Shaping the Future
of Nuclear
Energy
Remarks
by Joe F. Colvin
President and CEO
The Nuclear Energy
Institute
NEI Fuel
Cycle 99
Austin, Texas
April 12,
1999
Good morning,
and thank you for joining us for Fuel Cycle 99.
I would like to
thank Wes Taylor for his Texas hospitality and his kind
welcome to Austin and the Lone Star State.
Since I grew up
in a neighboring state, before I get started I thought I'd
share a tip that might help you better appreciate the unique
character of Texans.
If a person is
from Texas, he or she will tell you.
If they don't
tell you, don't embarrass them by making them admit that
they're not a native!
I am delighted
to be able to address this fuel cycle conference—and this
vital sector of the nuclear energy industry.
No matter how
bright the future of our industry—and I believe it is
brilliant—without a robust, stable and predictable fuel cycle,
nuclear energy cannot prosper.
You and your
companies are integral to our current success and will become
even more so in a competitive electricity marketplace.
And like nuclear
power generation, your business is a global industry—as the
large international presence at this conference clearly
demonstrates.
Other
similarities exist. Like the power generation side of the
business, the nuclear fuel industry is experiencing
consolidation.
And just as the
generators are experiencing change, the emergence of secondary
sources of material is changing the calculus of your business.
But these
changes are providing new, challenging and rewarding
opportunities.
This past year
certainly was one to remember across our entire industry. We
made important gains in a number of areas, including
competitiveness and market restructuring, regulatory reform
and resolving the used fuel issue.
USEC went
public… and we recently resolved the commercial aspects of the
U.S.-Russia HEU agreement.
We have seen the
financial community grow to be bullish on the nuclear
industry… and on the trend toward consolidation.
Leading Wall
Street utility analyst Robert Rubin put it very simply when he
recently noted that the "people who are buying the nuclear
plants are very smart."
Policymaker
support is also stronger than ever. Congress, in particular,
is increasingly supportive of nuclear energy.
This morning,
I'll speak about some of those events that are shaping the
destiny of our industry.
I probably will
violate the important tenets of "Texas-speak," which are:
"Talk low, talk slow and don't say too much."
But I want you
to share my confidence and optimism about the future of
nuclear energy.
Along the way, I
will touch on some broad issues, which our distinguished
morning panel—and others over the next two-and-a-half
days—will delve into in greater detail. I would like to thank
all of our speakers in advance for their participation,
and—like you—I am eager to hear what they have to say.
The importance
of nuclear energy to the United States and to the world is
increasingly being recognized by a large and diverse audience.
From
policymakers to opinion-shapers… from the financial community
to the people at our nuclear power plants…
…there is a
growing awareness that ours is a proven industry with 8,6001
reactor-years of operating experience worldwide…
…and with a
product that will become increasingly valuable as we tackle
the pressing demands of the 21st century.
One reason for
this enhanced recognition—and a primary reason we should be so
optimistic about the future of our industry—is the long, hard
work and dedication of the companies and individuals that
energize our business.
Our industry is
poised to capitalize on the opportunities before us today…
because those that make it work never stopped learning from
the past and preparing for the future.
They never lost
sight of the fact that the objective test of any technology is
a proven track record of excellence.
Over more than
four decades of successful operation, all the key indicators
of nuclear energy's safety and reliability have improved
steadily.
We have fewer
unplanned shutdowns, fewer safety system actuations, fewer
forced outages, higher capacity factors and higher
reliability.
For example,
last year U.S. nuclear power plants achieved an 87 percent
unit capability factor… and 98 percent of units achieved
safety system performance goals set for the year 2000.
In fact, from
1990-1998, increases in capacity factor at the nation's
nuclear plants resulted in an 11 percentage point increase in
nuclear generation.
That translates
into the rough equivalent of adding 11 new 1,000-megawatt
plants to the grid.
With more than
100 nuclear power plants providing about 20 percent of
America's electricity, it is clear that the U.S. nuclear
energy industry has passed the excellent-track-record test.
Another reason I
believe we all should be optimistic about the future of
nuclear energy is the advent of competition in the electric
power industry.
As I have said
on a number of occasions, competition is one of the best
things to happen to nuclear energy in many years.
Three years ago,
as restructuring started in earnest, the U.S. nuclear power
industry faced an uncertain future.
There were
significant unanswered questions about recovering the capital
invested in nuclear plants… and about nuclear energy's ability
to compete in a deregulated market.
All in all, a
lot of hand wringing!
Today, the level
of uncertainty is significantly reduced, the fundamentals of
the nuclear business are sound, and our economic prospects are
bright and getting brighter.
Twenty
states—encompassing 52 operating nuclear units—have taken
final action on electricity restructuring plans. Most states
have provided utilities with a reasonable opportunity to
recover stranded costs.
All things
considered, most nuclear plants are well-positioned for a
competitive commodity market.
Based on a
three-year rolling average (1994-1997), the United States had
nine nuclear units producing electricity below 1.5 cents per
kilowatt-hour, and 40 units producing at below 2 cents per
kilowatt-hour.
Below 2 cents
per kilowatt-hour is more than competitive.
This is
important because plants with the lowest production costs also
tend to be the industry's most efficient and safest units.
Strong economic
performance is consistent with safety.
Moreover, as
competition develops, many nuclear plants should be able to
improve their economic performance significantly.
The industry is
well-positioned for competition today largely because
individual companies, and the industry as a whole, started
working to improve economic performance in the late 1980s.
As a result,
nuclear power generation costs are declining and can decline
still further.
Through
innovation and cost-effective fuel cycle operation, your side
of the business has greatly aided cost-management on the
generation side of the business.
These positive
trends are being formalized in the historic move toward
license renewal and plant purchases.
Already, two
companies have filed for 20-year license extensions for their
combined five units… and at least six other companies have
notified the NRC of their intention to do so in the near
future.
Mike Tuckman of
Duke Power will discuss this issue in greater detail shortly.
Suffice it for
me to say that the future will see more relicensing
initiatives that will cost less and take less time.
Additionally,
two2
nuclear power plants are being purchased by companies making
the deliberate decision to focus their core business on
nuclear energy generation.
At least three3
other plants are being examined as potential candidates for
purchase.
Moreover, when
the "hidden value" of nuclear energy's emission-free nature is
added to the mix, nuclear power becomes an even more valuable
asset.
It is clear that
it will be impossible to balance future electricity demand
with increasingly stringent clean air imperatives without at
least maintaining the present level of nuclear generation.
When the
ambitious goals of the proposed Kyoto Protocol are taken into
account, the stage is set for more license transfers and
renewals and—eventually—the expansion of nuclear generation.
And while the
Congress remains undecided about the Kyoto Protocol, its
commitment to carbon abatement strategies is clear.
In short,
today's nuclear industry is reinventing itself to deal with
the business of nuclear energy and competition.
But for nuclear
energy to compete on an equal footing with other forms of
generation in a competitive electricity marketplace,
regulatory reform is a prerequisite.
Fortunately, we
have seen remarkable progress at the NRC toward comprehensive
regulatory reform..
Driven by
competition, the industry will become more business focused,
and the regulatory process must follow suit.
A strong,
credible, effective regulator is essential to our industry.
Establishing
standards where needed is a matter of necessity. Eliminating
requirements where not needed is essential.
These actions
will be key to reducing unnecessary costs and to establishing
more efficient regulatory processes.
The Nuclear
Regulatory Commissioners and senior staff recognize the
inherent value and necessity of changing the existing
regulatory process to make it more effective and
safety-focused.
The commission
initiated programs to implement risk-informed regulation,
inspection and enforcement.
The plant
assessment process also needs to be improved… and the NRC has
initiated a review and reform of that program.
The focus here
is clear: objective, clearly defined requirements that are
sharply focused on public health and safety.
And while the
major focus has been on power plant regulation, the NRC and
the industry are also vigorously pursuing risk-informing fuel
cycle facility regulations.
These NRC
actions are commendable and consistent with the direction in
which the industry believes the regulatory process must move.
However, the
onset of competition means that time is of the essence.
As you are
aware, both the fuel cycle business and the nuclear power
generation business depend on an equitable and timely
resolution to the used nuclear fuel situation.
The industry has
adopted a three-pronged approach to the federal used nuclear
fuel program that involves:
- Litigation
- Legislation
and
- Program
initiatives.
All three areas
work together.
Litigation—especially
with the potential for large monetary damages—gives Congress
and the administration an impetus to fulfill its statutory
obligation.
Comprehensive
legislation—which 70 percent of the last Congress
supported—also would encourage the administration to move
forward and execute a successful repository program.
Legislation
calling for temporary storage of used nuclear fuel is
currently before both houses of Congress.
In turn, a
successful repository program gives Congress the confidence
that it can legislate temporary storage at Yucca Mountain
because of the prospect that the repository will be
successful.
The Yucca
Mountain viability assessment issued last December is an
important indicator that the repository will function as
expected.
Ten lawsuits are
pending before the U. S. Court of Federal Claims seeking more
than $4 billion in monetary damages as a result of DOE's
failure to begin removing used fuel from plant sites.
In the first
three lawsuits, the court found that DOE was liable for
damages caused by its breach of contract with the utilities.
These lawsuits are now in the damage assessment phase.
Two months ago,
Energy Secretary Bill Richardson floated a concept that the
administration believes would resolve the impasse.
Under the
concept, DOE would "take title" to used nuclear fuel at plant
sites in exchange for utilities' dropping litigation against
the federal government.
The Energy
Department intends to finance its used fuel caretaker role by
drawing monies from the Nuclear Waste Fund.
Theoretically,
the department plans to begin moving fuel to the permanent
repository once it opens in 2010.
I say
theoretically because—based on current budget rules—DOE could
not complete the repository until 2020… or even later.
Furthermore, by
drawing down the Nuclear Waste Fund, DOE likely would
aggravate already contentious appropriations issues… and
postpone the date for operation of a permanent repository even
further.
While elements
of Secretary Richardson's concept show potential as part of a
comprehensive approach, as an alternative it falls short of
meeting the industry's critical needs and DOE's legal
responsibility.
Simply stated,
the devil is in the details, and the department has yet to
provide any details.
Nevertheless,
the concept may serve as a starting point for a constructive
dialogue between DOE and the industry on how to resolve this
formidable problem.
In the meantime,
the industry must aggressively pursue implementation of the
federal integrated used fuel management system.
Collectively,
the industry supports the two bills that have been introduced
in Congress—H.R. 45 and S. 608.
We believe—first
and foremost—that this legislation is the key to resolving
this very tough problem.
As the old adage
goes, paths clear before those who know where they are going…
and are determined to get there.
The nuclear
energy industry knows where it is going and is very determined
to get there.
But in order to
reach our destination, we must maintain industry consensus on
that direction.
And we must
intensify our efforts to secure lasting and meaningful change.
Nuclear energy
enjoyed a banner year in 1998, and indications are that that
will continue. I am also confident that new nuclear power
plants will be built in the United States.
On Capitol Hill,
both houses of Congress have shown increased interest in a
wide range of nuclear technology issues.
The Senate
Nuclear Caucus and the House Nuclear Issues Working Group are
exploring in detail the entire gamut of nuclear energy issues,
from medical isotopes to power generation.
Nevertheless,
most outside the industry remain oblivious to how safely,
reliably and economically the nation's nuclear plants produce
electricity.
Despite the fact
that nearly two-thirds of the public supports nuclear energy,
focus-group results suggest that the majority of college
educated, registered voters believe that there are fewer than
10 nuclear power plants operating in the United States.
The public
simply does not understand what we do, how safely we do it,
and how important nuclear-generated electricity is to the
well-being of our nation.
Nuclear energy
and nuclear technologies are a major part of everyday life,
but an image problem persists even among the most informed
members of the public.
This can only
constrain efforts to reinvent and revitalize the nuclear
energy business.
Moreover, we
can't rely on the media to correct the problem.
During the
recent observance of the 20th anniversary of the accident at
Three Mile Island, the plant's owner fielded hundreds of media
inquiries about the accident and the likelihood of a
recurrence.
But did anyone
see any news stories about the industry's historic 1998
performance?
Probably not,
because the mainstream media tends to emphasize the unusual
and the negative. The TMI anniversary made for good headlines,
consistently safe performance doesn't.
That tells me
that if good news about our industry is to be heard, we must
take it upon ourselves to deliver it.
Simply put, as
an industry we must do more to get our message out to the
public.
We must work
harder to improve the technological literacy of our
communities and make manifest in their eyes the many benefits
of a wide range of nuclear technologies.
We must make
very clear the direct link between the public's desire for
clean air and reliable electricity… and nuclear energy's
emission-free nature.
We must impress
upon the public that it is a fulfillment of our collective
environmental obligation to future generations to safely store
used fuel at a central location.
When we do that,
we get results.
For example, the
65 percent of college educated voters that support nuclear
energy jumps 10 percentage points to 75 percent when they are
given two important pieces of information:
- One,
that nuclear energy provides clean air advantages and
- Two,
that 20 percent of U.S. electricity is generated by nuclear
power plants.
Moreover, when informed
of nuclear energy's clean air benefits, two-thirds of
respondents said that this point would increase their support
for federal legislation to take used fuel to a centralized
temporary storage facility.
NEI has also
recently launched another flight of its comprehensive
communications campaign on the many benefits of nuclear
technologies.
The first of a
series of opinion leader advertisements will begin running
this week. This program is aimed at impressing upon opinion
leaders the many benefits that our industry brings to the
table.
I encourage you
to use these ads within your own companies. You can see
samples of the ads at the display outside.
We also have
initiated an ambitious program to work with our member
companies in building grassroots support for our industry.
The EnAct
initiative will promote new grassroots technology and
communication tools that will help members reach out to their
local communities and educate the public about what we do.
I encourage your
participation in the program… and I encourage you to get your
companies more involved on the grassroots level.
I want to leave
you with a simple message.
The nuclear
industry has a vision for tomorrow. And in it, nuclear energy
plays an ever more important role…
… maintaining a
safe, reliable energy supply… minimizing the environmental
impact of electricity generation … and contributing to our
economy.
In many
respects, that vision is being realized today.
There is great
cause for optimism about the future.
But there also
is much work left to be done, by all of us.
There's another
good Texas adage that I need to follow: "Never miss a good
chance to shut up!" So I will!
Thank you.
1 Total operating years worldwide is
8,576. U.S. total is 2,208. Both figures are as of July 1998.
2 TMI Unit 1 and Pilgrim.
3 Clinton, Nine Mile Point and
Vermont Yankee.