Public Policy

Chairman Alexander, Ranking Member Graham and distinguished members of the subcommittee, I am Marvin Fertel, senior vice president and chief nuclear officer at the Nuclear Energy Institute (NEI). NEI appreciates the opportunity to provide this testimony for the record on the need for new nuclear power plants, and the issues that must be addressed before our nation can begin construction of the new nuclear plants needed to meet growing electricity demand in the years ahead.

NEI is responsible for developing policy for the U.S. nuclear industry. Our organization’s 270 member companies represent a broad spectrum of interests, including every U.S. energy company that operates a nuclear power plant. NEI’s membership also includes nuclear fuel cycle companies, suppliers, engineering and consulting firms, national research laboratories, manufacturers of radiopharma-ceuticals, universities, labor unions and law firms.

America’s 103 nuclear power plants are the most efficient and reliable in the world. Nuclear energy is the largest source of emission-free electricity in the United States and our nation’s second largest source of electricity after coal. Nuclear power plants in 31 states provide electricity for one of every five U.S. homes and businesses. Seven out of 10 Americans believe nuclear energy should play an important role in the country’s energy future. ¹

Given these facts and the strategic importance of nuclear energy to our nation’s energy security and economic growth, NEI encourages the Congress to adopt policies that foster continued expansion of emission-free nuclear energy as a vital part of our nation’s diverse energy mix.

Last year, Congress demonstrated strong support for nuclear energy’s role in forward-looking energy policy legislation. That legislation includes most of the major policy initiatives necessary to carry this technology forward into the 21st century as a major contributor to U.S. electricity supply. These include renewal of the Price-Anderson insurance framework; financial stimulus for new nuclear plant construction; an expanded research and development portfolio; support for universities; and updated tax treatment of nuclear decommissioning funds to reflect today’s competitive electricity business.

Broadly, the energy sector believes it is imperative to provide substantial stimulus for investment in new transmission infrastructure for both electricity and natural gas, and in the new nuclear and clean coal power plants to meet the 50 percent increase in electricity demand by 2025 forecast by the Energy Information Administration. Investment in key parts of the electric power sector has collapsed over the last 10 years, and we must put in place new policy initiatives to address that challenge.

NEI’s testimony for the record will cover the following areas:

1. The business case for new nuclear power plants.
2. Industry initiatives to increase nuclear energy production.
3. The need to stimulate investment in America’s critical energy infrastructure, including investment in new nuclear power plants.
4. Industry programs to create the business conditions necessary for the construction of new nuclear plants and the steps to ensure construction of new plants to meet demand for new baseload electric generating capacity.
5. Industry confidence in the competitiveness of new nuclear power plants.

 
The Business Case for New Nuclear Power Plants
New nuclear plants will be essential in the years ahead to achieve a number of critically important public policy imperatives for our country’s energy supply and electricity market.

First, new nuclear power plants will continue to contribute to the fuel and technology diversity that is the core strength of the U.S. electric supply system. This diversity is at risk because today’s business environment and market conditions make investment in large, new capital-intensive technologies difficult, notably the advanced nuclear power plants and advanced coal-fired power plants best suited to supply baseload electricity. More than 90 percent of all new electric generating capacity added over the past five years is fueled with natural gas. Natural gas has many desirable characteristics and should be part of our fuel mix, but “over-reliance on any one fuel source leaves consumers vulnerable to price spikes and supply disruptions.”²

Second, new nuclear power plants provide future price stability that is not available from electric generating plants fueled with natural gas. Intense volatility in natural gas prices over the last several years is likely to continue, and subjects the U.S. economy to potential damage. Although nuclear plants are capital-intensive to build, the operating costs of nuclear power plants are stable and can dampen volatility of consumer costs in the electricity market.

Third, new nuclear plants will reduce the price and supply volatility of natural gas, thereby relieving cost pressures on other users of natural gas that have no alternative fuel source.

Finally, new nuclear power plants will play a leading role in meeting U.S. clean air goals and the administration’s goal of reducing the U.S. economy’s greenhouse gas intensity. In addition, under the cap-and-trade systems in place or planned for all major pollutants, incremental production from new emission-free nuclear power plants would reduce the compliance costs that otherwise would be imposed on coal-fired and gas-fired generation.

Nuclear power plants produce electricity that otherwise would be supplied by oil-, gas- or coal-fired generating capacity, and thus avoid the emissions associated with that fossil-fueled capacity.

The value of the emissions avoided by U.S. nuclear power plants is essential in meeting clean air regulations. In 2002, U.S. nuclear power plants avoided the emission of about 3.4 million tons of sodium dioxide (SO₂ ) and about 1.4 million tons of nitrogen oxide (NO_x ). To put these numbers in perspective, the requirements imposed by the 1990 Clean Air Act Amendments reduced SO₂ emissions from the electric power sector between 1990 and 2002 by 5.5 million tons per year and NO_x emissions by 2.3 million tons year. ³ Thus, in a single year, nuclear power plants avoid nearly as much in emissions as was achieved over a 12-year period by other sources.

The NO_x emissions avoided by U.S. nuclear power plants are equivalent to eliminating NO_x emissions from six out of 10 passenger cars in the United States. The carbon emissions avoided by U.S. nuclear power plants are equivalent to eliminating the carbon emissions from nine out of 10 passenger cars in the United States.

Nuclear energy helped reduce NOx emissions in northeastern and mid Atlantic states, according to a report last year by the Environmental Protection Agency and the Ozone Transport Commission (OTC).⁴ The 2003 EPA assessment found that energy companies have been shifting electricity production from fossil-fueled power plants to emission-free nuclear power plants to help comply with federal air pollution laws.

In Tennessee, for example, three nuclear reactors avoid the emission of approximately 170,000 tons of SO2, 60,000 tons of NO_x and 6.6 million metric tons of carbon every year. For perspective, 60,000 tons of NO_x , which is a precursor to ground-level ozone, is the amount released into the air by 3.1 million passenger cars. There are 1.7 million passenger cars registered in Tennessee.

In summary, nuclear energy represents a unique value proposition: a nuclear power plant provides large volumes of electricity—cleanly, reliably, safely and affordably. It provides future price stability and serves as a hedge against the kind of price and supply volatility we see with natural gas. And nuclear plants have valuable environmental attributes: They do not emit controlled air pollutants or carbon dioxide, and thus are not vulnerable to mandatory limits on carbon emissions. Other sources of electricity have some of these attributes. But none of them—not coal, natural gas or renewables—can deliver all of these benefits. Only nuclear power plants have all of these attributes, and that is why these plants are uniquely valuable.

Industry Initiatives to Increase Nuclear Energy Production
As our country prepares for the construction of new nuclear power plants, the U.S. industry has increased the productivity and efficiency of its existing 103 nuclear power plants.

The industry continues to uprate capacity at U.S. plants—the U.S. Nuclear Regulatory Commission has authorized more than 2,000 megawatts (MW) of power uprates over the last three years, and another 2,000 MW are expected over the next several years. An uprate increases the output of the nuclear reactor and must be approved by the NRC to ensure that the plant can operate safely at the higher production level. Companies will invest in these power uprates as conditions in their local power markets justify. 

In addition, energy companies are pursuing renewal of their operating licenses. This option allows today’s operating plants to extend their lives for 20 additional years—from 40 to 60 years. Just in the past 12 months, the NRC has approved renewed licenses for 13 reactors, bringing the total number of reactors extending their federal operating licenses to 23.

An additional 33 reactors either have already filed their renewal applications, or indicated formally to NRC that they intend to do so. That represents over one-half of U.S. reactors. We expect virtually all our nuclear plants will renew their licenses—simply because it makes good economic sense to do so.

With license renewal, our first plants will operate until the 2030s and our newest plants will run past 2050. As an industry, we’ve implemented systematic programs across the industry to manage the systems and components in these plants for their entire expected lifetime. And we’re making the capital investments necessary to allow 60 years of operation at sustained high levels of safety and reliability.

Increasing electricity production at nuclear power plants is a key component of the president’s voluntary program to reduce the greenhouse gas intensity of the U.S. economy. In December 2002, NEI responded to President Bush’s challenge to the business community to develop voluntary initiatives that would reduce the greenhouse gas (GHG) intensity of the U.S. economy. NEI indicated that the U.S. nuclear energy industry could increase its generating capability by the equivalent of 10,000 MW. NEI’s analysis showed that this would achieve approximately 20 percent of the president’s goal.

The additional 10,000 MW would come from three sources:

• Power Uprates—5,000 to 6,500 MW of capacity additions between 2002 and 2012.
• Improved Capacity Factors—the equivalent of 3,000 to 5,000 MW of additional capacity in 2002-2012.
• Plant Restarts—refurbishing and restarting Tennessee Valley Authority’s Browns Ferry Unit 1 would add 1,250 MW.

The nuclear energy industry has recorded substantial progress toward its goal. The NRC has approved 2,198 MW of uprates in the past several years. In addition, based on information from nuclear plant operators, the NRC expects applications for an additional 1,886 MW of uprates in the 2004-2008 period. ⁵

In addition, the Tennessee Valley Authority (TVA) is moving forward with refurbishment of Unit 1 of the Browns Ferry nuclear power plant. The TVA Board in May 2002 approved the refurbishment and restart, a $1.8-billion project, that is expected to return the reactor to commercial operation in 2007. Browns Ferry Unit 1 is not a new construction reactor, but its comprehensive refurbishment and restart, when complete, will represent a significant accomplishment for the industry.

With 5,334 MW of new capacity in prospect (4,084 megawatts of uprates and 1,250 MW at Browns Ferry Unit 1), the nuclear energy industry will be approximately halfway toward meeting its goal of expanding capacity by 10,000 megawatts by 2012. This represents substantial progress—the largest progress of any single industry—toward achievement of the president’s goal to reduce the GHG intensity of the U.S. economy by 18 percent by 2012.

Obviously, there are limits on how much additional electricity output can be produced at the existing 103 nuclear power plants. Meeting the nation’s growing demand for electricity—which will require as much as 400,000 MW by 2025, depending on assumptions about electricity demand growth⁶ —will require construction of several new nuclear power plants in the years ahead.

Stimulating Investment in America's Critical Energy Infrastructure, Including New Nuclear Power Plants
NEI believes that lack of investment in our nation’s critical energy and electric power infrastructure is a major problem. Our country is not investing enough in new baseload coal and nuclear plants, and we are not investing enough in new electricity transmission.

NEI’s assessment shows that approximately 183,000 megawatts of electricity generating capacity is 30-40 years old; approximately 104,000 MW is 40-50 years old. That represents about one-third of U.S. installed electric generating capacity, and is clear evidence that we are underinvesting for our energy future—relying too much on old, less efficient generating capacity and not investing in new, more efficient and cleaner facilities.

Investment in our country’s electricity transmission system has fallen by $115 million per year for the last 25 years, and investment in this area in 1999 was less than one-half of the level 20 years earlier—despite dramatic increases in the volumes of electricity being moved to market. One analysis⁷ shows that simply maintaining transmission adequacy at its current level (which is widely acknowledged to be inadequate) would require a capital investment of $56 billion by 2010, equal to the book value of the existing transmission system.

Given these facts, we strongly encourage the passage of energy policy legislation to provide broad-based stimulus for investment in new energy infrastructure, including new nuclear plant construction, deployment of clean coal technologies, new electricity transmission and other energy sources.

Passage of legislation that provides such investment stimulus is essential if we hope to preserve the diversity of fuels and technologies that represent the core strength of our energy supply and delivery system. That stimulus can come through shorter depreciation periods, investment tax credits and production tax credits, loans or loan guarantees, or research and development support, depending on the conditions and requirements of each energy source. In addition, renewal of the Price-Anderson Act, which provides insurance for the public in the case of a nuclear reactor incident, is a necessary step in paving the way toward new nuclear power plants.

NEI believes that more appropriate tax treatment of energy investment must be a central feature of energy policy legislation. As a general rule, the electric industry suffers from depreciation treatment that may have been appropriate for another era, when regulated companies with stable long-term cash flows had a reasonable assurance of investment recovery through rates. But 15- to 20-year depreciation periods for investments in generation and transmission assets are unacceptable for an industry operating in a competitive commodity market, where cash flows are highly volatile and there is no guarantee of investment recovery. Current depreciation treatment acts like a brake on new capital investment.

Energy policy legislation should also address another significant factor that could inhibit capital investment: Regulatory uncertainty. This uncertainty has a chilling effect on capital formation and capital investment. Regulatory uncertainty and perceived risks over the licensing process for new nuclear power plants could inhibit capital investment in new nuclear facilities. In the coal industry, uncertainty over environmental requirements, including possible future limitations on criteria pollutants and carbon dioxide, has slowed capital investment in new coal-fired generating capacity or in upgrading existing capacity. Public policy must recognize the impact of these uncertainties and develop mechanisms to address them.

NEI believes that policymakers must recognize the risks and uncertainties in our economic and regulatory systems and also recognize that policymakers have a responsibility to establish mechanisms to contain those uncertainties.

In the electricity sector, the last several years demonstrate what happens when the markets are left entirely to their own devices without necessary policy and planning guidance. The sole reason that gas-fired plants constitute more than 90 percent of the generating capacity built during the past five years is that these plants present the lowest investment risk. However, as trends in natural gas prices through 2003 demonstrate, sole reliance on gas for new generating capacity can expose consumers to punishing price volatility. Excessive reliance on natural gas for power generation also increases prices and limits the supply available to other industries that depend on natural gas as a feedstock. This, in turn, has a ripple effect reflected in higher prices in many other sectors.

By themselves, markets have no way of valuing energy security, fuel and technology diversity, or other legitimate public policy “goods.” Few new coal-fired or nuclear plants have entered service over the last decade, even though these plants provide the greatest measure of price stability going forward.

The decision to employ nuclear power as a major energy source in countries such as France and Japan was based on energy security. The governments of both countries originally decided the use of nuclear energy would protect their nations’ energy supplies from disruptions driven by political instability and protect consumers from price fluctuations resulting from market volatility. Today, France depends on nuclear energy for more than three-quarters of its electricity demand, and Japan for more than one-third.

The governments of France and Japan have committed to the use of nuclear energy as an essential part of their nations’ future energy portfolios for reasons of economics as well as energy security. Other nations with reactors under construction, such as South Korea and Taiwan, have cited energy security as an overriding concern in the energy policy decisions of their respective governments. Despite all of the international activity, the U.S. nuclear energy sector remains by far the world’s largest, producing 762 billion kilowatt-hours in 2003—more than the nuclear sectors of France and Japan combined.

If we do not employ policy mechanisms and investment stimulus to preserve fuel diversity, we run the risk of placing demands on certain fuels that they may not be able to meet. We must address electricity supply and transmission as an integrated system: More coal and nuclear electricity can reduce supply and price pressure on natural gas. More electricity from nuclear plants and renewable sources can moderate environmental pressures and compliance costs that would otherwise be imposed on coal-fired plants. 

Creating the Business Conditions for New Nuclear Plant Construction
NEI believes that our nation must meet rising electricity demand—50 percent growth by 2025—with a diversified portfolio of fuels and technologies, including nuclear energy.

We are confident that new nuclear plants can compete with other forms of baseload generation. Our cost targets—$1,000 to $1,200 per kilowatt in capital cost—are clearly competitive with other baseload electricity generating options.

Given this, the nuclear energy industry and the Department of Energy launched a program several years ago that will position the industry to build new nuclear capacity when needed, by creating the business conditions under which companies can order new nuclear plants.

This is a comprehensive program designed to address the business issues and unanswered questions—including licensing and regulatory issues, development of new plant designs, and financing—could be roadblocks to new nuclear plant construction.

There are three distinct and major phases on the road toward new nuclear plant construction:

1. pre-commercial licensing and design
2. construction of the first few new plants
3. sustained investment in significant numbers of new plants.

Pre-Commercial Licensing and Design
The Energy Policy Act of 1992 created a new licensing process under which the industry must apply for all necessary regulatory approvals from the NRC before significant capital is committed. Reactor sites and designs can be approved in advance. And new nuclear plants will receive a single license for construction and operation—not the separate proceedings that created unwarranted delay in the period between construction and operation of today’s plants.

This approach should limit the regulatory risks that impacted the construction and licensing of many of our operating plants. With the new process, complete plant designs must be available before construction begins. This process also allows meaningful input from the public and other stakeholders early on, before the plant is built, when such input can influence plant design and licensing issues. This should avoid the costly delays common to the old way of licensing a nuclear plant. Because the old licensing process did not require all the design and engineering to be complete when the construction permit was issued, it often resulted in extensive public hearings and public input after the plant was built and before it was allowed to operate.

The industry is validating this new, unproven licensing process. In 2003, Dominion, Exelon and Entergy began a three-year process for requesting NRC approval for early site permits. This does not mean that these companies are committed to building new nuclear plants at these sites. The program is designed to demonstrate that the untested early site permit process works as intended. If approved, the companies will be “banking” those sites for possible future use.

DOE has also requested proposals to share the cost of demonstrating the process of preparing and obtaining a combined construction/operating license from the NRC. This approach consolidates both of these licenses, thereby eliminating the separate hearings, reviews and proceedings that can dramatically increase costs. Beginning this year, DOE is expected to co-fund the cost of at least two applications. Like early site permits, combined construction/operating licenses can be “banked” for future use.

In addition to these licensing issues, this first phase also involves completing the first-of-a-kind engineering and design work for preferably two advanced reactor designs, and obtaining NRC safety certification for those designs. These new reactors are designed to improve safety and reduce capital cost so that they are competitive with other sources of baseload electricity.

The first, pre-commercial phase is not a trivial investment. It will cost $400 million to $500 million to complete the licensing demonstrations and the first-of-a-kind design and engineering for one reactor design. The industry expects to share that cost equally with the federal government under DOE’s Nuclear Power 2010 program. The private sector therefore would commit $200 million to $250 million to the effort, or up to $500 million for two reactor designs. It is critically important, therefore, that the government provides adequate funding for DOE’s Nuclear Power 2010.

If the private sector and the federal government do not share the cost of design, engineering and licensing work on new nuclear plants, the first few new nuclear plants built will be more costly than follow-on plants. This is because the first plants, like the first new plants of any new technology, would have first-time design and engineering costs associated with them. The industry estimates the capital cost of the first few nuclear plants built would be in the range of $1,400 per kilowatt. After these plants are built and the first-of-a-kind design and enginering costs have been recovered, subsequent plants of the series will have capital costs in the $1,000-$1,100 per kilowatt range, which is fully competitive with other sources of baseload electricity.

Construction of the First New Nuclear Power Plants
Companies interested in building the first new nuclear power plants must address two major challenges: potential regulatory risks and the significant capital investment associated with the first few new nuclear power plants.

Although industry/government programs are seeking to eliminate uncertainty from the licensing process, there is potential for unanticipated cost increases as a result of delays during construction or delays in commercial operation of a completed plant. These delays could be caused by the NRC’s failure to deliver necessary approvals on time, or by court challenges to agency actions that are later dismissed. These regulatory risks are beyond the private sector’s control and would jeopardize private sector investment in new nuclear power plants.

The financial community has indicated that it is unlikely to provide external debt financing from the capital markets, given the regulatory risks associated with the first several new nuclear power plants. This means that companies considering building new nuclear plants must either finance the first few plants with 100 percent equity, or obtain government loans, loan guarantees, or some other form of comparable government insurance against potential regulatory risks.

Nuclear power plants, like coal-fired power plants, are capital-intensive projects. A company building a new nuclear power plant will invest between $1.5 billion and $2 billion, including interest, during construction. During construction, a company would be investing substantial amounts of equity capital in the project, and this equity would be tied up for a four-to-five year construction period without generating any return to the company. Raising the equity capital required would dilute shareholders’ equity and earnings per share. This could lead to lower stock prices, reducing the company’s attractiveness to the financial community.

The $18-per-megawatt-hour production tax credit provided in the conference report for H.R. 6 is an important step toward making investment in the first few new nuclear plants attractive to the private sector. This tax credit is comparable to that provided for other sources of new, emission-free electricity generation. The production tax credit would provide an acceptable return on equity, even to a project financed entirely with equity capital. It does not, however, appear to protect the private sector investment against potential regulatory risk, and the industry is continuing to work with the executive branch and Congress to create the financial mechanisms necessary to do that.

Sustained Investment in Significant Numbers of New Nuclear Plants
Companies building new nuclear power plants face two significant challenges: (1) the earnings dilution during construction resulting from the large equity investment over an extended period in a capital-intensive project, and (2) the fact that substantial capital investment would be at risk for an extended period of time. These financing challenges are not unique to nuclear power plants. In fact, they are common to all capital-intensive elements of the electricity infrastructure, including advanced coal-fired power plants and new electric transmission capacity.

Both problems can be addressed through tax-related incentives. An investment tax credit would mitigate earnings dilution and the resulting negative impact on a company’s shareholders.

More appropriate depreciation treatment would address the concern over significant investment exposed over an extended period of time. Under current law, nuclear power plants are treated as 15-year property. This depreciation period may have been appropriate for a regulated, cost-of-service business environment. It is not suitable for a competitive, commodity business environment. More appropriate depreciation schedules—seven years instead of 15—would allow faster recovery of investment through reduced income tax liability. Such updated tax treatment would simply recognize that depreciation conventions established for a regulated, cost-of-service business environment are not appropriate for a competitive, high-risk business environment.

It is important to remember that these three phases comprise an integrated program. The pre-commercial activities (like validating the licensing process) are inextricably linked to the financial incentives and investment stimulus for plant construction. Unless the financial incentives for commercial deployment are in place, the companies and the federal government have little reason to invest hundreds of millions of dollars in design and licensing work. And unless we work together to invest in the design and licensing work, there is little reason to create financial incentives and investment stimulus for new plant construction.

Industry Confidence in the Competitiveness of New Nuclear Power Plants
The nuclear energy industry has a high level of confidence that new nuclear power plants can be built for an “overnight” capital cost⁸ of $1,000-$1,200 per kilowatt of capacity for subsequent plants.⁹ At this cost, which can be achieved after the first several new plants have been built, new nuclear power units are fully competitive with other baseload electricity production. The financial stimulus sought from the federal government is intended, in part, to “jump start” construction of the first few new nuclear power plants, thereby allowing the nuclear industry to reach a cost level of $1,000-$1,200 per kilowatt for successive plants of that kind.

The major alternatives to new nuclear plants include conventional coal-fired power plants with a full suite of environmental controls, which have capital costs in the range of $1,000-$1,500 per kilowatt of capacity. These include the so-called “clean coal” technologies, which have capital costs in the range of $1,200-$1,500 per kilowatt of capacity. At $1,000 per kilowatt, a new nuclear power plant could compete with new combined-cycle, gas-fired power plants, which have capital costs in the range of $600-$700 per kilowatt of capacity. Unlike the nuclear and coal-fired technologies, however, gas-fired power plants are extremely sensitive to fuel prices. Economic analysis shows that a new nuclear unit at $1,000 per kilowatt of capacity is competitive with a new gas-fired combined cycle plant fueled with gas at $4-$5 per million Btu.

The cost estimates for new nuclear power plants reflect a high degree of analytical rigor and are as solid as can be achieved, short of actually building a power plant and totaling the dollars spent. Two new designs—the AP1000 developed by Westinghouse and the Advanced Boiling Water Reactor (ABWR) developed by GE Nuclear Energy—serve as examples.

Westinghouse is currently pursuing NRC design certification of its AP1000 nuclear plant. The AP1000 is a 1,117-megawatt Advanced Light Water Reactor (ALWR). It is essentially a higher-power version of a 600-megawatt design, the AP600, which was certified by the NRC in 1999. More than $400 million was invested in developing and licensing the AP600 design, including an extremely detailed cost database, comprising more than 1,900 commodity categories and 25,000 specific items. The cost estimate was verified by Westinghouse, several international architect-engineers, the EPRI and several utilities. A comparably detailed cost estimate was prepared for the AP1000 by modifying the AP600 estimate to reflect the design changes.

In 2002, an industry team—comprised of Westinghouse, seven major U.S. power companies and architect-engineer Bechtel—completed a $1-million re-evaluation of the AP1000 reactor design. As part of that re-evaluation, Bechtel performed a thorough review of the modifications made to the original cost estimate and, after making minor adjustments, endorsed the AP1000 cost estimate.

Although the specific numbers are proprietary, the overnight capital cost for building the first two AP1000 reactors at one site is less than $1,400 per kilowatt. This includes all the first-time costs for completing design, engineering and licensing of the first project. After the first few projects have been completed, the capital cost for later plants will be approximately $1,000 per kilowatt, which is competitive with other sources of baseload electricity. Once those first reactors are built and capital costs reach the $1,000-per-kilowatt range, all future plants would be financed and built without federal government financial assistance.

The Westinghouse-Bechtel estimate of less than $1,400 per kilowatt has a solid analytical basis, has been peer-reviewed and reflects a rigorous design, engineering and constructability assessment.

GE Nuclear Energy and its partners have built two ABWRs in Japan, and are building two reactors in Taiwan (the Lungmen project). In 2002, GE and Black & Veatch (B&V) completed an independent cost estimate of the ABWR. This study resulted in volumes of data, including quantities, vendor costs and construction labor rates. The source of information for every piece of data is referenced. Most references for quantities of materials are to the Lungmen project database, and thus accurately reflect what would be required to build a plant.

This cost estimate was reviewed by GE, B&V and a U.S. utility. The estimate was based on actual experience from current and previous ABWR projects, and is considered a valid forecast of new reactor costs.

The bottom line: a single unit ABWR could be built for $1,445 per kilowatt. Two units on the same site roughly one year apart would have an average cost of $1,300 per kilowatt. These estimates are for a 1,450-megawatt reactor and include owner costs, supplier profit and contingencies.

These costs are slightly higher than the estimates for the AP1000 because the AP1000 incorporates a number of “passive” safety features that reduce the capital cost. GE Nuclear Energy is developing a boiling-water reactor design that incorporates similar advanced passive safety features. The company expects that overnight capital cost for this design will be lower than for the ABWR.

Conclusion
Electricity generated by America’s nuclear power plants over the past half century has played a key part in our nation’s growth and prosperity. Nuclear energy produces more than 20 percent of the electricity used in the United States today without producing air pollution. As our energy demands continue to grow in years to come, nuclear power should play an even greater role in meeting those needs.

The nuclear energy industry is operating its reactors safely and efficiently. In addition, the industry is striving to produce more electricity from existing plants. The industry is also developing more efficient, next-generation reactors and exploring ways to build them more cost-effectively.

The public sector must help create the conditions that will spur investment in America’s energy infrastructure, including new nuclear power plants. The passage of comprehensive energy legislation that addresses the business and regulatory risks of building new plants is an important step. The federal government also must continue to support efforts that encourage the industry to continue pursuing new plants, such as Nuclear Power 2010. Finally, Congress must enact policies that recognize nuclear energy’s contributions to meeting our growing energy demands, ensuring our nation’s energy security and protecting our environment.

Mr. Chairman, on behalf of NEI, I thank you for the opportunity to discuss nuclear energy’s significant role in providing electricity to our nation today and its vital importance as a clean, reliable and safe energy source for the future. 

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¹ Perspectives on Public Opinion , by Ann Stouffer Bisconti, Bisconti Research Inc., November 2003.

² Report of the President’s National Energy Policy Development Group, May 2001, page xiii.

³   EPA Acid Rain Program: 2001 Progress Report , U.S. Environmental Protection Agency, November 2002.

⁴   NOx Budget Program: 1999-2002 Progress Report , U.S. Environmental Protection Agency, March 2003. 

⁵  All power uprates must be approved by the Nuclear Regulatory Commission. Once NRC approval is received, generating companies schedule power uprates into their ongoing capital investment programs. Typically, it takes at least two to three years from the time of NRC approval before the uprate is completed. Given these lead times, companies in 2003 were completing uprates approved by the NRC in 2000 and 2001. The NRC approved 2,198 MW of uprates between 2000 and 2003 (243 MW in 2000, 1,111 MW in 2001, 711 MW in 2002, 133 MW in 2003) and expects licensees to apply for an additional 1,886 MW of uprates in the 2004-2008 period. The 2004-2008 forecast represents only those uprates about which the NRC has been informed; it does not represent the total remaining uprate potential of U.S. nuclear power plants.

⁶   Energy Information Administration, Annual Energy Outlook 2004 , DOE/EIA-0383 (2004). 

⁷  Transmission Planning for a Restructuring U.S. Electricity Industry , Edison Electric Institute, June 2001. 

⁸  “Overnight” capital cost does not include interest during construction and is a standard means of comparing the capital costs of various generating options.

⁹  This capital cost is achieved after first-time design and engineering costs have been recovered and as industry incorporates improvements in construction techniques and construction management gained during construction of the first few units.