Advanced Nuclear Reactors With X-Energy

In the latest episode of Cowen’s Energy Transition Podcast Series, Clay Sell, CEO of X-Energy, joins Industrial Gas & Equipment and Energy Oilfield Services & Equipment Analyst Marc Bianchi to discuss X-Energy’s high-temperature gas-cooled nuclear reactor and TRISO-X fuel designs. The discussion covers X-energy’s history, the path to demonstration, commerciality, government support, and the HALEU supply chain.

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Transcript

Speaker 1:

Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Marc Bianchi:

All right, Marc Bianchi here from the Cowen energy team with another installment of our Energy Transition podcast series, now with the focus on nuclear power and small modular and advanced reactors. Today, we’ve got Clay Sell, who is the CEO of X Energy. X Energy is a front runner in advanced reactors with a high temperature gas-cooled reactor design, and unique pebble structured TRISO fuel. Prior to X Energy, Clay was the president of Hunt Energy from 2008 to 2018. And prior to that, he was the deputy secretary of energy in the George W. Bush administration. So Clay, thanks so much for joining us. To kick it off, maybe just give us a high level overview of how X Energy got started, what’s so special about your offering, and maybe set the table on the commercialization timeline.

Clay Sell:

Marc, it’s great to be with you. X Energy was started in 2009, quite an extraordinary guy named Dr. Kam Ghaffarian. He’s not an energy guy. He’s not a nuclear engineer. He had made his fortune in the space business and had built incredibly successful engineering support service contractor to NASA. He had made his fortune that way. Along the lines, he had created a school in Kinshasa that provided education for 700 students in the Democratic Republic of the Congo. He was over there in 2009, and he was struck by the realization that no matter what he attempted to do for these important children, from an educational standpoint, their future would always be constrained by the energy poverty of their economy. And cam was inspired at that moment to do something about it. He was inspired to create a company that provided clean, safe, secure, and affordable energy. He took a systematic approach to identifying what that technological approach should be.

Clay Sell:

He started with hydrogen. He eventually looked at a series of nuclear technologies, but it was a conversation with a guy named Andy Kadak, who was a professor at MIT that introduced him to the pebble bed technology. In that era of… One of the most exciting advanced reactor initiatives anywhere in the world was the pebble bed modular reactor program out of South Africa. That program was unfortunately canceled by the South African government in about 2008. Kam was inspired to form X Energy in 2009, and he really enlisted a number of the leading intellectuals out of the pebble bed modular reactor program in South Africa to come to the United States and work off the open source technology that had been developed to bring that technology to the marketplace here in the United States. And so our technology is high temperature gas-cooled reactors. The gas, the heat transfer fluid, is helium.

Clay Sell:

We use a TRISO fuel in a pebble fuel form, and it’s really an amazing technology, which I’m sure we’ll get into in more detail through this call, but that’s how it all started. I’ll just say, Kam is an instinct, and he put a lot of his belief and a lot of his capital to work, 13 years ago, to really put our company in the position it is today, to be the leading technology vendor in the great energy transition that we’re in between now and 2050. I really regard it as the greatest business opportunity of our lifetime, the greatest social impact opportunity of our lifetime. And all of us at X Energy are so appreciative for Kam’s vision in getting this company going 13 years ago so that we’re in a position to be the first to market in this next era of nuclear power.

Marc Bianchi:

That’s a great introduction. Maybe talk to us a little bit about the timeline to commerciality. What are the financial sponsors right now, and what kind of capitals needed between now and commercially to kind of make it all happen?

Clay Sell:

Let me start with the timeline to commercially. One of the great advantages that we have at X Energy is we were selected by the department of energy for the advanced reactory demonstration program, which was honestly one of the greatest competitions that has ever occurred in our industry. The department of energy said, “We’ll pay 50% of the costs for a commercial project, as long as it can be online in seven years.” We put forward a two and a half billion dollar program that would involve completing the design of our reactor. It would involve completing the design, construction, and fabrication of our first fuel core in our TRISO X facility in Oak Ridge, Tennessee. And of course, it involved the construction of a first of a commercial plant in Washington state. The sum total of all of that was approximately two and a half billion, and half of that is being provided by the us government.

Clay Sell:

So, that is a tremendous source of capital that allows us to achieve the key elements in order to get to commerciality. So, element number one is to complete the design of our Xe-100 plant. That’s, on rough order, about a 600 million effort. So, the US government, and I should thank all of the taxpayers that listen to your podcast for their role in this, but the US government will pay half that cost. That’s a huge benefit to us to complete the design of our commercial nuclear power plant. And we’re on track to complete that by the first quarter of 2025. So, that’s the first piece. The second piece is to complete the design of our fuel facility and to fabricate fuel. We will break ground on our commercial fuel facility, which I should note will be the first new commercial fuel facility constructed in the United States in over 50 years, a commercial fuel facility for advanced reactors like ours.

Clay Sell:

We’ll break ground on that facility later this year, and it will be operational in the 2025 timeframe, in time to produce the first core for our first project in Washington state. A third element of that timeline is the regulatory pathway. And so next year, we will file our construction permit application with the US Nuclear Regulatory Commission associated, for our technology, on a specific site. And our customer for that project is Grant County Public Utility District, which is a member entity of Energy Northwest, which is the only nuclear operator in the Pacific Northwest today. So next year, we’ll follow our construction permit application. That will initiate about a 27 to 30 month process to get our license approved, which will then be followed by about a 30 month process to perform the nuclear construction on our facility, which should bring the first unit online in the mid-2028 timeline. This program was initiated under contract with the Department of Energy in 2021. We remain on track to bring our first unit online in 2028, achieving the goals of the program of seeing a project come online in approximately seven years.

Marc Bianchi:

Well, that’s great. And I’ve got some more questions that will hit on in a bit on the licensing process and how it may influence some of the other projects that you’ve got. You’ve talked about this letter of intent with [inaudible 00:08:07], and we’ll get into that, but maybe before we get there, let’s spend some time on the fuel. You’re using TRISO, and then you’ve got a little bit of a variation on it, your TRISO-X design in the pebble. Can you just talk about what TRISO is, and then what you’re doing that’s different to it? What’s the pebble all about? How is that different from other evolutions of trio that might be out there that others are trying to pursue?

Clay Sell:

TRISO fuel has been described by the Department of Energy as the most robust fuel form ever invented. What’s unique about it is we use higher enriched material. So in our case, it’s uranium that is 15.5% U235, and U235 is the… That’s the magic isotope when it comes to vision power. And so we have a higher percentage of U235 in our fuel, but we start with a small, a tiny 450 micron, about the size of the tip of a pencil lead, little piece of uranium fuel. And then we take that fuel and we encapsulate it in multiple layers of ceramic material. And this ceramic material does two really important things. Number one, it traps virtually all of the waste products that are produced during the burn up of this fuel, so it traps them permanently. And number two, the ceramic material that wraps the uranium cannot melt at any temperature that it would see under any scenario during the life of the reactor.

Clay Sell:

And so it’s a key element of the intrinsic safety of our reactor. That is we start with fuel that cannot melt down under any scenario. Now, in our case, we take that tiny little ceramic wrapped uranium kernel, which is once it’s wrapped, it’s about a millimeter in diameter, and we pack 19,000 of those kernels together in a proprietary way. They are perfectly spaced, and they they’re wrapped in graphite in the shape of a ball, what we call a pebble, which is about the size of a billiard ball. And that is our fuel form. And it’s an unbelievable fuel form. It’s incredibly robust. It cannot melt down. And because it’s round, we put it in the reactor core, and it allows us to fuel our reactor core continuously. So the pebbles flow through the reactor core, like gumballs through a gumball machine. When they come out, we measure them.

Clay Sell:

If they still have energy left in them, they go back to the top. If they are spent and all of the energy has been used, or burnt up, if you will, then they go to spent fuel storage. But the fuel is the key to our whole design, and it’s one of the main elements that allows us to ensure the regulators and the public that our reactor is intrinsically safe, it cannot melt down, and it really allows us to think about nuclear power and the way we use it, the way we site it and the missions that we want it to accomplish in a completely different way.

Marc Bianchi:

I get how the design can prevent a meltdown or sort of… Meltdown isn’t even part of the conversation, but what does this design do, if anything, for proliferation? Is there an element of avoiding nuclear proliferation for weapons because of this design? And then you mentioned once the fuel is sort of burnt, the pebble goes into waste storage, but is there also sort of an argument that from a long term waste perspective, this is maybe a better mouse trap?

Clay Sell:

Yeah. From a proliferation standpoint, there’s a number of reasons why the department of energy describes this as the most robust fuel ever invented. And part of the robustness goes to its proliferation resistance. There’s less than seven grams of heavy metal uranium in a pebble, and it is wrapped in these multiple ceramic layers and graphite that make it very, very difficult, virtually impossible to separate the usable nuclear material from this fuel form. So that’s the first layer of protection, but then over the course of irradiating the fuel in the reactor, we really consume or burn up most of the special nuclear material that would be of interest to a malicious actor. So, there’s very little material per pebble, virtually impossible to separate it from the ceramic and graphite layers. I’ll tell you a nuclear physicist, it’s actually a member of Congress, had us come brief him on the proliferation resistance.

Clay Sell:

And we briefed him. We sent our top scientists. We had extensive discussions. We wrote a lot of papers. And at the end, he called and said, “Well, Clay, I’m not saying it’s impossible to get special nuclear material out of the pebble, but I will admit that there are a thousand better ways for a malicious actor to get material than dealing with your fuel form.” And that was one of the greatest endorsements we could have heard from a non proliferation standpoint. Now from a waste standpoint, here’s the real benefit. This is a fantastic fuel form. The TRISO pebble, it’s an even better waste form, because it traps all of the nuclear waste in this ceramic and graphite fuel form for a geologic time period. That’s number one. It’s a fantastic waste form as it is. But secondly, because of the multiple passes, the fuel takes through the reactor, again, we get a much more efficient utilization of the uranium.

Clay Sell:

So, a typical light-water plant… I’m going to use numbers which don’t mean anything to you, except just as a comparison. A typical light-water plant gets approximately 40,000 megawatt days per ton of uranium. That’s a measure of the power that is produced. In our case, we get 165,000 megawatt days per ton, so over four times as much. So, that means we’re a much more efficient user of the material, and therefore for megawatt day of power produced, we are producing much less waste. Now, we still produce waste and we produce waste in this fantastic waste form, and this form will be deposited like other forms of nuclear waste, in a permanent geologic repository that the Department of Energy will own and operate. And so our waste form will go the way of all other commercial waste here in the United States.

Marc Bianchi:

The fuel’s really interesting, but TRISO, your version of TRISO, and then all the other advanced reactor designs require higher enriched starting point, right? So, we’ve got HALEU that that’s needed, but we don’t have any HALEU manufacturing in the US. There was 700 million in IRA to stand up HALEU supply. Maybe you could talk a little bit about what else needs to happen to really stand up the amount of HALEU, manufacturing capacity in the US that that’s needed for your purposes and the rest of the industry.

Clay Sell:

It’s a great question. Today, there’s not a high assay LEU supplier. And me just let level set with some terms. Most commercial reactors in the US use something called low enriched uranium, LEU, which is uranium that is less than 5% U235. So, if you dig uranium out of the ground, and there’s huge amounts of uranium in the ground, it’s going to be less than 1%, U235, 0.7% U235. In order to get it to LEU stage, most light-water reactors use fuel enriched to about 4.5% or 4.75%. And so you have to increase the percentage of U235, and that’s really done through a variety of different isotope separation approaches, but the most common technology use today is a centrifuge technology. It takes a tremendous amount of energy to get the uranium from 0.7%, U235 to almost 5%.

Clay Sell:

What we need in our reactor is 15.5%. There is no supplier of that today in the United States, because until we came along, there was no commercial demand. This is not something that’s difficult to do. It’s existing technology from existing producers. The only thing the producers are waiting for is a demand signal, so that they have confidence that when they invest the roughly half billion dollars it takes to build a high assay LEU cascade that they’ll get a return on their money. And so we have a lot of customers in the wings that are coming. Those customers today are not prepared to enter into a 60 year long term offtake agreement. They will be in a couple of years, but not today. So we need to get HALEU going today. And this is where the US government has stepped in with a really innovative solution.

Clay Sell:

They’ve said, “Hey, the US government will provide that commercial certainty in the interim to get this industry going. So, we’re going to step in and we’re going to buy a certain quantity of 15.5% material over a certain number of years that will give confidence to the various enrichment companies that they will get a return on their investment.” And so the us government was appropriated through the inflation reduction act 700 million for this. Department of Energy is going to roll out a program where the enrichers can enter into these offtake agreements. And we expect that a US enrichment industry for HALEU will be in place by the 2027, 2028 timeframe. Our commercial will have ample commercial off takers prepared to enter into long term offtake agreements by that time. And this bridge role, which is a classic government role that they will have played, will be complete in the material that they bought, can then be reintroduced into the marketplace. And it’ll be really a win-win for the nuclear industry, and it will provide a great return to the us taxpayer for the facilitation of the market that they’re providing.

Marc Bianchi:

Is the HALEU enrichment, the ultimate halo that gets produced interchangeable from fuel manufacture to fuel manufacturer? So, you guys are looking for 15.5%. Are there other designs that want different enrichment levels, and then everybody’s got to have a little bit different plant, or can the plants just be tuned to whatever enrichment levels needed and you just sort of make a batch for X Energy, and then you make a batch for other advanced reactor design B and advanced reactor design C and so forth?

Clay Sell:

There’s really two different ultimate products that become the feed stock for nuclear fuel. It’s either uranium metal that is enriched to some level, or it’s uranium oxide powder enriched to some level. So in our case, at X Energy, the feed stock that we require for our fuel plant is uranium oxide powder enriched to 15.5%. We work very closely with the other ARDP winner, which is Terra Power. Terra Power has a sodium cooled reactor that uses metallic fuel enriched at something approaching around 19%. So, they’ll need a different feed stock. The enrichment process is the same, so enriching the material up, it’s actually, you take the uranium, you turn it into a uranium hexafluoride gas, you enrich the gas, and then you take that gas and you convert it either into uranium oxide or uranium metal.

Clay Sell:

It’s a little different process for different reactors, but those are all… I don’t want to say, it’s just manufacturing, but in many respects, it’s just manufacturing. The uranium enrichers, the deconverters, they know how to do it. It’s all existing technology, and we don’t assess a lot of risk in getting the material for our fuel plant.

Marc Bianchi:

Great. Well, maybe on the fuel plant, so how far along is this in terms of technology readiness? Have you demonstrated that the capability of being able to produce the pebble now, or is there some extra technological advancement that needs to occur to get there? Maybe you could hit on any licensing that has to occur around the fuel manufacturing if there’s something to discuss there.

Clay Sell:

We have been operating pilot fuel facility using commercial scale equipment in rented space at a Oak Ridge National Lab since 2016. I have a well-established track record. This is a project that we did in partnership with the US Department of Energy, something we have a tremendous amount of pride, the way we’ve worked with them. So, we’ve been producing fuel forms exactly like we will use in our reactor, in our facility for a number of years. Even the fuel forms that will go through confirmatory testing, confirmatory radiation, all of those have been produced in our fuel facility. I will tell you that we’ve also produced fuel elements for many other advanced reactor manufacturers, and also for the Department of Defense and NASA for space nuclear applications.

Clay Sell:

And so we’re meeting a number of customer needs and a number of customer requirements out of our pilot facility in Oak Ridge, Tennessee. We’re going to build our commercial fuel facility also in Oak Ridge, Tennessee. We’re very proud of our relationship to the community there. That facility requires a license from the US Nuclear Regulatory Commission. We made our license application to the NRC back in April, and we anticipate about a 24 month license approval process, which puts us well on track to be operational and producing fuel for our first Xe-100, and quite frankly, also meeting the TRISO fuel needs of other customers well in advance of their requirements.

Marc Bianchi:

So, the third party element of this whole thing is TRISO fuel, it’s not TRISO-X, or will you potentially be selling TRISO-X to other advanced reactors?

Clay Sell:

Every TRISO fuel element that comes out of our factory is branded as TRISO-X. That is our proprietary brand. We’ve done a number of things under the leadership of Dr. Pete Pappano, who runs TRISO-X for us, to improve quality and reduce the cost and provide a higher level of certainty in our manufacturing process. A number of those inventions that we’ve made over the last half dozen years are now… They’re patent protected. We have a very unique and compelling manner in which we produce the fuel, and that’s why we call it TRISO-X it’s a little something different than the way TRISO has historically been made by some of our competitors.

Marc Bianchi:

Maybe let’s shift over to talk about the reactor design. So, you’re using a high temperature gas-cooled reactor. This is different from conventional light-water, as you previously discussed, but maybe if you can give us a little bit of an overview of the advanced reactor categories that there are, so gas-cooled liquid metal fast reactors, molten salt. Where does your design fit in, and what would be maybe some of the trade offs that would exist between the different reactor designs?

Clay Sell:

All reactor designs, you can think of it fundamentally in terms of the form of the fuel, metal oxide, metal clad, ceramic clad, the enrichment of the fuel, everything from no enrichment to up to 19% enrichment. And then you can think about it in terms of what is the heat transfer fluid? Is it water? Is it helium, in our case? Is it liquid sodium in the case of others? Is it molten salt in the case of others? And then you can think in terms of the neutron spectrum. Is it a thermal spectrum or is it a fast spectrum? Those are basically the dials that get turned on the various different designs. Interestingly, the US today, the US nuclear industry is dominated by light-water reactors, which were designed specifically for use in nuclear submarines. And that was the design that Hyman Rickover came up with in the 1950s.

Clay Sell:

And the first place nuclear power was ever used was… It was in the Nautilus submarine, and when it went underway in 1954. And then later that very reactor, that light-water reactor that was designed for the submarine was taken out of the submarine. It was put on ground, dry ground, and that became the first commercial reactor in the United States. And sometimes the winning idea is not the best idea. It’s just the one that you have and that there’s an infrastructure built around to execute on. And that’s really how light-water reactors became the reactor of choice for the commercial sector in the United States. Boiling water reactors really built by GE, pressurized water reactors built by Westinghouse or Combustion Engineering, those designs came out of the Naval nuclear program, and they kind of became the standard in the US.

Clay Sell:

But even as those reactor designs were becoming the standard, there was always the view, in our community, that there were actually better designs, more elegant designs, safer designs, and designs that did not present the risk of meltdown, like we saw at TMI at Three Mile Island in 1979, or like we saw at the Fukushima plant. One of those designs was high temperature, gas-cooled reactors using TRISO fuel. And of all of the other designs that have been developed and tested around the world during this light water reactor era, the one that has gotten the most traction, the most significant operational pedigree is high temperature, gas-cooled reactors, and particularly those using a pebble fuel form. Although the technology originated in the United States, it was really folks in the UK, and then in Germany, that really advanced the state of the technology. The most recent advanced reactor that has come online anywhere in the world today is…

Clay Sell:

Well, it’s unfortunately in China they brought online last December, a high temperature, gas-cooled reactor using pebble bed fuel. So, it’s a technology that is very well regarded. It’s very well understood. It has years, and in some cases, decades of operational pedigree, and we just saw unique opportunity in this era to take this technology, really reinvent it for the particular missions that we want to accomplish here, to size it in a way that is smaller so that we can manufacture components in a factory, so that we can size it appropriately for industrial applications. So, the technology is well established. It’s well proven. The US Department of Energy spent 700 million, 10 to 15 years ago, advancing this fuel form, advancing the regulatory case. And we at X Energy are really the inheritors of all of this work that has gone on before us.

Clay Sell:

It’s why high temperature gas-cooled reactors are generally regarded, by our industry and those that watch us, as the advanced technology that is nearest to the marketplace. And it’s because of this long technological pedigree that has been advanced through many countries and over several decades to get us where we are today.

Marc Bianchi:

One thing that stands out to me is, you’re unique because your plan is to manufacture the fuel and also provide the reactor, so there’s bit of a razor razor blade model, although I’m sure you’re not going to be giving any of it away for free. But can third parties manufacture the pebble fuel that will go into your reactor? Because I’m wondering, as a would be reactor buyer, I might be wondering, “Well, X Energy’s great. They’ve got this wonderful reactor design, but who knows if they’re going to be around in 30 years or 40 years when I may need to be refueling?” What can you say to people that might be concerned about that risk?

Clay Sell:

The history of the nuclear industry is historically the vendors of the technology, whether it’s GE for their boiling water reactor, or Westinghouse, or a AREVA for their PWRs, have also been the supplier fuel. There’s a fuel facility owned by Framatome, the French company. They produce reactors. There’s a fuel facility in the US owned by GE. There’s a fuel facility in the US owned by Westinghouse. Later this year, there’ll be a commercial fuel facility, or in two years when we come online, there will be a commercial fuel facility owned by X Energy. So historically, there have been a number of contractual mechanisms and structures to manage the risk around fuel certainty. And all of those, our customers will be able to take advantage of. We are in the business of making a market for TRISO fuel with our customers. And one of the great things about our free enterprise system is when we make that market, we know that we will draw competitors into the space. BWXT attempts to make TRISO fuel. General Atomics in the past has made TRISO fuel.

Clay Sell:

So once we create the market demand, there will be other competitors. That’s actually a good thing for our customers because it reduces their fuel security risk, and it’s also a great motivator for us to ensure that we continue to produce the highest quality fuel at the lowest price so we can continue to earn the business of our customers. So, the fuel security concerns, it’s nothing new or unique than what our industry has faced. And I can tell you, there has never been a fuel disruption of note in the 75 plus year history of the us nuclear industry. And so it’s something that our industry is well suited to address.

Marc Bianchi:

Great. Maybe you could talk to us a little bit about the supply chain for the reactor and how you plan to handle that. Are you going to be just a design company and having third parties make everything? Will you have manufacturing that you’re doing in house? Just how will all that work?

Clay Sell:

Marc, thank you for letting me get to one of my favorite topics. We are not just a design house. We endeavor to be the world’s greatest project delivery organization. And I will tell you that the number one thing that has held our industry back for the last 30 plus years, in my judgment, is the inability for our industry to deliver projects approximately on time and approximately on budget. Project execution has been a real challenge. And when projects like the Westinghouse Southern Nuclear project down at Plant Vogtle, that’s a project that was supposed to come online a couple of years ago at a price substantially less than what it’s going to come in line, and it’s taken double the time and double the cost. And we, at X Energy, have become real students of project delivery, what’s worked well, what has not worked well.

Clay Sell:

So, we’re doing a number of things differently and I’m going to get to the supply chain question, but the most important thing that we’re doing different than any nuclear vendor that’s ever gone before is we will have our plant 100% designed, 100% designed all the way through construction drawings before we ever break ground on our first project. That’s number one. So when we get the construction permit application, we will know exactly, to the last bolt, what we are building for our customer. The second thing that we’re going to do, which technology gives us, which our predecessors did not have, is we will design and build this plant in its entirety in 4D virtual scheduling. So, we will build this plant virtually before we ever scratch the ground in Washington state, which will build confidence with our constructors, that we have it properly planned. The third thing that we’re doing is we are bringing our constructors in in-house now, two and a half years before we complete the final design of our project.

Clay Sell:

So, our preferred constructors, which are Burns & McDonnell, who has teamed with Day & Zimmermann and Zachry Nuclear, those two constructors are working together with us, planning the construction plan for an Xe-100. So, that will all be completed and finalized, again, before we start construction, and before we get our final construction permit. And then the fourth thing that we’re doing is we’re engaged heavily early on with our supply chain. We’ve identified multiple suppliers for all of our key components because of the safety case of our reactor. We have many fewer safety related systems that are required in our power station than a traditional light water plant. And that’s important because safety related systems are very expensive and can only be procured from a nuclear regulated supply chain member. We have approximately five safety related systems versus 30 safety related systems in a modern light-water reactor plant, and so that reduces dramatically the amount of work that we have to do on our supply chain, and it allows us to buy many more of our components from traditional commercial off the shelf vendors.

Clay Sell:

We’re getting all of that mapped. We have selected all of our key suppliers on the major systems, as of today. They are heavily involved in our design and planning process, and we have strategic supplier agreements with those entities so that we can control the quality and the pricing for our customers and give the bulk purchase pricing benefit directly to our customers. So, there are a number of things that we’re doing to completely transform the way nuclear projects are delivered in the United States and around the world, but the last thing, and the most important thing that we’re doing, is we have successfully recruited the very best of the US nuclear industry into X Energy. George Vanderheyden, who previously was the CNO at the Emirates Nuclear Energy Corporation, which built the very successful Barakah project in the UAE. George leads our commercial division. He’s brought a number of key executives from the Barakah project to X Energy. So, we have best in class quality individuals, best in class procurement supply chain individuals, best in class project delivery individuals.

Clay Sell:

We are building the team that will deliver hundreds of Xe-100 projects over the next several decades, all with the goal of permanently breaking the trend that the US nuclear industry has been on of not delivering projects approximately on time and approximately on budget.

Marc Bianchi:

It’s probably the number one pushback from public utility investors, is this aversion to get involved in a [inaudible 00:38:23] type project?

Clay Sell:

And Marc, I mean, it should be, and they should be properly reticent to accept my contention, which is why we are so heavily focused on the execution of our first project. It’s not just about proving out our technology. It’s not just about proving out our fuel form, but it’s about proving out our project delivery model so that utility executives and industrial manufacturers that are seeking to buy an electric generator or a carbon free steam producer, when they make that decision, they need to have confidence that the cost and the schedule are approximately what they’ve been told. And we know that when we execute well on the first plant, that will put us in position to literally build as many of these plants as we can print over the coming decades. It’s really all about project execution. That is our focus.

Marc Bianchi:

That’s a great lead in to the next point that I wanted to talk about, is the customer pipeline. So, you have the demonstration project, and that’s moving forward, but then you recently announced an LOI with Dow. Maybe talk to us about what that LOI entails and what the timeline for that project and other projects that are outside of the demonstration program could look like, because I wonder, your regulatory approval, which may be highly certain internally, there may be questions from industry about, well, how long is the regulatory process going to take and so forth? And maybe you could also talk to kind of how you’re going about it, relative to maybe new scale. With new scale, they had of a standard design approval, and then they’ll have to get approval for the plant they’re going to build, but they can at least go in front of customers and say, “Hey, look, NRC approved our design.” So, you’re going a bit different route. Maybe just talk to us about how that works and how the customer adoption process would work within that context.

Clay Sell:

Our design is… The nuclear island, the nuclear reactor and the steam generator is a standard design that we will standardize across all applications. Now, what you do with the steam coming out of the nuclear island, whether you use it to generate electricity or you use it for any variety of industrial applications, that’s on the conventional side of the plant, and that will change and be adjusted flexibly to meet whatever the needs of the customer are. But the nuclear island will be a standardized plant. Let me talk about Dow Chemical, but first let me put the challenge that the globe is facing into context. People talk about decarbonization as a social aim, as a public good that should be achieved, and we accept that at X Energy. I personally accept the need to decarbonize the global economy. We have theories on how to decarbonize the transportation sector through electric vehicles, hydrogen vehicles, other low carbon emitting technologies.

Clay Sell:

We know how to decarbonize the electric sector with renewables and nuclear power, but 25% of the world’s carbon emissions, one fourth, of the world’s carbon emissions come from the industrial sector, and this is the industrial sector that needs heat for various manufacturing processes. And the industrial sector achieves that heat by burning things. 91% of what they burn are hydrocarbons. 9% of what they burn is biomass. All of that burning combusting produces carbon emissions. So, it’s a very, very intense part of the decarbonization challenge, and it’s one that renewables can’t really offer much help on, light-water reactors can’t offer much help on because they don’t produce high enough temperatures. But our reactor, the Xe-100 produces steam at 565 degrees C, which makes it attractive and usable for a number of industrial heat applications. And so, we see a unique market to address in providing carbon free steam and carbon free heat for the industrial sector. And we think it’s an opportunity that is really going to both transform our company and go a long way in decarbonize in the industrial sector.

Clay Sell:

Dow Chemical is the leading chemical manufacturer in the world. They have a 125 year history of bringing innovations to the marketplace. And Dow chemical has made a commitment to achieve net zero carbon emissions on scope one and scope two emissions by 2050, and that’s a big challenge. And they have acknowledged that their plan to do that will be made much better with carbon free nuclear generated steam. We began engaging with Dow Chemical well over a year ago on how our technology could be utilized at any number of their sites to decarbonize the industrial sector. And we announced two weeks ago, to bring a plant, to decarbonize one of their manufacturing facilities along the us Gulf coast by January 1, 2030 with an Xe-100 nuclear power plant.

Clay Sell:

Dow Chemical also indicated that they were prepared to invest, to take a minority stake in our company, which is something that we’re very proud to have them in. The news of this is quite remarkable. No US company, and very few foreign companies have ever sought to completely decarbonize an industrial manufacturing process with nuclear power. That’s what Dow has committed to do. That’s what X Energy is committed to enable. And we see it the beginning of a massive industry opportunity, not just for X Energy, but for other nuclear power stations that can produce very high temperature steam. We’re really excited about this opportunity. And the announcement with Dow came on the heels of an announcement about a month ago, where we are teaming with Ontario Power Generation, which is the leading nuclear utility in Canada to bring our technology to the industrial sector in Canada.

Clay Sell:

So, I believe that X Energy technology will be used for more nuclear power stations than any other technology in Canada in the coming decades, and we’re so pleased to be partnered with Canada’s leading nuclear utility to bring our technology to the marketplace. More announcements will be coming from Canada soon.

Marc Bianchi:

That’s a good preview. We’ll look out for some of those. Circle back on the licensing process for us, if you could. One of the things that the folks that have light-water reactors have said is, “Well, NRC is very familiar with light-water. They like stuff that they’re familiar with so it can streamline the permitting and licensing process.” You’re talking about 30 months, or up to, I guess, 27 to 30 months for you guys. What gives you confidence that that’s really the window, given that NRC is working with a new technology relative to light-water?

Clay Sell:

A number of things give me confidence. Number one, I’ve got a history in this town, and so I’ve been in and around the NRC from a policy standpoint for a long time. I’ve known all of the chairman for the last 25 years. I think the commission is particularly well led now under chairman Chris Hanson. They have a strong commission to go with it. I mean, our company has been directly engaged in pre-licensing discussions with the NRC since 2018, so four years now. We filed a number of limited topical reports and white papers that we have been able to engage the NRC staff on that both identify and go a long way in resolving a number of the technical issues associated with securing a license to construct, and then operate. We chose to go with a construction permit followed by an operating permit under code section 50, under part 50 of the NRC code, because we think that is the lowest risk, shortest time period, and best approach.

Clay Sell:

We recognize that the approach that we’re taking is different than the one that New Scale took, where they sought to get their design certified first, and then went out and tried to sell that certified design to a specific project. We’ve involved our project owners in tweaks and evolutions to our design so that the design that we get the first construction permit for, we’re confident, it’s exactly what the customers want. We do anticipate that, after a few part 50 processes, that we will then take our standard, well understood design and we’ll get a part 52 design certification that will then further accelerate our ability to get projects licensed and constructed on a go forward basis. But we have a lot of confidence in our regulatory approach. We have a great team at X Energy. We’re highly engaged with the NRC, with our customers. It’s our job to put forward an extraordinarily complete and satisfactory permit application. That’s what we’re working on now. We believe if we do that, we will get a timely and fair consideration from the regulator that will allow our projects to maintain schedule.

Marc Bianchi:

Awesome. Well, maybe to wrap it up, Clay, over the next 12 to 24 months, where are the milestones people should be watching for X Energy? You mentioned maybe some stuff coming out of Canada. You’ll be submitting your application next year for NRC, right? But is there anything else in the next 1224 that you’d put out there as sort of a milestone to demonstrate that you’re on track with the plan?

Clay Sell:

Yeah, again, the most important thing is really we’re heavily focused on all matters that relate to that path to first criticality, that path to first successful project delivery. And so, again, it starts with the fuel, our license application in April, getting our license approval in approximately 24 months, breaking ground on our fuel fabrication facility later this year, having that fuel facility operational in 2025, those are all key milestones in our future. Being heavily involved with the department of energy and facilitating a commercial HALEU market is something that is, again, on our critical pathway. And so we work very closely both with the department of energy and the enrichment partners to facilitate that. And then on the reactor side, it’s staying ahead of schedule on our Xe-100 design activities, again, to be in a position to complete 100% of our design by the first quarter of 2025.

Clay Sell:

For our customers, we anticipate that in the coming weeks, Grant County Public Utility District, which will be our first customer on the advanced reactory demonstration project, they’re part of Energy Northwest, that they will announce their preferred site, and we will continue with site characterization activities on that site, which will inform our construction permit application. So, that’s an announcement that you should see in the coming months. We expect specific site announcements out of both Canada and from Dow Chemical in the coming months, on exactly where those initial projects will go. And then we’ve also made a significant market entry in the UK. Energy security has, quite sadly due to the activities in Eastern Europe, with the Putin invasion of Ukraine, matters of energy security have taken on increased resonance and priority, particularly in the European economies, and particularly in the UK. So, activities have dramatically accelerated there. About a year ago, the UK government identified high temperature, gas-cooled reactors as the preferred technology to decarbonize their industrial sector and to produce hydrogen. They didn’t pick X Energy, but they did pick the technology that we are the leading proponent of.

Clay Sell:

So, we are heavily engaged with UK government and with our partners, Cavendish Nuclear in the UK to bring a project to fruition there. And quite frankly, you should expect announcements from us out of the UK in the coming months as well. So, we’ve got a tremendous amount of business development interest from the industrial sector, from chemical companies, from electric generators in the US, Canada, and in Europe. Only a small number of those have been announced as is appropriate for this stage of the game. But you can expect more announcements from us in the coming months, as each of those projects achieves milestones, where it’s appropriate to start engaging the public on the company’s plans.

Marc Bianchi:

That’s a great overview, Clay. You’ve been very generous with your time, so we’ll leave it there, but thanks so much for joining us, and we’ll look forward to chatting again soon.

Clay Sell:

Thanks, Marc.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of Cowen Insights.

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