News & Events

Thank you, Ken, and good afternoon. It’s a pleasure to be here again. Around five years ago I talked to this group about fundamental changes under way in the energy industry. Then, electric utilities across the country were dealing with the unintended consequences of a patchwork of deregulation efforts. Electric utilities, the classic “widows and orphans” investment, became as volatile as the trading pit at a commodities exchange. It seemed the electric industry was making headlines daily.

Unfortunately, the headlines were rarely positive. Most dealt with power shortages, soaring prices, trading disasters and the swift consolidation of our industry. At the extremes, we saw one of the 10 largest corporations in America, Enron, disappear in a blitz of scandals. Pacific Gas and Electric, one of the most respected names in our industry, was forced into bankruptcy by a regulatory scheme created by California that was positively insane. Two other California utilities teetered on the brink and, ultimately, the fiasco cost Gov. Gray Davis his job.

I wish I could tell you that all of this ended with California. But other states created new regulatory rules based on market rates but then enacted multiyear transition periods. Those transitions are now coming to an end, and we’re seeing another wave of silliness.

In Maryland, Constellation Energy’s Baltimore Gas & Electric subsidiary announced a 72 percent rate increase for residential customers to bring it in line with the market. The legislature promptly tried to fire the Public Service Commission, the Maryland Supreme Court denounced the legislators’ actions as unconstitutional, and just two weeks ago, as the new governor was trying to clean up the mess, the Commission chairman resigned.

In Illinois, a similar story is unfolding. Illinois’ utilities were forced to sell most of their power plants and required to buy electricity from the marketplace. After a five-year transition, companies like Exelon went out for bids and came home with sticker shock. Then, to shield residents and businesses from unstable and much higher market rates, the state told the utilities that they’d have to eat the difference— meaning utilities would lose money on every kilowatt of electricity they sold. Exelon’s Commonwealth Edison unit has said that will lead to certain bankruptcy if a deal is not cut. But that’s another story, for another time. It does, however, drive home the point that electric markets can be exceedingly volatile if not handled carefully.

When I addressed this group in 2002, my comments about nuclear energy were brief and pretty discouraging. I predicted that while most nuclear power plants would have their licenses renewed, no new nuclear power plants would be built in the U.S. to accommodate growing demand.

Today I’m here to tell you that I was dead wrong. Despite the condition of our economy, within the next decade, Michigan—and the rest of our country, for that matter— will need more electricity … a lot more, and pollution-free nuclear power has to be an important part of the mix.

Today I am pleased to announce that DTE Energy has started work on preparing a license application for a new nuclear plant at our existing Fermi site near Monroe. This is the first step to providing clean, reliable and affordable energy for the better part of the rest of this century. And with it we will provide thousands of highly paid jobs to highly skilled Michigan workers. But despite my enthusiasm, let me be clear that we have not yet made a final decision to build. Rather, we are preserving our option to build at some point in the future by beginning the long and complex licensing process now.

Given the four-to-five-year time frame for the federal licensing process, and the five-to-six-year construction period, we need to take this step immediately to have any chance of having a new plant operating in the next decade. Also, moving ahead now positions us to take advantage of the attractive, but time-limited, financial incentives included in the Energy Policy Act of 2005. We’ll keep you posted as we move through this challenging process.

As demand grows for electricity, so should nuclear energy’s stake in our nation’s fuel mix. A report by the North American Electric Reliability Council warns that U.S. demand for electricity is increasing three times as fast as resources are being added to our electric grid.

The U.S. Energy Information Administration predicts that by 2030, electricity sales in our country will increase by 45 percent. Just to keep our current fuel mix, we’ll need 50 additional nuclear plants, 93 wind farms (with thousands of windmills), 279 natural gas plants and 261 new coal plants. Even if you cut those numbers in half, we need a massive infrastructure construction program.

Closer to home, our state will require at least one new baseload plant by 2015, according to the just-published Michigan 21st Century Energy Plan. And we’ll need additional plants soon after that.

How will we address the growing need for electricity? You’ll hear a lot of talk in the coming months about energy efficiency, renewable energy and new technologies. We need them all. But if we’re brutally honest with ourselves, they are only a part of the solution for the foreseeable future. To put it another way, we will never run an auto assembly line or a cold-rolled steel mill using windmills or solar panels. You need big baseload nuclear and coal power plants to keep them running.

That’s what I’d like to talk about today— the resurgence of nuclear energy and the vital role I think it will play in powering the future of our nation and our state.

It’s easy for me to admit my flawed prediction of five years ago because it’s incredibly exciting for me to be standing before you discussing the possibilities for nuclear power.

My experience in the nuclear industry dates back 36 years when, to become a commissioned officer on a nuclear submarine, I had to run the gauntlet of an Admiral Rickover interview just to get into the program. Admiral Rickover, of course, was the father of the nuclear Navy. Every officer who qualified in nuclear submarines had to pass his scrutiny, and then learn in endless detail both the elegance and the complexities of the technology.

Later, in my civilian career in a large law firm, I worked on licensing proceedings for nuclear plants. That led to a position at Long Island Lighting Co., where I was introduced to the bare knuckles politics of the technology. I arrived in New York in time to complete the 20-year licensing and construction process for the Shoreham nuclear power station, a saga marked with bitter political battles. Ultimately, we sold a perfectly good plant to the state of New York to end decades of controversy. The state shut down the plant. And Mario Cuomo lost his job in the fallout from that decision.

When I moved to Detroit Edison in 1994, the utility had just recovered from the financial stress associated with building its Fermi 2 nuclear power plant. In those days, the financial risks associated with nuclear plants— licensing, construction and operations— were overwhelming. Based on what I’d experienced, I would have bet money that I’d never see a new nuclear plant built in this country in my working lifetime. Now, as chairman of the Nuclear Energy Institute, the trade association of the American nuclear industry, I can tell you that I was sorely mistaken. Today, there are plans pending for building up to 32 new reactors across the country. Utilities have spent more than $1.5 billion so far in the planning stages. While no shovel has hit the ground yet, the change in the environment is unmistakable.

What happened?

I’ve already mentioned the growing need for large-scale baseload electric generation. If we don’t start soon, the California energy crisis will seem like a minor inconvenience.

The increased volatility of natural gas prices and limited supply also has played a role. In the early 1990s, natural gas was inexpensive and gas-fired generation was a low-risk investment. Federal policy encouraged a massive build of gas-fired plants, but discouraged exploration and production of gas in areas considered environmentally sensitive. Since the laws of supply and demand had not been repealed, gas prices skyrocketed. At today’s prices, natural gas-fired power is not a cost-effective option.

Growing environmental concern is another factor causing the public to take a closer look at nuclear energy. With mounting evidence of the negative impact of carbon emissions and greenhouse gases, nuclear power is an attractive alternative to fossil-fuel generation. Nuclear power plants do not emit any greenhouse gases or controlled air pollutants.

The superb performance of our nation’s 103 operating nuclear plants is another reason to revisit this technology. With plants operating at or near record levels during the past six years, we’re more comfortable with nuclear power. It’s proven itself clean, safe, reliable and affordable. And that’s with a generation of plants designed in the 1960s and 1970s.

The Nuclear Regulatory Commission has already certified new standardized advanced-plant designs for the United States. These next-generation nuclear plants incorporate features designed to make them simpler, safer, and less costly to build and operate. Some of these simplified plants have been built overseas in a fraction of the time it took to build our current plants.

As a result, nuclear energy is finding favor with growing numbers of people and institutions. Who would have thought that a co-founder of Greenpeace and the author of the Whole Earth Catalog would become advocates of nuclear power? Yet Patrick Moore and Stewart Brand agree that nuclear energy must be part of America’s energy future.

In fact, seven in 10 Americans now favor the use of nuclear energy to produce electricity, according to a 2006 national survey prepared by Bisconti Research for the Nuclear Energy Institute. The survey found that the public associates nuclear energy most closely with clean air, reliability, efficiency and energy independence.

And many people in Michigan agree. In November, a national group advocating for nuclear energy launched its efforts in Michigan and announced a state coalition to further its cause. The Clean and Safe Energy Coalition— or CASE Coalition, as it’s called—is aggressively promoting nuclear energy as part of an affordable, reliable, and clean electricity supply for our state and the nation.

Membership in this coalition in Michigan is as diverse as the Michigan Chamber of Commerce, labor organizations like the Teamsters and International Brotherhood of Electrical Workers, the Michigan Retailers Association, state representatives, senators, civic leaders, and business leaders across the state.

So why the buzz? First, nuclear plats provide low-cost electricity at extremely high levels of safety and reliability; second, it’s electricity produced at a stable price without the punishing volatility of gas-fired generation; and third, it’s power generation with a negligible impact on the environment.

This final point has become one of nuclear’s strongest assets. Nuclear plants emit no carbon dioxide, which creates greenhouses gases. They emit no sulfur dioxide, which produces acid rain. And they emit no nitrogen oxide. That means no ozone. The U.S. Department of Energy says that the single most effective emission control strategy for utilities has been to increase nuclear power production.

It will be more than just utilities that benefit. With the increased emphasis on plug-in-hybrids in the automotive sector, those vehicles will only be as clean as the fuel used to make the electricity.

Reliable. Affordable. Clean. Other plants have one or two of these attributes, but only nuclear plants can boast all three.

Fitch Rating agency recently said it right: “It is no longer a question of whether there will be new nuclear plants.” So what’s the holdup?

I’ve already mentioned my personal experience— the siting, permitting and licensing processes for nuclear plants historically have been lengthy, and up-front capital costs are steep. From application to operation, it takes at least a decade to build a nuclear power plant, and it comes with around a $3 billion price tag, depending on its size.

Fortunately, at the federal level, the Energy Policy Act of 2005 had a number of innovative provisions to facilitate the licensing process and reduce financial risk.

At the state level, we still have major barriers. What company would be willing to make a $3 billion investment without some sort of assurance that it could recover its costs? That’s the dilemma for Michigan utilities caught in a hybrid regulatory environment. The partially regulated and partially competitive structure in Michigan fails to provide the certainty required for the power plant investment critical to the state’s future. Michigan must take control of its energy fate and fix its regulatory structure. I’m pleased to say that Michigan’s recently released 21st Century Energy Plan recognized the need for structural changes. Now we have to be bold and make them.

Another perceived hurdle is the disposal of used nuclear fuel. Yucca Mountain was designated by Congress as a national repository site in 2002 after decades of scientific study. Nuclear energy customers across the United States have already paid $28 billion through their electric bills to fund this project.

However, Nevada has opposed the project at every turn, and Congress has used most of the funds to balance the federal budget. As the debate over where to store waste continues, the United States is producing 2,000 metric tons of used fuel each year, with 50,000 metric tons held on site at existing nuclear facilities. While that approach may be inefficient, it is perfectly safe.

For example, at our Fermi 2 nuclear plant, used fuel has accumulated in our fuel pool, which will reach capacity in 2010. We will build a dry cask storage facility similar to the two other facilities already in place at other Michigan nuclear plants. These facilities can safely store waste for decades.

Meanwhile, the current political stalemate over long-term solutions may be a blessing in disguise. While the Department of Energy is targeting 2020 to begin accepting used fuel rods at Yucca Mountain, progress has become problematic since U.S. Sen. Harry Reid from Nevada, a long and vigorous opponent of the Yucca repository, has become the Senate Majority Leader. We now need to explore other options. In fact, the nuclear fuel left in these used fuel rods has immense value, so we really do not want to “dispose” of them. The political logjam on Yucca may give us the opportunity to rethink nuclear fuel policy.

The bottom line is that the used fuel debate is a political and policy debate, not a safety debate. Used fuel can be stored for decades in fuel pools and dry cask storage sites in total safety. We cannot delay the start of a new generation of nuclear plants while waiting for these endless political debates to play out.

While my theme today is the revival of nuclear power as a major part of the path to a clean, safe and affordable energy future, it’s not a “uranium bullet”— no single source of energy can or should supply all our needs. The key is maintaining a diverse mix of fuels in our energy portfolio.

Today 27 percent of Michigan’s electricity is generated by four nuclear plants. Coal fuels about 58 percent of total generation, and natural gas fuels more than 11 percent.

Given these numbers and despite all the talk about climate change and carbon dioxide emissions, the reality is coal-fired generation will be the workhorse of the American electric grid for most of this century. Our challenge is to continue to develop technologies to make new coal plants cleaner than ever.

We also need to accelerate our development of renewable energy resources. These resources can play a useful role in helping us meet our goals.

At DTE Energy, we announced a new program called GreenCurrents that will give our 2.2 million electric customers a renewable energy option. Once it’s approved by the Michigan Public Service Commission, this voluntary program will give customers the ability to buy power created from wind, sun, water, biomass and other environmentally friendly sources for just a few additional dollars a month.

Our company already produces alternative energy through biomass projects. We are also an industry leader in reforestation projects, and in wildlife habitat restoration and preservation.

Finally, we need to aggressively pursue programs to help consumers and businesses be more efficient in their use of energy. This is easier said than done. It’s like trying to force consumers to give up their SUVs.

When I was president of Long Island Lighting Co., we launched an aggressive energy conservation program in the wake of the loss of the Shoreham nuclear plant. One of the offerings was a time-of-use rate structure that sold discounted electricity in off-peak hours.

Wanting to lead by example, I signed up for the rate and proudly informed my wife, Sarah, that she would now have to do the laundry after 10 p.m. to take advantage of the great deal. Well, with four young boys, we were off that rate very quickly.

Our challenge will be to find easily understood programs that are in the economic best interest of both the customer and the utilities offering them. Detroit Edison has done that in the industrial sector. As part of contractual agreements with our largest industrial customers, a staff of 60 people have helped those customers save over $400 million in the last 10 years. We just need to get the incentives right.

Everyone in this room understands that our economic growth is inextricably linked to affordable, abundant electricity. You know that and I know that. And so do the policymakers in many countries across the globe.

That’s why a nuclear renaissance is already occurring in many parts of the world. Currently, 30 countries worldwide are operating 442 nuclear reactors for electricity generation, and 29 new nuclear plants were under construction in 12 countries … but none in the United States.

France’s 59 nuclear power plants generate more than 78 percent of its electricity. China and India are both embarking on ambitious plans to add more nuclear capacity over the next decade.

China plans to add as many as 63 nuclear reactors, nearly quadrupling its current fleet of 16. India is building seven reactors. Russia is building five, with plans for 42 new nuclear plants by 2030.

Here in Michigan, we have the opportunity to participate in the early stages of our nation’s nuclear energy resurgence while providing solid solutions for concerns about the environment, energy reliability and energy costs.

Moreover, nuclear power plants provide thousands of highly paid construction jobs and long-term employment for hundreds of engineers, scientists and skilled technicians—just the kind of new economy jobs we need.

But Michigan must act to remove its regulatory barriers. If that happens, DTE Energy is committed to keeping nuclear energy as a critical and growing segment of our energy portfolio well into the 21st century.