Skip to main content

What Heritage Gets Wrong About Nuclear Energy and Ex-Im Bank

Ted Jones
The following is a guest post by Ted Jones, Director of International Supplier Relations for NEI.

It is widely known that the U.S. nuclear energy industry is deeply involved in the broad effort to renew the Export-Import Bank of the United States (Ex-Im Bank). Hundreds of U.S. nuclear exporters, supported by the Nuclear Energy Institute, have sounded alarm at the prospect of losing the Ex-Im Bank because they know it is vital to U.S. competitiveness in the global nuclear industry.

I was therefore surprised to read an argument from a noted supporter of nuclear energy, my friend Jack Spencer of the Heritage Foundation, that our industry’s belief in the vital importance of the Ex-Im is mistaken. Heritage Foundation’s advocacy arm, Heritage Action, is one of the groups leading the opposition to the Ex-Im Bank. But I take Jack seriously on nuclear energy matters, so I’ll examine his responses to the nuclear energy industry’s arguments in favor of reauthorizing the Ex-Im Bank.

Ex-Im enables U.S. nuclear suppliers to reduce Russian energy dominance. Notably, Jack acknowledges the challenges posed by Russian competition in global nuclear energy markets. He accepts that U.S. nuclear exporters are contending with aggressive Russian expansion and that favorable financing terms is one of Russia’s key competitive advantages. And he acknowledges that Russia’s expansion into in nuclear energy increases the overreliance of U.S. partners on Russian energy, implicating broader U.S. national security interests.

As an alternative response to Russia’s nuclear energy export strategy, Jack suggests streamlining U.S. export regulations for U.S. nuclear cooperation partners. Modernizing U.S. nuclear export controls is a necessary but insufficient step toward a level playing field with Russian and other foreign nuclear energy suppliers. Crucially, it would do nothing to address the competitive imbalance in financing, which is often the decisive factor in nuclear energy tenders. In short, if the Ex-Im Bank goes away, the U.S. nuclear energy industry will lose a critical tool for competing against Russian nuclear energy supply. Export control reform is not a substitute.
Russia's edge in financing proved critical in reactor sale to Hungary. 
Although Jack is correct to note that energy-security concerns give an advantage to non-Russian energy suppliers, the Russian edge in financing is so powerful that it has been decisive in recent tenders in Eastern Europe. If the Ex-Im Bank goes away, nuclear energy suppliers from France, South Korea and Japan – all backed by national export credit agencies – will benefit from worries about overreliance on Russia. The U.S. industry will not even be at the table. This circumstance has led Ambassador John Bolton to write that while Tea Party Republicans might have a point about economic subsidies, they’re getting the Ex-Im Bank issue horribly wrong when it comes to geo-politics.

Ex-Im is a requirement to compete. Jack repeats the claim that private financing can fill the void left by the Ex-Im Bank. But the commercial banks have repeatedly debunked this myth about Ex-Im and private financing – as recently as last week. In no business sector is the indispensability of the Ex-Im Bank clearer than in the export of nuclear power.

There does not exist a commercial bank that will finance a nuclear power plant for 18 years plus the term of construction – the agreed limit among members of the Organization for Economic Cooperation and Development (OECD). According to the commercial banking executives that I’ve consulted, their unwillingness to finance nuclear power plants without the Ex-Im Bank holding a stake has nothing to do with project risk. Foreign utilities are typically very low credit risks. Rather, they explain that Basel III capital reserve requirements prevent them from allocating billions of dollars in tier one capital for as many years as necessary to finance a nuclear power plant.

Jack claims that foreign customers “can demand support from export credit agencies for the simple reason that such support is available.” If Ex-Im Bank goes away, export credit agency support will still be demanded by suppliers, and it will still be available – but from non-U.S. suppliers only. Again, U.S. nuclear suppliers will not even be able to compete.

Jack correctly points out that the U.S. industry has some advantages, including “reliable and efficient products, operational excellence, and safety culture.” But if these advantages are often insufficient today, how can they be adequate when U.S. nuclear suppliers lose the ability to offer a competitive financing package?

Jack rightly points out that the global elimination of export credit agencies is the most desirable solution. But as former Reagan-era assistant secretary of defense Frank Gaffney has pointed out, unilateral disarmament is a terrible strategy to achieve that outcome. Through leverage provided by the Ex-Im Bank, the United States has successfully imposed discipline on other export credit agencies in multiple business sectors, including nuclear energy. Under the Nuclear Sector Understanding of the OECD, export credit financing terms and trade-related aid in the nuclear energy sector must conform to agreed limits. If the United States shuts down the Bank, it would lose its greatest source of leverage for disciplining the 59 export credit agencies operating worldwide.

Uncertainty about Ex-Im is already hurting U.S. suppliers. Although Jack writes that the Ex-Im Bank is “inherently political,” it enjoyed strong bipartisan support from its establishment almost eight decades ago until 2011, when Heritage Action and other groups made it a target. I speak regularly to nuclear energy executives, who compete every day in international markets. Every one of them has a story about international customers asking whether their company will be able to close deals, given the uncertainty about Ex-Im Bank. Some of the executives have confirmed that their international competitors were the sources of the customers’ worries about Ex-Im Bank. This is the burden that U.S. nuclear exporters have carried since 2011. If Ex-Im goes away, that burden will in many cases become insuperable.

Jack reiterates other, broader arguments against Ex-Im Bank. It allows Washington to choose who wins and who fails, he writes, and it fosters an unhealthy dependence on “subsidized financing.” When nuclear energy executives who actually compete for international business hear these arguments, they are baffled and angry. They know that with Ex-Im Bank backing, any U.S. nuclear exporter is enabled to win -- and that the only losers are their competitors from Russia and elsewhere. Some of them dislike subsidies just as much as Jack does, but they all understand that export credit agencies play a vital role in international business that will not change if Ex-Im goes away. From their experience in competing head-to-head against foreign rivals that enjoy many forms of government support, they know better than anyone in Washington that without the level playing field provided by the Ex-Im Bank, they will no longer be able to compete. They cannot even conceive of a policy to support U.S. nuclear exports that does not include the Ex-Im Bank.


Popular posts from this blog

How Nanomaterials Can Make Nuclear Reactors Safer and More Efficient

The following is a guest post from Matt Wald, senior communications advisor at NEI. Follow Matt on Twitter at @MattLWald.

From the batteries in our cell phones to the clothes on our backs, "nanomaterials" that are designed molecule by molecule are working their way into our economy and our lives. Now there’s some promising work on new materials for nuclear reactors.

Reactors are a tough environment. The sub atomic particles that sustain the chain reaction, neutrons, are great for splitting additional uranium atoms, but not all of them hit a uranium atom; some of them end up in various metal components of the reactor. The metal is usually a crystalline structure, meaning it is as orderly as a ladder or a sheet of graph paper, but the neutrons rearrange the atoms, leaving some infinitesimal voids in the structure and some areas of extra density. The components literally grow, getting longer and thicker. The phenomenon is well understood and designers compensate for it with a …

Missing the Point about Pennsylvania’s Nuclear Plants

A group that includes oil and gas companies in Pennsylvania released a study on Monday that argues that twenty years ago, planners underestimated the value of nuclear plants in the electricity market. According to the group, that means the state should now let the plants close.


The question confronting the state now isn’t what the companies that owned the reactors at the time of de-regulation got or didn’t get. It’s not a question of whether they were profitable in the '80s, '90s and '00s. It’s about now. Business works by looking at the present and making projections about the future.

Is losing the nuclear plants what’s best for the state going forward?

Pennsylvania needs clean air. It needs jobs. And it needs protection against over-reliance on a single fuel source.

What the reactors need is recognition of all the value they provide. The electricity market is depressed, and if electricity is treated as a simple commodity, with no regard for its benefit to clean air o…

Why America Needs the MOX Facility

If Isaiah had been a nuclear engineer, he’d have loved this project. And the Trump Administration should too, despite the proposal to eliminate it in the FY 2018 budget.

The project is a massive factory near Aiken, S.C., that will take plutonium from the government’s arsenal and turn it into fuel for civilian power reactors. The plutonium, made by the United States during the Cold War in a competition with the Soviet Union, is now surplus, and the United States and the Russian Federation jointly agreed to reduce their stocks, to reduce the chance of its use in weapons. Over two thousand construction workers, technicians and engineers are at work to enable the transformation.

Carrying Isaiah’s “swords into plowshares” vision into the nuclear field did not originate with plutonium. In 1993, the United States and Russia began a 20-year program to take weapons-grade uranium out of the Russian inventory, dilute it to levels appropriate for civilian power plants, and then use it to produce…