles: modifying existing reactors, new construction of a reactor design used worldwide, or new construction of a Generation IV reactor designed by General Electric (GE -2.11%) that has never been built before.

We recently evaluated the pros and cons of each competing technology in anticipation of a head-to-head competition and determined General Electric's PRISM reactor might be the most economical in the long run. Now it's time to dig into the trends supporting the company's plan to dispose of the United Kingdom's plutonium stockpiles. Multiple billion-dollar revenue streams are at stake.

Trend No. 1: Economic policy in the United Kingdom
The United Kingdom's current economic policy focuses on leveraging its existing strengths and developing new expertise to become a global leader in strategic 21st century technologies. The nation has outlined "Eight Great Technologies" it will invest in to spur future growth:

1. Energy storage
2. Big Data
3. Satellites
4. Robotics and autonomous systems
5. Synthetic biology
6. Regenerative medicine
7. Agri-science
8. Advanced materials

While not explicitly listed as one of the Eight Great Technologies, the enthusiasm spawned by the policy has spilled over into advanced nuclear technologies. Earlier this month, a government report (link opens PDF) evaluated how the United Kingdom could become a global leader in advanced small modular reactors, or SMRs, which can be deployed more cheaply and quickly than traditional (and larger) reactor designs. More advantageously, several SMRs in development, including General Electric's PRISM, are capable of consuming plutonium.

The United Kingdom is part of a global consortium that is led by the United States and includes Russia, Japan, and China. However, the report admits that if the United Kingdom attempts to develop SMR technology on its own it would be starting from behind. So why not kill two birds with one stone? Combine the United Kingdom's unique problem of its relatively large plutonium stockpile with its pursuit of leadership status in cutting-edge technologies, and General Electric's PRISM reactor stands out as an obvious solution.

Trend No. 2: Climate policy in the United Kingdom
Few countries have targeted carbon dioxide emissions as aggressively as the United Kingdom. In 2013, the country emitted 21% less carbon dioxide than it did in 1990. That's great news, but now is not the time to celebrate. Most of the country's nuclear power plants are scheduled to close before 2023. While the United Kingdom has been preparing for the deadline for many years -- outlining plans to build 16 gigawatts of new capacity, compared to nine gigawatts in operation today -- addressing the problem in a cost-effective manner will be difficult.

New construction has been approved at eight of the nation's nine nuclear generating sites. Traditional large-scale reactors are planned at five of those facilities, while SMRs are being considered for the remaining three sites. That could help streamline regulatory approval for new reactor designs (compared to getting new sites approved) and lower the up-front costs to deploy low-carbon energy capacity. While a smaller footprint allows the PRISM reactor to be deployed at existing facilities, its unique design allows it to consume used nuclear fuels, too. That is particularly advantageous considering that nuclear waste is traditionally stored on-site without reliable long-term storage options.

Trend No. 3: NIMBYs
A smaller footprint and the ability to consume used nuclear fuels on-site would be persuasive when the government explains its decisions to citizens. Nuclear waste would not have to be stored for decades or centuries at current facilities, nor would it have to be transported throughout the United Kingdom to a centralized storage location, nor would citizens have to worry about what could possibly happen to that centralized location over the next 100,000 years.

Not only would it be easier to attain operating licenses for a new reactor at an existing nuclear facility, but it would go over much better with local citizens. That's because communities with nuclear power plants have more favorable opinions of their net benefits, such as well-paying jobs and tax revenue generation. Moreover, these towns will want to retain jobs when existing nuclear facilities close, while General Electric would benefit from a skilled workforce. The same symbiotic relationship isn't as easily realized by the two competing technology options, which would likely need to be built at new sites. 

*PRISM is based on decades of reliable performance of a smaller reactor at Argonne National Laboratory. Source: World Nuclear Association, U.K. Energy and Climate Change Committee.

In other words, the concerns of "Not In My Back Yard-ers" would be addressed and minimized.

What does it mean for investors?
Technological advantages alone make a strong case for General Electric's advanced reactor, but the combination of the United Kingdom's economic policy (focused on developing expertise in strategic 21st century technologies) and climate policy (requiring quick deployment of low-carbon energy sources) could provide the remaining firepower needed for deployment. Of course, any advantages would have to outweigh the uncertainties surrounding the new system and the fact that detailed engineering design has yet to be completed. But if PRISM proves cheaper to deploy while boasting a smaller footprint and the ability to be constructed on-site, that might be enough to persuade the public that pursuing a never-before-built reactor is the best option. In the end, taxpayers might get to decide.