Date post: | 25-Dec-2015 |
Category: |
Documents |
Upload: | mervin-benson |
View: | 215 times |
Download: | 0 times |
WALL STREET UTILITY GROUP
The Energy Policy Act of 2005: The Implications
for Nuclear Energy
22 September 2005
Today’s Briefing
Major elements of Energy Policy Act of 2005Frank L. (Skip) Bowman
President and CEO, Nuclear Energy Institute
Risk management: Understanding the nuclear licensing processMichael J. Wallace
Executive Vice President, Constellation Energy Group
President, Constellation Generation Group
Industry response to the 2005 energy legislationMarvin S. Fertel
Senior Vice President, Nuclear Energy Institute
Major Elements of the Energy Policy Act of 2005
Frank L. (Skip) Bowman President and CEO
Nuclear Energy Institute
Implications for Nuclear Energy
Positions nuclear energy firmly as one of the cornerstones of U.S. energy supply
Provides substantial investment stimulus for new nuclear plant construction
Provides investment protection for first plants Establishes long-term vision for nuclear energy
in U.S. by authorizing robust R&D program Provides appropriate recognition of nuclear
energy within DOE
Major Nuclear Energy Elements
Investment stimulus for new nuclear power plant construction Loan guarantee authority for technologies that reduce
emissions Production tax credit for new nuclear power plants
Investment protection for new nuclear power plants
20-year renewal of Price-Anderson Updated tax treatment of decommissioning trust
funds Substantial R&D authorization
Stimulus for InvestmentIn New Nuclear Plants
Loan guarantees for up to 80% of project cost Higher leverage, lower debt cost reduces overall
project cost by approx. $200 – $300 million
Production tax credit of $18 per MWhr for new nuclear capacity through 2021, subject to 2 limitations: $125 million per 1,000-MW per year 6,000-MW eligible, allocated among available
capacity Treasury Department/IRS rulemaking: Feb. 2006
The Value of Leverage
ESBWR AP1000
Debt/Equity Ratio
50/50Equity = 15%Debt = 8%
80/20Equity = 15%Debt = 5.5%
50/50Equity = 15%Debt = 8%
80/20Equity = 15%Debt = 5.5%
WACC 11.5% 7.4% 11.5% 7.4%
Overnight Cost
$3.0 billion $3.0 billion $2.2 billion $2.2 billion
Financing Cost
$853 million $580 million $626 million $425 million
Total Cost $3.85 billion $3.58 billion $2.83 billion $2.63 billion
Cost Saving due to Higher Leverage
$273 million $200 million
Note: $2,000/kW overnight capital cost; 51-month construction; 3-month start-up
New Generating Capacity: Estimated Power Costs($/MWh)
$39
$46
$49
$55
$57
$68
$0 $10 $20 $30 $40 $50 $60 $70 $80
Combined Cycle Natural Gas ($6.00/MMBtu)
Nuclear ($1,500/kW)
Pulverized Coal
Nuclear ($1,500/kW with 80% Loan Guarantee)
Nuclear ($2,000/kW with 80% Loan Guarantee)
Nuclear ($2,000/kW)
Protection of Private Sector Investment
Insurance protection against delays during construction and until commercial operation caused by factors beyond private sector’s control
Coverage: $500 million apiece for first two plants, $250 million for next four
Covered delays: NRC licensing delays, litigation delays
Major covered cost: Debt service Final rules: August 2006
New Tax Treatment for Decommissioning Funds
Legislation updates tax treatment of nuclear decommissioning trust funds to reflect competitive electricity markets Until now, tax treatment based on regulated, cost-of-
service business model
Repeals “cost of service” limitation: Allows all companies to establish qualified decommissioning funds and make deductible contributions
Allows companies to transfer monies in nonqualified funds into qualified funds and claim deduction Accretive to earnings
Long-Term Vision for Nuclear Energy
Creates robust R&D portfolio ($2.95 billion authorized) Nuclear Power 2010
$1 billion program cost-shared 50/50 with industry Complete design/engineering on two advanced
designs, test and validate new licensing process
Next Generation Nuclear Plant $1.125 billion Hydrogen production
Creates Assistant Secretary for Nuclear Energy at DOE
Understanding the Nuclear Licensing
Process
Michael J. Wallace Executive Vice President
Constellation Energy Group President, Constellation
Generation Group
Construction Permit
Application *10-30% of design
complete
Construction Permit
Application *10-30% of design
complete
Construction (design as you
build)
Construction (design as you
build)
Operating License Proceeding *
Completed plant idle during proceeding
Operating License Proceeding *
Completed plant idle during proceeding
Operating License Issued *
Operating License Issued *
OperationOperation
* Opportunity for intervention, hearings and delay
In this sequential process, regulatory reviews were overlapping: Process was
inefficient, unpredictable and invited abuse.
Overview of the Old “Two-Step” Licensing Process
Early Site Permit (ESP) *
Early Site Permit (ESP) *
ConstructionConstruction ITAAC Met **ITAAC Met **
OperationOperation
* Opportunity for public comment
** Opportunity for hearing, but threshold very high
Combined Construction
and Operating License (COL)*
Design >90%
Complete
Combined Construction
and Operating License (COL)*
Design >90%
Complete
Design Certification *
Design Certification *
In this process, all regulatory reviews (site, reactor design, construction/operating license) are completed before major capital investment
at risk. Potential for delay significantly reduced.
Overview of the New Licensing Process
ITAAC: A KeyRisk-Management Tool
ITAAC = Inspections, Tests, Analyses, Acceptance Criteria
ITAAC are quantitative indicators* that allow ... NRC to verify plant is built to specifications Project developer to prove plant is built to
specifications ITAAC are formally incorporated into COL If ITAAC are met, no grounds for hearings, no delay
after COL is issued
* For example, an ITAAC might specify that a certain pump will deliver a certain flow rate, or that a valve will close in a specified time.
The Process Leading to Commercial Operation
Project developer notifies NRC 180 days before fuel load; NRC publishes notice in Federal Register inviting requests for hearings
Threshold for intervention hard-wired to objective criteria: Hearing request granted only with prima facie evidence that one or more ITAAC has not been met, or will not be met
Even if NRC allows hearing, NRC can also allow fuel load and plant operation while hearing proceeds, if plant operation would not jeopardize public health and safety
Nuclear Plant Licensing: “Then and Now”
Then Now
Changing regulatorystandards and requirements
More stable process: NRC approves site and design, single license to build and operate, before construction begins and significant capital is placed “at risk”
No design standardization Standard NRC-certified designs
Inefficient construction practices Lessons learned from nuclear construction projects overseas incorporated, and modular construction practices
Design as you build Plant fully designed before construction begins
Multiple opportunities to intervene, cause delay
Opportunities to intervene limited to well-defined points in process, and must be based on objective evidence that ITAAC have not been, will not be, met
Technology still evolving Technology mature, stable designs
Time-to-Market Under New Licensing Process
First applications ESP: 33–36 months Design Certification: 36–60 months COL: 27–60 months (depending on
whether application references DC and/or ESP)
Nth applications COL: 22–36 months (depending on
whether application references ESP) Construction: 45 months from first
concrete to fuel load (achieved overseas)
Roadmap to Commercial Operation
0 1 2 3 4 5 6 7 8 9 10
Building a new nuclear plant is not a
one-step process or decision: It is a
sequence of 3 successive decisions
Time in Years (times shown are estimates)
1
2
3
Before a company can apply for a construction/operating license (COL), design and engineering work must be essentially complete and the reactor design certified by the NRC
FIRST DECISION: To file an application for a COL (a 3-4 year process, $50-90 million commitment)
SECOND DECISION (approx. 12 months before COL is issued): Long-lead procurement of major components and commodities
THIRD DECISION: proceed with construction
Industry Response to the 2005 Energy Legislation
Marvin S. Fertel Senior Vice President
Nuclear Energy Institute
Status of Reactor Designs
AP1000 (Westinghouse): Design certification expected in 2005/2006
ESBWR (General Electric): Design certification application filed August 2005, certification expected 2008
US EPR (UniStar): Application for design certification expected in 2007.
Before the Energy Legislation
Three companies have applied for Early Site Permits (ESPs) Dominion (North Anna) Entergy (Grand Gulf) Exelon (Clinton)
Three consortia Dominion (preparing COL for 2007 filing) NuStart (preparing COLs for 2007 filing)
• ESBWR at Grand Gulf• AP1000 at Bellefonte
TVA (feasibility study of new nuclear plant at Bellefonte)
Duke Energy considering COL
After the Energy Legislation
Progress Considering COL application in 2008, evaluating sites and
reactor vendors Southern Nuclear
In 2006, will file ESP application or preliminary data for COL application for Vogtle site
South Carolina E&G/Santee Cooper Considering COL
UniStar Nuclear Joint initiative by Constellation and Areva to develop
projects on own account, or in partnership with other companies
Entergy COL for ESBWR at River Bend
Financing New Nuclear: Significant Flexibility
Expect to see a spectrum of project and financing arrangements:
Regulated projects Merchant projects Varying degrees of leverage Projects built by single companies Projects built by consortia in order to share risk Projects built by companies on behalf of others Projects that are non-recourse to the project
developers’ balance sheets Projects that are full-recourse Other arrangements that we have not yet thought of
Prerequisites for NewNuclear Plant Deployment
Before Ordering a New Plant
Construction Commercial Operation
(1) Progress on technology design, technology cost, licensing issues (Nuclear Power 2010 Program)
(2) Price-Anderson renewal
(3) Protection against regulatory risk (construction delay, delay in commercial operation)
(4) Financial incentives to offset market risk of first few plants (i.e., high capital cost of first plants results in electricity that is not competitive)
2005 Energy Policy Act Satisfies All Prerequisites
Before Ordering a New Plant
Construction Commercial Operation
(1) Progress on technologydesign,technologycost, licensing issues (NuclearPower 2010 Program)
(2) Price-Anderson renewal
(3) Protection
AgainstRegulatoryRisk(constructiondelay, delay in commercial operation)
(4) Financial
incentives tooffset marketrisk of first few plants(i.e., highcapital cost of first plants results in electricity that is not competitive)
The Energy Policy Act of 2005: The
Implications for Nuclear Energy