NEW YORK—Construction of new nuclear power plants in the United States will ramp up slowly over the next decade as project sponsors exercise caution to effectively manage business risks, nuclear energy industry leaders told Wall Street financial analysts here today.
The industry’s expectations are that four to eight new nuclear plants will be generating electricity by 2016 or so, with a second wave of new power plants under construction as the first group commences commercial operation, the Nuclear Energy Institute’s president and chief executive officer, Frank L. (Skip) Bowman said during a briefing attended by more than 75 analysts.
“The exact number will, of course, depend on many factors – forward prices in electricity markets, capital costs of all baseload electric technologies, commodity costs, environmental compliance costs for fossil-fueled generating capacity, natural gas prices and more,” Bowman said. “The confidence gained by success with the first projects will support the decision-making process for follow-on projects.”
Bowman described new nuclear plant construction as “a risk-management exercise” and said that the industry continues the work that has been under way for the past decade to identify and remove or mitigate the business risks associated with these multi-billion-dollar projects.
“We have mobilized experts in licensing and regulation, financing, construction management, political affairs, public support, supply chain and work force. Seventeen entities developing license applications for up to 31 new reactors did not just happen. It has been carefully planned,” Bowman said.
Five license applications for seven potential new reactors were filed with the Nuclear Regulatory Commission in 2007, Bowman noted, and another 11 to 15 applications could be filed this year. Progress Energy just two days ago announced the filing of a license application for two possible reactors at its Shearon Harris Nuclear Plant in North Carolina.
Analyses from several sources show that, with debt-financing support from the federal government in the form of loan guarantees or helpful rate policies at the state level that support investment recovery, new nuclear power plants will be competitive with the nation’s other large energy sources – coal-fired and natural gas-fired power plants.
“Implementation of the federal loan guarantee program is going well. And a number of states in the South and Southeast have passed legislation providing companies with incentives to build new nuclear capacity and providing assurance of investment recovery,” Bowman said.
NEI board Chairman John Rowe, the chairman, president and chief executive officer of Exelon Corp., said companies are considering building new nuclear plants because the fundamentals of the U.S. electric power business demand it.
“The need for new baseload generating capacity is unmistakable,” Rowe said. “The electric sector’s dependence on natural gas exposes our customers to unpleasant price volatility, and our companies to unwelcome political stress and regulatory pressure. And uncertainty over future controls on carbon emissions will cast a cloud over coal-fired generation for as long as we avoid our responsibility to address the climate change issues squarely.”
Nuclear power plants operating in 31 states provide more than 70 percent of all U.S. electricity that comes from sources that do not emit greenhouse gases or controlled pollutants covered by the Clean Air Act.
The outstanding performance of the nuclear energy industry provides a “solid platform” to increase the nation’s reliance on nuclear energy, Bowman said.
Early estimates for 2007 show that U.S. nuclear power plants posted all-time record highs in electricity production and efficiency. U.S. nuclear plants generated approximately 807 billion kilowatt-hours (kwh) of electricity last year, exceeding by more than two percent the previous record-high of 788.5 billion kwh of electricity set in 2004. Nuclear energy generates nearly 20 percent of total U.S. electricity supply, even though nuclear power plants constitute only 10 percent of installed generating capacity.
The 104 nuclear plants also achieved a record-setting average capacity factor—a measure of on-line availability of power. The 2007 average of 91.8 percent surpassed the 2004 record of 90.1 percent, according to preliminary figures. Capacity factor is the ratio of electricity actually produced compared to the theoretical maximum electricity a power plant can produce operating at full power year-round.
The industry’s average electricity production cost—encompassing expenses for uranium fuel and operations and maintenance—also set a record low last year. The average production cost was 1.68 cents/kwh in 2007, besting the previous low of 1.72 cents/kwh set in 2005, according to preliminary data.