Nuclear – Why the Resurgence? William F. Henze II July 2010 Nuclear power is our “only existing, proven and scalable low carbon baseload generation technology.” - Business Roundtable (Jun. 2009) 1
Nuclear – Why the Resurgence? • U.S. Drivers: Age/mix of existing U.S. Fleet and Environment – 104 operating nuclear units produce 20% of power consumed � 40 years old on average � 2/3 on license extensions; balance overwhelmingly expected to be – Installed coal plant produces 50% of power consumed � Same age or older � Political challenges – Environment � World CO2e emissions: forty-five gigatons (Gt) in 2007. Under BAU, CO2e emissions rise at 1.5% per year. Global temperature increases up to 4 o centigrade by 2030. � Energy and environmental policy challenge: reduce GHGs sufficiently over the next fifteen years to prevent global warming in excess of 2 o centigrade, the level above which the effects are generally no longer considered manageable. – National Intelligence Council (November 2008) � Energy use is responsible for 60 percent of total GHG production. – U.N. Dept. of Economic and Social Affairs (June 2009) • U.S. Needs – Federal and State support through one construction cycle – To replace the 104 existing nuclear and some/all of the retiring coal units by 2030, while maintaining baseload reliability to support economic growth 2
Nuclear – Why the Resurgence? Federal Support • June, 2008: DOE announced solicitations for $18.5 billion of loan guarantees for new nuclear. • October, 2008: DOE announced that it had received 19 applications for loan guarantees to support 21 new reactors. The total amount requested was $122 billion. • January, 2010: President Obama stresses nuclear in his State of the Union address. • February, 2010: DOE announced the first loan guarantee - $8.33 billion to Southern Co. for Vogtle 3 & 4. • February, 2010: President Obama requested $36 billion in new funds for nuclear loan guarantees be included in the 2011 federal budget. • May, 2010: President Obama requested $9 billion in supplemental 2010 appropriations for nuclear loan guarantees. • July, 2010: House Energy and Water Appropriations Subcommittee approved 2011 appropriations legislation containing $25 billion for nuclear loan guarantees. • July, 2010: Senate Appropriations Subcommittee on Energy and Water Development approved 2011 appropriations legislation containing $10 billion for nuclear loan guarantees. • July, 2010: DOE representatives confirmed that more loan guarantees could be issued this year if Congress approves the additional $9 billion in supplemental appropriations. The $9 billion would be added to the remaining $10 billion of current lending authority. NRG’s South Texas project, Constellation’s Calvert Cliffs 3 project, and SCANA’s V.C. Summer 2 & 3 project are thought to be on the short list of future loan guarantee recipients. 3
Nuclear – Why the Resurgence? State Support for Utility Sponsors • South Carolina: – In 2008, South Carolina enacted legislation authorizing current recovery of costs associated with new nuclear. “ SCG is on the forefront of the nuclear renaissance with plans to build two new nuclear – units … .[This] … .should help the company nearly double its earnings by the end of the decade … . ” - UBS Securities (2010) • Georgia: – Georgia has enacted similar legislation for the benefit of Southern ’ s Vogtle units 3 & 4. • North Carolina; Florida: “ The Carolinas ’ regulatory environment remains constructive and is both shareholder and consumer – friendly. Meantime, we believe Florida's regulatory decisions at the beginning of the year could become a disincentive. ” – UBS Securities (2010) 4
Emerging Federal Bipartisanship • Nuclear Regulatory Commission has a solid pro-industry majority. • Bipartisan support in Congress for nuclear power. – Senators Kerry (D) and Lieberman (I) continue to work on proposals for robust financial and regulatory incentives for nuclear power and offshore drilling as part of a grand bargain for climate change legislation. – Two opponents of cap and trade, Senators Alexander (R) and Webb (D), introduced standalone legislation aiming to double nuclear power in 20 years and providing $100 billion of loan guarantee authority. – Senator Boxer (D), Chair of the Environment and Public Works Committee, concedes nuclear incentives have large Senate support that negates her opposition. – Senator Voinovich (R) introduced legislation on July 21 that would increase the DOE loan guarantee authority to $54 billion, as requested by President Obama. • Nuclear support is the quid pro quo for comprehensive energy legislation, whether cap and trade or other. 5
Nuclear – Why the Resurgence? • Global Drivers: Demand Growth and Environment – Demand Growth � Global electricity consumption: 18 trillion kilowatt hours in 2006; projected to increase to 31.8 trillion kilowatt hours by the year 2030. – U.S. Energy Information Administration (May 2009) � Rise of middle-class purchasing power in emerging economies such as the BRIC countries and the Middle East. The size of the global middle class is expected to increase by 2 billion people by 2030 (reaching 50% of the World ’ s total population). – Goldman, Sachs (July 2009) – Environment � China is now the largest energy consumer � And the world’s largest polluter 6
Nuclear – Why the Resurgence? • NEA/IEA Technology Roadmap ’ s Key Findings (June 2010) � To achieve a 50% cut in CO2 emissions, nuclear capacity increases to 1,200 GW by 2050, providing around 24% of global electricity (up from 370 GW providing 14% of electricity at present). Nuclear power becomes the single largest source of electricity. � Total global investment required to achieve 1,200 GW by 2050 is almost $4 trillion (2008 $), or 19% of estimated total spend on generation capacity in the period. � Construction of 1200 GW by 2050 will require about 20 large new nuclear units to be constructed each year. � Global industrial capacity to construct nuclear power plants will need to double by 2020. � First step - reach 475-500 GW by 2020: Taking into account the 21 units that started construction (22.5 GW) in 2008 and 2009, this will require construction starts on an additional 90 GW by 2016. That's 15 or so new units per year, up from 11 construction starts in 2009. In 2009 dollars, 15 units/year is $100bn/year. � Reaching a new unit construction rate of 20/year will require large near-term investments in industrial capacity and workforce development, but higher levels have been reached before. � During the 1970's, U.S. construction starts in the U.S. alone reached or exceeded 30 in each of five years. 7
Nuclear – Why the Resurgence? � AE (architect-engineer) firms will have to support the projected doubling of the rate of nuclear unit construction. � A suitably qualified and skilled work force is essential in order to achieve the 1,200 GW scenario and (1) demonstrate industry-wide ability to build new units on time and on budget, and (2) provide continued safe and efficient operations. � Though most of the supply chain can be ramped up within a few years, that cannot be said for very large steel forgings. − Global heavy forgings capacity is already in short supply and expansion will require large investment in the near term. Investors in heaving forging capacity are potential big winners over this 40 year cycle. � The international system of safeguards on nuclear technology and materials must be maintained and strengthened. Avoiding the spread of sensitive technologies while allowing access to reliable fuel supplies will be a growing challenge. 8
SMRs – Part of the Global Solution • Small Modular Reactors (300 MWe or less) � Scalable, factory-built � Long refueling cycles (decades) � Domestic and international markets � U.S. first movers: B&W mPower; NuScale � DOE and NRC fully supportive – DOE 50% cost-sharing available (FY 2011) for design certification of 2 designs – NRC budget includes funding for staff to process 2 design certs/license applications beginning 2012 – S.2812 (The Nuclear Power Act 2021) and S.2052 (The Research Initiative Improvement Act), both cleared the Senate Energy and National Resources Committee on July 21 and would provide $2.5bn for SMR demonstration. � Global demand: 500/year; vs. 20/year for large reactors (1500 MW) 9
Nuclear – Why the Resurgence? Nuclear power is our “ only existing, proven and scalable low carbon baseload generation technology. ” - Business Roundtable (Jun. 2009) 10
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