Nuclear Power with GE-Hitachi

On the eighth episode of Cowen’s Energy Transition Podcast, Jon Ball, Executive Vice President of Market Development for GE-Hitachi  and Marc Bianchi, Industrial Gas & Equipment and Energy Oilfield Services & Equipment analyst discuss GE-Hitachi’s BWRX-300 Small Modular Reactor (SMR) technology and its timeline to commercialization and customer prospects.

Press play to listen to the podcast.

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:

Marc Bianchi here from the Cowen Energy team with another installment of our Energy Transition Podcast series, where we’re currently focusing on small modular and advanced nuclear reactors. In today’s episode we’re joined by Jon Ball, who is executive vice president and market development leader for GE Hitachi, which is a 60/40 JV between the two companies and run by GE. GE Hitachi is one of the first movers in SMRs with their BWRX-300 design, which has a growing list of blue chip customers. The business flies a bit under investors’ radars, it sits within the broader GE.

But that may be set to change as GE begins their plan split into healthcare aviation, and power over the next few years. During our discussion with Jon, we cover the GE Hitachi nuclear business, BWRX-300 technology, licensing process and timeline to commercialization. So, sit back and enjoy as we learn more about GE Hitachi. Jon, thanks so much for joining us here. Maybe to kick it off, you could give us a little background on who you are and on the GE Hitachi venture. What are the origins of it? How has it evolved over time? What’s the ownership structure look like? And maybe, go through the main commercial offerings, and to the extent you’re able to share with us something about the market share.

Jon Ball:

Okay, great. Thanks Marc, for having me. So, I’ve been part of the nuclear industry now for 29 years, the last 24 plus with GE’s nuclear business. I’ve been part of essentially every segment in our nuclear business. I started off supporting our fuels business about seven years, including leading our manufacturing operation. I spent about seven or eight years in our services segment and I led our field service team, our engineered solutions team. And then the last several years, I’ve been in the new plant segment, including overseeing the development, the creation and the commercial adoption of the BWRX-300, our industry leading SMR. Recently I’ve taken on a new role. And so, my focus now is on the front end of the business as the market development leader. So, really ensuring that we maximize the market penetration, and the opportunities for this SMR.

A little bit about the company, GE helped pioneer the commercial nuclear industry, both here in the US as well as in Canada. And we had a number of firsts, we formed our nuclear division back in 1955. And very shortly thereafter, we had the very first reactor, the very first licensed reactor, licensed number one from the Atomic Energy Commission, now known as the U.S. NRC. That was the Vallecitos boiling water reactor, located just outside of Silicon Valley, 1957. 1962, we had the first reactor deployed in Canada. The nuclear power demonstration unit, it served as the basis for the CANDU nuclear fleet. And then, we also had the first generation three design, the advanced boiling water reactor, delivered on time, on budget in Japan. Overall, we have licensed 67 reactors in 10 countries. And when deploying nuclear technology, really there’s no substitute for having done this before. Our business, we’ve got a JV, joint venture with Hitachi called, GE Hitachi.

This is for new reactors and services. We have a separate joint venture for fuel called, Global Nuclear Fuel. Both of these joint ventures are 60% owned by GE, and 40% owned by Hitachi. So, as a result, they’re run and managed as GE businesses. Between these two joint ventures, we provide new reactors, and fuels, and aftermarket services to the global fleet. If you think about our penetration in the market and the US is a good example, one third of the nuclear fleet in the US is based on GE’s boiling water reactors. In fact, GE nuclear technology provides roughly 17% of all clean energy that’s produced today in the US. If you think about the market share, especially around fuels and services, many utilities self-perform, but for work that’s actually bid. We roughly hold about 70% of the market share for fuels and services for the boiling water reactor fleet.

Marc Bianchi:

That’s great. Maybe, as we think about what are the biggest drivers of the business for you, if you were to rank where the revenue streams are coming from, could you just help us understand that a little bit better? Is servicing, is decommissioning, is extending life, is fuel supply, how would you rank those as of most important to maybe smallest?

Jon Ball:

I would say today, given the fact we’re in a mode of ramping or deploying a fleet of SMRs. The majority of our revenue stream today comes from fuels and services. And I would say it’s roughly 50/50 between those two segments.

Marc Bianchi:

And as we think about the split of GE, the company has discussed about splitting into three, healthcare, space and energy. I think the split for energy has been communicated to 2024. How does that change things, if at all, for you when you think about what the world’s going to look like on the other side of that transaction?

Jon Ball:

I think as is the case with many aspects of the power portfolio, we don’t anticipate any changes to the structure of our nuclear business. So, really business as usual as we go into the spin.

Marc Bianchi:

And on Global Nuclear Fuel, before we get into some of the SMR stuff, can you just talk about what that … Are all the fuel offerings that you have under that umbrella, or is some of it outside of the JV within GE? And how should we think about the growth dynamic there? Is that just going to grow with the broader light-water reactor activity, or are there other factors that we should be considering when we think about the growth profile?

Jon Ball:

So, all the fuel offerings are underneath Global Nuclear Fuel, our fuel joint venture. We manufacture fuel in Wilmington, North Carolina at our headquarters. We have been doing that since the 1960s. We have a joint venture in Europe for delivering BWR fuel to the European market. And then, our joint venture partner in Japan, we have a fuel fabrication facility for the Japanese market. Now, in addition to the light-water reactor fuel that we’ve been manufacturing for decades, we’re in the process of developing the capability to manufacture metallic fuel for the Natrium design. And we’ll be doing that at our Wilmington, North Carolina facility as well. And we anticipate just as this SMR and advanced reactor market grows, that we’ll see growth in both the fuel segment as well as services.

Marc Bianchi:

And just for people that may not be as familiar with the supply chain. So, your involvement there is really on the fuel assembly, you’re not involved in any uranium enrichment or anything that’s further upstream than that. It’s just the actual fuel assembly, is that correct?

Jon Ball:

That’s exactly right. So, we essentially can think of our fuel business as providing a service, a fuel fabrication service. The uranium is actually owned by our customers, it’s sent to us in the form of uranium hexafluoride or UF6. We convert that UF6 into a uranium oxide, uranium dioxide to be specific. And then, we press into pellets, we load into rods, assemble them into what we call, fuel bundles and then ship them back to the customer.

Marc Bianchi:

Well, let’s get into some of the SMR discussions. So, your SMR is BWRX-300, I think that stands for boiling water reactor 10. And it’s 300 megawatts, correct me if I’ve got any of that wrong. But maybe, talk about the evolution of this design and what are some of the major milestones to commercialization? We’ll get into more detail, but maybe just give us a high level introduction to it if you could.

Jon Ball:

So, the entire nuclear industry including GE, we focused on developing larger and larger reactors, really for the past several decades. Several years ago, our competitors in both the US and Europe, had some pretty significant issues with large reactor projects going significantly over budget, past schedule. Given those challenges and at the time, continued low gas prices led to one of our projects, and this was for Dominion at the North Anna three site. We were deploying the ESBWR, which is economically simplified boiling water reactor, very large. The largest one that we had developed to date, 1500 megawatts. It got canceled. And so, we knew at that point that the future of nuclear had to look different and so, we set out really to innovate the future. So, out of that, we really took a step back and pulsed the market, and we focused primarily US, Canada and Europe.

We talked to utilities, we talked to industrial customers on what it’s going to take to deploy nuclear going forward. And it was clear that SMRs were going to be the future, that a lower capital cost structure was going to be important. And so, out of that BWRX-300 was born. And you’re exactly right, the X stands for 10th generation boiling water reactor. It’s most recently been scaled from the ESBWR, which I’ve mentioned, which was our most recently certified design. But, one of the challenges is you can’t just take a large reactor and just shrink it down, and go smaller without suffering diseconomies of scale. And so, the key here was simplifying the design through some new innovation, which we now have patented, it’s been licensed by the U.S. NRC. We’re able to use less concrete and steel per megawatt compared to large reactors.

So that, new innovation also coupled with the fact that we’ve got proven technology. If you think about 10th generation reactor, it turns out 90% of the nuclear island or the reactor system is the same as today. The same component, same materials, just smaller versions of what’s already operating, plus it uses today’s fuel. So, this is licensable, deployable in a meaningful timeframe and that’s important. When we set out on this journey, that was a key besides having a low cost solution. Customers said, “You really needed to develop something that can be deployed within a decade.” And so, again, given the design, the licensing pedigree, 10th generation really led us to focusing on a boil water reactor technology.

Marc Bianchi:

There’s a couple other technologies you have. So, you’ve mentioned the ESBWR, I’ve seen PRISM and ABWR, and then you’ve also got the involvement with TerraPower. You’ve mentioned a little bit on the fuel side, but I’m just curious if you could talk to us about those other technologies. What’s the future? Are they focused right now, or is everything going towards the BWRX-300? And then, what’s the scope of the involvement with Natrium, I believe it goes beyond the fuel side?

Jon Ball:

So, I’ve mentioned ESBWR, the other light-water reactor design that we have is the advanced boiling water reactor. We really consider both of these reactors are available for deployment, but we really keep them on the shelf, if you will, in the event there’s a customer interested in a large reactor deployment. I think given the fact that we’ve got this really elegant, simple, cost effective SMR solution, when we engage customers, the focus has been on BWRX-300. One point on the advanced boiling water reactor, 1350 megawatts, I’ve mentioned this was deployed in Japan back in the mid ’90s on time, on budget. It actually was constructed in only 38 months, which is really best in class performance.

Also, the first generation three technology deployed to market. Switching to the generation four technologies, so PRISM is a sodium cooled fast reactor. It’s based on the experimental breeder reactor number two, EBR-II that operated at INL for about 30 years. We’ve actually been working on PRISM since the 1980s. This technology happened to be the basis for the versatile test reactor, which is currently on pause or suspended. But it’s also being leveraged in the Natrium design. And so, we formed this partnership with TerraPower to deploy Natrium. And we determined that we were much better off working together than trying to compete against each other on bringing a sodium fast reactor to market.

So, essentially we took the best of PRISM and the decades of work that we’ve been working on in that design, combined it with the work that TerraPower had been performing on their traveling-wave reactor. And then, combined that with an innovative energy storage system to produce to Natrium. So, two very strong companies working together. TerraPower has the overall lead for the Natrium technology. They’ve got the lead on commercialization, but we’re a key partner and co-developing the technology. And I’ve mentioned previously on the fuel side, our Global Nuclear Fuel joint venture is also developing the manufacturing capability for the fuel that will someday power the Natrium design.

Marc Bianchi:

And as we think about growth in Natrium, I mean, I’m sure there’re limitations to how much you can discuss. But just the commercial agreement there, if we think that Natrium takes off and there’re reactors all over the world, are you going to have some piece of each of those or how does the sharing of participation in the profitability of this work at a high level?

Jon Ball:

Yeah, there’ll still be some joint sharing in the work that’s performed, both to deploy new reactors as well as the servicing of the Natrium design. And then of course, as I’ve mentioned, we’ve got the fuel aspect.

Marc Bianchi:

Back to the BWRX-300, I want to ask about the commercial opportunities, and the milestones and everything. But just before we get there, can you talk about … One of the things we hear from the other SMR developers is how their reactors are much safer than prior generations. This whole concept of walk away safe, where you don’t need all the extra cooling infrastructure, and backup power and all that stuff. Just what’s the pitch on BWRX-300 when it comes to safety? And maybe you could involve sighting in that, because we talk about these lower emergency planning zone radius’ that could be around some of these reactors. How does that apply to you guys?

Jon Ball:

So, BWRX-300 works essentially on the forces of nature and physics. So, essentially it has what we call, natural circulation. So, it doesn’t depend on pumps, and power to keep the fuel cool. And so, if you think about, you’ve got to shut down the reactor, you have some event, this reactor can cool itself without operator intervention or the need for offsite power. And we’ve got what’s called, an isolation condenser, and we’ve got three separate trains, if you will. Each one of those is capable of cooling without operator intervention for seven days. And so, given the fact that this not only is going to be the most cost effective design that we’ve developed, also the safest. And what we anticipate through the regulatory, the licensing process, is that the emergency planning zone will essentially be the site boundary.

Marc Bianchi:

Can you talk to us about the licensing process that you’re in the US, just where are you in that? You’ve mentioned some approval that you already have, just talk to us about that. And then related to that, I’m familiar with at least new scales process, they’re going part 52. Just curious where you guys are part 50 versus 52 and if there’re certain merits to either one that you would point out.

Jon Ball:

So, we actually don’t believe that a standard design cert, and the part 52 process is the best approach. Even if our focus was solely in the US, clearly having a design certification is helpful. But, we’re confident that there’s a more streamlined process that we think could be better leveraged globally. The process that we’re following is what’s called, part 50, as you’ve mentioned. This is the process that’s been used for every operating plant today in the US. There’s a lot of experience obviously in using that process. Essentially it involves getting a construction permit or a license, followed by an operating license. I think it’s important to note that many countries where we are currently interested in deploying our SMR, besides the US, Canada, the UK, Czech Republic, to name a few, they use a similar process.

Once a construction application’s been approved, that safety evaluation that was used in that submittal can then be leveraged in future submittals. So, you can think about it as essentially we’ve created a generic technology safety evaluation that’s going to be the same wherever we deploy. Then, the focus with new applications will be only on those items that are site specific, such as differing seismic conditions or differing country specific requirements. So, we believe that future applications can be greatly streamlined. Additionally, we’re using the IAEA guidelines for licensing. And so, most countries around the world have mapped their regulations into those requirements.

Marc Bianchi:

One of the things that investors have questioned is that it just seems like having a design certification gives you a lot of commercial opportunities. You can go say in front of a customer, “Hey, here’s my design cert. It’s already been vetted by the NRC.” Doesn’t that give a leg up to somebody with a certification? Or is there some intermediate verification that you get from the NRC that’s just as good? Or how do you respond to that concern that people might have, that if you don’t have design certification you’re lagging someone else that does from a customer acquisition perspective?

Jon Ball:

So, as I’ve mentioned, when we do one of these construction applications or a license to construct in Canada, which I’m sure we’ll talk about. Again, the safety evaluation of that reactor has been reviewed and approved. And so, I think the credibility that comes with that is comparable to the credibility that you have with a generic design certification. In both cases, you still have to go through, and do site specific and country specific requirements, so you’ll never get away from that. We’ve studied this in detail, we did part 52 with the ESBWR. Again, we’re confident that the most streamlined, the most cost effective, the quickest time to market, is by using this other licensing process.

Marc Bianchi:

Well, maybe talk about the customer opportunity set. So, there’s a bunch of customers in various stages of engagement, can you just give her an overview of the few that they’re furthest along and what the timeline to commercial operation for those might look like?

Jon Ball:

Let me start with OPG, Ontario Power Generation, because this really is our lead commercial opportunity. And OPG initiated a global SMR competition back in the 2019 timeframe with a goal to select a technology to be deployed at their Darlington site, which is located just outside of Toronto, by 2028. And at the time, they surveyed all available SMR designs, literally dozens of designs. And after a very rigorous two year process, we emerged as the winner back in December 2021. One of the key milestones to meeting that 2028 date is submitting our license application, or a license to construct. We did that just last week. So, October 31st, OPG, through our collaboration with them, allotted the licensing and engineering work that we provided.

They were able to submit their license to construct for the BWRX-300 to the Canadian regulator. So, this is a very significant milestone, this is the very first construction application for any SMR in North America. So, placing BWRX-300 in the global lead for global operations. So, if you think about the next set of milestones that will come, it’s now in the hands of the Canadian Regulator. They’ve actually stated publicly that they’re targeting a two year review cycle. So, at the end of that cycle we’ll then be able to begin construction. Our first project, we’re planning on a three year construction phase, and so that gets us to that 2028 date. So that’s OPG, that’s customer number one. We also are working with the Tennessee Valley Authority. And following OPG’s selection at the end of 2021, we’ve seen just a lot of increased momentum and interest in the technology, TVA being one of those.

We’re under contract with them to develop a construction permit application for the Clinch River site, which is located very close to the Oak Ridge National Lab. They haven’t set a commercial operation date yet, but it’s likely going to be in the early 2030s. They’re essentially a year behind OPG. TVA and OPG are collaborating, and they’re collaborating on deploying BWRX-300 across both borders. They’re also collaborating with the regulator, and I mentioned the ability to leverage the safety evaluation that comes from a construction application. Well, we’re going to be able to do that, a lot of the work that we provided for OPG can be leveraged for TVA. In addition to those two, Synthos Green Energy, which is a different type of customer. Typically, all of our customers have been utilities.

Synthos Green Energy represents an industrial company, which we think there’s going to be a large opportunity for SMRs going forward. They sign a letter of intent to deploy at least 10 units by the mid 2030s. They formed a joint venture with PKN ORLEN. ORLEN is largest company in Poland, it’s a state owned company. They formed a joint venture for the sole purpose of deploying BWRX-300 and what they’re looking for is number one, clean base load power. But, coal replacement is another really important strategic imperative for them, as well as a variety of industrial applications, including hydrogen production. Karnfull in Sweden was the next to announce that they’ve selected our technology, they have not set a timeline yet.

SAS Power, a couple months ago announced the selection of BWRX-300. They’re targeting the mid 2030s, they’re looking for up to four units. By the way, OPG also is looking for up to four units at their Darlington site. And then, we’re in discussions with many other utilities and industrial companies, primarily North America and Europe, although I would say that Asia, particularly Southeast Asia is heating up. And many of these customers are requiring fleets of SMRs going forward. So, tremendous interest and growing. And I think some of the less advanced opportunities, we’re at active competitions right now in the UK, in the Czech Republic, in Estonia. Each of those have different timelines, but we can expect some announcements in those areas in the coming months.

Marc Bianchi:

Well, I mean, that’s a lot of opportunity. Maybe if you take a step back and aggregate all of that, what does that mean for BWRX-300 deployments, if we look out to say the middle of the 2030s? Are we talking about still, maybe five to 10 globally or is it a number that’s much higher than that? Just curious, if you aggregate all that and risk adjust it, what does it look like?

Jon Ball:

I think it’s a hard number to call at this stage, but if you just take those customers that I’ve mentioned and what their plans are by the mid 2030s, you can get to 20 to 30 units very realistically. That number could go higher as interest continues to increase. I would say that supply chain, and regulatory approvals could potentially pace the number of units that ultimately get deployed, especially if that number continues to increase. So, just a couple of areas that we’re being very proactive in, but monitoring as we know that those do offer some challenges in bringing this technology to market.

Marc Bianchi:

The regulatory bandwidth is an interesting topic that’s come up. And if there are suddenly several applications into NRC, I mean, when would they need to start preparing for that? And do you think that they’re adequately staffed at this point? Or how much staffing would they need to be adding to accommodate what you see coming from you and your competitors?

Jon Ball:

It’s a really good question. I can’t speak on behalf of NRC, typically they staff from a variable perspective like many of us do. So, there’s no question as this market increases, as applications increase, they’re likely going to need to add staff. I would say the area that we’re really advocating for that, the entire industry that is, is around licensing harmonization. The nuclear industry is much different from aviation in that, you think about an aircraft rolls off the assembly line, it’s certified to fly anywhere in the world that same day, not the case with nuclear. Every country has their own separate regulations and nuances. And so, there’s a recognition by many organizations, including the IAEA. That recognizes that harmonization, if we’re really serious about decarbonization, if we’re really serious about impacting energy security, that regulators are going to need to collaborate.

And we’re very encouraged already. The U.S. NRC with our work, with Tennessee Valley Authority and then, the CNSC in Canada and the OPG project, these two regulators are working together in doing joint reviews. And so, this is a great first step. We’re going to continue to need more and more of that. And really the ideal state is that you have a licensing outcome such as the safety analysis of a regulator in country A, approves it, and then that gets approved in country B. And really what we’re only looking for are those differences in terms of site specific requirements, or perhaps the country specific requirements and just go re-review those items and not do a full re-review. These are the kinds of things this type of cooperation on the global scale is really going to be required, again, if we’re going to make a meaningful impact to climate change and energy security.

Marc Bianchi:

Absolutely. I mean, it sounded like the Canadian process is maybe a two year review process, at least with OPG now, this latest submission, where do you see that going? And you’ve mentioned, I think three years of construction timeline, so maybe the timeline is a five year process from start to finish. But, I don’t know if there’s any other color you’d want to provide around that. And then, where do you see that going over time? Is there an opportunity to compress that timeline significantly? Or maybe the manufacturing is manufacturing, and it can only go so fast?

Jon Ball:

I think that if you just look at the licensing piece, I’ve mentioned that, let’s take SAS Power as an example, same country, same regulator. In Saskatchewan, we’ve already submitted a license to construct for the Darlington site. We are creating what we call a standard design, meaning the reactor that we deploy in Canada is going to be the same as the one in the US and Europe, around the world. And so, the safety analysis that has already been reviewed under the Darlington for OPG under that submittal, is the same as what we’re going to submit for SAS Power.

So, one would expect that we should be able to get a more streamlined review process given there won’t be a need to go re-review all of that safety analysis, but rather focused on those areas that are site specific. And the other piece is, certainly on the construction piece we anticipate that there’s going to be learning with every one of these projects. And so, we’re targeting a three year construction cycle on unit number one. I’ve mentioned 38 months for the advanced boiling water reactor, which is significantly larger, 10 times larger if you will, structure wise than BWRX-300. And so, we believe that we can work the construction cycle on BWRX-300 down, perhaps approaching two years or even less.

Marc Bianchi:

Wow, that’s pretty impressive. One of the things that’s come up with the concept of the small modular reactors just generally is, nobody’s actually built one. And everybody says, “We’re going to leverage supply chain. And we’re going to build it modularly, and plug it all in together once we get to the site.” But it hasn’t actually been demonstrated. One of the common responses to that from the industry is, “Well, we build all sorts of other stuff modularly, so there’s precedent because of that.” But, maybe just talk to us about the confidence in being able to deliver the BWRX-300 on time, on budget. And what are the steps in the supply chain that need to occur between now, and then to get it prepared?

Jon Ball:

I think what gives us confidence that we can do this on time, on budget, the first piece is experience. And again, there’s no substitute for having done this before in this industry. And I think the ABWR rollout in Japan serves as an excellent proof point. Again, the 38 month construction cycle. And the way we did that was through a really thoughtful modular construction approach. And so, we’re going to leverage the learnings, and that approach on BWRX-300. I would say the second area is the fact that this is a proven technology, and we have very simple systems. Now, as I’ve mentioned, 90% of the reactor system is exactly what’s already been manufactured and sourced previously. The remaining 10% leverages existing components and materials, so there’s really nothing exotic or challenging to manufacture.

You’ll hear there are other designs discussing the need for prototypes or demonstration projects, in part due to either novel designs, complex designs, that ultimately have to be demonstrated. Unlike those, again, 10th generation reactor. And so, we have supply chains that exist today. So, rather than going out and trying to develop new capabilities, what we’re doing is expanding our supply chains. And so, our focus is on some new regions for expansion like Canada, to support OPG, SAS Power and then exports out of that country. We’re already working on supply chain expansion and partnerships in other regions, looking to deploy this technology, US, Central Europe, UK. And then, the third area is really around fuel and the certainty that our fuel offering brings. For BWRX-300, our fuel is commercially available today, it’s called GNF2, it’s manufactured at our Wilmington, North Carolina headquarters.

In addition to our joint venture in Spain for the European market, we’ve already delivered more than 25,000 of these fuel assemblies. 70% of the global boiling water reactor fleet has used this fuel. It’s operated very well, highly reliable fuel. And it takes 10 years to design, license, deploy, new fuel types. And these are for really just evolutionary changes. We’ve been doing this since the 1960s, so we have a lot of data points. It takes a lot of time. We don’t have to go through that. And so, unlike other SMRs and advanced reactors, we’ve got commercially available fuel that’s manufactured today. And I think that’s one of the reasons why we’re seeing very strong market adoption of this SMR.

Marc Bianchi:

It makes a lot of sense. What’s the cost of this plant, or what’s the cost of your design? And maybe, talk to us about how that translates into the levelized cost of electricity, because everybody’s trying to compare nuclear to all these wind and solar alternatives. That comparison is somewhat flawed, because levelized cost misses some of the aspects of reliability. But regardless, people want to know. So, to the extent you can talk to us about the cost, it would be greatly appreciated.

Jon Ball:

Let me start with the levelized cost or the LCOE. And as you’ve mentioned, this is a metric that most people, they want to understand. I will say it’s challenging metric, you’ve mentioned a couple of reasons. But, there’re numerous variables that are required in its calculation, some of which are highly sensitive, such as construction timelines, financing costs or financing rates, interest rates. As a technology provider, we don’t have visibility to the total cost that an owner might experience that end up being project dependence. So for example, land costs, permanent costs, other internal customer costs. These can vary widely from project to project. So, all that said, what we do have visibility to is what we deliver, which is basically the physical plant, the overnight cost of capital of deploying that unit, and the associated LCOE based on expected operating cost. And so, we believe that a $60 per megawatt hour is an achievable target on our in for the kind.

But again, to compute the total LCOE requires knowledge, understanding of total customer cost. We believe that the most important cost metric for nuclear is just simply the overnight cost of capital. Unfortunately we’re in, as I’ve mentioned, we’re in some active competitions and so, we view that as confidential at this time. What I would offer however, is that we are confident that BWRX-300 will be the most cost competitive SMR in the market. And this is really driven by number of factors. The first being that boiling water reactors are inherently simple to begin with, they are what’s called a direct cycle system. So, unlike a pressurized water reactor or PWRs, we don’t require a secondary steam cycle. So, when we go smaller, these secondary steam cycles are big systems, steam generators, pressurizer that need to be included. So, it becomes very challenging for pressurized water systems to become economical as you go smaller.

We don’t have to deal with that challenge. And we’ve taken this ability to simplify really to the next level. And through the innovation we are able to achieve overall cost on a per megawatt basis that are lower than large reactors. And this advantage, the fact that we’ve developed this really simple, elegant system can be seen in doing side by side comparisons. By doing side by side comparisons, you can get a general idea of the relative should cost between two different reactor designs. So for example, what’s the volume of concrete that each design requires on a megawatt basis? There’s some pretty significant differences between designs. What’s the size, and the number of vessels required to produce a comparable output? What’s the size of the reactor building on a per megawatt basis? So, all of these metrics equate or translate into real construction costs. And based on our side by side comparisons, we believe we have a significant advantage, which is another driver for the adoption of this technology.

Marc Bianchi:

What’s your scope of the overall project? I suspect that you’re probably limited to just the nuclear reactor side of it, and then the turbines and stuff are handled by someone else. But I don’t know, maybe that’s not the case. Just talk to us if you could, about how much of the plant is actually under your responsibility? And then, if there’s an EPC partner, what are they on the hook for and how does all that fit together?

Jon Ball:

So, if you think about just the overall plant, we are the designer of record. So, we have full responsibility to integrate the full plant design. So, in addition to that, we also are responsible for the licensing, as we’ve talked about. We do the manufacturing, the procurement of key reactor systems and components. We’re responsible for the plant startup, and commissioning. And then of course, we manufacture and provide the fuel, both for initial cores and reloads, and then provide the aftermarket services. Clearly we partner with a turbine generator supplier, and then additionally we have an EPC that we’ll partner with. Doing construction is the furthest thing from our core competency and so, we’ve partnered with many. In fact, if you think about just the overall GE power set of businesses, we’ve got extensive experience partnering with different EPCs around the world.

And so, we’re really leveraging really excellent EPC relationships that already exist. I did touch on construction, and I think this is an important point to elaborate on as well. Relative to our design construction, ends up being roughly half the cost of one of these units. So, it is not insignificant, so we want to make sure that’s as streamlined as possible. So, we’ve innovated to reduce cost on the construction side. What we’re trying to do is move as much into a factory setting, a very repeatable, predictable, factory setting as possible. And so, just to give you an example, the construction process that we’re using, although it’s novel to the nuclear industry, it’s used every day around the world. And essentially it involves digging a circular shaft, so you think about the tunneling industries, mining.

We do this every day around the world. And so, our reactor’s going to sit largely underground in this circular shaft. And what we’re able to do is eliminate the traditional bathtub excavation process that today’s existing plants utilize, as well as some SMR designs as well. It’s like a million cubic yards of excavated earth that we’re eliminating. And then, in that process, you’ve got to bring in engineered backfill, rebar and concrete, all in the name of seismic performance. We’ve eliminated all that. And so, what we’re using are what’s called, steel bricks, which is a factory fabricated system that’s sent to site and pieced together very much like a Lego set. And so, these steel bricks form not only the walls of the reactor building, but also the containment structure. And so, by doing that, we think we can eliminate or reduce cost, and time to construct significantly.

Marc Bianchi:

That’s fascinating. I wanted to move on to talk about the customer prospects a little bit more, where you’ve mentioned OPG and TVA, who are the leaders for customer opportunity. But, those are of quasi-government entities that don’t have a bunch of public utility investors to answer to. And I’m curious, what gets those public utility companies like the investor utilities to come forward and sign up? Do they need to see some of these projects in commercial operation, and proof of concept through commercial operation before signing up? Or how do you see that dynamic, and what’s the feedback from those types of customers?

Jon Ball:

Well, there’s a number of them right now that are currently evaluating SMRs. We’re helping assist in some cases, they’ve got their integrated resource plans. And so, we know that these investor owned utilities, they believe that there’s a pretty large SMR market. The Nuclear Energy Institute or NEI, recently did a survey of US utility execs, which is basically their members, largely, mostly investor owned utilities. And they indicated they had a need for 90 gigawatts of SMRs by the year 2050. And so, that translates into 300 of these SMRs the size of BWRX-300. So, there’s a strong need. In terms of, do they need to see proof of concept first?

I would say that everyone is really different. Some investor owned utilities, and even some state owned entities want to see an SMR commercial operation first. And it really depends on each individual company. So, I wouldn’t say investor owned utilities are one way, and state owned are different. I think it really depends. I think what’s common is that whoever we talk to, what customers really want is technology that is deployable in a meaningful timeframe. That is proven, it’s licensable. And again, having that available fuel, this is a key theme that we hear back is really an important factor.

Marc Bianchi:

Super. Well, we’re coming to the end of the time here. So to wrap it up, maybe you could talk about the milestones that investors should be looking for over the next 12 to 24 months to confirm that the BWRX-300 is contract for commercial deployment. So, what are the news items that we should be looking for to be announced, and provide proof of this whole plan?

Jon Ball:

First, I would say we are on track to be the first grid scale SMR deployed. As I’ve mentioned, the first major milestone is that license to construct application that was submitted to the Canadian regulator on October 31st. Again, placing BWRX-300 in the lead to begin actual construction. I would say the next really important milestone is from the CNSC, this is the Canadian Regulator. They’ve stated, again, publicly that they view this as a 24 month review cycle, that’s their goal. So, that will indicate whether or not we’re on track to begin construction about two years from now. And then, I think the other one is in the US, I’ve mentioned the construction permit application that we’re working on with the Tennessee Valley Authority, roughly a year behind OPG. So, that’ll be another important milestone to watch for. And then, I’ve mentioned we’re in many other commercial discussions, and competitive evaluations, and expect some announcements here in the coming months, US, UK and Europe.

Marc Bianchi:

Well, super. We’re going to have to leave it there, but that’s been fantastic. Jon Ball, executive vice president, market development for GE Hitachi. Jon, thanks so much for joining us.

Jon Ball:

Marc, thank you very much.

Speaker 1:

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

---