Delivering the Nuclear Promise

Rod McCullumNuclear Energy Institute

NCSL Nuclear Legislative Working GroupNew Orleans, LA

November 16, 2016

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Nuclear Energy’s Full Value Proposition

Nuclear energy’s

value

Supports grid stability

Provides electricity

price stability

24/7 electricity

production

Prevents carbon

emissionsProvides clean air

compliance value

Anchors the local

community: jobs, tax base

Contributes to fuel &

technology diversity

Nuclear – Ready to Deliver

U.S. Nuclear Plant Capacity

Factor*

*Source: Energy Information Administration

92.2% in 2015

91.7% in 2014

89.9% in 2013

86.1% in 2012

89.1% in 2011

91.1% in 2010

• U.S. reactors set record 92%

capacity factor in 2015

• 798 billion kWh

• 62.9% of U.S. carbon free electricity

• 4 new reactors being built

• 81 licenses extended to 60 yrs.

• 1st application for extension to 80

years submitted (Surry in VA)

Nuclear Plant Shutdowns: The Situation

• Reactor shutdowns

- Four in 2013 (2 in California, Florida, Wisconsin)

- One at the end of 2014 (Vermont)

- One in 2016 (Nebraska)

• Wisconsin, Vermont, Nebraska shut down because of adverse market conditions

• Announced shutdowns

• Prior to 2020: 3 in Illinois, 1 in Massachusetts, 1 in New Jersey

• 2025: 2 in California

• Others at risk

The carbon-free electricity lost when San Onofre closed down was greater than the carbon-free electricity from all California’s wind and solar

generating capacity

18,097 GWh 16,985

GWh

San Onofre 2 & 3 generation inlast full year of operation (2011)

California wind and solargeneration full-year 2013

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• Average generating costs have decreased from peak of $39.75/MWh in 2012 to $35.50/MWh in 2015.

• Average generating costs have decreased 2.4% from 2014.

• Capital spending down 3% from 2014, and 26% from 2012 peak.

• $6.25 billion in 2015 capex.

Snapshot of 2015 U.S. Nuclear Plant Costs($ per MWh)

2015 Average Generating Costs

2015 Generating Cost

Total generating cost = fuel + capital + operating. Source: Electric Utility Cost Group.

FirstQuartile

IndustryAverage

Single Unit Sites

Multi-UnitSites

Forward Prices

Declining Wholesale Electricity Prices

$45-75/MWhPrice Range

$30-50/MWhPrice Range $30-42/MWh

Price Range

Market Stresses … In Brief

• Low growth (in some cases, no growth) in electricity demand

• Continuing surge in supply of low-cost shale gas• Market design issues

- Fuel/technology diversity taken for granted and undervalued

- State and federal mandates and subsidies for renewables - Lack of recognition of valuable attributes of nuclear- Price suppression in energy markets

• Transmission constraints

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New England Forward Power Prices for 2019

Sources: Platts Mass Hub average forward power prices; 2020 New

England Energy Demand: 145 GWh; ISONE 2015 CELT Report

New England Forward Power Prices for 2015

Pilgrim Announcement Oct. 2015

Vermont Yankee Announcement Aug. 2013

$2.30/MWh

$2.50/MWh

• Pilgrim announcement met with $2.30/MWh increase in futures price for New England

- ~$330 million in additional costs to consumers in one year

• Market reaction to Vermont Yankee similar to Pilgrim

• PJM estimated losing three at-risk Illinois plants would raise prices $2.70 - $3.80/MWh in ComEd zone

Losing Nuclear = Higher Prices to Customers

You are here

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Genesis of the Nuclear Promise

• Our industry is operating in electricity markets that are deluged with natural gas at historically low prices

• Nuclear industry capability factor and reliability is at extraordinary levels…but total generating costs at nuclear plants have increased 28% in the last 12 years.

• “Business as usual” approach will not successfully address the challenges of rising costs and inadequate revenue

• Advance safety, reliability and economic performance together.

Part of the Solution: Delivering the Nuclear Promise

• Sustain high levels of safety and reliability

• Identify opportunities to re-design plant processes, drive innovation to improve efficiency and effectiveness

• Gain greater value for nuclear energy in electricity and clean air policy

Goal: Average cost of electricity is $28 per megawatt-hour

Four Building Blocks

Analysis and MonitoringObjective: Analyze plant cost drivers and identify opportunities to improve efficiency

Value RecognitionObjective: Leverage federal and state policies to ensure recognition of nuclear energy’s value

Process and Program RedesignObjective: Re-design nuclear plant processes to improve efficiency while advancing the fundamentals of safe, reliable operation

Strategic CommunicationsObjective: Implement a communications strategy to ensure industry engagement and stakeholder awareness

Building Block: Analysis and Monitoring

• CNO-led teams identified priority areas Including improvement opportunities in work management, radiation

protection, training, security and preventive maintenance

• Completed analysis of plant cost drivers Identified opportunities for efficiencies to be gained and

administrative burden reduced…

While maintaining safety and reliability

• Steering committee identified implementation “windows”

Pace and scope of site implementation to be determined by the company that owns and operates plant

Teams and CNO Leads

• Corrective Action Program Danny Bost, Southern Nuclear

• Engineering Tim Rausch, Talen Energy

• In-Processing Bill Pitesa, Duke Energy

• Oversight and Assessment Mano Nazar, NextEra Energy

• Preventive Maintenance Templates Neil Wilmshurst, EPRI

• Radiation Protection Fadi Diya, Ameren Missouri

• Regulatory Efficiency Mano Nazar, NextEra Energy

• Risk-Informed Operations Bob Bement, Arizona Public Service

• Security Bryan Hanson, Exelon

• Training Randy Edington, Arizona Public Service

• Transform Organization Tim O’Connor, Xcel Energy

• Work Management Preparation Dennis Koehl, South Texas Project

• Supply Chain Adam Heflin, Wolf Creek Nuclear Operating Corp.

Building Block: Process and Program Redesign

• 45 efficiency bulletins expected by end 2016

• Enabled savings approaching $500 million

Efficiency must take its place with hallmarks of

safety, reliability

• Anticipating and addressing emerging regulatory or technological issues

NEI Efficiency Bulletins

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• Vehicle for deploying efficiency ideas to fleet

• Value proposition - explains how idea advances safety, reliability and efficiency; Points to applicable guidance

• Levels of Commitment:- Mandatory Initiative

o All must implement if approved by 80% vote of industry CNOs

- All expected to implement

- Utility discretion

Examples of Completed Efficiency Bulletins

• EB 16-02: Implement Graded Approach to Walk-downs

• EB 16-04: Source Checking Personnel and Tool Contamination Monitors

• EB 16-22: Implementing and Effective and Efficient Work Management Process

• EB 16-26a,b,c,d: Standardization of Nuclear Access Requirements, In-processing Training, Radiation Worker Training, and Supplemental Supplier Contracts

Building Block: Value Recognition

• Increasing value recognition for existing reactors- Earning value for clean air attributes

New York’s new clean energy standard

Upstate nuclear plants to receive appropriate compensation

Precedent for other state, regional policy

- Advocating changes in electricity markets for additional value: Capacity pricing

Energy price formation

- Pursuing changes at FERC and RTOs

- Clean Power Plan implementation plans should recognize value of nuclear energy

Solutions Emerging Among the States (redesign)

• New York – Clean Energy Standard approved by Public Service Commission

• Ohio/Pennsylvania – First Energy actively seeking a solution for nuclear units recognizes their environmental benefits

• Illinois – Evaluating legislative proposal similar to New York

• Connecticut – Legislation including Millstone cleared Senate

Building Block: Strategic Communications

• Communications emphasizing industry’s effort to enhance efficiency, need for value recognition

• Advocating greater value for nuclear power plants in electricity and clean air markets

• Workforce Communications

A few words about the back end

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Effective Management of Decommissioning and

Used Fuel

Decommissioning Landscape

• NRC has a proven regulatory framework for decommissioning activities- 10 plants have safely completed decommissioning- 19 plants are in the process of decommissioning- 5 plants* planning near term shutdown

• There currently is no regulatory framework to govern the transition from operations to decommissioning- The process of transitioning from operations to

decommissioning is highly inefficient – Rulemaking needed

• Stranded used fuel is a major cost driver

*Pilgrim, Oyster Creek, Quad Cities 1&2, Clinton

Less than 25% of decommissioning

$ are spent actually tearing down the plant

Vast Energy Produced – Small Volume

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All the used nuclear fuel generated, if stacked, would only cover one football field <10 yards high

Yucca Mountain

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Other Used Fuel Management Improvements

Private entities are seeking to develop consolidated interim storage at away from reactor sites

• Waste Control Specialists has applied for an NRC license to store used fuel in West Texas

• The Eddy-Lea Energy Alliance plans to do the same thing in New Mexico

• DOE is now seeking to engage

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Game Changers on the Drawing Board

• Accident Tolerant Fuel

• Small Modular Reactors

• Advanced Reactors

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Conclusion

• The future of nuclear energy in the U.S.

• Industry’s Delivering the Nuclear Promise initiative seeks to keep nuclear in the mix

• How states interact with electricity markets will significantly affect the outcome

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Growth? Decline?

Questions?

Rod McCullum

Nuclear Energy Institute

rxm@nei.org

202-739-8082

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