Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 10:00 AM

Jeffrey Clay Sell

Mr.

Statement of Clay Sell
Deputy Secretary
U.S. Department of Energy


Nuclear Power 2010
Before the
Committee on Energy and Natural Resources
United States Senate
April 26, 2005


Mr. Chairman, Senator Bingaman, and Members of the Committee it is a pleasure to be here to discuss the Department of Energy’s Nuclear Power 2010 program.
For most of our nation’s history, America’s vibrant economy and society have benefitedfrom the abundant energy options we have had available. Even though we have increased our oil imports in recent decades, most of the energy used in the United States – including energy for home heating and electricity -- is produced domestically. Our coal, oil, natural gas, nuclear, and renewable resources all contribute to a diversified and reliable energy picture.


However, we are entering a new era in energy supply. As highlighted in the President’s National Energy Policy, forecasts indicate that our need for energy—even with ambitious energy efficiency measures across all sectors of the economy—will continue to grow as our economy grows. The Energy Information Administration forecasts that by 2025, the United States will import 68% of its energy for transportation uses and 38% of its total energy supply. Most notably, the U.S. will experience an increasing dependence on
imported natural gas, which is increasingly important for generating electricity.
Increased natural gas imports will require us to expand our capacity to accept shipments of liquefied natural gas.


Providing adequate and reliable supplies of electricity, while reducing emissions and
meeting the other challenges, will require the development and application of advanced technologies. New technology can help us to exploit renewable energy sources when they are practical, and enable coal – which generates more U.S. electricity than any other fuel– to continue as a viable, long-term element of our energy supply. In addition, the President made it clear in his State of the Union address that we must also consider new nuclear power plants as part of our long-term energy picture.


NUCLEAR POWER TODAY


Today, American utilities operate 103 nuclear power plants. These efficient and reliable facilities provide one- fifth of the nation’s electricity. These plants are emissions-free and can operate year-round in all weathe r conditions – unlike renewable sources such as wind, solar and hydro.


Over the past 15 years, nuclear utilities in the United States have become better managed, and have improved both efficiency and safety. In the early 1990s, U.S. plants were available to produce electricity only 70% of the time on average. These plants are now producing power more than 90% of the time. More efficient operation has allowed nuclear plants to produce more energy than ever before, adding availability equivalent to 25 new power plants since 1990 -- without building a single new plant.

The companies that today own and operate the nation’s nuclear generating units have demonstrated that they are excellent operators with the ability to manage and operate the plants in a safe, cost-effective, and reliable manner. As a result of this success, essentially all U.S. nuclear plants are expected to apply for renewed licenses to stay in operation into the middle of the century. There will also be some new generation, with The Tennessee Valley Authority restarting a third unit at the Browns Ferry Nuclear Plant in Alabama that ceased operating in 1985. TVA expects to invest $1.8 billion to bring this unit on
line and add 1,280-megawatt (electric) generating capacity to the TVA system in the spring of 2007.


CHALLENGES FACING NUCLEAR ENERGY’S FUTURE


Four basic challenges to the deployment of new nuclear power plants have been
identified by the utility and financial markets: regulatory uncertainty; financial
uncertainty; permanent nuclear waste disposition; and Price Anderson indemnification.

While the Department is working to address all four challenges, the Nuclear Power 2010 program is specifically focused on addressing regulatory and financial uncertainties.

Regulatory uncertainty is centered on building industry confidence in the Nuclear
Regulatory Commission’s untested, combined licensing process to expedite construction and commissioning of new plants. Financial uncertainty, while potentially related to regulatory uncertainty, is based on the owners and operators of nuclear plants being able to accurately estimate the cost of a new plant and manage cash flows between the time the decision is made to build and the time the plant becomes operational and begins making money. Since February 2002, the Department has been working with industry to develop and execute a roadmap for addressing the regulatory and financial uncertainties hindering the near-term deployment of new nuclear power plants.

The Nuclear Power 2010 Program is designed to work with the nuclear industry in a
50/50 cost-shared arrangement to establish a market-driven, public-private effort to address the technical, regulatory and institutional challenges to new plant construction.

The program’s basic missions are to demo nstrate the new Nuclear Regulatory
Commission licensing processes, identify suitable sites for new plants, and certify stateof- the-art (or “Generation III+”) designs for new nuclear power plants. The goal of the Nuclear Power 2010 program is to facilitate an industry decision to build and operate at least one new advanced light-water reactor plant in the United States early in the next decade.


NUCLEAR POWER 2010


While it is too early to determine success, the Nuclear Power 2010 program appears to be on the right track. Three utilities – Dominion Energy (North Anna, Virginia), Entergy (Grand Gulf, Mississippi), and Exelon (Clinton, Illinois) – are working with the Department to obtain “Early Site Permits” for three sites across the country—the first time this important regulatory tool has ever been used. The Nuclear Regulatory Commission is reviewing the three Early Site Permit applications submitted by the utilities in the fall of 2003 and is expected to make decisions on the permits in 2006. The successful demonstration of the Early Site Permit regulatory process in pre-approving plant sites will avoid the problems in siting that substantially increased the cost of some plants in the 1980s and partially contributed to the abandonment of others. The results from these 50% cost-shared partnerships with industry also will include a streamlined and predictable Early Site Permit process for future applicants and a catalogue of lessons learned by the power companies from navigating the process. The Early Site Permit application and approval process, like all major Federal government construction projects, includes critical public participation in open meetings and through the National Environmental Policy Act Environmental Impact Statement process.

The Department is also working with the Tennessee Valley Authority (TVA) to conduct a detailed evaluation of the cost and schedule requirements for deploying an NRC-certified General Electric Advanced Boiling Water Reactor (ABWR) at TVA’s Bellefonte site in Alabama. In addition to TVA, the team includes General Electric, Toshiba, Bechtel, USEC, and Global Nuclear Fuels. The final report from this study is expected in September of this year and will be considered in any decision regarding the viability of proceeding with this advanced reactor design at the site. Geological and seismological evaluations as well as transmission access and site infrastructure surveys are being conducted, with completion scheduled for the end of 2005. The Department has also recently received two new proposals from power companies to explore additional sites for new nuclear power plants, including existing nuclear sites and “greenfield” sites. The Department expects to make decisions on whether to proceed with these two new projects by the end of next month (May 2005).

In November 2004, the Department took another step forward in the Nuclear Power 2010 program by awarding two major cost-shared projects to utility- led consortia to implement
plans that could lead to the construction and operation of new plants. Learning from the experiences of the early 1990s, when the Department directly funded U.S. reactor vendors for design certification activities, the Department is requiring these projects be led by utilities – the ultimate owners and operators. Central to this effort, these projects will provide first-time demonstration of the Nuclear Regulatory Commission’s combined
Construction/Operating License (COL) process. These utility- led projects could result in the first license applications for a new nuclear power plant beginning in 2007. The two consortia are the Dominion Energy- led project with General Electric and Bechtel and the NuStart Energy- led project that includes nine power companies (Entergy, Exelon, Constellation, Florida Power & Light, Southern Company, Progress Energy, TVA, Duke and EDF North America), General Electric, and Westinghouse. While the Department is committed to a 50/50 cost-share for the regulatory demonstration and technology certification activities, the actual cost of construction of any new nuclear plants will be borne completely by the project sponsors. The Department is committed to this sevenyear,
$1.1 billion effort of which 50 percent would be non-Federal funding.

The Department did experience a delay in initiating these two projects as a result of a change by Dominion in its preferred reactor technology, which occurred just prior to the planned issuance of its cooperative agreement in December 2004. We believe that Dominion’s change from the Atomic Energy of Canada Limited Advanced CANDU Reactor, ACR-700, to the General Electric Economic Simplified Boiling Water Reactor, ESBWR, resulted from the longer-than-expected certification schedule set forth by the Nuclear Regulatory Commission for the AECL reactor. This longer certification schedule did not meet Dominion’s deployment plans. The selection of the GE reactor technology affected the issuance of the Dominion cooperative agreement as well as the scope and funding for the NuStart project, because the GE technology is also part of that project.


The Department asked these two consortia to work out an equitable arrangement and resubmit their cost proposals such that the work on the GE technology was split between the two projects. These cost proposals and cooperative agreements were re-evaluated by the Department’s procurement staff prior to finalizing the cooperative agreements. In addition, intellectual property rights and royalty payment terms and conditions took longer to negotiate than expected.

The Department finalized its cooperative agreement with Dominion Energy on March 31, 2005, and Dominion has initiated the planning phase of the project, which will establish the detailed project schedule and baseline budget. Later this fiscal year, the Dominionled project will submit a design certification application for the General Electric Economic Simplified Boiling Water Reactor (ESBWR) to the Nuclear Regulatory Commission. The Dominion team is focused on deploying the General Electric ESBWR technology at Dominion’s North Anna site in Virginia.
The Department will finalize its cooperative agreement with the NuStart Energy team today, at which time the consortia will initiate the planning phase of the project to establish the detailed project schedule and baseline budget. Later this fiscal year, the NuStart- led project will complete its site selection process, which could result in the identification of a single site for a new reactor or multiple sites.

The NuStart Energy team is focused on developing the General Electric ESBWR and Westinghouse AP1000 advanced reactor technologies. Without the construction of new plants, nuclear power’s contribution as a percentage of the nation’s total energy mix will steadily decline. Nuclear power helps to maintain a
more diversified energy supply and it has no emissions; nuclear power today comprises almost 75% of all the non-emitting power generation in the country.

The President’s FY 2006 budget supports the successful continuation of the Nuclear Power 2010 initiative in FY 2006 with a request of $56 million (an increase of $6.4 million compared to FY 2005).

CONCLUSION


Our nation cannot rely on any single energy technology to secure its future. A broadly diverse energy supply has served us well in the past and must be available for the future.

Nuclear energy should be a part of that diverse portfolio as we look to support our
growing economy while limiting air emissions and enhancing America’s energy
independence.

The Department of Energy’s goal is to work with the private sector, our overseas
partners, and other agencies to assure that the benefits of nuclear technology continue to increase the security and quality of life for Americans—and other citizens of the world— now and into the future.

This concludes my prepared statement. Your leadership and guidance has been essential to the progress the program has achieved thus far and your support is needed as we engage the tasks ahead.

I would be pleased to answer any questions you may have.