The 21st Century Electrification of America -and the role of nuclear power- Dr. Nils J. Diaz 28th Annual Bonbright Center Electric and Natural Gas Conference Atlanta, Georgia October 9-10, 2008

The US Energy Arena The search for better solutions to the demanding USA energy arena continue unabated. Our quality of life, economical, political, environmental and national security issues require sector-specific and comprehensive solutions. The US “engines” need diversified and reliable energy supplies. The resolution of the energy quagmire needs policies that must include conservation, increased efficiency, reduced reliance on foreign sources, development of national and secure resources, and advanced technologies. And, last but not least, every solution must be based on sound environmental stewardship, from the source to the end-user, and must include consideration of globate climate and environmental impacts.

The Electrification of America The electrical supply in the USA has the capability of expanding “rapidly” to support the needs of the nation, and to comply with requisites. I believe it is essential to electrify America, with a 21st century grid, a reliable and secure electrical grid that increasingly relies on assured fuel supplies, advanced technologies, predictable prices and a reduced carbon burden. The 21st century grid has to be able to support the stepwise electrification of the transportation sector. The new electrical grid would have to use clean coal, and increasingly nuclear and wind power while supporting the stabilization of the demand and supply of natural gas and liquid fuels. The electrification of America is a pathway that befits our economy and security interests. Nuclear electrical generation must be relied upon as a key part of the solution.

Major Existing Developments Supporting Global Deployment of New Nuclear Generation Multiple favorable socio-political, environmental and economic factors, and the need for replacing and adding base-loaded electricity supply without a carbon burden. A mature nuclear industry, with a strong and sustained record of safe, reliable and economic electrical generation. Advanced, standardized LWR reactor technologies with proven modular construction techniques for schedule and cost control. Safe and secure used fuel management, with new strategic directions for comprehensive resolution of fuel storage, recycling and disposal of radioactive wastes. Mature federal and state regulators, with the capability to discharge their licensing and regulatory authority for predictable safety, with due consideration of economics and on schedule, as appropriate.

U.S. Electricity Production Costs 1995-2006, In 2006 cents per kilowatt-hour Production Costs = Operations and Maintenance Costs + Fuel Costs Source: Global Energy Decisions Updated: 6/07

Role of Regulation in a Democracy To regulate or not to regulate, a democratic choice. “the maximum of individual freedom consistent with order” (R. Reagan). Regulation must result in a benefit or it will result in a loss. “Government can and must provide opportunity, not smother it; foster productivity, not stifle it” (President Ronald Reagan). The regulation of nuclear electrical generation, federal or state, should serve the public interest by enabling the safe, secure and environmentally responsible use of nuclear power in meeting the nation’s energy needs. Nuclear regulation must be credible and open: there is no credible regulator w/o a credible industry and there is no credible industry w/o a credible regulator. New reactor deployment requires regulatory bodies with the capacity to establish a framework to serve the nation now, without duplicative efforts.

New NRC One-Step Licensing Processes Licensing decisions finalized before major construction begins Utilities would order plants when regulatory/financial risks are reduced Limited work may be authorized before COL issuance Pre-Construction Construction Verification Early Site Permit Standard Design Certification Combined License Review, Hearing, and Decision Verification of Regulations with ITAAC Reactor Operation Decision Optional Pre-Application Review Let me first walk through the licensing process. The process starts with an option to enter into pre-application activities with the NRC. Pre-application activities are very important, especially in areas where new concepts are being used or where the applicant is conducting work that will be used for developing the application. Bringing the NRC staff on board early helps facilitate the review when the application is submitted. It also helps us identify any new regulatory tools that we need in order to be ready for the application. The rectangles on the left show that siting and design information is required. The application could reference either an early site permit, a certified design, both, or neither, as long as it provides sufficient information for the review. Referencing an early site permit and/or a certified design would be of great value because a good portion of the review would have been completed early. The ellipse in the middle captures the review of the COL application, the hearing that takes place, and the Commission’s decision on issuance of the license. The license would include ITAAC. These are the inspections, tests, analyses, and acceptance criteria that we have determined are necessary to demonstrate that the as built plant meets the regulations. It would also include any necessary license conditions. For example, license conditions could be used to capture startup testing requirements. The vertical dashed line shows that major construction activities would occur after the issuance of the combined license. The square to the right of the dashed line shows that following construction and before fuel loading, the licensee would complete the inspections, tests, and analyses to demonstrate that the plant as constructed meets the acceptance criteria. The NRC staff would verify that this has in fact occurred and the Commission would follow with the necessary finding that the acceptance criteria have been met and would authorize operation. The licensee would then commence fuel loading and startup activities.

New Nuclear Build Drivers Security of Supply > Supplies of uranium are abundant, diverse and well established > Reduction of dependence on imported gas > Long term operation, free of market and nature Economic Stability > Strong contributor to long term electrical and gas price stabilization > Major contributor to workforce and industry stability Environmental Stewardship and Minimal Carbon Burden > Environmentally benign footprint > Near zero carbon emissions > Effective carbon abatement

Issues to be Resolved Include Cost and financing: last 15 months escalation pressures on an already unsettled market A few chicken and egg propositions, like: what is the real cost before the plant is designed and who pays for the design upfront? The real sequence of licensing and engineering and procurement activities to minimize risk and accelerate the projects, as illustrated by the unresolved issue of the Design Certification and COL timing

The Electrification of America: the nuclear component Many major predictability components are favorable to the deployment of new nuclear power plants. Federal and State licensing and regulatory processes must be conducted at the front end, placing the risk prior to construction and the major financial investments. Need to continue to promote political support and to address public perceptions. Financial issues are now dominant. High initial capital cost needs to be considered in the full context of plant life generation costs, the added value of fuel diversification, minimal carbon burden and stable kW-hr price to the economy. Carbon taxation is favorable to renewables and nuclear. Large capacity, fission-powered generation should be added now to the nation’s energy portfolio for the security, long term economic benefits, sound environmental stewardship and the well-being of our people.

Summary Conclusions Many major predictability components are favorable to the deployment of new nuclear power plants. Licensing processes most place the risk at the front end, prior to construction and the major financial investments. Order, discipline and quality, all wrapped around the project management and regulatory management, are required, now not later. Financial issues are now dominant: capital costs and production costs. Large capacity, fission-powered generation should be added now to energy portfolios for the nations’ security, the long term economic benefits, for sound environmental stewardship and the well-being of our people