Nuclear Energy in a Carbon Constrained World

Chairman Jeff Bingaman (D-NM)
Committee on Energy and Natural Resources

"Let me first thank Tom Sanders, the current President of the American Nuclear Society, for inviting me here to today. Tom is a distinguished scientist at Sandia National Laboratories, which is in my home state, and I am very pleased he is serving the American Nuclear Society as its President.

"Let me outline my remarks for today. [SLIDE] They center around four challenges nuclear energy faces in a world that puts a price on carbon emissions. These themes are:

• One, nuclear energy's role in our future electricity mix;
• Two, the technological barriers to building new plants;
• Three, the financial barriers to building new plants; and
• Four, key policy issues associated with nuclear energy that we have faced in Congress and continue to deal with.

Nuclear energy's role in meeting our future electricity needs

"Let me begin by talking about nuclear energy's role in meeting our future electricity needs. As you all are aware, 104 nuclear reactors currently operate in the United States, and supply about 100 gigawatts of electricity, or about 19 percent of U.S. electric generation. This fleet of reactors has an excellent operating record, with a daily average capacity factor exceeding 90 percent. By comparison, coal plants have an average capacity factor of 85 percent and wind is about 30 percent. Nuclear power is certainly a reliable baseload power source.

"The importance of nuclear energy becomes apparent as we move into a world which puts a price on carbon because nuclear energy production has very low carbon dioxide emissions. The Energy Information Administration, or EIA, has examined the impact of nuclear energy under H.R. 2454, the Waxman-Markey bill.

"Here is a slide that shows where it believes new electric generating capacity would come from, under the provisions of that bill. [SLIDE] EIA projects that by 2030 an additional 96 gigawatts of new nuclear capacity would be added - an amount that would roughly double the size of our current fleet. This 96 gigawatts of new nuclear power is about the same amount projected by the National Academies of Sciences and Engineering in their recent report, entitled America's Energy Future. [SLIDE]

"This next slide shows the Academies' comparison between 2007 nuclear electricity supply and their projection for 2035, in slightly different units - terawatt-hours. The potential additional supply from nuclear power in 2035 (shown by the bar on the right) is roughly the same size as the existing base of nuclear power generation (shown by the second bar from the left) or about 100 GW.

"In this same report, the Academies also estimate that by 2035, new nuclear power plants represented by the bar on the right could displace between 360 million and 820 million metric tons of carbon dioxide annually. Which end of that range we achieve depends on whether the nuclear power plants replace natural gas plants that do not capture carbon dioxide, or if they replace coal plants that do not capture carbon dioxide. To put that range of 360 to 820 million metric tons in perspective, that is equivalent to 15 to 34 percent of the 2007 level of total carbon dioxide emissions from the U.S. electricity sector.

"How cost-competitive is nuclear power with other sources of electricity supply under a cap-and-trade system? [SLIDE] The next slide shows the National Academies' comparison of the levelized costs of electricity among all new sources of baseload electricity. The National Academies' study shows that the cost of electricity production from new nuclear plants - the third bar from the top - compares favorably with new production from other baseload sources of electric power.

"So, numerous models and projections indicate that nuclear energy is an important and competitive part of our future energy mix, especially when there is a price on carbon dioxide emissions. But there are some pragmatic technical and cost challenges to building new nuclear plants in the United States that we must consider which brings me to my next two major points.

Current technological barriers to building new plants

"Let me address what I believe are the current technological barriers to building new nuclear plants. Briefly, the biggest barriers are not related to the design of the reactors themselves, but to the challenge of licensing and building - on schedule and within cost - the first six to nine new power plants.

"We have not built a new nuclear power plant in the United States for 30 years - so we are essentially re-starting an entire industry. The Tennessee Valley Authority, or TVA, is about to bring on line the 1100-megawatt Browns Ferry Unit 1, which had been partially completed but was stopped in 1985. The TVA has also re-started construction on the 1200-megawatt Watts Bar Unit 2, which stopped construction in 1988 when it was 80 percent complete. From TVA's perspective, re-starting construction on unfinished plants makes good economic sense.

"Beyond the issue of re-starting partially completed plants, there is the challenge of licensing and commencing construction on new plants. The Nuclear Regulatory Commission currently has a large backlog of license applications for new plants. As of this month, it has 18 combined license applications docketed for 28 reactors. Of the docketed applications, it is actively reviewing 12. The staff of the Nuclear Regulatory Commission expects to receive an additional seven combined operating licenses for nine additional reactor units, making the total 25 license applications for 37 units. The reactors under consideration are based on five reactor designs, four of which are undergoing design certification, which is a separate public rulemaking process.

"This is a very significant workload for both the Commission and the industry. Coordinating the certification review for four out of five reactor designs, with 17 licensing proceedings, and then finding the trained workforce and suppliers to cost effectively build up to 28 units - that represents a major challenge.

"The National Commission on Energy Policy, working with Bechtel, has estimated that to design and build a single 1000-megawatt nuclear plant will require about 4,785 man-years of engineering work and 9,575 man-years of skilled tradeswork. There is simply not the trained personnel and supplier base to build a multiplicity of reactor designs beyond the 5 under consideration.

"Let me highlight a particular example of new-build construction that is giving many who might finance these plants some pause.

"Finland's Olkiluoto-3 reactor project is now $3.3 billion over its original cost estimate of $4.3 billion; with a project delay now exceeding three years. The reactor Areva is building at Olkiluoto is essentially one of the four undergoing design certification at the Nuclear Regulatory Commission.

"The problems with the plant in Finland underscore how crucial it is that we demonstrate, in the United States, the ability to construct ‘first-mover' reactors that are on budget and on schedule. The National Academies, in the America's Energy Futurestudy, also identified this as one of two principal demonstrations that must be accomplished during the next decade, so that we fully understand the range of available options for controlling carbon emissions from energy production. The other challenge of commensurate importance that they identified is the demonstration of carbon capture and sequestration on a large scale for fossil-fuel based energy production.

"Members of Congress are now addressing this new-build issue. Senator Mark Udall of Colorado recently introduced a bill in the Senate that proposes research on cost-effective construction of new plants. Senator Lisa Murkowski and I are both co-sponsors of that bill, and it is now before the Committee on Energy and Natural Resources for action.

"I plan to introduce a second bill, to complement Senator Udall's bill. My new bill would require the Secretary of Energy to develop and demonstrate, in partnership with the private sector, two designs for small modular nuclear reactors - less than 350 megawatts electric in size. The Department would help demonstrate the ability to license these reactors by funding applications to obtain design certification by 2018, and to obtain a combined operating license for each of the designs by 2021. Having certified and licensable designs for small modular nuclear reactors would be a significant boost to the field of nuclear power, and would help nuclear energy be a cost-effective contender for a broader array of carbon-free electric generation needs in the future.

"The challenge of building new, cost-effective nuclear plants leads me to the third topic I want to cover this morning, and that is the financial barriers for new plants.

Financial barriers to building new plants

"New nuclear plants are capital intensive.

• Florida Power and Light has disclosed that building two units totaling 2,614 megawatts will cost between $12 and $18 billion or roughly $4,600 to $6,900 per kilowatt.
• Progress Energy estimates that building two units totaling 2,380 megawatts will cost $17 billion, or $7,100 per kilowatt.

"These costs are large and have grown significantly from the 2003 ‘overnight' estimates by the MIT Future of Nuclear Power study of about $2,000 per kilowatt. While the ‘overnight' cost of new nuclear plants seems large, it still remains competitive when compared to other new baseload sources in a cap-and-trade context as indicated by the last slide that I showed from the National Academies' study.

"But let me note that even though nuclear energy is able to compete in a cap-and-trade context, the issue comes back to motivating the first builders of these plants, who will bear the most risk. On this issue, I believe that we in Congress should promote policies to help buy down some of the first-mover risk associated with nuclear energy, which I will discuss next.

Key policy issues we face here in the U.S. Congress

"The Energy Policy Act of 2005, on which I worked with Senator Domenici, first addressed the risks inherent in re-starting an industry that had not built a new plant in 30 years. At the urging of the industry and the prior administration, we legislated four key federal incentives to mitigate the risk associated with building new reactors.

• First, we extended the Price Anderson legislation to 2025, for certainty in new plant construction, and included coverage of modular reactors.
• Second, we put in place a production tax credit of 1.8 cents per kilowatt-hour for the first 6,000 megawatts of plants built over an eight-year span.
• Third, we created risk insurance for the first six plants during the final phases of plant construction and inspection by the Nuclear Regulatory Commission.
• Finally, we created a loan guarantee program for first mover plants.
"In the current energy legislation reported by the Senate Energy Committee, we propose a Clean Energy Development Administration with an overall loan guarantee authority of $100 billion for which nuclear plant builders, along with other clean energy developers, will be eligible.
Conclusion
"Let me conclude by summarizing my main points.

• Nuclear energy has an important role in energy markets that put a price on carbon, simply because it has very low associated carbon dioxide emissions.
• But nuclear energy is a costly up-front investment, even more so for the first units that will be built in the shadow of the large cost overruns by the plant being built in Finland.
• We have given nuclear energy assistance through legislation to help buy down the risk of first-movers, consistent with the recommendations of the National Academies in their America's Energy Future study. As of this time, these authorities are just beginning to be used.
• The issue of spent nuclear fuel is open. It can be safely stored for decades above ground until we reach a final and conclusive path for its disposal, but that path has yet to be determined.

"With that, I thank you for letting me offer my views today and I wish you all the best for a successful meeting."

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