Transcript: Nuclear Energy: 2006 Status and Outlook

STEVE WEHRENBERG:  Good evening, ladies and gentlemen, and welcome to the sixth evening in this ongoing conversation about energy.  My name is Steve Wehrenberg.  By day I’m the director of the Coast Guard’s Future Force program and also in charge of executive development.  But my passion and my avocation has to do with what we’re doing here this evening. 

In my role as director of a non-profit, the Energy Consensus, we are dedicated to educating the public decision makers and those who influence them on the topic of energy, energy security, and everything that’s connected to that with regard to our future.  I’m honored to serve as your moderator for this series, and as my habit I will certainly thank our hosts, Mr. Terry Pudas, director of OSD’s Office of Force Transformation.  He’s here, along with his comrade, the Honorable Ken Krieg, who I will introduce in just a moment.  I’d ask you to hold your applause for just a couple of minutes, although we do always want to thank our host for this event. 

Before we get started, a couple of brief administrative issues:  When we began this series, we had intended to use an online survey of participants in order to improve our product.  We’ve discovered the cycle time is too short and we’re going to stretch it out a little bit.  We thought we could do that every month.  Turns out we can’t make use of the information that quickly.  So we’ll stretch it out.  I would ask you, though, if you do get an invitation to participate, please give us your feedback because it is our desire to make this as useful as possible for you and for all the members of this community. 

Our website is fully operational at this point.  You can see the link at the top.  If you haven’t been there, you can go there to register for future events.  We also have a lot of links to other kinds of information.  You’ll find that all pretty useful. 

We are also producing a weekly newsletter that we email to as many people as we can, which is also available on that Cebrowski website.  Not only do we have sort of an energy fact every week, but we also have highlights of activity in the defense and military world and future events that you might want to participate in – I would say upcoming events in our community.  I use that word on purpose.  That term “community” is really pretty important to us.  We believe that the transformative power of a community of interest is unlimited.  And by bringing people together who share a concern for our energy future, whether that’s in person or virtually, we can improve our prospects for the future.  And I want to thank all of you for joining this community. 

In case you need to dash off before our conclusion tonight, I’ll remind you the topic of next month’s conversation will be Advances in Photovoltaics.  That’ll feature Scott Sklar, who’s a leader in blended technologies, and whose home in Arlington is powered by PV roofing shingles, a wind turbine, and I guess he has the first least fuel cell back-up system in the United States.  He has a lot of personal experience.  He’ll be joined by Dr. Bob Birkmire, the director of the Institute for Energy Conversion at the University of Delaware, which is a Department of Energy Center of Excellence for Photovoltaic Research and Education.
 
Here to introduce our speaker this evening is the Honorable Ken Krieg, undersecretary of Defense for Acquisition Technology and Logistics.  Mr. Krieg advises the secretary in all matters related to DOD acquisition – RND, future research, advance technology, construction procurement – and in particular, logistic policies aimed at our ability to deliver the right stuff to the war fighter.  It goes without saying he has a tremendous vested interest in our topic.  Energy is often the product of the logistic system, and of course it takes a fair amount of energy to get that product where it needs to be. 

Sir, will you introduce our speaker?

KEN KRIEG:  Gladly.  Well, again, let me add my welcome to all of you, and thank you for coming out.  I won’t spend a lot of time introducing our guest tonight, except to do two things: one, to tell you that Skip Bowman is the president and chief executive officer of the Nuclear Energy Institute, I think about 18 months or so?  You’re 18 months – 18 months in that position, and so has made that transition from 38 years in the United States Navy to his new role in the Nuclear Energy Institute.  I’d start out by noting, as any good Davidson graduate would, that obviously Skip could not get into Davidson and went to Duke instead.  (Laughter.)   Despite that failing, he went on to get a dual master’s degree in nuclear engineering in naval architecture and marine engineering from MIT. 

And, as I said, a very long and outstanding career with the U.S.  Navy, and in particularly in his last job as the dual command of the Naval Reactors Business and in his deputy administrator in the National Nuclear Security Administration, really expanded his role from just that of serving in the Navy in its traditional roles to serving what is one of the largest and longest running – you know, knock on wood on this – most successful programs that the nation has engaged in. 

So his ability to look at this question from a number of vantage points, both intellectually and professionally and now in his new role trying to steer – when I look, it’s really hundreds of various groups who participate in NEI, trying to steer that large body toward a direction of nuclear energy in this next century. 

Skip, thank you for coming.  We all look forward to your presentation. 

Please welcome Skip Bowman.

(Applause.)

ADMIRAL FRANK L. “SKIP” BOWMAN:  Thanks, Ken.  Thanks very much. 

Well, good evening.  It’s my pleasure to be here tonight.  And, Missy (sp), thank you for inviting me to do this.  It was worth the price of admission just to see some of my friends and former associates.  Notice that I was very careful not to say “old friends,” for a whole lot of reasons.  But it is wonderful to be here. 

What I’d like to do tonight is move as quickly as I can – by pressing the right button here – through what I found out over the weekend were far too many PowerPoint slides and leave some good time at the end for your questions.  I suspect that I may brush on some of the things you’re interested in as I go along, but I also suspect that you have some probing questions that I may not address. 

I thought I would do it this way, talking a little bit about some of today’s plants.  I know some of you are old hands at what’s going on in the commercial world today, but many of you have touched base, gone off to other things, and some have never been there.  So talking a little bit about today’s 103 reactors – when I left naval reactors, by the way, there were 103 reactors in the Navy and 103 reactors in the commercial world. 

So I wanted to talk a little bit about today’s performance, then talk about the imperatives that are driving us in the direction of this nuclear resurgence.  Some call it renaissance – resurgence, renewal, whatever the right word is – talk about then, after what the drivers are and how we find ourselves where we are, a little bit about exactly what those numbers might be, and then pay homage to what I call the three “yes, buts.”  And this is an honest-to-goodness, deep-down-felt feeling that I have that there are genuine questions in our great country from well-meaning people who want to know, hey, I’m with you; I believe that nuclear might have a huge role in reducing global warming and in diversifying our energy portfolio, and for all the reasons that you say it sounds like a good thing, but – and the “buts” usually come in one of those three forms up there, not shown is proliferation, which is a fourth “but,” which I will touch on as I go through one of these. 

But I truly believe people have some honest, legitimate questions that we should pause in the industry and address to the best of our ability.  You’re going to see when I get to the third one that, frankly, there’s not an answer right now, but we are trying very hard to develop an answer.  I hope those of you who are familiar with the industry will notice what I call about 120-degree change in direction having to do with the used fuel management program when I get to that part.  So I will hold that to the end as this outline says, and let me just start with today’s plants. 

To get us all on the same sheet of music, I’ve found an amazing thing as I’ve traveled around rotary clubs and Kiwanis clubs and other opportunities to speak to heartland America, that there’s a misconception, and maybe even here in this town – I’ll be careful – maybe even in this town that oil really plays an insignificant role in electricity generation in this country – 3 percent.  The big ones are 50 percent coal, 20 percent nuclear, and 20 percent natural gas.  So there’s 90 percent in the renewables; hydroelectric and oil constitute the other 10 percent. 

The strength of our energy portfolio in this country has been and needs to continue to be the diversity that you see on this chart.  And so it behooves us to do everything we can to maintain this diversity.  I’m going to talk a little bit later about how the swing toward natural gas, which was the right thing to do in the late ‘80s, early ‘90s, mid-‘90s, for various reasons, really got us in trouble and caused this volatility that we’re seeing in electricity prices right now. 

So we sort of ditched the idea of maintaining a balanced portfolio and went all out natural gas for a good period of time.  You’ll see 290,000 megawatts of natural gas generation, our capacity built over about a 10-year period while we were putting on about 14,000 megawatts of coal and nuclear – 290,000 versus 14,000.  So that got us in trouble. 

If you also look at this chart, there are a whole lot of words up there – and I apologize for that – but you’ll notice something that’s interesting about nuclear, and it’s this:  Nuclear is the one energy source that combines a number of attributes that I think we all would fundamentally salute.  It is abundant in terms of the amount of electricity it can generate.  It is cheap and stable.  Prices are – you’re going to see – again, as I continue on, you’re going to see they have been stable for many, many years now, and the projections are that it’s going to remain at that stable number. 

There are no emissions associated with nuclear.  Some of our friends who would like to introduce other reasons to not consider nuclear are arguing today that nuclear, in its life-cycle, generates as much carbon dioxide as any of the others up there.  It’s just not true.  It’s just false.  A study by the International Energy Agency shows that nuclear and hydro produce about the same amount of life-cycle carbon dioxide.  And then it goes up from there to the fossils, as you know. 

So we have to be very careful in dealing with folks.  I suggested earlier that there are legitimate questions, and then there are questions that are out there that are, in my view, illegitimate and are coming from those who got their nuclear education at, you know, Jane Fonda in “China Syndrome,” and they’re the ones we need to worry about a little bit. 

These103 nuclear plants are scattered like this: predominately, as you see, where there is water available to cool them.  So 103 nuclear plants generating 20 percent of our electricity today in this country, mostly on the eastern side of our great United States. 

There are 69 pressurized water reactors and 34 boiling water reactors, for those who are counting those kinds of numbers.  Seven of our states get the majority of their electricity from nuclear.  A lot of folks don’t know that either.  But that’s the distribution and a little bit about it.  Now we start the real success story about recent operations of the nuclear fleet on the commercial side in this country. 

Back here, if I went over here someplace and drew this chart from the ‘70s, we were way down here, off the chart low, and obviously off the chart to your left.  Starting in ’95, you can see a progressive increase while only adding really one plant right here.  That plant at Watts Bar One was added – came online in 1996.  It started construction, by the way, in 1974, a mere 22 years to build and get that plant on the grid.  But with one plant coming on, look at the output increase over time, and as I would argue, and have said before, over the past five or six years we’ve been relatively steady in the amount of electricity that we generate at these plants. 

On the safety side of things – and I’m going to return to this because, remember, that’s one of the “yes, buts” – we want to talk about safety and security in more detail than this, but this is just one measure.  If you go back to the ‘80s, the, frankly, bad old days in the wake of Three Mile Island when a whole lot of rule changes were being enforced and implemented by the Nuclear Regulatory Commission, when a lot of new plants were coming online that weren’t doing very well, very honestly, we had a lot of scrams.  Scrams means automatic initiation of safety features that shut down the reactor when things aren’t going the way they’re supposed to be going. 

I ask my folks, you mean to tell me that we – now, these are median values and not average values, so we’re going to get mixed up here.  I will almost guarantee you if I talk much longer I’ll get myself mixed up.  But I said, you mean to tell me we had on the order seven-times-60 scrams, automatic initiations of safety features that shut down reactors back in those days?  Yes – 400 to 500 kinds of numbers.  In the Navy program, those of you – and there are many of you here in this room – know that would be intolerable and just doesn’t happen.  So I was frankly shocked.  I made about four phone calls yesterday while I was looking at these view graphs for the first time saying, what on earth does this mean?  What is it supposed to mean to me?  But the better news is, of course, this precipitous drop as we got our stuff together and started understanding what needed to be done. 

Right in here was the advent of the Institute for Nuclear Power Operations down in Atlanta, Georgia, a group that strives not for meeting minimum standards, but for meeting excellent standards.  And you see what has happened.  This one anomaly here in 2003, you see zeros in ’99, 2000, all the way through 2005, with the exception of 2003; that was the great Eastern blackout when off power was lost to nine of our nuclear plants and they have to shut down by NRC decree for safety reasons at that point.  So that was the one anomaly: nine plants shutting down for that period of time that we had that going on.

Now, back to reliability.  The reason that billions of kilowatt hours came up from that period back in 1995 – I think it started on the previous chart, so – we had truncated this at ’95 in the previous one, but if you go back to ’80, as we have here, the primary reason we have been able to generate so much more electricity from our nuclear power plants is this thing called capacity factor.  Capacity factor is nothing more than the amount of megawatt hours that you generate divided by the amount of megawatt hours you could generate if the plant were online 365 days a year, 24 hours a day, at that rated nameplate output. 

So look at this: 90 percent on average here for the last three, four years.  No other industry in this country even comes close to a 90-percent capacity factor.  They would give their left arm to be in this boat.  We’ve done that through a whole series of things that involve paying attention to what our standards really ought to be: qualifications standards, training standards, the Institute for Nuclear Power Operations – I’m going to from now on say INPO, I-N-P-O.  INPO had a great deal to do with this marvelous recovery and efficiencies, but it has meant a great deal to the operating plant, so much so that over a period of time when the U.S. electricity supply – demand and supply – increased by about 25 percent, we maintained our market share of 20 percent without putting on any new plants, simply through this efficiency – through this capacity factor increase.  And those are also big numbers.

Common wisdom back in those 80’s – and even frankly into the early ‘90’s – was that nuclear power plants were going to be coming offline as quickly as people could find an economic way to make it happen.  To the contrary, what is happening and what we know now is really going to happen, all those numbers should add up to 103.  I know all the nukes in the audience are already doing that, and it does.  (Laughter.)

What has already happened is 44 re-licenses, extension of licenses, have been granted from 40 years to 60 years.  So the original license was for 40 years; the extension takes us out to 60 years.  Forty-four have already been granted.  Seven are under NRC review.  Twenty-seven of our plants have already announced that they intend to ask the Nuclear Regulatory Commission for this extension.  And 25 are unannounced because they’re not yet in the window that requires them to declare yet.  But trust me, they’re going to ask for license extensions.

Another measure is what it’s costing.  How would you like to see on your electric bill that you’re paying 1.7 cents a kilowatt hour?  None of us are.  We are paying more in this area like $.06 or $.07 a kilowatt hour, but watch this space because it may not even stay that way.  So these plants are very, very, very profitable to their owners.  And it’s why you see Exelon, as one example and Entergy as another example, going out and grabbing up as many as they possibly can at every turn.  These are extremely profitable plants.  It also, though, takes us back to one reason why the capacity factor is up so high.  If you have an opportunity to put on – to load on to the grid the dispatch electricity at 1.7 cents a kilowatt hour and sell it at $.08 a kilowatt hour, and your other option is to use your gas turbines at dispatch at eight cents, 10 cents, 12 cents, depending upon what natural gas is that particular day, guess which one you’re going to put on first?  And that’s true.  So nuclear is carrying the base load today until we don’t have anymore, and that’s certainly driving the capacity factor.

To compare – remembering the first chart about where our electricity comes from in this country, to compare the cost of the others with nuclear, you see that nuclear first scooted under coal back here around the year 2000 and we’ve been marginally under coal for production cost.  This doesn’t include the total cost of electricity because you have to include retiring capital and other features.  But even if you did, what that effect would be would be to remove all these lines up, all the lines maintaining their relative position one to the other.  So nuclear remains the cheapest of the ones shown here.  Frankly, hydro is just a little bit cheaper than nuclear, but hydro is difficult to keep online and we’re out of hydro sites.  And in fact, folks who worry about fish are worried about dams where they hydro plants are, so they’re under as much pressure as any of the other energy sources in this country.

But I think this says a great deal.  This must have been when gas was passing through a relatively low value.  As you know, it’s been up as high as $12 a million BTUs.  When we first started putting gas plants online, it was $2.25 a million BTUs.  So gas is now way up here and oil is just out of the question and part of the reason it’s only 3 percent. 

Now, that hope lays a foundation for the superb operations of our 103 plants today.  I’m going to talk a little bit more about INPO in just a little bit and share with you my first INPO board meeting because I think it’s instructive.  I thought I knew about the Institute for Nuclear Power Operations and how they operated, and I didn’t have a clue.  We’ll talk about it later. 

So the drivers of new nuclear are here, and these – a kind of blinding flash of the obvious, certainly what I just got through talking about.  If our plants were not operating safely and reliably and efficiently and making big bucks, we wouldn’t be having this discussion right now.  Secondly, we wouldn’t be having this discussion if there were not a growing base for new generation in this country.  And like it or not, the EIA, the Energy Information Agency, part of the Department of Energy, says that we’re going to go 45 percent increase between now and 2030 in terms of base load demand unless we implement some major, heroic efficiency measures: green roofs, hybrid cars, a whole lot of other things that might help us.  But right now, the planning is based on that estimate of 45 percent increase in base load between now and 2030.

The third element, of course, is what we know about going on and what I presume was the reason for this group to gather together, and that is to address energy requirements in the face of rising concerns of the environment.  Global warming – is it or isn’t it?  There’s a whole lot of evidence that lead you in the direction that we’re certainly not helping things by continuing to burn, preferentially, fossil fuel.  So that gave the initial impetus to new nuclear – let’s look at it, let’s start investigating – and it certainly hasn’t diminished any since I’ve been in this job. 

And then finally, as I mentioned earlier, this chronic, now, volatility in gas prices has also pushed nuclear. 

Now, I just said this:  The EIA, so-called Energy Information Administration, part of the DOE, is saying 45 percent increase in base load between now and 2030.  A point I would like to make, and hope you go away with, is just to maintain our 20-percent portfolio share in the nuclear world requires us to put online on the order of 50,000 megawatts of new nuclear.  Fifty-thousand megawatts of new nuclear is somewhere around 35 new plants.  That’s not to grab an additional share of the portfolio.  That’s not to move from 20 percent to 25 percent; that’s to hold 20 percent.  So do we still need coal, which we have in abundance in this country?  Yes, we do.  But we need clean coal. 

We need the technologies that will make sequestration and storage of carbon dioxide and other greenhouse gases, and scrubbing of those coal plant emissions.  We need more and more R&D to make that happen.  Do we need natural gas?  Yes we do.  We need everything.  And we certainly need efficiencies too.  And I’m a big believer in doing what we can.  If you haven’t heard the Home Depot story – put Home Depot wherever you want to put them in your pecking order of socially acceptable businesses; you ought to hear the Home Depot story about their environmental push and what they’re doing.  And they are so enormous and so big – how they’re driving their suppliers.  Their vice-president for this program will give you an eye-watering, bring you to your knees, gnashing your teeth and whining after you hear his presentation because Home Depot is doing a lot, and it’s stuff we all ought to be doing in this country.  So if you haven’t heard that yet, I would commend it to you.

Now, this is tough.  I hope to see a whole lot of red zeros on here.  This is the North American Electrical Reliability Council region by region, coming down from New England, New York, mid-Atlantic.  Trust me, as we go down this column, we’re talking about the various regions of this group called NERC, North American Electrical Reliability Council.  These numbers – 2007, 2008, 2009, 2010, 11 and 12 across here, and here are our zeros when we run out of what’s called excess capacity.  Excess capacity is, down at the bottom, a margin of about 12 percent in some regions and as much as 18 percent – I’m sorry, 15 percent in some regions and as much as 18 percent in other regions above the steady-state base load.  So don’t take a whole lot of comfort in the fact that it’s 15 percent or 18 percent above a steady-state base load because we frequently exceed steady-state base load, in both the hot summer days and the cold winter days. 

So these are the times by year that various areas are going to run out of electricity.  You might log, for future reference, because we’re going to get to it in just a minute, where the first of these are occurring, and you’ll see that a whole lot of people are moving to the sunbelt, a whole lot of people are moving to the Southeast, so that’s where interest in nuclear is predominant right now and why you don’t see so much – although New England is certainly right there at 2009; New York is there at 2008.  So you must ask the folks up there what they have in mind when they say no coal and no nuclear coming in.  Dim the lights a little bit, turn them off, I don’t know, but there has to be a plan other than hope because that’s not a good plan.  So I hope you get the point here.

Now, if we went pedal to the metal – I’m trying to think of the one I could use here – if we went pedal to the metal – (laughter) – in the nuclear world and threw our applications in as quickly as we could get them for licenses, and got those applications out of the Nuclear Regulatory Commission as quickly as they could process them, and started digging at the sites and started building as quickly as we possibly can, we would be doing very, very well to attach to the grid, hook up the grid, in the year 2014.  That’s the earliest we can get there.  More realistically, 2015 – late 2015, 2016 is my guess.  So we’re not even on the chart here and yet you see all the zeros already, even before we get to that number. 

Now, here’s what I alluded to earlier.  You should find 290,000 or so megawatts of gas capacity up on this chart.  And in that same period of time, in that last 15 years, coal 8,000 megawatts plus nuclear 2,400, so 10,000 megawatts of coal and nuclear and 290,000 megawatts of gas.  Well, goodness gracious, would you suspect that that might put a strain on supply and therefore on prices?  It did.  And I’ll come back to that in just a minute and finish telling the story.  But what kind of long-range planning were we doing? We were doing the kind of long-range planning that we do in this city that has a vision all the way out to two years if you’re in the House and maybe all the way out to six years if you’re in the Senate, and that’s what drove us into this.

Let me talk emissions free.  Remember that we – I pointed out as we zoomed through the very first chart that said that 30 percent of the country’s electricity is generated by renewables, by geothermal, solar, hydro, wind and nuclear all combined.  So this represents 30 percent of the much bigger pie of the total electricity generation in this country.  But of that emission-free generation, 73 percent of it comes from nuclear, because, again, like it as much as we do, there’s just not very much geothermal and there’s just not very much opportunity.  Solar has some wonderful qualities, but on that first chart you saw – I’m interested; I want to come back and hear the PTV or the photovoltaic fellow next week, or next time if I could because there’s some downsides there.  In generating those photovoltaic cells, a whole lot of energy goes into the process. 

So there are arguments today that solar’s not even break-even yet.  Technology will improve; it will get there, but there’s a problem with solar, there’s a problem with hydro because we’re out of dams, and those dams that do exist like out West, a whole lot of push to get rid of them.  Wind – even those who say no nuclear, no coal, and say wind is okay but don’t put it in the Narragansett Bay and don’t put it in front of my house outside of Martha’s Vineyard please, so there are difficulties.  But remember that nuclear is 73 percent of this emissions-free generation in the country.

Now, what does that mean?  Let me try to put it in some terms that we can tell our Aunt Sally about back in Tennessee.  This large standpipe of voided million metric tons of CO2 by using nuclear means this:  If we wanted to shut down all 103 nuclear power plants in this country and maintain carbon neutral posture – that is, not lose this advantage that nuclear gives us – we would have to take 130 million cars off the road.  We have 136 million cars licensed and registered to drive in this country. 

MR.    :  I’d be one of the six left.

ADM. BOWMAN:  (Chuckles.)  You’d be one of the six.  That probably wouldn’t go over very well, but, again, this represents the carbon dioxide emissions of around 130 million of our cars.  There are also sulfur dioxides and SOx’s, not just dioxides, that I could talk about, but I won’t today. 

    Now, I said I would return to this.  How dumb were we with this gas story?  We weren’t really too dumb.  There were some smart people making decisions.  Here’s what we faced back in the early ‘90s and – really late ‘80s to early ’90s.  We faced a situation that the base load was pretty well covered by coal and nuclear and a smidgling (sp) of those other sources.  What we needed at that time really was that hot day – that hot day peaking, that cold night peaking.  And what do you build to take care of that situation? Well, the cheapest thing going in terms of capital cost are gas turbines.  You can build a gas turbine plant relatively inexpensively compared to all the others. 

Secondly, you can throw a gas turbine online real fast.  You don’t have this prolonged warm-up period.  Remember plotting temperatures versus whatever we plot them against – I’ll probably get in trouble here.  You don’t have a warm-up period with a small one with a gas turbine.  You zing it up, you put it online, and then when the peak goes away and the air conditions go off, you take it off the line and it’s over with.  It made sense.  Gas was $2.25 a million BTU, as I said earlier, at that time.  So it did make sense.  And so, by golly, we went after it like a big dog – 290,000 megawatts over a 10-, 15-year period we put online – a whole lot of gas turbines. 

Well, what that did to us gradually as we got more people in the country and as base loads came up and as digital technology started giving us all new toys to play with at home that sucked more energy than ever out of the electricity pipes, what used to be peak power suddenly started becoming base load.  And so we needed these gas turbines online not just to handle the peaks, but to handle the routine, to handle the day-to-day.  And so we didn’t have enough natural gas to do that.  And down along the Gulf Coast – any of you from that area?  You could stand and tell the story about the chemical industry, the refinery business, the plastics industry, the fertilizer business all use natural gas not just as a fuel to heat things up, but as a feedstock.  We’ve lost in this country something like 100,000 jobs over the past three years in the chemical industry alone, having to export them overseas because we don’t have the gas to operate as feedstock and to operate as power for these plants. 

So we put these words, “unsustainable pressure,” on gas supply and price, and we saw periods of punishing volatility.  Now, this goes up what, 13-plus dollars a million BTU.  And remember, again, where we started from: a factor of six, higher, so no wonder – no wonder we saw what we saw last year and the year before that and we’ll continue to see until we address this issue. 

    So this is the challenge.  How do we resurrect coal and nuclear?  How do we rebalance the portfolio to make more sense?  How do we get that natural gas supply available as feedstock for some of these industries that are slowly but surely withering on the vine and sending jobs overseas?  What can we do?  How do we go about fixing about?  Oh, by the way, look at these numbers.  This is no small potatoes.  We don’t have enough wires running around the country to transport electricity from one region to the other.  So careful about building plants where they’re acceptable because you’ve got to move the electricity out of there in other than buckets, and so the transmission system in this country is also kind of suffering right now because of underinvestment.  We went down almost by a factor of two over a steady state period of about four to four and a half billion dollars a year going into that.  So we have to do that.  So the bottom line is here.

We diversified fuel technology; diversified energy portfolio is what we’re aiming at.  Nuclear is certainly not trying to take over the market.  You saw that we can’t.  We need 35 new plants just to hold the 20 percent that we have.  But we have to get going with it or we’re going to find ourselves in very, very serious trouble just around the corner. 

So here’s where we are.  I know you in the back can’t see it.  Down this side, our companies that have announced that they’re interested in new nuclear, they have shown an interest to one degree or another, four of those companies have asked for early site permits for specific locations to get approval for that site to have a new nuclear power plant on it.  Others are just talking about it, but all of them are in one stage or another of developing what’s called the combined construction and operating license application, which will go into the Nuclear Regulatory Commission.

    If you’re a numbers person, there are 12 companies generating 19 applications for up to 30 new nuclear plants today – snapshot as of 5:00 when I left the office.  So if you hope – and I’m sure, again, all of you nukes have already done this – if you add up the upper end of the ranges here, you should come out somewhere around 30 new nuclear plants being talked about.  How much talk about?  Well, look, these COL applications aren’t free.  You’re talking about $50 million investment to do the engineering, the first- of-a-kind kind of engineering because these are first-of-a-kind plants, and develop this application.  The first of these applications will be going into the Nuclear Regulatory Commission this time next year – maybe two weeks before this time next year, the first part of September of 2007.

    The Nuclear Regulatory Commission promises us that if the applications are high quality, and in particular if you follow the recipe for getting an early site permit first, so the site’s already approved, and you’re talking about a reactor design that’s already certified by the Nuclear Regulatory Commission and all you’re doing now is combining those two and saying, I, Company X, want to build that certified plant at this approved site, the NRC is saying as little as two years to make that happen.  If it’s a poor-quality application and you don’t have the early site permit and you’re coming in with a not-yet-approved, not-yet-certified design type, it could be four years.  So that’s where we are.  But we think that we’re right in saying that once we get the license in hand and we get permission to start real groundbreaking and doing, that we’re talking about four years from that point to get through the process of construction and testing to get online. 

    Now, if you add all that up, you’ll see where I came up with 2014 to 2016 before.  So this is pretty good news.  This column here – let me go to my cheat sheet so I don’t mess this up.  Yes, BWR is the new General Electric passive capacity, passive design (whispers) natural circulation – for you Navy nukes, it’s kind of like natural circulation like we’ve been using for a long time.  (Laughter.)  But it’s a boiling water reactor.  The ESBWR is 1,500 megawatts.  The ABWR is a tried and true, already certified, already licensed, all ready to go, and is already being built in Asia today and has been built in Asia.  It’s not quite as developed – it’s not quite as advanced as the ESBWR.  It’s another GE application of a boiling water reactor.  It does not include those passive features I just talked about, and is a little bit smaller at 1,350 megawatts. 

The AP1000 is the Westinghouse pressurized reactor.  And it’s misnamed.  It’s not 1,000 at all.  It’s 1,150 megawatts.  It should be the AP1150, but AP1000 has a nice ring to it, I guess, so that’s why we did that.  It is also passive.  Now, realize the safety implications of when I say “also passive.”  What that means is just what it says:  You don’t rely on any outside power to bring the plant down in the event of a casualty that requires cool down and depressurization of whatever.  So that’s the big drawing card there.  And I must be missing the U.S. evolutionary power reactor.  That was originally called the European power reactor, but since it’s being marketed in the United States, Areva, the company that developed that, a French company, realized that if French fries won’t sell in this country, then probably a French reactor won’t.  (Laughter.)  So it’s now the Evolutionary Power Reactor, and it’s a “hoss” – 1,600 megawatts.  Big guy.  So you see where they are, and we’ve got at least each one of those up here. 

You know all about, I presume, Unistar Nuclear.  Unistar Nuclear is a partnership formed by Areva, Constellation Energy, and now BWXT has joined.  BWXT, the provider of heavy components and fuel for the Navy nuclear reactor program, has joined that partnership and has already ordered heavy components for the first of the evolutionary power reactors to go in in this country – likely to be right around the corner at Calvert Cliffs.  That’s the rumor on the street.  How much media do we have here? Okay.  Likely to be that.  Who knows?  Likely not to be.  May not be.  All right, that’s where we are.

In my view, if you didn’t know this I hope you’re reasonably excited about the prospects.  I am, as you can tell.  I’m reasonably optimistic that this is really going to happen.  And these are big numbers.  I was joking when I said as of 5:00, but literally every week it seems like somebody joins the bottom of this chart and we’re about to run out of space on this PowerPoint.  These two weren’t there a month ago.  Amarillo Power and TXU were not on this chart, and NRG.  All three of those weren’t on there two months ago.  So it’s happening that quickly.  A lot of people are seeing the virtue of doing this.  Around the world we’ve got 27 new nuclear plants actually under construction – not just being talked about, not just developing applications to provide to the regulatory agency, but being built.

    Now, what comes to mind for you?  Twenty-seven plants being built around the world, 30 being talked about in this country; Russia’s talking about another 30; China’s talking about, god only knows, 50? 

MR.    :  Jobs.

ADM. BOWMAN:  Jobs for sure.  Where are going to get the people?  Where are going to get concrete and the steel and the basic materials, and where are we going to get the components?  Where are we going to find the certified nuclear components to go into these – into this explosion, into this renaissance?  We have to be real careful with this.  I’m on the road a lot trying to convince former manufacturers in this country that this is a true story, and that this is a thing that’s happening, and that they’re missing the boat.

 Some former, very strong defense-oriented companies in this United States have joined Nuclear Energy Institute because they believe that there’s going to be a role in this for them.  Like, for instance, when I bumped into Ron Sugar at the Chief of Naval Operations retirement ceremony and said, Ron, you’re going to miss the boat here if you don’t get Northrop Grumman to join NEI real quick and put your ear to the ground about possibilities for commercial nuclear power, he immediately said, yes.   Ha, I ran across the room found, Nick Shervai (sp) and said, Nick, Ron Sugar just joined NEI – (laughter) – and Bob Stevens, Lockheed.  And it’s happening. 

BWXT just got their nuclear stamp back.  So now where they were the sole provider for heavy components and nuclear fuel for the nuclear Navy, they now have converted their Mount Vernon, Indiana plant to commercial nuclear.  And so they’re able to build all the reactor vessels, pressure vessels, steam generators, pressurizers that are required for these large commercial plants, provided they can get their forgings from Asia because we don’t have the forging capability anywhere on the continental – anywhere in the United States to handle these size components. 

And, oh, by the way, when I left naval reactors we were building and often running on the Virginia class submarine.  Guess what?  We can’t build our own steam generator tubes in this country for the Virginia class submarine.  Had to go to Sweden to get those tubes done.  This is a big deal.  Infrastructure to support all of this we better be careful with. 

And now let’s talk about the human side of this.  I hate those words “human capital.”  As a former chief of naval personnel I liked calling people “people.”  Where are we going to get the qualified people to maintain the kind of records that I talked about in the first part of this?  Well, we are working really, really hard with universities right now.  Eighty universities are now members of NEI.  And I’m really glad.  We were able – and there are two members in the audience here that served with – or I served with them on the MIT Board of Visitors in the nuclear engineering department.  Four years ago MIT was about to close up – close the doors on the undergraduate nuclear engineering department because you couldn’t make a business case four or five years ago for nuclear.  Am I right, sir?  And we locked arms and said no; you have a moral responsibility to hang in there.  There’s 206 reactors in this country.  A hundred and three of them go to sea, a hundred and three of them don’t.  But you, MIT, helped get us here and you don’t have the right to step out of it.  (Laughter.)  And then we said, and, oh, by the way, we’ll be back in about two or three years and I’ll give you a business case that will water your eyes.  So don’t do it.  And they hung in there and now they’re happy they did. 

The University of Tennessee, Lee Dodds, the professor, head of that department, can’t take any more students at the University of Tennessee and South Carolina.  Two new departments started up at the University of South Carolina, South Carolina State, just last year.  So it’s happening.  It’s really happening.  Westinghouse hired 300 net increases in young engineers last year – 300.  NRC, 200 net increases, and they have as a goal 200 net per year for the next three years.  But this is not a walk in the park either and we better keep our eye on this, and it’s one of the things we’re looking about.

Okay.  So I’m assuming that the majority of you would vote with me that yes, we do need to continue down this path, and that new nuclear does makes sense.  But somewhere in the back of your mind you may have these questions, those things I called “yes, but”.  Yes, but are they really safe?  Are they really secure?  Have you thought about al Qaeda?  Have you thought about terrorist attacks on these plants?  Where are we really in terms of safety and security?  So let’s talk just a little bit about that.

This is really true.  Defense in depth.  We have always, in this country, built our plants in the Navy and on the commercial side with a whole lot of backup systems, a whole lot of redundancy, a whole lot of proofs of the pudding that are found in maintenance plans, and since Three Mile Island we have really put a whole lot of stock in well-trained individuals, properly qualified and properly watched over.  So I would start my discussion with that. 

I would continue my discussion with a look at one example of defense in depth.  This is the kind of defense in depth that keeps the bad stuff from getting out here into the atmosphere.  And if you take a look at the various barriers and the thicknesses of those barriers, you see why nothing got out of Three Mile Island.  You can’t do much worse than Three Mile Island.  You can’t do much worse than meltdown a core, a reactor core, and yet nothing got out.  Now, why is that?  Well, partly because of this – partly because of this:  We now know that the fission products in some of the dastardly stuff we have been always worried about will plate out on a whole lot of surfaces and will get entwined in the water atmosphere in the reactor.  We know a whole lot more than we did in ’79 when Three Mile Island occurred.  The lady who refused to leave her house because she wouldn’t evacuate got 30 millirem of exposure.  Those of you who are familiar with that term know that that’s about a tenth of what she would get walking around on an annual basis there in Pennsylvania.  So it is what it is.  I’m not suggesting that we take our eye off the ball by any stretch of the imagination, but I’m saying that we should put that into context properly. 

Now, we’re back to this again, and it’s simply because it makes sense to talk about it again.  We had this – remember, that was the nine plants that went out during the blackout.  But look at this; this is fairly dramatic.  We just don’t have automatic initiation of the safety systems, and that doesn’t just happen.  That comes about because all that other that I’ve been talking about has worked.  And now I’m going to go through a whole lot more.  If you look down in the corner down here it says “World Association of Nuclear Operators.”  So that’s the INPO for the world.  That’s the Institute of Nuclear Power Operators for the entire world.  And they keep these metric; they keep these benchmarks, these parameters going way, way back. 

Look at, as I go through this – you’ve already seen how scrams went like that – in zero now – and now this is safety system performance.  We’re up at 96, 97 percent of safety system performance.  That means availability of redundancy.  The fact that it’s not 100 percent doesn’t mean that it’s unsafe; it means that for a period of time the plant had to come down off 100 percent power, go do preventative maintenance, go do some operations on a redundant safety system, finish that operation and then bring the plant back up to power.  But it’s at 96 percent.  It started at 70 percent back here.  WANO calls it capability factor; I’ve been calling it capacity factor.  You’ve seen that ad nauseam.  That’s the 90 percent – 93 percent – 91 percent.

Accident rate.  This is the other kind of accidents, of course.  This is industrial accidents.  This is slips and spills and falls and that kind of thing.  But this would tell you – if I were smart enough I would’ve superimposed here the average industrial standpipes for industry in this country, and they’re not at .24 per whatever it is, megawatt hour per 200,000 worker hours.  I couldn’t read it.  They’re not there.  They’re way up here.  This is leading the country in terms of industrial safety.  Why do you suppose industrial safety at nuclear power plants is so much better than industrial safety at the other 16 sectors of industry in this country?  Why do you think?  You know the answer, rhetorically.  It’s because we care about safety.  We care in general.  We are so ingrained with reactor safety that we’re likewise engrained with don’t do dumb things with hot steam; don’t do dumb things with pressurized water, even if it’s coming from the city plumbing system.  So it’s borne out there.

Collective radiation exposure.  This is 1980; you don’t have to know what these units are, but look at the improvement here against 2005.  That’s a pressurized water reactor – boiling water reactor, same thing: one year of median values chemistry performance going up like it ought to, and right across the board.  So metric after metric after metric that we keep and watch and care a whole lot about within our industry have followed that kind of trend.

Now, let me back up just a minute and just use this to tell you that story I was going to tell you about INPO.  There I was, head of naval reactors for eight years.  Of course I knew what the Institute for Nuclear Power Operations did and I knew that a lot of our good people that left the nuclear Navy would go to work there, and that it was originally founded – the first president was Dennis Wilkinson.  Everybody knows those kinds of stories.  So we know what it was all about.  I didn’t know.  I went to the first board meeting.  I’m an ex-officio on that board – director on that board because of my job at NEI, and Jim Ellis, another admiral from the Navy who runs INPO, is on my board.  I went to this thing, and here’s what goes on:  At each quarterly meeting, all of the plants that had been evaluated by INPO over that quarter are brought out and the results discussed.  There was, at this particular meeting, one really bad set of results trending the wrong way, not to the point of unsafe, shut down, cool down, depressurize, but certainly not going in the direction that we wanted it to go. 

These chief executive officers jumped on their fellow chief executive officer and just pummeled him.  I mean, I had no idea.  It was gloves off.  It was who do you think you are?  What do you think you’re doing to the industry with this kind of performance?  What are your plans to improve this performance, and when we all go back with the INPO evaluation team six months from now, what do we expect to see?  It’s like that.  It’s tough.  And I’m not kidding.  I hope I’m making my point here.  I worry that I can’t do because I’m not a good drama person.  But it was real.  They were eating this guy alive because his plant wasn’t performing right.  And there were words like:  What are you doing about the site vice-president at that place?  What are you doing about your own chief nuclear officer and your bigger company?  Have you started thinking about replacements because they’re not cutting the mustard.  They’re not doing it.  That’s big pressure.  That’s enormous pressure. 

And there are other implications of doing poorly against the INPO standard of excellence.  Remember I said INPO doesn’t inspect to minimum standards; it inspects to excellent standards.  If you don’t meet it, your insurance rates might go up, as an example.  You might get kicked out of the INPO organization, and if that happened I’ll guarantee you that plant is toast.  That company is toast.  That CEO is toast.  So there have been, since I’ve been here – it’s a little more than 18 months now; I was just figuring out over here it’s more like 20 months – there have been two CEOs changed, euphemistically, at the CEO level.  Big doings.  We don’t take this lightly.  We take it very seriously. 

Now, a little bit about security.  How many of you noticed that Chuck Schumer – Jackie, when was it?  Bill, was it last Monday, Tuesday? – came out with a report card on the Department of Homeland Security and the report card said C- for DHS across the board, and in fact failing grades in a number of the sectors.  The one bright spot was the nuclear sector.  Here’s Senator Chuck Schumer from New York saying good things about the nuclear industry: B+.  Why would he say such a thing, Mrs. Clinton wanted to know.  How could you possibly do this to me?  Don’t you know that I’m mad at Indian Point and now you’re giving them fodder to shoot back at me?  You’re telling me that they’re good.  I’m just suggesting that there might have been that kind of talk.  I don’t know.  (Laughter.)  Where’s the media guys?  I’ve got to see the media guys.  (Laughter.)  We’ll meet at the bar.  All the media guys meet with me at the bar when we get through here.

    But look at this:  Since all this happened we have responded to 60 advisories from the Nuclear Regulatory Commission.  Does it say that up there?  No.  Sixty advisories from the Nuclear Regulatory Commission, which became kind of the pro forma way of doing this because the advisories means that it was not a rule; it was not a rulemaking process that got us there.  It was a memo, if you will.  How about go do this; we think this is a good idea.  Industry jumped on the train and said, we’ll do what we need to do because we’re in this together.  One point two billion dollars later, 60 percent increase in security forces later, new force-on-force exercises that occur once a quarter observed by the Nuclear Regulatory Commission once a year, all of this adds up to a B+ in a pretty tough scorecard that was just rolled out last week. 

Here’s what we have:  In general, if you could go visit these plants – and it pains me that we, as a result of 9/11, had to pull back our opportunities to take good people, American citizens, into these plants and let them look around.  But if you could go, what you would find is almost across the board, these 8,000 security guards, or former special forces – a whole lot of Navy Seals, whole lot of Army Green Berets – these guys know what they’re doing.  You don’t want to mess with them.  You don’t want to joke about – just like going through the airport, no jokes please, because I would never do that.  Very high – very high security at these plants. 

Now, that’s going to satisfy everybody – and I’m going really fast – but I’ll tell you that I’m willing to sit down with your neighbor next door and talk to him or her about safety and security, and so is my entire Nuclear Energy Institute staff.  We used to take one of two postures in this industry, certainly at the Institute.  One posture was get down in the foxhole and don’t raise your head and don’t get asked any questions.  The second posture was one of arrogance.  Ah, you don’t have to worry about.  We do have to worry about because American citizens have legitimate concerns about this and it’s my responsibility to explain those legitimate concerns, and I want to start the conversation by convincing them that I’m a bigger environmentalist than they will ever be because I’ve got six grandkids and it matters.  So I’m willing to go do it.  And that’s the way we’re talking now.  That’s the way we’re talking, and it’s the way I testified before Congress just last week, and it’s very important to us.

Now, here’s a little bit harder situation – we’re going to talk some nuts and bolts here.  This is my market caps of some representative countries.  I put Exelon up, not because they’re interested in new plants – you notice their name wasn’t on the previous chart – but because they’re the biggest.  The largest market cap in the nuclear industry is Exelon at $34 billion – $34 billion.  It goes all the way down to South Carolina – whatever ANA stands for – SCANA, goes all the way down to them at $4.7 billion.  Now think about this for a minute.  You want to build two pressurized water reactors on site X; you’re talking about at least a $4 billion investment.  Look at what that means in terms of percentages of their full market cap.  And it says over here – I didn’t know we had all that on there, but if you compare these to ExxonMobil, ExxonMobil by themselves are twice the market cap of all the companies that are talking about building new nuclear.  So this is a big gamble.  This is a huge risk.  You, as CEO, don’t go before your board of directors with a cockamamie idea about building a new nuclear plant when it represents 100 percent of your market cap in investment, or even merely 50 percent or 30 percent.  That’s big.  That’s big.  You don’t just do that willy-nilly.  You better have your ducks in a row when you go talk about it. 

Now, in recognition of this situation, the Congress last year did what’s right.  I’m going to talk about three provisions in the Energy Policy Act of 2005, the three that are up there:  One, guaranteed loans; two, production tax credits; and three, the so-called “stand-by support” – what I would call a risk insurance.  Notice with me these things real quickly as I go through, and I don’t think all of this is up there. 

The guaranteed loans, the federal loan guarantees, are not just nuclear.  It’s for all clean sources of electricity generation.  So you want to start a new wind farm?  You can get a guaranteed, U.S.-backed loan to start up that project by this Energy Policy Act.  Isn’t that good?  In my mind, it was huge, to have us not stand out as a bull’s-eye that nuclear is somehow different.  Nuclear is just like all the other non-emitters.  That was big, being able to be classified that way.  Ditto with production tax credits.  All the other non-emitters had been getting production tax credits for like six years, seven years.  So we finally got a piece of that action also – not just nuclear, but us non-emitters. 

The third one is unique nuclear, and it has to do with what if this new method of regulating and licensing doesn’t work and we get frivolous interveners like we had in the ‘80s, and production stops with $4 billion on the table and our production never gets started and you have $4 billion on the table?  Who pays the bill?  Well, the answer is for the first six plants we have some coverage that will cover the debt servicing at least, and maybe some of the O&M costs while the plant sits there idle.  That’s another big one because that gives the CEO a little bit more cover to go to the board.  Now when he talks to his board he says, if we’re one of the first six we can get that. 

Notice that those two are limited in number and in scope – production tax credits only the first 6,000 megawatts of new generation, and this last one only specifically for the first six plants.  The top one, though, is good forever and ever amen if we can just get the regulations written the way the law reads.  The law that President Bush signed into being says 80 percent of total project cost – okay, I can read that – 80 percent of total project cost.  By the time it gets out of OMB it reads, 80 percent of 80 percent of total project cost.  How?  I don’t know.  So 64 percent instead of 80 – it matters.  These guaranteed loans let us go into the project with a total project financing that’s non-recourse, can’t come back to the base company if the thing does fall flat.  It lets us go in with an 80/20 leverage debt to equity ratio as opposed to the nominal 50/50 that you see with major projects aside.

    It lets us reduce the cost of the debt from 8 ½ percent or so, which the market would command today, to 5 ½ percent if it’s government backed.  What it means to us as consumers, as users of electricity, is a mere $400 (million) to $500 million per plant per year in returns to our ratepayers in this country – $400 (million) to $500 million per plant per year.  That’s good.  That’s good.  OMB, please get on the train.  Read carefully.  Get your kids to come in and read it for you.  They can do it.  It says 80 percent of total project cost, not 80 percent of 80 percent.  So we’re having a little struggle here. 

With that 80 percent of total project cost, new nuclear comes out like this in total bus (?) bar cost.  Now, this is everything.  Remember when I said 1.7 cents a kilowatt hour?  We’re changing scales here because we’re now talking megawatt hours, but that would be $17 a megawatt hour today for the production cost, but I told you that didn’t include retiring the capital cost.  If you throw retiring the capital cost in and you have apples to apples here, this is another little trick that’s getting played on us.  Sometimes people say, well, what about today’s coal plants versus this new nuclear?  It’s outrageous.  We can’t afford it.  There’s no economic incentive to go do this.  That’s an apple and a cannonball.  It’s not even an apple and an orange.  They’re not even the same gender kind of thing.  It’s outrageous that we allow that to happen, but we do.  If you put all the new stuff on a chart and you give everybody the – by the way, integrated gas combined cycle, which is a coal plant that makes gas out of coal to start with and then sequesters the CO2 that comes out, is eligible for that guaranteed loan also.  That’s the clean coal I was talking about earlier.

    They will be able to dispatch at about $54 a megawatt hour by our estimation.  We’re down here with at $46 with a nominal $2,000 per kilowatt capital cost.  There’s too many assumptions here.  You get the picture.  We need that guaranteed loan to be able to play.  Without it we would be out here with $65 a megawatt hour if we didn’t have the guaranteed loan.  And now you do have a problem.  Back to the boardroom.  Back to facing your chairman of the board and explaining why you want to build a plant that has all this risk involved and is going to dispatch at $65 a megawatt hour when there’s things out there at $49 a megawatt hour. 

    Okay, a couple of other things, for those of especially familiar with the process.  What about how we used to business versus how we’re doing business now, and how much better a story this becomes.  In the old days we had all sorts of opportunity for frivolous intervention.  I’ll use that expression again.  Today we have what’s called a more stable process, a combined construction and operating license.  You go to the NRC one time.  You get a construction license, and provided during the construction and test period you meet some very stringent, very rigid requirements called inspections test, acceptance criteria as you go through the testing cycle; provided you meet those as you go through construction, that four-year period, at the end of that four-year period, the bar for intervention with litigation is way, way high.

    You cannot get standing in the court with frivolous, willy-nilly kinds of concerns.  If you met the ITAC (ph) – I think it’s up here – if met that things called ITAC, you just can’t get into the courtroom to fuss about it.  So that’s big.  That is really huge.  In the old days we didn’t have designs and standardization.  Hopefully we learn from the Navy and the French.  And I’m here to tell you that we have.  The chief nuclear officers in this country have stacked hands and have agreed that if they’re going to buy an AP1000 reactor plant, that one ought to look like that one ought to look like that one ought to look like that one.  That’s not the way we built the fleet of 103 that are out there today.  Everybody wanted a little tweak.  Everybody had a little bit better idea, a little bit better way to skin the cat.  And so we didn’t have standardization, and think about what that does to the Nuclear Regulatory Commission that has to adjudicate the safety of these things. 

    We used to build these plants while the technology was still evolving and the design was still being generated.  Well, we learned at Electric Boat that a smarter way to build submarines was to complete the design before you start building the submarine (Laughter.)  Now, that’s the way I do my home projects at home, and I doubt if it’s the way you do them either.  You kind of get going and you want to start hammering, if you’re like me.  Enough of this paper stuff; let’s roll them.  That’s the way we were building nuclear power plants in those days.  Not going to do it that way.  The design will be complete before we get started.  We’re going to take lessons from CAD (?) design; we’re going to take lessons from modular construction, which, without being silly, is precisely why Northrop Grumman and General Dynamics think that they might have a piece of the action here, to say nothing of their other subsidiaries that might have electronics and other materials that we could use.  So this is a huge story on this chart about the difference in the way we’re going to do business this time around versus last time. 

Now, we’re into the hardest.  I’ve made them progressively harder.  Safety and security, I have full confidence.  I even have confidence in financing provided we can get OMB to read.  Now we’re into one though that is more difficult because we frankly have not covered ourselves in glory, have we, for lo these many years.  Ask you neighbor – rhetorical again.  What does your neighbor think Yucca Mountain is all about?  My neighbor at the cocktail party thinks that Yucca Mountain is this mountain out in Nevada, somewhere outside Las Vegas, that we’re going to take this steaming cauldron of stuff out to and throw it in there and shut the door and walk away and say, over to you, grandkids.  That has never been the proposition. 

Now, think through what I just said.      I wasn’t trying to be totally silly, because a lot of people think that because that’s what the Department of Energy, doggone it, has told this American public we were going to do, that Yucca Mountain was a permanent repository into which we were going to put the used – once through used fuel – that is, no reprocessing, no recycling – and we were going to put it in the mountain and close the door and walk away.  I will tell you, from having been one of six that had to concur in the final EIS, the final EIS for Yucca Mountain recognized from the get go that there had to be, quote, unquote,  “50 to 300 years” of monitoring and retrievability before the doors go shut. 

    Okay, now what does that mean?  Well, it means the doors aren’t going to go shut, and if the modeling that we’re doing today is wrong, we’ll have an opportunity to go in and measure and calculate and put empirical data back into those models and jerk the curves back down to where they ought to be, and take corrective action if we need to.  And beyond corrective action, it allows us the opportunity that if technology is developed that make reprocessing and closing a cycle viable, economically and from an environmental standpoint, we can pull the fuel out and do that also.  So that was the plan from the very beginning – 50 to 300 years.

    There was a CNA study – what did I do with that thing – there it is.  There was a CAN study called “One Step at a Time” – some of you are familiar with that; I see heads shaking – six years ago that said what we ought to do is something called adaptive staging.  We ought to do this like this, one step at a time: look, measure, smell, feed back into the modeling – one step at a time, adaptive staging.  Well, I believe that.  And so we are now, as loudly as we can shout it, having people recognize that in 1982 the Waste Policy Act required this country to build a repository that was subject to monitoring and retrievability for an unspecified period of time.  The Nuclear Waste Policy Act didn’t say 300 years, 50 years; it said you must design into this facility the ability to monitor and retrieve. 

    The EIS followed from the DOE to implement that requirement, and it says 50 to 300.  I say, why 50 to 300?  That presupposes that somewhere out there we’re going to make the final decision to close the door.  How do we know that?  How on earth do we know that?  Adaptive staging can just keep on going, in my mind.  I don’t know what Yucca Mountain’s going to look like 300 years from now.  I sure don’t know what it’s going to look like a million years from now, which some people would have us be looking at right now.  But don’t you think that we ought to keep all the options open for our grandkids and their grandkids as we move along? And if this explosion – bad word – if this renaissance, this resurgence of nuclear energy is really going to happen across the globe – and we’re talking about as many as 300 new reactors going in at various places – I also think that we ought to be investigating and putting our money into the research and development of technologies that will allow us to evaluate closing the fuel cycle, reprocessing as much as we can.

    What goes in France today – don’t be fooled.  What goes in France and England and Japan and Russia today that’s called reprocessing is not what I’m talking about.  And it’s not what the DOE is talking about either.  What they do is they reprocess to the extent that the get uranium in one hand and plutonium in another hand, a pure stream of plutonium – and I told you I was going to use the word “proliferation” again – which is a proliferation risk, pure and simple.  And it causes the nonproliferation community in this country to go absolutely snaky when they think that’s where we’re headed.  It’s not.  It’s not where we’re headed. 

What we want to do is – if we can think about doing this – in the laboratory what I’m about to describe has been proven, but we’re talking about Petri dishes and not metric tons of heavy metal at this stage of the game.  We’re not quite commercialized yet.  We would pin that plutonium to – now, here we go; hold onto your chairs for a minute – to the really nasty stuff that’s coming out of this spent fuel that’s called actinides.  The actinides that are formed by uranium absorbing a neutron and not fissioning, but absorbing a neutron and developing some other heavy element as it moves on down the line and decays, decays, decays is what drives the heat load of the repository, and therefore the volume of the repository after 80 years of fuel operation.

    If we could take that actinide and pin the plutonium to it and develop a fuel that can be burned, fissioned in a fast spectrum reactor, a fast reactor, maybe even combine all sorts of things and include fast breeder reactor, now you get back the energy content, which is about 90 percent of the fuel rods that come out in a once-through cycle.  You get back that energy and you do away with, by fissioning, those actinides.  You do away with them.  So now we don’t have to contend with that.  The radio toxicity and the heat load that we put into Mother Earth goes down by a lot.  That’s not what’s happening in France – if I didn’t say this before – and Great Britain and Russian and Japan today.  But I think we ought to leave those kinds of options on the table.  Okay, I forgot that I had slides up here.

    This says that Yucca Mountain is complex before there’s politics involved.  Surprise.  There’s one big politics involved, isn’t there?  The minority leader of the Senate happens to be a very powerful man, and he’s slowed things down here and there.  And we all know that.  And we probably would too if we were elected officials from Nevada.  So this one says that we think at NEI – and the industry now believes – that closing the fuel cycle ought to at least be investigated.  I guess that’s a little strong.  I don’t know that it’s a new imperative.  But for sure, we need to put money behind the research and development and closing the cycle and truly recycling this stuff and reducing the heat load.  By the way, this 70,000 metric tons of heavy metal that you read about would fit in this room.  That’s how much it is in volume.  We can’t fit it in this room because you can’t put the thing so close together because of the heat load on this one affecting the heat load on that one and so you have to scooch them out a little bit – a whole lot.  And so that’s what’s driving it.  Well, you get rid of that heat load generator and now you’ve got something.  So that’s what this is all about. 

So NEI is now – this is the last point, whew – ooh, you not only looked at your watch, you heaved a sigh.  I saw that.  (Laughter.)  Two guys not only looked at their watch, they got out their calendars.  I know I’m in trouble.  (Laughter.)  Sorry. 

    Here’s where we are:  The long-term goal is to build Yucca Mountain, and that’s still the bull's-eye.  We have to have Yucca Mountain.  In our wildest imagination, the RND that I’m talking about will never get us to the point that we don’t need a deep geological repository to isolate this material from the environment for years and years and years.  So we need Yucca Mountain and we need it as quickly as we can.  We need Yucca Mountain, however, to take the form that I talked about – options available to shift in midstream and change designs if we get breakthroughs in research and development.

    In the short term, we believe that we should have a plan B.  We believe that we should be developing the reprocessing techniques, but we should also, just on the off- chance that Ward Sproat, the new guy at DOE, who is a wonderful man and just so enthusiastic; I love him – just on the off-chance that he’s a little bit wrong, that we’re not really going to get Yucca Mountain opened in 2017, we think we should start talking about one or two or three interim storage sites somehow linked to this technology that I’m talking about.  Now, the DOE thinks that too.  Assistant Secretary Dennis Spurgeon went out with what’s called requests for expressions of interest, or something like that.  He got 14 positive responses from various places across this country. 

    We want to be a part of the reprocessing development, the technology that’s going to be developed, and in exchange we’ll take interim storage.  Fourteen different places around the country have said that.  That’s good news.  That gives us an opportunity to satisfy the concerns that our neighbors have and maybe some of us have.  What are we really going to do with this used fuel?  Is there really an answer?

    Now, let me be clear about one thing and then I’ll stop.  Leaving the used fuel exactly where it is right now in dry cask or in spent fuel pools, as it is most of our sites, is perfectly safe.  There is no danger to the health and safety, the welfare of our citizenry.  There is no security issue associated with that.  So why don’t we just leave it then?  Why don’t we just leave it to sit there until we finally get Yucca Mountain and we figure out all this R&D?  Because we’re going to lose that 70 percent approval rating that we have in this country for new nuclear if we’re not real careful.  We are enjoying – in fact, it’s 70 to 80 percent approval rating in this country by polls for new nuclear being a part of the mix.  But it’s a very fickle love affair.  I just sense it.  And one of these days people are going to say, what are you talking about building new nuclear if you don’t know what you’re going to do with the old fuel from the old nuclear?

And so I think that showing that we are actually going to allow the government to exercise its statutory responsibility, take Title II and start moving this fuel to a site, a federal site, makes sense.  And so that’s where we are.  We’re not “Yucca or bust” at NEI or in the industry.  We’re Yucca and we have a plan B, which is interim storage sites to be developed as quickly as we can and as quickly as we can get volunteers to raise their hands, like those 14 did.  No more Nevadas, please; no more picking a state and forcing it down somebody’s throat.  We want volunteers because they see the benefits and the billions of dollars that will pour into their states. 

Stop.  And I realize there’s no time for questions, so I was successful in that. 

MR. WEHRENBERG:  Yes we can. 

ADM. BOWMAN:  I thought you were fussing at me.

MR. WEHRENBERG: Oh, no, no, I should warn you, Skip – first of all, let me thank you, but these people will stay here until midnight, so it’s really – (applause) – you’ve got to tell me when you want to leave, okay?

ADM. BOWMAN:  I thought I was getting mean stares to get off the – I saw hooks coming out and stuff.

MR. WEHRENBERG: Not at all.  We’ve got a couple of volunteers with microphones.  Raise your hand and somebody will come towards you with a microphone.  And I hope it’s not just me.  Nope.  We got a couple – a couple or three.  If you’ll identify yourself please and then ask your question.

Q:  Good evening, my name is Angine Choi (sp).  I work for Institute for Defense Analysis.  I’m looking for your views on two issues.  You mentioned about financing nuclear plant and you gave us three options to finance investment stimulus for new plant, but I was wondering if there were any lessons we can learn from Finland, the case of Finland that have TVO, which is a not-for-profit company – industry consortium claims they can build, run by private capital without Finnish government subsidies.  That’s the first question.  That’s first question. 

The second question is dealing with U.S.- E.U. nuclear plant.  You mentioned U.S.’s 20 percent energy need is met by nuclear plant, which is very similar to U.K.  But my question is, in Sweden, which is 50 percent energy met by nuclear plant, however they decided not to build nuclear plant.  In contrast, in Finland, which is 20 percent energy need met by nuclear plant, they plan to build further plants.  What is your views on these issues?  Thank you.

ADM. BOWMAN: You asked me two too many questions.  I’m sorry.  I remember the first one, and we’ll come back to the other two, and I’ll ask you to restate them.  Those were not options that were on that screen; those were a menu of available possibilities.  Only six plants will qualify for the risk insurance, so it’s not really right to call that an option; it’s an available stimulus.  Both that risk insurance and that loan guarantee are paid for by the industry.  The loan guarantee – I had to look at my paper here – the Federal Credit Reform Act administrates those kinds of loans; Export-Import bank does it today.  There are other industries that have guaranteed federal loans.  And the premium for that loan is based on the probability of failure times the indemnity that’s being offered by the loan, and the industry pays that.

    If in fact at the end of the day there are no failures, as I would expect in this whole process, the Treasury Department is going to make money off those guaranteed loans because the industry will pay for them.  So please don’t call them subsidies – not right.  Technically incorrect to call any of those things on that board except the production tax credit a subsidy.  The production tax credit is a subsidy, and as I told you, it’s offered to all non-emitters as an incentive to get plants to be built.  How many?  I’ve been saying six, but really you saw from those numbers that it’s four because they’re like 1,500 megawatts, 1,600 megawatts, 1,350 megawatts, so divide that into the 6,000 that the law restricts that incentive. 

So it’s a limited stimulus, which is a subsidy, that production tax credit, but the guaranteed loan the industry pays for, and the risk insurance industry will pay for likewise based on, again, the probability of this intervention taking place and what the indemnification is.  It’s radically different, that risk insurance.  The first two plants get $500 million apiece starting immediately when an intervener intervenes and the NRC doesn’t throw them out of court because they don’t meet the requirements.

    The next four is $250 million apiece capped at $250 million apiece, and the first payment doesn’t start after six months after the frivolous intervention, or the delay not due to the fault of the industry.  But the industry pays for that too, so neither of them are true subsidies.  They’re not handouts.  But, now, the other part of the Finland question had to do with developing an organization like TVO that would regulate and operate these plants similar to France, that their plants are nationalized – is it –

Q:  (Off mike) – U.S. and E.U.  You mentioned that U.S. is depending on 20 percent of power need on nuclear facility, which is very similar to U.K., but Sweden is about 50 percent and Finland 25, and France is 80 percent.  Can you able to find happy medium on those issues?

ADM. BOWMAN: What was the last part?

Q:  Can you find happy medium on dependence of nuclear plant?

ADM. BOWMAN:  Happy medium.  Well, as I’ve tried to say along the way, I think the happy medium would be 20 percent.  I don’t think we’re going to get much higher than 20 percent in the foreseeable future because, remember, I said we’ve got to build 50,000 megawatts just to hang on to our 20 percent.  So I think, like it or not, we might want more, but we’re not going to get more.  And, frankly, I think the diversity of the energy portfolio is what we ought to be pushing for anyway.  I think it was wrong to go 290,000 megawatts of gas all at once at the expense of nuclear and coal, but I think it would be equally wrong to go 290,000 megawatts of nuclear at the expense of coal and gas and other renewables. 

Yes, sir?

Q: Yes, I’d like to compliment you on an absolutely fascinating and wonderful talk.  I remember – I believe I heard you on WCSP C-SPAN.

MITZI WERTHEIM:  What is your name, please?

Q:  Oh, my name is Dr. Scott Chubb.  I’m with the Naval Research Laboratory.  And I especially thought it was very interesting what you said about how to deal with the spent nuclear fuel.  I think you’re absolutely right.  That’s something we really have to focus on.  And I was curious if anything was going on in the Department of Defense with regard to that.  But there was something else I wanted to mention, that I love the format listen, learn, connect.  There’s something that most people here don’t know about.  There was a technology that came into existence in 1989 and it’s just coming up to the surface.  It’s now called condensed matter nuclear science.  There were tremendous mistakes made in 1989.  It used to be called coal fusion.  The Office of Naval Research conducted a 10-year program on this, and it’s featured in New Scientist magazine.  This is another example – oh, New Scientist magazine from March 29, 2003.  There’s also a lot of it out on the web.  Newenergytimes.com is a good place to look.  But that’s irrelevant to this.  I mean, I agree with you completely about the need for diversity, and I was just wondering, what is going on with this nuclear spent fuel process and the research on it?

ADM. BOWMAN:  Well, it’s really not top dead center to me, to be honest with you.  There has been, in the DOE budget line for a few years, a thing called Advance Fuel Cycle Initiative, AFCI.  You can go look in the appropriations budgets.  It’s been like this, and not very much has happened.

Q:  Well, I think you hit the nail on the head there.  I think something should be done about that.  Advance – what was it?

ADM. BOWMAN: Advance fuel cycle initiative.  AFCI. 

Q:  All right.  I’ll check out your website too.  It’s an excellent talk.  Thank you.

ADM. BOWMAN: Thank you.
 
Q: Hi, Admiral.  Sean –

ADM.  BOWMAN: Should we just stop there, don’t you think?  (Laughter.)  It can only go downhill. 

I’m sorry, go ahead.

Q:  My name is Sean Todd, Fox Potomac Resources.  It seems inevitable that there will be legal challenges before new ground is broken for a new reactor.  How confident are you that the industry can address them expeditiously and successfully, and what should the industry be doing to best prepare for those?  I think they’re inevitable – the Waste Confidence Rule.  I don’t want that new reactor to come online in 2020 instead of 2015 as I hope that’s when that will come online.

ADM. BOWMAN:  Right.  I have a good deal of confidence.  I didn’t go into this.  In 1992, the whole method of licensing and regulating the construction and initial testing and initial start-up period of these reactors was changed in 1992.  It hasn’t been tested yet.  We think that it’s going to work just like it says it’s going to work.  But that was the reason some CEOs said to Secretary Bodman, we need for the first six plants to have a safety net.  That’s where that third element up there, risk insurance, came from.  What if that 1992 idea process doesn’t work?  What if, in fact, there are interventions?  What if, what if, what if?  That’s what the risk insurance is all about.  I personally think that it is going to move along.  I know that there will be more and more and more hand wringing as we go along.  I’m just sure that there will be.
   
    Yesterday, the Union of Concerned Scientists ruled out startling news that over the 3,100 reactor years of operation of reactors in this country, there had been 51 reactor years lost while plants were shut down to recover from either material problems or issues with people or something.  It all happened in the ‘80s, but the implication was, and therefore the same thing’s going to happen with these new plants.  We know we’re going to have that kind of argument.  And it’s really hard to figure out – they went on and said, and we’re concerned the NRC isn’t as tough as they used to be. So on the one hand they’re complaining that there were 51 shutdowns over a year, and on the other hand they’re saying, how come there aren’t any today? And then they conclude from those two facts that there’s going to be a whole lot tomorrow when the new ones come. 

So we’re going to have to contend with that, but I don’t think it’s going to get to the court stage.  I don’t think it’s going to stop us.  I think that we should address these legitimate questions.  I’m a big believer in sitting and talking until the cows come home with people who have legitimate questions about these kinds of issues.  But I don’t think that on a court level we’re facing the kind of situation that we were facing in the seventies and eighties.

Q:  Thanks a lot.

ADM. BOWMAN:  Knock on aluminum.

Q: Hey, Admiral.  Paul Wichcarver (sp).  One note:  If you haven’t seen the NEI website, it is a great place to go.  It’s got great information.  One of the things on there about employment opportunities is you mention in your website that the over the next five years, 25,000 of the employees of the current nuclear industry will retire.  You couple that with the resurgence, and I wonder if you can comment on – are you at all concerned about the employment draw the civilian nuclear industry will have on the Navy nuclear propulsion program, and what cooperation can be put it in place to offset any negative impact that might have?

ADM. BOWMAN:  Yes, I am concerned about it.  And it certainly was an issue for Admiral Rickover and Admiral McKee in the heyday of the Navy nuclear power program when we were building three submarines a year and a carrier every three or four years.  And the commercial industry was going up like that.  That’s not what we’re facing today.  There’s not that kind of poaching going on.  Certainly the commercial industry is excited and happy to receive former Navy nukes, both enlisted and officers, into their forces, but I don’t see it happening right now. 

The other good news/ bad news is we’re not building three submarines a year.  In fact we’re struggling to keep building one submarine a year.  So the requirements for our Navy nukes have gone down precipitously over that same period.  Is it something that we should ignore?  No.  We better keep our eye on it.  And I, for one, would try to encourage our industry not to go shopping inside the ranks of the active duty military. 

    First of all, there’s not really a process to allow that to happen.  But secondly, it’s wrong for the country.  And I think I could convince my executive committee at NEI, those CEOs, to go say we’re not going to do that.  So I’ll be there.  I’ll try to fight it.

MR. WEHRENBERG:  We’ve got one back here first.  I’ll get you next.

Sir?

Q: Brian Smith with the U.S. Air Force.  My question is about if the U.S., from a policy standpoint, aggressively pursues nuclear energy to meet the demand that you’ve shown, does it in any way sacrifice our sort of argument or moral high ground to engage countries like Iran or Pakistan or others that maybe we don’t want to see have nuclear energy but are looking into it?  How do you recommend we address that?

ADM. BOWMAN:  That’s a great question – incisive.  But it’s what the Global Nuclear Energy Partnership is all about and is attempting to address.  The Global Nuclear Energy Partnership says we really don’t want any country not to enjoy the fruits of peaceful use of the atom – electricity from nuclear energy.  The people on this earth that don’t have nuclear energy today, you know where they live.  And I think that’s morally bankrupt.  So the Global Nuclear Energy Partnership starts with the premise that we ought to afford fledgling countries and those without electricity for their citizens the opportunity to enjoy the fruits of nuclear power.  How do you do that to allow them to enjoy the peaceful use of nuclear energy and not open up Pandora’s Box in the proliferation world is the real question. 

So the Global Nuclear Energy Partnership – I’m going to call that GNEP from now on – GNEP says that the idea would be the user nations, the declared nations, the perm five and the Security Council, the U.N. Security Council, those who have an established nuclear power industry today would be fuel providers to the countries that are wanting to start up.  In return, the countries that are wanting to start up would return that fuel to those provider countries and have those provider countries then take care of the used fuel at the other end.  Doesn’t sound like a really nifty idea if you just think about it for a minute, except that it does accomplish those two things.  Because if you don’t allow, or don’t require the fledgling countries that are trying to develop nuclear energy to develop enrichment capabilities, that takes care of getting bomb-level uranium at the front end of the fuel cycle to make nuclear weapons because we’re going to provide it to them. 

    So we don’t let the fledgling countries, through U.N. action and the rest, IEA action – we don’t let the fledgling countries develop an enrichment capability.  We give them the enriched fuel – 2.5 percent, 4 percent U235.  At the other end of the fuel cycle, we don’t want them reprocessing that fuel that comes out of the reactors because it does have bomb-grade plutonium in it.  And, in fact, that’s how many countries develop their nuclear capabilities.  So the other part of the scheme would be after being given this stuff at the front end, give it back to the provider country at the back end. 

    Now, what does that argue for?  Provider countries are not going to want to participate in this until we get to the point that we had developed the closed-cycle technologies that we talked about, the ability to take that used fuel that comes in from country X and reprocess it and re-burn it in fast fission reactors and use up the bad stuff by generating energy from it.  And at the end of the day, the new countries have nuclear power for electricity; they don’t have enrichment capability on the front end and they don’t reprocess on the back end.  So that’s the grand scheme.  It’s a long way off.  It’s probably 30 years, 40 years out there.  It’s probably $50 billion, and I’ll bet if I were alive somebody would just ram that down my throat a few years from now because it’s going to be more than that.  It’s going to be a lot to develop this.  So years and money to get there, but that, in my view, adds even more impetus to my points that I hope I made that we not close out any options today, that we leave all options available while we see what is available in terms of reprocessing and reprocessing technologies. 

So I hope I’ve answered your question.  The idea that this administration came up with that is finding somewhat slippery but a little bit of purchase on the Hill is that the have nations would provide to the have-not nations enriched uranium at the front end and take it back at the back end, and that have-not nation would never develop enrichment or reprocessing capability.  And therefore it’s not a proliferation problem anymore than what we have today.  Does that make sense?  Okay.

Q:  Jack Spencer with BWXT.  You mentioned earlier – you were talking a little bit about the industrial capacity that we’re going to need as a nation to support the growing amount of nuclear activities that hopefully we’re going to have.  But as you know, over the last 30 years, as we’ve been building fewer submarines, fewer aircraft carriers, not to mention no nuclear plants, the industry here in the United States has shrunken significantly.  Now, as we try to get back into it, we find ourselves competing with countries and companies from abroad who have been in this industry and who are often state-owned, state-supported and very much state subsidized.  So I was wondering if you could give us a few comments on how to level that playing field so that U.S.  companies can reemerge in this growing nuclear industry and really compete with some of these countries – literally countries who have already established their place in commercial nuclear energy.

ADM. BOWMAN: Yeah, that’s a very clever argument for tariffs, isn’t it?  Is that where you were going?

Q:  No, I was talking about having a nuclear –

ADM. BOWMAN:  I know, imposing tariffs on other countries, materials coming in, so that we –

Q:  No, no.  I heard that you said, was it a clever argument for tariffs?  No.  It was a regular question about the U.S. nuclear industrial base.  (Laughter.)

ADM. BOWMAN:  It wasn’t clever, huh?  Okay. 

I don’t know of a way to do what you suggested without tariffs.  That’s why I jumped to the conclusion that, as your leadership at BWXT is pushing, that we need to impose tariffs.  But the short-term damage that that does is it does stymie development right now, because you said it right, we don’t –

Q:  No, really I don’t mean the tariffs.  I mean, we see this across U.S. industry.  It’s not about – (off mike).  It’s about leveling the playing field, however it is; whether it’s through tax incentives – (inaudible).

ADM. BOWMAN:  Yeah, I would agree that – (cross talk) – I would agree that incentives would be a good way to go about this.  And offering new companies or companies that used to be in the nuclear business incentives like that to get back into the business would be good.  And certainly that is a way to do it.  Your company, BWXT, decided to get back into the business without that because you already had the facilities and you’d been facilitized at Mount Vernon, and that’s good.  But there is a huge push right now to impose tariffs, and I’m not suggesting that it ought to be ruled out of hand, but it will have a short-term detriment to the growth of the nuclear industry in this country.  It is what it is and we are where we are in terms of tariffs.  I would support incentives over tariffs.  I would love to incentivize the manufacturing capability in this country to do exactly what you’re saying and try to encourage more people to at least look at the opportunities available in this resurgence.  So that’s where I would come out on it.  I don’t have any better ideas than what you have.

MR. WEHRENBERG:  (Off mike.)

Q:  Admiral Bowman, if we were in a separate scenario, I’d –

MR. WEHRENBERG:  And who are you?

Q: Joe Listenen (sp), Adams Atomic Engines.  You mentioned early off that it’s a renewal or revival.  In another scenario I might be saying, amen, Admiral; you’ve really got me convinced.  About three-fourths of the way through your brief, you were talking about the old and the new, comparing where the marketplace is today and where it was relative to the past.  You talked about how technology is maturing, but also that we have stable designs relative to our familiarity with spiral design or spiral development for the war fighter as we know right now.  Are those two concepts compatible with establishing a firm design and also spiraling in additional advanced and improved technologies?

ADM. BOWMAN:  Yeah.  When I tout the virtues of standardization, it’s probably better to talk about within a certain group of boiling water reactors and pressurized water reactors.  To say that we’re going to stop and never continue the evolutionary process and get better and better would be wrong also.  But what we did, as I understand it, in the beginning of this industry, was more what I said.  Maybe it was too cute, but it was almost that each plant was a little bit different than the previous plant because everybody had a little bit better idea of how to build the mousetrap.  And that was not good for the industry.  That stymied the ability to take people from this plant and put them immediately into this plant if you needed to do that even within the same company’s fleet.

    So I don’t mean to say that we’re locked into ESBWR and AP1000 and the evolutionary power reactor from Areva.  We’re not.  But for the first five or six I think we are.  And we’re standardizing not just the design of these plants, but processes that matter.  And so that’s another big part of this, how you conduct your outages at the plants.  That’s where I was coming from.

MR. WEHRENBERG:  Yes?

Q:  Thanks.  My name is Mike Mall.  I’m a professor at Columbia University.  I’m spending this year as a Jefferson science fellow at the Department of State.  I also want to say it was a great talk, Admiral. 

ADM. BOWMAN:  Thanks, Mike.

Q:  You talked about the great U.S. safety record for nuclear plants, the high reliability of our plants, and the good safety record.  But my question has to do with all the large number of nuclear plants around the world outside of the United States.  Could you make a comment about their safety, their affordability, their records of operation?  And when you look out, until we get things like GNEP 30, 40 years in the future – there’s going to be a big expansion of nuclear power around the world – what do you look at for the future for the reliability and safety of the international plants?

ADM. BOWMAN:  We have a whole lot of chips on WANO being able to execute their mission and convince these companies – these countries – I keep saying that; I’m sorry – these countries through the IAEA and through their own peer pressure to fully cooperate with the WANO inspection and evaluation regime.  It’s very important to recognize what Mike is suggesting, that an accident anywhere is almost an accident everywhere.  We could probably argue our way through an accident in Yugoslavia not being like an accident in Alabama for the first one.  But I can just see – remember the fickle love affair?  I can just see that public support just plummeting with the very first one.  So it is important, and we do have a vested interest in the safe operation of these plants everywhere they are.  And WANO is our means to hopefully get there along with IAEA inspections and evaluations that might take place. 

What kind of confidence do I have – you’re out of my field – about how well these plants are operated.  I have bits and pieces of information that say that in general they’re pretty doggone well operated and that more and more countries are cooperating with the WANO performance indicators and the self-reporting and the peer reviews.  For a while that was an absolute no:  You cannot come into our plants.  These are state owned.  You have no business coming in.  There’s proprietary information, and on and on and on.  That’s dissolving now as more and more people across the world are understanding that we are in this together and that an accident anywhere would be an accident everywhere. 

There’s a group called the World Nuclear Association – World Nuclear Association, not – although I do have some foreign members of my 280 members.  The World Nuclear Association purports to represent the entire world nuclear in an association.  They have formed a world nuclear university that brings together now, once a summer, 85 to 90 rising careerists in the nuclear industry, the 30-somethings coming together to talk, to learn.  I spoke to them in Stockholm this year.  Their first one was last year at Idaho Falls.  The second was in Stockholm.

    It seems to me to be spreading exactly the message that you’re suggesting, that we better be careful with what we have here.  Admiral Rickover used to say this is an unforgiving technology, and it is an unforgiving technology and it deserves our full attention.  We are worried about exactly about what you’re worried about.  I just can’t give you a quantitative feel for how these other plants are operating.  We do have a great deal of transparency that we didn’t have a year ago, though, I’ll tell you. 

Rod?  I’m about to run out of voice so if you don’t mind.

Q:  Admiral Bowman, I’m Rod Adams.  My question is, given the success that the DOE has had in their efforts to store used nuclear fuel, is the federal government the right organization to operate a nuclear fuel recycling industry, or is it something that maybe we should take that one-tenth of a cent per kilowatt hour and use it as a way to build a new industry?

ADM. BOWMAN:  Yeah.  What Rod’s referring to, the tenth of a cent per kilowatt hour, milli-killowatt (ph) hour, is what we’re all paying into the Nuclear Waste Fund ultimately and ideally from the intent of Congress to develop the Yucca Mountain facility and then move this fuel to Yucca Mountain.  My industry is in favor of, and fully supports, the research and development that will lead to the technologies that will allow us to close the fuel cycle, but we don’t believe it’s fair play for the taxpayers and the ratepayers of this country to use a nuclear waste fund to fund that technology development.  We do think that if you go back and read the law, that you can make an argument that the nuclear waste fund can be used for development of one, two, three interim storage sites.  We think that’s a bona fide and legitimate use of the Nuclear Waste Fund, and you could explain it to the neighbors, that it is getting it out of Alabama and into one of these two or three places that we would centralize.  But we would not encourage using the Nuclear Waste Fund for that $50 billion thing I was talking about.  It would bankrupt the fund quickly to go do that. 

It is envisioned that this be turned over to industry.  The request from Dennis Spurgeon to the world, to the United States, was for industry to signal intent.  So there really were two proposals out there.  One got 14 responses, and I’ve talked about that.  That’s various localities.  I’ll tell you a few: Oakridge, Savannah River, Idaho National Lab, Piketon.  There are scattered about places that said yes.  The other proposal said, industry, you tell us if you’re interested in this.  They’ve got 18 – remember I got it mixed up?  At one point I said 18 and I had to back up and say 14.  They got 18 yes’s on that one. 

So the vision is that the federal government kick off the research and development, but quickly transition to an industry team that would do exactly what you said, and that is operate these reprocessing facilities.

MR. WEHRENBERG:  Are you out of steam, Skip?

ADM. BOWMAN:  I’m running close to it.

MR. WEHRENBERG:  One last question?

(Cross talk)

Q:  Admiral, I’m going to try to make you leave this meeting not getting away so easy.  It was an excellent talk.

MR. WEHRENBERG: And you are?

Q: Adam Siegel, member of Energy Consensus, but also the Northrop Grumman Analysis Center, so you can Ron afterwards.  I can clean my office out quickly.  (Laughter.)  I’ll give you my card.

No, amongst the many “yes, buts” that were not up on the presentation, I want to raise two, one which is associated – but let’s take some names.  Amory Lovins would probably cost out nuclear power.  All your costs were of current production for already amortized facilities.  Amory would say that new power is somewhere between 12 and 16 cents per kilowatt, which is roughly two to three times what new power wind would be.  And he would argue that based on megawatts and other alternative paths that one could get, that while nuclear power is a path, all that money could be spent in better ways.  That would be Amory Lovins. 

And a second is there are also a lot of “yes, buts” which say there’s peak natural gas already passed the United States.  We’re approaching, if not past, peak oil – that we also face quite a lot of potential for peak uranium, and that if we pursue a lot more new nuclear power plants, we may have a version of what’s going on with the natural gas facilities.

ADM. BOWMAN:  Right.  I could make this a real short answer by telling you that I disagree vehemently with Amory on both those points.  And we’ve had discussions about it.  I think that Amory came to that conclusion years ago and won’t let go of it, and sort of rejects –

Q:  Sir, if I could – I tend to agree because I don’t think he’s looking at modularity and construction.  But that is a major, “yes, but” out there.

ADM. BOWMAN:  Well, I tried to include that.  One of my “yes, buts” was the economics of it all.  And so I did talk about for sure there was no question about marginal production cost.  Those are absolute facts and it’s what we’re seeing today.  I agree with Amory to the extent that he pushes as much efficiency as we can wring out of the onion.  Boy, me too.  I would much rather do that than build any kind of power plant, if you want to know the truth, because I think that’s what this country ought to be doing.  And he has some great ideas on how to get there.  I agree, fundamentally, with his approach in that regard.

    But I really think Amory came to the conclusion too many years ago about the cost of new nuclear before – and he also doesn’t factor in this huge leverage of the guaranteed loans.  This is enormous.  This is big difference.  When we go to Wall Street, which we do annually – and I’ve done it now twice since I’ve been here – and you talk to 105, 110 analysts, you talk to John Mack (sp) at Morgan Stanley, who happens to be a fraternity brother of mine at – where’d the Davidson guy go? – (laughter) – at Duke.

    You talk to them and they say, wow, we didn’t really know – understand what this guaranteed loan will do for you.  That number up there – Amory is right if we don’t get guaranteed loans for the first X number.  Amory would probably also take issue with my $2,000 per kilowatt capital cost.  He would argue that that’s low.  Some in our vendor industry today, Westinghouse, GE, Areva, would argue that it’s too high.  So if Amory is arguing it’s too low and the vendors are arguing it’s too high, maybe it’s somewhere in the middle.  We don’t know for sure.

    But based on experiences in Asia, based on – Finland’s not a good model, and that’s a long story.  I’m sorry, but Finland is an anomaly because I don’t know how that happened, but Areva really didn’t talk to the government of Finland before they got started building that plant and there are overruns associated with that.  Let me put that one aside.  But there are a lot of other examples around the world that say $2,000 a kilowatt, which I used up here, is in the ballpark.  It may not be perfect, but it’s going to come down also, we know that, if we go into production of these reactors. 

So cut short – I just disagree with some of Amory’s analysis and he knows that.  He and I have been at a couple of get-togethers and we’ve had wine afterwards.  (Laughter.)

MR. WEHRENBERG:  W-H-I-N-E?   (Laughter.) 

BOWMAN:  Whine, right.  Exactly.  (Cross talk.)  Sure.  Last one please.  Oh, I I’m sorry.  I ignored your uranium thing.  Could I answer that real quick – I’m sorry – and then I’ll come back. 

You mentioned peak uranium and uranium price.  Again, I don’t believe that.  I think uranium exploration is just like any other mineral exploration and the history tells us that when the spot price rises high enough, the juniors will get into the game and there are more deposits than we ever imagined out there.  I firmly believe that.  I visited two uranium mines in the last three months in Canada, and I really believe there are deposits that are beyond the economical recovery stage at today’s prices that we’re getting closer to as the spot price of uranium goes up.  Of that 1.72 cents a kilowatt hour that I said we operated at in production costs in 2005, about .25 cents of that owes to uranium.  So uranium doubles; that becomes .5.  Now we’re, instead of – you get it. 

So right now it’s to the right of the decimal point.  We’re keeping our eye on it though.  Some would argue that’s a reason for reprocessing.  It’s not yet a reason for reprocessing.  It’s certainly not economical to reprocess for the sole purpose of bringing the unused uranium out of the spent fuel and recycling it.  It’s way off the table in terms of economical proposition right now.  But as the spot price continues to climb, someday even that may be in the cards.  But that’s where I am.  I don’t think we’re at peak uranium.  I do think we are getting close to peak oil though.  And I’m going to go see Mr. Bartlett just next week. 

Is Lisa still here? (Cross talk.)  Okay.

Yes sir?

Q: Yes, my name is Martin Ogol (sp) and I’m here with a steering committee for a conference that’s going to happen in about one month.  The question, I guess, is a little broader than nuclear but it certainly ties in with this very closely and that is:  I was at an energy conference one time and I heard someone say, job number one in coming up with energy policy would be understanding how the living system works, how life around us works and so that we can fit into that most effectively.  And where it ties in directly here is that you may know that James Lovelock, who is the progenitor of the GAIA theory, which basically is earth system science, has been all over the news lately because he has come out in favor of nuclear power, and your own organization is going to be a co-sponsor of this event, which – I have to put in a plug – we have the announcement for here.  I’d be glad to distribute them. 

What my question is, is what do you think about that?  How do we all need to – whether it be nuclear or solar or coal or oil – need to really fit this into a larger context of earth systems?

ADM. BOWMAN:  Well, it would be foolish to say anything but I agree.  (Laughter.)  I definitely think that that’s true.  Were any of you able to see James Lovelock when he was here last week?  He is phenomenal.  He really knows his business, and as you correctly said, he is now very much pro-nuclear.  He used to not be so very much pro-nuclear.  He’s not the only one.  Patrick Moore, cofounder of Green Peace, is now speaking for NEI.  My wife says I look like I’m pumping gas down at the filling station when I wear these things.  Patrick Moore, cofounder of Green Peace – who would’ve thunk that a cofounder of Green Peace would be speaking for nuclear?  But he and James Lovelock, and there are several others that are of a mind that global warming and greenhouse gases polluting the environment, polluting our global world here is something that we have to pay attention to.  Patrick Moore puts it very succinctly.  He said he’s spent his entire adult life being against everything and he decided it was time to be for something, and he chose nuclear.  So he’s not my spokesman for a group called Clean and Safe Energy Coalition, and he’s out there.

    So I certainly agree that GAIA theory, I think – while still controversial, I think has something to it.  Now, what Lovelock is saying is that we’ve passed that and we’re no longer in harmony.  We’re no longer in harmony with all the assaults on the earth.  He used to say that eventually things would level out.  That this would go up and finally that caught up and we’d be back in harmony and distribution.  I think he’s saying, I’m throwing the flag, and if we don’t do something about greenhouse gases and CO2s and all the rest now, it’s Katie, bar the door.

I don’t want to get into global warming and greenhouse gases right now, but one thing I would say about that:  Submariners in this crowd, you remember when we first used to go to the Arctic and tried to find a place to surface, it was sometimes testy because the ice was thick and it was difficult to find the point to bring the ship up.  The last time I went up there, just before I left naval reactors in 2004, the ships not only could surface anywhere they wanted to; they were afraid to put their guys out on the ice to let them frolic like we always did.  No hitting golf balls, no playing softball because they were afraid they were going to fall into the water.  That’s an observation, but it certainly stuck with me as an observation that I won’t forget.

    When you start talking to people who don’t believe about all this, sometimes they say, two degrees, three degree, who cares?  We get way more than that kind of variation from day to day, night to night – we know that; living in Washington in particular we see it.  So what’s two degrees?  Well, two degrees, four degrees on a global scale is 16 feet of water in the oceans as these ice sheets melt and they start lubricating down below and they facilitate other ice sheets sliding into the ocean.  Sixteen feet of water, now go draw your contours around the United States and other parts of the world and see what that means.  Two or three degrees that I used to scoff at, I don’t scoff at them anymore now that I finally figured out this is big doings.  And so I really think this is something we have to pay attention to. 

I hope that somewhere in all of that I came close to saying something that had to do with your question.  (Laughter.) 

MR. WEHRENBERG: Admiral Skip Bowman, thank you very, very much for this evening.  (Applause.)

ADM. BOWMAN:  Thank you, sir.

MR. WEHRENBERG:  And thank all you for your insightful questions, which garnered of course the insightful answers that we had there.  I want to thank CNA Corporation for their support for this.  We have a number of volunteers in the audience as well.  I’m not going to bother to mention their names this time – perhaps next time. 

Please drop your nametags and name tents off at the front desk on your way out so that we can recycle them and not cut down more trees and contribute more carbon dioxide to the atmosphere.  If we don’t have your name, if we don’t have your email address, please make sure we do.  We try to communicate that way if we can. 

Last but not least, October 16 for our last session. 

(END)

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