Nuclear Energy Industry Experiences Record Year, Anticipates Developments, Growth

February 28, 2007 // Published as a news service by IHS

Tools for Engineers IHS sells standards collections and regulatory information for the oil & gas, petrochemical and utilities industries. For more information and a price quote, please complete the form below. API Collections ASME BPVC ASTM Collections CyberRegs - Compliance library IHS Standards Expert - Standards DB IEEE Collections NEMA Collections AWS D1.1 Welding Code First Name: Last Name: Email address:

Building the nuclear power plants that the nation needs will require innovative financing approaches and constructive input to the federal government from the financial community, nuclear energy industry leaders told financial analysts at the Nuclear Energy Institute (NEI) annual Wall Street briefing.

"The consistent safe, high performance and efficient operation of the nation's nuclear plants provides overwhelming evidence that our business model is working and buttresses the case for building a new generation of advanced-design plants to help America meet its energy needs," said Frank L. (Skip) Bowman, NEI president and chief executive officer (CEO).

In 2006, U.S. nuclear power plants supplied the second-highest amount of electricity in the industry's history while achieving record-low production costs, according to preliminary figures released by NEI. The 103 commercial nuclear plants operating in 31 states generated 787.6B kilowatt-hours (kW) of electricity last year, second only to the 788.5B kW of electricity produced in 2004.

Nuclear energy supplies electricity to one of every five homes and businesses. It also supplies nearly 75% of the electricity that comes from sources, including renewable technologies and hydroelectric power plants, that do not emit controlled pollutants or greenhouse gases into the atmosphere.

As the industry prepares federal license applications for more than 30 plants and invests in design and engineering work and the procurement of long-lead-time plant components such as reactor vessels, it is striving to extract the value intended by Congress from the Energy Policy Act of 2005, Bowman said.

The Energy Policy Act of 2005 included incentives for a limited number of advanced-design nuclear plants among its provisions encouraging improved energy efficiency and the construction of renewable energy sources and cleaner fossil-fired power plants. The legislation provides limited investment incentives for construction of nuclear plants and other high-capital-cost clean energy technologies.

But it does not by itself resolve all financing challenges, particularly with regard to the U.S. Department of Energy (DOE) implementation of the clean technology-neutral loan guarantee program that the energy bill authorized, Bowman said.

"The construction period is when a new nuclear project most needs credit support," he said. "Unfortunately, the [DOE] interim guidelines published last year were developed without input from companies with financial expertise and are not optimal for large power projects. So we must continue to work cooperatively with the agency as it moves forward. Constructive input from credible organizations and institutions, including the financial community, will be essential to making this program a success."

Properly implemented, the loan guarantee program will reduce financing costs and thus reduce the consumer cost of electricity from the project, Bowman said.

The industry's average production costs - including expenses for uranium fuel and operations and maintenance - were an all-time low of 1.66 cents/kW in 2006, according to preliminary NEI figures. Average production costs have been below 2 cents/kW for the past eight years, making nuclear power plants cost competitive with other electricity sources, particularly those capable of reliably producing large amounts of electricity.

Electricity production at nuclear power plants has increased 36% since 1990, adding the equivalent of more than 26 large power plants to the electrical grid and preventing the emission of massive amounts of controlled air pollutants and greenhouse gases.

The average production cost dropped to a record-low even though prices for uranium fuel have increased over the past three years. Production costs are a key measure of an electricity source's competitiveness in the market because generating companies typically dispatch their low-cost electricity to the grid first.

Even when expenses for taxes, decommissioning and yearly capital additions are added to production costs to yield a total electricity cost, nuclear-generated electricity typically clears the market for less than 2.5 cents/kW. By comparison, production costs alone for natural gas-fired power plants averaged 7.5 cents/kW in 2005, according to Global Energy Decisions data.

The industry's average capacity factor was 89.9% last year, according to preliminary figures. That is slightly higher than 2005’s 89.3%; the industry reached 90.3% in 2002.

Anthony Earley, chairman and CEO of DTE Energy and chairman of the NEI board of directors, said the business challenges facing the industry are manageable.

"The climate for nuclear power is changing," he said. "We have a more complete understanding of the business risks associated with new nuclear plant construction than ever before. And I am confident in our ability to manage those risks."

Source: Nuclear Energy Institute (NEI).