In This Issue
The Future of Nuclear Energy
September 1, 2001 Volume 31 Issue 3

Economic Determinants and the Role of Industry in the Future of Nuclear Power

Saturday, September 1, 2001

Author: Corbin A. McNeill, Jr.

The future of nuclear energy is one of the most important topics facing our nation today. To see how important, all you have to do is pick up a newspaper. For weeks now we’ve seen stories almost every day about the energy problems in California. Although some aspects of the current situation are unique to California, daily "Stage Three" alerts have made the entire country aware of what can happen when we run short of electric generating capacity.

The American appetite for electricity is growing every day. Nevertheless, nationally, our installed capacity has remained almost static at about 677,000 gigawatts for the past two years. At the same time, some people in our industry are projecting a nearly 50 percent increase in the demand for electricity in the next 20 years. We want not only abundant supplies of electricity but also cleaner air. To meet these twin demands, the "nuclear option" will certainly have to be an important part of our national energy strategy.

I want to explore with you the benefits of nuclear power and the role of industry in keeping the nuclear option viable. I’II briefly review the
history of nuclear power in the United States and then turn to the current state of affairs, as more states deregulate. Then I will turn to the future and an exciting new technology that has tremendous potential for the next generation of nuclear power plants--the pebble-bed modular reactor (PBMR).

There is general agreement that the person who most influenced the development of civilian nuclear power in the United States was Admiral Hyman G. Rickover. At the end of World War II, America turned its attention to developing nuclear energy to generate electricity. In 1946, work began at Oak Ridge, Tennessee, on the development of a civilian nuclear power plant. The program was abandoned two years later, however, and most of the personnel were transferred to a reactor program being conducted by the Navy, under then Captain Rickover. Known for his tenacity and dedication to hard work, Rickover’s crowning accomplishment came in 1953 with the successful launch of the Nautilus, a nuclear-powered submarine. The research had involved several types of reactors, but the pressurized-water reactor (PWR) became the standard for the nuclear Navy.

Rickover’s work greatly influenced the subsequent design of civilian plants. The first demonstration nuclear power plant, in Shippingport, Pennsylvania, was based on Rickover’s submarine reactor, and Rickover was put in charge of its development. Most of the PWRs in the United States today are adaptations of the Shippingport reactor. Rickover also trained many of the Navy and civilian employees in his program, many of whom went on to become officers of the electric utility companies that built America’s current nuclear power plants.

During the 1950s and 1960s, nuclear power was a high-technology/high-benefit program that had strong support from the government, as well as regulators, elected officials, and the general public. By the mid-1960s, utilities were considering building larger units in the expectation of an ever-increasing commercial demand for nuclear power. By the early 1970s, orders for nuclear plants were coming in so rapidly that unit size was increased simply to reduce the number of separate projects. Vendors could barely handle the number of orders they had.

But, as inflation began to increase in the 1970s, the cost of plant construction also increased. Then came the accident at Three Mile Island (TMI) in 1979, and public concerns about safety led to regulatory reviews and re-reviews. As a result, additional, redundant safety systems were required on existing plants, as well as new ones. The antinuclear movement, spurred by the TMI accident, successfully delayed the licensing of many plants, and costs rose astronomically, sometimes at the rate of $1 million a day. In the end, nuclear plants were high-cost alternative power sources. By 1988, U.S. nuclear production costs were 3.11 cents per kilowatt hour, making nuclear plants uncompetitive with coal-fired and natural gas-fired plants.

Another unresolved issue, storage of spent fuel, increased the negative public opinion of nuclear power. Although operators of nuclear plants have an enviable safety record in storing spent fuel, the issue still arouses strong public concerns and will continue to do so until we settle the issue by building a permanent repository.

In the late 1980s, even though nuclear power plants were not competitive with fossil-fuel plants, they were still protected by a regulatory environment that allowed utilities to recover capital costs. That equation began to change six or seven years ago when states began to reexamine the issue of retail electricity competition. In states with nuclear power plants, the most contentious issues in the deregulation debate have come down to how utilities can recover the stranded costs embedded in these plants. Settlements allowing for recovery of stranded costs over a period of years enabled utilities to write down the high capital costs related to the construction of nuclear power plants. Once the plants were written down, nuclear plants could compete strictly on the basis of operating costs, which gave plant operators a very strong incentive to control operating and maintenance costs.

It is now clear that nuclear power cannot and should not depend on government subsidies but must stand on its own merits as a competitive source of electricity. That is the challenge facing the operators of all 103 plants in America today. At Exelon, we’ve met this challenge by vigorously reducing production costs. Most of our plants operate in the top quartile of the industry, making us competitive in all of the regions where we operate.

The industry as a whole has also taken important steps towards reducing costs. In 1999, for the first time ever, nuclear plant operating costs were below those of fossil-fueled plants. Nuclear plants today generate electricity at about two cents per kilowatt-hour, just slightly below the cost of coal-fired generation. This accomplishment was the result of several factors. For example, we reduced the length of refueling outages. A decade ago, it was fairly typical for an outage to last three months; today, many last only three weeks. The reduction is attributable to employees developing skills in a variety of jobs involved in an outage, the performance of more maintenance while the plant is operating, and the consolidation of plant staffs. Another factor in the decrease in operating costs is the increase of utility mergers in the past few years. For example, the merger last October of PECO Energy and Unicorn, to form Exelon, accompanied by acquisitions made through AmerGen, a joint venture with British Energy, enabled us to assign the administration, maintenance, and outages for several plants to a single staff. So, the debate about whether nuclear plants can compete with coal and natural gas plants is over. The answer is clearly yes.

But simply being competitive today will not meet our needs for tomorrow. The nation’s demand for electricity is increasing every day. To meet that demand, new plants must be built. Otherwise, other parts of the country will experience problems similar to the recent problems in California. A great deal of work is being done throughout our industry to develop advanced thermal reactors, mostly evolutionary design changes on boiling-water reactors or PWRs. Most of these projects are focused on plants in the 1,000- to 1,700-megawatt range, in line with the size of current plants.

However, I think the industry should look in a different direction, namely toward PBMRs. Last year Exelon announced that the company was investing in a research project with ESKOM, the electric utility of South Africa, for the possible development of the PBMR. The study will be completed by the end of this year, and I’m confident that the results will be positive; we can then move forward with the construction of a prototype plant in South Africa. Within a few years, PBMR technology could be exported to Europe and the United States.

PBMR technology is an improvement on the gas-reactor technology used in the first commercial gas reactor, Unit One at Peach Bottom, Pennsylvania, in the early 1960s and similar plants built in Germany in the 1970s and 1980s; the technology is also being tested today in China. PBMR has a simple design basis, with passive safety features that require no human intervention and cannot be bypassed or rendered ineffective. If a fault occurs during reactor operations, the system comes to a standstill and merely dissipates heat on a decreasing curve. There is no possibility of core failure or release of radioactivity to the environment.

The PBMR consists of a vertical steel pressure vessel, 6 meters in diameter and about 20 meters high, lined with graphite bricks 100 centimeters thick. The reactor uses particles of enriched uranium oxide coated by silicon carbide. The particles are embedded in graphite to form fuel spheres, or pebbles, about the size of tennis balls. Helium is used as the coolant and energy-transfer medium to a closed-cycle gas turbine and generator system. During normal operation, the pressure vessel contains about 440,000 balls, 330,000 of which are fuel balls. The rest are pure graphite balls, which serve as an additional nuclear moderator that shifts the power of the reactor away from the control rods and toward the center of the reactor.

To remove the heat generated by the nuclear reaction, helium gas at 540?C enters the pressure vessel at the top, moves down between the hot fuel balls and leaves the bottom of the vessel, having been heated to a temperature of 900?C. The hot gas passes through a closed-cycle gas turbine that drives the electric generator before being returned to the reactor. The helium, which is chemically and radiologically inert, cannot combine with other chemicals, is noncombustible, and cannot become radioactive when passed through the core.

The inherently safe design of the PBMR would virtually eliminate the need for redundant backup systems and off-site emergency plants, thus greatly reducing the operating costs of the plant. With their modular design, PBMR plants could be built in 110-megawatt units, and new units could be added as demand increases. With standardized designs, the mass production of plants, assembly-line fashion, would become possible, similar to the way commercial aircraft are built today.

All of these factors make the economics of the PBMR very attractive. Just in terms of operating costs, a typical PBMR plant should be able to generate a kilowatt of electricity for less than a penny. The costs for other advanced thermal reactors under development range from 1.16 to 1.50 cents per kilowatt. The comparison is even more favorable when we look at natural gas plants, which have operating costs of 2.35 to 3.05 cents, depending on the market price of natural gas.

The low cost of operation, coupled with relatively low capital costs, make the PBMR an extremely attractive alternative for new plants. Add in the inherent safety of the design, and the benefits of the PBMR are even more striking.

In conclusion, I’m extremely optimistic about the future of nuclear power in the United States. It is the only source of power generation that can meet our growing demand for electricity and also contribute to a cleaner environment. We’ve come a long way in the past decade. We’ve demonstrated that we can run our plants more efficiently without compromising safety. We’ve shown that nuclear power can compete in the marketplace with other sources of power generation. And we’re developing exciting new technologies that could mean more efficient plants in the future.

The past 20 years have not been easy for the nuclear power industry, but I think the tide is beginning to turn in our favor. More and more people are learning of the environmental benefits of nuclear power. The industry’s focus on safety is restoring public confidence. And the public is beginning to understand that, as a nation, we simply must build more generating plants if we want to continue to enjoy the benefits of a technology-based economy. We now have a unique opportunity. By keeping nuclear power viable, we can meet America’s growing demand for electricity and, at the same time, address the concern for cleaner air. And, with new technology, plants can be built at less cost, making nuclear power an attractive economical alternative in competitive markets. In answer to the question posed by this symposium, nuclear power is the option for the 21st century.

About the Author:Corbin A. McNeill, Jr., is chairman and co-chief executive officer of Exelon Corporation. He made these remarks at the NAE National Symposium in Irvine, California, on February 9, 2001.