News & Events

As chairman of NEI’s Board of Directors, it is my responsibility to report to you on the state of the nuclear power industry.

Audiences generally expect a pep talk at times like these—a rosy forecast of sunny skies, smooth seas and a following breeze.

Those of you who know me recognize that “pep” is not my thing, particularly in matters of business.

I believe we are best served by cold-blooded analysis, and I fear that we place ourselves at risk if we start believing our own press releases.

Many people—in the political world, in the policy community, especially within our own industry—have great expectations for nuclear power.

Let me be clear—so do I.

Our nation needs more nuclear power, and it will come.

But we must keep these expectations harnessed to fact.

So this morning I will ask you to join me in a clear-eyed assessment of where we stand.

On the one hand, the outlook for nuclear energy is bright and growing brighter.

Our plants are operating well—better than ever, certainly better than any other type of power plant in the United States, and among the best nuclear power fleets anywhere in the world.

Our plants are reliable—turning in an average fleet capacity factor of around 90 percent, year in, year out.  Our best plants run at an astounding 95 percent capacity factor.

They are safe, measured by the industry’s performance indicators and the Nuclear Regulatory Commission’s reactor oversight process.

They are economic and profitable.  In fact, one of the great success stories over the last five or six years has been our ability to hold operating costs relatively stable, even as we have invested heavily in new security enhancements and in the new steam generators and other major components necessary to enable safe and reliable operation for 60 years, not just 40.

License renewal has become a routine undertaking.

Three-quarters of our operating plants have renewed their licenses or indicated formally to the NRC that they intend to do so, allowing us to extract value for our customers and earnings for our shareholders far in excess of what we imagined was possible 10 or 15 years ago.

We have also added 3,000 megawatts of capacity through power uprates, and we’ll add another 2,500 megawatts in the next several years.

It is little short of remarkable that nuclear power represented approximately 20 percent of U.S. electricity supply in the early 1990s, and still represents approximately 20 percent of U.S. electricity supply today, even though U.S. electricity demand has increased by 25 percent in that time, and even though we have fewer plants operating today than we did back them.

I can think of no higher tribute to the officers and employees who run our nuclear fleets.

And we are at long last moving to a time when generating companies will make business decisions to build new nuclear plants.

In fact, 16 companies and consortia are already taking the initial steps—developing license applications for as many as 30 new plants, representing approximately 40,000 megawatts of new capacity.

The NRC has approved early site permits for Clinton and Grand Gulf and will, shortly, for North Anna.

New designs, including the long-awaited “passive safety systems,” have been certified or are undergoing certification review.

Generating companies are ordering long-lead materials—forgings and components.

U.S. manufacturers are gearing up to meet expected demand for vessels and valves, pumps and steam generators, pipe and electrical components, and enriched fuel.

And uranium producers are developing new properties.

And our timing couldn’t be better, for the world is changing.

Fossil fuel prices, oil, natural gas and even coal have again skyrocketed in response to unprecedented worldwide demand.

Domestic fuel supplies have dwindled.
 
We are increasingly dependent upon foreign regimes—often hostile regimes—to heat and light our homes.

We have young men and women fighting and dying in Iraq.

And we are increasingly concerned about the pressing reality of global climate change, an issue that is very real—politically, scientifically and painfully real economically.

As I have said repeatedly, I firmly believe that we will need 20 to 30 new plants by 2030 if we are to have any hope of addressing climate change and enhancing our energy security.

But that is not the whole story.

Despite our demonstrated performance, and despite the demonstrated need, significant regulatory, financial and infrastructure challenges stand between where we are and where we need to be.

First, we all know that the federal government has failed to meet its obligations under the Nuclear Waste Policy Act.

Over the past 30 years, the American people have paid almost $30 billion to develop a permanent repository for spent fuel.

And sadly, we are not much further along today than we were 10 years ago.

Rather than engaging in continued accusations and recriminations, it’s time for both government and industry to acknowledge political reality.

We must accept that the operation of a permanent disposal facility at Yucca Mountain will not happen soon—certainly not by the 2017 date currently advertised by the Department of Energy.

An alternative must be found if we truly believe that nuclear is essential not only to achieve meaningful reductions in carbon emissions, but also to enhance our national energy security.

I support NEI’s position that long-term interim storage is that alternative.

We must establish a process under which the federal government takes title to spent fuel, and moves it from reactor sites to one or more federal locations for consolidated interim storage.

Long-term interim storage would demonstrate that the government is capable of meeting its statutory obligation to remove spent fuel from our reactor sites.

It decouples the decision to build new nuclear power plants from the operation of a permanent disposal facility for used fuel or the waste byproducts of nuclear fission.

And it gives us time to complete the technology development to close the nuclear fuel cycle, which will dictate the type of waste byproduct that will require long-term disposal.

While permanent disposal at Yucca Mountain or a similar facility remains a long-term imperative, we lose nothing if the operational date slips to 2025 or 2035 or even some later date.

But we risk losing everything if we cannot tell our friends and neighbors, with confidence, that the federal government has met its commitment to safely store spent fuel.

Second, we need to come to grips with the substantial financial challenge of building new units.

There is a myth that the Energy Policy Act of 2005 provided the nuclear power industry everything it needed—and perhaps more than it deserved—to finance the construction of new nuclear plants.

It will take a certain amount of courage to tell the politicians that it just isn’t so.

The production tax credit marginally improves the financial attractiveness of a project after it’s in commercial operation.  But it provides no help during construction, which is our major challenge.

The standby support is limited.  It covers debt service up to certain limits for a limited period of time, but would not cover other substantial costs borne by a nuclear plant subject to a delay in commercial operation.

And two years after passage, we still do not have final regulations to implement the loan guarantee program.  The Department of Energy has yet to hire staff to evaluate projects.  Neither the Congress nor the White House have provided sufficient loan authorization to support even one new nuclear plant.  And we have no idea what a loan guarantee will cost.

But it will take even greater courage for us to admit to ourselves that in the long run the federal government cannot and will not be the financier of first or even last resort.

While the federal government must play a role in providing the initial incentives to jump-start the industry, including, most particularly a robust and workable loan guarantee program, over the long term, both state regulators and the industry will have to step up if we are to successfully build the nuclear capacity the nation needs.

I have great concern that none of the current state regulatory models, be it rate base, integrated resource management or competition, will support the level of expenditure necessary to construct the next generation of plants.

The history of the last several decades, fairly remembered, makes plain that no regulatory model is safe in a time of rising prices.

Can my friends at Southern and Duke rely upon the rate-base regulation that prevails in most of their jurisdictions during times of rising prices?

Based upon my experience in New England in the ‘80s, only if every plant comes in at the right time and the right cost.

Can the Exelon companies rely on competitive markets when they are subject to the same stresses?

Only if prices are allowed to reach levels that support new construction, and right now that seems unlikely.

Will state governments maintain any regulatory bargain, no matter how explicit, in a volatile market?

They will have to, if we are to succeed.

And then the industry itself must be prepared to confront new risks and financial challenges.

New nuclear plants are extremely large capital investments—probably on the order of $5 billion in today’s dollars.

I have seen estimates ranging from $2,000 to $4,000 per kilowatt.

Capital projects of this magnitude are typically undertaken by companies with market values many times larger than even the largest U.S. electric power company.

If we truly believe in a new generation of nuclear generating facilities, we must be prepared to employ the same discipline, and many of the same techniques, that have enabled us to dramatically improve the performance of our existing fleet.

We will have to exercise rigid financial management and discipline.

We will have to work together in consortia and through NEI.

And ultimately, we will have to consolidate the industry into larger and larger generating companies for which nuclear power is a core business.

Third, and finally, we must address infrastructure.
 
It is no secret that the intellectual and manufacturing infrastructure that once supported this industry has atrophied over the past 20 years.

Hard to imagine it wouldn’t, given the lack of construction over the period.

And although we have seen recent encouraging signs that it can be revived, such as Tennessee Valley Authority’s successful effort to restart Unit 1 at Brown’s Ferry, we cannot assume that the infrastructure we need will be there unless we take steps to ensure that it is.

Unlike the spent fuel issue, and unlike the financial issue, infrastructure is, first and foremost, an industry responsibility.

Although there is revived interest in the manufacturing sector in the U.S., it is not nearly enough to impact expected forging bottlenecks in Japan and France.

And baby boomer demographics are impacting the availability of required talent.

Engineers and designers, qualified craft workers, experienced construction project managers—all need rapidly refurbished development pipelines, along with an infusion of Asian new-build experience.

In sum, the state of the industry is good—not sure our “renaissance” is in full flower.

As long as we remain clear-eyed, as long as we are not too dazzled by our triumphs or too worn down by our difficulties, we will endure and we will prosper.

I have every confidence that we will build the next generation of nuclear power plants in America. Partly because we are committed to that end. Partly because the American people need and want what nuclear plants deliver—large amounts of clean, reliable, safe electricity, day in and day out, sun or no sun, wind or no wind. And mainly because it has been my long experience that what the American people need and want, the American people generally get.