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Market Power in Uranium Enrichment

Author

Listed:
  • Geoffrey Rothwell

    (Department of Economics, Stanford University)

Abstract
Four firms dominate the international uranium enrichment market. Two reasons for this industrial concentration are (1) enrichment capacity can be used to make nuclear weapons, and hence its spread has been controlled through many mechanisms, including technology classification, and (2) increasing returns to scale. Historically, strong increasing returns to scale in gaseous diffusion technology development and commercialization prevented non-nuclear weapons states from considering uranium enrichment. Later, gas centrifuge technology allowed new entrants to build commercially competitive enrichment plants at much smaller sizes than diffusion technology and at a fraction of the electricity cost. At the same time, the nations that privatized or host privately-owned enrichment facilities have strongly discouraged others from developing enrichment capacity. Therefore, these firms have been benefiting from the exercise of national power to prevent entry into this market. Had there been no control on enrichment capacity, the uncompetitive diffusion capacity could have been retired and the market price could have been lower. Further, non-proliferation is not these firms’ primary mission. In situations like this, firms are usually regulated or nationalized, because free markets do not necessarily lead to the socially optimal level of concentration and diversity in supply. Creation Date: 2009-03 Revision Date:

Suggested Citation

  • Geoffrey Rothwell, "undated". "Market Power in Uranium Enrichment," Discussion Papers 08-032, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:08-032
    as

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    File URL: http://www-siepr.stanford.edu/repec/sip/08-032.pdf
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    Citations

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    Cited by:

    1. Lin, Boqiang & Bae, Nuri & Bega, François, 2020. "China's Belt & Road Initiative nuclear export: Implications for energy cooperation," Energy Policy, Elsevier, vol. 142(C).
    2. Viet Phuong Nguyen & Man-Sung Yim, 2019. "Nonproliferation and Security Implications of the Evolving Civil Nuclear Export Market," Sustainability, MDPI, vol. 11(7), pages 1-14, March.
    3. Warren, Paul & De Simone, Giuseppe, 2014. "Fuelling the future?," Energy Policy, Elsevier, vol. 74(S1), pages 5-15.
    4. Rothwell, Geoffrey, 2010. "International light water nuclear fuel fabrication supply: Are fabrication services assured?," Energy Economics, Elsevier, vol. 32(3), pages 538-544, May.
    5. Kessides, Ioannis N., 2010. "Nuclear power: Understanding the economic risks and uncertainties," Energy Policy, Elsevier, vol. 38(8), pages 3849-3864, August.
    6. Ahmad, Ali & Salahieh, Sidra & Snyder, Ryan, 2017. "Multinational uranium enrichment in the Middle East," Energy Policy, Elsevier, vol. 106(C), pages 103-110.
    7. Dimitrios Zormpas, 2021. "Jointly Held Investment Options and Vertical Relationships," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(4), pages 513-530, June.
    8. Geoffrey Rothwell, 2010. "New U.S. Nuclear Generation: 2010-2030," Discussion Papers 09-025, Stanford Institute for Economic Policy Research.

    More about this item

    Keywords

    Market Power; Government Regulation; Uranium Enrichment; Imperfect Competition;
    All these keywords.

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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