The Outlook for Nuclear Energy in the United Stated

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The Outlook for Nuclear Energy in the United
Stated Dark Ages, Renaissance, or Age of
Enlightment By John R. Brodman for the
Institute Francaise des Relations
Internationales September 2009
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Challenges Ahead

• Investment Risk Cost Uncertainty Still a Major
  Obstacle
• History of cost overruns Deja Vu all over
  again?
• Escalating costs in recent years High Cost vs.
  Market Cap
• Limited recent experience with actual
  construction, no one really knows.

Moodys the complexity and long-term
construction associated with building a new
nuclear plant expose a utility to material
adverse change conditions related to political,
regulatory, economic and commodity price
environments as well as technology developments
associated with supply and demand alternatives.
This Says it all.
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Other Challenges and Risks

• Untested Regulatory Process
• Design Certification
• Construction and Operating license approvals

Spent Fuel Disposal
Public Opposition

• Uncertainties
• Economic Growth Electricity Demand
• Technology Competition
• Large vs. Small clean vs. green
• Carbon Policy

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• Financial Incentives
• Nuclear Power 2010.
• Energy Policy Act of 2005
• Government loan guarantees of 18.5 billion for
  new reactors and 2 billion for enrichment
  facilities. 100 of debt, up to 80 of project
  cost.
• Production tax credits 18 per MWh for the
  first 6000MW of new capacity for first 8 years of
  operation.
• Regulatory insurance (stand by support)
  500million for the first two new reactors, and
  250 million for the next four. Covers NRC
  delays and litigation.
• Price Anderson Act for nuclear liability
  protection.
• States 10 states have some form of cost recovery
  for CWIP. One state (Ohio) has nuclear in its
  clean energy portfolio standard. Two considering.

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• Rational for Government Support
• Dispel uncertainties and risks first mover test
  cases.
• Us hasnt applied for a COL or started
  construction of a new nuclear unit in 30 years.
• Demonstrate commercial feasibility of new reactor
  designs and the new NRC license and regulatory
  processes.
• Show that industry can learn from past mistakes
  and prove that it can manage large, complex
  construction projects on time and within budget.
  Contain costs and reduce risks.

Nevertheless, new build is being watched
closely. Delays, cost overruns, mismanagement,
poor performance may impact conviction to
proceed, and progress of other units in the
planning, licensing, and construction
pipeline. New designs under consideration in the
US will all be built overseas prior to US
construction. US should benefit from learning
curve.
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A Word on Technology Albert Einstein once said
Technological progress is like an ax in the
hands of a pathological criminal. It can change
everything in its path. (He also said that if
you can drive a car and kiss a pretty girl at the
same time, you are not giving the kiss the
attention it deservesWhich is why I like to
quote Einstein.) Standardization is a great
economic concept, but it almost always gives way
to technological progress. Many new reactor
designs (Gen IV, fast reactors, high temperature
reactors, modular designs and small reactors) are
all on the horizon, as are advanced fuel cycle
technologies. Many promise to overcome the
financial risks associated with large, baseload
projects. The US was and still is a leader in
nuclear technology. There is a lot of political
and economic support for maintaining a long-term
commitment to the technology.
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SUMMARY

• Nuclear power has come a long way in the US

• Many things are now in place to support
  expansion, but many things (cost uncertaintyand
  risks) need to be resolved.

• Competition from natural gas, wind, and
  thin-film solar PV is strong right now, but how
  long will it last?

• All technologies, including Nuclear benefit
  from acceptance of the portfolio approach to
  our climate and energy security challenges.

• Nuclear energy has a bright future in the US
  and it will eventually find its way. But progress
  will be slow and deliberate in the next few years.

• Real renaissance will depend on US approach to
  climate change and an expansion of the
  governments loan guarantee program. The
  technology is here to stay.