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A nuclear future inevitable

After years of neglect by policymakers in the US, nuclear energy is back on the table as a cost-competitive, emissions-free source of power generation. But developers and industry proponents face a number of challenges, not least convincing a sceptical public, writes Ellen Lask

WITH 103 plants in operation, producing 20% of the nation's power, the US has the largest nuclear-energy programme in the world. Extensions of the life of plants and increases in output have kept nuclear's share of the power supply consistent for the past decade, even though there has been no significant growth in capacity and no nuclear facility has been licensed since the 1970s.

This is the result of a combination of factors: the distrust of the public after the incident at Three Mile Island, in 1979; the wariness of utilities and the investment community as siting, permitting and construction delays pushed costs far above projections; and conflicts over how to dispose of plant waste. In addition, Richard Myers, director of business and environmental policy at the Nuclear Energy Institute (NEI), the industry association, says uncertainty over the direction of electricity deregulation made the power industry hesitant to consider new projects.

In the late 1990s, however, the industry began thinking about new plants. And now, he says, the 'gradual unfolding of external events' is inducing others to consider them too. 'As generating companies and political leaders look at electricity demand and environmental requirements and recognise the need for stable prices and emissions-free power sources,' there is greater consensus that it is time for nuclear energy.

The focus is on the most advanced nuclear technologies available. 'Advanced, high-efficiency nuclear plants can provide secure and reliable electricity 24/7, along with price stability and clean air,' Myers says. He sees nuclear energy as a plausible solution to relieve the pressure on gas, the fuel of choice for new power plants since the early 1990s. In the past decade, the US has added 250 gigawatts (GW) of new gas-fired generating capacity, against just 9 GW of coal and 4 GW of nuclear. 'We've seen soaring gas demand lead to volatility,' says Myers, and with gas prices at high levels, 'nuclear generation is clearly competitive.'

Table 1: US power generation by type, 2003

 

% of total generation

Coal

50.1

Nuclear

20.2

Natural gas

17.9

Hydro-electric

6.6

Petroleum

2.5

Renewables

2.3

Other sources

0.4

Total generation (TWh)

2.527

 

Source: Energy Information Administration

 

Encouraging signs

A study performed at the University of Chicago provides some encouragement for this stance. Commissioned by the Department of Energy (DoE), the study found that nuclear power compares favourably with coal and gas after the initial costs for the first new plants are paid. It notes that 'capital cost is the single most important factor determining the economic competitiveness of nuclear energy.' And while 'first-of-a-kind engineering costs for new nuclear designs could ... adversely affect competitiveness ... with the benefit of experience from the first few plants, average electricity costs are expected to fall to $31-46 a megawatt hour (MWh),' against $33-41/MWh for coal and $35-45/MWh for gas.

Myers acknowledges that 'some types of generating capacity, such as nuclear and coal, are capital intensive, but their advantage lies in their low operating costs compared with gas, which is sensitive to price fluctuations.' He says new nuclear plants must 'be competitive on a capital basis with other large baseload capacity', but adds that, given today's prices, 'nuclear can beat gas.'

However, Myers does not deny it may be difficult to build the first new plants. 'The financial community remembers previous bad experiences, when nuclear plants took longer and cost more to complete, so it will be important to persuade investors that the risk can be managed and plants can be profitable.' It is vital tocreate the business conditions necessary to make nuclear an option when companies are ready'.

Restructured licensing process

This includes validating and understanding the licensing process and thinking through the financing. 'We are working towards completing design and engineering work and testing a restructured licensing process that contains the regulatory and licensing risks to show we can build plants with a high degree of confidence, on time and on budget.' Furthermore, because 'the industry has been so widely demonised, it needs strong moral and policy support. The governmentthe Executive and Congressmust articulate that new nuclear plants are a national imperative and essential to meeting electricity demand, environmental goals, security needs and fuel and technological diversity.'

Myers considers the administration of President George Bush and the Congress 'very supportive' of the industry's goals. Indeed, the national energy policy calls for new baseload nuclear capacity to support its objectives 'of enhancing US energy supply diversity and energy security' and 'addressing increasing concerns over air quality'.

A major component of the DoE's nuclear effort is Nuclear Power 2010, a public-private cost-sharing programme that aims to: 'Identify sites for new nuclear power plants; develop and bring to market advanced nuclear plant technologies; evaluate the business case for building nuclear power plants; demonstrate untested regulatory processes leading to an industry decision ... to seek Nuclear Regulatory Commission (NRC) approval to build and operate at least one new advanced reactor' within the next few years. Another is the Generation IV Nuclear Energy Systems Initiative, a multinational partnership to develop innovative next-generation reactor and fuel-cycle systems.

William Magwood, director of the DoE's Office of Nuclear Energy, Science and Technology, says the government's programmes are intended 'to pave the way for the development and deployment of new nuclear plants' using both existing and developing technology.

Reducing costs

Recalling that no nuclear plants have been ordered in nearly 30 years, Magwood says that since 'there is little certainty about the regulatory process, investor reaction or construction time, it is difficult for the private sector to invest in new plants. The 2010 initiative is not designed to subsidise plant construction, but to help industry deal with the early costs of engineering, siting, permitting and licensing them.' By allowing utilities to evaluate several advanced reactor designs and choose among them, the programme draws on 'a valuable lesson' from the past, when it was common to design and build unique plants, a practice Magwood characterises as 'an expensive proposition'. Instead, selecting one or two models that will be built and replicated will reduce the costs of each successive plant.

To date, three separate consortia of utility companies, plant operators and vendors have applied for government funding to seek combined construction and operating permits for demonstration projects under the 2010 programme. None of them has yet announced plans to build a plant in the immediate future. Nevertheless, says Magwood: 'Decisions later in the decade would allow new plants to open a lot sooner than many people think.'

In its 2005 fiscal-year (FY2005) budget, the administration requested an appropriation of $96m for nuclear research and development, 26% less than for the previous year. Magwood stresses that there was 'no lessening of intensity' on the government's part, but notes that when the budget request was made, there was still uncertainty over the industry response to the 2010 effort. Since then, however, 'hundreds of millions of dollars have been committed to the plan.' He adds that there were 'lots of priorities to fund, so a lot of tough choices had to be made'.

While the administration seeks to move forward with advanced reactor designs considered mature enough to be built in the near termso-called Generation 3+ reactorsCongress appears to favour 'leapfrogging to the next generation', as Myers puts it. In its budget deliberations, a congressional committee approved $10m more than the DoE had requested for the Generation IV initiative. The industry, for its part, prefers the evolutionary approach, with deployment of the first plants using Generation 3+ technology by the middle of the next decade.

A persistent obstacle to progress in planning new plants is indecision over disposal of spent fuel. Now, the waste is usually stored in pools and dry casks at the site of the plant that generated it. There is continuing debate on the legislative and judicial fronts regarding a nuclear waste repository proposed for a desert site at Yucca Mountain, Nevada, 90 miles northwest of Las Vegas.

A project in limbo

Although the president and Congress have endorsed the site, local opposition groups have kept the project in limbo. Just last summer, an appeals court upheld the site choice, but ruled that the Environmental Protection Agency's (EPA) provision for 10,000 years of radiation protection was inadequate, because of the process used to develop the plan. To respond to the ruling, it would be up to Congress to pass legislation approving the protection timeframe, a move seen unlikely during an election year, or the EPA would have to rewrite the standards.

Nonetheless, Magwood says the government hopes to proceed with the project and is now trying to resolve what legislative vehicle or process should be used. In the meantime, lawmakers in the Senate are holding up FY2005 funding for the DoE's waste programme until after the election. And continuing uncertainty over the project's future is said to have caused the House of Representatives to halve the funding for the 2010 initiative, barring the NRC from licensing any project during the next fiscal year, which in any case is highly improbable.

Myers is also confident the Yucca Mountain repository will be built. He calls it 'the most thoroughly studied piece of real estate in the universe' and notes the DoE has 'spent close to 20 years and $6bn-7bn evaluating the project'. Independent experts say the science is sound and have recommended that the project go forward the facility will be easy to manage and monitor and because the spent fuel will be retrievable, it even affords significant future energy potential, he says.

But even if the DoE loses the legal challenge, it is not the end of the projectthe standards will just have to be revised. With the DoE licence application expected to go to the NRC by the end of this year and three to four years to adjudicate it, Myers says the facility could be authorised by 2007 and ready to receive fuel shipments between 2010 and 2015.

Anti-nuclear agenda

Another barrier to renewed use of nuclear energy is what Myers calls 'implacable opposition from groups with a traditional anti-nuclear agenda'. Among these are the Nuclear Information and Resource Service, a Washington-based clearinghouse for those concerned about nuclear and sustainable-energy issues. The group counters one of the industry's chief arguments in support of nuclear powerthat it does not contribute to climate change. It claims the industry ignores thenuclear fuel chain's emissions of more carbon dioxide than most real-world sustainable-energy options', as a result of 'the fossil-fuel-intensive processes involved in uranium mining, conversion, enrichment and transport, and construction of power stations'.

Furthermore, it cites projections by the International Atomic Energy Agency of uranium production now and in the future being insufficient to sustain a significant increase in nuclear generation, which could cause depletion of the uranium supply within the next two decades.

David Lochbaum, a nuclear-safety engineer at the Union of Concerned Scientists, a nuclear watchdog group, takes a more balanced view. In the debate on fossil-fired generation, gas costs and energy independence, 'nuclear power plants look better head to head in economic terms,' he says. Although the economic gap narrows depending on the alternative, their costs are still projected to be higher than other new plants. But he says the administration is attempting to narrow the gap to show their viability and notes that the programme subsidising early site permitting is 'a cheap way of keeping the option open. If the relative costs go down, nuclear power makes perfect business sense.'

However, as a safety advocate, Lochbaum stresses several issues that must be addressed. He notes that at least 24 plants have renewed their licences, which diminishes the immediate need for new plants. Yet, although many owners do a good job of managing their facilities, the ageing plants are under technical strains that challenge safety equipment.

There is also the problem of 'ageing regulations', which are not designed for today's standards. While new plants would have to meet new requirements, the older ones must meet only earlier regulations. 'We must verify the mix of regulations to ensure the previous regulations provide comparable protection to today's.' He adds that the production upgrades obtained by many plant operators may not be covered by the original safety margins for the plants.

As for new plants, Lochbaum notes that by taking advantage of lessons learned over time, many of the more recent designs incorporated improved safety features, but lacked 'robust containment'. However, the 11 September 2001 terrorist attacks on the US taught a different lesson with regard to containmentone that must be addressed. And, until the waste problem is resolved, the on-site storage of spent fuel is another cause for concern, both for safety and security reasons.

'The Yucca Mountain impasse has caused costs and risks to plant owners to go up and safety levels to go down.' Lochbaum maintains he is 'neither enamoured of nor opposed to nuclear energy', but underlines that 'if we have to have it, we have to make it safe.' Like the more entrenched opposition, he claims better choices can be found in other technologies and would like to see more effort put into increased energy efficiency and the use of renewable sources.

Compelling advantages

On the other hand, Larry Foulke, the former president of the American Nuclear Society, a professional organisation supporting the development and application of nuclear science and technology for the public benefit, says a nuclear future for the US is 'inevitable'. Nuclear is clean, environmentally friendly, affordable, reliable, efficient, safe and secure—'the advantages are too compelling not to have it as part of the energy solution.'

Foulke blames the public's visceral opposition to nuclear energy on a lack of understanding and charges that many in the media do not provide balanced information. 'The public only reads about it when something bad happens,' he asserts.

He concedes that the public's fear is real and says the chief objection to the construction and operation of nuclear plants is the perceived safety risk. But Foulke maintains that, 'there is no better protected means of producing power.' He cites plant design, which independent studies have shown would withstand damage even in the event of a plane crash, and mandated safety measures such as security guards and procedures, and emergency evacuation plans. Furthermore, he points to the safety record of US plants over the past four decades, noting that the only major incident was the one at Three Mile Island, which was 'a non-event from a radiological and public-safety standpoint'.

Foulke divides the public into three groups: those who understand the technology and risk, and favour nuclear power; those who have 'religious' aversion to it and vociferously oppose it; and the majority of the population who do not feel strongly about it and are willing to be educated. But he recognises that it is hard to reach large numbers of people and educate them properly, especially without media support.

Foulke says a majority of policymakers favour nuclear power as they recognise more and more of its benefits, and says the difficulty in funding the 2010 initiative comes more from fiscal conservatism than anti-nuclear sentiment.

Like the NEI's Myers, Foulke is convinced that the best course is to build the Generation 3+ plants. This is essential to rejuvenate the industry and the workforce, he says, which has languished during years of inactivity. It has been eight years since the most recent plant began commercial operations, and 'if they don't start building in the near future, they won't have the capability.'

How realistic is it to expect that nuclear power plants will soon be springing up around the US' Even Myers acknowledges that it will not happen quickly. Assuming the new licensing process is successful, he forecasts construction will start by the end of the decade and the first new units will be on line sometime between 2012 and 2014. And Generation IV plants are not expected to be in commercial use until after 2020, at the earliest.

According to Gerald Keenan, managing director of Palmer Bellevue, a strategic advisory and private investment firm: 'It's clear that this new breed of technology will have to be taken seriously.' Nuclear power plants are arguably competitive with coal and gas on a lifecycle basis and they produce no atmospheric emissions, which will become increasingly important, because 'even utilities are expecting a greenhouse-gas regime and any technology without emissions must be considered. With sustained high gas prices, sooner or later, even environmentalists must realise that nuclear is better than coal.'

Assuming the technology works, is licensed and safe, there are several investment factors to focus on. One is risk. 'Nuclear hasn't left behind the bad rap it had in the past, when delays were inherent in building plants,' says Keenan. 'And delay equals risk for an investor.' There is litigation potential, especially during siting and licensing, when 'a small group of people can create delay and risk, and scare off investors.' Although the new regulations are designed to avoid delays, 'the ability to secure a site will depend on the willingness of the government to use its weight to make it happen. And there is the risk that another administration may not be as committed to the next generation of nuclear power as the present one is.'

Guarantees, incentives, subsidies

The up-front capital costs for nuclear plants are higher and the operating costs lower, as they are for gas or coal-fired plants. But with a new technology that has never been used, costs may not come in where expected, Keenan notes. 'Although the technology is not experimental from a technical point of view, it is untested on a commercial level. Consequently, before putting in their money, cautious investors may require a set of guarantees, incentives or subsidies.'

With the right set of incentives, some companies could withstand the investment without suffering, or a number of different owners could get together to spread the risk, like the consortia involved in the 2010 initiative. However, 'it's one thing to participate in a licensing operation and another to come up with your share of $5bn for a plant no one has tested before,' says Keenan.

Another important cost is the long-term storage of spent fuel. The inability to gain final approval for the Yucca Mountain facility makes it difficult to calculate lifecycle costs.

In Keenan's view, the key to making nuclear energy viable lies in building a constituency. Much of the opposition is from those who 'push gas or are philosophically against anything that is not renewable and who don't seem to be concerned about the cost of electricity'. But those who support nuclear energyhave to build a bridge to environmentalists and Democrats. As long as it's seen as an industry/Republican enterprise, it will always be under counterattack,' he says. 'Nuclear proponents must reach accommodation with those who believe new nuclear plants are better than coal or gas and are willing to come to an agreement.'

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