Tuesday, February 19, 2008

Notes from Platts' 2008 Nuclear Conference

Two weeks ago I attended Platts' 4th Annual Nuclear Energy Conference. Below are some highlights I would like to share from 8 of the 31 speakers.

Day One -
Michael Wallace

Michael Wallace, Chairman of Unistar and President of Constellation Energy Nuclear Group, began the conference by stating the nuclear industry must “exercise a fine sense of responsibility to get it right.” The industry cannot have rose-colored glasses and must ask negative questions.

Wallace stated that the U.S. needs to build new electrical capacity soon. He highlighted that electricity demand is outstripping capacity, energy prices are escalating, and there is a real concern for the environment and CO2 emissions.

Wallace said the challenges facing the nuclear industry are: a lack of infrastructure, an untested licensing process, diminished knowledge and experience, a global competition for resources, and spent fuel politics. Loan guarantees, production tax credits and standby support in the EPACT 2005 were all critical components to jump start the industry. But in the long term, he said the nuclear industry will need no incentives.

James Miller
James Miller, Chairman, President and CEO of PPL Corporation, stated that without nuclear, meeting demand while reducing CO2 emissions won’t happen. He believes coal is in trouble in the US and carbon capture and sequestration is 15 years off and possibly more.

Miller said the US will embark on a great gas crusade over the next several years because gas capacity is the only near-term option that can be deployed to meet growing demand. Miller believes importing liquefied natural gas will not save us.

Miller stated the number one issue for the nuclear industry is the ability to construct and staff nuclear plants.

Bill Borchardt
Bill Borchardt, Director of Office of New Reactors at the NRC, discussed that the NRC is much more disciplined and focused and the workload is large and in parallel. The NRC is confident they will meet the demands from the industry. They do not want to be a barrier to this process.

Borchardt also said the NRC is confident the second wave of Combined Construction and Operating License Applications will take considerably fewer resources to review. If applications stop coming in after the current wave in 2008 and 2009, the Office of New Reactors will start running out of work by 2011.

Dennis Spurgeon
Dennis Spurgeon, Assistant Secretary for the Department of Energy, said the first goal for the DOE is to get new nuclear plants built. He stated that all models conclude the U.S. needs nuclear to provide 30% of its electricity by 2050 to meet demand and reduce emissions. This means building an additional 300 GW of nuclear capacity.

Yoshitaka Sato
Yoshitaka Sato, General Manager of Forgings and Castings Export Sales for Japan Steel Works, said that JSW has received greater recognition as the only supplier of large-scale forgings in the world. By 2010, JSW will have the capacity to forge 8.5 nuclear units per year.

Day Two -
Chris Crane
Chris Crane, Executive VP of Exelon, said "if anyone is bullish on nuclear it’s us.” The nation needs fuel diversity and must deliver on nuclear. By building only gas capacity we are putting too many eggs in one basket. The nuclear industry has a sound licensing process and there is no other industry as coordinated as the nuclear industry. Three Mile Island was some contribution to the stop of new plants but the problem was mainly mis-management on the nuclear industry’s part.

Crane said the nuclear industry needs to continue excellence and to share the risks. The industry must be disciplined in project execution, must revitalize its manufacturing infrastructure, must communicate strengths, and must drive policy issues to resolution. First 5-6 new plants have to be built flawlessly.

Jeffrey Holzschuh
Jeffrey Holzschuh, Vice Chairman of Institutional Securities Group and Chairman at Morgan Stanley, stated they are huge believers nuclear has to be part of the mix. He said plenty of capital dollars are available for investment in new nuclear plants. In 2006, $100B was spent in the Power and Utility sector. In 2007, overall U.S. capacity of capital markets was $1.5T. If the U.S. builds 20 GW of nuclear capacity at $3,000/kW, it will cost $60B.

David Nevius
David Nevius, Senior VP and Director of Reliability Assessment and Performance Analysis at NERC, stated that transmission is not keeping up with demand and capacity growth in the country. Planning transmission lines for nuclear needs to be addressed now so it is not an impediment to the plant coming online. He stressed that many studies need to be done on the transmission needs to address 30 or more new nuclear units.

Wrap-Up
Overall, the conference was a great opportunity to hear what the industry is thinking and feeling. Everyone at the conference was excited to be there and wants to see the nuclear industry succeed in building new plants.

5 comments:

joe said...

A lot of talk, again. But did you, or any of the attendees, get a sense when someone might actually pull the trigger, and commit to building a new nuclear plant in the US? Realistically, utilities are going to go the path of least resistance if they need capacity, and that will be gas.

Who is the odds on favorite to commit to nuclear first?

My other concern is that the utilities seem to be taking a wait and see approach with their direct reports. They are holding the line on salaries, my guess being that they are conserving costs, anticipating the ramp up in salaries/benefits required to maintain staffing when the demand for talent/knowledge starts.

David Bradish said...

Companies are already pulling the trigger. NRG, Duke, Dominion and Constellation have already submitted applications for new plants. Nine more companies are expected to submit applications in fiscal year 2008. And several companies have already ordered long-lead items such as reactor vessels.

The 17 companies planning to submit COLAs over the next two years, in my opinion, are already committed. Companies are not going to spend tens of millions of dollars to receive a license if they don't intend to eventually build a plant.

The odds on favorite to have a new plant up and running first is too early to say. It all depends on the quality of the application and the planning of construction.

Anonymous said...

I think what Joe meant is that no one has yet signed a contract to actually build a new plant in the US.

joe said...

Yes, I'm not aware of anyone having committed to actually building a new nuclear plant in the US.

I believe they have simply reserved their right to maybe do so. The contracts signed with reactor vendors again simply reserve their place in a production line; again, I'm not aware of a single RPV actually under contract to be built for use in the US.

Anonymous said...

One good sign is that TVA pulled the trigger on the project to finish construction on Watts Bar Unit 2. I'm sure that project will be watched closely to see if they can finish on-time/on-budget. It is the old style reactor, but it is still considered new capacity.

William