New Nuclear Plants Coming to the United States?

By Bob Bellemare
President and CEO
In December 2006, Progress Energy Florida (PEF) became the newest utility to throw its support behind a new nuclear plant, announcing it will seek the necessary approvals to construct a facility in Levy County, Florida, near its existing Crystal River nuclear plant. PEF joins a line containing a dozen other companies and consortiums seeking permits and the necessary approvals for over thirty new reactors. The road ahead, however, appears to be a long one and in the end we should only expect a handful of these announced plants to get constructed.
The Nuclear Push
Utilities in need of new base load power plants are certainly facing a great dilemma. Natural gas combined cycle power plants, while clean burning and relatively inexpensive to build, are saddled with high fuel cost because of the rise in natural gas prices. Coal power plants, while much cleaner than the models of 30 years ago, are costly to build and have the highest carbon emission of any conventional sources. These market dynamics combined with incentives in the U.S. Energy Policy Act of 2005 (EPAct) are making nuclear a competitive option.
EPAct offers a 1.8 cents/kWh production tax credit for up to 6,000 MW of new nuclear facilities constructed during the first eight years of operation. There is also "standby support" being offered to the first six reactors constructed, should certain types of delays occur. The first two reactors constructed are eligible for 100 percent coverage of eligible costs, up to $500 million. The next four reactors are eligible for 50 percent coverage up to $250 million for delays in excess of 180 days. Eligible costs include those costs that occur for project delays caused either by litigation or by the failure of the Nuclear Regulatory Commission (NRC) to meet schedules. Covered costs include principal and interest on construction debt and the difference between the contract cost of the nuclear facility power and the fair market value of replacement power purchased.
To qualify for most of these financial incentives, however, applications must be in the hands of the NRC by the end of 2008. The following chart from the Nuclear Energy Institute (NEI) shows more than a dozen different utilities/consortiums representing over 30 new reactors have joined the race. Most of the companies are nuclear industry stalwarts, controlling over half of the nuclear plants operating in the United States today.
The Road Ahead
Restarting the U.S. nuclear industry will not be easy. Meeting the 2008 deadline and getting all the necessary approvals is not quick or cheap. The process for securing what is called a Construction and Operating License (COL) from the NRC can cost $50 million. And despite the incentives provided in EPAct, Wall Street is not eager to pony up the billions of dollars it will likely take to construct the first U.S. nuclear unit in decades without more assurances on cost recovery from state regulators. Because nuclear plants are so cost intensive, they will need low-cost financing if they are to be competitive. To get low-cost financing, investors need "security," but with the actual cost of a new nuclear plant in the U.S. being uncertain, how do you create a "secure" investing environment? Such is the challenge for utilities, regulators, and policy makers.
Another challenge will be reinvigorating the nuclear industry talent pool and supply network. In the three decades since the last nuclear plant order, the leading U.S. firms have either ceased operation, consolidated or become subsidiaries of non-U.S. parent companies. According to the Nuclear Regulatory Commission (NRC), there are now 442 nuclear plants in operation worldwide, and 27 more under construction which will create competition for materials and talent.
The NRC points to another challenge. A nuclear industry survey shows that nearly half of current nuclear industry workers are more than 47 years old, and that nuclear energy companies could lose as many as 23,000 workers over the next five years representing 40 percent of existing workforce. On the supply side, the NRC points out that the key suppliers to the industry—the architect/engineering firms, fuel suppliers and reactor manufacturers—anticipate that 32 percent of their workers will be eligible to retire within the next three years. This may be a difficult hurdle to overcome as the number of four-year nuclear engineering programs now stands at about 25, down from 38 in the 1970s.
The NRC itself represents an uncertainty. Although it has created a new licensing process, the process itself is untested since it has been over 25 years that a licensing application has been submitted. In an October 2006 speech, Commissioner Peter B. Lyons explains that the NRC has developed a standard design certification process that allows a reactor vendor to submit a design to the NRC for review and certification. To date, the NRC has certified four designs.
Sounds good, but the NRC may become overwhelmed by the nearly 20 applications it could see in 2007. According to Commissioner Lyons, to accommodate the expected increased workload, the NRC staff is hoping to implement a design-centered approach to facilitate parallel review of multiple standardized license applications. The process is based on the principle of "one issue, one review, one position" for multiple COL applications. A design-centered licensing review process can only be achieved, however, to the extent that the reactor vendor and the utilities standardize the pertinent sections of their applications.
And while there are "pre-certified" designs, details still need to be filled in. Former NRC Chairman Nils J. Diaz gives an example in a February 2006 speech. The Westinghouse AP1000 design, while approved, does not include specific design details in some important areas such as instrumentation/control systems and control room and piping design so that the best available technology can be used when a plant is constructed. These areas of design are subject to "Design Acceptance Criteria," a special set of inspections, tests, analyses, and acceptance criteria to be used in the COL process. Since specific design details for these areas were not included in the AP1000 rulemaking, they would have to be addressed by each COL application and potentially each COL hearing. In total, however, former Chairman Diaz stated he believes it may be possible for the NRC to complete the reviews, including the hearings, in approximately 24 months.
Crossing the finish line on the permitting, approval, financing and construction of a new nuclear facility will be a great challenge. Most will not make it around the first lap of the track, but expect a few new nuclear plants to come on-line around 2015. Because of the risks involved, I would be surprised to see more than six facilities constructed. Without the crutch of federal incentives the weight of the uncertainties involved in projects of this magnitude will likely crush their feasibility. The cost and operating experience of the few plants that are built will determine whether the U.S. nuclear industry does see a major rebirth or is put back on the shelf for another 20 years.