Nuclear Power PlantsEmission-Free Stability

in a Volatile MarketLSU Energy Conference

October 21-22, 2004

Adrian Heymer, NEI, 202-739-8094, aph@nei.org

NEI

NuclearGeneration Government

Affairs

NEICorporateServices

ExternalRelations Communications

[RegulatoryYucca MtnFuelROP, …]

[Policy,Environmental

IT, HR, Legal, Exec]

[Congress & Administration]

[MemberRelations,State,Local, ..]

[Media& PR]

Nuclear Generation

• Status of industry– Historical operating performance

• Benefits• New plants

Nuclear Power PlantsCurrent Status

• 103 Operating Units– One under major refurbishment– Average capacity factor ~ 90% over last 4 years

• 20% of US electricity generation• 70% of US emission-free generation

– Wind 1%; Solar 0.1%• Eliminates ~700 million tons/year of

Greenhouse gases

Air Quality CO2 Emissions Eliminated

Source EIA

9.5 0.512.1

234

694

0

100

200

300

400

500

600

700

800

Nuclear Hydro Geothermal Wind Solar

Mill

ion

Shor

t Ton

s

Decade of Safety & Economic Improvement

20

30

40

50

60

70

80

90

100

90 91 92 93 94 95 96 97 98 99 00 01 '02 '0365

70

75

80

85

90

95

Relative CostRisk (CDF) Capacity Factor

YearBased on UDI, DOE & NUS Data plus info. from ERIN Eng & EPRI

Relative Cost

Relative Risk

CapacityFactor

95.8%

92.2%

88.7%

82.1%

96.5%93.6%

90.1%

85.8%

97.1%

92.9%89.9%

82.6%

60%

70%

80%

90%

100%

1st Q uartile 2nd Q uartile 3rd Q uartile 4th Q uartile

MD

C N

et C

apac

ity F

acto

r

1999-2001 2000-2002 2001-2003Source: UDI/NRC - Updated 05/04

U.S. Nuclear Industry Capacity Factors by Quartile

(3-year rolling average for 103 units)

Number of Unusual Events Reported to NRC (1989-2003)

Source: SCIENTECH - Updated 06/04

Note: A Notification of Unusual Event for power and non-power reactor licensees is a condition involving potential degradation of the level of plant safety that does not represent an immediate threat to public health and safety.

151170

135

10392

66 6340

26 3418 13 14

33

197

020406080

100120140160180200

89 90 91 92 93 94 95 96 97 98 99 2000 2001 2002 2003

Nearly All Nuclear PlantsWill Renew Their Licenses

License Renewal Status Mar 200424Intend to Renew

26 Granted

18 Under NRC Review

24 intend to renew

35 have

Not Announced

Intention

Workforce Issues

• 50% of workforce will retire in the next decade– Knowledge retention a major issue

• Shortages in engineers & health physics– Hiring now to ensure knowledge and experience is

transferred before 2015• Major concern in shortages of skilled trades

– Health physics technicians, I&C, welders• National program with Dept. of Labor, unions,

schools, universities & community colleges to ensure sufficient skilled workers are available

Benefits of Nuclear Power• Proven, reliable, low-cost supplier of electricity• Stable fuel cost• Improves the environment• Economic benefits – jobs & economy

– Each nuclear plant• Adds over $500 million/year to the economy• Employs ~ 500 – 1500, with an equivalent number of indirect

jobs

• Waste product is controlled, stored, monitored, protected and regulated

US Electricity Fuel Costs (1981-2003) 2003 cents per kilowatt-hour

Source: FERC/EUCG – Updated 9/04

0.0

2.0

4.0

6.0

8.0

10.0

12.0

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Nuclear 0.44Coal 1.35Gas 5.18Oil 4.82

Price StabilityNatural Gas Prices

Mar-2003$8.06

Jan-2001$9.13

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

Jan-95Jul-95Jan-96Jul-96Jan-97Jul-97Jan-98Jul-98Jan-99Jul-99Jan-00Jul-00Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04

$/M

MB

tu

Reduce US Dependency on Foreign Suppliers

• 1,000MW capacity combined cycle plant operating at 90% capacity factor

• Natural gas fired ~ 77 billion cu.ft/yr. • Oil fired ~ 12 million barrels/yr

• By 2015 10% - 15% of US natural gas supplies will be from non-North American sources

• Nuclear can help stabilize natural gas demand, lower costs, improve price predictability, and reduce dependency on foreign suppliers

Environmental Benefits

• Nuclear generators eliminate Greenhouse gas generation

• Existence of a nuclear plant assists in siting industrial facilities (environmental cap & trade)– Eases burden of siting fossil fueled plants

• Assists in maintaining a balanced & diversified generating portfolio

The Hydrogen Economy& Nuclear

• Potential for new fuel system– Canadian & Japanese R&D using nuclear technology– Need for US pilot projects (using existing nuclear

plants) to test, validate process & infrastructure– Build foundation for launching advanced reactor

hydrogen production based on non-proliferation designs

• Cannot develop a hydrogen economy without nuclear and meet cost & environmental metrics using natural gas

The Need for New Nuclear Generation

• US needs 300,000+MW of new generation by 2025– Baseload needed after 2010 – clean coal & nuclear

• Increased environmental controls raise siting and cost problems for fossil fuel plants

• US industry needs low cost energy to sustain global competitiveness– A diverse and balanced generating portfolio– Base-load generation -- Non/low-emission – Nuclear lowest cost base-load generating option

New Nuclear Plants?• None ordered for 30 years• Reasons

– Until mid ‘90s an anemic operating record– Unpredictable licensing process– Design/Construct-As-You-Go approach

• Unreliable and prolonged construction

Licensing Problems Being Addressed

• 1989 – 10 CFR Part 52 introduced• Introduced a combined construction permit &

operating license (COL)• Resolves issues and contentions earlier• Provides more information earlier• Provides for more opportunity for comment &

requires a more disciplined process• Introduced ITAAC (Inspections, Tests, Analyses

and Acceptance Criteria)• Need for increased planning and project discipline

Financing New Nuclear Plants• Significant changes in electricity industry since 1970s

– Many companies not operating in cost-of-service• Wall Street nervous over new, unproven licensing process• Large capital projects diminish financial performance

metrics – earnings per share, etc• Innovative approaches to financing large capital projects

– Consortium approach– Public-Private financial structure for large projects that support

essential national infrastructure– Loan guarantees, accelerated depreciation, tax credits,…

New Plant Status

• Four designs approved – Six in pipeline• Three Early Site Permits under review -- 2006• Three consortia ready to test new COL process,

prior to formal application– 16 companies involved– Developing trial license applications

• Work to complete ~ 2007-8

– Decisions to order in 2007-8– Start construction 2009-2010

New Nuclear Plants?• Yes, if:

– Prove new licensing process -- predictable & stable– Establish a financial structure for financing large capital

projects that benefit national and State infrastructure– Nation gets serious about environment– Certainty on spent fuel disposal

• Energy costs, the economy & environmental issues will drive the need for new nuclear plants

Going Forward from 2005

Nuclear power plants provide safe, reliable, low-cost electricityStable cash flowHedge against volatility in natural gas price and supplySafeguard against escalating environmental requirements

Environmental Value

Forward Price Stability

Low CostSafe and

Reliable