[Senate Hearing 111-21]
[From the U.S. Government Publishing Office]
S. Hrg. 111-21
NUCLEAR ENERGY DEVELOPMENT
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
TO
RECEIVE TESTIMONY ON NUCLEAR ENERGY DEVELOPMENT
__________
MARCH 18, 2009
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Blackwell, Deborah Deal, Vice President, Licensing & Public
Policy Hyperion Power Generation, Inc.......................... 48
Cochran, Thomas B., Ph.D., Senior Scientist, Nuclear Program, and
Christopher E. Paine, Director, Nuclear Program, Natural
Resources Defense Council, Inc................................. 31
Fertel, Marvin S., President and Chief Executive Officer, Nuclear
Energy Institute............................................... 19
Klein, Dale E., Chairman, Nuclear Regulatory Commission.......... 3
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 2
APPENDIX
Responses to additional questions................................ 53
NUCLEAR ENERGY DEVELOPMENT
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WEDNESDAY, MARCH 18, 2009
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 9:38 a.m. in room
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman,
chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK, why don't we go ahead with the hearing?
Our meeting this morning has two purposes, both to consider
the nomination of David Hayes to be the Deputy Secretary of
Interior and also to hear testimony on nuclear energy
development.
To report the nomination or take any action on it, a quorum
of 12 members must be present. In the absence of a reporting
quorum, I would propose that we go ahead with the hearing at
this time, and once a reporting quorum is present, then we
could briefly recess the hearing and consider Mr. Hayes's
nomination and then return to the hearing once that has been
completed.
Nuclear power is an essential part of our energy mix. The
104 nuclear power plants now operating in this country supply
20 percent of our electricity. They do so reliably, cost
effectively, and without emitting greenhouse gases.
Nuclear power is an essential part of our energy mix and
must remain so for the foreseeable future. The current
generation of nuclear power plants was mostly built in the
1960s and 1970s and 1980s. For nearly 30 years, utilities did
not order a single new nuclear power plant. But in the last 2
years, 17 companies or groups of companies have ordered 26 new
reactors.
Our focus this morning will be twofold. First, we have
invited Dr. Dale Klein, who is the chairman of the Nuclear
Regulatory Commission, to give us an overview of the licensing
process that the commission uses to license new nuclear power
plants and review for us the status of new reactor
applications.
The original licensing process was often blamed for the
construction delays and cost overruns that were experienced in
the past. But the commission and the Congress replaced that
process with a new, streamlined, one-step process that is now
in place but has not yet--but has yet to be fully demonstrated.
So we look forward to hearing from Dr. Klein on this
licensing system and on the status of applications.
Our second panel will focus on the financial challenges and
other obstacles facing new nuclear power plant development. The
high capital cost of building a new nuclear power plant is a
serious obstacle to developing these plants. We have previously
tried to address the financial challenge through loan
guarantees, delay and accident insurance, and production tax
credits, and we will ask the second panel for its perspective
on these financial challenges and on any other problems facing
the industry at this time.
What to do with the spent fuel from nuclear power plants
is, of course, one of the biggest unsolved problems facing the
nuclear industry. Nuclear waste is not the subject of today's
hearing. I hope we can schedule a separate hearing on nuclear
waste in the weeks ahead.
Nonetheless, I recognize the keen interest Senators have in
the problem and in the Administration's decision to stop work
at the Yucca Mountain repository. I expect we will have
questions for the panel on the waste problem as well as part of
this hearing.
So, with that, let me defer to Senator Murkowski.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman.
I appreciate the hearing on the development of nuclear
energy here in the United States. We have seen a resurgence of
the nuclear power industry with 26 license applications from 17
entities pending for new reactors. But even with the benefits
of nuclear energy, which are no emissions, stable baseload, and
large-scale job creation, there has been conflicting evidence
from the new Administration on what role they will play to
support this revival.
If nuclear power has a place in our overall energy policy
to meet future energy needs and reduce greenhouse gas
emissions, and I firmly believe that it does, then we in
Washington need to be doing all that we can to move it forward
now. While there has been some mention about nuclear energy
being part of the overall energy strategy, the actions of the
Administration do not necessarily support that claim.
So far, this Administration has sought to kill Yucca
Mountain as a long-term repository for spent nuclear fuel
without yet providing an alternative. They have shown an
unwillingness to increase the loan guarantee program funding
levels to support the construction of new nuclear plants, and
they have focused on renewable and alternative fuel
developments to reduce our carbon emissions literally without
any mention of nuclear energy.
So where the nuclear energy as an initiative truly stands
with the current Administration is a bit of a mystery to me.
The U.S. may have the largest number of nuclear power
plants in the world, but no new reactors have been ordered in
the United States since 1978. Since that time, over 250 new
reactors were constructed outside the United States, compared
to just over 50 domestically.
China alone has 24 new nuclear reactors under construction,
which will be online between 2010 and 2015. Japan intends to
increase the amount of electricity it gets from nuclear from
today's 30 percent to over 40 percent by the year 2020. France
already gets 78 percent of its electricity from nuclear. It is
safe to say that nuclear has achieved a significant level of
international acceptance.
Unfortunately, as other countries have moved forward, the
United States has been stagnant in perhaps more ways than one.
Not only did we effectively stop building new reactors 20 years
ago, but we have allowed our nuclear work force and our
manufacturing infrastructure to disappear. It will take hard
work and investment as well as stable regulation and Government
policies to reestablish our domestic nuclear industry and
expand our Nation's primary source of carbon-free energy.
We have just begun to see the rebirth of the nuclear energy
industry in this country, and I credit a great deal of that to
the leadership of Senator Domenici, who sat next to you for so
many years here, Mr. Chairman.
I look forward to working with my colleagues on this
committee as well as those within the Administration to
continue the development and look forward to the comments from
the witnesses.
The Chairman. Let me ask Chairman Klein--Dale Klein, who is
chairman of the Nuclear Regulatory Commission, to go ahead and
take the chair here. Our first panel is made up of the
Honorable Dale Klein. He is the chairman of the Nuclear
Regulatory Commission, and we look forward to hearing from you
as to your view on this set of issues.
Please go right ahead.
STATEMENT OF DALE E. KLEIN, CHAIRMAN, NUCLEAR REGULATORY
COMMISSION
Mr. Klein. Thank you, Mr. Chairman, Senator Murkowski, and
members of the committee.
I am pleased to appear before you today to talk about the
Nuclear Regulatory Commission's new reactor licensing process.
My written testimony provides considerable detail on this
subject. So let me take this time to highlight the main points.
First, an update of the current status of new reactor
applications; the second, how the agency has improved and
streamlined the licensing process for proposed new reactor
applications with no compromise of safety; and third, our
extensive preparations to develop the staff and resources
necessary to provide timely reviews of the applications.
As you indicated with regard to the current applications,
the NRC has received 17 applications or combined operating
license applications for a total of 26 new reactors. A map
depicting the locations and types of proposed reactors is
included in my written statement. Based on industry information
submitted to the NRC, we could see up to five more COL
applications for seven more reactors by the end of 2010.
Unlike the current combined license process, the commercial
nuclear power plants currently operating in the United States
were licensed under a two-step process--first for construction
and a second step for operation. This led to a ``design as you
go'' approach, which deferred resolution of important safety
issues until plant construction was well underway, and it
allowed commercial reactors to be built with an unusual degree
of variability and diversity.
The Agency's new process approves a plant design before
construction begins while maintaining significant public
participation throughout the licensing application process. It
also provides two other significant procedures--first, review
and approval of standardized designs through a design
certification rulemaking and, second, review and approval of a
site suitability prior to a decision to build a particular
plant through an early site permit. The applicant may also
request a limited work authorization, which allows applicants
to perform limited work activities to prepare the site.
I should mention that not all the applicants are taking
full advantage of this new, improved licensing process. In
addition, some applications received to date initially lacked
information that the staff needs to complete this review. But
the NRC is working with the stakeholders to overcome these
challenges, and we are confident that the agency will be well
prepared to make timely regulatory decisions.
To prepare for the increased licensing activity we are
experiencing at the NRC, we made plans several years ago for
the staffing. Most significantly, the Commission created the
Office of New Reactors, or NRO, to lead the agency's effort to
establish the regulatory and organizational foundation
necessary to address the new reactor licensing demand. Staffing
the new office was given high priority, and today, we have over
475 highly competent and trained employees.
We also created a new reactor construction inspection
organization in Region II in our Atlanta, Georgia, location.
Mr. Chairman, my written testimony addresses other
important subjects, such as our cooperative efforts with
regulators abroad on construction and vendor inspection, but I
think I have mentioned the highlights.
This concludes my overview of the NRC's licensing process
for the new reactor applications and the current status of the
license applications, and I will be pleased to answer questions
you may have.
[The prepared statement of Mr. Klein follows:]
Prepared Statement of Dale E. Klein, Chairman, Nuclear
Regulatory Commission
Mr. Chairman, Senator Murkowski, and Members of the Committee, I am
pleased to appear before you today to discuss the Nuclear Regulatory
Commission's new reactor licensing processes.
Let me begin by noting that just last week the NRC hosted our
annual Regulatory Information Conference, which was attended by nearly
three thousand individuals, including regulators, members of industry,
stakeholders, and representatives from 31 other nations. Our annual
conference is part of the NRC's ongoing efforts to share information,
best practices and lessons learned to enhance nuclear safety and
security both domestically and abroad.
Mr. Chairman, my testimony will explain the current licensing
process for new reactor applications; contrast this with the agency's
older, less efficient, two-step process; and discuss the current status
of new reactor applications.
Congress has provided the NRC with the resources needed to meet the
growing renewed interest in additional commercial nuclear power in the
United States. These resources have enabled the NRC to successfully
complete, on schedule, significant new reactor licensing activities.
Over a number of years, NRC has taken steps to improve the licensing
process. These actions have served to increase the effectiveness,
efficiency and predictability of licensing a new reactor while
maintaining our focus on safety and security. All currently operating
commercial nuclear power plants in the United States were licensed
under a two-step process for approval of construction and later for
operation. But, all of the new reactor license applications have been
submitted under a new combined license application approach (also known
as ``COL''), which essentially takes the previous two-step review
process down to one step. To date, the NRC has received 17 COL
applications for 26 new nuclear reactors. A map depicting the locations
and types of proposed reactors is attached. Based on industry
information submitted to the NRC, we could see up to five more COL
applications for seven more reactors by the end of 2010.
In the simplest terms, under the original two-step licensing
approach the NRC would first issue a construction permit, based on
evaluation of preliminary safety and design information, to allow
construction of a nuclear power plant, and then later issue an
operating license upon completion of construction. The applicant was
not required to submit a complete design at the construction permit
phase. Before the scheduled completion of construction, (typically when
the plant was 50% completed), the applicant filed an application for an
operating license. At this point, the applicant had to provide the
complete design bases and other information related to the safe
operation of the plant, technical specifications for operation of the
plant, and description of operational programs.
Criticism of the two-step process centered on a design-as-you-go
approach to constructing the plant, which deferred resolution of
important safety issues until plant construction was well underway. The
deferral of design details until after construction was authorized
allowed commercial reactors to be built with an unusual degree of
variability and diversity--in effect, a set of custom-designed and
custom-built plants. Other criticisms included regulatory requirements
that kept changing, and a seemingly inefficient and duplicative review
and hearing process.
To address these problems, the process set forth in Part 52 of the
NRC's regulations allows an applicant to seek a combined license, which
authorizes construction based on a complete design and provides
conditional authority to operate the plant, subject to verification
that the plant has been constructed in accordance with the license,
design, and the Commission's regulations. Part 52 maintains significant
public participation throughout the licensing application process. A
graphic depiction of the licensing process is attached.
Part 52 provides two other significant procedures: (1) review and
approval of standardized designs through a Design Certification
rulemaking, and (2) review and approval of a site's suitability, prior
to a decision whether to build a particular plant, through an Early
Site Permit (ESP). The applicant may also request a Limited Work
Authorization (LWA), which allows applicants to perform limited work
activities to prepare the site before approval of the COL.
So far, only one of the five designs currently being referenced in
COL applications--the Advanced Boiling Water Reactor--has completed the
certification process and is only referenced in one COL application. It
should be noted that although the Westinghouse AP1000 is also a
certified reactor design, the design that was approved in 2006 has two
revisions under review by the NRC. A final decision on the design
changes is expected in 2010.
In addition, the design certification applications and some COL
applications received to date initially lacked information that the
staff needs to complete its review. Staff reviews have been further
complicated because some applicants are revising submission dates and
submitting modifications to their applications, often with late notice
to the staff, which is disruptive to the work planning process. The
result is that the early COL applications are unlikely to achieve the
full benefits of the Part 52 process. The NRC is working with
stakeholders to overcome these challenges and is confident that the
agency will be prepared to make timely regulatory decisions. As this
process matures, the Commission will seek the continued support of
Congress to sustain these efforts.
I would like to focus my comments briefly on improvements we have
made to date, and what we expect down the road in new reactor
licensing.
The NRC has sought to position itself strategically to be ready to
respond to the new reactor licensing workload. The Commission created
the Office of New Reactors, or NRO, to lead the agency effort to
establish the regulatory and organizational foundation necessary to
address the new reactor licensing demand. Staffing the new office was
given high priority, and today NRO has over 475 highly competent and
qualified employees.
The NRC has made great strides in addressing the new reactor
licensing challenge:
The NRC published a revised 10 CFR Part 52 (titled,
``Licenses, Certifications, and Approvals for Nuclear Power
Plants'') in August 2007 to clarify the applicability of
various requirements and to enhance regulatory effectiveness
and efficiency in implementing the licensing and approval
processes. The rule also incorporated lessons learned from the
reviews of the first design certification and early site permit
applications.
Similarly, the NRC published a final rule on Limited Work
Authorizations, or LWAs, which supplements the final rule on 10
CFR Part 52. This rule allows certain early construction
activities to commence before a construction permit or combined
license is issued. The rule specifies the scope of construction
activities that may be performed under an LWA, and specifies
activities that no longer require NRC approval. Like the Part
52 revision, these changes were adopted to enhance the
efficiency of the licensing and approval process and to reflect
more clearly NRC's authority.
In March 2007, the NRC completed the first comprehensive
update to the NRC's Standard Review Plan (SRP), which provides
guidance to the staff on how to perform technical reviews. The
update brought the SRP into conformance with the Part 52
revision, and extends the applicability of the SRP to the Part
52 licensing process.
The NRC issued a new regulatory guide, RG 1.206 (titled,
``Combined License Applications for Nuclear Power Plants''),
which provides guidance to potential applicants on standard
format and content of new reactor combined license
applications, and also recently issued guidance for applicants
on complying with the LWA rule.
The NRC has implemented a computer-based project management
system that significantly enhances the staff's ability to plan
and schedule work.
In 2004, the NRC promulgated substantially revised rules of
practice intended to streamline and make the hearing process
more effective.
The NRC promulgated an electronic filing rule that is
further increasing the efficiency of the hearing process.
The NRC created a new reactor construction inspection
organization in the Region II Office in Atlanta, Georgia. To
prepare for the commencement of construction activities, the
staff has observed ongoing new construction activities in
China, Finland, France, Japan, Korea, and inspected the
refurbishment and startup of the Tennessee Valley Authority
(TVA) Browns Ferry Unit 1, which has been idle since 1975, and
is currently inspecting the completion of TVA's Watts Bar Unit
2, which had been in a suspended state since 1985.
Finally, the NRC conducted an efficient review of project
management using the Six Sigma problem-solving methodology to
streamline the design certification rulemaking process.
With these activities, I believe that the NRC has established a
strong regulatory foundation for the review of new reactor license
applications.
I should also mention that the agency has made a consistent effort
to improve our coordination with other Federal agencies involved in new
reactor licensing. For example, consistent with its lead responsibility
for off-site nuclear emergency planning and response, the Federal
Emergency Management Agency (FEMA) supports the NRC's COL application
reviews by providing input to ensure that the off-site emergency plans
are adequate.
In addition to COLs, the NRC staff has completed the review of
three early site permit applications and is proceeding with the review
of the fourth application. With respect to design certifications, the
staff is continuing its review of General Electric's Economic
Simplified Boiling Water Reactor, commonly referred to as the ESBWR;
Areva Nuclear Power's U.S. Evolutionary Power Reactor, or U.S. EPR;
Mitsubishi's U.S. Advanced Pressurized Water Reactor, or US-APWR; and
amendments to Westinghouse's AP1000 design certification.
The NRC has completed preliminary work for the licensing of the
Next Generation Nuclear Plant, or NGNP. In August 2008, the NRC and DOE
delivered a licensing strategy to the Congress, as required by the
Energy Policy Act of 2005.
I would like to touch briefly on the GAO's 2007 audit of the NRC's
readiness to conduct reviews of COL applications. In general, the GAO's
findings were positive assessments, acknowledging the NRC's extensive
preparations and the quality of plans. The NRC continues to believe
that the GAO assessments provide useful insights to the agency's
management. The GAO identified four recommendations:
Fully develop and implement criteria for setting priorities
to allocate resources across applications by January 2008.
Provide the resources for implementing reviewer and
management tools needed to ensure that the most important tools
will be available as soon as is practicable, but no later than
March 2008.
Clarify the responsibilities of Office of New Reactor's
Resource Management Board in facilitating the coordination and
communication of resource allocation decisions.
Enhance the process for requesting additional information by
(1) providing more specific guidance to staff on the
development and resolution of requests for additional
information within and across design centers and (2) explaining
forthcoming workflow and electronic process revisions to
combined license applicants in a timely manner.
I am pleased to report to you that the NRC has completed its work
in response to these recommendations.
The NRC is also working with its international partners on many
areas of common interest. One program that we have initiated is the
Multi National Design Evaluation Program (MDEP) in order to take
advantage of international experience in licensing and constructing two
EPR plants in Europe to assist the NRC in its review of the US EPR
application. The NRC also has recently established interactions with
regulatory counterparts in China, Canada and the United Kingdom to
exchange information on the licensing review of proposed AP1000
reactors in the United States.
In addition to focusing on completing licensing reviews, the NRC is
working on the development and implementation of a new Construction and
Vendor Inspection Program. The program is building upon prior
experience, including lessons learned during the construction of the
104 currently operating reactors. Numerous historical lessons provide
insights related to quality and oversight problems during the previous
period of construction in the United States, and abroad. The most
important of these lessons is that a commitment to quality, instilled
early in a nuclear construction project, is vital to ensuring that the
facility is constructed and will operate in conformance with its
license and the regulations.
The NRC staff is working with the industry to ensure that a strong
commitment to quality is part of the foundation of every new reactor
project in the United States. Many of the components that will be used
in the construction of possible new reactors in the U.S. will be
manufactured abroad, so NRC inspectors are also visiting manufacturing
facilities and working with our regulatory counterparts in other
countries to ensure the quality of the manufactured components. Quality
assurance (QA) inspections of engineering and site activities are
contributing to the conduct of effective and efficient reviews of
design certifications, COLs, and early site permit applications. The
agency has also sought stakeholder involvement in an effort to make
construction and vendor inspection a timely, accurate and transparent
process.
While the Commission is satisfied that we have in place an
effective regulatory process, we are always looking for ways to
improve. Just as industry can become more efficient, the NRC is
constantly working to improve its efficiency with no compromise in
safety.
Mr. Chairman and Members of the Committee, this concludes my
overview of the NRC's licensing process for new reactor applications,
and the current status of license applications. I would be pleased to
respond to any questions you may have.
The Chairman. Thank you very much.
Let me just ask what kind of a timeline you anticipate for
actually--you have 17 applications pending. Is that correct?
Mr. Klein. That is correct.
The Chairman. How quickly do you expect that you will be
able to act on these applications? Are some of them on track to
be dealt with fairly soon, or what is the timeframe?
Mr. Klein. We are actively reviewing those applications, as
we speak. What we do in our process, once an applicant submits
their COLA, we will review for that application to review for
its completeness.
Once it is completed, then we will docket that application,
and we currently have many applications under review. So our
475 individuals are actively at work, as we speak, reviewing
those applications.
The Chairman. So you have not yet docketed the
applications?
Mr. Klein. We have docketed almost all of them.
The Chairman. Oh, you have docketed them.
Mr. Klein. Yes.
The Chairman. So, you are now in the review process, which
will lead to a yes-or-no decision by the commission as to
whether they can proceed.
Mr. Klein. That is correct. In this process, under this new
approach, what we are expecting is that it will take us about
30 months for the initial technical review, and we are allowing
another 12 months for the hearing process, for a total of 42
months.
We expect, as the second wave of these applications go
through, we will have efficiency of scale and be able to reduce
that time with no compromise on safety. One of the areas that
we have little control over is that hearing process.
The Chairman. The 42 months, when would you say that began
with regard to some of these applications?
Mr. Klein. The first applications that we received was in
2006.
The Chairman. OK. So the 42 months began in 2006?
Mr. Klein. That is correct.
The Chairman. You can count forward from that to see when
you might actually be in a position to act.
Does the Nuclear Regulatory Commission have adequate staff
to review all of the combined license and design certification
and early site permit applications that it has received and
expects to receive in the foreseeable future?
Mr. Klein. Mr. Chairman, we do. We have, I think, been
successful in articulating our need for personnel. We have a
highly trained staff. So, we have organized our New Reactor
Office in such a manner that we believe we can do the timely
review of those applications.
The Chairman. As to legal authority, are you satisfied that
the NRC has all of the statutory authority that it needs to
make this regulatory process work efficiently, or should we be
legislating changes in the law to help you in this regard?
Mr. Klein. We believe currently we have the legal authority
to make the necessary decisions for the licensing.
The Chairman. Let me ask about the so-called ``waste
confidence rule. As I understand the commission's original
waste confidence rule, the commission was confident that we
would have a repository available by the years 2007 through
2009 based, in part, on the Nuclear Waste Policy Act, which
called for such a repository by 1998, I believe.
Last October, when we still thought that Yucca Mountain
repository might some day open, the commission proposed
amending the waste confidence rule to say that you were only
confident that there would be a repository 50 to 60 years after
the 60-year extended life of a reactor.
I guess my question is what effect will the
Administration's announcement that it intends to not proceed
with Yucca Mountain have on your proposed rulemaking and on
your confidence in this area?
Mr. Klein. Mr. Chairman, as you indicated, we are going
through our waste confidence rule process currently. The
comments for the public portion ended recently, and our staff
will be evaluating and giving a recommendation. We expect the
Commission to make a decision on waste confidence this summer.
Based on our rationale, the reason we looked at the waste
confidence was that we wanted to have a clear understanding of
our confidence in the event that the Yucca Mountain site at the
time was not successful. As you know, our job as a regulator
and required by law is to evaluate that application. Because of
the uncertainty of the license application, we wanted to make
sure that we were confident in the case that the license
application was not successful that there were options forward
to handle safely the spent fuel.
The Chairman. So you expect this summer to make a new
decision as to your view as to the confidence that you can have
in this process?
Mr. Klein. Yes, sir. We do.
The Chairman. All right.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
I want to follow up with the chairman's inquiry here. The
decision that was made by the Administration through the--
actually, I shouldn't say it is a decision yet. But through the
budget blueprint that essentially pulls back on Yucca to an
extent that I think you have suggested makes it problematic in
keeping to the deadlines, which you were required to meet. I
understand that is by 2012.
Can you speak, just very quickly, to what the regulatory
commission needs in terms of funding to meet that mandatory
deadline?
Mr. Klein. Senator Murkowski, being a regulatory agency, we
try to follow the law ourselves, and Congress had given us
guidance that they expected us to evaluate the applications,
once docketed, within a 3-year period, with 1 year additional
in order to allow for contingencies. So that meant maximum of 4
years.
During our 2009 budget process, we were initially $36
million short of the funds we expected to be required to meet
that timely response. During the omnibus bill that was recently
passed, we were provided about $11 million of our $36 million
additional that we needed.
So it will be a challenge for us to meet our statutory
obligations on a 4-year----
Senator Murkowski. Can you meet it? Can you meet it, given
the funding that you have received through the omnibus, and
meet that 3-year period?
Mr. Klein. We are early enough in the stage that it is hard
to give you a definite answer. But it will be very difficult
for us to meet the 4-year commitment with the limited funding
that we have been receiving.
Senator Murkowski. Let me ask you about the challenges that
you face just with the staffing and the expertise that you
need. You mentioned you have got 475 staff that have been
brought on to handle the workload. What challenges do you see
in these years ahead?
You are stepping up in terms of the workload and the
handling the permits and the applications. What challenges do
you see in terms of the staffing, recruitment, and retention
within the Commission and being able to keep good people on for
the extended periods of time?
I understand that while you have a sufficient number of
employees, that slightly less than half of the staff have been
with the agency for less than 5 years. Can you just speak to
the manpower issue that we are facing?
Mr. Klein. Senator, as you indicated, we have been staffing
up for the last several years in anticipation of our increased
workload. The good news is, we have been able to recruit very
talented individuals.
One of the reasons that has helped us recruit is that we
were selected in 2007 as the best place to work in the Federal
Government. So we take advantage of that in our recruiting
activities.
So I think our challenges are twofold. One is training. We
have a very massive training program because we do have a lot
of new hires, and so we want to make sure that we train and
give the resources needed for our individuals to make their
proper decisions. So training is an area we focus heavily on.
I think our next challenge will simply be retention. As the
industry starts construction and building up, I think we all
know that industry oftentimes can pay more than the Federal
Government. So we need to pay attention to the needs of our
employees and continue with that number-one ranking so that our
employees will want to stay with us rather than go elsewhere.
Senator Murkowski. Do you have any concern that perhaps the
signals that are coming out of the Administration right now in
terms of, in my opinion, a lack of support for the nuclear
industry may affect your ability to recruit and retain good,
qualified, skilled individuals?
Mr. Klein. I think the area that we will have to watch,
both the Government and the industry, is what the enrollments
are our academic programs. We will need to watch those trends
to make sure that people believe that they have viable careers
in the nuclear field. So that is one area that I think we all
need to watch.
Senator Murkowski. I think we need to be watching it very,
very carefully.
Very quickly, you mentioned 42 months in terms of the time
required to complete these first reference licenses. Can you
tell me how that compares to the international experience in
terms of review and completion of the permits?
Mr. Klein. Senator, it is comparable. Our processes are a
little different. As you might expect, each country will do
things slightly different. France, for example, takes a little
bit longer on their initial siting, and then they will still do
the two-step process.
But in general, when we look at countries like France and
Finland and Japan and Korea, most countries are about in the 3-
to year period when you compare all of it. So we are
within the range. The UK is currently looking at their process,
and they are pretty well following our process. So we are not
outliers currently.
Senator Murkowski. OK. Thank you, Mr. Chairman.
[Recessed.]
The Chairman. Senator Udall, why don't you go ahead with
your questions?
Senator Udall. Thank you, Mr. Chairman.
Mr. Klein, nice to see you here. Thank you for taking your
time to come up and speak with us about this very important
energy source.
I would like to focus on your workload. In that context,
with so much that you are facing, do you have adequate budget
and human resources? If we gave you more--that is, if the
Congress provided you with more resources, what would be your
priorities for using those resources?
Mr. Klein. Senator Udall, as you know, when we build our
budgets, it is always a 2-year process where we start in the
out-years, and then when we come to the actual fiscal year, we
sometimes have to make adjustments. For 2009, the only area
that we have funds that are of a concern would be enough
resources for the evaluation of the Yucca Mountain application.
If we had more funds available in out-years, I would say we
would probably look at additional types of training and also
additional scholarships to recruit additional individuals into
the nuclear profession.
Senator Udall. Do you see a lack of people interested in
being nuclear engineers and being part of the nuclear industry?
Have you done inventories? Do you have a sense of that
potential future work force?
Mr. Klein. I am on leave of absence from, as I often say, a
small university in Texas, the University of Texas at Austin,
where I taught nuclear engineering for a number of years. We
did see declining numbers for a number of years in nuclear
education and in health physics.
We are now seeing those numbers increase, and I think what
we need to do is make sure we sustain those levels. Because if
we send a signal that there may not be employment
opportunities, we may see a drop-off again in the interest of
the young people in the nuclear profession.
Senator Udall. Moving to a related subject, this is this
year, I believe, the 30th anniversary of the incident at Three
Mile Island. The industry was directed to implement changes in
procedures and safety protocols. What are you all doing to
encourage 21st century safety culture at your existing
facilities?
Mr. Klein. Senator, I think everyone learned a lot from the
Three Mile Island accident--the industry, academia,
Government--all across the board. Certainly, the NRC learned a
lot. I believe that we are a much better regulator today. We
have a much more rigorous reactor oversight program. We have a
safety culture that is recognized both within the NRC and
within the industry as important.
I think one of the most significant aspects after Three
Mile Island was the creation of the Institute of Nuclear Power
Operations by the industry, where the industry recognized that
they needed to have more activity, more responsibility, more
self-checking among themselves.
So I think post TMI, we have all learned lessons, and we
have all implemented those lessons. I think the record speaks
for that. The operational efficiencies are higher. The safety
issues that we see are less, but the thing that we all need to
watch is that we can never become complacent. We have to
maintain high standards.
Senator Udall. I know at a previous hearing, there was a
discussion about Yucca Mountain. I know Senator McCain was
particularly interested in what the plans were for Yucca
Mountain. If Yucca Mountain were taken offline, what is plan B?
What is the agency's approach to the waste at, I think, some
100 sites around the country?
Mr. Klein. As you know, we are the regulator. So we don't
propose the solution. So what we would do is, we currently have
an application that we are required by law to evaluate, and we
are going through that process. That application is long. It is
8,000 pages, referencing a million documents, and it will take
our staff several years to evaluate that application to see if
it is sufficient.
In the interim, dry cask storage is safe. We license those
facilities. We monitor them. So, at-reactor sites, dry cask
storage currently is plan B.
Senator Udall. When you provide those licenses for the dry
cask storage, what is your estimate of the time that that
storage can be utilized before your concerns rise? In other
words, is it a 10-year timeline? Fifty years? What is the
timeline you operate off of?
Mr. Klein. Currently, our staff has evaluated that issue,
and in the past, we had looked at 100 years for the dry cask
storage of being safe and secure. The current waste confidence
that we are looking at may extend that an additional 20 years
to look at maybe a 120-year period for the dry cask storage to
be safe and secure.
Senator Udall. Do you have any concerns about the security
around that dry cask storage?
Mr. Klein. We watch it. Security is an issue that we always
watch. So, we have policies and procedures in place to ensure
that they are secure.
Senator Udall. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Bennett.
Senator Bennett. Thank you very much, Mr. Chairman.
Mr. Klein, I have been in the facility in France where the
spent fuel rods are reprocessed, and instead of being stored--
the final waste product, instead of being stored in something
like Yucca Mountain, I asked where is it, and they said, ``It
is in that green building over there.''
I said, ``What happens when the green building gets
filled?'' They said, ``Well, we will build another building.''
The reduction in mass as well as the reduction in
radioactivity is dramatic. I have been in the plant physically,
and the degree of safety process is to make sure that anybody
who is in the plant is properly taken care of, are very obvious
and more than adequate.
I understand that we in this country decided not to do
reprocessing. President Carter is the one who made that
decision. Although President Reagan reversed it, by that time,
the industry had pretty much left our shores or the boat had
left the dock, and we have simply not done that. Other
countries have.
My conviction is that we need to now say let us do
reprocessing. Let us get into that business. Reverse the
decision that Jimmy Carter made--factually, not just legally.
What is your experience, and what would be your recommendation
with respect to reprocessing?
Mr. Klein. Senator, as the regulator, we need to be
prepared to evaluate and establish the requirements in the
regulations if we move toward recycling in the United States.
So, we have been having consultations with the Department of
Energy to understand what they might be proposing so that, as
the regulator, we will be ready if they proceed forward in that
direction, either they or private industry.
Senator Bennett. You are a nuclear engineer. Do you see any
technical or engineering problems with reprocessing?
Mr. Klein. I have visited the same facilities that you have
in France, and I have talked to the regulators in France.
Clearly, those facilities are operated safely and securely. If
they were built in the United States, we would also operate and
make sure they were built safely and securely as well.
Technically, it is well understood.
Senator Bennett. If we were to increase the number of
nuclear plants, not just continue the current 20 percent, but
if we were to say let us drive toward 30 percent or even 40
percent of American electricity generated by nuclear, how big a
reprocessing plant would we need, and would we need more than
one?
Mr. Klein. That would really be a question probably better
directed toward industry and DOE. But if you look just at the
size of the facilities, France has about 58, 59 reactors. They
have the one facility that you visited in La Hague. We have
about 104 running today, so one could scale accordingly.
Senator Bennett. So, as I say, if we were to increase
beyond the 100-some odd that we currently have, as I think we
probably need to, then perhaps we would need 2 or even 3 of
these in the United States to handle that load?
Mr. Klein. It would be likely that we would. As the
regulator, we would make sure that those facilities were safely
and securely operated.
Senator Bennett. But you have no reason to believe that
they would present any kind of safety hazard?
Mr. Klein. I believe that we would be able to evaluate
those accordingly.
Senator Bennett. Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Shaheen.
Senator Shaheen. Thank you.
Good morning, Chairman Klein. Thank you for being here.
New Hampshire, as you may know, is home to the Seabrook
nuclear power plant, which I believe was the last power plant
licensed in the United States and actually constructed and
operating. It was quite a process to get that plant operating.
It took 10 years longer than expected, and it wound up costing
12 times more than projected. The final cost was over $6.5
billion.
The debt that resulted from the bankruptcy of Seabrook's
major utility owner, Public Service Company of New Hampshire,
was the fourth-largest bankruptcy in corporate history at the
time. There are many of us for whom the challenges of Seabrook
and the memories of that are still quite vivid.
One of--you talked about your process to streamline
licensing of plants. Do you think that streamlined process
would have made a difference in how long it took to license and
have Seabrook begin to operate?
Mr. Klein. Senator, I think the answer is yes. I think, in
other words, if we did a new Seabrook today, it would be,
hopefully, more predictable. The regulator, namely the NRC, I
think better understands our requirements today, and I think
industry would have a better understanding of how they intended
to build and design and operate those facilities.
As I indicated in my opening comments, one of the
challenges that we had with the existing fleet is that every
one is different. Standardization will make it a lot easier,
both for the regulator and for the operator. So, I believe that
we have done two things that are fundamentally different now
than in the first wave, and that is standardization and a one-
step licensing process with no compromise on safety.
Senator Shaheen. One of the things that I think drove up
the cost of Seabrook was the fact that Three Mile Island
happened in the middle of that construction, and there were
significant changes made to what was required of the plan.
How would the one-step licensing process take into
consideration any future Three Mile Islands or other accidents
that might affect understanding of how construction should be
done?
Mr. Klein. There were a lot of changes, as you indicated,
immediately after Three Mile Island, both equipment and
regulatory aspects. I think those have stabilized. I think we
now articulate our requirements. The industry knows what those
are.
So I don't believe that you would see those changing
requirements today. I believe we have decades of years of
experience since Three Mile Island. We now use a risk-informed
regulatory process. We know better what to look for. We have a
better oversight program, and we have a lot more experience not
only in the United States, but nationwide.
Senator Shaheen. To switch topics to cost, which is
obviously one of the big challenges with Seabrook, as you know
the Energy Policy Act of 2005 authorized the Secretary of
Energy to guarantee loans of up to 80 percent of construction
costs for energy projects that reduce greenhouse gas emissions,
including nuclear power.
You have pointed out that there are 17 pending applications
before the Nuclear Regulatory Commission. My understanding is
that there are about $18.5 billion in loan guarantees available
for that program. How many plants do you think that funding
could support in terms of the pending applications that are
before you?
Mr. Klein. As a regulator, we tend not to look at the
financing that much, and I think it depends on how the
Department of Energy wants to run that program. That might be a
better question to ask the next panel. As the regulator, we
don't follow the loan guarantees, per se.
Senator Shaheen. OK. As you are thinking about economies of
scale, which, hopefully, the standardization that you are
talking about would help lead to, how many reactors do you
think it would take to get to those economies of scale? Or do
you think you have already done that?
Mr. Klein. We hope that with our standard design process
and holding the industry to those standardization requirements,
we hope to do the standardization through the design
certification process and do that on the front end.
Now what happened was that there are more vendors than I
think we initially expected. We thought there might have been
three, and currently, there are a few more than that. So what
we hope is within each vendor, we will have a standardized
fleet, and we will do that standardization through the design
certification process before construction starts.
Senator Shaheen. Thank you.
The Chairman. Senator McCain.
Senator McCain. Thank you, Mr. Chairman.
Thank you for your good work, Commissioner Klein. Are you
operating under the assumption that Yucca Mountain will become
a reality?
Mr. Klein. No.
Senator McCain. You are not.
Mr. Klein. Our staff has not yet evaluated the license
application, and so we are beginning that process.
Senator McCain. Are you operating under the assumption that
Yucca Mountain will become a reality, that plans are in motion
and the process is moving forward for Yucca Mountain to be a
nuclear waste repository?
Mr. Klein. We are not counting on Yucca Mountain being
successful.
Senator McCain. You are not counting on it? Meaning, then
what are you looking at for an alternative?
Mr. Klein. Dry cask. For the interim, dry cask storage.
Senator McCain. Dry cask storage. Spent nuclear fuel
sitting in pools and in dry casks at nuclear power plants all
over America. Is that what you are planning on?
Mr. Klein. Yes, sir.
Senator McCain. Have you consulted any experts on national
security on this issue to have these spent nuclear fuel sitting
around nuclear power plants all over America?
Mr. Klein. Yes. We have. We look at the security both of
the operating facilities and of the dry cask storage, and we
consult on a lot of our tactics and techniques with the
Department of Defense.
Senator McCain. They say that that is no national security
threat?
Mr. Klein. I think there is always security threats. Before
I came to the NRC, I was at the Department of----
Senator McCain. What did they say?
Mr. Klein. I was at the Department of Defense, and there
are a lot of targets, including chemical plants and other
facilities. So, we have a wide variety of targets, including
tall buildings, as 9/11 demonstrated.
Senator McCain. I am asking again, what did the Department
of Defense tell you about this threat to our national security
if you consult with them?
Mr. Klein. The challenge the Department of Defense and all
the intel agencies have is exactly where a terrorist might
strike.
Senator McCain. The point is, obviously, that we would
rather have a one place where it can be stored. Any national
security expert or amateur will tell you that we need to have
one place to store it, and that is not going to happen now
because the Administration has declared that.
So now your answer is dry cask storage all over the United
States of America. I don't think many Americans believe that
that is a good solution. There is now presently 104 nuclear
power plants in operation. Is that correct, roughly?
Mr. Klein. Yes. That is correct.
Senator McCain. How many of them will be in operation 20
years from now? The existing plants.
Mr. Klein. My guess, assuming that those whose licenses are
about to expire do a license renewal and we approve those, all
of those plants could be running in another 20 years from now.
Senator McCain. I have talked to many utility executives
who say they aren't going to continue that operation. Have you
heard that?
Mr. Klein. No.
Senator McCain. But you intend--you think that every one of
those 104 that are now operating will be relicensed?
Mr. Klein. If they meet our requirements, yes, sir.
Senator McCain. They can meet your requirements, you
believe?
Mr. Klein. So far, 51 of the 104 have.
Senator McCain. On this waste confidence issue, again, a
repository can reasonably be expected to be available within 50
or 60 years beyond the license life for operation of any
reactor. Do you think that with Yucca Mountain being canceled
that you can meet the ``waste confidence criteria,'' which has
been changed, as we know?
Mr. Klein. We are going through that evaluation, and we
hope to make that determination by this summer.
Senator McCain. You mentioned to Senator Bennett that you
have seen the reprocessing facilities in France?
Mr. Klein. Yes.
Senator McCain. You believe that also that technology could
be employed here in the United States?
Mr. Klein. I believe that the NRC could establish the
frameworks, and that could be a viable option for the United
States
Senator McCain. Do you believe that there is a problem with
the material that is reprocessed as far as a national security
concern is involved?
Mr. Klein. I believe that we could establish rules and
procedures that would make that a minimum issue.
Senator McCain. But there are no plans, obviously, for any
reprocessing here in the United States, at least that you are
aware of?
Mr. Klein. No applicant has come forward with an
application to the NRC.
Senator McCain. I guess, finally, if it is 42 months, as
you mentioned, the process of licensing now, and you mention in
your testimony that first licensing began in 2006 application.
Is that correct?
Mr. Klein. Yes. I think I made an error. I think we really
started in 2007.
Senator McCain. So that would mean that a license could be
issued in late 2010, 2011?
Mr. Klein. The COL could be issued in that timeframe, and
then the utility would start construction. So I think the first
time electricity would be expected to be coming out of a new
nuclear plant is in the order of 2016.
Senator McCain. I thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Landrieu.
Senator Landrieu. Yes, Mr. Klein, I am very impressed with
your grasp of this issue, and I understand that you have been
doing this now for quite some time. I think my predecessor,
Bennett Johnson, when he chaired this committee and authored
the Yucca Mountain legislation, worked with you and all the way
back to Speaker Wright.
So I am glad that someone that is knowledgeable, both with
a background of defense and energy and with your academic
background, is in that chair because my general feeling--and I
am no expert, but I am a promoter of nuclear energy and power
for this country--it really is a sad and expensive story of a
policy that would make sense being torpedoed from the left
years ago from environmentalists that couldn't quite understand
the benefits of nuclear power to the country and from the right
about America's natural--sometimes it works well, sometimes it
doesn't--tendency for just let the free market build whatever
kind of system.
The combination of it has been devastating. I hope that now
President Obama can find a middle road between the kind of
Government-private sector planning that is necessary for
something this substantial and that we can put to bed forever
some of these environmental concerns because the development of
this industry has a record, particularly not--in Europe and
other places of safety and security.
I want to point for the record a couple of things on the
cost that I think is particularly interesting to my
constituents on nuclear power and its cost in production of
electricity. Since projected out and back through 2007, the
kilowatt-hour of nuclear is $1.76. Coal is $2.47. Gas is $6.78,
and petroleum is $10.26. I am sorry I don't have what it is for
wind and solar.
But as you can see, not only is the cost lower for nuclear
and coal, two completely different sources, but they are also
stable. I think what America is looking for first are lower
energy prices that are stable, a system of producing
electricity in this country where we can produce as much
domestically as possible or from friendly allies relatively
close geographically, and energy that is clean.
I think you and, hopefully, some of the leaders in this
Administration can understand that nuclear meets all of those
objectives and must be pushed forward with great haste and
needs to be a critical component of our energy regime in this
country.
But let me ask you this, and you have talked a bit about
this. I want to ask you two questions. In the cross-examination
of Jeanne Shaheen or her comments--no, maybe I think it was
Senator McCain--you said, Technically, it is well understood.
Do you remember that phrase that you used in conjunction?
Could you elaborate a little bit about that? Technically, it is
well understood.
Mr. Klein. It was regarding the reprocessing of the spent
fuel and separating and getting the usable material out and
then throwing away the residues. So, I think the technical
community understands recycling. I think there is----
Senator Landrieu. Inferring that it is just the political
situation that might be difficult. But technically, you think
you have got it done?
Mr. Klein. I think there still needs to be some additional
research on what might be the best technology. But I think we
all understand the chemical processes. Reactor spent fuel has,
as you know, been around for a long time. We know how it
behaves.
Then there is a lot of experience, both in the laboratory
and commercial sides, on the recycling options. The Department
of Energy wants to look at maybe some optimal techniques on
what you would do for what they call the back-end of the fuel
cycle. What we need to do, as a regulator, is whatever the
Department of Energy might propose, that we are ready to ensure
that it can be done safely and securely.
Senator Landrieu. Let me ask you this. I hear the NRC has
revamped its process for licensing new power plants. It is not
progressing as well as some of us would like. Can you talk
about some of those difficulties in a little bit more detail
than you have? Under the combined licensing process, I know
that you all are having some difficulties there, I hear. Can
you explain a bit about that?
Mr. Klein. What we had hoped the way the process would
work, and this is where you sort of design how you would like
it to be, and then reality comes in. We would, as a regulator,
we would have liked to have the plants completely certified and
all of that finished before an application comes in.
Then we would like to look at the siting of that plant at a
site, do an early site permit, and then look at the combined
license application. So that is the way that we envisioned the
process to work in the perfect world.
The perfect world is oftentimes overcome by reality, and
there was a need for baseload electricity. So, we have received
a lot of applications before we have completed the standardized
designs.
Now we will not issue the combined license until those
design certifications are finished, but we won't really
optimize our one-step licensing process until we go through
this complete system of design certification and then the
combined license application.
Senator Landrieu. I know my time has expired. But for the
record, you can submit this in writing. Would you outline for
me, and I will share it with the members of the committee, the
significant differences in design or licensing requirements
between the United States and other countries, that perhaps we
could learn a little bit more about the way they are doing it
and improve our system here?*
---------------------------------------------------------------------------
* See Appendix I.
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Thank you so much.
Mr. Klein. Thank you.
The Chairman. Thank you very much for your excellent
testimony. We appreciate you taking time out of your busy
schedule to be here with us, and why don't we go on to the
second panel at this point?
Mr. Klein. Thank you.
The Chairman. Our second panel is made up of Marvin Fertel,
who is the president and chief executive officer and chief
nuclear officer for the Nuclear Energy Institute here in
Washington. Also Dr. Thomas Cochran, who is the senior
scientist for the nuclear program with the National Resources
Defense Council.
We appreciate both of you gentlemen being here and giving
us your views. Why don't we start with you, Mr. Fertel, and
then Dr. Cochran, and then we will have some questions for both
of you.
So if you will just take 5 or 6 minutes each and tell us
the main points you think we need to be aware of. Please.
STATEMENT OF MARVIN S. FERTEL, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NUCLEAR ENERGY INSTITUTE
Mr. Fertel. Thank you very much, Chairman Bingaman, Ranking
Member Murkowski, Senator Udall.
We appreciate the opportunity to be here to share with you
our thoughts on policies that could facilitate the deployment
of new nuclear plants in our country. The U.S. nuclear
industry's top priority is and always will be the safe and
reliable operation of our existing fleet of plants.
As Chairman Bingaman said in his opening remarks, we have
104 nuclear plants, and they continue to sustain excellent
levels of performance. In 2008, we achieved an average capacity
factor of 91 percent and avoided emissions of almost 700
million metric tons of carbon dioxide.
Construction of new nuclear plants will address two of our
Nation's top priorities--additional supplies of clean energy
and creation of jobs. Today, nuclear energy provides
approximately 75 percent of carbon-free electricity generation.
Even with aggressive efficiency measures and historically
low growth in demand, the United States will need additional
baseload generating capacity. Every form of clean energy
technology, including nuclear, will be needed to reduce the
electric sector's carbon footprint.
As you heard from Chairman Klein, the Nuclear Regulatory
Commission is reviewing construction operating licenses for 26
new reactors, totaling about 34,000 megawatts of capacity.
Safety-related construction of the first new nuclear plants we
believe will start in 2012, with four to eight in commercial
operation by around 2016.
Because of these new plant projects, jobs related to
nuclear energy are expanding rather than contracting in our
country. Over the last several years, the nuclear industry has
invested over $4 billion in new nuclear plants and will invest
as much as $8 billion more before 2012.
Investment to date has already created 15,000 jobs over the
last 2 to 3 years as reactor designers, equipment
manufacturers, and fuel suppliers expand and build new
facilities. The number of new jobs will expand significantly
early in the next decade when the first wave of new projects
start construction.
If all 26 reactors currently in licensing were built, it
would result in over 100,000 new jobs to support construction
and operation. If the 26 reactors being licensed today were
built by 2030, they would maintain nuclear at 20 percent of our
electricity supply.
Increasing nuclear energy's contribution to meet the 2050
climate goals we are talking about requires a building rate of
four to six plants per year. This rate was achieved in the
1970s and 1980s, despite the challenges we encountered during
the period. With standardized designs and improved construction
techniques, this deployment rate is achievable after the first
wave of plants are constructed.
However, the electric power industry must invest between
$1.5 trillion and $2 trillion by 2030 to meet increases in
electricity demand and reduce carbon emissions. This is a
formidable financing challenge. The loan guarantee program
created in the 2005 Energy Policy Act is critical to ensure
that capital is available to finance modernization of our
electric infrastructure and to support financing of new
generating facilities.
Achieving workable implementation of the title XVII loan
guarantee program has been a challenge. However, many of the
difficulties can be corrected through rulemaking, and NEI
understands that DOE is developing revised rules to address the
defects in the current rule and implement the new loan
guarantee program authorized in the economic stimulus
legislation.
This committee can play a key oversight role in ensuring
that necessary revisions to the existing rule are promulgated
appropriately and quickly. If the changes cannot be implemented
through rulemaking, we encourage you to take statutory action
to fix it.
Existing limitations on loan guarantee authority are also a
constraint on expansion of nuclear energy and other
technologies eligible for title XVII loan guarantees. Ten
nuclear power projects have applied for approximately $93
billion in loan guarantees, well in excess of the current loan
volume limitation of $18 billion.
The original goal of the title XVII loan guarantee program
to jumpstart construction of the first innovative clean energy
projects remains as valid today as it was in 2005. But today,
the United States faces new and larger challenges. Financing
large-scale deployment of clean energy technologies, the United
States must have an effective long-term financing platform to
ensure deployment of clean energy technologies in the numbers
required.
During the last Congress, Chairman Bingaman introduced
legislation to create a 21st century energy development
corporation, and Senator Domenici, the ranking member of this
committee during the last Congress, introduced legislation to
create a clean energy bank. Both proposals have merit, and we
encourage this committee to start with those legislative
proposals and address clean energy technology financing in the
new energy legislation now being developed.
Let me now comment briefly on the need to develop a
sustainable used nuclear fuel strategy. Used nuclear fuel is
managed safely and securely at nuclear power sites today and
can be managed safely and securely for an extended period of
time either at sites or at centralized interim storage
facilities.
For this reason, we don't believe used nuclear fuel
represents an impediment to new nuclear plant deployment. It
is, however, an issue that must be addressed for the long term.
The nuclear industry has supported implementation of the
Nuclear Waste Policy Act as the law of the land since 1982, and
customers across our Nation have paid over $22 billion into the
Nuclear Waste Fund.
We are not aware of any technical issue that would
disqualify Yucca Mountain from the mission Congress assigned to
it more than 20 years ago. Nonetheless, we recognize the
position the Administration has taken with regard to the Yucca
Mountain project.
Therefore, we support Secretary Chu's proposal to establish
an independent qualified commission to undertake a reassessment
of the Federal Government's program to manage used nuclear fuel
and for it to produce a roadmap for a sustainable long-term
program, including recommendations for legislative changes. In
our view, a credible program includes interim storage, advanced
recycling, and a permanent disposal facility. We encourage this
committee to provide effective oversight of this independent
commission activity.
We do not believe, however, that we can abandon current law
before a new policy and associated program are defined. To do
so would likely provoke additional litigation among the Federal
Government, utility contract holders, and the State officials
who have authorized collection of the nuclear waste fee from
customers.
In conclusion, nuclear energy can and must play a strategic
role in meeting national environmental, energy security, and
economic development goals. The nuclear energy industry has a
limited, well-defined public policy agenda to ensure our Nation
continues to enjoy the benefits of nuclear energy.
That agenda includes near-term actions to ensure that the
title XVII loan guarantee program works as intended; creation
of a broader permanent financing platform to ensure access to
capital for the large-scale deployment of advanced
technologies, including nuclear energy facilities that will
reduce carbon emissions; and a sustainable strategy for
management of used nuclear fuel and ultimate disposal of waste
byproducts.
I thank you for the opportunity to be here and look forward
to your questions.
[The prepared statement of Mr. Fertel follows:]
Prepared Statement of Marvin S. Fertel, President and Chief Executive
Officer, Nuclear Energy Institute
Chairman Bingaman, Ranking Member Murkowski, and members of the
committee, thank you for your interest in nuclear energy and in
addressing the policies that can facilitate deployment of new nuclear
plants to meet national energy needs and reduce carbon emissions.
My name is Marvin Fertel. I am the President and Chief Executive
Officer of the Nuclear Energy Institute (NEI). NEI is responsible for
establishing unified nuclear industry policy on regulatory, financial,
technical and legislative issues affecting the industry. NEI members
include all companies licensed to operate commercial nuclear power
plants in the United States, nuclear plant designers, major architect/
engineering firms, fuel fabrication facilities, materials licensees,
and other organizations and individuals involved in the nuclear energy
industry.
My testimony will cover five major areas:
1. Current status of the U.S. nuclear energy industry
2. The need for new nuclear generating capacity
3. Progress toward new nuclear power plant construction
4. Financial challenges facing the electric power sector
5. Policy actions necessary to address the challenges facing
new nuclear plant development
I. Current Status of the U.S. Nuclear Power Industry
The U.S. nuclear energy industry's top priority is, and always will
be, the safe and reliable operation of our existing plants. Safe,
reliable operation drives public and political confidence in the
industry, and America's nuclear plants continue to sustain high levels
of performance.
Just last week, the Nuclear Regulatory Commission published a Fact
Sheet highlighting the dramatic improvements in every aspect of nuclear
plant performance over the last two decades: ``The average number of
significant reactor events over the past 20 years has dropped to nearly
zero. Today there are far fewer, much less frequent and lower risk
events that could lead to reactor core damage. The average number of
times safety systems have had to be activated is about one-tenth of
what it was 22 years ago. Radiation exposure levels to plant workers
has steadily decreased to about one-sixth of the 1985 exposure levels
and are well below federal limits. The average number of unplanned
reactor shutdowns has decreased by nearly ten-fold. In 2007, there were
two shutdowns compared to about 530 shutdowns in 1985.''
This high level of performance continued last year. In 2008, the
average capacity factor for our 104 operating nuclear plants was over
90 percent, and output of over 800 billion kilowatt hours represented
nearly 75 percent of U.S. carbon-free electricity. According to the
quantitative performance indicators monitored by the Nuclear Regulatory
Commission, last year's performance was the best ever. This performance
represents a solid platform for license renewal of the existing fleet
and new nuclear plant construction.
II. The Need for New Nuclear Generating Capacity
Construction of new nuclear plants will address two of our nation's
top priorities: Additional supplies of clean energy and creation of
jobs.
Nuclear energy is one of the few bright spots in the U.S. economy--
expanding rather than contracting, creating thousands of jobs over the
past few years. Over the last several years, the nuclear industry has
invested over $4 billion in new nuclear plant development, and plans to
invest approximately $8 billion more to be in a position to start
construction in 2011-2012.
The investment to date has already created 15,000 jobs over the
last two to three years, as reactor designers, equipment manufacturers
and fuel suppliers expand engineering centers and build new facilities
in New Mexico, North Carolina, Tennessee, Pennsylvania, Virginia and
Louisiana. These jobs represent a range of opportunities--from skilled
craft employment in component manufacturing and plant construction, to
engineering and operation of new facilities. The number of new jobs
will expand dramatically early in the next decade when the first wave
of new nuclear power projects starts construction. If all 26 reactors
currently in licensing by the NRC were built, this would result in over
100,000 new jobs to support plant construction and operations, and does
not include additional jobs created downstream in the supply chain.
This would be in addition to the 30,000 new hires in the next 10 years
to support operation of the existing fleet of plants through the
extended license period of 60 years.
New nuclear plants will also help the United States meet its
climate change objectives. Predominantly independent assessments of how
to reduce U.S. electric sector CO2 emissions--by the International
Energy Agency, McKinsey and Company, Cambridge Energy Research
Associates, Pacific Northwest National Laboratory, the Energy
Information Administration, the Environmental Protection Agency, the
Electric Power Research Institute and others--show that there is no
single technology that can slow and reverse increases in CO2
emissions. A portfolio of technologies and approaches will be required,
and that portfolio must include more nuclear power as well as
aggressive pursuit of energy efficiency and equally aggressive
expansion of renewable energy, advanced coal-based technologies, plug-
in hybrid electric vehicles and distributed resources.
NEI is not aware of any credible analysis of the climate challenge
that does not include substantial nuclear energy expansion as part of
the technology portfolio. In fact, removing any technology from the
portfolio places unsustainable pressure on those options that remain.
Analysis last year by the Energy Information Administration of the
Lieberman-Warner climate change legislation (S. 2191) demonstrates the
value of nuclear energy in a carbon-constrained world. In EIA's
``Core'' scenario, which included new nuclear plant construction,
carbon prices in 2030 were 33 percent lower, residential electricity
prices were 20 percent lower and residential natural gas prices were 19
percent lower than in the ``Limited Alternatives'' scenario, which
severely limited new nuclear construction.
It is also clear that the United States will need new baseload
electric generating capacity even with major improvements in energy
efficiency. Recent analysis by The Brattle Group, an independent
consulting firm, showed that the United States will need between
133,000 megawatts of new generating capacity (absent controls on
carbon) and 216,000 megawatts (in a carbon-constrained world) by 2030.
These numbers assume 0.7 percent per year growth in peak load--a
significant reduction from historical performance. Annual growth in
peak load between 1996 and 2006 was 2.1 percent, and the Energy
Information Administration's Annual Energy Outlook assumes a 1.5-
percent annual increase in peak load.
NEI estimates that if the 26 reactors being licensed today
(approximately 34,000 MW) were built by 2030, this would simply
maintain nuclear at 20 percent of U.S. electricity supply. To increase
nuclear energy's contribution to 2050 climate goals, build rates of 4-6
plants per year must be achieved. This was possible in the 1970s and
1980s even with the old licensing process and lack of standardization.
With standardized designs and improved construction techniques, this
accelerated deployment is feasible after the first wave of plants are
constructed.
III. Progress Toward New Nuclear Power Plant Construction
The Nuclear Regulatory Commission is reviewing construction and
operating license applications from 17 companies or groups of companies
for 26 new reactors totaling 34,200 MW. These new plants will be built
at a measured pace over the next 10-15 years. Safety-related
construction of the first new nuclear plants will start in 2012, and
NEI expects four to eight new nuclear plants in commercial operation in
2016 or so. The exact number will, of course, depend on many factors--
U.S. economic growth, 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, availability of
federal and state support for financing and investment recovery, and
more. We expect construction of those first plants will proceed on
schedule, within budget estimates, and without licensing difficulties,
and a second wave will be under construction as the first wave reaches
commercial operation.
Supported in part by government-industry cost-shared programs like
the Department of Energy's Nuclear Power 2010 program, detailed design
and engineering work on advanced reactor designs is nearing completion.
This detailed design information will allow companies to develop firm
cost estimates. Based on what is known today, however, there is a solid
business case for new nuclear generating capacity.
Nuclear energy is a capital-intensive technology. NEI estimates a
new nuclear power plant could cost $6 billion to $8 billion, including
financing costs. This large capital investment does not mean that new
nuclear plants will not be competitive. Capital cost is certainly an
important factor in financing, but it is not the sole determinant of a
plant's competitive position. The key factor is the cost of electricity
from the plant at the time it starts commercial operation relative to
the other alternatives available at that time. Based on NEI's own
modeling, on the financial analysis performed by companies developing
new nuclear projects, and on independent analysis by others, new
nuclear capacity will be competitive. (NEI's white paper, ``The Cost of
New Generating Capacity in Perspective'', is attached for further
information on this topic.)
Florida Power and Light and Florida Progress demonstrated this in
the financial modeling that supported their requests last year to the
Florida Public Service Commission for ``determinations of need'' for
new reactors at Turkey Point and Levy County. In FP&L's modeling, the
only scenario in which nuclear was not preferred was a world in which
natural gas prices were unrealistically low and there was no price on
carbon. The Florida PSC has approved both projects. Independent
analyses reach the same conclusion. In an integrated resource plan
developed for Connecticut last year, The Brattle Group concluded that
new nuclear plants are a lower-cost source of electricity in a carbon-
constrained world than supercritical pulverized coal with carbon
capture and storage (CCS), integrated gasification combined cycle with
CCS and gas-fired combined cycle with CCS.
Understanding the Past.--Many of the nuclear power plants
commissioned in the 1960s and early 1970s completed construction in
four to five years with construction costs around $500 million. By the
late 1970s and early 1980s, however, construction was averaging 10 to
12 years, and construction costs ranged as high as $5 billion. The
nuclear industry has conducted detailed and extensive analysis of this
experience, which demonstrates that the nuclear plants built after the
early 1970s were built under extremely unfavorable conditions--caused
by several major factors converging at roughly the same time.
Nuclear energy technology in the United States scaled up quickly.
The industry scaled from the first 200-megawatt-scale plants to 1,000-
megawatt-plus plants in just a few years. This rapid increase in
reactor size occurred at a time when electricity demand was growing at
seven percent a year on average, which required a doubling of electric
generating capacity every 10 years. In that business environment,
bigger was better for new power plants. Larger plants meant greater
economies of scale. Larger was also more complex, however, and that
complexity coupled with other factors discussed subsequently created
project management challenges. Construction times stretched out and
economies of scale vanished with schedule delays and rising costs.
Changing regulatory requirements and licensing difficulties added
to the challenge of managing these large construction projects to
schedule and budget, but licensing and regulatory requirements were not
the sole cause of cost increases and schedule delays. Construction
started before design work was complete. Some projects were managed by
companies with no prior nuclear construction experience. Project
planning and management tools equal to the complexity of the task did
not exist at the time.
Finally and of significant importance to the increasing cost, the
first generation of nuclear power plants were built under difficult
business and economic conditions. Growth in electricity demand slowed
from six to seven percent a year to one to two percent in the mid-
1970s. Many utilities intentionally slowed construction. The prime rate
reached 20 percent in the early 1980s. As project schedules stretched
out, costs increased and companies were forced to borrow more at
double-digit interest rates.
Lessons Learned: Roadmap for a Successful Future.--The root causes
of past construction delays are well understood and both industry and
government have taken steps to ensure that past experience is not
repeated.
The licensing process has been restructured to increase efficiency
and effectiveness and reduce uncertainty and financial risk. Today's
plants were licensed under a two-step process: Electric utilities had
to secure two permits--a construction permit to build the plant and a
second operating license to operate it. Under the new process, all
major safety and regulatory issues--reactor design, site suitability--
will be resolved before construction begins, and a company receives a
single license to build and operate the plant. The use of certified
standardized designs will also reduce licensing and construction times
through repetition. Once a design has been certified, the NRC reviews
will focus only on site suitability and plant operations. The industry
is working together to ensure that the standardization carries over
into their license applications, construction practices and operating
procedures to fully enjoy the benefits of a standard fleet of plants.
As construction proceeds, inspections and tests are performed to
ensure the plant has been built in accordance with the approved design.
These inspections, tests, analyses and acceptance criteria--or ITAAC--
are included in the plant's construction and operating license. ITAAC
are a key risk-management tool. When the ITAAC are met, the NRC and the
public know that the plant has been built according to its design and
will operate safely.
In addition to an improved licensing process, the next generation
of nuclear plants built in the United States will benefit from an
industry-wide inventory of lessons-learned. The roadmap for future
success includes:
Detailed design essentially complete before construction.--
Companies planning to build new nuclear plants intend to have virtually
all detailed design complete before construction is started.
Standardized, design-specific pre-build preparation.--Starting in
2006, the nuclear industry formed design-centered working groups (DCWG)
with each reactor vendor. These groups are charged with maintaining
standardization within each reactor design, which will enhance
licensing, preparation for construction and construction.
Focus on quality assurance.--While quality assurance is a core
competency at existing plants, in 2005, the U.S. nuclear industry
formed a New Plant Quality Assurance Task Force. In conjunction with
the Institute of Nuclear Power Operations (INPO), this task force is
conducting a systematic lessons-learned review of past and present
nuclear construction projects in the United States and around the
world.
Corrective action programs.--The industry is adapting the
corrective action program (CAP), which is standard at operating plants,
for use in new plant construction. A CAP includes a structured database
to capture and categorize potentially safety-significant items,
enabling constructors to identify and trend quality deficiencies,
record that corrective action was taken, and report to the appropriate
levels of management.
Focus on safety culture as part of construction.--Safety culture,
corrective action programs and programs that encourage employees to
raise safety concerns are now an essential part of the operating
philosophy at the 104 operating plants. The work force building new
plants will have the same safety focus.
Preparation for construction inspection.--In 2001, the U.S. nuclear
industry formed a New Plant Construction Inspection Program Task Force
comprised of utilities, reactor vendors and major construction
companies. The task force is formulating guidance and developing
programs and processes to implement the inspections, tests, analyses
and acceptance criteria that the NRC will use to determine whether the
plant is built according to the approved design and is ready to operate
safely.
Improved planning and construction management tools.--Project and
construction management at new nuclear plants will benefit from a suite
of sophisticated construction planning and management tools equal to
the complexity of the task, none of which were developed when the last
nuclear plants were built. Companies did not have computer-aided design
(CAD) to enable design changes. Databases for tracking components and
resources were not yet mature. Computerized tools that linked resources
with design and construction schedules were in their infancy.
Improved construction techniques.--Construction of new nuclear
plants in the U.S. will also benefit from improved construction
techniques (such as modular construction), many of which were developed
overseas, for the U.S. nuclear navy or for other industries.
Successful Track Record.--Recent construction and operational
experience demonstrates that an experienced project management team--
with effective quality assurance and corrective action programs, with
detailed design completed before the start of major construction, with
an integrated engineering and construction schedule--can complete
projects on budget and on schedule. The global nuclear industry,
including the U.S. nuclear industry, has performed projects ranging
from major upgrades to plant restarts to refueling outages efficiently,
without delay. As recently as 1990, maintenance and refueling outages
at U.S. reactors lasted more than 100 days; today's average is 37 days.
There are other examples that provide confidence that new nuclear plant
development in the United States will proceed smoothly:
The Tennessee Valley Authority returned Unit 1 of its Browns
Ferry nuclear plant to commercial operation in May 2007. The
five-year, $1.8-billion project was completed on schedule and
only five percent over the original budget estimate, a
significant achievement during a period of rapidly escalating
commodity costs. The Browns Ferry 1 restart project was
comparable in complexity to the construction of a new nuclear
power plant. Most systems, components, and structures were
replaced, refurbished, or upgraded, and all had to be inspected
and tested.
At the Fort Calhoun plant in Nebraska, Omaha Public Power
District replaced the major primary system components--steam
generators, reactor vessel head and rapid refueling package and
pressurizer--as well as the low pressure turbines, the main
transformer and hydrogen coolers, among other equipment. The
outage began in September 2006 and ended in December of that
year, lasting 85 days. The $417-million project was completed
approximately $40 million under budget and five days ahead of
schedule.
Nuclear construction experience in South Korea over the last
15 years demonstrates the ``learning curve'' that can be
achieved. The ``first of a kind'' nuclear power plants--
Yonggwang Units 3 and 4--were built in the mid-1990s in 64
months. The next two units--Ulchin 3 and 4--were built in 60
months at 94 percent of the ``first of a kind'' cost. The next
plants--Yonggwang 5 and 6--were built in 58 months for 82
percent of the ``first of a kind'' cost. By 2004, Ulchin 5 and
6 were built in 56 months for 80 percent of the ``first of a
kind'' cost. The next two plants--Shin-Kori 1 and 2--will be in
service next year. Construction duration: 53 months and 63
percent of what it cost to build Yonggwang 3 and 4. South
Korea's goal is a 39-month construction schedule.
Nuclear power plants in Japan achieve construction schedules
similar to those in South Korea. The first two Advanced Boiling
Water Reactors built were constructed in times that beat the
previous world record and both were built on budget.
Kashiwazaki-Kariwa Unit 6 began commercial operation in 1996,
and Unit 7 began commercial operation in 1997. From first
concrete to fuel load, it took 36.5 months to construct Unit 6
and 38.3 months for Unit 7. Unit 6 was built 10 months quicker
than the best time achieved for any of the previous boiling
water reactors constructed in Japan.
The Qinshan nuclear power plant in China consists of two
728-megawatt pressurized heavy-water reactors. First concrete
was placed on June 8, 1998. Unit 1 began commercial operation
on December 31, 2002, 43 days ahead of schedule. The
construction period was 54 months from first concrete to full-
power operation. Unit 2 began commercial operation on July 24,
2003, 112 days ahead of schedule.
U.S. projects will also benefit from this learning curve in other
countries, since most of the reactors being licensed in the United
States will be built overseas prior to U.S. construction. South Texas
Project Units 3 and 4, for example, are Advanced Boiling Water Reactors
of the type already built in Japan. There are 44 nuclear plants under
construction worldwide, and 108 more ordered or planned.
IV. Financial Challenges Facing the Electric Power Sector
The U.S. electric industry faces a formidable investment challenge.
Consensus estimates show that the electric sector must invest between
$1.5 trillion and $2 trillion in new power plants, transmission and
distribution systems, and environmental controls to meet expected
increases in electricity demand by 2030. To put these numbers in
perspective: the book value of America's entire electric power supply
and delivery system today is only $750 billion, which reflects
investments made over the last 60 years.
Addressing the financing challenge will require innovative
approaches. Meeting these investment needs will require a partnership
between the private sector and the public sector, combining all the
financing capabilities and tools available to the private sector, the
federal government and state governments--particularly at a time when
the electric sector is already showing some signs of stress.
The financial crisis has forced investor-owned utilities to reduce
capital spending for 2009 by approximately 10 percent, on average. The
industry is experiencing downward pressure on equity returns, largely
because rate increases have not kept pace with rising costs. Bond
spreads are also wider (in some cases, significantly wider) and,
although all-in debt costs are not dramatically higher because yields
on Treasuries are so low, the cost of debt will be significantly higher
than historical norms when Treasury yields recover if bond spreads
remain at current levels. Industry leverage is beginning to rise--not
to the levels seen in 2003, when debt represented about 61 percent of
the investor-owned utilities' capital structure--but it has increased
somewhat over the last three years and debt now represents about 56
percent of industry capital structure.
In summary, the electric power sector is in the early stages of a
major, 20-year capital investment program, and is not as well
positioned for these capital expenditures as it was in the 1970s and
1980s when it last undertook a major capital expansion program.
For new nuclear power plants, the financing challenge is
structural. Unlike the many consolidated government owned foreign
utilities and the large oil and gas companies, U.S. electric power
sector consists of many relatively small companies, which do not have
the size, financing capability or financial strength to finance power
projects of this scale on their own, in the numbers required. Loan
guarantees offset the disparity in scale between project size and
company size. Loan guarantees allow the companies to use project-
finance-type structures and to employ higher leverage in the project's
capital structure. These benefits flow to the economy by allowing the
rapid deployment of clean generating technologies at a lower cost to
consumers. The recent stimulus bill recognized the need to provide
access to low-cost capital to encourage rapid deployment of renewable
energy projects. Similar support is required for nuclear energy since,
in many cases, new nuclear plants and renewable energy projects are
built by the same utilities.
Loan guarantees are a powerful tool and an efficient way to
mobilize private capital. The federal government manages a loan
guarantee portfolio of approximately $1.1 trillion to ensure necessary
investment in critical national needs, including shipbuilding,
transportation infrastructure, exports of U.S. goods and services,
affordable housing, and many other purposes. Supporting investment in
new nuclear power plants and other critical energy infrastructure is a
national imperative.
The loan guarantee program created by title XVII of the Energy
Policy Act is an essential and appropriate mechanism to enable
financing of clean energy technologies. In fact, an effective and
workable loan guarantee program is significantly more important today
than it was when the Energy Policy Act was enacted in 2005.
The title XVII program currently includes 10 technologies that are
eligible for loan guarantees. They include renewable energy systems,
advanced fossil energy technology (including coal gasification),
hydrogen fuel cell technology for residential, industrial, or
transportation applications, advanced nuclear energy facilities,
efficient electrical generation, transmission, and distribution
technologies, efficient end-use energy technologies, production
facilities for fuel efficient vehicles, including hybrid and advanced
diesel vehicles, and pollution control equipment. Each of these
technologies presents different financing challenges.
The financing challenges are, of course, somewhat different for the
regulated integrated utilities than for the merchant generating
companies in those states that have restructured. But these challenges
can be managed, with appropriate rate treatment from state regulators
or credit support from the federal government's loan guarantee program,
or a combination of both.
Supportive state policies include recovery of nuclear plant
development costs as they are incurred, and Construction Work in
Progress or CWIP, which allows recovery of financing costs during
construction. Many of the states where new nuclear plants are planned--
including Florida, Virginia, Texas, Louisiana, Mississippi, North
Carolina and South Carolina--have passed legislation or implemented new
regulations to encourage construction of new nuclear power plants by
providing financing support and assurance of investment recovery. By
itself, however, this state support may not be sufficient. The federal
government must also provide financing support for deployment of clean
energy technologies in the numbers necessary to address growing U.S.
electricity needs and reduce carbon emissions.
The title XVII program also represents an innovative departure from
other federal loan guarantee programs. It is structured to be self-
financing, so that companies receiving loan guarantees pay the cost to
the government of providing the guarantee, and all administrative
costs. For this reason, a title XVII loan guarantee program is not a
subsidy. In a well-managed program, in which projects are selected
based on creditworthiness, extensive due diligence and strong credit
metrics, there is minimal risk of default, and minimal risk to the
taxpayer. In fact, the federal government will receive substantial
payments from project sponsors.
V. Policy Actions Necessary for New Nuclear Plant Development
Financing
Since enactment of the Energy Policy Act in August 2005, achieving
workable implementation of the title XVII loan guarantee program has
been a challenge. The implementation difficulties predate formation of
the Loan Guarantee Program Office. In fact, NEI is impressed with what
a relatively small staff in the Loan Guarantee Program Office,
operating under chronic budgetary constraints, have been able to
accomplish in the time--slightly more than a year--that they have been
at work.
Despite this significant progress, implementation of the program by
the Executive Branch continues to be difficult, for reasons outside the
control of the Loan Guarantee Program Office. The staff is working to
address problems with the regulations governing this program that were
promulgated by the Department of Energy in 2007, but one of the major
difficulties stems from an unnecessarily narrow and restrictive reading
of the original statutory language by the DOE Office of General
Counsel. Section 1702(g)(2)(B) of title XVII asserts that ``[t]he
rights of the Secretary, with respect to any property acquired pursuant
to a guarantee or related agreements, shall be superior to the rights
of any other person with respect to the property.'' This language can
be misinterpreted as a prohibition on pari passu financing structures,
and a requirement that the Secretary must have a first lien position on
the entire project. Counsel for NEI and many of the project sponsors,
with substantial experience in project finance, believe that Section
1702(g)(2)(B) gives the Secretary a ``superior right'' to the property
he guarantees, not to the entire project.
The current interpretation of this language is thus a major
obstacle to co-financing of nuclear projects. Projects financed as
undivided interests cannot proceed if this interpretation stands.
Financing from export credit agencies in other countries like France
and Japan, would be equally difficult. This result makes little sense
since such co-financing will leverage the existing loan volume of $18.5
billion, and reduce the risk to which the Department of Energy is
exposed.
NEI is encouraged by Energy Secretary Steven Chu's intent,
expressed before this committee during his confirmation hearing and at
other times, to address the difficulties that have arisen during
implementation of the title XVII loan guarantee program. Many of these
problems can be corrected through rulemaking, and NEI understands that
DOE is developing revised rules to address defects in the current rule
and to implement the new loan guarantee program authorized in the
economic stimulus legislation. The Energy and Natural Resources
Committee can play a key oversight role in ensuring that the necessary
revisions to the existing rule are promulgated quickly, and do not
become entangled in internal Executive Branch procedural difficulties,
as has happened so often in the past. If the necessary changes cannot
be implemented through rulemaking, it will, of course, be necessary to
seek statutory changes to accomplish the same purpose.
Insufficient Loan Volume.--The title XVII loan guarantee program
was an important step in the right direction. That program was designed
to jump-start construction of the first few innovative clean energy
projects that use ``technologies that are new or significantly improved
. . . as compared to commercial technologies in service in the United
States at the time the guarantee is issued.''\1\
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\1\ AEnergy Policy Act of 2005, Section 1703(a)(2)
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That goal remains as valid now as it was in 2005, but today the
United States faces a larger, additional challenge--financing large-
scale deployment of clean energy technologies, modernizing the U.S.
electric power supply and delivery system, and reducing carbon
emissions. As noted earlier, this is estimated to require investment of
$1.5-2.0 trillion between 2010 and 2030.
The omnibus appropriations legislation for FY 2008 and FY2009
authorizes $38.5 billion in loan volume for the loan guarantee
program--$18.5 billion for nuclear power projects, $2 billion for
uranium enrichment projects, and the balance for advanced coal,
renewable energy and energy efficiency projects.
DOE has issued solicitations inviting loan guarantee applications
for all these technologies and, in all cases the available loan volume
is significantly oversubscribed. For example, the initial nuclear power
solicitation resulted in requests from 14 projects seeking $122 billion
in loan guarantees, with only $18.5 billion available. NEI understands
that 10 nuclear power projects submitted Part II loan guarantee
applications, which represented $93.2 billion in loan volume. Two
enrichment projects submitted Part II applications, seeking $4.8
billion in loan guarantees, with only $2 billion available. NEI also
understands that the solicitation for innovative coal projects resulted
in requests for $17.4 billion in loan volume, more than twice the $8
billion available.
It is, therefore, essential that limitations on loan volume--if
necessary at all in a program where project sponsors pay the credit
subsidy cost--should be commensurate with the size, number and
financing needs of the projects. In the case of nuclear power, with
projects costs between $6 billion and $8 billion, $18.5 billion is not
sufficient.
The scale of the challenge requires a broader financing platform
than the program envisioned by title XVII. An effective, long-term
financing platform is necessary to ensure deployment of clean energy
technologies in the numbers required, and to accelerate the flow of
private capital to clean technology deployment.
During the 110th Congress, Senator Bingaman introduced legislation
to create a 21st Century Energy Deployment Corporation. Senator
Domenici, ranking member of this committee during the last Congress,
introduced legislation to create a Clean Energy Bank. Both proposals
address aspects of the financing challenge facing the United States and
its electric power industry.
NEI believes that the existing title XVII program and the DOE Loan
Guarantee Program Office, operating under workable rules, could serve
as a foundation on which to build a larger, independent financing
institution within the Department of Energy. There is precedent for
such independent entities, equipped with all the resources necessary to
accomplish their missions, in the Federal Energy Regulatory Commission
and the Energy Information Administration. This approach could have
significant advantages:
1. An independent clean energy financing authority within DOE
could take advantage of technical resources available within
the Department, to supplement its due diligence on prospective
projects and to identify promising technologies emerging from
the research, development and demonstration pipeline that might
be candidates for loan guarantee support to enable and speed
deployment.
2. An independent entity within DOE would have the resources
necessary to implement its mission effectively, including its
own legal and financial advisers with the training and
experience necessary for a financing organization. Providing
the independent entity with its own resources would eliminate
the difficulties encountered during implementation of the title
XVII program.
3. Programmatic oversight in Congress would remain with the
Energy Committees, which have significantly more experience
with energy policy challenges, and in structuring the
institutions necessary to address those challenges.
Development of a National Used Fuel Strategy
Used nuclear fuel is managed safely and securely at nuclear plant
sites today, and can be managed safely and securely for an extended
period of time. For this reason, used nuclear fuel does not represent
an impediment to new nuclear plant development in the near term. It is,
however, an issue that must be addressed for the long-term.
The Administration has made it clear that Yucca Mountain ``is not
an option.''
The nuclear industry's position on used fuel management is clear:
The Nuclear Waste Policy Act establishes an unequivocal
federal legal obligation to manage used nuclear fuel, and
remains the law of the land. Until that law is changed, the
nuclear industry believes the NRC's review of the Yucca
Mountain license application should continue.
If the Administration unilaterally decides to abandon the
Yucca Mountain project without enacting new legislation to
modify or replace existing law, it should expect a new wave of
lawsuits seeking further damage payments and refunds of at
least $22 billion in the Nuclear Waste Fund already collected
from consumers that has not been spent on the program.
Given the uncertainties associated with the Yucca Mountain
project, DOE should reduce the fee paid by consumers to cover
only costs incurred by DOE, NRC and local Nevada government
units that provide oversight of the program.
A credible and effective program to manage used nuclear fuel
must include three integrated components: interim storage of
used nuclear fuel at centralized locations, technology
development necessary to demonstrate the technical and business
case for recycling used nuclear fuel and, ultimately, the
licensing of a permanent disposal facility.
The nuclear energy industry supports creation by the Executive
Branch of a bipartisan blue-ribbon commission of credible experts to
undertake a reassessment of the federal government's program to manage
used nuclear fuel, and produce a roadmap for a sustainable long-term
program.
Regulatory Effectiveness and Predictability
An objective, effective Nuclear Regulatory Commission is a key
factor in ensuring safe and secure operation of the 104 operating
nuclear generating plants. An objective regulatory process--i.e., a
process that is safety-focused and performance-based--will ensure that
nuclear plant operators remain focused on safety-significant issues and
that management attention is not diverted by matters of low safety or
security significance. For new nuclear plants, a central element of the
regulatory process is a predictable licensing process for the review
and inspection of new reactor designs and new construction. The
industry and the financial community must have confidence that the
licensing process provides the level of predictability necessary to
support large capital investments.
Research and Development
NEI appreciates this committee's recognition--in the draft research
and development legislation published recently--of the strategic
importance of increased funding for research and development.
Substantial increases in energy R&D investment will be necessary in the
years ahead to create a sustainable electric supply infrastructure.
Unfortunately, recent trends are in the opposite direction. In a 2007
analysis, the Government Accountability Office found that DOE's budget
authority for renewable, fossil and nuclear energy R&D declined by over
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.
The Electric Power Research Institute (EPRI) has estimated that the
United States must increase investment in energy R&D by $1.4 billion
annually between now and 2030 to develop and demonstrate the technology
portfolio necessary to bring electric sector carbon emissions back to
1990 levels by 2030. That additional cumulative investment of
approximately $32 billion in R&D would reduce by $1 trillion the cost
to the U.S. economy of bringing electric sector emissions back to 1990
levels, according to EPRI's analysis.
A robust research and development program is necessary if nuclear
energy is to realize its full potential in the nation's energy
portfolio. In 2008, the directors of the 10 DOE national laboratories,
including now Secretary of Energy Chu, published a report recognizing
that ``nuclear energy must play a significant and growing role in our
nation's energy portfolio in the context of broader global energy,
environmental, and security issues.'' The report also expressed support
for the required R&D effort: ``The national laboratories, working in
collaboration with industry, academia, and the international community,
are committed to leading and providing the research and technologies
required to support the global expansion of nuclear energy.''
The report from the national laboratory directors identified areas
of research that were incorporated, earlier this year, into a
comprehensive strategy for nuclear R&D developed by EPRI and the Idaho
National Laboratory. NEI supports the R&D priorities identified:
Maintaining the high performance of today's light water
reactors and extend their operating life beyond 60 years, to 80
years. R&D will be required, among other items, to develop
advanced diagnostic and maintenance techniques, to extend
component life and introduce new technologies, and to enhance
fuel reliability and performance.
Completing the cost-shared government-industry Nuclear Power
2010 Program, to complete the design and engineering work that
will support the nuclear plants on track to start construction
over the next several years.
Developing proliferation-resistant recycling technologies
that will capture the vast amount of energy that remains in
used nuclear fuel and reduce the volume and toxicity of the
waste by-product that requires permanent disposal.
Developing high-temperature gas-cooled reactors to produce
electricity and for non-electric applications. High-temperature
reactors can reduce greenhouse gas emissions from large-scale
process heat operations in the petroleum and chemical
industries currently fired by liquid fuels and natural gas.
This technology will also be capable of producing hydrogen
economically for fuel-cell vehicles and industrial
applications, as well as desalinating water cost-effectively.
The national laboratory directors, EPRI and INL point out that the
leadership position of the U.S. in the global nuclear enterprise is at
stake. Participation in the development of advanced nuclear energy
technologies will allow the U.S. to influence energy technology choices
around the world, and to ensure that non-proliferation regimes are in
place as other countries develop commercial nuclear capabilities.
Therefore, technical leadership is in the interest of the
Administration, the congress, and the industry.
Supply Chain
During the 1970s, the United States had the manufacturing
capability to produce the large vessels, steam generators and other
components necessary for nuclear power plant construction. Much of that
capability--and the associated jobs--moved offshore over the last 30
years.
In the nuclear sector, there are signs that U.S. manufacturing
capability is being rebuilt. In North Carolina, Indiana, Pennsylvania,
Virginia, Tennessee, Louisiana, Ohio and New Mexico, among other
states, U.S. companies are adding to design and engineering staff,
expanding their capability to manufacture nuclear-grade components, or
building new manufacturing facilities and fuel facilities--partly in
preparation for new reactor construction in the United States, partly
to serve the growing world market.
Last year, for example, AREVA and Northrop Grumman Shipbuilding
formed a joint venture to build a new manufacturing and engineering
facility in Newport News, Va. This $360-million facility will
manufacture heavy components, such as reactor vessels, steam generators
and pressurizers. Global Modular Solutions, a joint venture of Shaw
Group and Westinghouse, is building a fabrication facility at the Port
of Lake Charles to produce structural, piping and equipment modules for
new nuclear plants using the Westinghouse AP1000 technology. In New
Mexico, LES is well along with construction of a $3-billion uranium
enrichment facility, scheduled to begin production this year. Even for
ultra-heavy forgings, Japan Steel Works is expanding capacity, and
companies in South Korea, France and Great Britain are planning new
facilities.
Although progress in this area is encouraging, federal government
policy could accelerate the process of creating new jobs and generating
economic growth. Specifically, the expansion and extension of
investment tax credits for investments in manufacturing provided in the
stimulus would ensure continued expansion of the U.S. nuclear supply
chain and help restore U.S. leadership in this sector.
Work Force
The U.S. nuclear industry recognizes the critical importance of a
skilled, well-trained and dedicated work force to operate and maintain
the 104 nuclear plants that supply 20 percent of America's electricity,
and to build and operate new nuclear plants in the years ahead.
The nuclear industry is 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.
Electric utilities have created 42 partnerships with community
colleges to train the next generation of nuclear workers. The industry
is developing standardized, uniform curricula to ensure that graduates
will be eligible to work at any nuclear plant. Sixteen states have
developed programs to promote skilled craft development. Enrollment in
nuclear engineering programs has increased over 500 percent since 1999.
Grant programs from the NRC, the Department of Energy, the Department
of Labor and the Department of Defense for education and training are
having a major impact on increasing our trained workforce.
NEI commends Senators Bingaman and Murkowski for the attention to
workforce development in the draft legislation published recently on
research and development. As with the nuclear supply chain, targeted
tax credits to encourage companies to invest in apprenticeship programs
and other work force development would accelerate job creation and
training in the nuclear energy sector.
VI. Conclusion
In conclusion, the need for advanced nuclear plants is well
established. Nuclear energy clearly can and must play a strategic role
in meeting national environmental, energy security and economic
development goals. The nuclear energy industry has a limited and well-
defined public policy agenda to ensure our nation continues to derive
the benefits that nuclear power provides. Those policy conditions
include:
1. near-term actions to ensure that the title XVII loan
guarantee program is working as intended, and creation of a
broader, permanent financing platform to ensure access to
capital for the large-scale deployment of advanced technologies
including nuclear facilities that will reduce carbon emissions,
2. a sustainable strategy for the management and ultimate
disposal of used nuclear fuel,
3. an effective and predictable licensing process, and
4. a research and development program that will allow the
nation to meet environmental goals and provide leadership on
issues related to expansion of nuclear technology and non-
proliferation.
Mr. Chairman, thank you for the opportunity to testify, and this
completes my testimony.
The Chairman. Thank you very much.
Dr. Cochran, go right ahead.
STATEMENT OF THOMAS B. COCHRAN, PH.D., SENIOR SCIENTIST,
NUCLEAR PROGRAM, AND CHRISTOPHER E. PAINE, DIRECTOR, NUCLEAR
PROGRAM, NATURAL RESOURCES DEFENSE COUNCIL, INC.
Mr. Cochran. Mr. Chairman, Ranking Member Murkowski,
Senator Udall, Senator Sessions, thank you for providing the
Natural Resources Defense Council the opportunity to present
its views on several current issues related to nuclear energy.
Our testimony focuses on three issues--whether additional
Federal loan guarantees should be provided to construct new
nuclear power plants, whether the United States should engage
in reprocessing of spent nuclear fuel, and whether Congress
should intervene in the Nuclear Regulatory Commission's
proposed rulemakings on temporary storage of spent fuel and the
so-called waste confidence rule.
Turning to the first issue, Congress should not provide
additional loan guarantees to construct new nuclear plants.
Sufficient nuclear loan guarantee authority already exists to
accomplish the legitimate public purpose that is involved
here--namely, to shift much of the downside financial risk
involved in the initial commercial deployment of new or
significantly improved low-carbon energy technologies from
private interests to the Federal taxpayers.
To avoid serious and lasting distortion of the U.S. energy
marketplace and an economically inefficient decarbonization
effort, nuclear loan guarantees should be limited to the lead
units of new nuclear plant designs not previously deployed in
the United States or in similar markets abroad with comparable
regulatory requirements. These designs must incorporate
substantial design innovations promising improved safety,
increased operating efficiency, significantly reduced capital
costs, and lower environmental impacts.
In our view, few, if any, of the Generation III+ reactors
being proposed today plausibly meet this description. But if
any of them do, it could only be the lead units of new passive
safety, small-footprint, less capital-intensive designs that
have not yet been deployed elsewhere. Fitting this description
currently are the AP1000 and the ESBWR. Possibly later, the
very high-temperature gas-cooled reactor under development by
the Department of Energy might also qualify.
But even here, we find there are currently three regulated
utilities, each proposing to add two AP1000 units to their
respective rate bases. These do not appear to require loan
guarantees for financing, or at least full loan guarantee
coverage at 80 percent of the total project cost.
Thus, we believe the $18.5 billion is already sufficient to
support construction of more than just the lead units of the
innovative standardized reactor designs currently available to
the United States market. Therefore, no additional loan
guarantee authority is needed.
More loan guarantee support to underwrite the U.S. market
penetration of additional designs already deployed or under
construction in foreign markets would only further distort the
energy marketplace and undermine the goal of design
standardization, which is a widely shared objective of DOE,
NRC, the nuclear industry, and others concerned about the
future effectiveness of NRC safety regulations.
Federal loan guarantees should not be abused to insulate an
entire industry from competition with a host of new energy
technologies that promise comprehensive environmental and
social benefits. Unlike improvements in efficiency and
renewable technologies, nuclear power is a decarbonization
solution packaged with a host of noncarbon environmental,
security, and waste problems.
For these reasons, nuclear power should not be considered
for inclusion in any renewable electric standard Congress may
legislate.
Turning to the second issue, the Federal Government should
not encourage or support commercial spent fuel reprocessing.
Reprocessing of commercial spent fuel, as it is practiced today
in France, Russia, and Japan, offers no advantages and numerous
disadvantages over continuing to rely on the once-through
nuclear fuel cycle as practiced in the United States and most
countries with nuclear power plants. The trend in recent years
has been for more countries to abandon reprocessing than to
initiate reprocessing.
Relative to the existing open fuel cycle, the use of a
closed or partially closed MOX fuel cycle in thermal reactors
has proven to be more costly, less safe, leads to greater
routine releases of radioactivity into the environment, greater
worker exposure to radiation, larger inventories of nuclear
waste that must be managed, and it does not appreciably reduce
the geologic repository requirements for spent fuel or high-
level waste.
Putting aside for the moment the serious proliferation and
security concerns involved in any future global shift toward
reprocessing, it is clear that combating climate change is an
urgent task that requires near-term investments yielding huge
decarbonization dividends in a 5- to 20-year timescale. For
thermal reactors, the closed fuel cycle is unlikely ever to be
less costly than the once-through fuel cycle, even assuming
significant carbon controls.
But setting aside even these near-term cost barriers,
commercial viability for a closed fuel cycle employing fast
reactors is an even longer-term proposition. So even fervent
advocates of nuclear power need to put the reprocessing agenda
aside for a few decades and focus on swiftly deploying and
improving the low-carbon energy solutions.
Spent fuel reprocessing, plutonium recycle, and fast
reactor transmutation are currently uneconomical, high-risk,
100-year answers to an urgent climate question that now
requires low-risk, 5- to 10-year solutions. For now, Congress
and the new Administration should terminate the Global Nuclear
Energy Partnership program of the Department of Energy and its
associated efforts to close the nuclear fuel cycle and
introduce fast burner reactors into the United States.
Finally and very quickly turning to the last issue, as the
political sun sets on the proposed Yucca Mountain project, the
Federal Government needs to begin identifying alternative
geologic disposal sites for the country's nuclear waste.
Congress should initiate a search for a new geologic--one or
more new geologic repository sites for the disposal of spent
fuel and to assure adequate Federal funding--ensure that
adequate Federal funding is available to retain the technical
community associated with the Yucca Mountain project so that
this expertise will be available to assess and develop new
proposed geologic waste disposal sites.
Congress should not interfere in the NRC's ongoing waste
confidence and temporary storage rulemakings and let this
regulatory body attempt to fulfill its independent regulatory
mandate.
Thank you very much, Mr. Chairman. I would be pleased to
answer questions.
[The prepared statement of Mr. Cochran follows:]
Prepared Statement of Thomas B. Cochran, Ph.D. Senior Scientist,
Nuclear Program, and Christopher E. Paine, Director, Nuclear Program,
Natural Resources Defense Council, Inc.
I. Introduction
Mr. Chairman and members of the Committee, thank you for providing
the Natural Resources Defense Council (NRDC) the opportunity to present
its views on several current issues related to nuclear energy. NRDC is
a national, non-profit organization of scientists, lawyers, and
environmental specialists, dedicated to protecting public health and
the environment. Founded in 1970, NRDC serves more than 1.2 million
members and supporters with offices in New York, Washington, D.C., Los
Angeles, San Francisco, Chicago and Beijing.
Our testimony focuses on three issues: a) whether additional
federal loan guarantees should be provided to construct new nuclear
power plants; b) whether the United States should engage in
reprocessing of spent nuclear fuel; and c) whether Congress should
intervene in the Nuclear Regulatory Commission's proposed rulemakings
on temporary storage of spent fuel and so-called ``waste confidence,''
that is, whether sufficient confidence exists today in our long-term
ability to isolate spent fuel from the biosphere that we can
responsibly license new reactors that will add to the nuclear waste
burden.\1\
---------------------------------------------------------------------------
\1\ NRC, Consideration of Environmental Impacts of Temporary
Storage of Spent Fuel After Cessation of Reactor Operation (hereinafter
``Proposed Temporary Storage Rule'') 73 Fed. Reg. 59547 (October 9,
2008), and Waste Confidence Decision Update, (hereinafter ``Proposed
Waste Confidence Rule'') NRC, 73 Fed. Reg. 59551 (October 9, 2008).
---------------------------------------------------------------------------
II. Summary of Recommendations
A. Loan Guarantees.--Congress should not provide additional loan
guarantees to construct new nuclear plants. Sufficient nuclear loan
guarantee authority already exists to accomplish the legitimate public
purpose that is involved here. Let us define here what we believe to be
the legitimate purpose of loan guarantees--they are intended to shift
much of the downside financial risk involved in the initial commercial
deployment of new or significantly improved low-carbon energy
technologies from private interests to federal taxpayers.
Since the underlying light-water reactor technology to be supported
by these guarantees has been around for 45 years, has been the prior
recipient of many tens of billions of dollars in government support,
and already accounts for 20% of U.S. grid-connected power generation,
the technology innovation case for nuclear loan guarantee support is
weak, and at best, a very narrow one. To avoid serious and lasting
distortion of the U.S. energy marketplace and an economically
inefficient decarbonization effort, nuclear loan guarantees should be
limited to the lead units of new nuclear plant designs, not previously
deployed in the United States or in similar markets abroad with
comparable regulatory requirements. These designs must incorporate
substantial design innovations promising improved safety, increased
operating efficiencies, significantly reduced capital costs, and lower
environmental impacts.
In our view, few if any of the Gen III + reactors being proposed
today plausibly meet this description, but if any of them do, it could
only be the lead units of new passive safety, smaller footprint, less
capital intensive designs that have not yet been deployed elsewhere.
Fitting that description currently are the AP-1000 and the Economic
Simplified Boiling Water Reactor (ESBWR), and possibly later the Very
High-Temperature Gas-Cooled Reactor (VHTGR), now in the early stages of
development by the Department of Energy (DOE).
But even here, we find that there are currently three regulated
utilities, each proposing to add two AP1000 units to their respective
rate bases, which do not appear to require loan guarantees for
financing, or at least full loan guarantee coverage at 80% of total
project cost. We believe that the $18.5 billion is already sufficient
to support construction of more than just the lead units of the
innovative standardized reactor designs currently available to the U.S.
market, and therefore no additional loan guarantee authority is needed.
More loan guarantee support to underwrite the U.S. market
penetration of additional designs, already deployed or under
construction in foreign markets, would only further distort the energy
marketplace and undermine the goal of design standardization, which is
a widely shared objective of the DOE, Nuclear Regulatory Commission
(NRC), nuclear industry and others concerned about the future
effectiveness of the NRC's safety regulation.
Federal loan guarantees should not be abused to insulate an entire
industry from competition with a host of new energy technologies that
promise comprehensive environmental and social benefits. Unlike
improvements in efficiency and renewable technologies, nuclear power is
a decarbonization solution packaged with a host of non-carbon
environmental, security, and waste problems. For these reasons, nuclear
power should not be considered for inclusion in any ``Renewable
Electricity Standard'' Congress may legislate.
B. Spent Fuel Reprocessing.--The federal government should not
encourage or support commercial spent fuel reprocessing. Putting aside
for the moment the serious proliferation and security concerns involved
in any future global shift toward reprocessing, it's clear that
combating climate change is an urgent task that requires near term
investments yielding huge decarbonization dividends on a 5 to 20 year
timescale. For thermal reactors, the closed fuel cycle (spent fuel
reprocessing and recycling plutonium) is unlikely ever to be less
costly than the once-through fuel cycle, even assuming significant
carbon controls. But setting aside such near-term cost barriers,
commercial viability for a closed fuel cycle employing fast reactors is
an even longer-term proposition. So even fervent advocates of nuclear
power need to put the reprocessing agenda aside for a few decades, and
focus on swiftly deploying and improving the low-carbon energy
solutions.
Think about it. In pursuit of closing the fuel cycle, the U.S.
government could easily spend on the order of $150 billion over 15
years just to get to the starting line of large-scale
commercialization. But all that spending will not yield one additional
megawatt of low-carbon electricity beyond what could be obtained by
sticking with the current once-through cycle, much less by investing
that $150 billion in renewable and efficient energy technologies.
Spent-fuel reprocessing, plutonium recycle, and fast reactor waste
transmutation are currently uneconomical, higher-risk, 100-year answers
to an urgent climate question that now requires low-risk 5 to 20 year
solutions. For now, Congress and the new Administration should
terminate funding for the Global Nuclear Energy Partnership (GNEP) and
its associated efforts to close the nuclear fuel cycle and introduce
fast burner reactors in the United States.
At any point along the way, Mr. Chairman, we can revisit this issue
to assess whether there may be truly disruptive innovations in nuclear
technology that would alter this negative assessment, and induce us to
view closing the fuel cycle as a more cost-effective pathway to
decarbonization than the host of cheaper alternatives we have available
to us today.
C. Nuclear Waste Disposal.--As the political sun sets on the
proposed Yucca Mountain project, the federal government needs to begin
identifying alternative geological disposal sites for the country's
nuclear waste. Congress should initiate a search for a new geologic
repository site for disposal of spent fuel, and insure that adequate
federal funding is available to retain the technical community
associated with the Yucca Mountain project, so that this expertise will
be available to assess and develop new proposed geological waste
disposal sites. The Congress should not interfere in the NRC's ongoing
Waste Confidence and Temporary Storage rulemakings, and let this
regulatory body attempt to fulfill its independent regulatory mandate.
III. Detailed Observations
A. Loan Guarantees--Congress should not further subsidize
the construction of new nuclear power plants and
not provide additional loan guarantees for this
purpose
In the United States existing nuclear power plants operate
efficiently and are profitable either because ratepayers long ago paid
the piper for their stranded capital costs, or these assets were
heavily discounted when corporate ownership changed in the 1990's and
now are carried on the books of the new owners at a small fraction of
their original asset value. The domestic nuclear power industry,
however, is confronting two big economic dilemmas with respect to new
nuclear plants. New plants remain uneconomical when compared to other
electricity generating technologies and improvements in end-use
efficiency; and the unit costs of new nuclear plants are so high that
they are difficult to finance in the private capital markets,
especially today.
As a purely commercial proposition, when stripped of all the
various forms of federal and state subsidies, new nuclear plants are
likely to remain non-competitive with other forms of baseload
generation in most areas of the country until the price of carbon
emissions exceeds $50 per ton of carbon dioxide. We note, however, that
efficiency and many renewable sources are competitive with nuclear now
and will only become more so. To bridge this gap, the nuclear industry,
through its congressional boosters, has already received production tax
credits for the first 6,000 megawatts of new capacity, licensing cost
sharing with DOE, ``regulatory risk'' insurance against delays in
construction, and to date some $18.6 billion in federal loan authority
to support the construction of new plants. In addition, most new
reactor projects are benefitting from additional subsidies and
incentives, such as tax abatements and worker training programs,
offered by state and county governments.
Now the industry is returning to Congress for yet more support,
essentially stipulating that nuclear power ``must be part of the energy
mix'' needed to mitigate climate change and to provide for jobs under
the economic stimulus plan. We should reject this categorical
imperative, command economy type approach. It reminds us of the mindset
we used to encounter in Minatom, the old Soviet Ministry of Atomic
Energy. The economically efficient way to mitigate climate change is to
internalize the cost of carbon emissions through a declining cap-and-
trade program, which NRDC strongly supports.
This Committee should reject any broader attempt to use loan
guarantees to recapitalize a technically mature industry, or to shift
the overall terms of trade in the electricity marketplace in favor of
nuclear power. This runs a serious risk of misdirecting investment
capital away from commercialization of low-carbon energy technologies
that are cheaper, cleaner, and more versatile than currently available
nuclear power plants.
Shifting the overall terms of energy commerce in favor of low-
carbon solutions, nuclear power included, is the task of a climate
bill, not the federal loan guarantee program. At best, federal loan
guarantees should be construed as bridging the gap between successful
prototype development and a foothold in the commercial marketplace, by
spreading the risk of the initial capital investments required to bring
a new technology to commercial scale.
But federal loan guarantees should not be abused to insulate an
entire industry from competition with a host of new energy technologies
that promise comprehensive environmental and social benefits. Unlike
improvements in efficiency and renewable technologies, nuclear power is
a decarbonization solution packaged with a host of non-carbon
environmental, security, and waste problems. For these reasons, nuclear
power should not be considered for inclusion in any ``Renewable
Electricity Standard'' Congress may legislate.
In sum, the economically inefficient way to mitigate climate change
is to broadly subsidize deployment of currently available nuclear power
plant technologies. This will crowd out or slow investment in improved
energy efficiency, utility-scale renewable electricity supply, and
decentralized smart-grid technologies that can mitigate climate change
in less time, with less cost and risk. If Congress is unwilling or
unable politically to let a climate bill do the work of sorting out the
most cost-effective low-carbon energy technologies, one possible way to
mitigate economic inefficiency would be to closely couple any
additional federal loan guarantees for nuclear with utility commitments
to phase out existing coal capacity, such that future electricity
demand growth in the affected service area or regional grid must be met
in the first instance by large improvements in less costly energy
efficiency, and by the development of renewable sources having
environmental impacts and a marginal cost of generation less than
nuclear power.
The idea that the nuclear and coal dependent Southeastern region of
the United States is without renewable resources worthy of development
is a gross distortion that needs to be dispelled. The region has vast
distributed potential for photo-voltaic solar development, waste-heat
cogeneration, bio-gasification, small hydro, and offshore wind. Above
all, with the highest rates in the nation of energy consumption per
unit of economic output, the region has a huge energy efficiency
resource that can be tapped at far less cost than nuclear. The fact
that the dominant utilities and electricity grid in that region are not
currently structured to take advantage of these resources does not mean
that they do not exist.
We should not use loan guarantees, or any other federal subsidies,
to promote the economically inefficient use of nuclear power ahead of
low-carbon energy alternatives that will be available sooner, at lesser
cost, and with fewer environmental impacts. Under a well designed cap
and trade system with competitive open access to the transmission and
distribution grid, if nuclear power is needed for decarbonization, the
marketplace for low-carbon energy will get around to demanding more of
it, but not before it has exhausted the potential of other available
energy resources (including all cost-effective avenues for extracting
energy savings from improvements in efficiency) that can displace
CO2 at a lower cost per ton than nuclear power.
An appropriate role for direct federal support of low-carbon energy
is to underwrite research, development, and demonstration of
meritorious new technologies that are unlikely to be developed by
private industry acting alone, either because the return on the
investment is too distant or because the investment risks are too high.
Alternatively, society may reap benefits by using production or
investment tax credits to more rapidly expand the market for beneficial
emerging technologies, thereby helping to driving down unit costs of
production to a level that allows the technology to become self-
sustaining in the marketplace.
Further subsidization of new nuclear power plants does not meet
either of these criteria. The first 6,000 megawatts of nuclear new-
build capacity are already covered by a production tax credit
comparable to wind, and sufficient loan guarantee authority ($18.5
billion) has already been made available to support construction of the
first 'new' Gen TIT+ reactor designs proposed for the U.S. market--the
Toshiba-Westinghouse AP1000 and the GE-Hitachi ESBWR. All other reactor
designs proposed for construction in the United States either don't
qualify as innovative, have already been constructed elsewhere, or
both.
Furthermore, loan guarantees are not essential for nuclear plants
currently being developed by regulated utilities as evidenced by
Progress Energy's efforts to build two new units in Levy County,
Florida, Georgia Power's efforts to build two units (Alvin W. Vogle
Units 3 and 4), and South Carolina Electric & Gas's efforts to build
two units (Virgil C. Summer Units 2 and 3). All six of these proposed
units are AP1000 designs.
Finally, as NRC Chairman Dale E. Klein noted last week, the
``excessive exuberance'' for nuclear power has declined because of the
global credit and economic crisis. The current economic recession has
reduced the projected demand for electricity and there is a reduced
need to build new base-load electricity generating capacity.
B. Reprocessing--The Federal Government should not
encourage or support commercial spent fuel
reprocessing
Reprocessing of commercial spent fuel, as it is practiced today in
France, Russia and Japan offers no advantages and numerous
disadvantages over continuing to rely on the once-through nuclear fuel
cycle as practiced in the United States and most countries with nuclear
power plants. The trend in recent years has been for more countries to
abandon reprocessing than to initiate reprocessing. Relative to the
existing open fuel cycle, the use of a closed or partially closed
mixed-uranium and plutonium oxide (MOX) fuel cycle in thermal reactors
has proven to be more costly and less safe. It leads to greater routine
releases of radioactivity into the environment, greater worker
exposures to radiation, larger inventories of nuclear waste that must
be managed, and it doesn't appreciably reduce the geologic repository
requirements for spent fuel or high-level nuclear waste.
Because reprocessing as it is practiced today does not appreciably
reduce repository requirements it is not an alternative to Yucca
Mountain. Should GNEP's advanced reprocessing technologies--essential
to the success of the GNEP vision--prove technically feasible, they are
unlikely to significantly impact repository requirements, because the
fast reactors required for efficient waste transmutation are likely to
remain more costly and less reliable than conventional thermal
reactors, and hence will not be commercially deployed in sufficient
numbers to effect the desired reductions.
The GNEP vision of burning the long-lived actinides, requires that
some 30 to 40 percent of all reactor capacity be supplied by fast
reactors. In other words, for every 100 thermal reactors of the type
used throughout the United States today, some 40 to 75 new fast
reactors of similar capacity would have to be built. The commercial use
of large numbers of fast reactors for actinide burning is unlikely to
occur because--to borrow observations made by U.S. Navy Admiral Hyman
Rickover more than 50 years ago that remain true today--fast reactors
have proven to be ``expensive to build, complex to operate, susceptible
to prolonged shutdown as a result of even minor malfunctions, and
difficult and time-consuming to repair.''
The development of fast reactors to breed plutonium failed in the
United States, the United Kingdom, France, Germany, Italy, and Japan.
We would argue it failed in the Soviet Union despite the fact that the
Soviets operated two commercial-size fast breeder plants, BN-350 (now
shut down in Kazakhstan) and BN-600 (still operational in Russia),
because the Soviet Union and Russia never successfully closed the fuel
cycle and thus never operated these plants using MOX fuel.
Moreover, the advanced reprocessing technologies are even more
costly than the conventional PUREX method and produce even larger
inventories of intermediate and low-level nuclear wastes.
The closed fuel cycle technologies required by GNEP pose greater
proliferation risks than the once-through fuel cycle. Even though
GNEP's ambitious vision of deploying new reprocessing plants and fast
reactors in large numbers will surely fail to materialize, the
partnership's research program will encourage the development in non-
weapon states of research facilities well suited for plutonium
recovery, i.e., small hot cells and even larger reprocessing centers,
as well as the training of experts in plutonium chemistry and
metallurgy, all of which pose grave proliferation risks. It is for this
reason that we advocate terminating the GNEP research on advanced
reprocessing technologies.
For now, Congress and the new Administration should terminate
funding for the GNEP and its associated efforts to close the nuclear
fuel cycle and introduce fast burner reactors in the United States.
This leaves the question of what level of long-term DOE research
funding is appropriate to explore advanced nuclear fuel recycling
technologies.
We hold the view that even substantial research spending in this
area is unlikely to lead to disruptive nuclear technology breakthroughs
that actually meet the stated goals of the research--cost-effective and
non-proliferative techniques for reprocessing, recycling and
transmuting plutonium-based fuels. And while the proliferation risks of
this cooperative international research would be ongoing and tangible,
we and many others in the nonproliferation community believe that
shutting down the current U.S. plutonium recycle research effort, and
any support it extends to foreign efforts, is the wisest course, at
least until such time as the latent nuclear proliferation risk in the
world is much better controlled than it is today.
Others, including Energy Secretary Steven Chu, appear to believe
that some level of ongoing advanced fuel cycle research is appropriate
and has some chance of yielding the desired disruptive nuclear
technology breakthrough, if pursued for perhaps a decade or more.
History has not been very kind to this view, but the plutonium fuel
cycle community is a lot like the fusion energy community in this
respect--hope springs eternal as long as federal research dollars are
within reach.
So weighing these contrasting glass-half-full and glass half-empty
perspectives, Mr. Chairman, you might conclude that some modest long-
term research program, geared to narrowing the technical and cost
uncertainties surrounding the toughest unresolved technical, economic,
safeguards, and proliferation issues, would be an appropriate and
prudent middle path to pursue with respect to closing the fuel cycle.
We would emphasize that even more important than the particular choice
of technology is a better understanding of the requirements for the
international institutional setting in which a large-scale fast reactor
roll-out would be attempted. This, more than the technology, is the
long pole in the closed fuel cycle tent. If one is serious about
wanting to minimize the risks of proliferation, one is more or less
driven to consider some form of international ownership and control
over nuclear fuel cycle facilities, and this is likely to prove just as
demanding a task as the development of more ``proliferation resistant''
strains of reprocessing. We also note that absent such an international
structure for closely regulating the closed fuel cycle, we are unlikely
ever to transition to a world free of nuclear weapons.
C. Congress should not interfere in the NRC's ongoing Waste
Confidence and Temporary Storage rulemakings
The issue of whether and how the availability of permanent geologic
disposal should factor into the NRC licensing of commercial nuclear
power plants has been with us for decades. A compromise on how the
issue would be addressed in a scientific and publicly acceptable manner
was reached nearly twenty five years ago and the basic framework of
that compromise has not changed substantially over the years.
To make a long story short, in June of 1977, the NRC denied a NRDC
petition that forced the question of whether there should be a
rulemaking proceeding to determine whether high-level radioactive
wastes generated in nuclear power reactors can be permanently disposed
of without undue risk to public health and safety. NRDC then petitioned
the United States Court of Appeals for the Second Circuit to review the
NRC decision. The D.C. Circuit remanded the matter to the NRC for
further proceedings to determine whether there was reasonable assurance
that a permanent disposal facility will be found. This and a related
case gave rise to the NRC's ``waste confidence'' rulemaking. The NRC
issued a set of findings in 1984 and subsequently revised them in 1990,
and reaffirmed them in 1999. The NRC is now revisiting the issue.
The resolution of this issue properly remains with the NRC which
was established to address health and safety issues associated with
civil use of atomic energy. We would caution against intervention into
this ongoing NRC decision-making process. It may be instructive to
remind ourselves that the current failure to develop a geologic
disposal facility for high level radioactive waste and spent fuel is
due in large part to interventions by Congress subsequent to the
passage of the Nuclear Waste Policy Act of 1982.
The Chairman. Thank you both very much for your testimony.
Mr. Fertel, I gather from your testimony you think the top
priority for the nuclear power industry, as far as legislation
might be concerned, would be fixing this loan guarantee
program, getting this in a form that it is able to assist all
of those that would like to go forward and construct these
facilities. Is that an accurate understanding?
Mr. Fertel. That is accurate, Mr. Chairman.
The Chairman. Dr. Cochran has made the argument that these
loan guarantees should be limited to the lead units of new
nuclear plant designs and not made available to subsequent
units that employ designs that have already been built. What is
your response to that?
Mr. Fertel. My response is quite straightforward on that,
sir. As a Nation, we are looking to radically change our
electricity supply system. We are looking to go to much lower
carbon footprints for everything. We talk about smart grid. We
are clearly moving toward renewables. We need to do more
efficiency.
There is no silver bullet. We basically need a portfolio
that does all of these things very effectively, and the only
large proven baseload source of electricity that doesn't emit
carbon is nuclear. The reality is that if we are going to go to
a low-carbon footprint across our electricity system, it won't
happen in 5 years, as Tom is saying. It will take us much
longer.
But to do that, we are going to have to finance large
projects, and there is advantage from a public policy
standpoint to loan guarantees, which I will explain. If I
leverage--if I am a merchant plant in a State that actually has
deregulated, I would actually leverage more debt to equity. If
I had loan guarantees, I would be able to do that.
That reduces the cost of electricity to our customers. So
it helps there. It helps us deploy quicker, whether it is
nuclear or renewables or anything else.
The third thing right now in title XVII, the way you wrote
it, sir, we actually pay the Government for the loan
guarantees. It is not a gift. You actually get money for it.
The companies want to deploy nuclear and they will ultimately
maybe get financing in the open market, but in our economic
situation today, you are not going to get a lot of financing
for anything.
So it is good public policy, in our opinion, if you are
trying to move our electricity system in a different way and
moderate the impact on customers.
The Chairman. Let me ask a question about this
reprocessing. Is there any interest on the part of private
companies, Mr. Fertel, as far as you know, in building fast
reactors or reprocessing plants with private capital? Is there
any move to do that?
Mr. Fertel. There is clearly interest by a couple of the
prime movers in that area over the last couple of years because
of the Bush Administration discussing of GNEP, and they have
been looking at it as a business case. Where I agree with Tom
is it won't happen fast, and it doesn't have to happen fast.
But we do need to look at what we should do if we do want
to close the fuel cycle in this country, and I think Tom may be
wrong in his premise that the rest of the world won't continue
to look at reprocessing. If we want to influence them on
technology, on safety, on environmental, and on
nonproliferation issues, you can't do it when you say we don't
care to do it, and we think you shouldn't. You have to engage.
The Chairman. Dr. Cochran, let me ask you about this NRC
waste confidence rulemaking. You suggest that Congress stay out
of that. Do you believe, in light of the current state of the
repository program, that the NRC can reasonably expect a
repository to be available even in this timeframe of 50 to 60
years after the 60-year operating life of a reactor?
Mr. Cochran. I believe that is such a long time that I
don't think any answer would be meaningful. First of all, half
the nuclear power plants have extended their licenses for 60
years. The other half are expected to apply and extend their
licenses. They are already beginning to think about a second
extension to 80 years, and then you add on another 50 to 60
years beyond that, you are well beyond 100 years into the
future.
Now do I have confidence that we will find a solution
within the next 100 years? Let us review the history. Yucca
Mountain is not the first failure to find a solution to the
spent fuel or high-level waste disposal. It is actually the
third failure in the last 50 years.
The first failure, you recall, was efforts by the AEC to
dispose of high-level waste at Lyons, Kansas, in a salt
repository. When that program was terminated because the site
proved to be less attractive than initially thought, the newly
formed ERDA/Department of Energy proposed--this was, I think,
during the Carter Administration--a retrievable surface storage
facility solution, where we would gather up all the fuel and on
an interim basis store it in one large central pool or pools.
That proposal was also shot down and abandoned, and that
led to the nuclear--development of a new alternative and the
passage of the Nuclear Waste Policy Act of 1982. In that case,
we supported that act. It set up a beautiful system where one
Federal agency, the Department of Energy, was to go out and
find the best sites in the Nation and narrow it down to two.
A second Federal agency, the EPA, was to independently
develop criteria for safe disposal of the waste in the
repository. The third Federal agency, the Nuclear Regulatory
Commission, would make the decision.
In the intervening years, the Department of Energy and the
Congress corrupted the site selection process, and it led to
singling out Yucca Mountain. In the intervening years, the EPA
took decades to finalize the criteria, and they corrupted that
process as well. So, you have ended up with now a political
solution that is essentially eliminating Yucca.
Will that happen again? Perhaps. I think it is incumbent
upon us--because the large inventories of spent fuel exist and
geologic disposal is still the best solution for long-term
disposal of this material, it is incumbent upon us to
immediately start to identify new geologic repositories. We are
going to lose a couple of decades if we simply cutoff the
funding for the technical people who know this issue best so
that they are not around to help us engage in identifying the
best options under plan B.
The Chairman. Thank you very much.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Interesting panel. Very seldom do we have just two, and
really, you couldn't be on----
Mr. Fertel. So close together, right?
[Laughter.]
Senator Murkowski. So close together. That is right.
Anyway, it has been interesting hearing the comments from both
of you.
Mr. Fertel, first to you, you have--we all recognize that
the number of applications that Department of Energy has
received for the loan guarantees far exceeds, $93 billion as
opposed to the $18.5 billion that is currently available and
limited to.
What does NEI believe that the authorized loan volume needs
to be in order to get the nuclear industry reestablished?
Mr. Fertel. That is an excellent question, Senator, and we
are trying to get a better handle. I mean, you have an
indication by just what was filed.
Senator Murkowski. Right.
Mr. Fertel. Which is $93 billion by the 10. You shouldn't
look at that as 10 plants. We are not privy to what they filed,
but I am sure there are multiple units in those filings. It is
not 10 applications, 10 single units.
I think the difference, again, is that the program that the
2005 act put in place was a program that Tom described very
well. It was to jumpstart some new technologies.
I think the situation is a structural problem that we are
trying to address, which is the ability of our Nation to
privately finance large projects and particularly when the
companies are the size of our electric utilities. They are not
the size of Electricite de France or some of the German
companies, which are almost 10 times at times the size of some
of our companies that you can't finance as easily or at all in
some cases.
So Government intervention to support it actually has
merit. Right now, the program is $111 billion, of which $18.5
billion is for nuclear. The rest goes to renewables and other
technology.
So we ought to be clear. Nuclear is not running away with
the bulk of the money in the current program, but I think you
have an indication from what has been filed.
Senator Murkowski. You made a statement that I want to
follow up with because I made the suggestion at a hearing that
we had last week that the Administration's actions with regard
to Yucca could be viewed as a disincentive to those in the
industry to pursue new applications to advance this nuclear
renaissance that we have been talking about.
You have suggested here this morning that you don't think
that that is necessarily the case, and I appreciate that. But
let me ask you this. If, in fact, we do not get a strong signal
from the Administration that they believe--let us say that they
trend toward Dr. Cochran's view that, in fact, the loan
guarantees are perhaps not that necessary or perhaps we do not
need to increase the amount.
You have that message coupled with the message on Yucca.
What does that do to the growth of the industry?
Mr. Fertel. Yes, I think it immediately causes some of the
companies to slow down because they can't finance some without
loan guarantees. You would probably lose the merchant plants
just as a business decision.
I think that in other boardrooms, you would have the board
of directors sitting and saying, ``Well, where is the
Administration on this, and what do we do?'' So I think,
clearly, the combination would have to slow down any deployment
of new nuclear.
My comment on the waste issue is that you always had the
possibility, and Chairman Klein referred to it, of Yucca not
getting licensed. We think that there is great technical stuff
and they have worked so hard and they have worked so long, but
that was always a possibility. You would then have to go find
another location.
So that was always out there. As the chairman said, they
will make sure you manage safely and securely the used fuel
onsite or at any other location we put it. So we would say you
could go forward if it was just waste, as long as there is an
effort by our country to do something.
With Senator Bingaman back in his question to Tom about
waste confidence, let me just add maybe a perspective on waste
confidence that you don't usually hear. The reason NRC has the
waste confidence rulemaking is because of NEPA. It is to allow
them to deal with the issue of waste, which is an environmental
issue as well as a safety issue under NEPA.
This is a personal opinion. We have a law. We may not be
implementing it very effectively, but it is the law. It would
seem to me that if the Federal Government passes a law that
says we are going to ultimately deal with waste--Tom is right--
eventually, we should ultimately deal with the waste.
I am not sure they should litigate that either through a
waste confidence rulemaking or through individual proceedings
in regulatory. I think you could legislatively say you have
waste confidence because otherwise you don't believe our
Government will ever implement what it says it is going to do.
Now I think NRC is accommodating the process very well by
doing a very robust rulemaking and then relying on it. But that
is why they have to deal with it, because of NEPA.
Senator Murkowski. My time has expired. But if I may, Mr.
Chairman, just one question of Dr. Cochran?
Because you have very clearly articulated your perspective
that we should not expand the nuclear loan guarantee program,
we should not pursue the spent fuel reprocessing. You have seen
the President's blueprint in terms of the goals that he is
looking to for climate change and reduction in emissions. He is
looking for an 83 percent reduction in emissions by 2050. That
is pretty aggressive.
Do you believe that we can achieve the goals that he is
setting out without nuclear?
Mr. Cochran. First of all, we have nuclear. We have 104
plants. They have been increasing their capacity factor and
their capacity, and there will be more nuclear plants. So
nuclear is in the mix, and nuclear is here to stay.
Senator Murkowski. But when you say that, I want to follow
on the question that I asked to Mr. Fertel.
Mr. Cochran. I want to finish my answer.
Senator Murkowski. If, in fact, we do not have an increase,
if we just stay at our 104, can we get there from here?
Mr. Cochran. Let us put in place the policies that will
achieve a priority objective, which is to mitigate climate
change. The economically efficient, most efficient way to do
that is to treat carbon as you would any other pollutant.
So, the highest priority is to get Federal legislation to
implement a cap and trade program on carbon, a meaningful cap
and trade program. We should solve the climate issue by dealing
with the pollutant, not by going out and subsidizing your
favorite technologies.
There is a role for Federal subsidies. There is a role for
loan guarantees.
Senator Murkowski. That is clearly what we are doing.
Dr. Cochran. But it is not to, as Mr. Fertel wants to do,
provide unlimited loan guarantees to all the nuclear plant
owners and operators that come to the table and want to build a
new nuclear plant. Now----
Senator Murkowski. So could we----
Mr. Cochran. Wait just a minute.
Senator Murkowski. I still want to get back to my question,
which is can we achieve the level of reductions that the
President is looking for, given what we have with our current
nuclear capacity?
Mr. Cochran. NRDC thinks we can, but more importantly, we
ought to put in place the policies that get us there the
quickest, most safely, and at the least cost to the Federal
Government. Our concern is that providing these unlimited loan
guarantees to the nuclear energy industry will ultimately
reduce the efforts to deploy technologies that can provide
carbon offsets more cheaply and more quickly.
Now let me--let us just take--first of all, let us
recognize that the loan guarantees are not needed for those
utilities that are regulated because they can go to the PUCs
and get money provided through increased rates and finance
these plants.
He mentioned that it would likely eliminate or reduce the
number of merchant plants we build. Well, let us take a case.
Let us take the business model for Calvert Cliffs plant right
down the street.
Calvert Cliffs is a proposal by UniStar, which ultimately
is a proposal by the French government because UniStar is a
joint venture between Constellation Energy and Electricite de
France, and Electricite de France just bought half of
Constellation Energy. Electricite de France is owned, 85 or
higher percent, by the French government.
They want to build a French plant, EPR, which is built by
AREVA, owned by the French----
Senator Murkowski. Dr. Cochran, I am----
Mr. Cochran [continuing]. Government.
Senator Murkowski [continuing]. Double over my time here. I
am 5 minutes over, and I am not quite sure where you are going.
Mr. Cochran. I am not sure I am not over my time, but let
me finish my point.
Senator Murkowski. You are over your time. Where you are
going is----
Mr. Cochran. Where I am going is----
Senator Murkowski [continuing]. Really inconceivable.
Mr. Cochran [continuing]. That your loan guarantees, you
have got to go to your constituents and the constituents in New
Mexico and say we want to tax homeowners, families, so that we
can provide insurance to the French government so that through
Electricite de France they can enter the American market, sell
electricity below cost so the consumers in Washington, DC., and
Baltimore don't have to provide energy efficiency, and they can
make a profit by selling nuclear energy below cost.
I think that is a bad model for solving climate. It is a
bad model--it is a bad business model for having efficient
nuclear power plants.
Senator Murkowski. I think where the Natural Resources
Defense Council is coming is they do not believe that nuclear
should be any part of the solution for this country, and I am
disappointed with your response.
Thank you, Mr. Chairman.
Mr. Cochran. Senator, the highest priority program of the
Natural Resources Defense Council is to achieve Federal
legislation that will cap carbon emissions. This happens to be
the single most important Federal policy that would help the
nuclear industry.
The second most important Federal policy that could help
the nuclear industry would be to encourage the development and
deployment of plug-in hybrids and electric vehicles. This is
also a priority of our organization. So don't tell me----
Senator Murkowski. We will work with you on that.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Udall.
Senator Udall. Thank you, Mr. Chairman.
This previous interchange is informative and entertaining
enough, I am tempted to yield my 5 minutes to Senator Murkowski
and----
[Laughter.]
Senator Udall [continuing]. We will continue the
discussion. I do think my colleague from Alaska is on to an
important line of questioning, and I think it is, in many ways,
why this hearing was held today.
Dr. Cochran, thank you for your passion and your interest
and the time you dedicate to understanding nuclear power. I did
want to return to you for some additional comments.
But Mr. Fertel, in the interest of fairness, I would like
to hear your thoughts on loan guarantees and once again give
you a couple of minutes to talk about why you think this is
important.
Mr. Fertel. Thank you, Senator Udall.
Again, I think going--not to rebuke, but some of Tom's
points. First of all, the loan guarantees, the citizens of
Colorado and the taxpayers of New Mexico or Alaska or Alabama
are not paying any money for the loan guarantees that we get.
We are paying the Government money for the loan guarantees that
we get, and then we are producing cheaper electricity with it.
To be honest, on Tom's sort of attack on the French, I
don't want to defend the French, but AREVA is in the process
right now of building a facility in Norfolk, Virginia, that is
going to employ 500 people, that is going to build equipment
for the EPR that would be built in this country. Their
facilities in Lynchburg have hired probably more than 500
people in the last couple of years, and the people that will
build the plant in this country will be unionized people that
they have signed a contract with to build in Maryland.
So I think we need to maybe not throw as many stones at
some of what is going on. First, it is a global marketplace,
and second, the building is going to come here and the
electricity will be here.
We think loan guarantees are a good public policy. We think
that they allow for a more effective deployment of clean
technologies. As I said, there is $111 billion in the loan
guarantee program now, of which $20.5 billion is nuclear. So I
don't know if Tom thinks they should take out the other $90
billion that goes to renewables and other things, too? We
don't. We think they should get it if they need it. We don't
imagine how they can spend it.
It helps us reduce the cost of electricity. It helps us
deploy low-carbon technologies quicker than we could without
them because of the size of some of our projects in particular,
but others that are having trouble. We think that the
Government actually gets money back for it.
So we see it as a good public policy. We see it as
something that achieves the end goals we want. I agree with Tom
that if we do a climate bill with cap and trade or whatever
form it takes, it will also have an impact on the technology
decisions.
The answer, Senator, is we need all the technologies we can
use. How we deploy them depends upon the policies we set.
Senator Udall. Is it fair to say that when Dr. Cochran
talked about his concern that the loan program was initially
framed to promote these new cutting-edge technologies, these
more modular units that we are now hearing that we ought to
expand those loan guarantees to the more mature technologies,
is that because of the marketplace and the----
Mr. Fertel. That is exactly right, Senator.
Senator Udall [continuing]. Stresses there?
Mr. Fertel. Yes, we actually agree that when Senator
Bingaman and the committee passed the 2005 act, its intent was
different. It is still a valid thing to look at and to do. But
the financing and structural problems that we have in deploying
the bulk of technologies we need actually needs more help than
what the original program was intended to do.
Yes, sir. That is correct.
Senator Udall. Dr. Cochran, in the interest of fairness,
would you care to comment?
Mr. Cochran. The renewable industry, as I understand it,
was not seeking loan guarantees prior to the financial
meltdown. Now the Congress, in its wisdom, has put in large
amounts of loan guarantees to reflect the difficulty of
immediate financing following the financial meltdown.
It is my view that the loan guarantees should be limited to
application of the new innovative energy technologies, and once
the technology has gone above, say, 5 percent of the market,
you shouldn't continue them. You don't need to continue them.
The economically efficient way to solve the climate problem
is through a cap, a carbon cap. It is not through a loan
guarantee program. There is nothing in the loan guarantee
program from preventing utilities from, let us say, shutting
down a gas-fired plant rather than a coal plant. So, we lose
half the benefits, the carbon benefits, if they are going to
shut down some other technology rather than the plants that
emit the most CO2.
So I think the economically efficient way to address that
CO2 problem is cap CO2 and put a price on
it. Let these guys compete in the marketplace, and your job
ought to be to eliminate all these Government subsidies rather
than load them up.
There are legitimate reasons to subsidize new energy
technologies. One is to do R&D on long lead-time technologies
that are valuable to society or technologies that are high risk
that the industry won't provide the R&D.
The second is to lower initial costs by creating a market
and introducing technologies, building a marketplace and
reducing the costs in that manner. Beyond that, the Government
ought to get out of the business and let the marketplace work.
Senator Udall. Thank you. My time has expired.
That is certainly the mission of this committee and the
Senate of the United States is to not advantage one technology
over another technology. Easy to say. Harder to do.
I am glad Senator Murkowski and Senator Bingaman are
leading the charge so that we find our way to that goal.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Sessions.
Senator Sessions. Thank you.
We are certainly advantaging one technology over another in
that we are giving direct substantial subsidies for wind and
also talking about mandating a certain amount of it.
Whereas, all the nuclear power industry who, if we can get
it going again, will produce far more clean baseload power with
no emissions is a loan guarantee, which I suppose, Mr. Fertel,
you intend to pay back?
Mr. Fertel. We not only pay it back, but we need to pay for
it. I mean, Tom uses ``subsidy'' as a sort of throw-away line,
and usually a subsidy means you are getting it for free. For
our loan guarantees, we actually have to pay the Government to
get it, and then, of course, we pay it back. So----
Mr. Cochran. There were more nuclear plants canceled than
built in the United States. Mr. Fertel believes that there is
no risk associated with the construction of these nuclear
plants, and therefore, the Government is not at risk.
Senator Sessions. Mr. Cochran, we know the history of that,
and it is one of the dark days in this country that those
plants were stopped. I am telling you, if we had gone forward
with nuclear power, we wouldn't have to be depending on France
today for certain technologies. You and some of your colleagues
are the reason that happened.
It has damaged our emissions, increased the CO2
in the atmosphere, and if we don't build--tell me how many
plants, Mr. Fertel, we need to build to just keep our
electricity by nuclear power at 20 percent in America today?
Mr. Fertel. Our estimate right now is if we built 26, which
is 34,000 megawatts, by 2030, we would stay at 20 percent in
2030.
Senator Sessions. This is--I just saw an MSNBC poll. Sixty-
seven percent of Americans are in support of building more
nuclear plants. Now the Administration has talked about it. Dr.
Chu is a nuclear physicist. He has been cooperative and talking
somewhat positive. But Mr. Chairman, I am not seeing any action
yet.
I know our bill that you are working and Senator Murkowski
has got a lot of good things in it, but I don't see anything in
it would help us with nuclear much. So I hope we can do some
things that signal that Congress is supportive. I am just sorry
to be upset about that.
I am looking, in Alabama, at the Bellefonte plant, they put
$4 billion in it, TVA did, 25 years ago. It is the fundamental
reason TVA has a large debt today, $4 billion with no income
for 30 years nearly. They want to restart it. They are going to
commence soon to restart that plant.
How much better would the environment be and how much
better would TVA's bottom line be had that plant been completed
and not stopped?
With regard to the--hopefully, we won't have an RPS
renewable standards, but it strikes me, Mr. Fertel, that if
required renewable standards are made, the purpose of renewable
portfolio is reduce CO2 emissions, shouldn't there
be some credit for a utility that is spending billions of
dollars over 6 years to get a massive reduction of
CO2?
Shouldn't they be given some credit as opposed to somebody
that was able to get some renewable in the interim, and should
these utilities be required to pay fines when, in the long run,
they will reduce CO2 far more?
Mr. Fertel. Obviously, we think that nuclear's significant
role in reducing CO2 emissions should be recognized
in some way, as Congress looks at both the climate bill and as
it also looks at any sort of electricity standards. But I have
confidence that the chairman and the ranking member and the
members of this committee will try and work together to figure
out the best way to do that.
We think renewables have a role. We think efficiency has a
major role. Obviously, if we can get coal--the carbon capture
and storage, coal will continue to play a role. If we don't do
that, the rest of what we do may not matter because the rest of
the world will build lots of coal.
So we see everything having a role, and where I differ with
Tom, where he says let the marketplace decide, he doesn't
really do that because he knows which ones he wants. What I
would say is that the marketplace will help you decide where
you go with what, but this whole discussion on carbon, while
important, you actually want to produce electricity, too.
We need to make sure that we are producing electricity, and
one of the reasons we think that you need to deal with the
structural problem is that you really can't build quick enough
electricity plants, and we won't build, no matter how much we
think we will, a smart grid in the next 5 years. We may not
define a smart grid in the next 5 years.
So we really need to go about this smart as a Nation and
not pick winners or losers, but not decrease our options by
doing things that makes it harder to deploy the technologies we
know work.
Senator Sessions. Just briefly, one of the things, Mr.
Fertel, that I think nuclear power provides us is an
opportunity for smart meters, where in off-peak hours, you can
utilize the baseload nuclear power. Is that a positive factor
for the public and the environment?
Mr. Fertel. It is a positive factor there. It is a positive
factor what Tom said about plug-in hybrids.
Senator Sessions. I agree.
Mr. Fertel. It would be a really good time to be charging
your hybrid overnight when the nuclear plant is working and
producing electricity at the low numbers that Senator Landrieu
mentioned from an operating standpoint.
Senator Sessions. Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Let me just ask you one more question, Dr. Cochran. Is it
your view that the NRC should go ahead with licensing new
reactors before Congress comes up with a solution to the
nuclear waste problem? I mean, if Yucca Mountain is not going
to be the solution, do you see that as an impediment to the NRC
going ahead and granting applications or granting licenses?
Mr. Cochran. I don't see that as an immediate impediment.
But there is a rulemaking process ongoing before the Nuclear
Regulatory Commission to resolve that issue and to address the
environmental issues that Mr. Fertel raised, which are part of
that rulemaking process.
I think the proper way to deal with that issue is for the
NRC to complete that rulemaking, to go back and revise the
environmental assessments that are assumed for all nuclear
power plants--is going to be zero emissions associated with a
geologic repository and that the repository is going to be in
some salt deposit somewhere--and do that in an orderly, proper
rulemaking procedure where the public can engage on those
issues.
The Chairman. That concludes my questions.
Senator Murkowski, do you have any other questions?
Thank you both very much. I think it has been a useful
hearing.
Thank you.
[Whereupon, at 11:35 a.m., the hearing was adjourned.]
[The following statement was received for the record.]
Statement of Deborah Deal Blackwell, Vice President, Licensing & Public
Policy Hyperion Power Generation, Inc.
The Committee's interest in nuclear energy development is
appreciated. It is no secret that nuclear must be part of the ``mix''
of energy generating tools for the future of the United States and the
world. Clean, emission-free energy from nuclear power plants can
provide the baseload power today that is required and that wind, solar
and hydro will probably not be able to supply for decades.
And, the people of the United States are ready to accept more
nuclear power. This year's Gallup Environment Poll has found new high
levels of support. Seventy-five percent of Americans whose total annual
household incomes are at least $75,000 favor using nuclear power to
produce electricity in the United States. With all income levels
factored in, 59% now favor the use of nuclear power. A global survey
just released from Accenture reveals that more than two-thirds of
people around the world believe that their countries should start using
or increase their use of nuclear power
However, little attention has been paid to a key development in the
nuclear industry--small, modular nuclear power reactors (SMRs). SMRS
solve many of the problems of large-scale nuclear power plants.
According to an independent report by the Wall Street Journal, each of
the next traditional-sized new nuclear power plants will cost $6
billion to as much as $12 billion, and they will take as long as 12
years to build and license.
Clearly financing of such expensive projects is going to continue
to be a problem. The loan guarantees approved by you and your
colleagues are welcome and appreciated. But, they will only assist in
the building of perhaps three or four traditionally large-scale plants.
As you realize, four additional nuclear plants will not meet the
burgeoning need for baseload power in this country.
The answer may well lie in the development of SMRs. There are less
than a handful of companies developing SMRS that have been identified
by the Nuclear Regulatory Commission as upcoming license applicants.
And, there is only one wholly-American owned and operated private
company that is developing for global commercialization, a small
nuclear power reactor for distributed power from the U.S. Department of
Energy and that is Hyperion Power Generation. The company's SMR was
invented at Los Alamos National Laboratory. It has been licensed to
Hyperion through the lab's technology transfer program.
Providing 70 MW thermal power (27 to 30 MW of electric), each
stand-alone proliferation-resistant Hyperion Power Module provides
enough power for 22,000 average American-style homes or the industrial
equivalent, for a capital investment of only $25 to $30 million per
module. (Modules can be teamed for greater output.) The HPM, with its
small amount of low-enriched fuel, makes the benefits of nuclear power
available almost anywhere in the world without a multi-billion dollar
investment. And, as the HPM will be mass produced in an American
factory and is only 1.5 meters wide by 2 meters tall, the time from
purchase to installation can be only a matter of months--not years,
depending on the site.
Because the HPM is transportable, the design provides a desirable
solution for emergency response and U.S. military installation use,
among many others. Attached is a more in-depth discussion of the
Hyperion Power Module and its global applications.
Thank you for your attention. We appreciate the Committee's
interest in our national energy security and in its commitment to
increasing U.S. economic security through technical innovation and
small business development.
Attachment.--The Hyperion Power Module (HPM)
Perhaps the most important component of U.S. infrastructure is its
system for generating and distributing electric power. Supplied by
conventional centralized power plants and transmitted often hundreds of
miles by an aging grid system, electricity is the lifeline of the
country. Terrorism aside, the system is frightfully vulnerable due to
normal wear and tear and simple accidents, as evidenced by the blackout
several years ago in the Northeast. In addition to replacing or
providing backup for the existing infrastructure, the amount of
electricity needed for residential, commercial, industrial and military
use is growing at an unprecedented pace.
While solar, wind and hydropower technologies can deliver peak
power, they will not be able to deliver reliable baseload power--the
electricity that is needed 24 hours a day, seven days a week, to run
the world's infrastructure for schools, homes, government, commercial,
and industrial purposes. Nuclear energy is the only viable baseload
power solution for the rest of the 21st century.
But nuclear power in its current configuration cannot meet global
needs now or in the future.
Conventional nuclear power reactor plants, designed to serve large
regions, cost billions of dollars to construct. A recent article in the
Wall Street Journal forecast that the next new nuclear plant would end
up costing $12 billion and take 15 years to license and build. The
national and global economy will not be able to support such investment
in time or funds. Conventional plants cannot be financed and built fast
enough to meet the growing demand for energy.
Now, for the first time, the advantages of nuclear power--
efficient, cheaper, and non-polluting with no greenhouse gas
emissions--are available in a significantly smaller, less capital
intensive, less complex package. The small modular reactor (SMR) for
``distributed generation'' can have an impact on electricity needs and
a place in the history of mankind's accomplishments that far exceeds
its metaphoric miniature version--the common battery. Distributed
generation systems generate electricity from many small energy sources
instead of one large, vulnerable and capital-intensive site. They
reduce the size and number of power lines that must be constructed.
And, they reduce the amount of energy lost in transmitting electricity
because the electricity is generated very near where it is used. An
aesthetic and environmental improvement, distributed generation also
makes widespread outages less likely regardless of cause.
Designed to provide distributed power, SMRs can be manufactured at
a single location and shipped wherever they are needed. They provide
essential power to even the most remote locations without designing and
building individual, massive, and costly conventional power plants. The
only U.S. small modular power reactor (SMR) design feasible for
deployment within the next five years is the Hyperion Power Module
(HPM).
American Innovation, American Jobs, the Hyperion Opportunity
The HPM was invented at Los Alamos National Laboratory. Through the
U.S. government's technology transfer initiative, the exclusive license
to develop and commercialize the invention was granted to Los Alamos,
New Mexico-based Hyperion Power Generation, Inc. (HPG). The company has
now retained the nation's top nuclear power design and engineering
teams, including staff from U.S. federal laboratories and industry, to
further develop the reactor. HPG will also partner with industrial
leaders for the production, operation, and maintenance of the HPM.
Hyperion Power Generation, Inc. is a small business totally owned and
operated by U.S. citizens, and is the only U.S. owned and controlled
small reactor design firm in the world.
In addition to generating income for the labs involved in the
project, Hyperion Power Generation can stimulate both short and long-
term jobs in the private sector. Construction of a U.S. manufacturing
facility will involve a variety of building trades. Long-term, the
factory will ensure a wide variety of positions ranging from assembly,
forging and security, to quality assurance, testing and management.
Additionally many jobs would be created and ensured for complementary
technology and manufacturing companies both new and currently existing.
Already, over $7 billion worth of HPMs are in the company's ``sales
pipeline.'' The company expects to produce at least 2,000 units in the
first ten years of operation and a great number of those will be sold
before the factory is open. This early enthusiasm for the product is a
clear indication of the product's coming success and contribution to
future U.S. employment.
Applications for the Hyperion Power Module
Generating nearly 70 megawatts* of thermal energy and from 27 to 30
megawatts of electrical energy, the HPM is the world's first small
transportable reactor, taking advantage of the natural laws of
chemistry and physics and leveraging all of the engineering and
technology advancements made over the last fifty years.
---------------------------------------------------------------------------
* While individual HPM units produce 70WM thermal power, the units
can be ``ganged'' for even greater energy output.
---------------------------------------------------------------------------
The HPM was initially created in response to the need for an
efficient source of steam to power equipment for removal of fossil
fuels from oil sands and shale. Thus far, retorting and processing
equipment cost an unacceptable amount of the very resource that is
being accessed and the HPM was created to eliminate that unsatisfactory
paradigm. Using hydrocarbons to recover heavy hydrocarbons is
inefficient and unnecessary.
However, Hyperion Power Generation's small modular, self-
stabilizing reactor (the HPM) offers such attractive advantages that it
could alter the manner in which nuclear energy is harnessed for
generating electricity and creating industrial steam. As such, the
possible applications for the technology are enormous. Meeting all the
nonproliferation criteria of the Global Nuclear Energy Partnership
(GNEP), the HPM is appropriate anywhere cost, safety and security is of
concern.
There are five main areas of application for the HPM:
Distributed ``baseload'' power for urban and rural
communities
Quickly installed back-up and emergency power for disaster
areas
Military bases (independent, baseload power)
Oil & gas recovery and refining, including in oil sands and
shale recovery
Remote communities lacking accessibility to a source of
electrical generation.
Energy Savings Around the Globe
A key design objective of the HPM is the ability to produce
electricity anywhere in the world for less than 10 cents a kilowatt
hour. As an example, the costs of the HPM for use in heavy oil recovery
have been estimated to save over $1 billion dollars a year, for a
single, high-power application when compared with the present cost of
using natural gas. The estimate is based on the projected 5-year life
of the HPM reactors, and includes the cost of refueling and waste
handling. The savings come from the higher energy content of nuclear
fuel and the low personnel costs for operating the HPM. The inherent
safety of the HPM's core, coming from its chemistry-based self-control,
minimizes the human oversight needed for operation. The compact design
permits staged introduction of the new power source to any application
and the low unit costs reduce financial risk, both for the initial
demonstration programs and for final deployment. Furthermore, the
compact design and ``walk-away'' safety can permit, for the first time,
the distributed production of power from nuclear sources.
The compact nature and inherent safety opens the possibility for
low cost mass production and operation of HPM reactors. The overnight
capital costs and the operating costs for this device have been
estimated and found to be very attractive. The capital costs were
estimated by an expert in the nuclear industry and found to be $1,400
per kW of electricity, which compares favorably with an estimate of
$4,500 for the same electrical production but from gigawatt scale
installations. The operating costs for thermal power steam production
have been estimated to be $3 per million BTU, costs that are not only
lower than natural gas but also more stable--all without
CO2, nor NOX nor SOX emissions.
Summary of Unique Advantages of the HPM:
ransportable baseload power source
Installed within a day or so once minimal site prep is
performed
Substantial power--enough power for an entire community
infrastructure (20,000 homes)
Reliable, continuous power--enough for five to eight years
depending upon demand
No refueling on site
No maintenance of heat source
Only small area required for sighting
Attractive costs and low investment
Technical Overview
The Hyperion Power Module (HPM) was specifically designed to avoid
the high construction costs and uncertainties associated with
traditional reactor technology. Each unit will generate approximately
27 megawatts of electrical power. A one and one-half meter diameter
core, without internal mechanical moving parts, permits the reactor to
be sealed at the factory, sited underground, and eventually returned to
the factory for fuel recycling and refueling after a useful life of
five to seven years.
The HPM has the following attributes:
Single-unit, sealed construction and dispersed, underground
siting also provides anti-tampering protection.
The inherent simplicity and compactness of the design will
enable mass production of Hyperion modules as turnkey devices.
The modest size of the modules greatly reduces the financial
investment risk in both the development and the eventual
deployment of the reactors.
Mass-production and the minimal required operational
oversight make the Hyperion reactor economically competitive
and attractive for new and distributed power production
deployment, and could substantially contribute to national
energy independence.
The physical characteristics of uranium hydride, a combined fuel
and neutron energy moderator, are ideal for the generation of safe
nuclear power. The reactor operates at an optimum temperature of 550C.
At 550C, the dissociation pressure for the hydrogen above the hydride
is approximately eight atmospheres, which permits easy transportation
of the gas without presenting significant high-pressure risk. The
temperature-driven mobility of the hydrogen contained in the hydride
can change the moderation, and therefore the reactor criticality,
making the HPM reactor self-regulating and passively safe.
The hydrogen forced out of the core during any over-temperature
excursion reduces the neutron energy moderation necessary for nuclear
criticality. The Hyperion Power Module is inherently fail-safe, since
any temperature increase from excess activity immediately reduces the
criticality parameters and thus the power production. The consequent
power reduction causes the temperature to decrease and that temperature
decrease eventually reverses the process, resulting in relaxation
oscillations that quickly damp out to steady-state operation.
History of the Fuel & Technology
Hydride materials have long been recognized as possible controls
for self-regulating nuclear reactors. In addition, uranium hydride was
demonstrated to be a successful reactor fuel very early in the nuclear
era, although the hydride was cast into blocks using a polymeric binder
to prevent the hydrogen from escaping. This binding of the fuel
precluded any observation of the self-regulation characteristics
inherent to the material.
While the science of the Hyperion reactor has been around for this
long time, it has not been implemented because the conditions for self-
regulation had not been explored and the limits on those conditions
delineated. We have now performed the critical modeling and thereby
discovered the critical feature and design criteria for exploiting the
safety and self-regulation advantages of hydride materials within the
reactor that make a hydride reactor practical for construction and
deployment.
Hyperion is proposing a new concept for an inherently safe nuclear
power source that is self-stabilizing and requires no moving mechanical
components. The modest size of the modules reduces the financial
investment risk for both development and deployment. The potential for
mass-production and the minimal operational oversight make these
reactors economically attractive for new and dispersed power production
deployment.
In Conclusion
Transportable and buried safely underground out of sight, HPMs,
with their small size, but mighty power, and virtually maintenance-and
proliferation-free design, offer the long-awaited solution to our
country's desire for increased national security through independent
and robust distributed power systems.
Hyperion will seek a design certification from the U.S. Nuclear
Regulatory Commission. The company expects its first installation to go
live in late 2013.
APPENDIX
Responses to Additional Questions
----------
Responses of Dale E. Klein to Questions From Senator Murkowski
Question 1. The increased interest in new reactor licensing over
the last few years has put the NRC in the position of certifying new
reactors while at the same time reviewing license applications.
Do you see any issues with this fact in terms of continuing to
maintain the safety of new reactor construction or maintaining public
involvement in the process?
Answer. The NRC has long sought standardization of nuclear power
plant designs, and the enhanced safety and licensing reform that
standardization could make possible. The NRC's licensing process,
regulation (Part 52 to title 10 of the Code of Federal Regulations),
provides a predictable licensing process, including certification of
new nuclear plant designs. This process reflects decades of experience
and research involving reactor design and operation. The design
certification process provides for early public participation and
resolution of safety issues prior to an application to construct a
nuclear power plant.
NRC approval of each standard design is formalized via a specific
design certification rulemaking. This process allows the public to
review and comment on the designs up front, before anyone builds a
plant of this design. NRC design certification fully resolves safety
issues associated with the design.
A specific provision of Part 52 allows applicants to reference a
certified design that has been docketed but not approved. Thus,
although the Commission anticipated that applicants would first seek to
have designs certified before submitting combined license (COL)
applications that reference those designs, the NRC's regulations,
nonetheless, allow an applicant--at its own risk--to submit a COL
application that does not reference a certified design. The
Commission's Policy Statement on the Conduct of New Reactor Licensing
Proceedings addresses this very situation and its effect on public
participation in COL adjudications. The Commission determined that
issues concerning a design certification application should be resolved
in the design certification rulemaking and not in a COL proceeding.
When an issue is raised in a COL proceeding that challenges information
in the design certification rulemaking, under NRC processes, that issue
should be referred to the staff for consideration in the design
certification rulemaking. This makes the process more effective and
efficient by allowing the NRC review and a public COL hearing to focus
on remaining issues related to plant ownership, design issues not
resolved earlier, and organization and operational programs. Granting a
COL signifies resolution of all safety issues associated with the
plant. The new licensing process affords multiple opportunities for
public participation in the process.
With respect to maintaining the safety of not only new reactor
construction but the operating reactors as well, the NRC reorganized
the Office of Nuclear Reactor Regulation to create an Office of New
Reactors to ensure effective oversight of operating nuclear power
plants and prepare for the industry's interest in licensing and
building new nuclear power plants in the near term. The agency also
added a new organizational unit, headed by a Deputy Regional
Administrator for Construction in its Atlanta office, to oversee
inspections related to expected new construction of nuclear facilities.
These changes will ensure we maintain our focus on the safe and secure
operation of existing nuclear power plants, while enhancing our
effectiveness in processing the anticipated new plant licensing
workload.
Question 2. The NRC has recently proposed changes to the 1990 Waste
Confidence Decision that would base this decision on the probable
availability of a deep geologic repository for wastes within 60 years
of the end of any reactor's operating license. Recently the
Administration has made it clear that although it intends to continue
to support the Yucca Mountain license review, it does not intend to
open the repository.
In light of the proposed waste confidence decision changes do you
feel the Administration's position will impact the NRC's ability to
grant new reactor licenses or extend current licenses?
Answer. As published in the Federal Register on October 9, 2008,
the Commission sought public comment on proposed revisions to two
elements of its 1990 waste confidence findings, one of which would
potentially alter the date when a geologic repository may be expected
to be available. The public comment period closed on February 6, 2009.
NRC staff will review these comments and prepare a recommendation for a
final rule to be presented to the Commission for action later this
year.
The proposed revision issued for public comment would predict that
repository capacity will be available within 50 to 60 years beyond the
licensed operation of all reactors and would affirms the Commission's
confidence that spent fuel can be safely stored for at least 60 years
beyond the operating license. Changes to existing U.S. policies--or
revisions to strategies--for the long-term management of high-level
waste, should any be adopted, would be considerations as the Commission
deliberates its waste confidence findings.
Responses of Dale E. Klein to Questions From Senator Cantwell
Question 1a. While nuclear power has proven to be a reliable way to
generate greenhouse gas emissions free electricity--including about 10%
of the power in Washington state--there seems to be continued doubt
about the economic viability of any new reactor plants.
Given the current credit crisis, tightness in the supply chain,
lack of skilled craft and sub-suppliers, among other challenges, how
many nuclear plants do you think can be built in the U.S. in the next
decade?
Answer. NRC agrees there am challenges; however, as a safety
regulator engaged in the process of reviewing combined license
applications, it would be inappropriate for the NRC to speculate on the
number of nuclear plants that will be built in the next decade. To
date, the NRC has received 17 combined license applications for 26
units. Part of the review process for a combined license application
includes a review of the applicant's financial qualifications to carry
out the licensed activities. For an application to be approved, the NRC
must have reasonable assurance that the applicant possesses or can
obtain the funds necessary to cover estimated construction costs,
related fuel cycle costs, and provide decommissioning funding
assurance. An applicant must also demonstrate that it possesses or can
obtain the funds necessary to cover the costs of operation for the
period of the license. If the NRC approves the application and issues a
license, the decision to construct the facility is the licensee's
business decision.
Supply chain issues, lack of skilled craft and sub-suppliers are
among the challenges the NRC is anticipating and our inspection program
is being developed to assure quality is maintained if construction
moves forward.
Question 1b. Is it accurate that only about four or five U.S.
utilities even have the financial capacity to build a two-unit nuclear
plant?
Answer. Of the 17 combined license applications that the NRC has
received to date, nine utilities have submitted applications for two-
unit nuclear power plants. These applications are still under review,
including the financial qualifications review. The utilities are:
Tennessee Valley Authority, Luminant Generation Company, LLC, Progress
Energy Florida, Inc., Progress Energy Carolinas, Inc., South Texas
Project Nuclear Operating Company, Exelon Nuclear Texas Holdings, LLC,
Duke Energy, South Carolina Electric & Gas, and Southern Nuclear
Operating Company.Senator Maria Cantwell to Chairman Dale Klein
Question 5a. I understand the NRC is currently considering
applications that reference five different reactor designs and the
industry is expected to submit additional designs for NRC review and
approval. But in a speech last week, NRC Commissioner Jaczko
characterized current new reactor licensing as ``a situation where we
have incomplete designs and less than high quality applications
submitted for review.'' And pointed out that ``today, almost a fifth (3
of 17) of the combined operating license applications we have received
are on hold at the request of the applicants themselves.''
If one of the factors leading to the massive nuclear construction
costs overruns in the 1970s and 1980s was the lack of standardization
among reactor designs at the time, what is the NRC doing to ensure that
only a limited number of the safest and most cost-effective advanced
technologies are approved?
Answer. The NRC's licensing process for new reactors (10 CFR Part
52) evolved from 30 years of lessons learned in licensing today's 104
operating commercial reactors, and is expected to make the licensing
review process more effective and efficient. Under the Part 52
licensing process, the NRC established regulatory requirements for
Design Certifications. The design certification process allows an
applicant to obtain approval of a nuclear reactor design, independent
of an application to construct or operate a plant. During the design
certification review, the NRC reviews the safety issues associated with
the proposed nuclear power plant design. Because the certification of a
reactor design requires rulemaking, the issues addressed and resolved
in the certification process have a high degree of regulatory finality.
A design certification is valid for 15 years from the date of issuance,
but can be renewed for an additional 10 to 15 years. Any applicant can
reference a certified design in a combined license application, which
addresses site-specific design features and environmental impacts. This
newer licensing process resolves design issues early in the process
before construction begins, reduces regulatory uncertainty, and
encourages the standardization of reactor technology within the U.S.
The NRC's reactor licensing process under Part 52 permits an
applicant to submit an application which references a reactor design
that is not yet certified. If an applicant selects a reactor design
that has not yet been certified, however, then the design certification
rulemaking is conducted concurrent with the combined license review.
The applicant assumes the likely risk that this will result in a more
resource-intensive review process compared to a combined license
application that references an already-certified design.
Question 5b. Is there anything Congress can do to support more
plant design standardization? For example, should we make nuclear
financing contingent on one or two standardized designs?
Answer. The NRC believes that the current NRC licensing process
provides sufficient incentive for applicants to use standardized
designs while not constraining innovation or continued improvements to
reactor technology. In general, applicants for new reactor combined
licenses are choosing among the 5 designs currently under review on the
basis of their power planning needs, their experiences with reactor
technologies already in their reactor fleets, and other economic and
business considerations that the individual applicants are best
equipped to address.
______
Response of Gregory B. Jaczko to Question From Senator Cantwell
Question 5a. I understand the NRC is currently considering
applications that reference five different reactor designs and the
industry is expected to submit additional designs for NRC review and
approval. But in a speech last week, NRC Commissioner Jaczko
characterized current new reactor licensing as a situation where we
have incomplete designs and less than high quality applications
submitted for review.'' And pointed out that ``today, almost a fifth (3
of 17) of the combined operating license applications we have received
are on hold at the request of the applicants themselves.''
If one of the factors leading to the massive nuclear construction
costs overruns in the 1970s and 1980s was the lack of standardization
among reactor designs at the time, what is the NRC doing to ensure that
only a limited number of the safest and most cost-effective advanced
technologies are approved?
Answer. Standardization is important. From the regulatory
perspective, it is technically an efficiency issue and not a safety
issue, but it is crucial to an effective and predictable license review
process.
Standardization does not necessarily mean moving forward with only
one new design. Having some diversity is beneficial so that any generic
safety issues that may be discovered in the future will not affect all
plants simultaneously. However, we are now looking at the possibility
of applications to build more than six unique new designs, including
the potential of two separate versions of the Advanced Boiling Water
Reactor and small modular light water reactors. We have approached an
unnecessary and inefficient number of reactor designs to review and
potentially regulate. Such a situation would only make the NRC's
application review and potential oversight work more complicated.
There has been recognition on the part of the industry that
standardization is important, Applicants have developed a set of
working groups around specific designs. Vendors and applicants are
working together to ensure applications are as uniform and consistent
as possible. The NRC has attempted to encourage applicants to continue
their coordination and to provide high quality applications for the
agency's review if they desire a predictable license review schedule.
The NRC is committed to thoroughly review each license application
and provide oversight of operating reactors to ensure the Atomic Energy
Act standard of ``a reasonable assurance of adequate protection'. is
met. Without additional standardization, however, the Nuclear
Regulatory Commission may ultimately be challenged to secure and manage
the resources necessary to conduct licensing reviews and regulate a
large number of diverse new reactors if they are approved and built.
Question 5b. Is there anything Congress can do to support more
plant design standardization? For example, should we make nuclear
financing contingent on one or two standardized designs?
Answer. There are a couple of steps the Congress could take if it
wanted to support additional requirements for nuclear reactor
standardization. It could provide additional guidance to the NRC about
how to prioritize its resources. It could also restrict the use of
financial incentives to a finite number of designs.
______
Responses of Dale E. Klein to Questions From Senator Barrasso
Question 1. Chairman Klein, can I have an update on the in-situ
recovery General Environmental Impact Statement (GEIS)? As you know,
the prompt resolution of the GEIS will allow several Wyoming uranium
production operators to move forward on their In-situ Recovery (ISR)
permit applications.
Answer. The NRC expects to issue the final GEIS by June 2009. The
final GEIS addresses approximately 2200 comments received on the draft
GEIS, which was issued for public comment on July 28, 2008. These
comments were received from federal, state, and local agencies, the
uranium mining industry, advocacy groups, and interested members of the
public. The purpose of the GEIS is to provide a starting point for
NRC's environmental reviews of applications to obtain, renew, or amend
NRC licenses for in-situ recovery (ISR) uranium recovery facilities, in
accordance with NRC's NEPAimplementing regulations at 10 CFR Part 51.
Each site's environmental characteristics will be evaluated
specifically in a supplemental environmental impact statement that
addresses issues not covered by the GEIS. It is expected that the GEIS
will improve the efficiency of NRC review of ISR applications.
The NRC is currently reviewing five license applications for new
ISR facilities in Wyoming. The NRC has been using the draft GEIS in the
environmental reviews for these applications. The NRC expects to make
its licensing decision on each application within the two-year schedule
it provided to the applicants at the start of NRC's review--This
schedule is dependent on the timing and quality of each applicant's
submittals, the response to NRC requests for additional information,
and on the availability of sufficient resources.
Question 2. The Wyoming Bureau of Land Management (BLM) is
currently not recognizing NRC's primacy over regulating ISR sites in
Wyoming and is requiring their own Environmental Assessments and/or
Environmental Impact Statements for ISR projects already licensed by
the NRC.
What progress has been made by the NRC towards signing a Memorandum
of Understanding or similar document between the NRC and the BLM?
Answer. The NRC and the BLM initiated discussions regarding formal
cooperation in September 2008, which has resulted in a draft Memorandum
of Understanding (MOU). Several meetings have occurred to discuss the
structure and content of the MOU including the roles and
responsibilities of each agency and the process by which information on
environmental impacts wouid be shared between the agencies. It is
anticipated that the MOU will be finalized before the end of summer
2009.
The NRC and BLM have agreed to share information to increase
efficiency and avoid duplication of efforts--Timing differences in the
availability of environmental information will likely preclude
developing one environmental document that can be used by both
agencies. In many cases, the BLM is required to complete an
environmental analysis on the potential impacts of exploratory
drilling, an activity that is not within the NRC's jurisdiction.
Therefore, BLM begins its environmental review before the applicant
applies to the NRC for a license.
NRC's National Environmental Policy Act analysis, in comparison,
begins when a company's application for a sou'ce materials license for
uranium recovery is accepted for docketing. Further, given the
different applicable legislation, the different agencies' missions and
the resultant differing decisions stemming from the agencies'
environmental evaluations, the content of the two documents may
necessarily differ. Nevertheless, coordination and communication
between the two agencies will allow the environmental documents
prepared by the two agencies to be tiered or to have information
incorporated by reference.
The NRC continues to work closely with the individual BLM field
offices in Wyoming (without a formal MOU) on the uranium recovery
applications that have been received, accepted, and for which
environmental documentation is being prepared. Information is being
shared on a regular basis, including NRC requests to the applicants for
additional information to support an environmental analysis, and
notices submitted by the applicant to the BLM for exploratory and
confirmatory drilling on the site. In addition, BLM field office
personnel give NRC staff regular updates on applicant activity on the
uranium recovery sites.
NRC and BLM will continue to communicate with industry to improve
understanding of both agencies' processes, which should help facilitate
applicants' planning process.
Question 3. I have a question regarding the infrastructure needs in
the domestic uranium production industry. Do you agree there is an
urgent need for new milling capacity for domestic conventional uranium
mining projects? What is NRC doing to promote or assist in the
licensing of such milling facilities?
Answer. As a health and safety regulator, it would be inappropriate
to comment on whether there is a need for new milling capacity for
domestic conventional uranium mining projects. The need for domestic
uranium milling capacity is generally reflected in the price of
uranium. Both spot prices and long-term prices are substantially higher
than they have been over the past decade and beyond, reflecting a gap
between supply and demand. As a result, new applicants have emerged to
fill this gap. Countries like the United Kingdom, China, India, and
Russia are planning significant expansions of nuclear energy; other
nations are also planning new reactors. Many new reactors are under
construction today throughout the world. U.S. companies are considering
or planning to build up to 33 new reactors. Building all of these
reactors would likely put substantial pressure on current uranium
supplies.
The NRC's mission is to license and regulate the Nation's civilian
use of byproduct, source, and special nuclear materials to ensure
adequate protection of public health and safety, promote common defense
and security, and protect the environment. Under this mandate, the NRC
does not promote nuclear projects, but provides the regulatory
framework to enable the safe use of radioactive material. In its
uranium recovery program, the NRC regulates the construction,
operation, and decommissioning of conventional and heap leach uranium
mills and in-situ recovery operations, but does not regulate
conventional uranium mining.
The NRC licensing process is designed to be efficient, effective,
and stable. In that regard, we have updated regulatory guidance for
licensing new facilities, held a new licensing workshop with
prospective licensees to guide them through the licensing process,
committed to meet with applicants throughout the licensing process, and
implemented operational metrics that ensure that NRC's licensing
activities are completed in a transparent and timely manner.
The NRC is nearing completion of a Generic Environmental Impact
Statement addressing common issues for environmental reviews of ISR
facilities to allow a more efficient environmental review process. The
NRC has also increased its coordination with the State of Wyoming, the
Bureau of Land Management, the U,S. Forest Service, and Indian Tribes
to enhance efficiency and maintain consistency for regulatory actions
and to effectively engage our stakeholders in NRC's regulatory process.
In addition, NRC co-sponsors an annual uranium recovery workshop in
Denver, Colorado with the National Mining Association to discuss
licensing issues and other uranium recovery topics of interest. Over
250 attendees participated in the last workshop.
Response of Dale E. Klein to Question From Senator Landrieu
Question 1. Would you outline for me, and I will share it with the
members of the committee, the significant differences in design or
licensing requirements between the U.S. and other countries, that
perhaps we could learn a little bit more about the way they are doing
it and improve our system here?
Answer. The regulatory licensing process used by the countries
currently involved with the review and construction of new nuclear
power plants is similar to the original, 10 CFR part 50, NRC licensing
process. This process uses a two-step licensing process. After the
regulator is satisfied that the design selected by the applicant meets
established safety criteria, the regulator issues a construction
permit. The level of inspection effort during construction varies from
country to country but once construction is completed and startup
testing and preoperational testing are successful, the r egulator will
issue an operating license. This process allows for construction for
new designs to start before the vendor completes the design process and
before the regulator has an opportunity to complete a full design
review. The NRC is currently implementing a one-step licensing process
in which we complete a design review before issuing a license to begin
construction.
The NRC is participating in international initiatives, through
bilateral and multi-lateral agreements among regulators, and through
programs facilitated by international organizations such as the
International Atomic Energy Agency and Nuclear Energy Agency, which are
designed to better understand each other's regulatory regulatory
requirements and increase multi-national convergence of codes,
standards and safety goals. One example is the Multinational Design
Evaluation Program--a program that includes 10 countries that are
currently in the process of reviewing designs similar to those that the
NRC is reviewing. Significant progress is being made on the overall
MDEP goals of increased cooperation and enhanced convergence of
requirements and practices. Particularly noteworthy accomplishmnets
include: performance of the first joint vendor inspection,
establishment of the MDEP library, development of common positions in
the area of digial instrumentation and controls, and development of a
comparison table which will identify the similarities and differences
between the Korean, Japanese, and French codes for class I pressure
vessels as the compare to the ASME code. MDEP has developed a process
for identifying common positions on specific issues among the member
countries which may be based on existing standards, national regulatory
guidance, best practices, and group inputs. NCR is using this program,
and other vehicles, to better understand the other regulators'
processes so that we can cooperate with them on design reviews with the
goal of making our reviews more efficient and effective.
______
Responses of Thomas B. Cochran to Questions From Senator Cantwell
Question 2a. What are utilities estimating the per kilowatt cost of
constructing a new nuclear power plant?
(b) How long will it take to build a plant once its license is
approved?
(c) I understand that AREV A's experience building one of their new
standardized plants in Finland has not been ideal. What can we learn
from that project that can inform the current debate on whether to
construct new nuclear plants today?
(d) Given the other clean energy alternatives out there and the
need to quickly build more capacity to meet growing electricity demand,
what is the business case for a utility to build a new nuclear plant?
How do the costs of new reactors compare with projected costs for wind
or solar facilities in the decade it will likely take to get a new nuke
plant up and running?
Answer. (a) The best recent public estimates of the cost of
construction of new nuclear plants in the United States are those that
have been presented to public utility commissions associated with: the
proposal by Progress Energy to build two API000 plants (Units 1 & 2) at
a new site in Levy County, Florida; the proposal by Georgia Power, a
unit of Southern Company, to build two API000 plants (Units 3 & 4) at
the existing Alvin W. Vogtle Nuclear Power Station in Georgia; and the
proposal by South Carolina Light and Gas to build two APlOOO plants
(Units 2 & 3)at the existing Virgil C. Summer Nuclear Power Station.
The estimated plant ``overnight costs,'' i.e., construction cost before
borrowing charges, allowances for inflation and real cost growth during
construction, and other owner's costs, are in the range of $3,000 to
$6,000 per kilowatt, where the upper end of this range includes the
cost of new transmission lines and facilities. New nuclear plant cost
estimates are a moving target given that the best estimates of the
costs of new nuclear plants have doubled over the past five or six
years.
(b) If a license for a new plant is approved, it would likely take
from four to six years to construct the reactor and perhaps another
year before it is fully operational. The nuclear industry is in a
better position than NRDC to estimate the actual time of construction.
(c) Construction of AREVA's new Evolutionary Pressurized Water
Reactor (EPR) at the Olkiluoto nuclear site in Finland began in August
12,2005, but has already fallen three years behind schedule to 2012,
after safety and quality-assurance problems with the piping,
containment liner and concrete base slab were discovered. This has put
the Finnish EPR 50 percent over budget with a current estimated cost of
at least $6.7 billion.
AREVA's partner Siemens has pulled out of the project, leaving
AREVA to buyout Siemens' share at an estimated cost to AREVA of $2.6
billion.
Construction of a second EPR, at Flamanville, France, began
December 3, 2007, and the construction period was estimated to be 54
months but has encountered problems. Construction of this plant is
being managed by Electricite de France (EdF). In the summer of 2008,
Autorite de Surete Nucleaire (ASN), the French nuclear safety
authority, shut down the construction site due to safety concerns about
technical and quality-control problems with the reinforced steel used
in the concrete base. ASN's action followed a series of letters from
the agency to Flamanville's construction manager. In the letters, ASN
inspectors highlighted a range of problems including nonconformities in
the pinning of the steel framework of the concrete base slab,
incorrectly positioned reinforcements and inadequacy of technical
inspection by both the construction companies and EdF. Inspectors also
uncovered inconsistencies between the blueprint for reinforcement work
and the plan for its practical implementation. They noted incorrect
composition of concrete that could lead to cracks and rapid
deterioration in sea-air conditions. Concrete samples were also not
collected properly, according to ASN. Cracks have already been observed
at part of the base slab beneath the reactor building. The supplier of
the steel containment liner reportedly lacks the necessary
qualifications. Fabrication of the liner was continuing despite quality
failures demonstrating the lack of competence of the supplier. As a
result, one quarter of the welds of the steel liner in the reactor
containment building were deficient. [WISE, ``Flamanville EPR
Construction Suspended, ``Nuclear Monitor, June 5, 2008].
EdF insists the Flamanville EPR will open on schedule in 2012,
despite news reports that put the project nine months behind schedule
after just nine months of construction. In early March 2009, EdF ran
afoul of the European Commission, which raided the company's offices,
suspecting EdF of antitrust violations and illegal price hikes.
(d) Commercial nuclear power plants are not a ``clean energy
alternative.'' In light of the potential for improvements in energy
efficiency and the recent downturn in the economy, we do not see a
``need to quickly build more capacity to meet growing electricity
demand.''
In any event, the cost of new nuclear plants and other supply
alternatives will vary from site to site and over time. Before
committing to build a new nuclear power plant a utility or energy
generating company should, among other considerations, be required by
the public utility commission to demonstrate that the projected energy
need cannot be met by an integrated portfolio of alternatives that has
a lower average delivered cost to the customer. The mix of alternatives
should include improvements in energy efficiency, matched with
renewables firmed by natural gas and distributed sources of industrial
waste-heat cogeneration. Estimates of the cost of fossil-fueled
alternatives should be based upon meeting effective constraints on
carbon emissions, and nuclear electricity costs should be assessed
without assuming that they will be paid down by federal, state and
local government subsidies and federal loan guarantees, and should
include charges that cover the full cost of storing and disposing of
spent nuclear fuel.
To us the most important public policy issue with respect to
nuclear financing is not what the plants will ultimately cost-the
honest answer today is nobody really knows-but who should bear the
financial risk of such large and costly nuclear projects. The best
science and engineering available suggests that we are not close to the
point of exhausting the cost-effective decarbonization potential
available from a wide range of renewable energy and efficiency
technologies that are cleaner, intrinsically less hazardous than
nuclear power and can be deployed more quickly. Basic considerations of
economic logic and sound public investment suggest that we turn our
attention first to exploiting the full potential of these more benign
energy sources where it is economical to do so, and turn to nuclear at
the point when the marginal cost of adding another megawatt of
efficiency savings, wind, biogas, or solar exceeds the true life cycle
cost to society of adding a megawatt of nuclear power.
The public policy justification for taxpayers to bear the downside
economic risks of private investments in costly new nuclear plants
that, from a technical standpoint, do not differ significantly from
existing nuclear power technology, and show no likelihood of delivering
lower costs to electricity consumers and ratepayers, is highly dubious
in our view. On the one hand, there are a host of rapidly evolving
clean energy and efficiency technologies that have low current market
penetration and enormous decarbonizing potential. On the other hand, we
have a mature nuclear power industry with a 20 percent market share
demanding public support for massive reactor investments that in many
regulated electricity markets will likely displace, not dirty cheap
existing coal-fired generation, but relatively cleaner new natural gas
capacity and potentially cheaper distributed generation from biomass,
biogas, waste-heat cogeneration, wind, and PV solar.
If the utilities and merchant companies seeking to deploy new
nuclear units are truly convinced of their economic viability, and are
merely concerned that the first-of-a kind project execution risk for
their own particular project could undermine their individual balance
sheets, then the appropriate solution is more widespread private cross-
ownership of the initial tranche of reactor projects, so that several
companies share the risk of each individual project. The solution is
not to load the downside economic risk of a historically noncompetitive
industry onto taxpayers, while reserving the risk-reduced economic
upside for highly leveraged limited liability corporations with only 20
percent equity invested from one or a few private owners.
Bottom line on cost: Let the $18.5 billion in loan guarantee
authority already provided by Congress do what it was originally
designed to do: reduce the economic risk of deploying the first two or
three ``first-of-a kind'' units of innovative reactor designs new to
the American market. If these initial projects vindicate the economic
potential of new Gen 3+ nuclear power plants, then presumably there
will be no need for further government support. If they do not provide
such evidence of viability, then presumably both industry and
government will look to other generating technologies in the near term,
and focus on a program for developing a more cost-effective nuclear
reactor candidate for deployment in 2025 and beyond. Either way,
enlargement of the nuclear loan guarantee program is not needed now,
and could even be harmful by handing a position in the market to
nuclear power technologies and projects that do not deserve to be there
based on their intrinsic levels of performance. Either ratepayers or
taxpayers will be forced to make up the difference.
Question 3. As you know, Congress authorized DOE to guarantee loans
that support early commercial use of advanced technologies if there was
a reasonable prospect of repayment. And currently, $18.5 billion of the
allotted $38.5 billion for the loan guarantee program is earmarked for
nuclear power projects. But the GAO has since estimated that the
average risk of default for DOE loan guarantees could be 50 percent or
higher and Wall Street has put the industry on notice that it won't
provide loans without a complete underwriting by the federal
government.
Do you agree with GAO's assessment of the average risk of default
for new nuclear plants? If you disagree please detail your objections
to their analysis and provide your estimate of the average risk of
default for the 17 pending nuclear plant applications. Given your
estimate, please quantify the likely cost to the US Treasury of those
defaults.
Do you support the Energy Department pursuing non-cash equity such
as land or other assets as part of a loan guarantee package?
Answer. We do not have independent information to determine the
validity of the GAO assessment of the probability of default for new
nuclear plants. In the United States there were 110 operational nuclear
power plants in 1990 and 104 operational plants today. According to our
records, more than 130 proposed U.S. power reactors were cancelled
before becoming operational. Of these cancelled reactors, many were
cancelled before construction. We have identified one reactor that was
cancelled after construction was completed. We have identified another
20 reactors that were cancelled during construction. And we have
identified yet another 22 reactors that were cancelled after a
construction permit was issued. While these data suggest that the
future default rate could be high, we are not in a position to judge
the relevance of this historical information for estimating future
default rates. One reason to expect a lower default rate is precisely
because of this financial train wreck that ended the first nuclear
build-out. People have presumably learned from this experience and
would not rush headlong into risking large sums without due diligence
and more careful sharing of the risks between reactor vendors,
constructors, and owners.
Equally important, the global economy is in recession because bank
and other financial institutions bundled toxic assets with less risky
assets in order to remove or lessen the risks associated with the
higher risk loans. Surely we have learned that separating the risk of
investments from the investments themselves carries a significant risk.
In short, for the reasons outlined in our testimony, we do not
support Federal loan guarantees for the construction of new nuclear
power plants in any form.
Question 4. When the loan guarantee program was created in the 2005
Energy and Policy Act it was intended to promote a small number
projects for new and innovative energy sources that did not have the
proven track record necessary for Wall Street financing.
Please describe how the 17 projects that have applied to the DOE
loan guarantee program to date employ ``new and innovative'' technology
relative to the 104 nuclear power plants up and running today.
Answer. Some of the proposed reactor designs are not new or
innovative. The ABWR, for example, is an old design although none are
operating in the United States today. General Electric submitted the
Standard Design Certification Application for the ABWR to the U.S.
Nuclear Regulatory Commission (NRC) in piecemeal format from September
29, 1987, through March 31, 1989. The NRC issued a final rule
certifying the ABWR design on May 12, 1997. Two ABWR in Japan,
Kashiwazaki Kariwa Units 6 and 7, began construction in September 1991
and February 1992, and became operational in 1996 and 1997,
respectively. Both were then shut down as a consequence of the
earthquake near the site on July 16, 2007. Three additional ABWRs are
under construction, two in Taiwan and one in Japan.
AREV A claims the USEPR is safer than previous PWRs built in
France, but AREV A also claims the EPR is ``a mature design based on
familiar technology.''
The French government owns 93 percent of the stock in AREV A, which
is the vendor of the USEPR. The French government is also the principal
investor in Electricite de France (EdF) which proposes through a joint
venture (Unistar Nuclear) with Constallation Energy (partially owned by
EdF) to build a USEPR at the Calvert Cliffs Nuclear Power Station in
Maryland. If built EdF would own about one-half of the new unit. It
makes no sense for U.S. taxpayers to subsidize the construction of a
French plant whose majority owner will be EdF, the French government
electricity monopoly, or guarantee the French government's investment
risks in these plants through U.S. taxpayer-backed loan guarantees. If
the French government wishes to insure EdF against the risks of
investing in the U.S. nuclear power market, in the same way that the
Overseas Private Investment Corporation (OPIC) reduces risks for U.S.
investors making overseas investments, the French government is welcome
to do so, but there is no reason why U.S. taxpayers should assume the
vast share of the economic risk of helping a foreign state-owned
company to penetrate the U.S. nuclear electricity market, and drive up
their electricity costs in the process. This outcome makes no economic
or political sense.
Response of Thomas B. Cochran to Question From Senator Murkowski
Question 1. In your written testimony you refer to the political
sun setting on the Yucca Mountain project and argue that the Congress
should initiate a search for a new geologic repository site for spent
nuclear fuel.
Given that the Department of Energy conducted such a study in the
early 1980s why is the NRDC confident that such a study would yield
substantially different results today?
Why is it reasonable to assume that any site selected would avoid
the same political fate as the Yucca Mountain repository?
Answer. The site selection process for two geologic repositories as
required by the Nuclear Waste Policy Act of 1982 (NWPA of 1982) was
corrupted. First, the Department of Energy (DOE), in its initial
selection of candidate media and sites for a repository, showed a
preference for sites on DOE and other federal lands. Then, the U.S.
Congress short-circuited the site selection process by choosing the
single Yucca Mountain site for development as a repository.
Before initiating a new site selection process, Congress and the
Administration should seek an independent study, followed by
Congressional hearings, to fully understand what went wrong in the site
selection process of the 1980s and then put in place safeguards to
prevent repetition of previous mistakes. If something along these lines
is not done, NRDC would not have confidence that a new search would
yield results different from the failed efforts to site a repository at
Lyons, Kansas or at the Yucca Mountain site in Nevada.
______
Response of Marvin S. Fertel to Question From Senator Murkowski
Question 1. Over the last twenty years the nuclear utilities have
achieved a remarkable level of operational efficiency and worker safety
that is far better than the industrial sector in general and rivals
that of the financial industry. You referred to a number of statistics
in your testimony. The industry will require thousands of new workers
all across the country to construct and operate just the new reactors
that have already submitted license applications to the NRC.
In NEI's view what is the best way to perpetuate the nuclear
industry's commendable safety culture as we go through the coming
expansion?
Answer. There are many ways by which the nuclear industry will
perpetuate the high levels of safety performance. First, all companies
are implementing knowledge transfer and retention programs to ensure
that the experience gained over the first 3,000 reactor operating years
is maintained. These programs include formal interviews and
documentation from experienced personnel as well as mentoring programs
for younger employees. Second, the industry is continuing to expand its
training programs by partnering with many universities and community
colleges to ensure there is a steady pipeline of qualified personnel.
Finally, and perhaps most importantly, the industry will continue to do
what it does best--learn from operational events and benchmark the best
practices in the world as it strives for continuous improvement.
Responses of Marvin S. Fertel to Questions From Senator Cantwell
Question 1a. While nuclear power has proven to be a reliable way to
generate greenhouse gas emissions free electricity--including about 10%
of the power in Washington State--there seems to be continued doubt
about the economic viability of any new nuclear plants.
Given the current credit crisis, tightness in the supply chain,
lack of skilled craft and sub-suppliers, among other challenges, how
many nuclear plants do you think can be built in the U.S. in the next
decade?
Answer. Despite the current economic crisis, nuclear energy is one
of the few bright spots in the U.S. economy--expanding rather than
contracting, creating thousands of jobs over the past few years. Over
the last several years, the nuclear industry has invested over $4
billion in new nuclear plant development, and plans to invest
approximately $8 billion more to be in a position to start construction
in 2011-2012.
In the nuclear sector, there are signs that U.S. manufacturing
capability is being rebuilt. In North Carolina, Indiana, Pennsylvania,
Virginia, Tennessee, Louisiana, Ohio and New Mexico, among other
states, U.S. companies are adding to design and engineering staff,
expanding their capability to manufacture nuclear-grade components, or
building new manufacturing facilities and fuel facilities -partly in
preparation for new reactor construction in the United States, partly
to serve the growing world market.
Last year, for example, AREVA and Northrop Grumman Shipbuilding
formed a joint venture to build a new manufacturing and engineering
facility in Newport News, VA. This $360-million facility will
manufacture heavy components, such as reactor vessels, steam generators
and pressurizers. Global Modular Solutions, a joint venture of Shaw
Group and Westinghouse, is building a fabrication facility at the Port
of Lake Charles to produce structural, piping and equipment modules for
new nuclear plants using the Westinghouse AP1000 technology. In New
Mexico, LES is well along with construction of a $3-billion uranium
enrichment facility, scheduled to begin production this year. Even for
ultra-heavy forgings, Japan Steel Works is expanding capacity, and
companies in South Korea, France and Great Britain are planning new
facilities.
Although progress in rebuilding the supply chain is encouraging,
federal government policy could accelerate the process of creating new
jobs and generating economic growth. Specifically, the expansion and
extension of investment tax credits for investments in manufacturing
provided in the stimulus would ensure continued expansion of the U.S.
nuclear supply chain and help restore U.S. leadership in this sector.
Electric utilities have created 42 partnerships with community
colleges to train the next generation of nuclear workers. The industry
is developing standardized, uniform curricula to ensure that graduates
will be eligible to work at any nuclear plant. Sixteen states have
developed programs to promote skilled craft development. Enrollment in
nuclear engineering programs has increased over 500 percent since 1999.
Grant programs from the NRC, the Department of Energy, the Department
of Labor and the Department of Defense for education and training are
having a major impact on increasing our trained workforce.
As with the nuclear supply chain, targeted tax credits to encourage
companies to invest in apprenticeship programs and other work force
development would accelerate job creation and training in the nuclear
energy sector.
The supply chain and work force are responding to the opportunities
offered by the expansion of nuclear energy. Access to financing in the
current credit markets, however, is a potential constraint.
The United States faces a significant challenge--financing large-
scale deployment of clean energy technologies, modernizing the U.S.
electric power supply and delivery system, and reducing carbon
emissions. This is estimated to require investment of $1.5-2.0 trillion
between 2010 and 2030.
The omnibus appropriations legislation for FY 2008 and FY2009
authorizes $38.5 billion in loan volume for the loan guarantee
program--$18.5 billion for nuclear power projects, $2 billion for
uranium enrichment projects, and the balance for advanced coal,
renewable energy and energy efficiency projects.
DOE has issued solicitations inviting loan guarantee applications
for all these technologies and, in all cases the available loan volume
is significantly oversubscribed. For example, the initial nuclear power
solicitation resulted in requests from 14 projects seeking $122 billion
in loan guarantees, with only $18.5 billion available. NEI understands
that 10 nuclear power projects submitted Part II loan guarantee
applications, which represented $93.2 billion in loan volume. Two
enrichment projects submitted Part II applications, seeking $4.8
billion in loan guarantees, with only $2 billion available. NEI also
understands that the solicitation for innovative coal projects resulted
in requests for $17.4 billion in loan volume, more than twice the $8
billion available. The recent stimulus package added an additional $60
billion in loan volume to the existing allocation of $10 billion for
renewable technologies and transmission projects to assist with
financing constraints.
It is, therefore, essential that limitations on loan volume--if
necessary at all in a program where project sponsors pay the credit
subsidy cost--should be commensurate with the size, number and
financing needs of the projects. In the case of nuclear power, with
projects costs between $6 billion and $8 billion, $18.5 billion is not
sufficient.
The scale of the challenge requires a broader financing platform
than the program envisioned by title XVII. An effective, long-term
financing platform is necessary to ensure deployment of clean energy
technologies in the numbers required, and to accelerate the flow of
private capital to clean technology deployment.
Safety-related construction of the first new nuclear plants will
start in 2012, and NEI expects four to eight new nuclear plants in
commercial operation in 2016 or so. The exact number will, of course,
depend on many factors--U.S. economic growth, 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, availability of federal and state support for
financing and investment recovery, and more. We expect construction of
those first plants will proceed on schedule, within budget estimates,
and without licensing difficulties, and a second wave will be under
construction as the first wave reaches commercial operation.
To increase nuclear energy's contribution to 2050 climate goals,
build rates of 4-6 plants per year must be achieved. This was possible
in the 1970s and 1980s even with the old licensing process and lack of
standardization. With standardized designs and improved construction
techniques, this accelerated deployment is feasible after the first
wave of plants is constructed.
Question 1b. Is it accurate that only about four or five utilities
even have the financial capacity to build a two-unit nuclear plant?
Answer. It is accurate to say that most utilities will have
difficulties building a two unit site without support from the federal
loan guarantee program, support from state regulators (such as
construction work in progress), or both. Several projects also involve
partnerships to spread the costs and risk.
Unlike the many consolidated government owned foreign utilities and
the large oil and gas companies, U.S. electric power sector consists of
many relatively small companies, which do not have the size, financing
capability or financial strength to finance power projects of this
scale on their own, in the numbers required. Federal loan guarantees
offset the disparity in scale between project size and company size.
Loan guarantees allow the companies to use project-finance-type
structures and to employ higher leverage in the project's capital
structure. These benefits flow to the economy by allowing the rapid
deployment of clean generating technologies at a lower cost to
consumers. The recent stimulus bill recognized the need to provide
access to low-cost capital to encourage rapid deployment of renewable
energy projects. Similar support is required for nuclear energy since,
in many cases, new nuclear plants and renewable energy projects are
built by the same utilities.
Question 2. What are utilities estimating the per kilowatt cost of
constructing a new nuclear power plant?
Answer. The per kilowatt cost of a new nuclear plant will depend on
the size of the units and infrastructure required at a given facility
location. However, an evaluation by the Brattle Group conducted for the
state of Connecticut showed a cost of 8.34 cents per kilowatt hour for
a base case. This study showed that new nuclear was the least expensive
option with the exception of combined cycle natural gas with no carbon
controls. If a carbon tax is imposed, nuclear will likely be the least
expensive baseload electricity.
------------------------------------------------------------------------
Overnight
capital cost Electricity
(2008 $/kW) cost (c/kWh)
------------------------------------------------------------------------
nuclear 4038 8.34
------------------------------------------------------------------------
supercritical coal 2214 8.65
------------------------------------------------------------------------
supercritical coal + CCS 4037 14.19
------------------------------------------------------------------------
IGCC 2567 9.22
------------------------------------------------------------------------
IGCC + CCS 3387 12.45
------------------------------------------------------------------------
gas combined cycle 869 7.60
------------------------------------------------------------------------
gas combined cycle + CCS 1558 10.31
------------------------------------------------------------------------
CCS = carbon capture and sequestration
IGCC = integrated gasification combined cycle
Figure 1. Comparison of electricity generation technology capital and
electricity costs from ``Integrated Resource Plan for Connecticut,''
The Brattle Group, January 2008
Similarly, Florida Power and Light, Florida Progress, Southern
Company, and SCANA demonstrated new nuclear's competitive busbar cost.
These costs were presented in the financial modeling that supported
their requests in the past two years to their respective state public
service commissions (PSCs) for ``determinations of need'' for new
reactors. For instance, FP&L modeled nine different scenarios. The only
scenario in which nuclear was not preferred was a world in which
natural gas prices were unrealistically low and there was no price on
carbon. The Florida, Georgia, and South Carolina PSCs have approved
these new nuclear plant projects.
Question 2a. How long will it take to build a plant once its
license is approved?
Answer. The timeline to build a new plant once a license is
approved by the NRC is estimated at roughly 60 months for the first
plants in the U.S. However, once the process has been tested, foreign
experience shows that with standard designs, the timeline can be
significantly shortened. As an example, the Japanese have demonstrated
that they can build an Advanced Boiling Water Reactor in less than 39
months from the first safety related concrete pour until the unit is
synched to the grid while meeting budget goals.
Question 2b. I understand that AREVA's experience building one of
their new standardized plants in Finland has not been ideal. What can
we learn from that project that can inform the current debate on
whether to construct new nuclear plants today?
Answer. The schedule delays and cost overruns at Areva's Olkiluoto
Unit 3 project in Finland are due to deficient project management,
according to a report by the Finnish regulator. These project
management deficiencies are similar to those that helped cause delays
in nuclear power plant construction during the 1970s and 1980s.
However, the root causes of these construction delays are now well-
understood. Over the last several years, industry teams have conducted
systematic assessments of what caused construction delays, and
developed a detailed inventory of lessons-learned that are shared
industry-wide. The industry also undertook a comprehensive project to
benchmark major maintenance and upgrade projects at operating plants,
to identify the characteristics of successful project management. Based
on this research and analysis, the industry then developed project
management strategies and techniques intended to ensure completion of
major projects on time and within budget.
Largely as a result, the nuclear industry, including the U.S.
nuclear industry, has performed major projects efficiently and without
delay-ranging from $400 million material upgrades such as the Fort
Calhoun refurbishment, to the $1.8 billion plant restart at Browns
Ferry Unit 1, to refueling outages averaging 37 days industry-wide.
Recent construction and operational experience demonstrates that an
experienced project management team, with effective quality assurance
and corrective action programs, and with detailed design completed
before the start of major construction, can complete projects on budget
and on schedule.
Question 2c. Given the other clean energy alternatives out there
and the need to quickly build more capacity to meet growing electricity
demand, what is the business case for a utility to build a new nuclear
plant?
Answer. Nuclear energy provides base load electricity that can be
widely deployed and has a capacity factor in the ninety percent range.
In addition, a single new nuclear plant typically provides between
1,000 and 1,700 megawatts of generation which allows fewer plants to
deliver significant increases in electricity to the grid.
As discussed earlier in this response, two utilities in Florida
have had certificates of need approved by the state public utilities
commission based on nuclear providing the lowest cost option for rate
payers. Similar decisions have been made in South Carolina and Georgia
in support of building new nuclear units.
Seventeen companies have applications under NRC review for twenty-
six new nuclear plants to ensure that they preserve the option for
nuclear generation as demand grows. It is anticipated based on the
efficiencies in the new licensing process and new construction
techniques for standard designs that the timeline to build a new plant
will be gradually trimmed to seven years once the first wave of new
plants is licensed and constructed.
Question 2d. How do the costs of new reactors compare with
projected costs for wind or solar facilities in the decade it will
likely take to get a new nuke plant up and running?
Answer. It is difficult to predict the costs for wind or solar
facilities in the future. The costs of these projects tend to be site
specific depending on the natural resources available. In addition to
the costs of the generating capacity, solar and wind technologies
typically require transmission upgrades and back-up electricity sources
such as a combined cycle natural gas plant.
Predominantly independent assessments of how to reduce U.S.
electric sector CO2 emissions--by the International Energy
Agency, McKinsey and Company, Cambridge Energy Research Associates,
Pacific Northwest National Laboratory, the Energy Information
Administration, the Environmental Protection Agency, the Electric Power
Research Institute and others--show that there is no single technology
that can slow and reverse increases in CO2 emissions. A
portfolio of technologies and approaches will be required, and that
portfolio must include more nuclear power as well as aggressive pursuit
of energy efficiency and equally aggressive expansion of renewable
energy, advanced coal-based technologies, plug-in hybrid electric
vehicles and distributed resources.
Recent analysis by the Electric Power Research Institute (EPRI)
suggests that nuclear will be the low cost generating option going
forward as carbon taxes are imposed. As shown on the graph in Figure
2*, the costs of non-greenhouse gas emitting technologies are constant
while the costs of natural gas combined cycle (NGCC) and coal without
carbon capture and sequestration (CCS) climb as the carbon tax
increases on the x-axis.
---------------------------------------------------------------------------
* Figure 2 has been retained in committee files.
---------------------------------------------------------------------------
As discussed in previous answers, analyses by several other parties
also indicate that new nuclear plants will be a competitive source of
baseload power. Deployment of a combination of technologies will be the
best path forward to meet our climate change goals in the most
expeditious and economic manner.
Question 3. As you know, Congress authorized DOE to guarantee loans
that support early commercial use of advanced technologies if there was
a reasonable prospect of repayment. And currently, $18.5 billion of the
allotted $38.5 billion for the loan guarantee program is earmarked for
nuclear power projects. But the GAO has since estimated that the risk
of default for DOE loan guarantees could be 50 percent or higher and
Wall Street has put the industry on notice that it won't provide loans
without a complete underwriting by the federal government.
Do you agree with GAO's assessment of the average risk of default
for new nuclear plants? If you disagree please detail your objections
to their analysis and provide your estimate of the average risk of
default for the 17 pending nuclear plant applications. Given your
estimate, please quantify the likely cost to the U.S. Treasury of those
defaults.
Answer. No, NEI does not agree with the assessment cited. The
reference to the default rate is unsupported and is misleading.
On page 20 of its July 2008 report\1\, the GAO estimates that the
loss rate (the product of default rate times recovery rate) would be
over 25 percent. The report says this rate was calculated using the
assumptions included in the fiscal year 2009 president's budget. A
footnote references Table 6 of the Federal Credit Supplement, Fiscal
Year 2009. In that document, a default rate of 50.85 percent and a
recovery rate of 50 percent were assumed for the entire loan guarantee
program. Furthermore, as Note 4 in Table 6 explains, these rates are
``[a]ssumptions reflect[ing] an illustrative example for informational
purposes only. The assumptions will be determined at the time of
execution, and will reflect the actual terms and conditions of the loan
and guarantee contracts.'' Thus, the cited basis for the GAO's assumed
default rate of more than 50 percent recognizes that the actual default
rate and recovery rate to be used in estimating loss rate must be based
on the details of individual projects and deals. It is unlikely that a
single value (50.85 percent) chosen to be illustrative of the entire
pool of guaranteed projects would be representative of a specific
portion of that pool (e.g., the nuclear power projects) with its
particular risks and characteristics.
---------------------------------------------------------------------------
\1\ ``Department of Energy: New Loan Guarantee Program Should
Complete Activities Necessary for Effective and Accountable Program
Management'', GAO-08-750, July 2008.
---------------------------------------------------------------------------
Similarly, a CBO estimate of 50% default probability is also an
unsupported assumption. The CBO language dates back to a 2003 analysis
of S.14, the Energy Policy Act of 2003, which was considered (but never
passed) during the 108th Congress. The loan guarantee program in the
2003 legislation bore no resemblance to the loan guarantee program in
the 2005 Energy Policy Act. The 2003 program was nuclear-specific, not
technology-neutral. It did not require project sponsors to pay the
credit subsidy cost, and thus did not have the significant fiscal
discipline associated with title XVII. The CBO ``analysis'' simply
asserted that there will be a 50 percent default probability, with no
modeling or financial analysis to support that assertion.
The Nuclear Energy Institute believes that the nuclear projects now
undergoing NRC licensing review will not present any risk of default to
the DOE loan guarantee program. These projects have been structured and
are being managed in ways designed to minimize risks.
The federal government uses loan guarantees widely to ensure
investment in critical national needs, including shipbuilding,
transportation infrastructure, exports of U.S. goods and services,
affordable housing, and many other purposes. The federal government
successfully manages a loan guarantee portfolio of $1.1 trillion. A
disciplined process is used to ensure that the taxpayers' interests are
protected before federal agencies issue loan guarantees. The Department
of Energy will use a similar process for its loan guarantee program.
The title XVII loan guarantee program evaluation process includes
financial analysis, due diligence and underwriting performed by expert
outside financial, technical and legal advisors (whose fees and
expenses are paid by the companies developing the projects) to assist
in the underwriting, negotiation, documentation, and monitoring of the
projects. The strength and credit worthiness of the project can be
measured by indicators (widely used by investment banks and rating
agencies) such as the credit rating of the project sponsor, project
capital structure, project cash flow, strength of power purchase
agreements, borrower's exposure to market and commodity risks,
management and operator experience, etc. Projects that do not meet
defined metrics will not be approved for loan guarantees.
In the case of new nuclear power projects, the companies will have
significant shareholder equity ($1 billion or more per project) at
risk. This equity is in a ``first-loss'' position--i.e., the company
forfeits that equity in the event of default. For most electric
companies, such a loss would be unsustainable. The significant amount
of money at risk imposes a high level of discipline on investment
decisions. As a result, the companies seeking loan guarantees for
nuclear power plants have a powerful incentive to ensure that projects
are properly developed, constructed, operated and maintained to achieve
commercial success. The federal government's interest and the company's
interest are completely aligned. Like the federal government, the
nuclear companies wish to avoid default at all costs.
The energy loan guarantee program is self-financing: There is no
cost to the taxpayer. The 1990 Federal Credit Reform Act created a
standardized way of accounting for loan guarantee programs in the
federal budget. Federal agencies that provide loan guarantees are
required to calculate a ``cost,'' following standardized protocols. In
most loan guarantee programs, this cost appears in the federal budget
as an appropriated amount. The energy loan guarantee program took a
different and innovative approach. The Department of Energy cannot
issue a loan guarantee unless the company receiving the loan guarantee
has paid the cost of the guarantee and all administrative fees and
costs incurred by the agency in administering the program.
Based on the above, NEI believes that the nuclear projects subject
to the loan guarantee program will cost the U.S. Treasury nothing and
will actually return a profit to the Treasury through the payment of
credit subsidy fees.
Question 3a. Do you support the Energy Department pursuing non-cash
equity such as land or other assets as part of a loan guarantee
package?
Answer. Yes. NEI believes that non-cash project assets, such as
land, should be allowed as part of the project sponsor's equity
contribution.
Question 4. When the loan guarantee program was created in the 2005
Energy Policy Act it was intended to promote a small number of projects
for new and innovative energy sources that did not have the proven
track record necessary for Wall Street financing.
Please describe how the 17 projects that have applied to the DOE
loan guarantee program to date employ ``new and innovative'' technology
relative to the 104 nuclear power plants up and running today.
Answer. The 17 applicants that originally applied to the loan
guarantee program are planning to construct and operate advanced
nuclear power facilities employing passive and evolutionary design
features. These features are new and innovative when compared to the
existing 104 operating reactors that provide 20 percent of the
country's electricity. Although several projects are under
consideration, the nuclear power facility proposed by each is one of
five standardized designs that is or will be certified by the NRC.
A key example of the use of new and innovative technology is in the
area of instrumentation and control. Most of the operating reactors
today use hard wired point-to-point control room to field monitoring
and control systems. In simple terms this means there is one wire per
function or 30-50,000 wires coming from the field to the plant control
room. The new reactors are designed with three-layer instrumentation
and control system that uses extensive multiplexing and fiber optics.
Single multiplexer units can generally handle 300 to 400 signals. Fiber
optics allows the plant operator to interface with all screens,
peripherals and alarms.
Also, many of the new reactors designs are utilizing modular
construction. These modules are rail shippable, which allows
construction to take place in a controlled environment and then shipped
to the construction site. Advances in 3D computer modeling play a
significant role in this modular construction approach. This approach
reduces construction time and ensures efficient use of field manpower.
Two of the five new plant technologies achieve enhanced safety
through incorporation of passive or inherent safety features. These
features require no active controls or operational intervention to
avoid accidents in the event of malfunction, and may rely on gravity,
natural convection or resistance to high temperatures. Traditional
reactor safety systems are `active' in the sense that they involve
electrical or mechanical operation on command. Inherent or full passive
safety depends only on physical phenomena such as convection, gravity
or resistance to high temperatures, not on functioning of engineered
components. There is no need for active equipment such as pumps, fans,
and other rotating machinery.
In addition to advanced instrumentation and control systems, all
five new reactors benefit from:
Use of NRC-approved probabilistic risk assessments that show
the likelihood of a release of radiation is significantly below
that of operating facilities and well below the NRC safety
goals.
Enhanced protection from fires through physical separation
of equipment and cables and redundancy in safety systems
Enhanced protection against aircraft impacts
Fewer valves, less piping, less control cabling, and fewer
pumps than the existing operating fleet based on lessons
learned from over 30 years of experience with commercial
operation
Question 5a. I understand the NRC is currently considering
applications that reference five different reactor designs and the
industry is expected to submit additional designs for NRC review and
approval. But in a speech last week, NRC Commissioner Jaczko
characterized current new reactor licensing as ``a situation where we
have incomplete designs and less than high quality applications
submitted for review,'' and pointed out that ``today, almost a fifth (3
of 17) of the combined operating license applications we have received
are on hold at the request of the applicants themselves.''
If one of the factors leading to the massive nuclear construction
cost overruns in the 1970's and 1980's was the lack of standardization
among reactor designs at the time, what is the NRC doing to ensure that
only a limited number of the safest and most cost effective advanced
technologies are approved?
Answer. It is important to remember that many of the plants
constructed in the 1970's and 1980's were built and commissioned under
the most unforgiving conditions.
The defining event for the 1980s-vintage plants was the accident at
the Three Mile Island nuclear power plant in 1979. After that accident,
nuclear power plants-both operating plants and those under
construction--were engulfed in new regulatory requirements imposed by
the Nuclear Regulatory Commission. The changing requirements forced
extensive redesign and rework at nuclear units under construction. This
stretched out construction schedules and--to make matters worse--the
delays coincided with a lengthy period of double-digit inflation and
national economic distress. All this combined to drive up the cost of
these nuclear units to several times the original cost estimates. For
some of these nuclear plants, half the total cost was interest on debt
raised to finance construction.
The 104 nuclear power plants now supplying about 20 percent of U.S.
electricity also were built under a two-step licensing system. Under
this system, electric utilities had to secure two permits-one to build
a nuclear power plant, a second to operate it. Many companies started
construction before design and engineering was complete. In fact, in
many cases, the design/engineering work had barely started.
This ``design as you go'' approach led to big problems. The Nuclear
Regulatory Commission (NRC) obviously could not finish its review and
approval of the plant design until the plant was built and the power
company requested an operating license.
Even before the accident at Three Mile Island, requests for
operating licenses were complex and contentious. After the accident,
they became even more difficult. The reviews, conducted by licensing
boards, were formal adjudicatory proceedings with all the trappings of
a courtroom trial-discovery, cross-examination and the like. They were
typically lengthy, bitterly contested, divisive events. And they caused
delays in plant operation, which added hundreds of millions of dollars
to the cost.
Based on that experience, the electric power industry resolved that
future nuclear power plants would be fully designed before construction
began. Never again would electric utilities start building a nuclear
power plant that was only partly designed, or do extensive design and
engineering work during construction. The change in design philosophy
was accompanied by a complete overhaul of the licensing system, which
was ratified by Congress in the Energy Policy Act of 1992.
The new licensing process delineated in 10 CFR Part 52 allows
nuclear power plant designers to submit their designs to the NRC for
``certification.'' When a design is certified, electric utilities can
order that plant, confident that design and safety issues have been
resolved.
The new process also lets a company request a combined license to
build and operate a new nuclear unit. As long as the design is pre-
approved, and as long as the plant is built to pre-approved
specifications (and the Nuclear Regulatory Commission will be on-site,
checking to make sure that it is), then the power company can start the
plant up when construction is complete--assuming of course, that no new
safety issues have emerged.
Taken together, the new design philosophy and the new licensing
system ensure that the major licensing issues--design, safety, siting
and public concerns--will be settled up front before a company starts
building a nuclear power plant and puts billions of dollars at risk.
In summary, the conditions that led to large cost increases for
some operating nuclear power plants no longer exist. Past experience is
useful in identifying the weaknesses in the regulatory process and
fixing those weaknesses. Past experience does not, however, provide
useful guidance as to the cost of nuclear power plants that will be
built in the future, or the length of time it will take to build them.
Regarding design certifications, the NRC's statutory responsibility
is to ensure the designs are safe. As noted in their policy statement
on regulation of new reactors, the Commission expects, as a minimum, at
least the same degree of protection of the environment and public
health and safety and the common defense and security that is required
for current generation light-water reactors. Furthermore, the
Commission expects that advanced reactors will provide enhanced margins
of safety and/or use simplified, inherent, passive, or other innovative
means to accomplish their safety and security functions. How many
designs are ultimately certified and whether those designs are cost
effective is not for NRC to decide. The market place will make that
determination.
The industry agrees that reviewing the design certifications and
COL applications in parallel is not ideal, but is necessary for the
first wave of applications. The NRC has completed acceptance reviews
formally accepted (docketed) all of the design certifications and COL
applications submitted by the industry to date. The NRC has provided
review schedules to applicants and has been successfully meeting early
milestones which is another indication that the applications are
complete.
The long lead times for these new nuclear projects allow the
sponsors to make adjustments as market conditions change. A limited
number of applicants have placed their NRC reviews on hold pending
resolution of business issues. The NRC has requested notifications from
applicants as soon as possible if there are changes in the content or
schedule for applications to support the NRC's work load management
efforts. The NRC and industry are working to prioritize the review
activities to ensure project sponsors will be able to meet their online
need dates for power. Note that all review activities are paid for by
project sponsors through hourly billing by the NRC.
Question 5b. Is there anything Congress can do to support more
plant design standardization? For example, should we make nuclear
financing contingent on one or two standardized designs?
Answer. Presently three standardized designs and one design
certification amendment are under review by the Nuclear Regulatory
Commission. The Department of Energy's Nuclear Power 2010 program plays
a critical role in supporting the design and licensing activities
needed for the NRC to complete its reviews of two standardized designs.
Congressional support of funding for this program in fiscal year 2010
would be beneficial.
As discussed above, standardized designs serve a function in
reducing risks before a project sponsor proceeds with construction.
Financing for construction activities should not be tied to a limited
number of designs as the major construction risks related to design
certainty will already be addressed at that point.
Response of Marvin S. Fertel to Question From Senator Shaheen
Question 1a. As you know the Energy Policy Act of 2005 authorized
the Secretary of Energy to guarantee loans for up to 80% of
construction costs for energy projects that reduce greenhouse gas
emissions, including new nuclear facilities. Last June, DOE solicited
applications for guarantees of loans totaling up to $18.5 billion. The
DOE now has received 17 applications for 26 new reactors seeking
guarantees for a total of $122 billion in loans, which it is now
evaluating.
How many reactors do you think the current amount of funding that
is available for loan guarantees, $18.5 billion, will cover?
Answer. It is difficult to predict how many new nuclear power
plants will be built with the $18.5 billion in federal loan guarantees
currently authorized. Some projects have multiple co-owners, and it is
possible that not all co-owners will choose to avail themselves of the
loan guarantee program. Some projects will receive partial support from
the government export credit agencies of France and Japan, which
testifies to the degree of confidence the French and Japanese
governments have in nuclear power. Such co-financing will leverage the
$18.5 billion in existing loan guarantee authority and, as a result, it
may cover 3-4 projects.
Certainly, the $18.5 billion in existing loan guarantee authority
will not cover all the projects that filed Part I loan guarantee
applications with the Department of Energy. DOE originally received
loan guarantee applications from 17 companies for 21 new reactors, with
an aggregate loan volume loan volume of $122 billion and total project
costs of $188 billion. Those applications represent 28,800 megawatts of
carbon-free generating capacity and would, NEI estimates, avoid 183
million metric tons per year of CO2, 124,000 tons of
NOX, and 348,000 tons of SO2 (based on a 90%
capacity factor).
Question 1b. In your opinion, how many new reactors will be
necessary for economies of scale to begin to kick in and the costs of
each reactor begin to come down, making it easier to secure financing?
Answer. International experience proves that each consecutive
construction project using a standard design will benefit from
efficiencies learned from the first. Particularly in the U.S. where the
reactor designer and architect/engineers are teamed for construction,
this will be the case.
The United States faces a significant challenge--financing large-
scale deployment of clean energy technologies, modernizing the U.S.
electric power supply and delivery system, and reducing carbon
emissions. This is estimated to require investment of $1.5-2.0 trillion
between 2010 and 2030.
The omnibus appropriations legislation for FY 2008 and FY2009
authorizes $38.5 billion in loan volume for the loan guarantee
program--$18.5 billion for nuclear power projects, $2 billion for
uranium enrichment projects, and the balance for advanced coal,
renewable energy and energy efficiency projects.
DOE has issued solicitations inviting loan guarantee applications
for all these technologies and, in all cases the available loan volume
is significantly oversubscribed. For example, NEI understands that 10
nuclear power projects submitted Part II loan guarantee applications,
which represented $93.2 billion in loan volume. Two enrichment projects
submitted Part II applications, seeking $4.8 billion in loan
guarantees, with only $2 billion available. NEI also understands that
the solicitation for innovative coal projects resulted in requests for
$17.4 billion in loan volume, more than twice the $8 billion available.
The recent stimulus package added an additional $60 billion in loan
volume to the existing allocation of $10 billion for renewable
technologies and transmission projects to assist with financing
constraints.
It is, therefore, essential that limitations on loan volume--if
necessary at all in a program where project sponsors pay the credit
subsidy cost--should be commensurate with the size, number and
financing needs of the projects. In the case of nuclear power, with
projects costs between $6 billion and $8 billion, $18.5 billion is not
sufficient.
The scale of the challenge requires a broader financing platform
than the program envisioned by title XVII. An effective, long-term
financing platform is necessary to ensure deployment of clean energy
technologies in the numbers required, and to accelerate the flow of
private capital to clean technology deployment.
During the 110th Congress, Senator Bingaman introduced legislation
to create a 21st Century Energy Deployment Corporation. Senator
Domenici, ranking member of this committee during the last Congress,
introduced legislation to create a Clean Energy Bank. Both proposals
address aspects of the financing challenge facing the United States and
its electric power industry.
NEI believes that the existing title XVII program and the DOE Loan
Guarantee Program Office, operating under workable rules, could serve
as a foundation on which to build a larger, independent financing
institution within the Department of Energy. There is precedent for
such independent entities, equipped with all the resources necessary to
accomplish their missions, in the Federal Energy Regulatory Commission
and the Energy Information Administration. This approach could have
significant advantages:
An independent clean energy financing authority within DOE
could take advantage of technical resources available within
the Department, to supplement its due diligence on prospective
projects and to identify promising technologies emerging from
the research, development and demonstration pipeline that might
be candidates for loan guarantee support to enable and speed
deployment.
An independent entity within DOE would have the resources
necessary to implement its mission effectively, including its
own legal and financial advisers with the training and
experience necessary for a financing organization. Providing
the independent entity with its own resources would eliminate
the difficulties encountered during implementation of the title
XVII program.
Programmatic oversight in Congress would remain with the
Energy Committees, which have significantly more experience
with energy policy challenges, and in structuring the
institutions necessary to address those challenges.
Responses of Marvin S. Fertel to Questions From Senator Stabenow
Question 1. Retooling Plants. In your testimony, you emphasize that
the U.S. is ramping up its ability to manufacture nuclear components.
This is partly to serve as a growing world market. Do you see any
attempts being made to retool existing manufacturing facilities that
were once used for other purposes--such as what is happening in
Michigan--with manufacturing plants?
Answer. Yes, the U.S. is seeing retooling of existing facilities,
development of new facilities and expansion of existing product lines
(with augmented quality programs). Some examples include:
Retooling--Precision Custom Components, LLC in York, PA has
retooled their existing manufacturing facility with machine tools and
other needed equipment to expand into the commercial nuclear industry.
PCC provides reactor vessel internals, reactors servicing equipment
such as integrated reactor head packages and spent nuclear fuel casks.
Holtec in Turtle Creek, PA added 90,000 square feet to its
manufacturing division in a facility that had been an old Westinghouse
factory. They manufacture dry fuel storage canisters and high-tech fuel
racks for electric utilities in the United States and around the world.
With this expansion, Holtec added 75 new jobs last year and has
announced plans for 500 new hires in the next three to five years,
including manufacturing and welding engineers, production workers and
machinists.
Development of New Facilities--Curtiss Wright Flow Control
Corporation is building a $62 million, state-of-the-art, multipurpose
Large Manufacturing Complex in Cheswick, PA. The nine-story, 48,000-
square-foot facility will be used to build commercial nuclear reactor
coolant pumps as well as support the production and testing of other
new large products.
AREVA and Northrop Grumman Shipbuilding are building a new
manufacturing and engineering facility in Newport News, Va., to supply
the growing American nuclear energy sector. The 300,000-square-foot
facility represents an investment of more than $360 million, and will
manufacture heavy components, such as reactor vessels, steam generators
and pressurizers. This will result in more than 500 skilled hourly and
salaried jobs.
Global Modular Solutions, a joint venture of Shaw Group and
Westinghouse, is building a 600,000-square-foot module fabrication
facility at the Port of Lake Charles to produce structural, piping and
equipment modules for new nuclear plants using the Westinghouse AP1000
technology. The new facility is scheduled open in the summer of 2009
and will employ 1,400 workers or more at full capacity.
Augmenting Quality Programs--In order to supply many nuclear
components, it is necessary to have an appropriate quality
certification and/or quality program in place that meets the industry
standards. One such quality certification is the ASME N-Stamp. Over the
past 2 years, the industry has seen a nearly 20 percent increase in the
number of N-Stamps held in the U.S. from only 221 in 2007 to 263 today.
The Nuclear Energy Institute has been actively engaging U.S.
businesses to encourage them to consider entering the global nuclear
supply chain through a series of regional workshops that bring together
procurement and supply chain leaders from reactor vendors and
engineering, procurement and construction firms with businesses
exploring the nuclear market.
In February, NEI conducted our fourth workshop in Chattanooga,
Tennessee and nearly 450 people participated. Our next event is
scheduled in Detroit on June 4th and will target manufacturers in the
Great Lakes Region. Local co-sponsors for this event include the
Michigan Chamber of Commerce, the Michigan Minority Business
Development Council and the Michigan Manufacturers Association.
Nationally, these events are co-sponsored by the U.S. Department of
Energy, the National Association of Manufacturers and the Association
of Mechanical Engineers.
NEI believes that Congress can help accelerate this retooling and
manufacturing expansion by:
Providing a manufacturing tax credit to allow the
development of new facilities or the expansion or retooling of
existing manufacturing facilities.
Providing grants and technical assistance to small and mid-
sized business to assist them with putting appropriate nuclear
quality programs in place.
Providing a worker training tax credit to assist with the
development of a qualified workforce to support this expansion
of nuclear manufacturing capacity.
Encouraging the export of nuclear products and services by
better coordinating federal policy initiatives and actively
advocating for the industry.
Question 2. Incentives for Nuclear Manufacturing. When nuclear
manufacturing in the U.S. is discussed, a lot of the focus is on heavy
manufacturing that not only takes long lead times, but is done
overseas. What do you think will be done in the manufacture of non-
heavy components for nuclear plants--such as wiring--in the U.S.?
NEI believes that there is substantial opportunity to manufacture
both heavy and non-heavy components for nuclear plants in the U.S. In
addition to heavy components, the first eight new nuclear plants built
in the U.S. may require:
Over 1,800 miles of cable
4,000 to 24,000 nuclear grade valves
1,000 to 2,000 pumps
30 to 150 miles of nuclear grade piping
Over 3 million cubic yards of concrete
Over 700,000 electrical components
Roughly 500,000 tons of structural and reinforcing steel
500 to 1,300 large and small heat exchangers
Many of these components and commodities are produced in the U.S.
Yet with the advent of licensing and eventually constructing 26
reactors in the U.S. and potentially 200 overseas, there is an
opportunity to significantly expand U.S. manufacturing capacity.
Additionally, while there are U.S. manufacturers capable of producing
components, many lack the necessary quality programs required to
participate in the nuclear market.
A key criteria in selecting the locations of the industry's
regional manufacturing outreach workshops (described above) is the
current industrial base that exists in the region. In 2008, workshops
were held in Columbia, SC, Cleveland, OH and San Antonio, TX to reach
out to the existing industrial base for components like valves, pumps,
cabling, cable tray, hangers, fasteners, steel, etc. The 2009 program
also targets regions of the country with an existing manufacturing base
that can be repurposed to support the nuclear industry. As mentioned in
the first response, the next event is scheduled in Detroit on June 4th
and will target manufacturers in the Great Lakes Region.
Finally, we are seeing growth in the heavy component manufacturing
area as well. The Babcock & Wilcox Company has the ability to fabricate
heavy components at their facilities and the recent announcement by
AREVA and Northrop Grumman Shipbuilding will add additional heavy
component manufacturing capacity in the U.S.
NEI believes that the policy recommendations outlined above can
help accelerate U.S. industry's entrance into the nuclear market for
heavy and non-heavy