Advanced Reactors and Government Support for New Nuclear Plants Presentation to the National Association of Regulated Utility Commissioners Rebecca Smith-Kevern Office of Light Water Reactor Deployment Office of.
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Advanced Reactors and Government Support for New Nuclear Plants Presentation to the National Association of Regulated Utility Commissioners Rebecca Smith-Kevern Office of Light Water Reactor Deployment Office of Nuclear Energy February 19, 2008 Plant Safety, Performance, and Economics Steadily Improving Excellent plant management and operational experience Well-developed safety culture and effective regulation Lowest production costs for fueled-generation Nuclear Capacity Factor Is at an All-Time High Performance improvement is equivalent to adding 17 more gigawatts since Watts Bar 1 in 1996. 95% 90% Capacity Factor 85% 80% 75% 70% 65% 60% 55% 50% 1980 1985 Source: Energy Information Administration data 1990 1995 2000 2005 Electricity production costs do not include capital. For a new plant construction add at least 20 – 30 mills/kWh to cover capital investment for both nuclear and coal. DM#181900 NARUC 2 Nuclear Energy Plays an Important Role Today U.S. Electricity Consumption Nuclear power is clean, reliable base load energy source • Provides 19% of U.S. electricity generation mix • Provides over ⅔ of U.S. emission-free electricity • Avoids about 700 MMTCO2 each year • Helps reduces overall NOx and SOx levels 787 BkWh Nuclear 19% Total 4,053 BkWh Vermont Yankee (1) Columbia (1) FitzPatrick (1) 2006 Monticello (1) Nine Mile Point (2) Kewaunee (1) Fermi (1) Point Beach La Salle (2) Cooper (1) Callaway (1) Peach Bottom Perry (1) (2) Beaver Valley (2) Cook (2) Byron (2) Quad-Cities (2) Dresden (2) Braidwoo d (2) DavisBesse (1) San Onofre (2) Wind 2% Surr y (2) Harris (1) McGuire (2) Watts Bar (1) Sequoyah (2) Browns Ferry (3) ANO (2) Palo Verde (3) Brunswick (2) Oconee Vogtl e (2) H. B. Robinson (1) (3) Catawba (2) Summer (1) Hatch (2) Grand Gulf (1) Comanche Peak (2) (Number of operating units per site shown in parenthesis) South Texas (2) Hydro 25% Solar 0% Geothermal 1% Farley (2) Biomass 5% River Bend (1) Waterford (1) Net Non-emitting Sources of Electricity Salem (2) Hope Creek (1) Three Mile Island (1) Calvert Cliffs (2) North Anna (2) Clinton (1) Wolf Creek (1) Diablo Canyon (2) Millstone (2) Indian Point (2) Limerick (2) Oyster Creek (1) (2) Susquehanna (2) Duane Arnold (1) Ft. Calhoun (1) Pilgrim (1) Ginna (1) Palisades (1) Prairie Island (2) Source: Energy Information Administration Seabrook (1) Crystal River (1) St. Lucie (2) Turkey Point (2) 104 Nuclear Power Units at 65 Plant Sites Totaling 100 GWe Nuclear 67% Source: Energy Information Administration DM#181900 NARUC 3 Nuclear Energy … Why Support Expansion of Commercial Nuclear Power? US Electricity Demand Increasing • 300 GWe of additional capacity Electricity Generation by Resource 7,000 6,000 Coal 5,000 BkWh needed by 2030 • 50 GWe new nuclear capacity needed to maintain current share Natural Gas Nuclear 4,000 Oil 3,000 Ren Hydro 2,000 • Only zero-emitting baseload Projected 1,000 technology that can be expanded by a significant margin 1950 1960 1970 1980 1990 2000 2010 2020 2030 Unacceptable Risks Identified • Regulatory Uncertainty • Litigation Risk • Economic Competitiveness of First Plants » Long Construction Durations » Higher Capital Costs for Early Plants Power companies are unwilling to increase their market capitalization by a significant percentage to build new nuclear plants DM#181900 NARUC 4 Nuclear Power 2010 … Demonstration Program to Deploy New Nuclear Power Plants Program initiated in February 2002 Focused on addressing regulatory, financial, and technical challenges Based on Near-term Deployment Roadmap and other studies Government/industry cooperative effort • 50-50 cost-shared industry projects • Market-driven DM#181900 NARUC 5 Nuclear Power 2010 … Program Scope and Goal Exploring sites for new nuclear plants Demonstrating key untested regulatory processes • Early Site Permit (ESP) • Combined Construction and Operating License (COL) Developing new light water reactor designs • Design Certification for new reactors • First-of-a-kind engineering (FOAKE) for new standardized nuclear plant designs EPACT 2005 Incentives • Loan Guarantee • Standby Support Delay Risk Insurance • Production Tax Credit for Advanced Nuclear Reactors Program Goal Pave the way for industry decisions to build new advanced light water reactor nuclear plants in the United States that will begin operation early in the next decade. DM#181900 NARUC 6 EPAct, Title XVII, “Loan Guarantees” Purpose • Government support needed—financial risk to first movers too great » Market capitalization of power companies too small any to add so much more equity to balance sheet Process • Solicit applications from project sponsors • Due diligence review assesses risk • Issue Term Sheet • Sponsor pays subsidy cost and guarantee granted Authority • Consolidated Appropriations Act, 2008 granted time-limited (through FY 2009) loan guarantee authority for $18.5 billion for nuclear power project and $2 billion for nuclear fuel cycle projects » If COL approval is a condition precedent, no project would be ready before FY 2010 » FY 2009 budget requests an extension of authority with same ceilings through FY 2011 Status • Final Rule issued on October 4, 2007 • Earliest practical date for nuclear solicitation: 4/15/08 For more information: www.LGprogram.energy.gov DM#181900 NARUC 7 EPAct, Section 638, “Standby Support” Indemnification against delays for six new advanced nuclear reactors: • Failure of NRC to comply with scheduled reviews and approvals • Certain litigation that delays commencement of full-power operation Covered Costs • Initial two reactors: 100% of covered cost of delay up to $500M per contract • Subsequent four reactors: 50% of covered cost of delay up to $250M per contract after initial 180-day delay Department issued final rulemaking in August 2006 Two Step Process: Conditional Agreement (Step 1), then Standby Support Contract (Step 2) Released Standard Conditional Agreement September 2007 Released Agreement Instructions in December 2007 Schedule First Standby Support Conditional Agreements with industry expected in 2008 DM#181900 NARUC 8 EPAct, Section 1306, “Production Credit” (Section 45J of IRS code) Improves project internal rate of return by reducing tax burden over first 8 years of facility operation National megawatt limitation of 6,000 megawatts will be allocated to eligible projects Allocation: • COL application before 2009 • Construction begins before 2014 • Placed in service before 2021 1.8¢ per kilowatt-hour, but limited to a maximum of $125 million per 1,000 megawatts allocated per year Treasury issued IRS Notice on production credits in May 2006 with guidelines for allocation and approval process Currently evaluating need to issue clarifying regulations for claiming production tax credits for new nuclear capacity DM#181900 NARUC 9 Proposed New Nuclear Plant Sites DTE (Fermi) UniStar/Alternative Energy Holdings (Idaho Energy Complex) UniStar/ Ameren (Callaway) UniStar/Amarillo Power Texas Energy Future Holdings (Comanche Peak) Expansion New Site NRG (South Texas) Exelon (Victoria County) Source: Cambridge Energy Research Associates UniStar/PPL (Susquehanna) Entergy (River Bend) UniStar/Constellation (Calvert Cliffs) TVA (Watts Bar) NuStart/TVA (Bellefonte) NuStart/Entergy (Grand Gulf) UniStar/Constellation (Nine Mile Point) Dominion (North Anna) Progress (Harris) Southern (Vogtle) SCANA (Summer) Duke (Lee) Progress (Levy County) FPL Group (Turkey Point) DM#181900 NARUC 10 Advanced Reactor Designs Under Consideration GE-Hitachi ABWR – NRC Certified (1997) Westinghouse AP1000 – NRC Certified (2005) GE-Hitachi ESBWR – Under NRC Review AREVA US-EPR – Under NRC review Mitsubishi US-APWR – Under NRC Review DM#181900 NARUC 11 Benefits of Advanced Reactor Designs Standardization • Easier to operate • Faster and cheaper to build, operate and maintain Simpler and Safer • Latest technology • Less equipment and components • Passive safety systems (AP 1000 and ESBWR) • Simplified operations and maintenance Larger Scale • Range from 1100 to 1700 MW Operating or under construction elsewhere DM#181900 NARUC 12 Reactor Technologies Vendor AP1000 ESBWR ABWR US-EPR US-APWR Design Certification Reactor Type Reactor Power (MWt) Electric Output (MWe) Design Life (Years) Westinghouse Certified by NRC December 2005 Advanced Pressurized Water Reactor (Passive Design) 3400 1117 60 GE-Hitachi Under Review expected in 2009 Boiling Water Reactor (Passive Design) 4500 1560 60 GE-Toshiba Certified by NRC 1997 Advanced Boiling Water Reactor 3926 1350 60 AREVA DCD submitted on December 11, 2007 Pressurized Water Reactor 4300 1600 60 Mitsubishi DCD submitted on December 31, 2007 Advanced Pressurized Water Reactor 4451 1700 60 Number of Fuel Assemblies 157 (17x17 fuel array) 1132 (10x10 fuel array) 872 (10x10 fuel array) 241 257 (17x17 fuel array) DM#181900 NARUC 13 Backup Slides DM#181900 NARUC 14 Generation III—ABWR, EPR, and USAPWR Larger plants/greater capacity • US-EPR – 1600 MWe • US-APWR – 1700 MWe Improved plant efficiencies • US-EPR – 37% • US-APWR – 10% more than APWR Improved safety features • EPR has double containment for ensuring safety Flexible fuel cycles (up to 24 months) ABWR operating in Japan since 1996 DM#181900 NARUC 15 Generation III+ Design Objectives Standardized designs Simplicity and small plant sizes Increased plant design life – 60 years Reduced costs – larger plant rating or simplifications Shorter construction schedules Passive safety systems Increased plant safety features Digital I & C provides reliable and accurate plant monitoring and control Improved seismic responses Less equipment and components Simpler operation and maintenance DM#181900 NARUC 16 Advanced Passive Designs AP1000 and ESBWR • Rely on natural forces to increase safety • Improved automatic safety features • Substantially reduce size, equipment, and components • Simplicity and small plant size • Significantly less construction time DM#181900 NARUC 17 DOE Loan Guarantee Program Considered most important of EPACT incentives for new nuclear plants Only incentive that can reduce cost of money • Allows lenders to offer significantly lower interest rate, reducing cost of plant by 10 to 15 percent • Production Tax Credit provides positive cash flow after reactor is in operation; cannot alleviate financial risks during construction • Standby Support, because it provides limited protection for lenders, cannot significantly lower debt interest rate Power companies unable to increase their market capitalization by significant percentage to build new nuclear plants • Would not go forward without loan guarantees Source: Nuclear Energy Institute All plants of each reactor technology will need loan guarantees until proven track record established—3 operating plants of each reactor technology DM#181900 NARUC 18 Cost Comparison with Alternatives Levelized Cost of Electricity (2006 mills/kWh) Nuclear Pulv Coal IGCC w Carb Seq Gas CC Gas CC w Carb Seq 1st nth No EPAct, No C Mitigation No EPAct, but with Fossil C Mitigation 68 59 46 62 62 86 1st LGs (+PTCs for Nuclear) 48 57 83 Today, without incentives, nuclear plant would have higher generation cost than pulverized coal or natural gas combined cycle With learning, nth nuclear plant has lower generation cost than integrated gas combined cycle or natural gas combined cycle with carbon capture We never get to lower cost nth nuclear plant unless first few are built • EPAct incentives make first nuclear plant less expensive than IGCC or natural gas CC with carbon capture DM#181900 NARUC 19