Credit: World Nuclear Association
Remarks as prepared
Daniel B. Poneman
Centrus Energy Corp. President & CEO
World Nuclear Association Annual Symposium
Many of us in the room – and you don’t have to admit who you are – can remember back to 1973.
That was the year everyone in the United States panicked because our oil dependence shot from 28% to 35%.
And in October, the Arab Oil embargo began.
It was intolerable. Gasoline prices skyrocketed. Mile long lines formed at gas stations. Here in the U.K., inflation hit 24 percent and the Tory government was driven out of office. President Nixon launched “Project Independence,” vowing to make America energy independent by 1980.
Why? Because energy is different. It is elemental to the economy. It is the prerequisite of progress. And is indispensible to national defense.
In response, world leaders got together in 1974 and said we need a forum to address these issues collectively. And so they founded the International Energy Agency.
A defining feature of the IEA was – and is – a requirement for all member nations to maintain a strategic oil reserve equal to 90 days of oil imports. Releases from the reserves are coordinated through IEA, which has happened in times of crisis like the 1991 Gulf War, in 2005 after Hurricane Katrina, and in 2011 as a result of the conflict in Libya.
Just like the reserve requirement at a bank, even a modest reserve is enough to defray risk, to build confidence and to bring stability to the market. In other words, they are enormously useful even when we don’t tap them.
Oil is certainly not the only strategically important resource we have stored.
In the event of a public health emergency or a terrorist attack, United States has $7 billion worth of medicine and supplies stockpiled in secure facilities around the country. The contents and location of those stockpiles are a closely guarded secret.
Saudi Arabia has constructed a massive water reservoir which holds 2 billion liters of drinking water. That’s equivalent to about 800 Olympic swimming pools.
China is stockpiling  rare earth elements like neodymium, dysprosium and terbium. And a group of West African nations are planning a 1 million ton regional food security reserve.
Finally, suppose a giant asteroid hits the earth. Huge killer tsunamis ensue. The dust plume blocks out the sun for more than a year. All plant life is wiped out. You may be among the few lucky survivors.
If so, you’ll want to make your way to the Svalbard Global Seed Vault, which is buried in the permafrost on a remote island high in the Arctic Circle. It houses 100 million seeds representing more than 4,000 plant species – including all the essential crop varieties to sustain life on earth. Built to last 10,000 years, it is the ultimate insurance policy – not only against killer asteroids, but also more immediate threats like famine or climate change.
On that happy note, let’s look at the nuclear power sector.
Last year in Paris, 175 countries set a goal of limiting warming to 2 degrees Celsius this century. To achieve that, the IEA says we need to more than double nuclear capacity by 2050.
In that spirit, I want to commend Agneta’s leadership on the Harmony program, which aims to build 1,000 gigawatts of new nuclear power by 2050. It’s aggressive, but the problem it addresses is of enormous scale and urgency.
30 countries now depend on nuclear energy, and at least 20 of those countries depend on nuclear power for at least 15 percent of their electricity. And the list is growing.
Let’s look at the eastern hemisphere, which is where most of the expansion is happening.
While most of the new reactors are coming in China, Russia and India, nuclear power is also expanding to new countries.
Two countries already have new reactors under construction …
…Another 9 countries are planning to build reactors …
…And 6 more countries have proposed new reactors.
As we scale up the nuclear fleet and expand to more countries, we need to scale up our confidence that the fleet will run reliably – providing the strongest assurances about energy security. Failing to do so could undermine our collective work on energy security and non-proliferation.
As everyone in this room knows, unlike with coal or gas fired plants, the cost of fuel is only a small fraction of the cost of nuclear power. But if you can’t get fuel, suddenly you have a multi-billion dollar stranded asset and the lights go off. No country can afford to take that chance. So if we don’t want countries to build more enrichment that the world doesn’t need, we need to remove their legitimate concerns about their ability to refuel the reactors.
Obviously, I’m the CEO of a company that sells reactor fuel. We are proud of our record of delivering for our customers, on time, every time, for more than two decades. Let’s stipulate that there is a significant surplus of supply. No one is projecting a shortage. So why should we build a strategic reserve in the face of a global glut of supply?
It’s a little bit like the story of grasshopper and the ant. Should we rest as comfortably as the grasshopper did when food is plentiful? Or should we use this time to build our reserves for the future?
In the summertime, the grasshopper was hopping about, chirping and singing. An ant trudged by carrying a huge ear of corn to his nest. “Why not come and chat with me instead of working so hard laying up food for winter,” asked the grasshopper. “Why bother?”
Let’s start by asking the question the grasshopper forgot: what are the risks?
We can think about four categories of “Black Swan” events:
First: regulatory or policy changes. In the early 1970s, the United States was the exclusive supplier of enrichment to our allies around the world. But in 1974, the U.S. closed its order books for new plants. That moratorium, which went on for four years, prompted a number of countries to accelerate their investments in building an enrichment capability of their own.
The second category is natural disasters. While we haven’t had anything affect an enrichment plant, there have been some significant disruptions of uranium mines. The Cigar Lake mine in Canada, which is one of the largest uranium deposits in the world had two major floods. That helped drive up the price of uranium.
Third, there is the possibility of equipment failure or unexpected shutdowns.
Even though the United States has more than 130 oil refineries, gasoline prices can go up overnight if just one or two of those refineries get knocked offline. In the nuclear fuel market, our industry has an extraordinary record of reliability, we have a surplus, and most requirements are met through long-term contracts. But a single enrichment plant can represent 10 percent of global capacity. The Metropolis plant is 25% of the conversion market.
Finally, there is the ever-present threat of terrorism, which all of us need to be prepared for – from oil to gas to nuclear to hydroelectric dams. We have not had any incidents and the nuclear industry has strong security measures in place.
Ultimately, the international fuel market has proven itself to be robust and reliable. We have never had a significant supply disruption. And maybe we never will.
But people have been buying insurance policies to protect themselves against low probability events since the Code of Hammurabi 4,000 years ago in Ancient Babylon. What’s the chance your house is going to burn to the ground? Statistically, the odds are 400 to 1 against. But who here doesn’t have fire insurance?
So simple prudence suggests that now is the time for governments to establish strategic reserves of enriched uranium fuel.
By creating additional demand for mined, converted and enriched uranium, it would help to sustain capabilities that have long-term strategic importance.
Depending on the unique circumstances and requirements of a country, a reserve could take different forms, from fabricated fuel to a virtual reserve held at the converter or the fabricator. Alternately, there could be a network of regional, international repositories.
Of course, we already do have some fuel banks in the United States, Russia and in Kazakhstan under the IAEA. I strongly support them. But the essence of security is found in diversity of reserves, just as is also the case with oil reserves.
Let’s take a look at a checklist of the classic circumstances under which you might create a strategic reserve. And let’s see how nuclear stacks up.
Is nuclear fuel key to our national, energy, and economic security? Yes.
Is the supply subject to factors beyond the ability of any one nation to control? Yes
Are we dependent on imports for the vast majority of our fuel? For the United States and at least 23 other countries with nuclear power, the answer is yes.
Is there a strategic industry under stress? Yes.
Is there an opportunity to fill the reserve at low prices? The time has never been better.
Five criteria … five check marks. I guess creating an LEU reserve isn’t such a wild idea after all.
Obviously, we’d have to determine how much fuel is needed in a reserve, along with how and where it should be stored. That’s a topic for a different day. But just to illustrate how manageable this is, let me give you an example of one possible approach.
IEA member states are required to maintain oil reserves equal to approximately 25% of their annual imports. If you are a net exporter, you don’t need a reserve.
Using the United States as an example, what if we applied that model to the nuclear fuel market? We import 68% of nuclear fuel. 25% of that amount comes out to roughly 340 metric tons of LEU, or about 17 reactor reloads.
Compare that to what we spend on oil reserves.
To build the Strategic Petroleum Reserve, the United States spent $7 billion tunneling out 60 enormous caverns, which are 2000 feet deep. For those of you more comfortable with the metric system, that’s enough to fit the Statue of Liberty, Big Ben and the Eiffel Tower stacked on top of each other with considerable headroom to spare.
A strategic LEU reserve, on the other hand, would cost about $350 million to fill. And based on commercial storage rates, it might cost $1-2 million to operate.
Best of all, since the energy density of Low Enriched Uranium is about 83,000 times higher than oil, the entire reserve would fit inside a 6000 square foot warehouse … Like the one in this picture!
Or, once WNA has finished with the Symposium, we could easily fit the reserve inside this ballroom.
Here is one of the four sites that comprise the strategic petroleum reserve. It’s 500 acres at the surface, and the tunnels extend two hundred stories underground.
Our LEU storage facility would fit inside this little red dot.
We finish where we began. Energy is critical to national security and international security. Nuclear energy is a key part of that equation – both in terms of energy security and non-proliferation. Both of those goals would be supported by having an enriched uranium reserve.
While this is not a new idea, it’s an idea whose time has come. With markets where they are, we have an opportunity to put this plan into action. This forum is the right group of people, at the right time, and the right place, to have that conversation.
 The moratorium lasted from 1974-1978. Source: Internationalization of the Nuclear Fuel Cycle, National Academy of Sciences et al, 2009
 2006 and 2008
 The first written insurance policy was in the code of Hammurabi: http://www.investopedia.com/articles/08/history-of-insurance.asp
 Out of 132 million housing units in the United States, there were 369,000 home fires reported in 2013. (includes apartments, mobile homes, etc.)
 30 countries have nuclear power. All of these are net importers of enrichment except for Russia, UK, Netherlands, Germany, France, and China.