News & Events

Good afternoon. It’s a pleasure to join you for this year’s KAIF/Korean Nuclear Society conference.

One of the first times that I traveled to Asia for our industry was in 1997 for the United Nations climate change conference in Kyoto. I remember that it was really the first time that nuclear power advocates from Korea, Japan, the U.S., Europe and Canada began to gain widespread recognition in the U.N. forum for the role of nuclear energy in reducing greenhouse gases.

Last year – a decade later – the United Nations’ Intergovernmental Panel on Climate Change listed nuclear energy as a key greenhouse gas mitigation tool both for today and tomorrow.  It took a substantial effort by the industry to be recognized by some leaders and groups among the technology-based solutions to climate change. 

But today, more than ever, nuclear energy’s clean air benefits are playing a significant role in our countries.  And that carbon-free electric production is attractive to developing nations that are exploring nuclear power as part of their energy future.

Several factors are driving the resurgence of nuclear energy, including increased support from both the public and policymakers.  Some of the most important drivers of this increased favorability are:
    Safe, efficient nuclear plant operation
    Carbon reduction.
    Energy security.
    The need for baseload electric supply.
    Energy diversity.
    And economic electricity production.  

These also are many of the same attributes that drove the rapid expansion of nuclear energy in the United States and in other nations after the Middle East oil embargoes of the early 1970s.

U.S. energy companies are again considering construction of advanced nuclear power plants because the fundamentals of the electric power business demand it.  The need for new baseload generating capacity is unmistakable.  In fact, four U.S. regions are dangerously below accepted reserve margins for electric capacity.
Moreover, the U.S. electric sector’s dependence on natural gas exposes our customers to unnecessary price volatility, and our companies to unwelcome political stress and regulatory pressure.  And uncertainty over future controls on carbon emissions will cast a cloud over coal-fired power generation for as long as we avoid our responsibility to address the climate change issue squarely.

It is crucial that as the U.S. industry pursues new reactor construction, that all leaders in the industry, in the policy community and in the financial community share a reasoned perspective on the business risks of new nuclear plant construction.

We know there will be major challenges associated with bringing new reactors to completion without delay and within budget.

But we also know that many of the conditions that led to cost increases and construction delays for many U.S. operating nuclear power plants no longer exist, that the remaining risks are reasonably well-understood, and that the industry has taken steps and created mechanisms to manage and contain those risks.

My focus today is on U.S. policy and the strategic plans for long-term energy security and environmental protection and the expected role of nuclear power in pursuing those goals.

I want to begin framing that issue with a brief summary of last year’s U.S. nuclear power plant performance, then turn to steady public support for nuclear energy, where U.S. companies stand with new nuclear plant development, and what we can reasonably expect going forward.

We approach the business of new plant construction as a risk-management exercise, and the industry has worked together over the last several years to identify, understand and manage the business risks associated with new nuclear plants.

And although we have wrung much of the risk out of the business, it’s impossible to drive all risks to zero.

The performance of U.S. reactors in 2007 was outstanding.

We continue to see average capacity factors sustained at very high levels.  Our preliminary data show that the fleet last year operated at almost 92 percent, the highest ever.

This obviously reflected excellence in plant management and operations, and management of outages.

We estimate output was at record levels, about 807 billion kilowatt-hours – mostly the result of high capacity factors, but also partly due to more capacity available, both because of power uprates and the restart of Browns Ferry Unit 1 last May.
Although nuclear power represents slightly more than 10 percent of installed electric generating capacity, 104 reactors generate nearly 20 percent of U.S. electricity.

High output obviously drives economic performance.  We estimate production cost last year at $16.80 per megawatt-hour—a record low.

That implies a total busbar cost of around $22 to $23 per megawatt-hour – comfortably below where all major U.S. electricity markets cleared.

So these plants generate substantial income and drive earnings for their owners and will continue to do so.

Safety and Awareness of Clean Air Benefits Build Strong Public Support

This steady safe and efficient operation of U.S. nuclear plants is the underpinning of favorable public and policymaker support for nuclear energy in America.

From the most recent survey of public opinion sponsored by NEI, eight out of 10 Americans surveyed believe that nuclear energy will play an important role in our energy future.  The same number believes that U.S. regulators should renew the operating licenses of reactors that continue to meet safety standards.

Looking at future electricity production, three quarters of those surveyed support activities by electric companies to prepare to build new reactors.  In fact, we’ve seen very little organized opposition to date for the nine license applications that have been filed with the Nuclear Regulatory Commission.

When it comes to new reactors, 62% agree that electric companies should “definitely build” new reactors.  We intentionally ask the question with those words to measure the strength of support among the public.  Nearly six out of 10 people would find it acceptable to add a new reactor at the existing nuclear plant nearest to where they live.

On the issue of safety, 53 give U.S. reactors a high safety rating—5 to 7 on a 1 to 7 scale where 1 is a low safety rating and 7 is a high safety rating.  We are somewhat concerned the percentage of the public assigning a high safety rating to U.S. plants has declined from a high of 66% in 2005.

This slide shows the steady increase in support in recent years for definitely building new reactors.  This tracks similar trend lines in favorability of nuclear energy overall.

We also know that the closer you get to nuclear plant sites, the more favorable that the public is to nuclear energy.  They know people who work at the plant, realize the economic benefits from the plant and know workers at the plant who are involved in their community.
Remember that 59% of the public said that they would find it acceptable to add a new reactor at the nuclear plant closest to where they live.  Among residents within 10 miles of U.S. nuclear plants, 71% said they would find a new reactor in their community acceptable.

That’s not surprising given that 86% of plant neighbors have a favorable impression of the nuclear power plant closest to their community.

New Nuclear Plants: Progress and Expectations

U.S. nuclear plants clearly represent a solid platform from which to launch the next generation of reactors.  Let me summarize where the U.S. industry stands and what we expect over the next several years.

Seventeen companies or groups of companies are preparing license applications for as many as 31 new nuclear reactors.  Nine applications for construction and operating licenses (COLs) have been filed with the Nuclear Regulatory Commission through early April.  Another 7 to 11 are expected this year.

We expect the first new reactor license approvals in late 2010, early 2011.

Two advanced reactor designs have already been certified by the NRC.  Two were submitted for certification last year.  One has been submitted this year. 

A reasoned perspective on the “renaissance” of nuclear power in the United States suggests that it will unfold slowly over time.  We expect four to eight new plants in commercial operation by 2016 or so.

The exact number will, of course, depend on many factors – forward prices in electricity markets, capital costs of all baseload electric technologies, commodity costs, environmental compliance costs for fossil-fueled generating capacity, natural gas prices, growth in electricity demand, and more.

If those first nuclear plant projects are built on schedule, within budget estimates, and without licensing difficulties, a second wave could be well under construction as the first wave reaches commercial operation.

The confidence gained by success with the first projects will support the decision-making process for follow-on projects.

Managing the Business Risks of New Nuclear Plant Construction

The companies operating nuclear plants in the United States today, and preparing to build new ones starting in the next decade, are operating to higher standards.
Today’s nuclear industry has learned from the experiences of the past – including many lessons learned and good practices from this country – and those lessons inform everything we do.

The U.S. industry is positioned well for growth today because the industry started many years ago on a systematic program to identify the business risks of building new reactors and to develop ways to eliminate or manage those risks.

In some areas, like licensing, we assembled several hundred industry personnel to review the NRC’s new reactor licensing process, under which designs and sites would be approved up front and companies would receive a single license to build and operate.  The industry review identified ambiguities and potential uncertainties, and developed techniques to eliminate them.  The result is a stable, workable platform for new nuclear plant licensing and construction.

Last year, NRC finalized its new plant licensing regulations, and those revisions were subject to review and comment by all stakeholders, including the nuclear industry.

We followed the same approach in other areas – financing, for example.

For the industry, the loan guarantees in the 2005 Energy Policy Act are critical to new nuclear plant financing.  I would guess that hundreds of industry experts have been working in earnest since 2000 developing tools, techniques and programs to manage the risk of new nuclear plant construction.

We have mobilized experts in licensing and regulation, financing, construction management, political affairs, public support, supply chain, and work force.

Seventeen entities developing license applications for up to 31 new reactors did not just happen. It has been carefully planned.

The new licensing process is markedly different from the old.

The process is restructured to ensure that all major issues – design, safety, siting and public concerns – will be settled before a company starts building a nuclear plant and puts billions of dollars at risk.

The regulations are stable, well-understood, workable and defined in great detail.  Equally important, NRC staff and the industry share a common understanding of how to comply with its terms and conditions.  Nothing like this existed when today’s plants were licensed.

All applications for licenses to build a specific reactor design will be identical – virtually word for word – except for site-specific variations.  When the NRC staff has reviewed an issue once, that issue should not be reviewed again in subsequent applications.  This produces greater regulatory certainty.

The new licensing process includes a system by which the NRC and the project sponsor can verify that the plant has been built in accordance with the design.  As construction proceeds, the project sponsor will perform the tests necessary to demonstrate that this acceptance criterion has been met, and provide written documentation to that effect to the NRC staff. 

And finally, the NRC licensing process establishes a high threshold and a narrow focus for intervention after the COL is approved and construction begins.

Here is the new NRC licensing process for new reactors in the U.S.

Before the license application is approved and before major capital investment has occurred, the NRC must offer the public an opportunity for a hearing and will review the staff’s conclusions in what is known as a mandatory hearing.

There is one opportunity for a second hearing as the date for fuel load and initial plant operation approaches.  But this hearing, if it occurs, is narrowly focused, and the Commission itself will review contentions to determine whether or not they are admissible.

The new process provides appropriate opportunities for public participation while protecting project sponsors from inappropriate delays.

The interest in new nuclear plants has led to questions about whether there is an adequate supply chain and work force infrastructure to meet the near-term needs of the industry. 

Market studies indicate that the manufacturing supply chain should be adequate for the first wave of new nuclear plants.

Forgings, particularly the ultra-heavy forgings used to fabricate the reactor pressure vessel, are the most visible constraint and the one that has received the most attention. As you know, only Japan Steel Works currently has the capability to make these 350-ton-plus forgings.

The ultra-heavy forgings for the first wave of U.S. nuclear plant construction have already been manufactured or companies have reserved a place in the manufacturing queue.

Companies also are taking the first steps toward rebuilding U.S. capability for nuclear-grade component manufacturing.  Many have taken steps to obtain certification to produce nuclear-grade components and equipment, and conduct nuclear-grade construction.

We are working with the federal government, state governments, universities and community colleges, high schools, labor unions, utilities, other trade associations and professional organizations to address the work force challenge.

We are promoting nuclear energy careers and employment opportunities among younger people.

And we’re making progress.

As one measure of this progress, at the university level, enrollment in nuclear engineering has quadrupled in recent years.

In the areas of radiation protection, operations, and maintenance, 17 industry-community college collaborative training programs have been launched, most within the past three years, to bring younger workers into these fields.

To attract workers to skilled craft careers and provide appropriate training and education, the industry has participated in the formation of 10 consortia and other collaborative arrangements among state governments, industry and academia.

Like all new generating capacity in the United States, there is considerable uncertainty about the capital cost of new nuclear generation.  As with virtually all projects today, we are working in an evolving cost environment for basic commodities and labor. 

New baseload generating capacity – nuclear or coal – will be expensive.  These are large, capital-intensive projects.

Financial analysis shows, however, that new nuclear plants can deliver electricity in the range of $70 to $80 per megawatt-hour, when they come to market starting around 2016, assuming limited credit support from the federal government in the form of loan guarantees or supportive cost recovery policies at the state level. 

Analysis by NEI and other organizations show that this would be competitive with other options – coal-fired or gas-fired.  Analyses by some of NEI’s member companies demonstrate that nuclear power plants are the most economic option for large-scale electricity production for the next decade.

The Challenges

I will conclude my remarks with a few thoughts about the path forward for the U.S. nuclear energy industry.
Like any industry, and especially those working to meet future energy requirements, we face uncertainties.

We have a high degree of confidence that the new nuclear plant licensing process is well-structured and will work as designed, but it has never been tested and we cannot guarantee zero risk.

We face major changes in the U.S. government in the next year, with the election of a new president and elections for members of Congress.

We find ourselves operating in an evolving cost environment, which makes it more difficult for generating companies, reactor suppliers and engineering, procurement and construction contractors to come to contract terms.  But we are getting there with precision.

And finally, these are large capital projects relative to the size of the companies that will build them, which brings additional complexity to the table. It will require creative partnerships and joint ventures as the U.S. prepares to invest some one trillion dollars in electricity sector expansion and environmental compliance technology between now and 2020.

On the other hand, we think the uncertainties are manageable.

We enjoy good bipartisan political support, and strong support from the public.  In some communities, a new acronym for facility siting – PIMBY, or Please, In My Back Yard – has emerged as a symbol of their support for new reactors.  Significantly, support among Americans perhaps for the first time ever is almost evenly dispersed by political ideology. That shows the growing linkage between nuclear energy and climate change solutions. 

And we see growing acceptance of nuclear power in the environmental community, again driven by concerns over climate change and carbon emissions.

The licensing process is indisputably more efficient and predictable than when we last built nuclear plants in the United States. We understand what went wrong the last time and we’ve taken steps to remove or mitigate those risks.
There’s no doubt the U.S. needs new baseload generating capacity.

Our view of the future, then, is positive and grounded in reality.

We understand the risks associated with new nuclear plant construction.  We have taken steps, implemented programs and, where necessary, overhauled the system to mitigate and remove those risks.

We will take a measured approach to new nuclear plant construction.

Better to do it right than do it fast.

In our view, the uncertainties associated with nuclear energy are no larger than the risks facing the other options for baseload electricity. 

New coal-fired capacity has its own challenges, and only some of those are identified and understood.  That helps explain why 28,500 megawatts of coal-fired capacity was announced in the United States in 2006 and 2007, and all but about 6,000 megawatts of coal-fired capacity was postponed or cancelled.

But since new nuclear power plant construction will ramp up slowly, and since companies cannot predict future constraints on carbon emissions, we see the United States burning growing volumes of natural gas to meet demand for electricity.

This is not an ideal energy policy for the U.S. More gas-fired generation will place additional strain on natural gas supply and will drive even more jobs in the chemical and fertilizer industries offshore.

As we move toward construction of new nuclear plants, our stakeholders and consumers can count on two things. 

First, we will maintain our commitment to continued safe and reliable operation of our current fleet. 

Second, as policy on climate change continues to evolve, nuclear energy will be a vital part of any energy portfolio that addresses the dual goals of energy supply and reduction of greenhouse gases.

To paraphrase the World Economic Forum’s report on 2008 global business risks, for some the objectives of secure, reasonably priced energy and reductions in emissions of greenhouse gases seem both out of reach and in conflict.  But failure to develop a clear holistic policy approach to managing energy security and reducing carbon emissions may end up threatening both objectives.

Thank you.