Residual value of nuclear fuel to be an economic disruptor of shipping


Tomorrow’s challenges for shipping are not just about the environment, but also about the economics of our industry. Shipping is the most fiercely competitive industry we know, and for a long time, we have been on a race towards zero. That’s zero emissions and zero margins, writes Mikal Boe from CORE POWER.

Nuclear has been beaten up since the 1980s with fear and mistrust fostered by those who would profit from its demise. These are two industries, both essential to the future of human prosperity, and both are ripe for disruptive change.

The global push for a ‘green energy transition’ and an environmentally sustainable ocean transportation sector, comes down to the matters of energy density and energy efficiency. Simply put, the more fuel we use, the more waste we produce, and conversely, the less fuel we use, the less waste we produce. The waste varies, but it’s still waste. That’s why energy content matters.

Our current low sulphur IFO380 contains on average 41 mj per kg or 11 MW hours per ton of fuel consumed. Our industry’s focus on synthetic fuels made from green hydrogen contain less than half the energy of bunker fuel. Green methanol contains just 20 mj per kg and green ammonia slightly less. A transition to low-energy fuels would therefore result in a more than 100% increase to our fuel consumption and a corresponding increase in our waste and emissions footprint.

Nuclear fuel from uranium, which has been safely and efficiently used in power generation and nuclear navies since the 1950s contains 80m mj per kg, the equivalent of 22m MW hours per ton of fuel. That is roughly 4m times more energy per ton of fuel than the proposed alternatives.

With nuclear fuel, since we use so infinitely little of it, we produce only negligible quantities of waste. This waste, whilst toxic and harmful if ingested, is never released into the environment like we do with exhaust gases. If it is not delivered or ingested, it is logically not harmful.

If we are to produce a smaller quantity of waste and emissions, we must use a smaller quantity of fuel. Not less fuel by going slower, but less of a better fuel so we can go faster. Going faster on less fuel improves our economics.

Since January 21 1954, there have been over 700 reactors built and operated around the world. About half of these have been operated at sea. We know it works well. Naturally, when our industry thinks of nuclear power, it therefore thinks of naval reactors. But naval reactors are not suited to commercial use and that’s why we don’t have nuclear-powered ships today.

The benefits of naval reactors include millions of miles without refuelling, true zero emissions and because we don’t need fuel tanks, we get more cargo space. However, the features that come with naval reactors, make them unsuitable for shipping.

They are highly pressurised and require a large evacuation zone around them. This makes port calls all but impossible. The fuel is highly enriched, a showstopper in civilian life. They are tricky to operate and require a very high degree of active management by specialised crews.

We need a way to get the same benefits from a new set of features that are suited to our needs. To work, new nuclear for maritime must be ‘fit for purpose’.

Here is how we can achieve it. Reactors that are unpressurised mean we can shrink the evacuation zone around the machine, so it does not extend beyond the boundary of the vessel. This would reduce operator liability from being an unlimited public liability, to one covered by conventional marine insurance. We need low-enriched fuels, acceptable for civilian use. We must then use those fuels so efficiently that we don’t need to refuel for the lifetime of a vessel. For the first time, we should also mass manufacture these new reactors for better construction and higher quality assurance.

But there is one new feature that makes new nuclear a real and powerful disruptor.

Since we went from sail to steam in the 1860s shipping alone has poured over 1,000bn tons of high-energy fossil fuels through marine engines and released over 3trn tons of exhaust gases into the atmosphere. All that fuel had zero residual value. As it turns out, pollution costs. Accounting for well-to-wake, fossil fuels therefore have a negative residual value.

New liquid nuclear fuel would have a positive residual value, dramatically changing the way marine power is financed.

Instead of stopping the reactors at refuelling intervals to remove the spent fuel and load fresh fuel, new liquid fuel reactors can be topped up at full power. They don’t stop, they don’t produce any emissions and the little residual waste, equivalent to the amount being topped up, would be extracted from the core, and stored securely inside the reactor island causing no harm to the environment. The ‘tank’ would always be full. What goes into the reactor on day one would still be there intact, on the last day.

At 2.5% inflation, a well-maintained asset can double in value over 30 years. With a 30-year ship life, or a floating production platform for synthetic bunker fuels, the energy in the reactor could double in value. As an example, take a $100m asset, a $150m reactor, and a $250m fuel inventory for a total capex of $500m.

Consuming bunker fuel, the same asset with a $60m capex; fuel at $600 per ton and carbon taxes at $100 would cost roughly the same $500m in combined capex and opex. Consuming ‘green’ synthetic fuels, like ammonia or methanol would quadruple that cost to $2bn.

The economics of that same asset powered by new nuclear would see the residual value of the nuclear fuel going from $250m on day one, to $500m at the end. The liquid nuclear fuel would then be drained from the reactor and loaded into a next-generation for reuse over another 30 years, for a new cycle of productive, appreciating economic life.

High residual value opens the door to leasing. Leasing of fuel and the reactor system could include the license, liability insurance, specialised reactor operators, and the maintenance of the system, in the price. Essentially, a low, stable monthly payment for clean, durable energy. Estimates show that a ‘lease margin’, the spread between actual and financeable value could be as much as 60% of the original capex.

The EU taxonomy allows nuclear to be financed by green bonds, the US government is encouraging investment in new nuclear. Japan, India, China, Brazil, Canada, and others are all encouraging private investment in the nuclear fuel cycle. Shipping wants sustainability across the board, both environmentally and economically. This could be it.