Admiral Frank L. (Skip) Bowman
President and Chief Executive Officer
Nuclear Energy Institute
“Clean Energy for Texas: Why Texas Needs Nuclear Energy”
Dallas Friday Group
Dallas, Texas
July 27, 2007
Remarks as prepared for delivery
Thank you for the invitation to address the crucial, related issues of climate change and increasing energy requirements. I will discuss how clean nuclear energy can partner responsibly with renewable energy sources (such as wind and solar) to realistically meet these growing energy requirements after all conservation and efficiency measures are exhausted. I salute Mike Sloan’s passion to augment the wind power resources of Texas as much as possible.
But, along with renewables, nuclear energy is an indispensable part of the future energy portfolio of Texas, if we are going to be environmentally responsible and produce the baseload electricity required to drive modern economic growth.
Let me focus on three topics:
First, the importance of emission-free nuclear energy in generating electricity for our country.
Second, nuclear energy in Texas today, the electricity challenges that Texas faces tomorrow, and the steps that Texans have taken, and plan to take, to solve them.
And, third, two key challenges confronting the future of nuclear energy—used nuclear fuel and financing.
Let’s start with nuclear energy’s clean air benefits. Nuclear energy is our country’s only large-scale energy source capable of producing electricity around the clock while emitting no air pollutants or greenhouse gases during production. 104 nuclear power plants generate 20 percent of this country’s electricity. Importantly, in the context of today’s discussion, nuclear energy generates nearly 75 percent of the clean electricity generation of the United States. Nuclear plants, in fact, prevent carbon dioxide emissions equivalent annually to the carbon dioxide emissions from virtually all passenger cars in the United States.
Because our nuclear plants are a fully amortized investment, nuclear energy is also the lowest-cost large-scale producer of electricity in this country. Nuclear energy’s electricity production cost in 2006 was 1.7 cents per kilowatt-hour, compared to coal at 2.4 cents, natural gas at 6.8 cents and petroleum at 9.6 cents. And nuclear’s production costs remain relatively stable from year to year.
For these reasons, nuclear energy relieves economic and environmental pressures on fossil fuels. Greenhouse gas emissions from the electricity sector would be far greater without the contribution of nuclear electricity generation. Natural gas price volatility would also be worse without nuclear energy in the generation mix.
Using nuclear energy for electricity production makes natural gas more available as a feedstock for the petrochemical and fertilizer industries. As you know, high and volatile natural gas prices have already driven a substantial number of U.S. jobs overseas.
As a domestic energy technology with fuel from the U.S. or reliable trading partners, nuclear energy is essential to our nation’s energy security. And energy security is a critical component of our national security. America already depends on imported oil for 63 percent of its oil consumption, largely from countries whose values do not coincide with our own.
We exacerbate that dependence on energy sources from these countries by increasing our dependence on imported natural gas. Consensus estimates show that the United States will be importing 25 to 30 percent of its natural gas needs within 20 years—most of it from countries that are prone to experience continued political instability and perhaps social collapse.
Clearly, it is in our national interest to maintain and expand nuclear energy in this country for the generation of electricity. It is in the more narrow interest of Texas as well, and I would like to turn now to the energy needs of Texas and how nuclear energy can help.
Growth in population is an obvious predictor of growth in electricity demand. According to the U.S. Census Bureau, Texas is expected to add 12 million new residents through 2030. At the same time, the U.S. Energy Information Administration projects electricity demand in Texas to increase a total of 48 percent by 2030.
Economic growth is another predictor of growth in electricity demand, and the Texas economy is booming. Texans have achieved an average growth in Gross State Product of 3.1 percent per year over the past five years. Texas will need reliable, low-cost electricity in the future to continue this trend—both for commercial and residential customers—to attract and grow businesses and encourage spending and investment.
The Fitch Ratings Firm has concluded that those regions of the country that build new nuclear plants are expected to have an economic advantage over others that don’t. In a 2006 report, Fitch observes that the receptivity to new nuclear plants “will tend to favor lower energy prices in the Southeast and Midwest to the disadvantage of the Northeast and California.”
But the solution, of course, is not simply to build more generation. We must consider the potential impact of the increased generation on the environment—both today’s air quality and longer-term climate change. The Clean Air Act requires us to do this. But so does our responsibility to environmental stewardship—to the kind of Texas that you want to pass on to your grandchildren.
Texas already benefits from nuclear energy. As you know, there are two reactors at the Comanche Peak plant operated by Luminant (formerly TXU), and two reactors at South Texas Project, operated by the South Texas Project Nuclear Operating Company. Combined, these two plants produce 10 percent of the electricity in Texas.
Texas-based companies—responding to the need for new baseload generation—have expressed their intentions to submit an application to the Nuclear Regulatory Commission to build and operate new nuclear plants in Texas—Luminant, for two additional reactors at the Comanche Peak site in Glen Rose; South Texas Project Nuclear Operating Company and partner NRG, for two more reactors at South Texas Project in Matagorda County; and Amarillo Power, for one commercial reactor in Carson County.
In addition, the largest operator of nuclear power plants in the United States—Exelon—announced that it is considering a license application to build nuclear in Texas as well, and is currently considering Matagorda or Victoria County.
The Texas State Legislature—recognizing the value of new nuclear plants to Texas—enacted two laws in May designed to attract nuclear plant construction projects. The first law adds nuclear and advanced coal facilities to those eligible for local taxing authorities to grant temporary property tax relief. The second law authorizes the Public Utility Commission to provide assistance in the collection of funds held in trust for the eventual decommissioning of new nuclear plants.
The mood in our country has fundamentally shifted to one of supporting nuclear energy. Even those that have adamantly opposed nuclear in the past are agreeing nuclear must be on the table. But this is not unqualified support; rather it is couched as one of several “yes, but …” qualifiers. Two of those are used fuel and cost.
I would like to address used nuclear fuel management by dispelling several myths:
The first myth: That there’s a lot of this stuff.
All of the used fuel rods from all the nuclear plants that have ever operated in America would cover one football field seven yards deep. This is a small amount of material.
Myth number two: That used fuel is difficult to manage.
Just the opposite: In engineering terms, used fuel is easy to manage and easy to monitor. Used nuclear fuel is already captured as a solid material that is being stored safely today in water-filled steel vaults or concrete and steel containers.
Myth number three: That the industry doesn’t have a plan for used fuel.
Of course, we do have a plan. The original plan of deep geologic disposition of partially used fuel at Yucca Mountain remains viable and scientifically justified. But a parallel and complementary path features the development of advanced fuel cycle technologies to employ recycling to recover vast unused energy in the fuel, reduce waste volume and reduce radiotoxicity. This new plan involves three stages.
First, interim storage of used nuclear fuel at volunteer sites while reprocessing technology is being developed.
Second, research and development, demonstration, and commercial deployment of advanced fuel cycle technologies to reprocess and recycle used fuel.
And, third, the construction of a permanent nuclear waste disposal facility at Yucca Mountain to isolate the residual byproducts of advanced fuel reprocessing.
This plan has major advantages for our country and specific advantages for new nuclear plant construction. Interim storage decouples the decision to build new plants from the operation of a permanent disposal facility. The permanent disposal facility will be needed, but not any time soon. Reprocessing as envisioned would dramatically reduce the volume and toxicity of the used fuel that must be accommodated at Yucca Mountain.
Another issue I want to discuss is the future cost of nuclear hinged to financing new reactors and the broader challenge of attracting investment capital to refurbish and expand this country’s electric power sector. The electric power sector, over the next 15 years, must invest between $750 billion and $1 trillion in new generating capacity, new transmission and distribution infrastructure, and environmental control technology.
Nuclear construction must compete for investment capital with all of these essential investments. Simply maintaining nuclear energy at 20 percent of U.S. electricity supply, in the face of the predicted growth in electricity requirements, will require construction of about 35 new nuclear power plants by 2030, an enormous investment.
The “all-in” nuclear project costs in construction-year dollars, including interest during construction, represent a substantial financing commitment relative to the market value of the companies that will undertake them. Energy projects on this scale are routine only to major oil companies, who have market capitalizations 10 to 15 times higher than the largest electric companies.
However challenging, construction of new nuclear plants is essential for this country’s energy diversity and clean air requirements. Over the past 15 years, the electric power sector invested heavily in new natural gas plants primarily to address peaking power requirements. Construction of new baseload generation, such as nuclear and coal, all but disappeared. Natural gas plants were preferred because they could be built quickly and at low capital cost. Now, we in Texas and across the country must address that looming 40 percent increase in the baseload requirement.
Fortunately, Congress recognized this financial challenge. The Energy Policy Act of 2005 authorizes the Department of Energy to develop a loan guarantee program to attract private investment and limited production tax credits for energy projects that do not emit greenhouse gases, including nuclear power plants, cleaner coal plants, and wind power.
Texans have joined the nuclear industry and Wall Street investment banks in providing comment to DOE, urging the agency to put forward workable rules for these necessary incentives. Governor Perry, the Bay City Chamber of Commerce and Agriculture and the Matagorda County Economic Development Corporation have all written letters supporting a workable loan guarantee structure for new reactors. We will continue to work together to urge DOE to make the final regulations workable.
We have accomplished a lot, but there is still much to do. Your continued support, and your willingness to take action, will be essential in bringing more nuclear energy to Texas. Expressing your support to your policymakers, both state and federal, will be very important. But equally important will be educating the broader business community and the general public—both in Texas and throughout the country—on the role that nuclear energy must play in solving our energy crisis, preserving our air quality and growing our economy.
I hope that you will continue to join us in this effort. Thank you.