News & Events

Good morning and thank you for joining us at the 2010 Nuclear Energy Assembly.  It is the privilege of NEI’s chairman each year to provide an overview of the nuclear industry’s performance over the past year, as well as the political, regulatory and public environment in which our industry is working.

The past year has been difficult economically for many industries, including the electric power sector.  Electricity demand, especially from our big industrial customers, was down significantly compared to pre-recession levels. 

Nuclear power plants continue to be profitable and still are generally the lowest-cost producers on the electricity system, but our industry is not immune to the financial pressures confronting the rest of the economy.  Plans for major capital projects, including some new nuclear plant projects being proposed, have slipped by a few years.  This is partly because electricity demand is lower than expected and partly because of near-term financial pressure on the companies. 

However, the long-term perspective for nuclear energy has not changed.  The first new reactors are scheduled to come online around 2016 or 17 and that is just the beginning of the first wave of new reactors. 

The nuclear energy industry is putting in place assets that will deliver reliable, carbon-free electricity and provide a hedge against future environmental restrictions and against volatility in natural gas prices almost to the next century.  That is why companies are moving ahead with new reactor construction.  These projects are in the best interests of our shareholder and consumer interests for the long-term.

The nuclear energy sector is well-positioned for expansion.  Nuclear energy has strong, bipartisan political support driven by high public favorability for nuclear energy and growing recognition of nuclear energy’s environmental and energy security benefits. 

There is widespread, bipartisan recognition that any credible program to reduce carbon emissions must include new nuclear power plants.  Senators John Kerry, Joe Lieberman and Lindsey Graham certainly believe that and fashioned a robust nuclear energy title for the climate change bill they developed for Senate consideration.

Construction and operation of new nuclear facilities and the supply chain for our industry will create high-quality, sustainable jobs and economic growth.  The industry’s expansion also means expansion in diverse industries that support nuclear plants, including manufacturing components needed to build and maintain these plants; the design and fabrication of fuel; and the educational programs needed to prepare workers for a future in this industry. 

In the past few years, when many industries have lost jobs, the nuclear energy industry has spurred the creation of some 15,000 jobs.  Looking forward, the industry would create 89,600 jobs and drive $1.7 trillion in economic value in local communities near new reactors over 60 years if we expanded nuclear energy based on the Electric Power Research Institute’s PRISM model.  This analysis includes building 64 gigawatts of new nuclear energy capacity to meet both growing electricity demand and carbon reduction targets.

The Obama administration is supporting our industry, putting the loan guarantee program for new clean-energy projects on a more secure footing and awarding the first conditional loan guarantee for a nuclear energy project to Southern Company in February. 

Nuclear energy also has strong bipartisan support in Congress and increasingly in state governments as well.  Several states are exploring nuclear energy as one strategy to meet future electricity demand while reducing carbon emissions.  In Iowa, Gov. Chet Culver recently signed a law that provides funding for the state to study potential sites for a new reactor in that state.  Other states are seeking to overturn moratoria on the construction of nuclear plants, and there has been good progress in that area over the past year. 

Not all facets of our industry are well positioned, however.  I am disappointed that the administration has terminated the Yucca Mountain repository licensing effort.  The federal obligation to manage used nuclear fuel is unambiguous and the Energy Department—with the concurrence of Congress and previous administrations—had been developing a repository at Yucca Mountain for stewardship of the nation’s reactor fuel. 

NEI, along with my company and 15 others, is suing the Energy Department to suspend the Nuclear Waste Fund fee absent a viable program to managing used nuclear fuel. 

In the meantime, the president has appointed a blue ribbon commission to assess the nation’s program for managing used nuclear fuel and high-level radioactive waste.  This panel—led by former Congressman Lee Hamilton and former National Security Director Brent Scowcroft—is meeting for the second time next week and is looking anew at policy options that it will present to the president in 2012.    

Marv Fertel will have more to say about used fuel management and the view from our nation’s capital in just a few minutes, so I’ll leave my comments at that.

Against a backdrop of strong political and public support, the nuclear energy industry continues to move ahead with powerful momentum.

This morning I will discuss the performance of U.S. nuclear power plants, the challenge of achieving regulatory stability, and the progress and expectations related to new nuclear energy facilities.

The industry and our regulator can point to a decade of sustained safe and reliable operation at U.S. nuclear power plants—including a 90 percent average capacity factor, high productivity, and consistently excellent safety performance.  Nothing is more important to the future of nuclear energy than the safe, reliable operation of our existing assets.  It is the industry’s highest priority, and all of our industry’s policy and regulatory priorities are predicated on operating our facilities safely and reliably. 

I want to pause here and recognize our industry’s commitment to safety and to thank everyone in this room for your role in the superb performance record that our industry worked toward over the past decade.  We come together through NEI to manage many of the technical and regulatory issues that has led to our record of safe operation. Our commitment is strong and our work in this area is integrated through strong partnerships with the Institute of Nuclear Power Operation and the World Association of Nuclear Operators. Together, our exchange of operating experience and best practices and the mutual support among operators both here and around the world has led to outstanding levels of safety. 
 
I want to acknowledge INPO President and CEO Jim Ellis and WANO Chairman Lauren Stricker, who have led the organizations’ efforts to promote excellence in the operation of the world’s commercial reactors.

Nuclear energy continues to be the lowest-cost producer among major electricity sources.  In 2008, the latest year for which we have firm data, the cost of electricity from nuclear power plants was 1.87 cents per kilowatt-hour compared with 2.75 cents for coal-fired plants and about
8 cents for natural gas plants.

More important during this period of great uncertainty in energy supply and the economy is the long-term price stability of nuclear energy.  Production costs for nuclear energy have been relatively flat or falling since 1995, in stark contrast to other fuels in the electricity sector.

Electricity output in 2009 was nearly 800 billion kilowatt-hours—about six billion kilowatt-hours shy of the record set in 2007—and the average nuclear plant capacity factor last year was 90.5 percent.  The industry has maintained an average capacity factor of about 90 percent for a decade now, and we should aspire to sustain that level of operation.

The safety performance of our 104 nuclear plants also is very high, as demonstrated by the NRC’s performance-based reactor oversight process established a decade ago.  The NRC’s reactor oversight process has proven both effective and efficient, and individual commitments from utilities to the NRC on some issues are getting the desired results.

Although the agency is looking at possible adjustments to the process, we believe that the regulatory oversight process is working well and that the fundamental paradigm shift to focus on results rather than inspection findings should continue.

The industry’s strong safety performance demonstrates—in the best possible way—that our plants have a strong safety culture.  A consistently strong safety culture at nuclear facilities can go a long way to preventing downturns in performance and minimizing the significance of any that do occur.

At the beginning of this decade, deterioration of metal components and welds at the Davis-Besse, Summer and Oconee plants was a wake-up call for the industry both in materials management and safety culture.  The industry has responded collectively to the latter working through INPO to develop a safety culture program and self-assessment tools.  We believe this approach will provide a better regulatory footprint for NRC oversight.

Last June, the industry issued a guideline that describes our approach to assessing and addressing nuclear safety culture issues.  At its core, the responsibility for safety culture rests with the plant operators.  The guideline places primary responsibility on line management, and in particular, on the site leadership team. 

The goal is to provide a holistic, objective, transparent and safety-focused process to provide an early indication of potential problems, develop effective corrective actions and monitor the effectiveness of the actions.  Importantly, the guideline also provides for non-industry participation in safety culture programs—from the NRC, INPO, external nuclear safety review boards and members of external safety culture assessment teams.

The responsibility for ensuring that an effective safety culture is maintained ultimately rests with the top executive.  At OPPD, it’s my responsibility.  My message to my colleagues is this: Embrace safety culture. Say what you mean.  Do what you say you will do and unfailingly model the behavior you expect of your staff.

Transparency in communications is part of a strong safety culture—and it is absolutely essential to maintaining public confidence in the safety of our facilities and in the effectiveness and integrity of industry management.

Even when we maintain our focus on safety, some issues that have no safety impact adversely impact public trust in our industry.  One of the most prominent issues confronting the nuclear industry today is—from standpoint of safety and the regulations—not an issue at all.  I’m referring to tritium leaks at nuclear power plants.

Tritium is one of the most benign of radioactive materials, and the radiation levels we’re talking about are very low.  Public understanding of tritium, however, is low…they hear two words—radioactive water. They are concerned about the health implications of tritium leaks, but perhaps the overriding issue is trust.

In 2006, the industry passed the groundwater initiative to address concerns related to tritium leaks.  Among other things, it requires nuclear plants to notify local officials of groundwater leaks, regardless of whether there is any safety significance.  Maintaining public trust requires us to be transparent and to notify our key stakeholders quickly when these kinds of events occur at our facilities. 

Public trust in corporate America is rising, including a significant 18 percentage point increase in 2010 over 2009, according to the Edelman Trust Barometer.  In our business, we must ensure that our facilities are operated with the highest integrity, ethics, transparency and attention to the public good. 

While clearly we need to provide the facts as we know them and counter misinformation, we also need to listen to stakeholders and work to understand their perspective.  We sometimes fail to recognize that others’ perceptions can vary significantly from ours. 

Trust is fragile in any industry—even more so in our industry. We must always work to maintain the trust of those in our plant communities.  Perhaps our biggest failing in communicating with the public is that we do not always get what is most important to communicate to elected officials and residents near our facilities. 
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I’d now like to turn to the topic of regulatory stability.  Regulatory stability is important for existing and future nuclear facilities.  As an industry, we must have effective regulations, transparent regulatory oversight and a clear understanding of what is required of us.  And while regulations surely must evolve over time—the NRC’s new process for licensing nuclear plants is a prime example—there should be a reasoned, objective, well-defined approach to making changes.  We can’t build an effective, long-lasting regulatory process on a foundation on shifting sand.

Security is an area in which regulatory stability remains elusive.  Nuclear power plants have always been among the best secured industrial facilities, and since 9-11, the industry has spent nearly two billion dollars on security enhancements.  We recognize the importance of security at our plants, and we should always strive to improve our security. 

However, additional regulatory requirements or financial commitments for physical security will lead to only marginal improvements based on today’s strong security presence.  We can, however, enhance the integration among industry security at our sites and local, state and federal entities so that these resources are fully incorporated into our processes and procedures. This, ultimately, will result in more robust security.

Although the NRC considers nuclear energy facilities to be among “the most secure private facilities,” the agency issued a rule that adds significant new security requirements. In theory, there is no end to the enhancements one can make in security … but at this point, we are talking about changes with diminishingly small returns. 

Changes that add little or nothing to nuclear plant security nevertheless consume industry and NRC resources and potentially can divert attention from matters that warrant more attention. 

The industry and the regulator must view nuclear plants holistically and prioritize resources where they offer the greatest safety benefit.  Former NRC Chairman Dale Klein, in March, said that “the time has come for a recalibration of our thinking about security in the nuclear industry by taking a more risk management approach to the subject.

This recalibration will allow the federal government to increase its focus on risks associated with other critical U.S. infrastructure, such as the chemical and biological sectors, where the need for more intense focus may be greater.”

Klein said that the NRC and industry must remain vigilant, but must also begin applying risk insights for security-related decisions. “Simply put,” Klein said, “we need to be better regulators in the security arena to ensure that our requirements are balanced,” end quote.  There will always be pressure from some to increase security to reach a zero risk level.  That, of course, is unobtainable.

No one will argue that nuclear power plants SHOULD be extremely secure facilities—least of all those who work at these facilities and whose families live nearby.  However, the NRC should stabilize its overall approach to physical security.  At this point, changes to physical security at nuclear power plants generally provide diminishingly small returns. 
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The buzz in our industry, of course, is mostly about new nuclear energy facilities—both power plants and fuel facilities.  The NRC is actively reviewing 13 license applications for up to 22 reactors.  Site preparation is under way for two of these projects—at Southern Company’s Vogtle site in Georgia and SCANA’s V.C. Summer site in South Carolina. 

Southern Company CEO David Ratcliffe will give us an update on the tremendous work at Vogtle later this morning.

Licensing and construction for the first new reactors will take about 10 years.  We expect to shorten that time to about six years for future projects if the industry maintains a commitment to reactor standardization and as we gain experience with the licensing process and modular construction practices.

The NRC’s licensing process is working as designed, although some NRC requests for additional information have led to delays in review schedules.  These questions are an expected part of licensing a new reactor … and they demonstrate that the process is working as intended.  Design issues are being resolved before construction begins. 

At the time our Fort Calhoun reactor and many other nuclear plants were licensed … these kinds of questions came up during or after completion of construction—and led to extensive delays. 

Many of the issues we’re encountering in licensing these first new reactors are generic and will be resolved not just for these first plants, but for all current and future applications, so this is time well spent.

The NRC has begun construction inspection activities where site preparation is under way and is inspecting vendors that are manufacturing long-lead components.  Regulatory oversight from the start ensures that all parties understand our expectations for quality.

Although low natural gas prices will influence new electric generation decisions at least in the near term, the industry is confident that new nuclear generating capacity will be competitive, particularly in a carbon-constrained world.

In a report on America’s Energy Future last year, the National Academies found that new nuclear capacity competes well against all other baseload options, except for conventional coal-fired generation without carbon capture and storage, or gas-fired combined-cycle capacity fueled with low-cost natural gas and without carbon capture and storage. 

We see similar results in cost analyses by the Energy Information Administration, the Brattle Group, Massachusetts Institute of Technology, the Congressional Budget Office, and in analyses conducted by companies proposing new nuclear plants in regulated jurisdictions, where such analysis is required in order to obtain a certificate of need from a public service commission.

Although new reactor development earns most of the headlines in the sustained positive media coverage that our industry has enjoyed in recent years, the first new significant nuclear fuels facility in the United States is on the verge of operation in New Mexico.  URENCO’s National Enrichment Facility is in the final stage of NRC review and is expected to begin uranium enrichment production in June.

This project demonstrates that the industry and the NRC can license a large project efficiently, while maintaining a commitment to public participation and transparency. 

Work also is proceeding to develop uranium enrichment technology at the American Centrifuge Project in Ohio, an AREVA uranium enrichment facility in Idaho, and further testing of GE Hitachi Nuclear’s SILEX technology.

The next frontier for nuclear energy technologies is small reactors, which are capturing the attention of innovators at universities, national laboratories and entrepreneurs such as Bill Gates.  These reactors range in size from 25 megawatts to about 350 megawatts.  They complement the large-scale designs by providing additional options for generating clean, safe power, hydrogen and process heat.

In April, Congressmen Jason Altmire of Pennsylvania and Joe Barton of Texas were among 20 members of Congress who introduced legislation to facilitate the design and licensing of small reactors.
   
The Nuclear Power 2021 Act would allow the U.S. Department of Energy to enter into public-private partnerships to design and license two small reactors by 2021.  The proposed bill says that DOE, using the agreed-upon designs, should complete the design certification license process by 2018 and the combined license process by 2021.

The Nuclear Energy Research Initiative Improvement Act would direct DOE to develop a five-year strategy to lower the cost of constructing and licensing nuclear reactors, including small reactors.  The bill would provide providing $250 million over five years for research on lowering the cost of plants, including small-scale reactors.

As Congressman Altmire said: “Investing in the development of safe and reliable reactors of all sizes will both increase our nation’s energy security and create good paying jobs here at home.”

In closing ... Developments related to new nuclear plants are very encouraging, with a licensing process that is working and can be more efficient as we build additional standardized reactors … and with the federal loan guarantee program on solid footing, including the possibility of expanding three-fold.  We’re also seeing expansion of the U.S. nuclear supply chain and growing numbers of young people being attracted to careers in nuclear energy. 
   
The industry’s top priority for new nuclear plants is managing the business and regulatory risk involved.  The essential elements for success are disciplined projects, predictability in the licensing process, investment stimulus, firm financing plans, and sustained work force development.

Our top priority overall is ensuring the continued safe, reliable operation of our nuclear energy facilities.  The industry must never lose sight of the enormous and invaluable contribution made by those who operate and maintain today’s nuclear energy facilities—be they power plants, fuels facilities or other aspects of our business. 

The winners of NEI’s Top Industry Practice Awards, which will be announced today, personify the industry’s commitment to safe, reliable operations.  To all of this year’s winners, and all the other individuals who ensure that industry performance remains high—I extend the industry’s congratulations and thanks. 

Our challenge is to continue to raise the bar on excellence in all facets of our industry, particularly those related to safety.