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Sunday, April 16, may be remembered as the day that nuclear power was reborn. On that date a founder of Greenpeace argued for greater reliance on nuclear power to generate electricity. This sea change in public perception is complemented by technical and operating advances, and all these may facilitate resuming construction of nuclear-fueled facilities to generate electricity. Of course, substantial hurdles remain: Waste disposal continues to be daunting, and nuclear facilities continue to be capital intensive. And there are those who take the position not just of NIMBY (Not In My Back Yard) but of BANANA (Build Absolutely Nothing Anywhere Near Anything). Nevertheless, the confluence of positives appears to have reached the tipping point in favor of a renaissance of the nuclear power industry. Despite its capital costs, nuclear power is coming back, and it should play an important part in providing our nation’s future energy. THE GREENING OF NUCLEAR POWER Electrical demand continues to increase, while tolerance for greenhouse emissions continues to decrease. These two factors inexorably lead to a re-examination of nuclear power, even among some of its more implacable former foes. For example, in that historic April 16 op-ed in The Washington Post, Patrick Moore, a founding member of Greenpeace, noted that the nearly 600 coal-fired electric plants in the United States produce 36 percent of U.S. emissions of carbon dioxide. This is nearly 10 percent of global emissions. By contrast, the current fleet of 104 U.S. nuclear plants avoids 155 million tons of carbon emissions annually, and it has saved more than 2 billion metric tons since 1973. To meet its voluntary commitment under the U.N. Framework Convention on Climate Change, the United States would have to build 50,000 megawatts of new nuclear power generating capacity by 2020 — a 50 percent increase over today’s nuclear capacity — to reduce greenhouse-gas emissions by 156 million tons. If the United States ratified the Kyoto Protocol, we would have to reduce emissions 7 percent below the 1990 baseline, which translates to 272 million tons of reductions. As the pressure to reduce emissions increases, so too does the need to add more generation capacity. According to the Energy Information Administration, total electric sales are projected to increase at an average annual rate of 1.9 percent between now and 2025. Over the same period, 43 gigawatts of older generating capacity likely will be retired, leaving a requirement of 281 gigawatts of new capacity. In short, reductions in greenhouse gases and increases in capacity to meet higher levels of demand for electricity are only possible through increased reliance on nuclear power. If the public wants green electricity, nuclear power is the feasible answer, and that fact is increasingly swaying public opinion. REASONABLE COSTS Although environmental concerns may provide an impetus for nuclear power, economics provide the sustainable force for development. Here too the prospects for nuclear resurgence are positive. In the early years of nuclear development, costs, while not cheap, were at least reasonable. For example, in 1971, the capital cost of a nuclear facility was in the range of $150 per kilowatt, which was only slightly higher than the cost of a coal-fired plant. After Three Mile Island, however, capital costs mushroomed. Billions of dollars were spent to retrofit existing facilities for increased safety, while staggering interest rates in the early 1980s caused construction delays that added billions to the price of a reactor. As a result, the final 20 reactors built in the United States cost from $3 billion to $4 billion each to construct, or $3,000 to $4,000 per kilowatt. Yet over the past decade, existing nuclear facilities have achieved impressive gains in operating efficiencies. In 1973 nuclear facilities were running at a little more than 50 percent capacity. Through consolidation of ownership, improved operator training, and advances in refueling technology, capacity utilization has increased to nearly 90 percent for most facilities. This compares favorably with the 71 percent average capacity factor for coal plants. Increased capacity, in turn, leads to increased economic competitiveness. Nuclear fuel costs approximately 1 cent per kilowatt, which is about the cost of coal. But at higher capacity utilization levels, the variable cost of production from a nuclear plant is about 2 cents per kilowatt, which is significantly less than coal-fired generation. Operators have not only increased efficiency, they have increased capacity. Although the last new nuclear plant came on line in 1996, more than 4,000 megawatts of increased output have come from existing facilities. This represents the equivalent of four new facilities. Congress and the Bush administration are doing their part to improve the economics of nuclear generation. The Energy Policy Act of 2005 bristles with incentives for new nuclear construction. Section 638 reimburses the owner of advanced nuclear facilities for costs incurred in delayed operation arising from (1) the failure of the Nuclear Regulatory Commission to comply with schedules for review and approval or (2) litigation that delays the commencement of full-power operations. The act also provides new tax credits, and it significantly extends the Price-Anderson Act, which provides indemnification from liability for accidents above a specified threshold. The amount of the indemnification was increased from $100 million to $500 million. The statute also creates an advanced fuel-cycle initiative and lets the Energy Department make loan guarantees for projects (including advanced nuclear plants) that reduce greenhouse gases. For its part, the Bush administration intends to push the Global Nuclear Energy Partnership, which includes provisions for tightly controlled reprocessing of spent fuel. The nuclear industry originally envisioned that most of its spent fuel would be reprocessed, leaving only a small amount for permanent disposal. In March 1977, however, President Jimmy Carter indefinitely suspended commercial reprocessing because of concerns about nuclear weapons proliferation. The GNEP may allow limited reprocessing of nuclear fuel and thus mitigate the waste-disposal issue that plagues the industry. Currently, the Senate has moved to provide $250 million for the GNEP, but the House cut the program budget by $100 million. SAFETY CONCERNS ARE ABATING Although economics have not been favorable for nuclear units for many years, the true problem has been safety concerns. From the movie “The China Syndrome” to Three Mile Island to Chernobyl, a specter of doom has hung over the industry. With the advent of better technology and a sustained track record of safe operation, however, perceptions are changing. The two engines of safety improvement are standard reactor design and reactor simplification. During the late 1970s and early 1980s each utility wanted a custom-designed nuclear facility. Each such facility required custom redesigns to address evolving safety concerns and uniquely trained operators. Adm. Hyman Rickover, the father of the nuclear Navy, cited this approach to reactor design as the single biggest impediment to civilian nuclear development. Lessons have been learned. The NRC has certified four standard reactor designs, and a fifth is under study. Moreover, most new reactor designs are significantly less complex than their predecessors. Several advanced light water reactor designs are being developed that would have fewer valves, fewer pumps, and less pipe. The ongoing simplification of plant systems reduces requirements for maintenance and online surveillance, and thus reduces the likelihood of operator error. Also under development is the Pebble-Bed Modular Reactor design, which virtually eliminates the risk of a meltdown and the need for a containment building. This should provide significant savings. Thus, standard designs based upon simplified systems should not only improve safety margins but further reduce variable operating costs and upfront capital requirements. NOT YET SUNNY DAYS Though a new dawn may be breaking, clouds linger on the horizon of a nuclear renaissance. Despite safety improvements, nuclear power continues to conjure fears in many and concerns in most. While the fear of mechanical breakdown may be abating, concern is increasing that terrorists may attack reactors. And as residential development has occurred around nuclear facilities, some fear that evacuation plans approved 20 years ago may no longer be adequate. Compounding the safety concern are the NIMBY and BANANA folks. When it is impossible to put a wind farm in the North Atlantic off Martha’s Vineyard because of the scenic predilections of the rich, powerful, and famous, the prospects are daunting for finding sites for the 50 new nuclear facilities needed to comply with the U.N. Framework Convention on Climate Change. Waste disposal continues to be a concern. The Yucca Mountain facility in Nevada is no closer to operation than it was in 1982, when the federal government committed to storing nuclear waste there. Yucca Mountain was originally set to open in 1998 but did not receive final congressional approval until 2002. The Department of Energy is not expected to file its license application for the Yucca Mountain facility before 2008 and will not have a final design for the casks intended to contain the actual radioactive material before 2012. Meanwhile, the department estimates that it will spend $2 billion to $3 billion through 2010 in payments to utilities that successfully sued it for its failure to take nuclear waste as it had promised in 1998. Private entities have proposed an above-ground disposal facility in Utah, but this proposal is likely to raise the same opposition as has hamstrung Yucca. This situation certainly isn’t ideal. Nuclear facilities were not designed to be long-term waste-storage lots, and the large quantities of nuclear material at these sites may be a temptation for those who would cause us harm. Finally, construction costs may inhibit the spread of nuclear power. Although new designs and regulatory streamlining promise to reduce capital costs, those costs will still be high. In its 2004 Annual Energy Outlook, the Energy Information Administration estimated that the capital cost of a nuclear facility was $2,083 per kilowatt (down from $4,000 per kilowatt for the last units constructed). France has reduced the capital cost for nuclear construction to approximately $1,550 per kilowatt with advanced construction techniques and reactor standardization. To be competitive with other means of generating electricity, the United States must reduce capital costs to the $1,000- to $1,500-per-kilowatt range, something that many industry experts believe is now attainable. Yet, though much lower than the costs experienced in the late 1990s, these are still high capital costs. Vertically integrated utilities with captive customers may be able to afford to build new nuclear facilities. But in states that have adopted programs allowing consumers to choose their electric supplier, would-be builders of nuclear facilities may be hard-pressed to secure funding. Nuclear power may be beginning a rebirth, but the labor may be neither easy nor painless.
Stephen L. Teichler is a partner in the D.C. office of Duane Morris, where he is the chair of the energy, environment and resources practice. Charles W. Whitney, a partner in the Atlanta office, is head of the firm’s nuclear practice group.

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