 I'm Sharon Squassoni and I'm a senior fellow and I direct the proliferation prevention program here at CSIS. And I'm so pleased you could join us this morning for our event on new nuclear suppliers. We have, I have a few administrative announcements, but we have kind of an interesting format. This morning we're going to hear presentations from myself and the other speakers and then we're going to break for coffee and then we're going to really get into the discussion. So make a note of your questions and comments and I can assure you that we are going to have a lively discussion. So this event this morning, first of all, turn your ringers off on your cell phones. This is on the record and let me just take a moment to thank the staff, our staff, terrific staff who have helped out with this because I always forget at the end of the program. So Bobby Kim and Jake Greenberg and Jacob Usman from the proliferation prevention program and also our external relations program guys who make all of this very seamless. I also want to thank our partners in this project. So this is a part of a larger project called Sustainable Nuclear Futures. It was funded a three-year project by the MacArthur Foundation. But we couldn't have done this without our foreign partners. So in New Delhi it was the Observer Research Foundation. In Korea it was the ASAN Institute. And in China it was the China Arms Control and Disarmament Agency. So we have two publications on your chairs. One is kind of a report from the workshops themselves. And the other one is the kind of background paper. My presentation this morning I'm going to kind of go into the background of this project. Why are we here? What is responsible nuclear supply? That kind of thing. But first what I would like to do is introduce all my speakers. So I'm very, very pleased to have Chris Skodomsky, Alan Hansen and Gretchen Hund here today. I think Alan you deserve the prize for traveling. I don't know how many thousands of miles. Alan came to all the workshops in Delhi and Seoul and Beijing. Gretchen joined us in Korea. And Chris is here because he is one of the leading experts on nuclear supply. So after I give a short presentation, Chris will kind of set the context for us. Alan will talk about his experiences at the workshops. Gretchen will also as well as talk about her work in corporate governance. Chris is the head of research for nuclear issues at Bloomberg New Energy Finance. And he's had a long, illustrious career at a variety of regional and multinational firms including the UN Development Program, the World Bank, Department of Energy. And in 2005 he joined the faculty at NYU Center for Global Affairs. So we're really pleased to have you here with us today. Alan Hansen is the executive director of the International Nuclear Leadership Education Program at MIT. Some of you may know Alan from his years as a senior executive at Arriva and he's an MIT grad as is Gretchen. Who is a senior scientist and leader of the policy and analysis team at the Global Security Technology and Policy Group at Pacific Northwest National Laboratory. That's almost more than, it's quite a mouthful, more than what I describe who I am. But Gretchen is fantastic. She has over 25 years of experience addressing topics that combine science, technology and public policy. So, without further ado, I'm going to launch into just a quick description of kind of to give you the substantive context of what we're talking about today. This project started back in 2010 and so we were thrown a little bit for a loop with Fukushima. And so one of the questions we first started to address was, all right, after Fukushima, what do we mean by responsible nuclear supply? And so this is sort of an outline of what I'm going to talk about today. Why do we need responsible nuclear supply and then how do you approach it? You can approach it at the vendor level, at the government level and the multinational and international levels. So the conventional wisdom is everything works, right? Nuclear suppliers, they follow their government regulations and that's fine. And it's a free market out there. Well, anybody in the nuclear business knows that it's not really a free market, that government policies have a huge impact. Some of you I recognized from the meetings, the nuclear meetings yesterday at the Atlantic Council where we heard about the new or revamped US policy related to nuclear cooperation agreements. Those kinds of government policies have a big impact on what happens around the world. On the other side of it, the suppliers themselves make their choices based on their risk assessments and the recipients themselves can increase or reduce the risks. And so my going in thesis was that responsible nuclear supply requires efforts by everybody, by the governments, by the suppliers, by the recipients. So is there a universal definition? No, of responsible nuclear supply. But since Fukushima, there's been increasing talk of nuclear governance. We need better nuclear governance, right? And so what does that apply to? Safety, security, you know, nonproliferation. And we have a lot of pieces of the puzzle in place, but I still think that we could do more. All right, so my own definition, and this is part of the discussion paper, which you have, and this is what we took around the world with us. How would we define responsible nuclear supply? Well, it minimizes or it doesn't increase the risks of the release of radiation to the environment, people, or society. This is a very, very broad definition. And it would cover not just, you know, nuclear safety, but it would also cover the nuclear security aspect. So it could be an accident, it could be, you know, theft, sabotage. And so it would cover all nonproliferation, nuclear security, and nuclear safety. Is this possible after Fukushima? Well, Fukushima obviously wouldn't have been prevented by better nuclear governance, but the system has changed. And I know Chris is going to get into more detail about how the nuclear industry and the markets have changed since Fukushima. Some suppliers are going to get out of the game. Some suppliers have already gotten out of the game. There may be new suppliers, and that's what we're focusing on today. What will happen with South Korea as a supplier, potentially China and potentially India? One of the big questions is how will the nuclear newcomers such as Vietnam and the United Arab Emirates and Saudi Arabia, how will they approach their nuclear construction and deployment? Will they be as constrained as the traditional nuclear power operators by public opinion? Will they have to, you know, they're starting in a lot of ways, starting afresh with their regulatory systems. So that's one of the questions we'll talk about today. I think this is my last slide. The bottom line is if we want nuclear energy for the future, it has to be sustainable. And in order to be sustainable, we have to make sure that we're doing all the right things in nuclear safety, nuclear security, and on fuel cycle issues where we're looking at sensitive nuclear technologies, enrichment, and reprocessing for non-proliferation reasons. I would suggest to you today, and I would love to hear your comments, that this requires all stakeholders to reduce the risks. So with that, I'm going to skip over these things. These are in your, oh no, I have a longer presentation here. This is in the publications that you've had, but we sort of took a kind of leveled approach, different kinds of things that vendors could do, that governments could do, that multilateral and international groups including the nuclear suppliers group could do. We have kind of a menu of recommendations at the vendor level. It's not just the nuclear principles that the Carnegie Endowment has been promoting, but also specifically some things that dual-use exporters can do in voluntary actions. Gretchen will talk a little bit more about this. On the unilateral and bilateral approaches by governments, there are issues about export promotion and what nuclear cooperation agreements should include, should some of them go beyond the nuclear suppliers group requirements, should we get all nuclear suppliers to require the additional protocol as a condition for supply, and what are the role of fuel cycle assurances. And then finally on the international approaches, there are additional things that could be done within the nuclear suppliers group, requiring the additional protocol, for example, as a condition of supply, a lot more transparency between countries on what these nuclear cooperation agreements include. I mean, one example is this issue of prior consent for enrichment and reprocessing. We didn't do it with the UAE, but when you look at the South Korean agreement, they actually did give the UAE prior consent for enrichment and reprocessing, which is kind of funny because the UAE said it wouldn't enrich a reprocess. So I think there could be more harmonization there. I am a big fan of promoting multinational voluntary approaches, for example, making enrichment facilities open to foreign investment, having more multinational enrichment and reprocessing or storage and waste test, test, test approaches. And then finally, this question of official material production cut off treaty. I think there's a way, and we can talk about this more in the Q&A, for bringing in some nuclear fuel cycle approaches into that very, very moribund negotiation, which hasn't gone anywhere in about 20 years. Okay, so that, those are the end of my slides. I'm going to give the floor over to Chris. Set this up for you. Good idea. Everybody's abandoned you stage, so we can see Chris's slide. Thank you, Sharon, and it's a pleasure to come down to the CSIS to talk about one of my favorite topics, what's going on in the nuclear world. It's very disconcerting that my colleagues have abandoned me in my presentation. Is there something that they know that I don't know? Always do that. The end of the show we don't want. Okay, I guess this is, there we go. So technology can always confound. Every time I come to Washington and introduce myself as Bloomberg, people freak out and run out of the room because they think I'm part of a news organization. I am part of a news organization, but New Energy Finance was founded by a bunch of ex-McKinsey consultants in London in 2004, 2005. I joined them several years ago specifically to help them understand what's going on in the nuclear power industry. We have 12 offices scouted around the world, and these are the markets that we serve. Our mandate is to provide the best information, the best data, the best intelligence on clean energy, carbon-free markets, water, and increasingly natural gas because of the impact it has on renewable energy development. I'm going to break down my talk into three specific areas. We're going to talk about the changing dynamic power markets, economic challenges facing nuclear power plants, and talk briefly about the new suppliers. So this is the growth that we're looking at in certain parts of the world. In the U.S., it's relatively flat, but in other parts of the world, specifically China, there's a huge amount of growth. Look at India, tremendous amount of growth. Even Australia is almost doubling their generation capacity in the next few years. So it's not surprising, therefore, when you look at where are the nuclear power plants that are under construction today where they're located. They're primarily located in Asia, followed by Europe, which includes Russia, and much less in the Americas. There are other regions in the world where the growth and demand for electricity is skyrocketing. One of those is the Middle East. This is the type of data we collect, the type of data we discriminate. And as we can see here, a year on year, 5% for the region between 2010 and 2020. When I was in Abu Dhabi last month to talk to the management of Enec, the Emirates Nuclear Energy Corporation, they said that demand in the country is going up 9% a year. When you're faced with such great demand, you need to build nuclear power plants and you need to build them quickly, which is what they are going ahead and doing. There is another very, very important driver in the Middle East in that there's a tremendous amount of oil still being used to generate electricity. If you go around and add all of that up, in these five countries that amounts to 246 terawatt hours of electricity generated by oil, which if you assume a 90% capacity factor, which is perhaps a little bit high, that translates to 31 gigawatts of nuclear power opportunity. When you look at the Saudis, the Saudis are using a transfer price of $5 to price their fossil fuels. There's an opportunity cost price of oil today about $100, so there's a big disparate difference. The Saudis have said that if they don't build nuclear power plants by 2028 due to the increasing demand for electricity inside the country for domestic use, for desalination of water, they are not going to have any oil for export markets, which really places the stability of the kingdom perhaps in jeopardy. So my boss always bugs me. He says, Chris, what's the cost of nuclear power plant? I say, listen, you can take your pick. You want the vendor costs, you want the owners' costs, the overnight costs, or the oil and financing. This is very, very important to understand because when you look at the cost for nuclear power plants, it can get very, very confusing what's included and what's not including, and it's important to get an assessment. So therefore, going from left to right in Japan and finishing up with the Hinkley Sea, these are done on date of first concrete, date of anticipated first concrete for the last two projects in the right. You can see it's a definite trend of price increasing for nuclear power plants. Now, many people will say that this Hinkley Sea project in the UK is a ridiculous project. It's very, very expensive. It's not going to work. It's so expensive. And so if you go ahead and even take out that project, you still see there is a significant increase in the price over time over the last few years of prices for nuclear power plants trending upwards. We'll talk about the significance of this in a little while. If, however, you introduce a new supplier like the Chinese, this is a vendor cost, I assume, because the Chinese have a very, very lack of transparency in their swars of pricing concern, you see that curve flattening out. This is for a 2200 megawatt facility, first of a kind technology, an older technology that the Chinese are trying to sell or are in the process of selling or negotiating to build in Karachi. Another challenge for the nuclear energy industry is we can generate carbon free electricity with nuclear. We can also do it with renewables. Ironically, if you look at this graph, when did investment in the nuclear energy or renewable energy industry peak right around Fukushima and has ironically declined? This is based on a regional basis. Every single quarter we collect this data. This is it on a technology basis. So we see a great predominance of yellow indicating solar. There's a lot more solar being done and being built around the world, which is significant for a variety of different reasons. And it's caused by the continued price trend of lower and lower costs for installed PV. So you have a central PV, the levelized cost of electricity is declining in contrast to the price of electricity we saw from nuclear power plants, which the initial capital cost is increasing here. This is a comparison of PV with other technologies on a global basis, US China coal, US combined cycle gas turbine, which is kind of really ridiculous right now because of the press prices of natural gas, but it gives you an idea on a global basis. If you compare this to the UK strike price, the price of electricity that the government has guaranteed to buy electricity from the Hinkley C nuclear power plant starting in 2020 or so, whenever it's coming online 2023, all of these are cost competitive. That's something for us to pay a little bit of attention to. I must confess, I live in the desert in Southern California. There's a tremendous amount of solar insulation. I live in those red dot areas. And as a result of that, I bought my solar PV system in 2006, way ahead of the curve and paid a premium for doing so. But I did it because Governor Schwarzenegger said he'd pay for part of it. So I said, well, I'll take that deal. But if you look around the world, the places where solar rooftop PV is becoming competitive with the grid increases, increases, increases. So now there is an alternative. As a homeowner, it's cheaper for me to buy a PV system that can be plugged into the grid. This is an important thing for regards to demand erosion and forecasting the future of nuclear power plants, other baseload. It's a very disruptive technology. It's a big wave in the industry that all of us need to be cognizant of. We're thinking about seriously studying what's going on over here. So last month, I was in Abu Dhabi. New country, new site, new supplier. This is the first time the Koreans have embarked on an international export sale of a reactor. You can pick me out, dead center of that photograph. I am standing behind people from Oman, people from Sudan, people from Saudi Arabia, people from Vietnam, people from other parts of Africa. All of these people, of the 27 people who were there, 17 different countries, many of them are looking to investigate new opportunities for nuclear power in their countries. This project, unlike projects in the UK, unlike projects in Europe and to a lesser extent the US, is on budget and it is on schedule and relatively competitive. And it's a great place to go ahead and visit. I was very privileged to go and see what's going on there. The Koreans are working very, very hard to make sure this comes on time, on budget. This is the first of four projects in the current contract. The site is 30 kilometers by 3 kilometers, big enough to handle 12 nuclear power plants and it's unclear at this stage when or if they'll expand to the full thing. This is relatively close to the Saudi border. So, if we look now at the distribution of reactors under construction by origin, this is how it breaks down. I'm missing one reactor somewhere, but I think it's probably not going to change the dynamics too much. If we were to go ahead 10 years, the question we need to ask ourselves is how are the proportions are going to change? So starting from the top right. U.S. Japan, well, allegedly the Chinese are going to build eight more additional AP-1000s. So that number will go from 13 to 21. Korea is going to build at least two more reactors in the United Arab Emirates. They're going from six to eight, assuming they don't build any more. France, they have two EPRs built under construction in Europe, two in China. They're going ahead and they're going to probably build one or two more, two more in the UK. So that number is increasing. The Russians are very, very aggressive. They have a contract with Turkey. They have negotiations with Vietnam. They're negotiations with Jordan, Bangladesh. We can anticipate that they will go ahead and increase their percentage of that. India is in fact a buyer of technology. They would like more technology. In their country, they're having a struggle whether or not to use domestic technology or to acquire international technology and there's debate that's going to play out. The Chinese, we've already seen planning to sell two reactors to Pakistan. How successful they become in exporting technology over the long term remains to be seen. However, we'll come back to that particular point. When I was in Abu Dhabi last month, I got the impression that it's such a lavish program. The technology is so expensive that few countries in the world can go ahead and take to have the luxury of investing in nuclear. Perhaps Saudi Arabia, United Arab Emirates. The Russians have said, well listen, there's a lot of countries that we can sort of help. So they're devising this build-on operate technology. They will build it, own it, operate. And you pay for electricity and for the water that's generated if there's any water that's desalinated from that. This precludes the necessity of a tremendous capital investment by the local country. And it will be something that's under development now. It's unclear what impact and how many of these plants the Russians will be able to go. What it's an alternative strategy that exists that they're having some success with. Poland. In the area of concern about climate change, they're getting about 90% of their electrical power from coal. They don't want to buy more Russian gas. They don't have a strong solar resource. They have some wind. So what does a country like Poland do? Well, this is their plan to add capacity, add nuclear capacity in the top. They are horrified at the prospect of doing so because it's a huge investment. They're a non-nuclear country. And the debate going on is, do we really want to invest in this? And if so, which technology, which vendor do they choose? Do they choose a European vendor like Arriva, EDF, the EPR, has had fantastic cost overruns in Europe? Do they choose a Chinese partner? Who knows? Do they choose an American-Japanese partner like GE Hitachi or Toshiba, Westinghouse? Probably. So they're really up in air so trying to decide what type of technology they'll deploy when. Hopefully, the decision was going to be made by the end of this year. It will be a big surprise if that, in fact, happens. This is our projection from Bloomberg New Energy Finance of what the generation portfolio is going to be in the UK in the next 20 years. We see nuclear maintaining a small and growing percentage of that market. Yet they need to close all of their nuclear reactors by 2022 so they're going to have an aggressive new build. The Chinese are interested in being financial investors. The question then becomes to us, if the Chinese become financial investors, at what point do they become suppliers of technology? Unknown, very interesting to watch what goes on over there. Before leaving for this event yesterday, a colleague of Bloomberg told me, you know, it's a shame that the nuclear power industry is in such the doldrums. So I always tell him, you know, we've had Fukushima, we have record low gas prices, and we've got five nuclear power plants under construction in this country. I think we're really doing well, and the rest of the world is really, really growing. The question that we need to ask is how does that look between 2020 and 2030? Thank you very much. Chris, and we'll help you get your stuff. Thanks very much, Bobby. Well, good morning. As Sharon indicated in her introduction, I got the prize for the most frequent flyer miles attending the workshops. And I actually got a lot more than just those miles because it was a very instructive experience to visit a number of countries, some which I had visited before, others for the first time. And I'm going to try to just give you a brief overview of some of the impressions I came back with rather than reiterate the discussions that we had there. You can read some very good summaries that CSIS has prepared that describes what went on at the workshops. So I'm going to march through them one by one. The first place that we went was India. And it was very convenient that the workshop was organized to follow the first WNA, World Nuclear Association India nuclear conference, which I also got to attend. And that conference gave us a very, very good technical background on what is being done in India, what they plan to do. And then we moved into the workshop, which included some people who were not involved in the WNA, but some who also were. But my biggest impression, the strongest one, was how proud the Indian nuclear establishment is that they managed to survive a boycott by the Western world because of their nuclear tests and that they have what they believe is a thriving, growing nuclear indigenous industry. And it really is indigenous. It's quite unique from what we do in the West. And what's unfortunate is that the fact that they have developed this indigenous technology has left the West with relatively little influence with regard to how they behave. And we have been very fortunate that from a non-proliferation point of view, outside of their own proliferation, they have been sterling performers. Now, we found out in the workshop that there is some domestic opposition to what they're doing. But it's on an individual basis. There's not a real, coherent, organized opposition yet. And although the Russians had some trouble opening the first power plant in Kundan, Kulam, they eventually did get it open over a large amount of local protests. But in the end, the major lesson is that India is not ready to do exports on any grand scale. They certainly can export components. They are doing it already. The company that I used to lead, Transnuclear, is building containers at Larson and Tubro in India. And those containers are coming to the United States for use. They are high-quality, ASME, NQA1-qualified containers, so the Indians can make the components. But what else would they export? They have pressurized heavy-water reactors, which they know the technology very well. Do we want them to export those? I think for the people in this room, the answer is quite clearly no. And the reason to me is very simple. When the U.S. negotiated the agreement with India, fully half of the operating PHWRs in India are outside of the agreement, which means they're part of the military establishment. So these machines are ideal for producing weapons-grade material. And I would not personally, speaking on my personal kind of things here, I would not want to see these exported to other countries because of what they can be used for. What else have they developed? They've developed indigenous reprocessing that's apparently working quite well because it's producing enough material for them to have a fairly robust nuclear weapons program. Do we want them to export that? Clearly no. And what else do they have? They're getting involved in fast reactors. They're one of the few places that has a pretty good test program in fast reactors. And since these are plutonium-based reactors, would we like to see those exported? And the answer to that is pretty much no as well if you're concerned about non-proliferation. So outside of exporting components, India does not have things that they can export that are going to develop a lot of revenue for them without causing, I think, proliferation concerns in other places in the world. Now the good thing is that they are so wrapped up in their own domestic program which needs to grow dramatically that I don't see them aggressively moving to do export in the near term. So I view India as being pretty far in the future with regard to becoming a new supplier. When they do so, I certainly hope that they will be responsible in the way that they do it. Next we went to Korea. Totally different story. The Koreans, as you've just heard, have been successful at home with their nuclear power program. They have one of the biggest domestic programs in the world. They gained success by making the sale to the United Arab Emirates, their first export. And as Chris just mentioned, they are executing right now reportedly on time and budget. It remains to be seen because one of the things I learned building things in my career was you don't know what it costs until you finish building it. And so it remains to be seen whether they will in fact stay on budget and it also remains to be seen whether they budgeted a lost leader or really intended to make any money on this project. We'll just have to wait and see. But if they are successful with the UAE project, then I think that that opens the door for them in a lot of other places in the world because it will demonstrate their reliability. And it will also put cost pressure on other vendors because the price at which they have sold those reactors is very, very competitive. So the whole world's watching, the whole nuclear world is watching this project to see how they execute. However, this was not on our watch. It did not happen before our workshop. But for those of you who followed the nuclear trade press, the Republic of Korea has gotten caught up in a really bad nuclear scandal with regard to falsification of documentation associated with their own reactors. And this problem turns out to be a lot larger than I think anybody anticipated that it would be. I'm not going to argue that there are real safety consequences associated with the falsifications because many of these issues, some of which have occurred in other places in the world, are usually documentation issues. But the inability to maintain strict honesty and verbatim compliance to procedures and documents is an early warning with regard to the integrity of your supplier and their ability to really do what it is that they say they're going to do. To my mind, this is a very, very big black eye. It is certainly hurting them domestically with many of their reactors shut down. There are people who are going to jail over this issue. Some of them very senior people. The real question remains, will the brand be tarnished so that people will not trust them as a reliable supplier? And the other one is, will they reform so that this kind of an issue doesn't take place in the future? And the second one is really the biggest concern because when you're in a hurry to do something and you're truly budget and schedule conscious and you put that consideration above safety and above verbatim compliance, then you cut corners, which is how they got to where they did in Korea. It's my understanding that the International Oversight Committee that the Emirates have created for seeing their program has brought this problem to the attention of the Emirates and the Emirates are trying to get the assurances that they need that in fact this kind of data falsification will not take place with the material that's exported. So again the situation is very different from India. Here we have a successful exporter, a new supplier. What remains to be seen is will they do it responsibly because falsification of documents is right at the top of the list of irresponsible behavior. Finally we went to China and China is another interesting situation, quite different from the previous two. We arrived on an unusual day. It had rained the day before and the sun was out. There was a blue sky and I thought, gee this is pretty good. I went to bed and the next morning I got up and I couldn't see the building next to the hotel and I understood very dramatically why they need and why they want nuclear power. For anybody who has not been to Beijing you really don't understand what pollution is. So that was the first lesson I took away and we didn't do that in the workshop. But you saw from what Chris showed you, they've got the biggest and fastest growing program in the world. It's quite dramatic and the good thing about that from the perspective of exporters, they are so busy domestically that their focus at the moment is not on export. They have so much to do domestically that I don't see them diverting resources to a large scale export program at least over the next few years. It's clearly on their mind going forward but I think we're going to be seeing quite a period of time before they jump into the market in the same way that the Koreans have. In that regard I consider that the deal under discussion with Pakistan is an anomaly. It's being negotiated because China is probably the only country in the world who would export something to Pakistan. They believe that because they had exported reactors there prior to their joining the NSG that their contractual dealings with Pakistan are grandfathered. I don't think that there is a consensus within the nuclear suppliers group that that in fact is true but nonetheless China is planning to move ahead and export more technology to Pakistan. They are the only major potential supplier that has not signed up to the principles of conduct which have been put together midwives by Carnegie and Sharon had a role in that as well and I really congratulate Carnegie on what they've done. However, those principles are just that. They're principles. You would like to think that there is such a thing as a code of conduct that in negotiations the word code implies legal constraints which some of the suppliers, primarily Russia were unwilling to sign up to and so you end up with principles which are very nice but there is voluntary compliance with those principles. I would like to think that all of the companies that signed up to the principles will comply with them and I think that they probably will but then you go through and you read the details and you see phrases like the vendor shall seek to and that's very easy. You can seek to do something just by asking somebody to do it and they say no, you've still complied with the principles and they go off and do whatever they want to do and so it's a relatively weak foundation document. It's a good thing, don't get me wrong there but if it's going to have real teeth then it could do even more than it does right now but I don't see the vendor community prepared to put teeth into that document. I also suspect that one of the reasons that China did not sign up for this was with a vision to the Pakistan sale because if you read the principles I think it would be very difficult for making the case that you can responsibly supply to Pakistan. Finally, when it comes to export the reactors going to Pakistan presumably they will be first of kind but there's still really generation two reactors that build off on antiquated technology, good technology but it's not at the forefront of what's being supplied in the world today. They are bound by their agreement with Westinghouse that they cannot export the AP1000 reactors which they're building without further discussions shall we say with Westinghouse and so one of the things that they're doing is they're developing their own indigenous reactors obviously borrowing from the technologies that they've learned from around the world from the French and from the Japanese and from the Canadians and from the Russians and from Westinghouse from everybody. When they have an indigenous technology I suspect that that is what they will be selling because at that point they are free of the constraints that would come with exporting technology which had any connection whatsoever with the United States. And so we will eventually see the Chinese exporting when they do so again I hope that they will be rigorous about stepping up to being responsible but to my mind the Pakistan situation raises some questions in my mind with regard to how stringent they'll really be. So those are some of the impressions and some of the things I came back with and finally there's a place we didn't go and this is the elephant in the room and or in the world nuclear community and Chris has talked a little bit about this. This is a timing sequence here. The UA deal by Korea was unique. It's the only sale which Korea has made outside of their peninsula so far. If we take a look at the situation in Turkey which Chris mentioned this is about the third or fourth time that in Turkey they ran a procurement and on previous occasions they had been terminated for a variety of reasons and the Western world was quite skeptical of Turkey as a recipient of nuclear technology. The last time they ran a procurement they got no bids zero and there were a variety of reasons for that. Every vendor had its own reason for choosing not to make an offer to Turkey but I think to some extent it indicates a real set of responsible suppliers who were concerned about whether or not Turkey was really ready to do this and was going to do it in the way that it needs to be done to be done right but since they didn't get any bids the Russians ran in the next day with the briefcases and before you know they walked off with a sole source deal under a build-on-operate model that nobody has ever used anyplace in the world and you saw the picture of that deal that Chris put up there it's really quite unique it remains to be seen whether it will work how it will work the understanding is that the actual agreement between Turkey and Rosatom is a relatively short agreement and there are already some rather interesting discussions about what is in the contract and what is not and I think that the people are going to find out that this model is a lot more complicated and difficult to implement than it appears on the face of it but soon after that what do we see next? the Russians were everywhere and I mean everywhere any country that expressed any interest in nuclear power Rosatom was there the next day to start talking to them they have entered into agreements with many countries the two question marks that I have here are countries these are not really orders here but these are countries with which in a matter of weeks they ended up entering into nuclear cooperation agreements now you can't do that in the United States this process here takes years and that would be the truth in I think most other countries that are responsible suppliers they can do it in a matter of days or weeks and so that has left them with a very very commanding situation the cost of nuclear power as Chris showed us is very very high particularly if you do it right and for those vendors who can bring financing along with their product they have an incredibly important edge and that's precisely what Rosatom is doing and there's no one else in the world who's in a position to do that not Korea, not the US, not France, not Japan and I don't think even China will do that except for this very special situation in Pakistan the last order that was placed this is the real shocker Jordan is traditionally allied very strongly with the western world the fact that they chose Rosatom in a competition with European and Japanese suppliers it was I think a real surprise certainly it was a surprise to me I think it came as a surprise to a lot of people and this was done in a background in which the Jordanians are furious with the Russian government over their behavior in Syria because it's causing a huge refugee problem for them in their own country despite that political situation they still signed up with Rosatom so this is the element in the room I don't really believe that the Russians will follow through and make all of these a supply but some of them are real I think Vietnam and Belarus in particular these projects will to my mind undoubtedly go ahead some of the others are quite speculative will Russia be a responsible supplier I think that's an open question as well if we learn from the Japanese experience the situation is not directly comparable in Russia but I do not believe that Russia has a truly independent regulator I think a truly independent regulator would find himself in jail the first moment that he caused a problem at the highest levels of the government so I don't think the independence is there while the technology that the Russians build is extremely good I don't question their technology I question the soft things that go with it with regard to safety culture independent regulation if I felt that I could get on an airplane any place in Russia and actually land at the place that I'm going I would feel a lot more comfortable with their nuclear supply but unfortunately the history there is not particularly good and it indicates that there is a lack of understanding of what it takes to build a true safety culture how to do preventive maintenance what to do about fitness for duty all of these things that are not hardware are a problem and this is one of the things that we tried to convey when we went around to these workshops it's not enough to just export the hardware you have to get the safety culture you have to do the regulation you have to do the non-proliferation you have to do all of these institutional things along with the equipment or you're not a responsible supplier and I think that's enough said and I look forward to the further discussion thank you Alan we'll have Gretchen next and your slides should just be following that just hit this button that's the easiest way to do it keep going perfect great, thank you Alan well I can't ask for much better segue than what Alan just gave me with respect to teeing up the importance of the non-material or hardware if you will as far as really being important this is going to be kind of my take on it I was only lucky enough to be in one of the three workshops the one in Korea but the understanding and the importance of industry's role in all this is what I'd like to talk about today Chris did show us that trends are going up that it looks like we will see an increase in nuclear power over the next several years even with an accident like Fukushima but I'd just like to make the point that it's not really a given you know that events can happen and things can go wrong potentially and the importance of making sure that there aren't disasters and that people are really thinking about how they, back to Alan's point really looking at how to be responsible in building a culture within these companies at the end of the day is really critical because reputation matters and we've heard that from so many of the interviews we've done with companies around the world and trust is really important and it comes in different ways I mean you definitely have trust with respect to having your project being on time and on budget that's really critical but it's also important as I said to making sure that these disasters don't happen and that you have supply chain integrity so looking at corporate culture is really important this is a slide that I've used to try to look at the different steps that companies can take and also industries can take to try and look at going beyond compliance or being responsible and at the far left hand side you'll see a code of conduct maybe even before that to Alan's point are principles if you will and then actually having a code of conduct to having an industry as a whole come up with a code of conduct instead of just individual companies and then something we're calling kind of a third party where you have an industry entity that's really looking to provide advice and counsel and maybe even kind of judgment with respect to how companies are doing and then you end up in this ISO like guidance doesn't have to be ISO itself but where there really is this kind of oversight if you will is having a third party verification with respect to ISO so these are all kinds of steps that one could take this slide is really trying to look at the fuel cycle as a whole and trying to think about where all the places where responsible supply or going beyond compliance could occur and we looked at several different case studies of other industries and I'm just going to pick two one is with the cement industry I personally worked with the World Business Council for Sustainable Development and this consortium of cement companies came to them in Geneva and said it's just a matter of time the world's going to figure out that we're the second largest producer of CO2 in the world and we'd like to figure out how to really get our arms around that and not be that we help them kind of look at different things they could do and nobody made them do it they did this on their own similarly I'm going to pick the apparel with respect to the cotton pledge it's interesting because in Uzbekistan there's child labor making a lot of this cotton and so you had the J crews and different companies that want to say hey suppliers really be wary that we're not buying we're making sure that our cotton is not coming from this place and there's several other different case studies that we've done as well but it's not just these other industries as you can see from this list of bullets there's all obviously if you will with respect to in the nuclear industry kind of what I call self-regulation again not trying to undermine the regulations that are on the books they're all fantastic this is going beyond what's regulatory required the first one Alan responded to and that's this nuclear power plant exporters principles of conduct that Carnegie did a great job in leading and was published in 2011 and getting the ball rolling with respect to that you know second we have info this was after three mile island again industry led serves as kind of a third party to make sure they're bringing up the bar that if any of the suppliers aren't doing a great job excuse me the nuclear reactors aren't doing a good job they bring up the the bar and then there's wins the world institute nuclear security this is really looking at guidance and training for all security managers of nuclear material across different different elements within the fuel cycle but it's really kind of third party sharing not judgmental really more providing advice if you will and then CEC this started back in 2011 and so it's pretty new developing kind of this internal compliance program of focusing in on export control they have industry working groups provide kind of policy standards trying to help you know these are all really great examples but there's something missing with all of them and with the Carnegie principles we're really just focused on the reactors and as Alan mentioned I think we could probably go further with respect to what we're trying to get suppliers to do the same for INPO it's geographically limited to the United States and for this to really take hold we need to have the world kind of think that this is important and with respect to wins I tease Roger Housley who I think very highly of the head of wins I just would love to see it more than nuclear security but again not everybody can do everything not blame him at all CEC it's commodities it's really looking at the precursors if you will not focus actually on looking at the entire fuel cycle as well again all of these are good examples I kind of want something that's more comprehensive and that's what we've tried to do is look at a way to try to get industry more and I use the word we and I would like to give credit to Andrew and the audience who's been my colleague in doing a lot of this work we published this piece in the bulletin this May June article and what we tried to do is come up with a way to get the conversation going and these are seven metrics that we're putting out there for companies to talk about and hopefully industries as a whole to think about how they can go beyond compliance and be able to measure sustainability to do the right thing we would say and what's been fun to look at this is through the lens of corporate sustainability and because a lot of these companies today are writing reports about corporate sustainability and they're measuring and they have metrics and they have to put this out for their shareholders to take you know basically to understand and what's been kind of fun to realize is that this isn't just something they do because it's nice or a good thing to do the investment community really cares about this the UN has sponsored the principles for responsible investment and there's actually a thousand different financial services that have signed on to the PRI and collectively it represents 30 trillion dollars within the US which is pretty impressive so this isn't just a nice two these are important things to do but right now there really aren't any metrics for how to look at sustainability by thinking about proliferation being a piece of this but if you think about it, if you're a company and you're making widgets things that could actually be diverted and used in a nuclear weapon why wouldn't you include this in the way you do reporting I mean I don't know it makes sense to me obviously so when I presented these in Korea the first one corporate government statement that made sense to people as far as an individual company signing on to something participating in supporting nuclear conduct or a pledge again the Carnegie approach is one step in that direction this commitment to preferentially choosing business partners this is an attempt to have kind of what I call the ripple effect so if you're a company and you end up saying I'm only going to source material from companies who follow similar requirements that I'm putting on myself that's a tremendous way to try to move the ball forward we've looked at this next one is policies on suspicious trade requests here we've looked at the possibility of having an independent industry run third party that actually collects information from companies because one thing we have heard in our interviews is wow you know I'm just really not comfortable in sharing these illicit requests when I get one I just ball it up and throw it in the trash can and that's lost intelligence that no one has the opportunity to use but if they were comfortable in sharing those illicit requests with this third party entity that then could make sure that anybody who's a member of that third party doesn't fill that order that could go a long ways we're hoping towards making sure that these things aren't happening the number five participating in a government export control rulemaking example is if you have the Department of Commerce coming out and saying here's a notice of inquiry we want to collect information from industry on whether or not we should do XYZ just making sure that companies actually do that and they have their technology advisory committees that industry participates in which we've presented that which is also a great way to move things forward and then non-proliferation training education for employees this was an interesting one that I ended up getting a response at the Korean workshop I heard the culture issue within Korea is not great and this is obviously given all the issues again that Alan mentioned with respect to these parts being forged I mean this is really important training people and it's not something you do once it's probably something you want to do every year every other year to make sure that people stay crisp and understand what those issues are and the last one acknowledging non-compliance this is something that is done in the environmental sustainability on business so that you're comfortable being transparent about something that didn't go perfectly this is what happened we did get pushed back from folks saying hey we've got info this is done internally this allows people to report without having to the whole world know about it but again this is something that is being used in other industries so we think at least it's worth looking at but for those companies who aren't really taken by the sustainability seeing the interest in doing that maybe they don't value sustainability or as far as investment there were privately held firm it may be necessary to look at incentives and so this slide is an attempt to try to capture what are those incentives that we could put forth to try and get industry to take a more proactive role in caring about non-proliferation and one thing I need to make really really clear is this list up here is something we have just dreamt up this is not by any means the US government has come out and said yes Gretchen I agree with all these items in fact that's not the case at all quite the opposite well not the opposite but this is just a way to get the conversation going of things that we think we ought to be looking at and have that conversation going the other thing I'd like to mention is when I use the term with industry when I do these interviews and I say is it your job to care about non-proliferation they'll say well no it's really government's job but if I say is it your job to secure and really make sure that control all the goods and services throughout your supply chain is that your job yeah absolutely well that's kind of what we're talking about here so part of it is semantics so we need to get past that and not worry about the language so starting on the left hand side with cost you know process improvements the first one we've got here licensing certainty I can't tell you how many times we've heard from companies you know only if I knew is it going to be two weeks is it going to be a month how long is it going to take for my license to get approved and if there were programs available where you could guarantee whatever the number it happens to be you know that these license decisions are going to happen within a certain amount of time it would really help companies reduce their financing risks allow them to make sales more easily and we kind of use this term buy American last you know because it takes so long getting through the hoops I mean that's not what we want for companies and so that I think would be a pretty important one Green Lane this is kind of teeing off of the US Customs and Border Protection you know they have something they call CTPAT the Customs Trade Partnership Against Terrorism that's typically always been looked at imports things coming into country so we're kind of turning things around and saying what if you had a CTPAT but with exports as far as things going out the door that could really help and you know there are certain benefits could be you know the likelihood of being targeted for inspection maybe you could get the front line your goods and services through as far as inspectors you'd have access to expedited processing maybe special training you know again these are all things that we've dreamt up and there is a bit of a pilot going on but I'd love to see that mature if you will then the next one is export data flexibility you know here's looking at the automated export system right now there's a lot of boxes you need to check when you're doing your exports and getting all that information collected ahead of time sometimes can be really onerous and what if the possibility of saying maybe the weight of what I'm trying to ship that's something I don't really know until the minute I'm trying to ship but what if I could wait 10 days and give you that information later is it really at the end of the day going to make a huge difference from the standpoint of being able to know that this is a valid export probably not so if there are ways to look at being more flexible that's what that one's going after then lower overhead expenses you know tax credits you know we've met with companies and we've said well you know the government is giving energy efficient appliances you get a tax credit for these kinds of things you know what if you had a tax credit for export awareness training back to the importance of training you know what if you had you had a compliance software to look at lists of who in fact are on the list and making sure that those kinds of lists and ways to use those lists could be somehow you get a tax rate or purchasing that is something you could not have to handle with expected company it could get covered and then interagency reciprocity sometimes you know there's so many different parts of the US government that are involved in export control and if you as a company are helping one entity or one part of the US government making sure that that is known across to the other ones so having some kind of reciprocity could be important maybe you're getting credit for supporting non-proliferation mission you know throughout the interagency instead of just that one one part of the with the US government and then on the right hand side this differentiation with respect to market advantage you know we think there's great excellence in non-proliferation that could create value by a firm you know with respect to their reputation if you had some kind of good housekeeping seal the equivalent to be able to show you know I'm going beyond what I need to be doing and that we think that could provide real value for companies in fact we've heard it from doing interviews and then this preferred access here's the idea is secure the strategic commodity partnership network if there's kind of this yellow pages if you will kind of the strong proliferation members and they're part of this network and they're doing a great job you know that could make some sense and then preferential sourcing I mean could the US government get to a point where it could actually preferentially source from companies who are on some list of being above what's really required again these are just ideas that we've thrown out none of them have been really vetted we've talked to folks in different parts of the US government we're just trying to get the conversation going so in conclusion I think I definitely have heard it loud and clear that reputation matters it's really important on many many fronts for companies I mean we heard this in Seoul I've heard it from lots of companies we've met with in fact they'd rather have huge fines but somehow make sure their reputation is maintained and the nuclear suppliers you know they need to be responsible for security and they need to be thinking about the whole supply chain not just the reactors but all through that whole supply chain in my mind that's kind of you know that would be just amazing if we could get to that point and there are different ways to do it there's a coach that I've mentioned the third party but they're also these kind of competitive these incentives that could be given to companies from doing so so it's my challenge to have people to think about but again as Alan mentioned I'd love to hear your questions and hear what more people have to say so with that I will close thank you Gretchen we're going to take a couple minutes break get some coffee some pastries whatever we have over there and then we'll come back for questions and comments and a discussion session thanks