Nuclear Supply Chain With BWXT

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:
All right. Hey everyone, Marc Bianchi here from the Cowen Energy team with another installment of our Energy Transition podcast series, where we're now focusing on nuclear power and small modular reactors. Today, I'm joined by John MacQuarrie and Joe Miller from BWXT. John is President of Commercial Operations, which includes BWXT Canada. And Joe is President of Advanced Technologies, which includes Project Pele and the company's efforts and advanced fuels among other things. So, gentlemen, thanks so much for joining us. Maybe before we get into the questions you could each kind of introduce yourselves in a little more detail and give us an overview of what your responsibilities are.
John MacQuarrie:
Hey Marc, it's great to be joining you. So just by way of introduction, BWXT reports in two segments, government operations and commercial operations and as you said, my role as President of the Commercial Operation Business, and maybe just a little bit about myself. So I've been in the nuclear industry for about 27 years, 24, which with BWXT. My background is engineering focused on nuclear power. Working in the Canadian market, but also US, Europe, Asia in my experience is in the Canadian market. So it's a little bit about me.
Marc Bianchi:
Joe?
Joseph Miller:
Yeah. Thank you, Marc. This is Joe Miller. Advanced Technology is part of government operations based out of Lynchburg, Virginia. My background, I started my career on a submarine, the USS Norfolk, and then moved into shipyard and ship building for the Virginia class submarine fleet and spent about six years in the high tech manufacturing industry in the semiconductor market. Joined BWXT 11 years ago, started off in test engineering and moved into advanced technologies about five years ago, but we've been able to build up a portfolio starting with few million in R&D back in 2017 to about a hundred million dollars in revenue this year. And really focusing on advanced reactors with our Marque Program B and the Pele micro reactor for the Department of Defense, and also focusing on space reactors, both for propulsion and power.
Marc Bianchi:
Great. That's a great overview. Maybe as we keep going with sort of the high level stuff, and maybe John, you can comment on this, BWXT's role, kind of in the commercial nuclear business, can you talk about what are the key areas where you participate there and what are the relative sizes of those businesses? Just so people can get a sense of how impactful they can be for the company.
John MacQuarrie:
Yeah, sure, Marc. So part of our business is the design and manufacturer of components for nuclear power plants. We also do the same for a variety of other equipment, and perhaps we'll get into that in detail a little bit later, but you can imagine that there's a need for all kinds of heat exchangers and equipment that's designed to fuel reactors and so we're involved in a lot of that. We're also providing services which include engineering services and field services for maintaining components in nuclear power plants. So it's a kind of full service capability that we offer. We do that largely in the Canadian market for the CANDU technology and also CANDU reactors around the world, but we also participate in the nuclear power business in non CANDU markets. So we provided the replacement component to pressurized water reactors in the US, for example. The other part of our business in the commercial division is nuclear medicine business. And so there we manufacture radio isotopes and radio pharmaceuticals for various nuclear medicine customers, and we provide those around the world.
Marc Bianchi:
And as you think about growth, which again, we're going to talk to in more detail, but just sort of set the table, what are the top couple growth opportunities for you, maybe if you would rank them from most impactful?
John MacQuarrie:
Sure. Yeah. When you look at our two market segments, maybe I'll start first with nuclear medicine. I think that's a tremendous growth opportunity that we've got, is public information that we are launching a new product line to manufacture technetium 99 generators. And so we're working through that and very excited about launching that soon, but then we also have a group of pipeline type products. So radio isotopes and pharmaceuticals that we're developing that each one has really, I think, exciting growth opportunities. One of the big areas that we're focused on in addition to diagnostic products is therapeutic products, which is a really fast growing part of the nuclear medicine markets. That's definitely one of our biggest areas of growth.
And then in the power business, there's really two things that are driving growth there. First, we're in the midst of really significant investment in the Canadian market for extending the life of reactors. And that's been ongoing for a while and will continue for a while and it's really driving a lot of demand for products and services. And the other, I think even more exciting part of our business is the potential for new reactors and particularly small module reactors. And we're seeing a lot of activity in that area. And so I would rank that as a significant growth opportunity.
Marc Bianchi:
Starting with the Canadian market, so you mentioned the role in the candy reactor, maybe talk about a little bit, just the history of the company's involvement in the Canadian market? I think you acquired the GE Hitachi business in Canada a few years back. Where were you before that? What did that do for you and what's the main involvement with CANDU from here?
John MacQuarrie:
Yeah. So maybe just very briefly a little bit about the Canadian market overall. It's about a $17 billion annual market, so pretty good size all including operations in the whole supply chain, boat 19 reactors. Most of those are in the province of Ontario, so heavily concentrated there, all CANDU type reactors. And right now, as I said, we're seeing really significant investment in life extension in 10 of those reactors. So about $26 billion being invested over the next 10 years or so, and that's ongoing. So we're seeing a lot of demand from that. Our role, traditionally, we operated as a designer manufacturer of components and a service provider on those components. But as you said in, we did acquire the GE Hitachi nuclear energy business, so that got us into manufacturer of fuel. So we supply fuel for 10 reactors here in Canada. They also brought us the OEM status for the very unique on power refueling system for the CANDU reactors.
So CANDU reactors are unique in that, they're the only commercial reactors that are refueled while they operate. They don't have to shut down to refuel. And that gives them a really interesting ability to be able to operate for longer cycles. And in fact, some of the Canadian reactors have set records for the longest operating cycles. So that gives them some benefit. Maybe just a little bit more about the CANDU technology, it's natural uranium, so simple fuel, lower cost fuel than most reactors [inaudible 00:06:49] said long operating cycles and quite high flux neutron flux reactors, so really good for producing isotopes. And for many decades, most of the cobalt 60, which is used for sterilization have been made in Canadian CANDU reactors and now these reactors are launching into technetium isotope creation, [inaudible 00:07:07] and other things and so pretty exciting for that part of the use of these reactors.
Marc Bianchi:
What are the limitations, if any, for CANDU? When I think about other reactor technologies that are, I'm sticking with the conventional side here, so mostly light water reactors and not talking about the advanced reactor designs yet.
John MacQuarrie:
Yeah. So limitations for CANDU, I would say are, I think with natural uranium fuel, you have the advantages that I talked about, which low cost, but you're not enriching. And so you've got a little less power that you can get out of a kilogram of fuel, okay? So that can be a limitation. Most of the advanced reactors are going to higher levels of enrichment, so beyond 5%. So that's a challenge. And I think the other challenge they can do faces is the complexity of the reactor it is. As I said, it's on power refueling and so that creates some complexity in how you operate it and that can drive costs a little bit higher. And so I think those are the two biggest challenges in the CANDU reactor space.
Marc Bianchi:
Is there much growth outside of Canada for this technology? Can you kind of talk to that? And then what's the application, if in any of these SMR designs?
John MacQuarrie:
So in terms of the growth outside of Canada, the biggest opportunity right now is that as I mentioned, the life extension work that's going on in Canada is going to be moving international here. So if you think about the CANDUs that are located in South Korea and China and in Europe and Romania, they're going to go through that same need to have a major replacement of their components. And so that's going to drive quite a bit of demand in that market. And then in terms of potential new build, there is a significant effort ongoing right now in Romania to build two new CANDU plants there. They've already got two units there, but they're looking at adding two more. And so that could be a really significant development and between the Romanian government and their nuclear utility there, and a number of banks, including the US EXIM Bank, there's a great deal of effort put together financing for those projects and to define those projects right now.
So that would be the largest opportunity from a CANDU perspective. And then the second part of your question on SMRs, I think that the CANDU technology is scalable. So there are designs that go down as small as 300 megawatts, but at this moment we don't really see that the technology is being taken in that direction. So right now the CANDU technology is licensed by SNC-Lavalin from the Government of Canada. And it's operated in a division of SNC called CANDU Energy. And so they are really the stewards of that technology. And obviously that's up to them to really describe what they're going to do with it, but for what we can see, I think looking at what they're doing, they're not out there marketing an SMR version of the CANDU reactor. I think they're more focused on the markets that I talked about previously.
Marc Bianchi:
And maybe switch over to light water technology with the GE Hitachi small modular design. So they've got this BWRX-300, which my understanding is that stands for boiling water reactor, number 10, and it's 300 megawatts. So it's an extension of a prior design that they had. Maybe before we get into all of that, correct me if I'm wrong on this presumption that, that's outside of GE Hitachi, Canada, this is GE Hitachi globally, and they would be a partner or a customer, but there's nothing in house at BWXT that is involved in this technology, right?
John MacQuarrie:
That's correct, Marc, yeah. So it's being driven by GE Hitachi out of Wilmington. They do have a Canadian entity that is leading this effort from the Canadian market, but separate from BWXT. Now we do have agreements with GE Hitachi, so they have been selected by Ontario Power Generation to cooperate, to work together, to deploy this BWRX-300 technology at the Darlington site, which is kind of the flagship location for Ontario Power Generation, where they've got four CANDU reactors, but they've got a good site to locate this GE SMR at that site. And in terms of our rule there, we've announced that we've got an agreement with GE to work collaborative, to deploy the BWRX-300 at that site. And our role is really around the design and manufacturer of the reactor pressure vessel component, which is kind of the key component in that reactor.
So we've got a fair bit of activity going on with them. That Darlington site is looking very encouraging. Recently, TVA announced a partnership where they are also interested in the GE Hitachi SMR technology, and they are working with Ontario Power Generation. So the two owners are working together there to figure out how to optimize the deployment of that technology. And we've also signed a deal with GE Hitachi to look at up to 10 reactors in Poland with a company called [inaudible 00:11:36] Screen Energy. So that's very exciting, because it is clear that the Pols are really in need of reducing their dependence on fossil fuels and they're really looking to nuclear technology to do that.
Marc Bianchi:
Can you give a little bit of an overview of the technology, I know it's not your technology, customer technology, but your big stakeholder in the success of this, so I'm curious, how is it different from other light water small reactors that are out there? What's what are some of the key design differences that as an outsider, as an investor I'd want to know about to differentiate?
John MacQuarrie:
Yeah, so specifically about the GE Hitachi Technology. I think the interesting aspect of it is that it is an evolutionary design. So as you notice, it's noted in the name of the reactor, it's kind of the 10th version of a reactor that they've been deploying and operating for through their customers for many decades. So the fuel is the same as what's operating in other plants. And so the risk is, I think, associated with that design is reasonably low. They've greatly simplified the design by reducing the number of plant systems that are needed through optimization of that design. So they've really reduced the concrete and steel. It's typically our big drivers of the cost of these reactors and they've changed the way that the reactor is protected from a safety perspective to make it even more safe. And that's reduced the cost of the overall reactor from what we can see. Obviously we're looking at it from a supply perspective of what we do. So they're probably a better positioned to answer that question about the reactor, but that's what I see from my perspective.
Marc Bianchi:
What are the milestones with Darlington and TVA? There's obviously commerciality milestones that need to be considered, but then there's also regulatory and licensing. Can you just help us understand what that profile looks like over the next, I guess it's talking about eight-ish years, maybe a little bit earlier for Darlington, right? That's 2028.
John MacQuarrie:
That's right. Yeah, OPG has said that they would like to have this SMR grid connected by the end of 2028. So six years from now. So that's a good, I think challenge, although possible. I think they're hoping to be first right in North America with this SMR, that TVA has not indicated what their timeline is, but presumably they're going to follow closely with OPG. I think the key timelines are, when you think about that time to deploy it, got to get through finishing the detailed design of the reactor, including the components, have to work through the licensing process and so that is with the Canadian regulator, what we call the Canadian Nuclear Safety Commission and GE is working through that right now. And they're what's called a vendor design review and I understand that that's going reasonably well. They're hoping to be into construction in 2024 and then finish it in 2028. And when you work backwards, that means that they have to be looking at some of the big components, things that we would be involved in right away.
Marc Bianchi:
These are two government entities, TVA and OPG who are supporting this project and if we look in the US outside of TVA, we've got this advanced reactor development program where there's money flowing into those projects, and this is a bit different type of government support. How does that either help or hinder the timeline and how are they looking at first of a kind cost here? What's their threshold for this thing to be very expensive, recognizing at the Nth of a kind ones will be much lower and they're just trying to seed a market so that it can be a kind of government investment that pays off over time.
John MacQuarrie:
So from my perspective, it's very helpful that you've got these two government own utilities looking at this technology. They have that backing of the government that I think is very solid and they both have a mission to really lead in clean energy development and deployment. And I think that's a key part of why they're focused on this reactor and working together. I think that when they think about the risk here, I think they are expecting that the first one's going to be a bit more expensive. And I think they both companies have experience with that in new technologies, but they are looking, at my understanding, they are looking at building more than one. So they're expecting that the first one, maybe two, could be more expensive, but then as you move into third and fourth, they would expect that that cost would come in line. And I believe they view it as a competence [inaudible 00:15:45] power with any other non emitting base load type of power.
Marc Bianchi:
That's great. Maybe outside of the GE Hitachi design, what's your involvement in other SMR designs that are being contemplated? When could we be hearing more about that?
John MacQuarrie:
So we've been fortunate to be involved with a number of them. We offer ourselves as a merchant supplier products to these SMRs and so we have been working with new scale on their SMR. It's been announced that we started working with them as early as 2019. We had contracts to look at the design of their components. And in that case, it's a integral component that has a reactor core and steam generation all in one component and have been working on design for manufacturability with them. Pretty exciting they've got their site identified that Idaho National Labs with a consortium of customers there to operate and they've also recently announced that they've got a collaboration agreement with the nuclear utility in Romania. So they're working on a European customer there. And so that is something that we're involved in. And then there's another advanced type of reactor vendor.
I think I would say more advanced than either GE or a new scale in the sense that they're gone to a different technology, a molten salt technology, which is [inaudible 00:16:57] for energy. And we've had contracts with them, both that same time frame, 2019 to look at the design of their steam generator component and some other heat exchangers. And so been working through that with them. So I see that that type of reactor because it is a greater change from the light water reactors that we operate today, that it may take a little longer to get to market than the GE Hitachi or new scale product. But certainly think that type of advanced reactor's got a good role to play at some point in the future.
Marc Bianchi:
So as we speak to investors about these small modular companies and the approach of doing things in a modular way, there's some concern from investors that, well, hey, you've never done this. The industry's never done this. You can make all these components and they're components that are similar to what we've used in conventional reactors, but we've never actually built a small modular reactor, so investors have a lot of battle wounds from cost overruns and time delays with nuclear plants. What can you say that that gives you confidence being a supply chain participant in these things that we can actually pull these things off as advertised?
John MacQuarrie:
So from my perspective on the risk, first of all, because these are smaller units, the risk is slower. They're more factory built than the bigger units. And so a lot of the risks that we've seen in large nuclear build projects has come in the field. And so the more proportion of that work that you can get in a factory, the lower your risk is. When we look at what we would do in terms of component design and manufacturer are feeling quite comfortable with that. It's not very far from our long experience in terms of designing and making components.
And so we don't see significant risks in the components. And I think that obviously the SMR vendors have to respond to how they see the risk of the overall plant, because that's not quite our domain, but just from my perspective, I think that what they've developed here is absolutely the right way to go in reducing the risk where you've got this kind of evolutionary design, where much of the plant isn't so different than the current light water reactor fleet, it's just smaller. And so there is a lot of experience there and there's less first of a kind risk.
Marc Bianchi:
One of the other elements that comes up is just the sheer inflation that we've seen and everything. And there's been some questions as to whatever LCOE was promised or plant cost was promised, now, if you put new materials costs in and labor costs and so forth, it ends up being significantly higher. Do you have any perspective on that and what you're seeing could filter through to the end cost for the customer?
John MacQuarrie:
Yeah. We have seen some inflation for sure, in some of the materials, you typically get into some specialty alloys in these types of components. And so there has been a increase, although we've seen some reductions recently, so we're seeing some reduction back towards where it was about a year ago, so that's encouraging, but we're still in a bit of a higher price. I think that nuclear obviously has to compete within another form of technology and they're all using some pretty special materials. I think all of those are experiencing some level of inflation. So I think it is a relatively speaking, a level playing field here. And I think that it's still going to be a competitive technology if we can hit the targets that all these SMR vendors have set for themselves.
Marc Bianchi:
Well, thanks, John. Joe, Let's move over to you. Maybe to kick it off, can you talk about the Project Pele in more detail and I guess we're most interested is, can this be sort of a leader to something for the commercial market and how does the opportunity set look there? What's the timeline with the project and then what's the timeline for broader adoption and what do you think the ultimate addressable market could be?
Joseph Miller:
Yeah, absolutely. I would say starting off with the one to five megawatts is the power range of the Pele program. Though the big benefit of that is you have the ability to transport one to five megawatts, real high power dense systems in any remote application or off grid application that would be desired. So unlike the SMR market, this wouldn't be for base load power supply for the existing grid, this would be focused effort to add energy anywhere in the world. And so that it provides tactical capability to the Department of Defense. But in addition to that, there's a commercial aspect to that, that's very interesting. And we've been fielding a lot of questions and having conversations with potential commercial customers based on the fact that there are high energy prices throughout the world in remote locations.
Reactor that can fit in a standard ISO container, be transported, assembled, operated, and provide years of electricity without having a logistical tail is very appealing to those customers. And so with the delivery of the Pele reactor in the mid 2020s in that operation and that proof principal and proof of concept all happening in this decade, we can see the commercial market emerging pretty rapidly. And so BWXT has positioned ourselves pretty well, not just with a Pele micro reactor program, but with other commercial development through the advanced reactor demonstration program, which you had mentioned, and being able to couple technologies as purpose built use case for micro reactors for the commercial industry.
Marc Bianchi:
Is there a way to think about the application outside of defense? Where I'm thinking of some remote place where you might be burning diesel, which is very expensive, is expensive to get the diesel, can you help me think about what the cost competitiveness might look like? I mean, we're probably dealing with very high costs for the incumbent technology, so what does that look like?
Joseph Miller:
Yeah, it's a great question. I mean, not only are you burning diesel to create electricity and a lot of that electricity is reconverted back to thermal energy. And so the real cost comparison comes from that a high temperature gas reactor provides. In addition to the fact that you don't have to convert from carbon intensive program, like our process like diesel, coal, and natural gas, you would be able to convert directly from the reactor's thermal output to thermal energy on demand. And so that's one application. Another application would be the fact that a lot of these remote locations have a need for essentially located small power source.
And so being able to fit into that grid where coal plant exists, let's say up in Alaska where a small coal plant exists, distributes energy to air force installation, also distributes energy to the surrounding community. You come in with a clean energy source that's transportable that can provide thermal energy as well as electric really helps with the cost bases and then when resource utilization or things like the oil sands and other commercial applications require a very thermal intense project or process to heat water, create steam, things of that nature, once again, you can get back to a cost basis and efficiency standpoint of a nuclear reactor that provides a lot of benefit.
Marc Bianchi:
Okay, great. Maybe we'll shift over to fuel supply and this is somewhat related to Pele because Pele's going to be using TRISO, can you just explain to us what TRISO is, just as a 101, because we haven't talked about it yet on this podcast series in detail and then you know what your involvement is?
Joseph Miller:
Sure. Yeah. TRISO is it's pretty unique fuel form that's been around for several decades and in its current scaled up industrial capability. Here in BWXT, we have the ability to manufacture at a kilogram scale and be able to supply the future market. But the fuel form itself is tri-structural isotropic fuel, that's where TRISO comes from. So tri-structural has essentially at its core would be uranium kernel. That's coded in carbon and coded in silicon carbide to be able to contain that uranium and also all the vision products during operation of the reactor. And so what that allows you to do is to greatly reduce the amount of infrastructure that's required on site. And so that the fuel can operate at a higher temperature than commercial power plants can operate today. And then also you don't have to build a large containment surrounding the reactor pressure vessel. The containment is actually the fuel. And so over the last 15 years, BWXT in conjunction with our national labs, the DOE National Labs, we've been manufacturing TRISO at scale for testing and now be manufacturing all the trio for the Pele program.
Marc Bianchi:
And there's some other variations of TRISO, I think X Energy has their TRISO X, are you potentially part of that supply chain or are there other applications for TRISO where you would be an intermediate participant?
Joseph Miller:
Yeah, absolutely. Once again, like John mentioned, as a supplier to the commercial market, BWXT is interested in that market as well from a TRISO fuel manufacturing standpoint. And so there are other reactor designs other than Pele that use TRISO, Kairos as one of those reactor designs. And so the flexibility of the fuel is an enabling asset that advanced nuclear concepts have. And so we are not only interested in our own homegrown design, like the Pele program and our micro reactor program, but also how we can be a supplier to the larger commercial market.
Marc Bianchi:
And one of the things about TRISO is it doesn't use low enriched uranium, we need to use high assay low enriched, which is known as HALEU. There's no HALEU production in the US right now, understandably because we just don't have a market for it. But how do you see that evolving? I mean there's 700 million in the IRA for HALEU, but how much of a gating factor could that be to seeing this thing develop? And what's your interest or involvement in potentially making HALEU yourselves?
Joseph Miller:
Yeah, it's a great question. I mean the immediate bridge that's required would be down blending, something that BWXT does. And then like you mentioned, reestablishing the enrichment capability in the US is something the Department of Energy is investing in through the $700 million, you just stated. So BWXT over the last several decades and other companies have developed different [inaudible 00:26:23] programs. And that's how we got the initial stockpile of HAU. HALEU hasn't been used in the commercial sense in a large scale in the US, now that that demand is starting to reemerge or, and have a requirement then BWXT interested and we just submitted a proposal recently to a DOE RFP to manufacture HALEU for the future, both for the commercial and for the government markets.
Marc Bianchi:
What's different about making HALEU versus LEU and is there anything that if you have an incumbency in low enrichment, maybe you've got a step ahead advantage in doing HALEU?
Joseph Miller:
The technology is very similar, but the biggest difference would be the security protocols that have to exist in the different categories of licenses to enrich above 5%. So from zero to 5%, zero or greater than zero being natural all the way to 5% being LAU, five to 20% being high assay LEU, or HALEU, and then above 20% being HAU in those different categories, the requirements for licensing and security are different, but the overall technology is quite similar.
Marc Bianchi:
Do you have a sense of what the $700 million from the government, what would that do? How much HALEU production could we get out of that and what sort of megawatts of generation would that support? If I had in my mind that we need X megawatts of HALEU supply, how far to that goal does this get us?
Joseph Miller:
Yeah, it's a great question. I would say the 700 million is about reestablishing capability in the United States and then you would scale that up. You would scale that capability up to meet the demand. The 700 million represents the initial capability that's required to get the advanced reactors, get that market supplied with HAELEU fuel, be able to facilitate the expanse of advanced reactors by having that initial supply. So you would essentially have to add more and more capability, but having that established, having supply chain up and ready to supply is the point of this initial [inaudible 00:28:20] funding.
Marc Bianchi:
Maybe just one last one for you, as it relates to moving off into outer space, can you talk about the opportunity for space technologies? How can nuclear make a difference in deep space travel? And what's the near term movement on that right now?
Joseph Miller:
Yeah. So over the last couple of years, there's been a resurgence of interest by NASA and now DARPA in space travel. And so NASA's program Nuclear, Thermal Propulsion now called Space Nuclear Propulsion was really focused on taking a nuclear powered propulsion spacecraft from lower orbit, all the way to Mars and the enabling technology or what nuclear presents to the space market is that very high power density. So you have low mass, you have volume, really high thrust, high specific impulse capability with nuclear that you don't have with current technology. And so in order to transit astronauts from lower orbit, all the way to Mars and back, you would need that higher performing engine. And that's why Nuclear Thermal Propulsion came about very similarly with the DARPA program, the ability to transit within that Cislunar volume is very important from a tactical capability for the US and in the new space domain.
So that would be propulsion. On the power side, the Artemis program, which is set to launch here later this month, being able to create a real infrastructure on the moon to provide a gateway to outer space is really important to NASA, it's important to all humankind. And so having a high powered dense small about 40 kilowatt electric power system on the moon would be an enabling capability to have astronauts and people living and working on the moon and then also provide the infrastructure required to transit outside of our normal domain.
Marc Bianchi:
How specifically are you guys involved in that and what are the next milestones?
Joseph Miller:
Yeah, so we have two contracts for nuclear thermal propulsion, one for developing the fuel and a few other materials for the reactor. And then we have a design contract as well to be able to complete conceptual design and then move on to the next stage of preliminary and final design for that system. So that's set to launch right now and the timeline is in the 2030s, we also are proposing to the DARPA DRACO program for, and that will be awarded sometime later this year and then for the fission surface power for the lunar power supply, we have a contract as a subcontractor to Lockheed Martin. And in that scope, we will be the fuel supplier reactor designer and reactor manufacturer as that series progresses.
Marc Bianchi:
Awesome. To wrap it up with a couple more high level type questions, and either of you feel free to respond where you see fit, how do you see the competitiveness of nuclear versus other forms of generation? And I think many people are aware of the sort of argument that nuclear is a good base load power source, but the proponents of the anti-nuclear proponents would say, well, hey, we can just use smart grids and batteries and be able to handle high levels of intermittent solar and wind. Where do you guys see the counterpoint to that argument or you have any thoughts on any of those topics?
John MacQuarrie:
Yeah, Marc, from the commercial perspective here, I think that there is going to be renewable backed up by store. It's going to be a growing market, but I think when you compare that to nuclear, because you really have to take that intermittent source with energy together to compare that total cost to nuclear. I think you do have a competitive technology in nuclear power. And so from my perspective, I think you're going to see, to decarbonize, you're going to see all of that being part of the mix and nuclears in North America is about 20% market share. I think it'll probably hold onto that may not choose dramatically from that up or down, but there are retirements of nuclear units and there'll be new ones built, so that's how I think about that.
Marc Bianchi:
There's these small reactors are positioning themselves to be load following, hopefully to be better integrated with the intermittency and then also changing demand that we have throughout the day. How do you see that? I've heard one argument is that if you're load following, then you're not getting full utilization out of your facility because you've got portions of the day where you're running below capacity, but maybe help understand that argument and if there's a reason that SMRs would be better suited for that than more of the conventional fleet.
John MacQuarrie:
So many of the SMRs are being designed to load falls somewhat. So they're not being designed to cycle all the way down to virtually zero power and backup, but they are cycling around their peak power. And I think there's an advantage there to operators to be able to do that. But when you think about what that means in terms of how they should be operated optimally, I think that probably would want to run them near their peak power and use that power when there's less demand, say at overnight to charge electric vehicles, to look at hydrogen production and other things. So my personal view is that a bit of load falling is helpful, but they're going to need that base load power to really remove carbon from our energy grid.
Marc Bianchi:
And then finally, you sit in an interesting position where you have a view of the commercial nuclear market and then also on the defense side, so I'm curious as we look at what's happened in China and Russia, I mean China is a leader in nuclear power and highly capable, they've already got SMR, China's got a couple SMRs that they're developing and when the Western countries see the success that's happening in the East, is there a bit of a arms race concern here that we're not keeping up or how important is it that the Western countries and are we seeing dollars put to work from the Western countries to try to make sure that equally as capable on the nuclear side as those Eastern counterparts?
John MacQuarrie:
Yeah. Maybe I'll give the commercial perspective and Joe can share his, I would say that we are not seeing much competition from Chinese players and specifically what we do for example, at the supply chain level, I don't think we're seeing a lot in Western nations in terms of nuclear plant supply. There was a project that was developed in the UK. It's no longer got Chinese participation. So I think we're not seeing that develop. I think that the Chinese are really putting a lot of investment into nuclear technology that is commercially viable. And so that's something that we're all mindful of, but I feel like there's enough being spent by Western governments and specifically the US has got significant leadership here that we will see commercially at least that we'll keep base with the Chinese, not as big a threat from my perspective from the Russians.
Marc Bianchi:
Joe, anything to add there on the defense or space side?
Joseph Miller:
Yeah, I would agree. And I think it extends into the defense and space side, having that tactical capability and technology that's been so dependable over since really the forties is important for us to reinvigorate and that investment's showing up in big ways, both from NASA, from the department of defense as the US wants to continue to be a leader in new commercial technology, is also a leader in new nuclear technology, I think if you triangulate those three things, nuclear, commercial, and defense, you start to see the US start to lead more and more and more in investment. And that's why you're starting to see the reemergence of a lot of these projects and so looking at what other countries are doing, especially China and Russia has prompted the US to take nuclear more seriously of, as you can see through recent programs.
Marc Bianchi:
Well, super guys, I think we got to leave it there, but this has been really enlightening. I wasn't aware of all the capabilities at BWXT until we kind of got into this process, so I really appreciate your time and thanks so much. We'll look forward to talking again soon.
John MacQuarrie:
Thanks, Marc.
Joseph Miller:
Thank you, Marc.
Speaker 1:
Thanks for joining us. Stay tuned for the next episode of Cowen Insights.

This podcast should not be copied, distributed, published or reproduced, in whole or in part. The information contained in this recording was obtained from publicly available sources, has not been independently verified by TD Securities, may not be current, and TD Securities has no obligation to provide any updates or changes. All price references and market forecasts are as of the date of recording. The views and opinions expressed in this podcast are not necessarily those of TD Securities and may differ from the views and opinions of other departments or divisions of TD Securities and its affiliates. TD Securities is not providing any financial, economic, legal, accounting, or tax advice or recommendations in this podcast. The information contained in this podcast does not constitute investment advice or an offer to buy or sell securities or any other product and should not be relied upon to evaluate any potential transaction. Neither TD Securities nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefore (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed.