Executive Insights: License renewal means energy renewal


By Jack Skolds, Exelon

Sept. 18, 2003 — America needs nuclear power. It’s that’s simple. We need nuclear power for energy security, environmental protection and fuel diversity. We need nuclear power to keep our economy strong.

At Exelon, we believe we have a unique understanding of the value provided by nuclear power. We operate the nation’s largest fleet of nuclear power plants. Seventeen in all. Those plants generate 118 billion kilowatt-hours of electricity per year, or a about 3 percent of all electricity produced by in the United States from all sources.

All told, the nation derives about 20 percent of its electricity from nuclear power. That number has been constant for approaching two decades, since the last true energy crisis we have seen in the United States.

The good news is that collectively the U.S. fleet of more than 100 plants is operating at levels never envisioned when nuclear power came into commercial use in the 1950s. Competition and sustained high-level performance have demonstrated in remarkably clear terms the economic, environmental and social value of nuclear power, despite the controversial issues that persist among pubic attitudes toward this essential and clean energy source.

The bad news, of course, is that despite this record of achievement, no new nuclear plants have come into service for more than 10 years. The well-known and unfortunate fact is that not a single order for a new nuclear plant has been placed since before the accident at Three Mile Island in 1979. We have become expert at operating this technology, yet we seem in a very real sense headed away from it.

Time, itself, would be the problem except for a powerful tool that the American nuclear power industry has fully embraced: License renewal.

Talking term limits

U.S. nuclear power plants are licensed to operate for 40 years as specified by Congress in the Atomic Energy Act of 1954. The law was modeled on the Communications Act of 1934 in which radio stations were licensed to operate for several years and then allowed to renew their licenses as long as they continued to meet their charters. The Atomic Energy Act, likewise, allowed for nuclear power plants to renew their licenses.

Congress selected 40 years for nuclear power plant licenses because that was the time over which electric power plants typically were paid off in customer rates. The 40-year license term was not based on safety, technical or environmental factors.

The U.S. Nuclear Regulatory Commission has set up a process under which nuclear power plants can renew their licenses for 20 years. The rigorous procedure takes up to 22 months of careful preparation, review and scrutiny and is designed to answer a single basic question: Can the plant continue to operate safely during the renewal period?

At Exelon, we have finished the process for our Peach Bottom Atomic Power Station in York County, PA, and in early May the NRC announced that it has extended the operating licenses for the two Peach Bottom plants that together produce 2,274 megawatts of electricity. In addition, we announced earlier this year that we are seeking to extend the operating licenses at our two plants at the Dresden site and our two plants at Quad Cities, all in Illinois.

The result is that Peach Bottom’s units will operate through 2034 and continue to deliver safe electricity to more than two million households on the Atlantic Seaboard without turning a spade of earth or putting one ounce of carbon emissions into the environment. This is what license renewal does for us.

On a broader scale, the NRC to date has approved license renewals for 16 nuclear power plants and has another 14 applications under review. The agency expects to receive applications for 25 more renewals by 2006. These 55 plants represent more than half the total number operating in the United States. Most of the other 48 plants are expected to renew their operating licenses as well.

This far-reaching effort will contribute mightily to America’s energy independence, environmental quality and inventory of safe and inexpensive electricity. We operate our nuclear fleet today more efficiently, safer and better than ever before. Consider the record, especially over the last decade:

* Because of a powerful combination of large-scale coal and natural gas-fired plants along with nuclear power, the nation essentially has abandoned the use of oil for the generation of electricity.

* Sustainable nuclear production has increased from 577 billion megawatt hours in 1990 when 111 units were operating to nearly 800 billion megawatt hours today with 103 units operating.

* Safety systems are operating at outstanding levels, and unplanned shutdowns have gone from a relatively common occurrence in 1990 to rarely seen today.

* Industry capacity factor averaged 67.5 percent ion 1990. Today, we are well over 90 percent and have been for several years.

Advantages

Nuclear power is the most eco-efficient of all energy sources because it produces the most electricity in relation to its minimal environmental impact.

* In 2002 alone, U.S. nuclear power plants prevented 4.24 million tons of sulfur dioxide, 2.06 million tons of nitrogen oxide and 179.4 million metric tons of carbon from entering the earth’s atmosphere and nuclear power plants were responsible for nearly half of the total voluntary reductions in greenhouse gas emissions reported by U.S. companies in 2001, according to the Energy Information Administration.

* Throughout the nuclear fuel cycle, the small volume of waste by-products actually created is carefully contained, packaged and safely stored. As a result, the nuclear energy industry is the only industry established since the industrial revolution that has managed and accounted for all of its waste, preventing adverse impacts to the environment.

While decisions by the NRC to renew licenses are based on safety, decisions by companies to pursue license renewal are based on economics – the efficiency of the plants, their performance, location and competition in that area. At the end of a nuclear power plant’s original 40-year license, initial capital costs for the plant will have been fully recovered and the decommissioning costs will have been fully funded. Any incremental costs incurred during the original license period could be amortized over a longer period because of license renewal, further reducing the cost of electricity. For many companies and for the nation, license renewal represents the most inexpensive option for future electricity generation.

Without license renewal, we would begin losing plants to shutdown on a large scale just a few years from now, beginning in 2010. By 2030, essentially all of the plants in the United States would be shuttered and 20 percent of America’s electricity would have to come from another fuel source, 24 hours a day, rain or sine, windy or calm. With license renewal, we will retain the nuclear energy option at least through mid-century when we expect new, even more efficient nuclear technology to be available.

By then, we can only hope that the industry’s performance and demonstrated expertise has produced a level of national confidence in nuclear energy that will allow us to continue reaping its benefits for another century, safely and at a remarkably low cost.

Skolds is executive vice president of Exelon Generation, president & chief nuclear officer of Exelon Nuclear, and chief executive officer of AmerGen, a partnership between Exelon and British Energy.

Exelon Corporation is one of the nation’s largest electric utilities with approximately 5 million customers and more than $15 billion in annual revenues. The company has the largest nuclear generation portfolio in the nation and one of the industry’s largest portfolios of overall generation capacity, with a nationwide reach and strong positions in the Midwest and Mid-Atlantic. Exelon distributes electricity to approximately 5 million customers in Illinois and Pennsylvania and gas to 425,000 customers in the Philadelphia area.

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