On behalf of the nuclear energy industry, the Nuclear Energy Institute (NEI)¹ appreciates the opportunity to provide the subcommittee with its perspective on the nuclear-related programs under the subcommittee’s jurisdiction, and on the president’s proposed budget for those programs in fiscal 2008.

NEI supports fiscal 2008 funding for the following programs: Office for the Energy Loan Guarantee Program ($8.4 million), Nuclear Power 2010 ($183 million), Generation IV Reactor Programs ($100 million), Nuclear Hydrogen Initiative ($35 million), University Programs ($50.1 million), Office of Radioactive Waste Management ($494.5 million), Advanced Fuel Cycle Initiative (increased funding over fiscal 2007) and the Nuclear Regulatory Commission ($913 million).

The nuclear energy industry produces one-fifth of America’s electricity, and is preparing to build advanced-design nuclear power plants to meet growing electricity demand. Nuclear energy is an essential component of a diverse energy portfolio, and NEI appreciates the recognition of nuclear energy’s importance by Chairman Visclosky, Ranking Member Hobson and members of this committee.

NEI’s statement for the record addresses the industry’s highest priorities. In several cases, NEI believes America’s energy security justifies increases in fiscal 2008 funding above the president’s request.

Establishing an Effective Energy Loan Guarantee Program.  The energy loan guarantee program was created by the 2005 Energy Policy Act to support private-sector investment in advanced energy technologies, including new nuclear power plants. The loan guarantee program is designed to be self-financing, with project sponsors responsible for underwriting the cost to the federal government of providing the credit support. Properly implemented, there will be no cost to the taxpayer.

This program is essential for companies planning to invest billions of dollars in licensing and construction of new nuclear power plants in the United States. As NEI has testified before this subcommittee previously,² the loan guarantee program addresses the difficult financing challenge standing in the way of new nuclear plant deployment. The electric industry faces major capital investment requirements ($750 billion to $1 trillion) over the next 15 to 20 years (in distribution, transmission, generation and environmental control technology). The capital investment required will strain the electric sector’s financing capability. The size of the capital investments (at least $3 billion to $4 billion for new nuclear plants in today’s dollars) is very large relative to the size of the companies making the investments, and the loan guarantee program provides the credit support necessary to finance these new plants.

The nuclear industry shares the subcommittee’s conviction that the loan guarantee program requires disciplined management and rigorous project evaluation, with the cost of loan guarantees covering the government’s potential exposure. NEI appreciates the subcommittee’s leadership (in the fiscal 2007 continuing resolution) in providing the funding and statutory language necessary to establish the Loan Guarantee Office at the Department of Energy. We endorse DOE’s request for $8.4 million to cover the program’s administrative costs in fiscal 2008. The nuclear industry notes, however, that the president’s fiscal 2008 budget proposes a $9 billion loan volume limitation, with only $4 billion of the $9 billion allocated to large power projects like nuclear power plants. Given the cost of new energy infrastructure projects (including new nuclear plants, coal gasification plants and coal-to-liquids projects), a robust and viable loan guarantee program will require larger annual loan volumes in future fiscal years.

Maintaining the Momentum in the Nuclear Power 2010 Program.  The Nuclear Power 2010 Program supports the design and engineering work necessary to bring two advanced reactor designs (the Westinghouse AP1000 and the General Electric ESBWR) to the level of design completion necessary for companies to develop firm cost estimates, and to file applications for licenses to build and operate these plants. Approximately two-thirds of the 33 new nuclear reactors announced publicly depend on successful, timely completion of the first-of-a-kind engineering on the two advanced reactor designs supported by the Nuclear Power 2010 program. Through its investment in the Nuclear Power 2010 program, the federal government achieves enormous leverage on behalf of the American taxpayer; the $727 million total expected government investment in Nuclear Power 2010, matched by equal industry funding, will stimulate tens of billions of dollars of investment in new nuclear projects by 2015.

The Department of Energy’s proposed fiscal 2008 budget proposes $114 million for Nuclear Power 2010. This level of funding will not maintain the program’s momentum, and NEI recommends fiscal 2008 funding of $183 million, to be matched equally by private-sector funding.

Ensuring Adequate Funding for the Nuclear Regulatory Commission and Oversight.  The industry supports the NRC’s fiscal 2008 budget request of $913 million to provide effective oversight of operating nuclear plants, timely processing of applications for license renewal and requests for power uprates, and efficient review of applications for combined construction/operating licenses, early site permits and design certification. We believe this level of funding also should ensure NRC readiness to begin review of DOE’s Yucca Mountain license application next year. The industry also encourages the subcommittee to support NRC’s need for additional office space to fulfill its regulatory responsibilities.

Given the increase in the NRC’s budget—$200 million in the last two years and $425 million in seven years — NEI urges the subcommittee to require regular progress reports from the agency on the status of its licensing and other regulatory activities. Such reporting will allow the subcommittee to determine whether the agency is achieving the desired operational efficiency — by reducing the time required to process new-plant license applications as it gains experience, for example. The industry also urges the subcommittee to require greater transparency in where NRC funds are being spent, by requiring full disclosure of planned staffing and resource needs in individual NRC divisions. This would demonstrate to Congress and the industry, which pays up to 90 percent of NRC’s budget, that more of the requested budget is being allocated toward licensee-specific charges rather than general license fees.

Developing an Integrated Used Fuel Management Program.  The nuclear industry appreciates the subcommittee’s leadership in the area of used fuel management, and its support for the Yucca Mountain repository program. In 2008, the federal government will be nine years behind on its commitment to start moving used nuclear fuel from nuclear power plants across the nation to a federal repository. The nuclear industry supports the administration’s proposed budget of $494.5 million for fiscal 2008 to enable the Office of Civilian Radioactive Waste Management to submit a license application for the Yucca Mountain project by June 2008.

The Yucca Mountain project is a key component of a three-part integrated used fuel management strategy that includes: (1) developing a permanent disposal facility; (2) research, development and demonstration to close the nuclear fuel cycle and reduce the volume, heat and toxicity of byproducts placed in the repository; and (3) interim storage until recycling or permanent disposal—or both—are available.³ Continued, demonstrable progress on all three elements of this integrated used fuel management system is important to preserve confidence in nuclear energy, and to support licensing and construction of new nuclear plants.

The nuclear industry has consistently supported research and development of the advanced fuel-cycle technologies incorporated in the Advanced Fuel Cycle Initiative. The industry recognizes that the Congress has important questions about the administration’s Global Nuclear Energy Partnership. Nonetheless, the industry supports increased funding for the Advanced Fuel Cycle Initiative in fiscal 2008 to continue this technology research and development program, and to achieve better definition of the program, which is critical to a long-term integrated strategy for used fuel management.

Preparing for the Next Generation of Nuclear Power Plants.  The large light water reactors operating today are well-suited for baseload electricity production, and the nuclear industry will continue to build and operate these reactor types well into the 21st century. It is clear, however, that the promise of nuclear energy technology extends beyond electricity production to include production of hydrogen and process heat. Next-generation high-temperature reactors, using advanced hydrogen production technologies, can produce hydrogen for transportation or for upgrading coal and heavy crude oils into usable products, thereby relieving pressure on natural gas supply (the source of most hydrogen produced today). High-temperature reactors also can generate process heat for desalination, to extract oil from tar sands and for scores of other industrial applications.

This enormous potential justifies continued federal investment. NEI urges the subcommittee’s support for the next-generation nuclear plant at the Idaho National Laboratory, funded through the Generation IV Nuclear Energy Systems Initiative program.  NEI recommends funding for this program of $100 million in fiscal 2008, higher than the $36.1 million proposed by DOE.  NEI also recommends higher funding for the Nuclear Hydrogen Initiative — $35 million in fiscal 2008, rather than the $22.6 million proposed by DOE.

Investment in people is as important as investment in technology, and the nuclear industry urges the subcommittee to restore funding of $50.1 million in fiscal 2008 for university programs managed by the Office of Nuclear Energy to support vital research and educational programs in nuclear science and health physics at the nation’s colleges and universities. NEI also encourages the subcommittee to consider supporting a new program within the Office of Science for undergraduate and graduate programs in radiochemistry and other disciplines important to medical, energy and other applications of commercial nuclear technology.

Conclusion: Closing the Energy R&D Gap.  NEI has recommended modest funding increases, above the administration’s request, in several strategic nuclear energy programs, including Nuclear Power 2010, the Next Generation Nuclear Plant, the Nuclear Hydrogen Initiative, support for university programs and others.

NEI sees a growing body of evidence that indicate increases in energy R&D will be necessary in the years ahead to create a sustainable energy supply infrastructure that meets national needs. In an analysis for this subcommittee in February, the Government Accountability Office found that DOE’s budget authority for renewable, fossil and nuclear energy R&D declined by more than 85 percent (in inflation-adjusted terms) from 1978 through 2005. The need for new technologies to address critical energy needs has not diminished over the same time period, however, nor have the energy and environmental imperatives facing the United States become any less urgent.

Similarly, the Electric Power Research Institute is conducting a broad-based assessment of the electricity supply and demand-side technologies necessary to achieve meaningful reductions in electric-sector greenhouse gas emissions in the United States. Although still in progress, EPRI’s analysis demonstrates that a broad-based portfolio of technologies and techniques—including substantial improvements in efficiency, aggressive deployment of new nuclear and renewable generating capacity, improvements in coal-fired power plant efficiency, and carbon capture and storage — will be required.  EPRI’s initial estimate suggests that successful development and deployment of this portfolio between now and 2030 will require additional R&D investment of approximately $2 billion per year.  Although the federal government cannot be expected to finance all of that, there is clearly a need and a rationale for increased federal support for energy research, development, demonstration and deployment, in the nuclear energy area and across the portfolio.

---

¹ The Nuclear Energy Institute is responsible for developing policy for the U.S. nuclear energy industry. NEI’s 297 corporate and other members represent a broad spectrum of interests, including every U.S. utility that operates a nuclear power plant. NEI’s membership also includes nuclear fuel cycle companies, suppliers of equipment and services, engineering and consulting firms, national research laboratories, manufacturers of radiopharmaceuticals, universities, labor unions, and law firms.

² See Nuclear Energy Institute Statement for the Record, House Appropriations Subcommittee on Energy and Water Development, Hearing on the Future of Nuclear Energy, September 13, 2006.

³ This integrated approach to used fuel management — incorporating interim storage, continued licensing of the Yucca Mountain project and “a substantial R&D program” to develop and evaluate advanced nuclear fuel cycles — is generally consistent with testimony before this subcommittee on Feb. 28, 2007, by Dr. Ernest Moniz of the Massachusetts Institute of Technology. In part, Dr. Moniz recommended “a plan for taking federal title to spent fuel and for moving it as soon as possible from reactor sites to one or more federal locations for consolidated interim storage over a 50- to 100-year time period.”