Bombs away: Startup aims to defuse nuclear warheads

Goodbye plutonium? The outer layer of Thorium Power's fuel pack contains uranium, thorium, and other metals. The inner layer contains higly toxic plutonium.

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NEW YORK (FORTUNE Small Business) -- It sounds like a tall order for a high-tech startup, but Seth Grae's two-man firm in a Washington, D.C., suburb might just save the world from nuclear annihilation.

Or at least reduce the risk that some rogue nation or freelance terrorist could make off with one of the many decommissioned Soviet-era nuclear warheads lying in storage across Russia. Using an obscure technology for fueling nuclear reactors, Grae's firm, Thorium Power, says it is within arm's reach of turning plutonium warheads into electricity for Russia's staggering economy. Along the way, Grae and his investors could make a tidy profit, assuming that they can persuade the U.S. government to back their plan.

The key is a patented technology that combines warhead plutonium with the more stable element thorium in a fuel intended to work in existing Russian commercial reactors. After ten years of shoestring research at a nuclear laboratory in Moscow, Grae is waiting for the U.S. government to fund a final round of testing. For the first time, weapons-grade plutonium will have been burned in a commercial Russian reactor. If the tests are successful, Grae says, the Russians could start burning plutonium-rich Soviet-era warheads within three years.

Licensing the technology to firms that win the U.S. contracts to eliminate the Soviet warheads could also generate tens of millions of dollars in royalties for Thorium Power (www.thoriumpower.com). An even larger market would be commercial nuclear power plants, which today spend hundreds of millions of dollars in the U.S. alone to store highly toxic plutonium waste. Using thorium technology, Grae says, they could turn their waste into more fuel that would leave far less radioactive material behind it.

The idea of recycling Russian plutonium into electricity was the brainchild of the late Edward Teller, the Hungarian-born father of the hydrogen bomb and the man who first conceived of the Star Wars missile defense plan. During Soviet-American arms reduction talks in the 1970s, an aging Teller grew fearful that spare warheads might go astray. In 1983, Teller called his former star student Alvin Radkowsky, then semiretired and teaching in Israel. Radkowsky, who invented the table-sized nuclear reactors that power the U.S. Navy, was regarded as America's best reactor designer. Teller asked him to devise a safe way to destroy plutonium warheads.

Radkowsky reached back to thorium, a fuel component he had first explored in the 1950s. He calculated that by wrapping a plutonium core in a blanket of thorium, uranium, and small amounts of other metals, he could create a controlled nuclear burn that would eliminate 90% of the plutonium at a fraction of the cost of other methods.

In 1992, Radkowsky and Grae set up a firm to develop a thorium-plutonium fuel pack for use in Russian reactors. The problem was that nuclear research and development couldn't be done in a garage. So rather than deliver a finished product to the Russians, they decided to move the entire R&D effort to Russia and fund it partly with U.S. government money intended to discourage Soviet nuclear scientists from selling their services to rogue states such as North Korea and Iraq. In 1994, Grae and Radkowsky enlisted Moscow's respected Kurchatov Institute to develop a working model.

Radkowsky was Thorium Power's chief scientific officer until his death in 2002. Today more than 500 Russian nuclear scientists and technicians are working on the thorium project at Kurchatov. The work has been funded by $12 million in venture capital, more than $5 million in U.S. government financing, and in-kind contributions from the Russian government.

Grae has made dozens of trips to Moscow to oversee the Kurchatov project, working, eating, and drinking with the Russians. "I think that's the only reason they let me in," he said. "I don't speak Russian, and I'm not a physicist, so I couldn't steal any of their secrets."

Thorium Power faces a stiff challenge from a rival process called MOX (for mixed oxides), developed by subsidiaries of Areva, a French government-owned firm. The struggle has landed Grae's company in the middle of a Beltway catfight that pits a powerful office within the Department of Energy against senior members of Congress.

The Energy Department's National Nuclear Safety Administration (NNSA) has already selected MOX to dispose of plutonium in surplus U.S. warheads. NNSA officials will also fund and oversee the Russian plutonium-disposal program, and they take a dim view of rival technologies. NNSA spokesman Bryan Wilkes claims that Thorium Power relies on "immature technologies" and insists that the Russians will eventually choose MOX too.

Last April a review conducted for the Department of Energy by the nuclear-engineering firm Westinghouse Electric endorsed thorium over MOX as the best way to eliminate Russia's surplus plutonium warheads. "The bottom line is that from a technical standpoint [thorium] looks like a good technology and from a perspective of burning weapons-grade plutonium, it is preferable to all the others," says Regis Matzie, chief technology officer at Westinghouse Electric. According to Matzie, thorium can destroy plutonium about three times faster and at half to a third the cost of the only other technology on the table, MOX.

Wilkes dismisses the Westinghouse report, even though he works for the Department of Energy, and Russian embassy spokesman Vladimir Ryubachenko insists his country will not use Thorium Power's technology, even though the project is being developed in a Russian lab. "We will use MOX," he told FSB. "We think that French technology is more reliable." But Ryubachenko concedes that none of the contracts and agreements needed to implement either technology have yet been signed.

Grae's outsider bid faces bureaucratic opposition because it appears to threaten the long-term prospects of the multibillion-dollar MOX industry, says Edwin Lyman, senior staff scientist at the Union of Concerned Scientists in Washington. Yet Lyman is hardly a thorium booster. He argues that neither MOX nor thorium will help halt the spread of nuclear weapons. He favors a third technology called "vitrification": sealing warhead plutonium in massive glass bricks that would be too heavy and radioactive to steal, then storing them in well-protected depots.

MOX has never been tested in Soviet-designed reactors, and Russia won't allow its decommissioned warheads to leave the country for processing abroad. Even MOX's backers agree it will take a decade of testing in Russian reactors before they can be sure that MOX fuel can be safely used there. And that is a decade that the world cannot afford, say many nuclear proliferation experts. It is only a matter of time, they say, before some nuclear-hungry state or terrorist group pries a warhead from Russia's loosely guarded stock.

Grae is a seasoned Washington player who estimates that he spends about 10% of his time on "government relations," better known as lobbying. Faced with entrenched bureaucratic opposition from the Department of Energy, he has wisely sought support from Congress, which provides all of the agency's multibillion-dollar budget.

Thorium backers on Capitol Hill include Senate Minority Leader Harry Reid (D-Nevada) and Representative Jim Gibbons (R-Nevada), both of whom are especially concerned about safe nuclear-waste disposal because of the federal government's plan to build a central waste repository underneath Nevada's Yucca Mountain. Other prominent boosters are Senator John Warner (R-Virginia) and Representative Curt Weldon, a Pennsylvania Republican and vice chairman of the House Armed Services Committee. "We have strong indications," says Grae, "that the project will receive additional government funding this year."

The tests at Kurchatov, the first long-term essay of a thorium-plutonium fuel pack, will indicate if the thorium technology can be used to burn through some 34 metric tons of plutonium that Russia has agreed to scrap under a 2000 agreement between presidents Putin and Bush. Grae and his backers say the technical results have been encouraging so far. The key, says Westinghouse's Matzie, is that the thorium fuel pack is designed to fit into Soviet-era reactors with minimal modification. That translates into huge cost savings. And the thorium manufacturing plant would cost about $100 million, they estimate, compared with nearly $1 billion for the more complex MOX plant.

In January, Thorium Power announced a merger with Novastar Resources, a small, publicly traded thorium mining company. Grae hopes that going public will allow Thorium to raise capital from a broad range of institutional investors. And money could ultimately decide the technological argument as well. Thorium Power promises commercialization in three years, as opposed to a minimum of ten years for MOX. Sealing the warheads in glass cubes won't help the Russians recoup any of the billions that they spent building their nuclear arsenal. "They paid for the plutonium," says Grae. "Now they want something from their resource."

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