NEI 2017 Wall Street Briefing:
Nuclear Power is Critical Infrastructure
Introduction
Good morning and many thanks for joining us today for our annual update on nuclear energy in
America.
I’m Maria Korsnick, president and CEO of the Nuclear Energy Institute. I replaced Marv Fertel,
who retired at the end of last year.
I’ve met some of you, and hope to meet many more of you in the months ahead. And I look
forward to continuing NEI’s outreach to the financial community and continuing to serve you as
a source of objective information and well-reasoned perspective.
Since this is my first briefing for the financial community, I thought it would be appropriate to
give you a little of my background.
My first job out of college was as an engineer at the Calvert Cliffs nuclear plant in Maryland,
where I worked for 17 years.
I was a senior reactor operator at Calvert Cliffs, site vice president at the Ginna plant in upstate
New York, corporate vice president of operations at our Baltimore headquarters, chief nuclear
officer of Constellation Energy Nuclear Group and, before I joined NEI in 2015, I was senior
vice president of Exelon’s northeast operations, responsible for five reactors across New York
and Maryland.
So I’m an operations person through and through – keenly aware of what it takes to safely
operate nuclear plants, and what it takes to operate a reliable electric system.
You will learn that I am also passionate about nuclear energy.
I am convinced that nuclear energy, by any objective measure, represents the most complete
value proposition of all sources of electricity. Nuclear energy is essential to a robust, sustainable
electric system – one that will continue to deliver reliable, affordable electricity while meeting
environmental policy goals.
Our nuclear plants drive regional economies by providing hundreds of well-paying jobs.
I firmly believe that the U.S. is the global leader in nuclear energy today and that it must
continue to embrace this leadership role.
The U.S. has the largest fleet of nuclear power plants, and the Nuclear Regulatory Commission is
viewed as the global leader for ensuring safety. This leadership is predicated on having a strong
nuclear industry that is building for the future.
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In my time with you today, I would like to lay out a vision for nuclear energy and provide an
assessment of key issues facing the industry.
This vision begins with the vital role that nuclear power plays today and in the electricity system
of the future.
I will discuss the actions in New York and Illinois to value nuclear energy as part of a broader
policy landscape.
I will also highlight some of the key numbers that define the state of the industry.
Finally, I will conclude by discussing the critical role of US nuclear leadership, and then I will
take your questions. We also will have handouts for you at the conclusion of the Q&A session.
Nuclear Power’s Vital Role
Our operating nuclear plants are the backbone of the U.S. electric system, and a critical part of
our national infrastructure.
Think for a moment about the essential services they provide. Nuclear plants run nearly all the
time, impervious to weather conditions. Uncertainty or interruptibility of the fuel supply is a nonissue, unlike gas, renewable energy, and coal. The cost of electricity from a nuclear plant is
affordable and stable.
Due to uranium’s extraordinarily high energy content and stable prices, nuclear electricity has
very little price volatility, making it a valuable part of a portfolio. Nuclear plants are tremendous
economic engines. Collectively, the nuclear industry contributes about $60 billion every year to
the U.S. economy.
The nuclear fleet supports over 475,000 jobs and produces over $12 billion annually in federal
and state tax revenues. Over its entire lifetime, a single two-unit plant creates the equivalent of
1,000 jobs for 60 years!
Nuclear plants provide a unique combination of large capacity, dispatchable generation, and
enormous clean air compliance value. Nuclear plants do not emit pollutants such as carbon,
sulfur or nitrous oxides. Independent studies estimate the value to society of avoiding these
emissions at roughly $33 billion per year.
These are long-lived assets, operating for 60 to 80 years. The new plants now under construction
in Georgia and South Carolina will still be operating in 2080, and quite possibly at the end of this
century.
Nuclear power is critical to the national energy infrastructure. It provides sustained economic
benefits to the entire economy. It plays a key role in assuring grid reliability. It is by far the
largest source of clean energy.
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When a nuclear plant closes because the markets do not fully value the services they provide, the
negative economic consequences of these shutdowns cascade.
In many areas, the local nuclear power plant is the economic anchor of the community. These
shutdowns are painful for nuclear plant employees and for their communities.
We will see these impacts play out over the next few years in the wake of announcements that
five nuclear plants will be closing, including Indian Point here in New York.
The financial community and power companies are often focused on immediate challenges and
opportunities.
NEI is working side-by-side with the companies operating our nuclear plants to address these
challenges. We are focused on ensuring that their economic value is fully recognized, and that
they enjoy an efficient, risk-informed, safety-focused regulatory environment.
But we cannot allow short-term priorities to consume all of our attention and resources.
Let me ask you to think 25 to 30 years ahead. I know that seems like a long time, but it’s the
blink of an eye when we’re thinking about planning for our electric infrastructure.
We expect a lot from our power system. Low costs are always important. We need our plants to
be flexible, adapting to changing demand. Excess capacity is needed to keep the lights on when
the system is stressed. Dispatchable generation is needed to step up when intermittent sources
fall.
We want fuel diversity for energy security and to prevent price swings. And we want to make
sure that this is done while protecting clean air and clean water for all.
Doing all of this right requires thinking decades ahead, in terms of both policy and technology
development. Nuclear power will play a vital role in meeting these needs.
Within 25 to 30 years, the U.S. electric grid will include a range of reactor types that will expand
the roles for nuclear energy in the economy.
These designs are the outgrowth of decades of continuous innovation combined with scientists
and entrepreneurs such as Bill Gates who see a new generation of nuclear technology.
The grid of the future will include a growing role for intermittent renewable energy.
So the nuclear reactors of the future will accommodate that reality. Some will make electricity
around the clock. Others will produce electricity when it’s needed, then produce other products
when it is not. Some will supply the transportation market. Nuclear electricity will charge
batteries and nuclear process heat will make alternative fuels. Some reactors will make fresh
water. Some will drive industrial production. Some reactors might even produce energy from
today’s used fuel, reducing the disposal burden.
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The runway to that future is a continuum of development and innovation. The journey starts with
preserving America’s existing nuclear power plants. Almost all of the reactors in the U.S. have
received a renewed license to operate for 60 years. The industry is working to enable additional
license renewals that will allow them to safely operate even longer.
The knowledge and expertise developed in support of today’s fleet will be the base used to
develop those new technologies.
We see this now. We have four reactors under construction in Georgia and South Carolina.
These designs use passive safety approaches to advance the state of the art in nuclear technology.
This approach was informed by decades of operational experience and innovation.
Beyond the four being built, nuclear plant owners have already received construction-operating
licenses for seven additional reactors and three more are being evaluated at the Nuclear
Regulatory Commission. These licenses provide valuable options as companies look to the
future.
Small modular reactors – SMRs – will be ready in the early to mid-2020s. These are designs that
use their smaller size to maximize safety and rethink how nuclear plants could be configured.
They will offer flexibility in deployment and operation.
Last month, NuScale became the first company to apply for a SMR design certification from the
NRC. The industry also is pressing ahead with the development and deployment of advanced
non-light-water reactors in the 2030s.
This is truly a journey, and each step is important.
Industry and government must play the short game and the long game with equal energy and
commitment.
Allowing existing nuclear plants to close prematurely will compromise America’s ability to
develop a sustainable electric sector. Premature closures will cause significant economic
damage. The loss of expertise, and erosion of the commercial infrastructure will severely limit
the ability to develop the grid of the future.
A promising future creates a compelling rationale for tackling challenges in the present.
A Tipping Point
With that vision of the long-term in mind, let me now give you a view of the policy landscape
addressing the challenges facing our reactor fleet.
We are reaching a tipping point as policymakers have come to appreciate the risk of losing
nuclear plants. We have come a long way in a relatively short period of time.
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A short story will illustrate. In September 2013, NEI senior management met with senior
officials at the Department of Energy and the Federal Energy Regulatory Commission to make
sure they understood the challenges facing our operating nuclear plants.
At the time, the Kewaunee plant in Wisconsin had just closed, and the Vermont Yankee plant
was scheduled to close at the end of 2014. We told DOE and FERC that many others were at risk
– thanks to low growth in electricity demand, low natural gas prices, state and federal policies to
promote renewables, transmission constraints, and other factors. This was a surprise to many. Let
me paraphrase a typical response from one FERC commissioner:
“I had no idea …I thought it would always be 20 percent of U.S. electricity supply. I guess I was
taking it for granted.”
Since then, companies have either shut down, or announced the shutdown, of seven additional
reactors. And, as you know well, others are still at risk.
However, I believe the tide is turning. The federal government, the regional transmission
organizations and the states now recognize the problem, and are moving to reform the
competitive markets where the greatest threats exist.
First, the FERC is taking actions to support reforms to the capacity markets and the energy
markets. Accurate price formation in the energy markets is particularly important, because a
baseload nuclear plant derives most of its revenue from the energy markets.
While we don’t think these changes will solve the problem, they will be part of a solution.
Second, several of the regional transmission organizations – including ISO-New England and
PJM – recognize the challenges occurring in the energy markets due to requirements imposed by
federal and state policies. Organized markets are facing the need to reconcile state policies to
address environmental and price stability needs with the economic signals coming from the
market.
For example, recognizing that the New England states have developed a patchwork of state
mandates, the New England Power Pool is taking a close look at the issues. Stakeholders in the
region are exploring how they could achieve environmental policy goals through the wholesale
markets. Designing markets that can consistently value important aspects of our infrastructure
will lead to better decisions in the long-term. It is too soon to tell if these processes will lead to
near-term changes, but they are clear signals that the markets will need to evolve to meet the
changing landscape.
While federal and market policymakers have begun working through these complex issues, states
have taken the lead in acting to preserve nuclear generation.
NEI is working with members and industry coalitions in these states to increase appreciation
among policymakers and the public for the critical value of existing nuclear plants.
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Over the past year, we have seen two extraordinary and precedent-setting accomplishments when
New York and Illinois adopted policies that level the playing field for nuclear energy.
These policies ensure continued operation of several nuclear plants that would otherwise have
shut down. The zero emission credits contained in the New York and Illinois policies
demonstrate that states recognize the monetary value of the different attributes of nuclear power.
In New York, NEI supported efforts by labor allies and advocacy groups to put in place a Clean
Energy Standard that preserved the upstate nuclear plants. The plants will receive zero-emission
credits, recognizing the clean-air attributes of the power they produce.
The Ginna, FitzPatrick and Nine Mile Point plants upstate will be able to continue operating due
to these credits. By keeping these plants open, the program will save New York consumers over
$1 billion each year through lower electricity prices.
In Illinois, NEI teamed with power companies, business and labor groups to achieve passage of
the Future Energy Jobs Bill. This legislation recognizes the value of nuclear energy to the state’s
clean-air goals by introducing a zero-emission standard. This law will allow the Clinton and
Quad Cities plants to avoid closure and preserve the more than 4,000 jobs supported by them.
New York and Illinois serve as examples to other states that effective solutions are possible, even
in competitive markets. The nuclear industry is sharpening the focus of its advocacy efforts in
other states where major policy opportunities exist.The Connecticut legislature is expected to
consider a clean energy procurement process that would include nuclear energy, placing it on
even footing with other non-emitting sources. Policy opportunities are emerging in Ohio,
Pennsylvania and New Jersey.The best solutions will be ones that reflect the needs and
opportunities of each state and region.
We are painfully aware of the serious challenges facing us. The forces that are putting pressure
on the competitive generation sector are taking their toll on the nuclear fleet.
But 2016 is also when we began to see the ocean liner change its bearing.
We see states, regions and the federal government taking actions to preserve our nuclear power
plants. The industry was able to work with stakeholders to preserve five nuclear plants that
would have otherwise shut down. We will continue working to find policy solutions that allow
these plants to remain part of our electric infrastructure.
“Nuclear by the Numbers”
Now, let me move away from the policy world and instead highlight some key numbers that help
to characterize the state of the industry.
90 percent. Collectively, the nuclear power plant fleet achieved an average capacity factor in
excess of 90%, as it has for nearly 15 years. The availability and reliability implied by this
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number reflects the sustained level of operational excellence from the fleet. The capacity factor
also represents the critical role that nuclear power plays in providing stable baseload power
essential to grid reliability.
$6.3 Billion. The nuclear industry collectively invested $6.3 billion in 2015 to adopt new
technologies, enhance power plant operations, increase equipment reliability, and expand
technical training.
We will see the 2016 data next month, but as you can see, the nuclear industry is consistently
making the investments that will allow the fleet to operate safely to 60 years and beyond.
$650 Million. NEI introduced the Delivering the Nuclear Promise program last year at this
briefing. This industrywide effort to seek greater efficiency in plant operations has already
identified $650 million in potential savings. Over a thousand staff across the industry have
collaborated to develop 46 efficiency bulletins targeting improvements in all aspects of
operations. To date, over 95% of these measures are being implemented, reflecting the
commitment to continuous improvement. We are just getting started.
19.5 percent. Nuclear energy continues to supply more than 19% of electricity in the U.S. The
long-lifetime of nuclear plants provides a bridge to the future as shorter-lived assets age and
must be replaced. Failing this, the United States will face a massive replacement of over half of
U.S. generation capacity by mid-century.
The loss of nuclear plants will have economic impacts as well. Earlier I mentioned that the
nuclear industry contributes over $60 billion each year across the U.S. economy. However, when
plants close, those losses are concentrated in communities and regions that have dramatic
consequences. I’d like to focus on the how the closure of Vermont Yankee is being felt in their
region.
$493 million. This relatively small nuclear plant was an economic engine for Southern Vermont
creating $493 million in economic activity. Every year. Vernon is a town of 1,200 whose
economic welfare depended on the plant and its employees. As the plant ceased operations and
began winding down its activities, the impacts were felt beyond the economy.
A former elected official in Vernon described the sense of loss in the community. Plant
employees were deeply involved in all parts of civic life such as the schools and the volunteer
fire department. Charitable organizations aren’t sure how they are going to be able to serve those
in need without the donations from plant employees.Housing prices in the region fell over 25
percent.
If more and larger plants are closed, these are the kinds of impacts will be repeated in other
communities and at even larger scale. Devastating impacts like these drive our efforts to prevent
early closure of plants, even as the industry is simultaneously building for the future.
5,500 Megawatts. By 2021, the U.S. will have added 5,500 megawatts of new clean air nuclear
capacity. Watts Bar Unit 2 entered commercial operation last October, while the new units at the
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Vogtle and Summer plants continue to drive toward completion. Combined, this added capacity
will equate to 44 million megawatt-hours of electricity every year. This is equivalent to the
generation from 25 typical combined cycle natural gas plants, and it is more than all of U.S. solar
generation in 2015. These new units will deliver economic, environmental, and grid security
value well in excess of the investment.
And note that many of the insights gained in building and licensing these units will apply to
small modular reactors and advanced non-light water reactors in the future.
The nuclear industry has the performance, the capability, and is making the investments
necessary to sustain and expand the nuclear fleet. This presents our government and investors the
opportunity to ensure a sustainable energy infrastructure for the long-term future.
Nuclear Plants are Critical Infrastructure
While it is difficult to make predictions about the Trump Administration in these early days, it
seems clear that his priorities include improving our infrastructure and creating jobs. Nuclear
energy will serve these priorities well.
We do need to address infrastructure. Every year, the World Economic Forum publishes a Global
Competitiveness Report, ranking the world’s 138 economies. In the 2016 report, the United
States ranked third overall. But measured by its infrastructure, the United States — the world’s
largest economy and most powerful nation — ranked 11th. Even worse, the quality of electricity
supply in the United States was ranked 17th. The American Society of Civil Engineers’ most
recent report card gives the U.S. energy infrastructure a D+ grade.
Large parts of our electric power infrastructure are in solid shape. Capital investment has
increased steadily over the last 15 years – from approximately $40 billion a year in the early
2000s to about $100 billion a year today. But most of this has gone to transmission, distribution,
natural gas, and renewables.
The part of America’s electricity infrastructure in urgent need of attention is the baseload plants
that form the backbone of America’s electric grid. The nuclear and coal-fired fleets represent
more than half of U.S. electricity supply. They play a key role in grid stability and stabilize
electricity prices, acting as an essential hedge against price volatility and supply interruptions.
By 2040, half of the nation’s nuclear fleet will have turned 60. The existing fleet provides a
platform to invest in new technology, but we must look to make that investment before it is too
late.
So the nation faces two challenges. First, preserving as much of its baseload infrastructure as
possible which includes existing nuclear capacity, and second, creating the policy conditions
under which companies will develop and build the new nuclear technologies that the nation will
need in the 2020s, 2030s and beyond. This is the investment gap in U.S. electric infrastructure
that federal and state policy-makers must address.
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I’ve already discussed what we’re doing to preserve our existing nuclear plants. Let’s discuss
new nuclear build. It may seem strange to think about the construction of more nuclear plants at
a time of low natural gas prices and slow load growth. But like other major infrastructure
investments, it is critical to anticipate gaps with long-term planning and early investment.
It is difficult to imagine an energy infrastructure project that produces more jobs and economic
benefits than construction of a new nuclear power plant.
Consider the four new nuclear units being built at the Vogtle site in Georgia and at the V.C.
Summer site in South Carolina. They are due to start operating in a few years and now more than
halfway through construction. They employ a workforce of approximately 3,500, not including
the tens of thousands of indirect jobs created to support the projects and their workforce. These
new units will ultimately each employ 700-1,000 skilled workers who will operate these plants
for 60 years to 80 years. These projects are likely the largest infrastructure projects ever
undertaken in those two states.
In fact, when Vogtle and Summer are completed is precisely the time for companies to move
forward with construction of additional units.
The detailed design and engineering on the AP1000 at Vogtle and Summer will improve cost and
schedule certainty for future projects. The lessons learned from these two projects can be applied
to new ones both in the regulatory process and in construction and startup activities.
Let me give you an example of where we are already seeing this learning take place. The design
for the AP1000 includes large modules that are fabricated and then carefully placed into the plant
with great precision. The CA-20 module, for example, is huge – more than 1,000 tons. It took
over 15 hours to place it in position for Vogtle 3. The same task took less than an hour for unit 4.
Opportunities for further cost efficiency in building new nuclear plants exist through
standardization and new financing approaches.
We know this can work because we have seen it elsewhere. Using a single reactor design
and building at a steady pace, South Korea was able to reduce construction durations from 64
months to 52 months over the course of a decade. Faster, more efficient construction translated
into lower cost – about 30 percent.
I cannot think of a reason why we could not do this in the United States. Innovative financing
and ownership structures will also reduce cost. The major challenge for a new nuclear project is
scale. These are large capital investments – on the order of $7-billion for a new reactor – being
built by relatively small companies. New nuclear projects require financing support to manage
the risk.
The federal loan guarantee program – authorized in the 2005 Energy Policy Act – is an essential
financing technique. Loan guarantees allow employment of higher leverage in the project’s
capital structure, and a broader range of financing structures. Like other major elements of the
national infrastructure, nuclear plants provide tremendous and far-reaching benefits for nearly a
century.
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Maintaining U.S. Leadership
Let me conclude with a few thoughts about nuclear energy and America’s global technology
leadership.
In the world’s future, nuclear energy will clearly play a very important a role. The 2016 World
Energy Outlook from the International Energy Agency forecasts an 80 percent increase in
electricity generation from nuclear power worldwide by 2040. Under a more aggressive
decarbonization scenario, nuclear output increases 140 percent by 2040.
In order to retain its position as a world leader, America must lead this transition toward
increased nuclear generation, not follow it. Yet while the US brought the world into the nuclear
age and our companies dominated nuclear trade for decades, today the Chinese and the Russians
are ahead in the global nuclear marketplace. Nearly two-thirds of all nuclear power plants under
construction use Chinese or Russian designs. For the past decade or more, Russia and China
have pursued long-term strategies to develop a robust domestic nuclear program and to export
nuclear technology. These countries understand well the leverage that comes from supplying
energy, and are aggressively using the supply of nuclear energy technology to strengthen their
hands in Eastern Europe, Asia, and the Middle East. Unfortunately, the U.S. has not viewed the
nuclear industry strategically and has not responded effectively to the threat posed by Chinese
and Russian efforts to dominate global nuclear markets.
Although U.S. nuclear technology suppliers still have the most advanced, most innovative and
safest technologies, they start at a disadvantage, competing against sovereign entities around the
world. U.S. government support for nuclear suppliers – including a strong export credit agency
in the U.S. Export-Import Bank – is essential.
Let me conclude with a final thought:
To preserve its ability to shape global use of nuclear technology, the United States must have
both a strong domestic nuclear power program and an aggressive nuclear trade and export
program.
The US will not be seen as a credible global nuclear leader if it casually allows its nuclear fleet
to atrophy. All of this begins with strong nuclear energy infrastructure at home.
Thank you and I’d be happy to take questions.
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