William J Weida

The Colorado College

And

Global Resource Action Center for the Environment

January 28, 2026

Utility Interest In MOX

Nuclear reactors are operated to generate power, and power generation is a commercial enterprise. A commercial enterprise can only operate if it makes profits and to do this, operating costs must be kept as low as possible. Thus, a central issue concerning MOX use is whether it is cheaper or more expensive to use than the conventional low enriched uranium (LEU) fuel currently used in reactors. This question has been extensively researched and the answer is unambiguous--MOX is more expensive. In fact, in the early 1990’s, the costs for MOX were five to six times those for LEU-based reactor fuel (Berkhout, 1993, p. 6). Even DOE’s own Technical Summary Report For Surplus Weapons-Usable Plutonium Disposition states that "in no case can MOX fuel complete [sic] economically with LEU fuel." (1996, p. 4-6)

Given this unfavorable cost difference, no commercial reactor operator would willingly accept MOX fuel unless that operator was subsidized by the US government at a level sufficient to compensate for the losses caused by choosing MOX. Such a subsidy is called an ‘incentive fee’ by the Department of Energy, and the size of this subsidy will be the deciding factor when a commercial operator is given the option of using MOX.

In December, 1995, DOE "issued a request for expressions of interest for tritium production that also solicited interest in regarding the future potential use of mixed oxide fuel from surplus weapons plutonium either coincident with or separate from tritium production." (Technical Summary Report For Surplus Weapons-Usable Plutonium Disposition, 1996, p. 4-7) Table 1 shows the expressions of interest this request elicited in 1996.

According to Greenpeace International, Florida Power and Houston Lighting and Power later decided not to take part in either part of this program, and Arizona Public Service responded to the DOE's inquiry only "to obtain additional information on these programs," and "has not volunteered to produce tritium for DOE." (Arizona Public Service Company, 1996) Commonwealth Edison and Duke Power said they have aligned with COGEMA and BNFL to study burning MOX in their reactors (Nucleonics Week, 1996).

The responses in Table 1 were predicated on the prospect of both free MOX fuel and a possible subsidy from the US government (Numark, 1996, p. 6). In conjunction with this solicitation of interest, DOE compiled a detailed list of the estimated charges it would be willing to cover in return for a utility’s agreement to use MOX fuel. These costs were estimated to be approximately $825 million per reactor through 2024, with the greatest cost being the waiver of the utilities' contribution to the Nuclear Waste Fund, a sum equal to $310 million per reactor (National Conference of State Legislatures, 1996).

The DOE has stated that it regards these responses as evidence of "sufficient commercial interest in use of existing or partially completed light water reactors for plutonium disposition..." (Technical Summary Report For Surplus Weapons-Usable Plutonium Disposition, 1996, p. 4-7) A more even-handed view of the responses to the DOE offer would note that shifting all MOX fuel fabrication costs to the US government--i.e., providing free MOX fuel--did not provide a sufficient economic incentive to make a power producer switch from LEU fuel. Instead, an incentive fee (subsidy) of indeterminate size was still required to make MOX competitive with LEU. This

Table 1

Utility and Private Company Interest

In MOX Burning and/or Tritium Production

means that reactor owners were not expressing a ‘commercial interest’ in the normal sense of private enterprise--they were, instead, offering to allow the US government to use their facilities for a fee. With this in mind, it is important to consider exactly how large the subsidy would have to be before a utility would allow the US government to use its plant.

The Need to Subsidize MOX Use

Because of the negative connotations associated with government subsidies of ostensibly private commercial enterprises, the DOE has chosen to call the subsidies it proposes for MOX use "incentive fees." To be acceptable to the power producer, a subsidy for MOX-burning would have to make the power producer competitive with alternative sources of energy. Thus, a correctly-sized subsidy would allow rate-payers to pay the same charge for electricity whether they purchased it from the nuclear power producer or from a coal-fired power producer who was providing competitive prices in a free market environment.

However, when nuclear power is involved, it is not clear how this concept would be applied. Industry analysts have always compared the costs of nuclear power generation with the costs of all competing sources of energy. As deregulation of the power industry continues, these cost comparisons have become more meaningful because a deregulated industry will have greater difficulty ‘covering’ the costs of one or two marginal power generators.

Table 2

1996 DOE-Generated Costs For Existing, Partially Completed And Evolutionary Reactors That Burn MOX--Millions of 1996 Dollars

However, the DOE has avoided making comparisons between MOX use and any other competing source of power except other LWR reactors. When the rationale for the use of one form of energy depends solely on the relative price level of just one of a number of competing energy sources as it does in this case, one encounters the ‘energy value trap’. For example, claiming that MOX becomes an economically viable source of energy when the price of uranium dramatically increases misses the economic point that MOX becomes economically viable only when it can successfully compete with all other energy sources. If other sources of energy have stable prices, the fact that uranium’s price is increasing is not relevant to the economic viability of MOX--it only indicates that uranium is becoming less competitive.

For example, in 1996 the DOE’s Technical Summary Report For Surplus Weapons-Usable Plutonium Disposition recorded operating costs of MOX-burning facilities only as the net additional costs of LWRs burning MOX fuel. None of the significant costs to operate a LEU-burning light water reactor were included, and DOE declined to include "estimates of incentive fees, if any, that might be paid to utilities for MOX irradiation services...in addition to the expected reimbursable costs that would be incurred by the utilities..." (1996, p. 4-3) If one assumes that LEU-powered reactors were competitive with other energy sources at the time this report was written, these net additional costs can be viewed as an estimate of the levels of subsidy that would have to be provided to the operating costs of a MOX user to encourage plutonium burning for power production. However, subsidies to operations are only one of a number of subsidies that the DOE would have to deliver to MOX users. If one assumes the DOE figures are accurate, these subsidies can be calculated from Table 2, which shows the costs of various MOX fuel options as calculated by the DOE.

Specific Subsidy Calculations

There is ample evidence that nuclear plants are marginally competitive with other forms of power production in the United States (and in some cases, they may already be non-competitive). In the most recent example, Northeast Utilities announced in October, 1996 it was shutting down the Connecticut Yankee nuclear power plant because the costs and benefits of running the plant for another 10 years, "[do] not seem favorable." A worst case scenario showed an "economic disadvantage" of about $100 million if the plant continued operations. The lower market price of fossil fuel power generation was responsible for some of this ‘disadvantage’ and the high cost of maintaining the plant accounted for the rest (Kerber, 1996, p. A6). As another example, Bruce 2, one of Canada’s CANDU reactors needed to have its reactor fuel pressure tubes replaced. The location of these pressure tubes, the difficult geometry, and the relatively high residual radiation fields made this a very expensive repair. As a result, Bruce 2 was mothballed in 1995 to avoid costly repairs (Silver, 1996, p. 8). ‘Normal’ steam generator replacement for the CANDU is very straight-forward and has been done at about 30 plants world-wide. However, this operation still usually carries a total cost of $100-$200 million (Fuoto, 1996).

In addition to their general non-competitiveness, a number of other factors make nuclear power in the US only marginally competitive or non-competitive in situations where European nuclear power claims to be competitive. These factors are unlikely to change in the future, and many of them have been complicated by the introduction of new, unproved technologies. These factors arise from:

When nuclear power plants are already having trouble remaining competitive for reasons such as these, any additional costs (such as maintenance, additional security, or modifications) further degrades the ability of these plants to compete with other commercial power producers. For this reason, either the subsidy required to induce nuclear plant owners to use MOX must cover all additional costs of MOX use or the additional costs must be shifted to those who purchase the power. As a result, the subsidies to nuclear plants for using MOX must occur in three areas:

1. Subsidies To Investment in Facilities

MOX use requires new production facilities and increased safeguards in existing facilities because of the sensitive nature of plutonium. None of these costs would be incurred with standard LWR operations. Thus, the life cycle cost of federal subsidies in this area can be calculated in Table 2 to be:

Existing Reactors: $870 million to $1.38 billion

Evolutionary and Partially Completed Reactors: $3.05 billion to $6.88 billion

2. Subsidies To Operations of Facilities

The DOE claims that all operations costs in Table 2 are in addition to the cost of using LWRs with LEU. As a result, all of these costs would have to be subsidized to allow reactor operators to maintain their original competitiveness when using MOX fuel.

Existing Reactors: $2.33 billion to $2.72 billion

Evolutionary and Partially Completed Reactors: $4.61 billion to $4.78 billion

3. Subsidies to Capital Costs

According to the DOE, government ownership of the MOX fuel fabrication facility saves the government approximately $600 million. This is due to the lower cost of capital relative to private financing, no interest during construction, and no need for a rate of return for private companies. Thus, if the cost of MOX and LEU fuel were compared on a consistent financing basis, the cost differential would be $750 million, not the $150 million as shown in the Net Life Cycle cost for MOX fabrication shown for LWR’s in Table 2. For comparison, a new column of data for private financing has been added to Table 2 to put all costing on an equal basis.

The federal funds expended to avoid paying the higher interest rates that accompany the use of private capital are subsidies. They are defined this way because the government funds could have been lent out or used to reduce the debt, and because this benefit is not available to competing, non-nuclear power producers. The value of this subsidy is the difference between the cost of private capital and cost of using government funds.

Existing Reactors: $0 million to $750 million

Evolutionary and Partially Completed Reactors: $0 million

4. Total Life-Cycle Subsidies Required by a MOX User--The Sum Of All Subsidies In All Categories

Existing Reactors: $3.2 billion to $4.85 billion

Evolutionary and Partially Completed Reactors: $7.7 billion to $11.7 billion

5. Offsets to Subsidy Costs--Fuel Displacement Credits

If a nuclear power producer is competitive with other forms of power production, and if that producer elects to use MOX that has been provided free by the DOE, the federal government should be reimbursed for the amount of LEU fuel that the MOX has replaced. This reimbursement is not a payment for the MOX fuel, it is simply a reflection of costs of operation offset by the use of MOX. If the price of uranium rises, or if the cost of other factors involved in LEU fuel fabrication increase, and if this is reflected in an increase in the cost of LEU fuel, then the size of the fuel displacement reimbursements should also rise. At current LEU prices, the range of these credits would be between:

Existing Reactors: $320 million to $2.01 billion

Evolutionary and Partially Completed Reactors: none

On the other hand, if the nuclear power operator is not competitive with alternative forms power production, it may reduce fuel displacement reimbursements below the actual amounts of LEU fuel displaced. The amount that a power producer falls short of reimbursing the federal government for displaced fuel would also be a subsidy to the power producer. As competitiveness decreases, either reimbursements will decrease--and subsidies will increase--to the point where no fuel displacement reimbursements are being returned to the federal government by the power producer, or the power producer will be forced to incur increasing losses. In such a scenario, the producer would either go out of business, or the federal government would be forced to provide additional subsidies. While this eventuality may seem problematic, it is fair to note that the federal government is unlikely to allow a power producer to fail if that producer has become a critical part of a plutonium disposition program involving MOX burning.

6. Total Subsidies Required by MOX Users with Credit for Fuel Displaced

It has often been claimed that even if MOX was free, nuclear power producers would prefer to buy LEU fuel. The following figures show why this statement is true. Irrespective of the fuel displacement credit generated by MOX use, the life-cycle costs of MOX still greatly exceed the costs of LEU. The ranges of subsidy required by existing reactor MOX users--after full reimbursement for fuel displacement credits--would be:

Existing Reactors--Lower Subsidy Range (Govt. Financing) $1.92 billion to $3.11 billion

Existing Reactors--Upper Subsidy Range )Private Financing) $2.09 billion to $3.71 billion

For evolutionary and partially completed reactors, the revenues shown in Table 2 accrue to the owners of the plant, not to the government. Thus, their impact on the plutonium disposition mission costs is unknown (Technical Summary Report For Surplus Weapons-Usable Plutonium Disposition, 1996, p. 4-7). In spite of this, DOE showed these revenues as reductions in government costs. To correct this, Table 2 also includes the costs for the more likely option where the federal government receives no revenues since there is no indication that any revenues will be returned to the federal government--unless the government becomes the owner of the plant. For this reason, the subsidies required from the federal government remain constant at:

Evolutionary and Partially Completed Reactors: $7.7 billion to $11.7 billion

Additional MOX Subsidy Issues

As the price of LEU rises and it becomes less competitive with other sources of energy, the subsidy provided to the MOX burner must cover not only the difference between the price of LEU and the price of MOX, but also the difference between the price of LEU and the price of the most economically competitive energy source. In every case the subsidy required to get an energy producer to use MOX must be the difference between the cost of MOX and the cost of a fuel source that is most economically competitive. However, if such a subsidy was actually delivered to a nuclear power producer, it could potentially make MOX burning economically viable in a market where no form of nuclear energy is competitive. These subsidies have the potential to "save" nuclear power producers who cannot compete in a deregulated environment.

In its report on surplus weapons-usable plutonium disposition DOE included no calculations of ‘incentive fees’ and noted that this created "a significant cost uncertainty" in DOE’s cost estimates. (Technical Summary Report For Surplus Weapons-Usable Plutonium Disposition, 1996, p. 4-3) This ‘cost uncertainty’ springs from at least four different problems that arise when a government agency elects to intervene in the operation of a market by subsidizing one sector: