EIA Reports

U.S. ENERGY INFORMATION ADMINISTRATION
WASHINGTON DC 20585

FOR IMMEDIATE RELEASE
May 27, 1998

Nuclear materials declared as surplus to defense programs could supply about 20 percent of the world's commercial nuclear fuel by 2001, compared to less than 5 percent in 1997, according to information released today in the Energy Information Administration's (EIA) new report, Commercial Nuclear Fuel from U.S. and Russian Surplus Defense Inventories: Materials, Policies, and Market Effects. Nevertheless, even with the availability of surplus defense inventories, EIA projects that additional uranium production will be required to close a gap between supply and demand.

As a result of an agreement signed between the United States and Russia in 1993, the first fuel derived from highly enriched uranium taken from dismantled Russian nuclear warheads was delivered to a U.S. electric power utility in November 1995. Later, the U.S. Government began to implement the commercialization of U.S. highly enriched uranium and the sales of commercial-grade uranium that was no longer required for defense purposes. Other surplus defense inventories, including plutonium, are being considered for commercialization, but the implementation of such plans is awaiting government approval.

With the availability of competitively priced uranium from surplus defense inventories, U.S. nuclear power generating companies are expected to incur lower uranium procurement costs than if the market were supplied entirely by newly produced uranium. The cumulative savings in uranium procurement costs for U.S. electricity producers in 1996 dollars are estimated to be between $2.1 billion and $5.3 billion from 1997 through 2010.

Report Highlights

• Similarities in military and commercial nuclear fuel cycles allow for the conversion of surplus highly enriched uranium and plutonium to commercial nuclear fuel for producing electricity. Deliveries to U.S. consumers of this fuel could reach about 50 percent of projected U.S. uranium requirements by 2010.

• Based on different assumptions for the market penetration of surplus defense inventories, the U.S. uranium spot-market price is projected to rise to a range between $14 and $17 (per pound of uranium oxide in 1996 U.S. dollars) by the middle of the next decade. This price range is higher than the lows of between $9 and $10 seen in the mid-1990s, but considerably lower than the peak price of nearly $100 seen in the late-1970s.

• The United States Enrichment Corporation (USEC) purchases the enrichment services component of low-enriched uranium produced from blending down Russian highly enriched uranium. USEC is expected to sell this enrichment services component to nuclear power generating companies through long-term contracts.

• With access to surplus defense inventories, USEC could market low-enriched uranium as "enriched uranium product" directly to end users, as opposed to the typical practice of providing enrichment services. By purchasing enriched uranium product, electric generating companies could gain flexibility in supplying fuel to reactors while lowering their costs of inventory management.

Commercial Nuclear Fuel from U.S. and Russian Surplus Defense Inventories: Materials, Policies, and Market Effects can be accessed electronically from EIA's World Wide Web Site at http://www.eia.doe.gov/cneaf/nuclear/com_fuel/com_fuel_sum.html. Printed copies of the report will be available on or before June 8, 1998, from the U.S. Government Printing Office, 202/512-1800, or through EIA's National Energy Information Center 202/586-8800.

EIA Program Contact: Bill Szymanski, 202/426-1177; Dan Nikodem, 202/426-1179
EIA Press Contact: National Energy Information Center, 202/586-8800

EIA-98-11

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