Interview: BWXT CEO Looks to Decarbonization and Great Power Competition

BWX Technologies (BWXT) is finalizing the design for a 1-5 megawatt equivalent microreactor for the Pentagon's Project Pele, to be delivered to Idaho National Laboratory for testing and approval in 2025. That high-temperature-gas reactor (HTGR) prototype will be in addition to work with NASA to develop nuclear propulsion in space and with the US Department of Energy (DOE) on a commercial HTGR microreactor. These advanced reactor developments augment BWXT’s portfolio, which has typically been dominated by government contracts to support the US nuclear naval fleet. Energy Intelligence's Jessica Sondgeroth spoke with BWXT President and CEO Rex Geveden on Jun. 22 at the Nuclear Innovation Council’s Advanced Reactor Summit in Charlotte, North Carolina to discuss these developments and more. Below is an edited and shortened transcript of that interview.

Q: Everybody's got an eye on BWXT's work with Project Pele. Can you give us the latest development, where the project is now?

A: That was a design competition that started with Westinghouse, X-energy, and ourselves, and we ended up winning the final design and the development of the prototype. We entered into the final phase under contract in May last year. It’s about a $300 million program that runs parallel with a Triso fuel program that we also won in a competitive face-off against X-energy.

Where we are right now is we're manufacturing fuel for that demonstration reactor. We are putting the finishing touches on the final design. We've gone out for long lead material procurements. We've got about $80 million under procurement right now. Obviously, we've been going through staffing for this thing. I'd say we're in full gallop at this point and planning to start assembly in 2024. Anticipating design iterations and minor backups in the supply chain, we're on track to see a fueled and operating reactor in 2025 at Idaho National Laboratory.

Q: What kind of commercial applications do you envision will come out of Project Pele?

A: I'll offer some definitions of scale and applicability. Obviously, large reactors are gigawatt-scale things. Small modular reactors are in that range from 50 MW and maybe 300 MW. Here we're talking about 5 MW, 10 MW, or less for microreactors. Pele puts out a few megawatts of power; it isn't a grid-scale reactor. So think of this as for off-grid applications. The very obvious example is a smallish military installation. Get yourself off the grid, insulate yourself from the risk of cyber attacks, insulate yourself from the risk of brownouts and blackouts and things like that.

Off-grid application is a thing to zero in on: island economies, remote industrial operations, perhaps mining, fracking, maybe process gas and process heat if you can get the price right. It’s expensive because you're losing scale economics when you go all the way down to a few megawatts.

We do have a commercial derivative called Banr [BWXT Advanced Nuclear Reactor] that we're developing under the Advanced Reactor Development Program with DOE. We're examining those technologies to drive costs out so that we can reach a commercial endpoint. It's just a little bit of a TBD [to be determined] right now, but we have some announcements here in the next few weeks about some exciting developments that we're doing with various entities to advance the commercial case.

Q: I understand BWXT is manufacturing Triso [tristructural isotropic] fuel for Project Pele, but also variants of the fuel for other applications. Can you talk about some of those variants, and what you envision those would be for?

A: Coated fuels of various types. The concept behind these coated fuels is that they’re safer because you encapsulate the active fuel in a ceramic layer — you're capturing the fission products as their nuclear reaction occurs. Think of that as a level of containment that saves cost and introduces a new safety factor that's attractive. In the space application, we work with various coated fuels. Although Triso is a type of coated fuel, it isn't particularly suited to space reactors for a variety of reasons.

Q: Have you seen any commercial interest from any of the vendors in these other coated fuels for their designs?

A: I don't think so, but I'm probably not the best person to ask for that.

Q: On the NASA project, there's competition for the lunar surface microreactor, but you’re also working on nuclear propulsion. Can you tell us a little bit about where you are with those projects?

A: We've been working on nuclear thermal propulsion with NASA since the summer of 2016. What NASA was doing was driving the technology necessary to ultimately fly a space reactor. So it's been fuel development, cold flow testing, and getting adequate flow through the core of the reactor. We've been developing various coated fuels for delivery to NASA and they've been testing that at NASA facilities and at DOE laboratories. We've built some representative reactor components for cold flow testing and the like.

NASA and Darpa [the Pentagon's Defense Advanced Research Projects Agency] are kind of combining forces on the Draco program — that's the Demonstration Rocket for Agile Cislunar Operations. Lunar space is becoming strategically interesting. NASA has its own civil purposes, but I think frankly it's become more of a strategic security imperative. What you're going to see is a pooling of resources and capabilities into that program. We're competing for that. We're hopeful of succeeding. We're in a good competitive position. We developed a breakthrough fuel technology for that application that works in that very high-temperature challenging environment.

The work that we've done here with the coated fuels and the representative components, all of this is building up the foundational components of the program that's called Draco. That's what we're focused on.

Q: For Draco, are they looking to develop their own design or do you hope that BWXT would be selected for its design?

A: I think BWXT would be selected for its design. The way this works, they selected spacecraft providers and nuclear developers in that first round. We weren't successful in that first round, but we ran along in parallel because of the work we were doing with NASA. So we've jumped into the second-round competition, and feel well positioned for the award, which hasn't been announced yet.

Q: Are there commercial implications for nuclear propulsion?

A: That's a little farfetched at this point, right? Because what you're talking about here is in-space propulsion. For nuclear thermal propulsion and nuclear electric for that matter, what you have is a technology that's very efficient — the specific impulse is twice as high at least as a chemical rocket engine. So it's good gas mileage, but not great thrust. You can't really get out of gravity well with that technology, as you probably know. You need chemical propulsion to get off the ground and into space. But once you're in orbit, in space, nuclear is a really nice option for you.

I don't see presently commercial applications there unless it's some kind of on-orbit computing that's necessary for some analytics that you're doing in space and distributing all over Earth or something. And you need extremely high-density power. You can think of farfetched things, but right now I think it's powered propulsion applications for national security and civil space — both government applications.

Q: In terms of Navy applications, do you envision any viable growth opportunities coming out of the Aukus military arrangement, between the US, UK and Australia, or out of Brazil's interest in nuclear Navy propulsion?

A: That's all obviously US government proprietary technology. The design authority is US Navy through the Navy labs. We build the reactors to those designs. We're very, very intimately involved in design for manufacturability, and those designs belong to the government. They certainly aren't intending to ever export those designs. In fact, in the case of Australia, we're providing nuclear submarines. We're not sharing nuclear technology in that case. The only case where we shared technology has been with the UK under the Mutual Defense Act, which came in place in 1958, I believe. It's possible now that we deliver nuclear capability to other nations, obviously—Aukus’ existence is proof of that potential—but how far that would go, I don't know. I'm not sure what the Navy or the government's appetite is for it and I'm certainly not speaking for them.

Q: Yes, absolutely. I don't know what their appetite is.

A: I mean, it's very closely held technology. It is a strategic competitive advantage to this nation, and nobody's eager to let it go.

Q: That much has seemed clear. Switching tracks to your engagement with the US Nuclear Regulatory Commission (NRC), I know that while Project Pele as a Department of Defense project is not under the purview of the NRC, I presume you are engaging with NRC in the commercial space — at least for Banr. What does that look like?

A: We have an ongoing long-term longstanding relationship with the NRC because we handle special nuclear materials in Lynchburg, Virginia, and in Erwin, Tennessee, at our plants. So we know them well. That said, we don't do much with them in the way of commercial nuclear design approval like NuScale, X-energy, Ultra Safe and the others that are on that path. We did go down that path somewhat on mPower back in the day, which is a small modular reactor technology that we ultimately abandoned because the business case wasn't holding up. What we're doing in the case of our high-temperature gas reactor is kind of watching what the NRC is doing on Part 53 [a new regulatory process for advanced reactors currently in draft phase], evaluating it. But we're certainly not in the design approval process with them yet. That said, we are formally engaging with the NRC on Banr. We've submitted a quality assurance program description to the NRC that governs our fuel development scope.

Q: What is your early view of Part 53? I know they’re still working on the dual path.

A: Our institutional view is that it's necessary. There's a widely held view that what's been put forth so far is not yet adequate. I think the industry is a little bit frustrated with it. I wouldn't put my name on that frustration because we're not dealing with that yet, but we're following it.

Q: BWXT is obviously a big government contractor with the potential for expansion via Pele. Do you envision more commercial business for BWXT in the future?

A: If you look at our portfolio today, we've forecasted to the street that we would do about $2.4 billion in sales this year. The government sales represent a bit less than $2 billion of that. The balance is commercial and commercial is a combination of commercial nuclear power and nuclear medicine — 80% of that commercial business is commercial nuclear power. When I came into the business it was an 80-20 split of government to commercial, and it remains an 80-20 split today.

What I thought at the time, seven and a half years ago when I came in, was that commercial would outgrow government, because, for one thing, our franchise program with Naval nuclear propulsions is a sole source program, so we have no expectation of market share gaining there because we had the market. But at the time, the ship-building plan was flat from the Obama administration. You had two Virginias a year until there was a Columbia and then you had one Virginia, one Columbia. The plan was for two submarines, period. Columbia’s a little bigger volume than Virginia, so there was some growth, but not a lot. And then Ford on five-year intervals, every shipbuilding plan since that time had two Virginias plus Columbia, and then in some cases accelerated forward procurement tempo. At that time, I thought the government business is going to be flattish.

I did think we'd grow in management and operations and environmental restoration and nuclear technical services in the DOE and weapons complex, but those are long acquisition cycles and long contracts, so it takes a lot of time to build that up.

At the same time, you look at our commercial businesses and we were facing a refurbishment upcycle in Canada where we were primarily exposed. We had very little exposure to the US market, which was a melting ice cube at the time. We doubled our exposure to the Canadian market by buying the GE-Hitachi assets, the fuel plant and the fuel handling robotics, and all that stuff that came with the GE business. We have invested a couple hundred million in nuclear medicine by buying [Sotera Health's Nordion medical isotope business] and then invested another $300 million in product development and introduced a whole variety of medical isotopes.

So it was my view that commercial would grow faster than government. What’s turned out to be the case is they’ve both grown and they've both grown pretty fast.

Our top line this year, $2.4 billion is going to be more than $1 billion larger since we spun out of Babcock & Wilcox [in 2015].

Q: That's huge.

A: The government growth has been surprising. It's the great powers competition that's driving everything. There's been a higher focus on strategic platforms in the US and in particular accelerating recapitalization of the Navy fleet as evidenced by those ship-building plans. The surprising thing is government interest in reactor technology in different domains. So you move out of the sea and onto terrestrial capabilities, and we've got the flagship program with Project Pele. We hope to get the flagship program with Draco for space, but to move into the terrestrial and space domains, who knows where else you go — maritime or subsurface or whatever.

On top of that, obviously this hyperfocus is now on refurbishing the weapons stockpile. Special nuclear materials — uranium metal processing, plutonium pit production, tritium production — are all very high priority.

That's the surprising demand signal: the strategic thing is very big combined with the multiple domains of application for government nuclear reactors. We just can't outgrow the government demand is what's happened.

Q: That makes sense.

A: I suppose it’s a good problem to have, right? We can't outgrow the government customer.

Q: Why would you want to at this point?

A: If you decide you're going to go out there and certify a reactor design, it's a long, long put. Because you're on a 10-year path or an eight-year path with the NRC and then you have to go and sell those designs to some utility. They have to get over that capital hurdle, so you hope in 14 years you start to get some cash flow from your license design, and that's a hard business case.

With the government, you get paid for designs, get paid for fuel development, you get paid for prototypes and the checks come within the month of starting. So it's the pivot I made when I became CEO — let's get out of this mPower stuff and treat the commercial market as a merchant supplier, face the market as a merchant supplier, and pivot over to the government market and see if we can plant some seeds and create some interest in these new domains.

Q: You've mentioned the abandoned mPower SMR a couple of times. Given this revitalized global interest in SMRs, what kind of lessons learned would you share?

A: In our business where we have great core businesses — the Candu commercial business, rock solid fuel services, component fabrication, the navy nuclear business, the net nuclear technical services business, a very high return on investment capital business — with a bunch of businesses like that, that flow cash and are stable, predictable, long cycle, high barriers to entry, you don't need to throw a Hail Mary.

We didn't need mPower kind of projects in our portfolio. I'd say that there are investors who have an appetite for that level of risk. Let them accept that risk and try to go get those designs certified and sold into the market. I hope they all succeed because I want to make fuel and components and designs for those players. I just don't want to try to make the 80-foot putt myself.

Q: Given this risk appetite, what then is your plan for deploying the Banr in the commercial market?

A: The market for a microreactor is different than the market for an SMR. The market for independent, reliable power for industrial and commercial uses that I discussed earlier exists already — the end users exist — and they’re coming to us for solutions. We have made the right investments in people, facilities, and technology, and we’re building relationships with customers and technology partners to enter the market without bearing the full risk.

Q: Do you also envision new opportunities for the Candu [Canadian-designed pressurized heavy-water reactor] market, especially given interest in Eastern Europe, at least with refurbishment and expansions?

A: The Romanian reactor Cernavoda is certainly going to be refurbished. I think they'll do a newbuild over there too. Canada's pretty serious about large reactors now. I think they'll make a choice between AP1000 and Candu, and they have strong inclinations toward an indigenous supply chain, so I think Candu’s got a real life there. There's a lot of chatter about building a few of those in Canada.

Q: Given the experience with mPower, are there any SMR vendors that you're watching very closely? That look the most commercially viable at this point?

A: Do you mean are we picking any winners?

Q: Yes.

A: We've been public about the fact that we're supporting GE-Hitachi on the BWRX-300 for [Ontario Power Generation] at Darlington. We're making the reactor pressure vessel. We'll probably do other things on that. We're certainly interested in TVA [Tennessee Valley Authority] opportunities around that BWRX and the Polish opportunities. So we've been very public and shoulder to shoulder with GE.

But we haven't picked a winner because we are a merchant supplier. We have other relationships that we haven't announced, where we're doing design work and probably will do component fabrication work. The industry sees us as a reliable supplier that hasn't picked a winner. If we're going to maintain that posture as a merchant supplier, we really can't do that, unless it's extremely economically compelling. We just don't want to combine forces and take ourselves out of that merchant supply place position, which I like to be in.

Q: That covers all of my questions. Any final thoughts?

A: In my experience in this industry, which is three-quarters of a decade now, I've never seen a time like this. The level of interest is extraordinary. The macro forces in the markets are extraordinary.

There are two and a half kinds of tectonic forces that are driving the markets. Two of them are obvious: the first obvious one is the decarbonization of the grid and the new emphasis on energy security, which was amplified by Russia's behavior in Ukraine. Those two things have conspired to bring nuclear front and center. There's also an interesting technological push that's going on in that market too: there's a reasonable amount of success going on in fusion. There's a lot of capital moving toward that. I put that in the same category. That's tectonic force number one.

Tectonic force number two is the great powers competition, which obviously includes China's ambitions in the South China Sea. The theft of our intellectual property and military secrets, and economic coercion in Australia and other places, is leading the world to align its strategic thinking around opposing those kinds of forces. Obviously Russia's hegemony in Crimea and now the broader Ukraine have created this new strategic environment. We talk about great power competition, which was an arcane term 10 years ago because we were coming off 25 years of post-Cold War stability and 20-25 years of anti-terrorism and theater warfare related to that. So it's a different, more strategically-focused world.

That's leading to all these opportunities in the government.

And the half tectonic force is half only because it doesn't have the same scale as the others, but the revolution in therapeutic nuclear medicine is absolutely stunning. We're going to see a nuclear medicine market go from a backwater $5 billion global enterprise to $25 billion -$30 billion by the end of this decade.

Q: Taking Russia out of the game must be huge there.

A: Taking Russia out of the game is a big deal for industrial and for medical isotopes. But that's not really what's driving it. It's the development of these biochemicals that can preferentially seek out cancer proteins that are expressed by certain cancer cells. You've got these biomolecules that can find cancer, you attach a medical isotope to it that's an alpha or beta emitter, and put it right beside the cancer cell and obliterate it.

Because of the path length of that kind of radiation in the human body, it's not damaging any surrounding healthy tissue. It's going to revolutionize oncology, and some of the clinical trial results are stunning, to say the least.