US scrambles to interrupt reliance on Russian nuclear gas | USAEMALL.com

Hello and welcome back to Energy Source, coming to you today from New York.

All eyes in the US are focused on how the incoming Trump administration will shake up energy and climate policies as it attempts to deliver on a pledge to “drill, baby, drill” and end electric vehicle mandates. But in a sign that liberal states aim to frustrate the president-elect’s agenda, California’s Democratic governor Gavin Newsom is proposing to offer state tax breaks to people who buy EVs if Trump axes the existing $7,500 federal tax credit.

“We’re not turning back on a clean transportation future — we’re going to make it more affordable for people to drive vehicles that don’t pollute,” said Newsom.

Not only is Newsom moving to safeguard lucrative incentives for people who buy EVs, he is also considering excluding Tesla from the new state incentives programme in a snub to Donald Trump’s ally Elon Musk.

Our main item today focuses on threats to nuclear fuel supply chains following Moscow’s announcement of restrictions on exports of enriched uranium to the US.

Thanks for reading, Jamie

The race to rebuild the US nuclear fuel supply chain

At a facility in Oak Ridge, Tennessee, last week engineers for Centrus Energy resumed manufacturing a classified centrifuge technology required to produce nuclear fuel as part of an expansion plan the company says is critical to breaking US reliance on Russian supplies.

The $60mn initial investment marks the first stage of a potential multibillion-dollar investment required by the company to undertake a large-scale expansion of uranium enrichment — the prime component of nuclear fuel — at a separate manufacturing facility in Ohio.

Centrus is one of a handful of US-based companies competing for $3.4bn in federal funding to jumpstart American production of nuclear fuel following the decades-long decline of a domestic industry that was overtaken by cheaper Russian imports.

“We feel a great sense of urgency about getting started and we want to make an initial investment to begin centrifuge manufacturing and expand our manufacturing capacity to give ourselves a head start in anticipation of further federal funding becoming available,” Dan Leistikow, Centrus vice-president of communications, told Energy Source.

US utilities have signed initial supply contracts worth $2bn with Centrus, which are contingent on the company securing sufficient federal funding to expand its manufacturing capacity further, he added.

Centrus is in the early stages of resuming enrichment operations a decade after the company emerged from Chapter 11 bankruptcy following a financial crisis sparked by the 2011 Fukushima nuclear accident in Japan. The market downturn left only two major western suppliers of enrichment services: France’s Orano and Urenco, a UK, German and Dutch consortium. 

For many in the US nuclear industry, a rebuild of the US nuclear fuel supply chain cannot happen fast enough due to the growing threat that Russian nuclear fuel will no longer be available to American customers.

Centrus’s announcement of an expansion followed an order by Russian President Vladimir Putin on November 15 restricting exports of enriched uranium to the US, a move that Moscow said was in retaliation for similar US restrictions imposed earlier this year.

Washington’s ban on imports of Russian-enriched uranium was intended to support the development of a domestic nuclear fuel supply chain by incentivising US utilities to sign contracts with American companies. But it contained waivers that allow for Russian shipments to continue until 2028 to prevent supply shortages that could damage the US nuclear industry.

Moscow’s newly imposed restrictions contain similar exemptions that could allow fuel exports to continue to flow to the US. But the heavy reliance on Russian imports by the US nuclear fleet of 94 reactors has alarmed the industry, which is concerned tensions due to the war in Ukraine could spill over and interrupt supplies.

Russia controls about 44 per cent of the global uranium enrichment capacity, which are measured in separative work units (SWU). It was also the largest foreign supplier of these types of services to US utilities in 2023, accounting for 27 per cent of all foreign-origin enrichment services, according to the US Energy Information Administration. The US imported 72 per cent of enrichment services from abroad last year.  

Constellation Energy, which operates a fleet of 21 nuclear reactors, the largest in the US, said it had stockpiled enough fuel to power its operations until 2029, in anticipation of disruptions to Russian supply through bans, sanctions or other means.

“It is critical to our national security and our energy security that we move immediately to revitalise our domestic uranium conversion and enrichment capabilities to ensure an uninterrupted supply of fuel for nuclear plants,” the company said in a statement.

The scramble to boost the US nuclear fuel supply chain comes amid a revival in interest in nuclear energy due to surging power demand from data centres, electrification of transport and reshoring of manufacturing.

Constellation recently announced plans to reopen a reactor at Three Mile Island, site of the worst nuclear accident in US history. In September, Holtec International secured a $1.5bn loan to help fund the restart in 2025 of the Palisades nuclear power plant in Michigan. Tech giants Amazon and Google recently announced deals with companies building small modular reactors (SMR), a new generation of nuclear technology using high-assay low-enriched uranium (Haleu), which is more powerful than standard nuclear fuel.

Citi forecast in a note published on Monday that enriched uranium requirements by US utilities will increase by 10 per cent annually until 2030 and overall uranium demand in the US will increase by 15mn lbs by 2035.

Russia’s nuclear operator Rosatom and subsidiary Tenex currently hold a monopoly on commercial sales of Haleu. However, Centrus is collaborating with the US Department of Energy to produce the SMR fuel, which involves enriching uranium to higher levels than required for standard reactors.

Urenco and Orano are also racing to expand uranium enrichment production in the US. All these nuclear fuel projects rely on government subsidies and are subject to high technology risks, but if the nuclear revival is to be sustained, the industry insists a secure supply chain is needed. (Jamie Smyth)

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Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.