President and Chief Executive Officer
Nuclear Energy Institute
Nuclear Energy Assembly
State of the Industry
May 14, 2013
These are very interesting and changing times for the electric utility industry. In the past decade, we have witnessed significant transformations in the energy sector—with the discovery of shale gas and horizontal drilling … the smart grid … electricity portfolio standards and other policies driving the expansion of renewables … significant new environmental requirements … and lower electricity demand due to the shrinking economy.
The leaders in the electric business are managing through these changes … and clearly the situation is still very dynamic for the electricity industry and for us in the nuclear industry. But amid these challenges, we are making progress on several fronts. We have five reactors under construction … 70 percent of our reactors with renewed operating licenses … and new fuel cycle facilities supporting our domestic and global industry.
In particular, I want to acknowledge SCANA and Georgia Power, and their partners, who reached significant milestones this spring when workers poured the concrete basemat for new reactors at V.C. Summer and Plant Vogtle.
This morning, I’ll review the status of America’s reactors, the response to the Fukushima accident and new reactor development. Then I’ll turn to the major challenges we face as an industry and our public policy priorities going forward.
I’ll close with some thoughts on the future I see for nuclear energy—which is an integral component of our energy diversity portfolio and has a value chain that includes its 24/7 electricity supply, its long-term price stability, its clean air benefits, and its job creation attributes.
Let me turn to a snapshot of the industry’s operating performance. Overall, it has been another year of reliable, safe performance. The average capacity factor for 2012 was 86.4 percent—which is the best reliability of any electric generation source. The 2012 capacity factor reflects the extended shutdown of three facilities.
If we exclude them, we get an average of approximately 89 percent. I think it is fair to say that the fleet continues to operate at around 90 percent capacity factor, as it has for more than a decade.
The industry continues to invest significant capital to maintain the highest levels of safety and reliability … to complete significant uprates at some facilities … and to position them to operate beyond their original 40-year license terms.
Last year, the industry invested $8.5 billion in our facilities.
The industry also is making solid progress—and additional investment—as we implement new NRC requirements based on lessons learned from Fukushima. We believe the greatest safety improvement comes from the industry’s FLEX approach, which provides a comprehensive, tailored capability to respond to extreme events.
The heart of this effort is adding more portable, backup safety equipment at each facility that will provide power and cooling to the reactor and the spent fuel pools. We also are establishing two regional response centers that can provide additional equipment to any U.S. location within 24 hours.
Since Fukushima, each nuclear power plant site has spent millions of dollars and thousands of hours confirming their seismic and flood protection capabilities. Plus, we are looking at new analytical information to ensure U.S. reactors will continue to be safe even if they are subjected to earthquakes or floods that are beyond the design parameters of a plant.
While we’re enhancing the safety and efficiency of our existing reactors, the industry also is building new reactors to boost our portfolio of low-carbon electricity sources.
In the new plant area, the Tennessee Valley Authority continues work on a $4.2 billion project to complete Watts Bar 2 … and plans to complete the reactor by December 2015.
As I mentioned earlier, construction is well underway on new reactors at Georgia Power’s Vogtle site and SCANA’s Summer facility in South Carolina. Vogtle 3 and 4 are 40 percent complete and are expected to be online in 2017 and 2018 … and Summer 2 and 3 have made similar progress and will also come online in 2017 and 2018.
These are the largest construction projects in their states and they are driving direct employment for nearly 4,000 workers, twice that during peak construction. These projects in Georgia and South Carolina will support about 35,000 jobs across America, according to an analysis by Westinghouse and the Shaw Group.
In addition to the five new reactors under construction, 10 applications for construction and operating licenses and two for early site permits are under NRC review. We don’t expect construction on some of those projects to start until later this decade, but we do expect more new reactors to be built as electricity demand recovers.
We’ve also seen significant progress in the domestic fuel supply sector. Louisiana Energy Services in New Mexico will double its enrichment capacity … and GE Hitachi Nuclear Energy has received a license to build a laser-enrichment plant in North Carolina. GE plans to decide this year whether to construct the facility. And the U.S. Enrichment Corporation has plans for a new enrichment facility in Ohio.
Because of both the potential market here and the value internationally of having a design certification granted by the NRC, the agency continues to review applications to certify an additional three new reactor designs. One of the only new energy programs approved by the Congress and supported by the Obama administration is the DOE’s cost-shared program to bring small modular reactors – under 300 megawatts capacity – to market in America and internationally early next decade.
The Energy Department is now aggressively implementing the program and last November entered into a five-year, cost-shared arrangement with Babcock and Wilcox to support a new project to design, license and help commercialize their small modular reactor.
In addition, DOE is conducting a follow-on solicitation open to other companies and manufacturers, focused on furthering small modular reactor designs and development.
As you’ve heard, while we’re making progress in the safe, reliable operation of our current plants … enhancing safety based on lessons learned from the Fukushima accident … moving forward with the construction of new plants and the continued innovation of nuclear technology, we also face some significant challenges.
Electricity demand last year was 1.1 percent below what it was in 2011 … and 2.5 percent below the record in 2007.
In addition, our nation clearly is benefitting from the availability of new, abundant supplies of shale gas, and conventional wisdom has natural gas prices staying low. As a result, gas-fired electric generation is the fuel of choice for almost all new generating plants. Also, the low price of gas impacts the price of electricity and, particularly in competitive markets, directly affects the profitability of nuclear plants.
Although it is likely we’ll have reasonable gas prices for a long time, prices in the range of $2 to $3 per million Btu during 2012 are not sustainable. In fact, natural gas prices already are increasing. In March 2012, the average delivered cost of natural gas to electric utilities in the Southeast was $2.60 per million Btu. This March, it was $4.20.
Also, certain regions of the country may see short periods of significantly greater volatility. In the Northeast last winter, gas pipeline constraints pushed delivered gas prices in New England above $30 per million Btu. As a result electricity prices spiked to $250 to $260 per megawatt hour in a market that typically clears in the mid $40-per-megawatt-hour range.
Finally, it’s worth remembering that natural gas-fired power plants operating as baseload plants consume prodigious volumes of natural gas. A 1,000-megawatt gas plant running at 90 percent capacity factor burns about 60 billion cubic feet a year – slightly less than New Hampshire’s entire natural gas consumption in 2011, and more gas than 22 states burned for electric power production in 2011.
Clearly as we use more and more natural gas for electric generation, for selected forms of transportation and for LNG exports, the price will behave as it does for all commodities … and as demand increases, even with robust supply, prices will rise.
Another challenge is that even with the high performance of nuclear plants, we are seeing continued growth of regulatory requirements for reactors and fuel facilities, with, we believe, inadequate attention given to priorities or to the additive effect on the plants.
The industry, members of Congress and other stakeholders have urged the NRC to assess the cumulative impact of regulatory activities … and ensure that the issues most important to safety get top priority and that the NRC follow a disciplined process in identifying new requirements.
NEI, working with the industry’s chief nuclear officers, has proposed a process that will allow nuclear facilities to integrate major regulatory actions with self-initiated improvements and then … in consultation with the NRC … prioritize these actions based on their safety significance.
Industry organizations such as NEI and the Institute of Nuclear Power Operations also have begun to examine their own impact on facilities, looking for ways to streamline industry initiatives and other activities such as committee meetings, task forces and the like.
The NRC has discussed the cumulative impact of regulation for several years, and is engaged constructively and transparently with industry and other stakeholders to address this important issue.
Achieving the desired outcome on this important activity will not be easy. It will require not only the use of more disciplined and effective processes and tools, but also cultural changes by us in the industry and by staff at the NRC. However, success at this activity will, with no doubt, positively contribute to enhanced safety at the plants.
A third major challenge we face is inaction by federal policymakers on passing critical legislative initiatives. In this regard, we believe it is time that the Nuclear Waste Policy Act be amended to establish effective and sustainable used fuel management program.
We expect serious dialogue and actions over the coming years to address used fuel management. We saw the first stages of congressional interest in reshaping our nation’s nuclear waste management program recently when Senators Wyden, Alexander, Feinstein and Murkowski released a bipartisan draft discussion bill that includes many of the industry’s principles for nuclear waste legislation reform. But not surprisingly, it was silent on the Yucca Mountain project.
The Nuclear Waste Policy Act is the law of the land and as such, we believe that the NRC should complete its review of the Yucca Mountain construction license.
However, even with Yucca Mountain proceeding, there must be changes in the overall program. Discussion of the Senate draft bill, as well as legislation expected to be introduced in the House of Representatives, will begin a process that we hope will lead to a successful path forward after years of inaction.
The industry supports creation of a new management organization with access to the Nuclear Waste Fund and its ongoing collections … and in addition to development of a repository, we support creation of consolidated storage facilities at volunteer sites.
NEI has been meeting with a wide range of stakeholder groups on this issue to build consensus around a forward-looking used nuclear fuel policy that will allow the Energy Department to meet its legal obligation to begin moving used reactor fuel from shutdown and operating plants. Again, we expect this legislative process to take some time, but ultimately to be successful.
We also expect to see Congress focus more attention on the role commercial nuclear technology can play as a job creator here and as an instrument of U.S. foreign policy.
The global nuclear technology market is a major opportunity for U.S. vendors and suppliers.
The Commerce Department estimates the commercial opportunity over the next decade may be worth as much as $740 billion. If U.S. suppliers were able to capture nominally 25 percent of this market, it would create or sustain up to 185,000 high-paying American jobs.
Robert Hormats, the undersecretary of State for economic growth, energy and the environment, told NEI’s Supplier Advisory Committee a few weeks ago that promoting nuclear power for U.S. companies remains a core component of the administration’s energy policy and a core component of our energy diplomacy agenda around the world.
Federal policies that impact civil nuclear exports fall within the jurisdiction of several federal agencies – and there had been limited coordination. At the industry’s urging, the administration created a position last year in the White House National Security Council to coordinate policies and integrate programs and coordination is improving.
As a result, the White House has become much more active in supporting U.S. tenders for nuclear projects abroad, including most recently in the Czech Republic.
Moreover, the State Department is activating our U.S. embassies and ambassadors to be envoys for our industry in global markets where developed and emerging nations are looking to develop nuclear energy.
We will continue to drive better coordination and integration within the government on trade matters … including timely trade agreements, with reasonable provisions.
In addition to bolstering the domestic nuclear supply chain, engagement in the global market promotes critical U.S. national interests. It increases U.S. influence over nuclear nonproliferation and nuclear security policy and practices. It improves safety worldwide, because it allows us to export our operational expertise. It creates or maintains jobs. And it ensures continuing U.S. engagement in operational support, training, fuel supply, and other services over several decades of operation.
I’d like to close with some thoughts on the outlook for nuclear energy.
The long-term prospects for nuclear energy remain strong. Even with modest economic growth over the next two decades, the Energy Information Administration forecasts that the United States will need about 340,000 megawatts of new generating capacity by 2040 … to meet increased demand and to replace retired plants. That’s about 15,000 megawatts per year every year between now and 2040.
The strength of our electricity system is diversity of technologies and fuel types. To help protect our nation’s energy and environmental future, nuclear energy will and must be an important part of our overall electricity supply system. Also, as I mentioned earlier, the value chain for nuclear energy is both broad and significant, encompassing all the attributes desirable in an electric supply technology.
Globally, our country needs to capture a greater share of the commercial nuclear technologies market—and our companies are poised to do so.
The U.S. nuclear energy industry is ready to meet that challenge, both at home and abroad.
We must remember the ramifications of our past when we relied too heavily on any one fuel source to meet large-scale electricity needs, and maintain the diversity of fuel supply as we build the electric grid for future generations.
We are communicating that message across the country through our industry leaders, policymakers, our coalition partners, policy groups and think tanks, digital communications and social media.
The theme of this conference is “Storied history – bright future.” The evidence of the storied history is the high performance of our 102 operating plants and strong fuel supply infrastructure, our leading edge in advanced reactor technology and the respect our regulator has worldwide. This foundation provides the road to our bright future.
That future will include nuclear energy … reactors both large and small that provide a unique set of attributes for business and consumers alike.
Our responsibility is to operate our nuclear energy facilities safely, responsibly and reliably so that they support a high quality of life and drive America’s and the global economies into the next period of prosperity.