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AN ALTERNATIVE TO RUSSIA FOR ADVANCED NUCLEAR FUEL: Advanced nuclear reactor developers are worried about lacking alternatives to Russian high-assay low enriched uranium, the special fuel needed to power their reactors, as Jeremy explored in a story published this morning.

Members of both parties in Congress favor funding development of HALEU capabilities at home, and the Democrats’ Inflation Reduction Act, expected to pass the House tomorrow, would allocate $700 million to the Department of Energy to that end.

But nuclear policy advocates and industry leaders emphasize that creating a domestic HALEU supply base will take years, maintaining that the best way to ensure deployment stays on track is to pull fuel from existing stores of weapons-grade, highly enriched uranium (think warhead material) managed by the National Nuclear Security Administration and to downblend it for commercial use.

What the industry is looking for: Securing fuel is top of mind for companies on advanced nuclear’s leading edge, especially TerraPower and X-energy, who are participating in DOE’s Advanced Reactor Demonstration program and are therefore bound by a deadline of 2028 to demonstrate their small modular reactor designs.

Benjamin Reinke, senior director of corporate strategy for X-energy, said fuel acquisition is the “single largest supply chain risk” the industry faces. He expressed that X-energy had reluctantly resolved to source its HALEU from Russia, but the war in Ukraine has thrown a wrench in those plans.

It’s more or less the same story with TerraPower, which is planning its demonstration plant at the site of a retiring coal-fired power plant in Wyoming.

The company had planned to get its first core reactor load from Russia, Jeff Navin, TerraPower’s director of external affairs, told the Senate Energy and Natural Resources Committee in a July 28 hearing.

“But obviously, when Vladimir Putin's tanks rolled into Ukraine, that calculus changed dramatically," he said.

In lieu, downblending would serve as a “stopgap” measure, Navin asserted, and government and industry will have to pursue it to meet the 2028 timeline for the DOE-funded reactor demonstration program.

“Without having the ability to downblend [highly enriched uranium], we will not have the fuel available to turn those reactors on in time,” he said.

Ryan Norman, a policy adviser for center-left think tank Third Way, agreed, saying that downblending from existing HEU stockpiles is the only viable near-term solution. Rolling out a new federal HALEU program is necessary for the longer term but would take 3-5 years at a minimum, he told Jeremy.

“Right now, even if this bill passes on Friday and it’s signed by the president … it still will take a lot of time for DOE to issue a [request for proposals], negotiate those contracts, and then for those domestic companies to actually build facilities and scale up the production capabilities. So, the timeline has really come down to a crunch,” he said.

The ins and outs: HEU downblending would have to take place in conjunction with NNSA’s material disposition program, which involves classified activities and is highly sensitive.

The Obama administration declassified information in 2016 revealing that there were 41 metric tons of highly enriched uranium available for potential downblending. It’s not exactly clear how much there is available to date, although Norman said the amount needed for the initial demonstrations under the Energy Department’s ARDP program would be around six or seven metric tons.

A bill introduced by Sen. John Barrasso would give new funding to DOE and explicitly direct it to develop HALEU via downblending from existing stockpiles, while another bill backed by Sens. Joe Manchin and Jim Risch would allocate $3.5 billion for a fuel program at DOE that could potentially be used for downblending.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

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GAS PRICES FALL BELOW $4 A GALLON FOR THE FIRST TIME SINCE EARLY MARCH: National average gas prices fell below $4 a gallon today for the first time since early March, according to AAA, continuing a steady two-month decline that has offered drivers some much-needed relief at the gas pump.

Today’s national average of $3.99 is a 68-cent decrease from the previous month, and a $1.02 drop from mid-June, when prices soared to a record-high of more than $5 per gallon. The drop is due largely to cheaper crude prices and lower-than-expected demand from consumers, who have made significant adjustments to their driving habits this summer to offset high pump prices.

A recent AAA poll found that two-thirds of U.S. drivers made “significant” changes to their driving habits or lifestyle since March to help cut down on gas costs. Drivers' top three changes included driving less, combining errands and reducing shopping or dining out, according to the survey.

“Oil is the primary ingredient in gasoline, so less expensive oil is helpful in taming pump prices,” AAA spokesperson Andrew Gross said in a recent blog post. “Couple that with fewer drivers fueling up, and you have a recipe for gas prices to keep easing.”

IEA INCREASES RUSSIAN CRUDE FORECAST FOR 2022: The International Energy Agency increased its Russian oil production forecast today by an additional 500,000 barrels per day (bpd) for the second half of 2022, and by 800,000 bpd for 2023— an adjustment that comes as the IEA acknowledged that Western sanctions have had a “limited impact” on Russia’s global crude exports.

“The outlook for world oil supply has been revised upward, with more limited declines in Russian supply than previously forecast,” the Paris-based agency said in its monthly Oil Market Report.

While Russian crude exports to the U.S., Europe, Japan, and Korea have fallen by nearly 2.2 million bpd since the start of the war, Moscow has rerouted much of its flow to India, China, Turkey, and other consumers, the report said—offsetting most of its previously anticipated losses.

In addition, natural gas and electricity prices have “soared to new records, incentivising gas-to-oil switching in some countries," the IEA added. Read the full report here.

…MEANWHILE, OPEC LOWERS DEMAND FORECAST: OPEC reduced its 2022 growth forecast for global oil demand by 3.2% today, breaking with the IEA’s assessment as the oil cartel cited economic impacts from the war in Ukraine, high inflation, and lingering effects of the COVID-19 pandemic.

In its monthly report, OPEC predicted oil demand to rise by 3.1 million bpd for the remainder of 2022; a decrease of 260,000 bpd from its previous forecast.

"Global oil market fundamentals continued their strong recovery to pre-COVID-19 levels for most of the first half of 2022, albeit signs of slowing growth in the world economy and oil demand have emerged," OPEC said in its report.

"This is, however, still solid growth, when compared with pre-pandemic growth levels,” it added. "Therefore, it is obvious that significant downside risk prevails."

OPEC also increased its output by 162,000 bpd in July, up to 28.84 million bpd—less than it had originally pledged.

EU COAL BAN TAKES EFFECT: The European Union’s ban on Russian coal imports officially took effect today, ending a four-month transition period granted by the European Commission in April. Despite the months-long wind-down period, the ban is expected to hit the bloc hard—and comes as some member countries, including Germany and Austria, have upped their coal imports in recent months amid a frantic effort to secure alternative power supplies ahead of a feared Russian gas cutoff.

The EU is deeply dependent on Russian coal, which accounted for roughly 45% of its total imports, and 70% of its thermal coal imports, according to Bruegel, a Brussels-based think tank. It’s the first ban on Russia’s energy industry to take effect since leaders adopted seven separate sanctions packages earlier this year.

Since April, the EU has started to up its coal imports from other countries, including Colombia, Australia, and South Africa—but those countries may not be able to fill the void completely, due to countries’ own domestic demand as well as broader global competition.

UBS analyst Myles Allsop told the Financial Times last month that “there is a big question mark” as to whether the EU can find enough coal suppliers to replace Russian imports, and account for the shortage of natural gas.

“Europe was importing around 35-40mn tonnes of thermal coal from Russia in 2021,” Allsop said. “I think the ability for the coal industry to easily fill the gap, the shortage of power, is really challenging.”

SCHOLZ BACKS PROPOSAL FOR NEW EUROPEAN GAS PIPELINE: German Chancellor Olaf Scholz said today that he supports the idea of a new gas pipeline linking Portugal, Spain and France to central Europe, saying the project would make a “massive contribution to relieving and easing” Europe’s energy crisis.

Speaking to reporters at a press conference this morning, Scholz said he has discussed the project with European Commission President Ursula von der Leyen, as well as leaders of Spain, Portugal, and France.

“I have been very active in talks with my two colleagues in Spain and Portugal, but also the French president and the president of the European Commission in advocating that we should take on such a project,” he said, noting that there would also be “other connections between north Africa and Europe that will help us to diversify our [energy] supply.”

He declined to give further details on the project, though von der Leyen has called in recent months for the resumption of the Midi-Catalonia (or MidCat) pipeline project linking Spain to France.

That project was ultimately halted in 2019 due to what energy regulators cited as a “lack of necessity and high cost,” though the war in Ukraine has forced previous holdouts, including Spain, to reverse course and support the pipeline.

CALIFORNIA SETS AMBITIOUS TARGETS FOR OFFSHORE WIND: The California Energy Commission set an ambitious new target yesterday to deploy 25,000 megawatts of offshore, floating wind power generation by the year 2045.

The five members of the commission voted unanimously to adopt the new goal, which the commission said would power some 25 million homes by 2050.

"This remarkable resource will generate clean electricity around the clock and help us transition away from fossil fuel-based energy as quickly as possible while ensuring grid reliability," California Energy Commission Chairman David Hochschild said in a statement.

Despite having the most aggressive climate change goals in the country, California has long struggled to integrate offshore wind due to the sharp drop-off of the continental shelf in the Pacific Ocean. But new floating turbine technology has now made offshore wind projects a possibility.

In a statement, the Business Network for Offshore Wind said that California’s goal “is both the largest and furthest reaching offshore wind goal of any state[.]”

The Rundown

Wall Street Journal Climate bill draws clear battle lines for midterms

Financial Times Carmakers’ battery plans in peril as raw material costs soar

Bloomberg World’s largest oil exporter has to go big on carbon storage

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Calendar

FRIDAY | AUGUST 12

House lawmakers will reconvene in Washington to take up the Inflation Reduction Act, after Senate lawmakers voted to approve the bill late Sunday. House Majority Leader Steny Hoyer said in a floor update that lawmakers should be prepared to vote as early as Friday on the bill. Time TBA.