A Perspective: Status and Future of Nuclear Power in the United States Larry R. Foulke, ANS Vice President/President Elect American Nuclear Society 555 N. Kensington Avenue LaGrange Park, IL 60526, USA (412) 476-7511 Larry.R.Foulke@verizon.net For presentation at the Americas Nuclear Energy Symposium (ANES 2002), October 16, 2002 SUMMARY OF STATUS the Nuclear Regulatory Commission (NRC) Department of Energy (DOE) Secretary has promulgated a modern licensing process Abraham summarized the current status of including an early site approval process and nuclear power in the United States well in his pre-certification of reactor designs. remarks that appeared in the April 2002 issue of Nuclear News . He stated that “Nuclear All this good news is attributable in no small 3 power is a vital part of the nation’s electricity way to the President's National Energy Policy supply. It has played a major role in supplying which endorses nuclear power, and an electricity in the United States for over three alphabet soup of exciting DOE programs such decades. Currently, 103 nuclear power as DOE 2010, NEPO (Nuclear Energy Plant reactors produce approximately 20% of the Optimization), NEER (Nuclear Engineering electricity consumed in this nation.” Education Research), NERI (Nuclear Energy Research Initiative), and INIE (Innovations in The current performance of nuclear plants in Nuclear Infrastructure and Education). the United States is excellent. Over the past 20 years, the average capacity factor has However, despite all this excellent increased from about 60% to over 90%. This performance and good news, no new nuclear increased capacity translates into an plants have been ordered in the United States additional 23,000 megawatts of power on the in the last 25 years. Given an energy source grid – the equivalent of building 23 new plants. with so many benefits, why have there been Nuclear safety has been excellent and there no new plant orders? have been substantial reductions in operating and maintenance costs, worker exposures to This paper addresses this issue and identifies radiation, and quantities of radioactive waste some steps to jump-start new plant orders. generated. Since the mid-1970s, nuclear These remarks represent a synthesis of views energy has enabled the United States to avoid from many of my colleagues in the American emitting over 80 million tons of sulfur dioxide Nuclear Society. 1 and about 40 million tons of nitrogen oxides. But before addressing the issue of building the Nuclear generated electricity is among the next nuclear power plant, let us acknowledge cheapest available today. The production that there is a lot going on in the nuclear costs (fuel, operations, maintenance) of most technology arena in the United States other nuclear plants are less than two cents a than the use of nuclear power to produce kilowatt-hour and the best plants generate electricity. electricity for only about one cent a kilowatt- hour. This has not gone unnoticed by the Today, in addition to providing clean energy, a industry. Seven reactor facilities have dazzling array of nuclear technologies helps received 20-year license extensions. Many to: more plants are expected to follow in the next few years. Performance is excellent and there Ø improve medical diagnosis, is a good market for pre-owned plants. Ø protect livestock health, 2 Recent university data suggests that there is Ø develop water resources, an upswing in nuclear engineering Ø preserve food, enrollments. Yucca Mountain is moving along Ø promote agricultural productivity, towards becoming a geological repository and Ø cure human illness, Ø enhance human nutrition, Where feasible and sustainable, solar and Ø advance environmental science, wind energy will be delivered as electricity just Ø eradicate virulent pests, and as will nuclear energy. Solar and wind power Ø strengthen industrial quality control. have always played a role and they always will. But they alone simply cannot do the job. Currently, more than 12 million nuclear It boils down to numbers. Just as it takes medicine procedures are performed each year more potatoes to feed an army than to feed a in the United States, and it is estimated that family, it takes more energy to run a nation one in every three hospitalized patients has a (gigawatt chunks) than to run a household 6 nuclear medicine procedure performed in the (kilowatt chunks). 4 management of his or her illness. Neither is the statement, that "the renaissance ABUNDANT ENERGY PROVIDES LIFE of nuclear power in the United States is QUALITY inevitable," meant to be anti-conservation. Our national well-being depends on reliable Where feasible and rational, the efficient use and abundant energy. Energy is the daily of energy should be promoted. Over the past bread of civilization. We use energy to till the two decades, Americans have indeed learned soil, to grind grain, to move flour to the to use energy more efficiently. The United bakeries, and to bake the bread. Energy States uses about 10% more energy today drives our economy. Energy heats our homes than it did in 1973, yet there are more than 20 and pumps our clean water. We use energy million additional homes, 50 million more to build not only our homes, but also vehicles, and the gross national product is 7 everything in our homes. In short, energy 50% higher.” drives society – in every economy and every civilization. Civilization would simply vanish The transportation sector offers the greatest without energy. Energy frees man to be opportunity for conservation and reduced creative. On the other hand, without abundant dependence on foreign and domestic fossil energy, there would be no unemployment! fuels because it is the largest consumer of We’d all be working 24 hours a day and seven petroleum. To reduce our reliance on foreign days a week simply to stay alive – chopping oil and make a cleaner environment, all wood, hoeing the crops, subsisting and feasible domestic energy options should be surviving. In addition, social security would exploited to free us from using carbon-based not be a problem; the average life span would fuels. Unfortunately, the United States has probably drop by 20 years to return to what it responded to decreased domestic production used to be. However, those are improve- of oil and gas by increasing imports. ments we can do without. However, that strategy simply will not be viable in the future. Today, many believe that In addition, our economy is, according to Peter we are facing worldwide pollution that is 5 Huber, increasingly, using energy in the form environmentally unacceptable. Furthermore, of electricity. If you go back to the 1880's, no within 10 to 15 years we will be facing oil and electricity was used. Ever since, the share of gas prices that will be politically unacceptable. "all energy" used in the United States in the Electrical energy, generated by any means, form of electricity has grown to 40% and that will pave the way for an eventual shift from the trend will continue. According to Huber, more use of petroleum in transportation, either as a than 90% of the growth in energy demand generator of hydrogen through electricity or since 1980 has been met by electricity. directly through electricity. Automobiles will continue to become more electrified, become hybrids over the next 10 But conservation alone cannot do the job. years, and then be followed by a transition to There are 1.6 billion people in the world today 8 electric propulsion or the use of hydrogen as a who have no access to electricity. In the year fuel (perhaps produced by electricity), or a 2000, 1.1 billion people lacked access to safe 9 combination of both. drinking water). They also need energy. The renaissance of nuclear power in the This all sounds logical and compelling. United States is inevitable. This statement is However, no new, large commercial electrical not meant to be anti-solar and anti-wind. generating capacity of any kind will be built today without a suitable and reliable financial Ø The new combined construction and return on investment from the private sector. operating (10CFR52) licensing process Hence, industry and the government need to looks promising but until it is demonstrated work together to address specific financial and court-tested, there will still be concern risks involved with building nuclear plants. To whether or not the new ITAAC have a new nuclear plant by 2010, industry (Inspections, Tests, Analyses, and should encourage the government to take Acceptance Criteria) process works. additional steps to mitigate financial risks. Ø The majority of the population is pro- While energy planning should not constrain nuclear, especially in light of growing price competition or innovation, it should environmental concerns regarding global promote dependable and clean energy warming, although they tend not to be supplies for the long term. The nation's activists in their belief. energy plan should permit government intervention in situations where market forces Ø Operating costs are low, and the facts alone cannot bring about long-range goals to show that the risk to humans from nuclear meet a national imperative. Driving forces power per megawatt of energy produced such as environmental quality and energy is very low. independence require more aggressive short- term government investment to obtain the The nuclear industry responded to the long-term benefits that nuclear energy President’s National Energy Policy with “Vision 10 provides. 2020,” which sets a goal of 50,000 megawatts of new nuclear generating capacity MAJOR DETERRENT TO THE NEAR-TERM added to the United States grid by 2020. The NUCLEAR POWER Nuclear Energy Institute took a lead role in As indicated above, a major roadblock to formulating this Vision and has established an building a new nuclear power plant in the Executive Task Force on New Nuclear Power United States at this time is financial risk. Plants to help to guide near-term industry actions toward that goal. Other barriers to building new nuclear plants have not vanished but have been reduced. The industry applauds the DOE’s Nuclear Power 2010 triple initiative in which the Ø The management of spent fuel took a government and the private sector will work giant step forward with the support of a together to (a) explore sites for new nuclear geological repository at Yucca Mountain power plants, (b) demonstrate the efficiency by the President and Congress. "Spent and timeliness of key processes designed to fuel management" is a problem of make licensing of new plants more perception and, therefore, a political predictable, and (c) encourage and fund issue. In reality, the used fuel from research needed to make the safest and most nuclear power plants has some great advanced technologies available. This is all advantages that we do not exploit– the excellent but it may not be enough. waste is of small volume per megawatt of the energy produced; it is sequestered GOVERNMENT HAS A ROLE TO ENSURE and segregated from the start; and it is RELIABLE ENERGY SUPPLIES easy to track. In fact, only about 3% of Governing bodies have, and have had, a clear used fuel is truly waste. The bulk of the role and responsibility to assure reliable used fuel remains as valuable fertile and sources of energy and, hence, to help remove fissile material that we may recycle barriers to an expanded role for nuclear power someday and, thereby, reduce waste in the United States. Energy issues are too volumes and activity still further. important to be left to the vagaries of a free market. Energy issues must be considered Ø Renewal of the Price-Anderson Act and planned in light of the inextricable linkage appears to have support from both houses between energy independence, national of Congress. security, global economic competitiveness, and environmental quality. Governing bodies can mitigate these risks for relatively expensive but they will generate the benefit of the nation. While deregulated power that is competitive in many markets. markets can stimulate low prices through Early costs for these learning-curve issues competition, they do not capture well the long- could be addressed by government dollars as 12 range benefits of energy independence, a "preferred equity" investment. Dividends energy diversity, and a reduction of to the government on the equity investment environmental pollution. Once upon a time in would occur after plant capacity factors reach a regulated market, the utility's job was to a pre-set level. Commercial lenders would provide reliable power while recovering costs then loan only as much as they consider in the rate base. In other words, reliability of economically justified. supply and financial solvency were paramount. But now many utilities face new As an alternative, the government could economic forces. There is little premium for provide loan guarantees for a portion of the vision and investment in the national welfare. plant cost during the construction period. There is currently no financial benefit for Once the high-risk period is passed and the production of electricity from non-polluting plant is operating, the plant owners could energy sources or for enhancing the nation's restructure the debt, thus avoiding the need energy independence and security. for guarantees by the government. Moreover, the CEO of a generating company Investment tax credits payable during has little incentive for doing more than that construction to mitigate the issue of significant which satisfies his Board. National earnings dilution during the construction imperatives seldom come into a Board period have usefulness although limited. decision - financial return does. Hence, Investment tax credits would amount to a national imperatives force us to find alternative modest percentage of the investment in a ways to motivate the mitigation of financial given year, but the credit would normally be risks and promote financial credits for the non- granted only once for a particular investment. financial benefits of the nuclear option. Since a new plant will take three to four years to build, two or three years of investment will FINANCIAL ISSUES AND MITIGATING still have to be carried without earnings. ACTIONS Hence, investment tax credits are not enough Let us consider the major issues and the to eliminate the hit in earnings over a multi- potential mitigating actions for near-term year period – but they would help mitigate nuclear power in the United States. The them. actions proposed are not out of line with a recent report to the Nuclear Energy Research Also, accelerated depreciation could be made Advisory Committee (NERAC) by an available for new nuclear plants to be more in integrated project team composed of key DOE line with other major industrial facility 11 staff members and Scully Capital Services. additions. Let us also keep foremost in mind that new nuclear power plants are projected to be Such steps may be necessary in a competitive after the first several plants are deregulated environment where the power built and the financial risks associated with the company cannot pass on construction costs first plants no longer exist. as an Allowance for Funds Used During Construction. Issue: Markets are not prepared to finance new nuclear projects because of their high Issue: There are concerns about delays cost, particularly early plants, and power and/or termination of plant projects as a result companies are concerned about earnings of acts of government (regulator) or the acts of dilution during construction. the public (interveners). The higher cost of early plants is associated The government could assume extraordinary primarily with two learning-curve issues: First- costs associated with delays due to the acts of of-a-Kind-Engineering and Construction. government or the acts of the public (as a Once these two issues are put behind the consequence of government actions) through industry, new nuclear plants may still be “standby credit facilities.” Through these facilities, the government would agree to carry international agreements to limit carbon interest payments resulting from construction emissions. Emissions credits for nuclear delays that are due to changing government generation would go a long way toward requirements and not due to contractor faults. encouraging new construction. Such standby credit facilities could also offer a “make whole” provision under which the These financial proposals are meant to ease government would take ownership of the plant the introduction of the next generation of and repay both the lender and equity-holder in nuclear plants. Once the technology and the event that “acts of the government” and processes are demonstrated, overcoming “acts of interveners” (that could result from many of the first of a kind hurdles, normal government actions), prevent plant financial markets can be expected to provide commissioning. This step would provide traditional financing as more generating excellent protection from the specific risks that companies and financial markets become are at issue but without the disadvantages of confident in the technology and reliability of loan guarantees. construction schedules. Regardless of the financing scheme, clean air credits are a Issue: A great financial risk is recovering legitimate incentive that will help stimulate costs from a deregulated market. nuclear construction and provide a mechanism for addressing the challenge of Kyoto. The solution here is a long-term Power Purchase Agreement from a creditworthy The Bottom Line entity. Reduced uncertainty in siting and licensing is helpful, but it may not be enough. The bottom line is that to get a new nuclear Given the higher capital cost of a nuclear plant by 2010, industry and the government plant, the risk of long-term recovery of that should deliberate together, and the investment is a great financial penalty faced government should act to help the industry by the plant owner. The government could deal with today’s financial showstoppers. The guarantee the purchase of a certain amount of government may not be able to implement all the future power production from a new plant the actions described above, but industry at a negotiated price. This would mitigate the should be prepared to employ any risk- risk of forecasting electricity demand and price mitigating opportunities that present for many years out in the future. This themselves in the future. It appears that the temporary floor price would allow investor deliberations have begun (see "Inside NRC," returns similar to that achievable from October 7, 2002). alternate power-generated sources. These actions proposed above in response to Issue: The government should provide credits four major issues would almost certainly jump- for the non-financial benefits of nuclear power. start the nuclear industry. But how likely is it the Congress would look favorably on funding Free enterprise can hurt the nation if credits these proposals? The anti-nuclear segment of for non-financial, national benefits such as our population might look at these steps with environmental quality, energy security, and the great delight and use them to conclude that burn-up of weapons grade fissile material are nuclear power cannot realistically make a not entered into the financial equation. come-back, at least not in the near term (2020 Initiatives to create a level playing field for time frame). However, energy independence nuclear power must be pursued. Carbon and environmental quality are too important to trading would create an enormous incentive to leave to short-range market forces and to the build nuclear plants. Every citizen is a opponents of nuclear power. stakeholder when it comes to burning up weapons grade fissile material, and having The challenge is to find ways for the clean air, clean water, reliable electricity government to stimulate energy independence supplies, and energy security. in a politically acceptable way. To promote political acceptability, the industry should More prominence must be given to the share the financial risk. Vendors make emission free nature of nuclear power, and its partnerships with nuclear utilities today for role in helping meet the challenge of service and operation. Vendors can also make similar partnerships for future advance planning. An EISA program would construction. Under the historical business not be limited to nuclear projects but it could model, vendors engaged with the utility on a be applied to building a diverse energy transactional basis without providing any infrastructure. With an EISA program, the equity investment. In a new business model nation could also take steps to strengthen the 13 for the renaissance, long-term relationships distribution grid to get power from large new between vendors and utilities may be needed plants to areas of the country where power is to give the utilities confidence that the vendors needed. are also willing to make investments and share the risk. What this will take is creative leadership and risk sharing with the government by members Some might suggest that we should simply of industry (utilities and vendors) who believe wait for the price of energy to go up and then that nuclear power is essential to their long- nuclear energy will find its proper place. term competitive position as well as the nation. Unfortunately, with a capital-intensive technology, the price of energy is correlated to LONG-TERM AND NEAR-TERM the cost of money, which does not help the There needs to be a near-term track (2010) economics of new nuclear plants. Following and a long-term track. Getting on the long- the Arab oil embargo of 1973, the price of term track requires that all parts of the nuclear energy was very high, and interest rates on enterprise be engaged. The purchase of a any construction rose to 20%. Moreover, new nuclear plant in the near-term is only one building new nuclear plants is a time- key ingredient to long-term development. consuming process and their need is Other key ingredients include the vendor, inevitable. So, why wait? We need the architect/engineer and educational nuclear option soon - the time to build is now. infrastructures, continued research and development, and healthy national A PROPOSAL: EISA laboratories. A government loan guarantee example/model could be derived from the shipbuilding or For a near-term plant to be built by 2010, it is highway industries. For example, the prudent to focus on the technology that can government could fashion a broad program of restart the nuclear industry in the United federal energy financing that contains States quickly . . . that is, existing, but mechanisms like those in the Transportation improved Generation III+ designs which are or Infrastructure Finance and Innovation Act can be certified quickly by the NRC. 14 (TIFIA). The Department of Transportation Generation IV reactors may some day provide loans money, limited to a portion of the total even more economic and attractive cost, for the construction of highways and alternatives, but that day is most likely beyond bridges. The money from such an act, which 2010. Hence, we must continue to invest in could be called the Energy Infrastructure and Generation IV technologies, but we must not Security Act (EISA), would be used for loans, rely on their leading a nuclear renaissance. loan guarantees, and specific insurance against unique business risks. Additional Any proposal for Generation IV needs to have financial tools, such as Power Purchase a significant risk-sharing component for it to be Agreements, could also be included. politically acceptable. It also needs to be couched in a demonstration package (let us The rationale for EISA would be to make the call it the prototype of a fleet). Thus, we nation energy independent, to provide for envision a cost-sharing demonstration project energy security, and to expand the nation’s for Generation IV. Price guarantees are not sources of environmentally clean energy. part of that package nor is cost overrun or rate Such an act combined with the good financial protection. DOE has proposed a split of some condition of many of the nuclear utility expenses for advanced reactors. This cost- 11 conglomerates, the anticipated energy needs sharing should be broadened to the total of the nation, and the need to maintain the project (that might then make the plant nuclear infrastructure could put new energy economical) and costs can be repaid once the projects on the books. Rebuilding the nation’s plant begins producing electricity. energy infrastructure requires vision and For Generation IV reactors, a research/ nuclear power is important to future world demonstration plant should be built on a DOE energy security and economic prosperity and site to prove design principles that could lead who are dedicated to joint development of the to a certification. To introduce the next generation of nuclear energy systems. technologies that have been identified as Generation IV, a new risk-informed licensing CLOSING THOUGHT process that is technology neutral will be We conclude by echoing some remarks made 16 required since many Generation IV reactors by Angie Howard at the recent Conference are not water based. The regulators should on Nuclear Training and Education. Howard be urged to use this time to develop a process remarked that “Today’s challenges are the to establish new licensing criteria and a results of success…the success of a mature collaborative role with developers to test the and productive nuclear industry that is on the new technologies through a process using a verge not only of realizing the full potential of research/demonstration plant to ultimately its first generation of existence, but of laying lead to "certification" of new designs. This is a the foundation for another generation - a way to get the demonstration and certification generation that will carry the industry from the th at the same time and this may cut the 50 anniversary we will soon be celebrating 15 deployment time and costs considerably. right through to the nuclear centennial.” This too would require a risk-sharing approach with DOE. The cost-sharing should be based ACKNOWLEDGEMENTS: on the research, development, and testing The author wishes to thank many colleagues elements of the research/demonstration in the American Nuclear Society who facility, which the government could logically contributed to these remarks by their support while the cost of construction could be comments and critical reviews. borne by the industry supporting the demonstration effort. REFERENCES 1. 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