1. Nuclear Power – Is the Renaissance Real? Jim Harding Wisconsin Public Utility Institute Seminar March 2008 Madison, WI

2. Let’s Start With the Economics Capital cost is growing rapidly and is most important EIA - $2083/kW (2005) MIT - $2000-2500/kW (2003) Keystone - $3600-4000/kW (June 2007) S&P - $4000/kW (May 2007) Moody’s - $5000-6000/kW (October 2007) FP&L - $5700-8020/kW (Fall 2007) Puget Sound Energy - $10,000/kW (January 2008) Operating costs less important but not insignificant Discounted life cycle cost estimates range from 5-18 cents/kWh.

3. Estimating Cost is Tough No recent North American or European nuclear construction experience Historical estimates were “targets” more than estimates Software assumes Asian construction practices, and excludes owner’s costs – contingency, escalation, interest during construction, land, transmission, and oversight. No delays No incentive to be accurate; no real money being spent Often not considered: Escalation during construction; first of a kind premiums and learning curves instead Supply-chain problems (key parts, leadtimes, skilled labor, sub-suppliers, uranium) Transmission costs and lead time Finance and siting challenges

4. Recent Asian Experience PlantMWeCODYen@COD2002$s/kW2007$s/kW Onagawa 3825Jan 20023.1 Billion24093332 Genkai 31180Feb 19944 Billion26433656 Genkai 41180Jul 19973.2 Billion19602711 KK 31000Jan 19933.2 Billion26153617 KK 41000Jan 19942.2 Billion26093608 KK 61356Jan 19964.2 Billion22903167 KK 71356Jan 19973.7 Billion19572707 Y 5 (SK)1000Jan 200417002352 Y 6 (SK)1000Jan 200516562290 Average23543257 Cost data from MIT 2003 Future of Nuclear Power study. Average does not include South Korean units, owing to labor rates. Real escalation from 2002-2007 at 4 percent/year.

5. Real Escalation is the Biggest Problem Provided to Keystone panel by EPRI

6. Steeper Curve Than in the Mid 80s

7. CommodityEsc 86-03Esc 03-07Ratio vs. History Nickel3.8%/yr60.3%/yr15.9x Copper3.3%/yr69.2%/yr21x Cement2.7%/yr11.6%/yr4.3x Iron/Steel1.2%/yr19.6%/yr16.3x Heavy construction 2.2%/yr10.5%/yr4.8x Source: American Electric Power Four Percent Real May Be Too Low

8. Nuclear is in Worse Shape Industry moribund in Western Europe, US, and Russia since TMI and Chernobyl Twenty years ago (US): 400 suppliers, 900 N- Stamp holders; today 80 and 200 Only one forge for large parts – Japan Steel Works Long lead times for key equipment, e.g. simulators Skilled labor and contractor limits World uranium production well below current consumption

9. Recent Estimates Keystone - $3600-4000/kW; 8-11 cents/kWh Real 2007 dollars, 5-6 years of construction, for operation in 2012/2013. Would be $5600/kW (16-17 cents/kWh) at AEP escalation rate to 2013. Standard & Poor’s - $4000/kW; 9-10 cents/kWh Basis not stated; levelized fixed charge rate Life cycle costs reflect Keystone O&M and fuel costs Moody’s - $5000-6000/kW Basis not stated; operating and fuel costs not estimated Florida Power & Light - $5700-8020/kW Completion in 2018-2020, no new real escalation. Current dollars at COD Puget Sound Energy - $10,000/kW Basis not stated, but consistent with FP&L plus AEP escalation rate through completion.

10. “Updated” Lifecycle Costs Cost CategoryLow CaseHigh Case Capital Costs 6.07.9-12.7 Fuel 1.62.0 Fixed O&M 1.32.5 Variable O&M 0.5 Total (Levelized Cents/kWh) 9.412.9-17.7 Low case is Keystone, without South Korean units. High cases cover Keystone through Puget capital cost estimates. First year 1.7 times higher.

11. What’s Wrong Here? Finance – capital cost for 2 units may be larger than utility’s book value. Bet the company… Rate shock and physical bypass – 25-30 cents/kWh. Not appreciably better than today’s photovoltaics. Bet the company… Delays and further cost escalation. Bet the company… Huge capital commitments diverted from more promising options. Bet the consumer…

12. Efficiency and Renewables Can Be Disruptive Technologies A disruptive technology is often cheaper than the operating cost of the existing system Demand is not limited to growth in service Efficiency resources cost less than operating costs for existing gas (or coal with carbon taxes); they pay for themselves with +3x more carbon savings per dollar Wind was disruptive from 2002-2005 and may be again Photovoltaics may soon become one Only disruptive energy technologies can grow fast enough to solve climate challenges

13. Rapid Worldwide Growth in Renewables

14. Technical Innovation Driven by Standards

15. Northwest Power Planning Council, Achievable Savings, August 2007 Utility Programs Are Also Important

16. Historical Northwest Utility Programs Northwest Power Planning Council, Achievable Savings, August 2007

17. Figure 8 -Estimated ENERGY STAR CFL Market Share for the Northwest and U.S., 2000-2006 Sources: NW CFL sales 2000-2006: PECI and Fluid Market Strategies sales data reports; and NEEA estimate of an additional 1.5 million WAL-MART CFLs sold region-wide in 2006 (See Appendix A [Section 9.1.1] of MPER3 for more detail); U.S. and NW population estimates 2000-2006: U.S. Census 2004; U.S. market shares and non-CFL sales 2000-2005: Itron California Lamp Report (2006); U.S. market share 2006: D&R International (personal communication). Compact Fluorescent Market Penetration

18. The Bottom Line Twenty years from light water reactor technology will be roughly the same as it is today – it is an expensive distraction Efficiency resources, wind turbine technology, and photovoltaics are improving rapidly Take one example --- Nanosolar started by the Google founders, backed also by Swiss Re Building two 430 MW/yr thin film PV production facilities this year in Germany and California, using a technology they equate to printing newspapers Currently shipping and reportedly profitable at $0.99/watt (not including installation and balance of system) Take another – Arizona Public Service concentrating solar purchase – 14 cents/kWh The cheapest, least risk strategy is rapid development of efficiency resources. Wind, concentrating solar, geothermal, PV come next

19. Supplemental Slides

20. Pulverized Coal Gas (CCCT)Eastern IGCC WindNuclear Capital Cost ($/kW) 2438700279517004000 Total cost (cents/kWh) 5.86.8 7.18.9 CO2 Capture Cost ($/kW) 940470450NA Cost for CCS (cents/kWh) 6.22.83.4NA Cents/kWh12.09.610.27.18.9-9.8 Cents/kWh (credits $10-30) 6.2-7.97-7.77.1-8.77.18.9-9.8 With Carbon Taxes and Low Nuclear Costs - S & P Found no Advantage Keystone O&M and fuel costs are used instead of those estimated by S&P

21. Tom Neff (MIT), Uranium and Enrichment: Enough Fuel for the Nuclear Renaissance?, December 2006.

23. Jeff Combs, President, Ux Consulting Company, Price Expectations and Price Formation, presentation to Nuclear Energy Institute International Uranium Fuel Seminar 2006

24. Fuel cycle stepsMITThis analysis Uranium$30/kg$300/kg Enrichment$100/SWU$140-340/SWU Fabrication$275/kg Disposal$400/kg Reprocessing$1000/kg$1500-2000/kg Fuel cycle cost Open0.5 cents/kWh1.6-2 cents/kWh Closed2 cents/kWh3.4-4.3 cents/kWh Differential4x2-3.5x Reprocessing Is Still Expensive Approximately 5.25 kgs of spent fuel must be reprocessed to obtain 1 kg of MOX.

25. The International Challenge 370 GWe of existing nuclear capacity in 20+ nations All retired, with or without life extension, by 2030-2050 Socolow/Pacala wedge – 1 GTe of carbon avoidance; 7 GTe are required 700+370=1070 GWe of nuclear capacity required by 2050-2060 21 GWe per year on average 23 new enrichment plants 10 Yucca Mountain repositories 36 new reprocessing plants and 100+ MOX plants, if fuel is recycled Is it possible? Can it happen without weapons proliferation?

26. Retirements Quicken by 2020

27. SourceGW 2030GW/yr% world electricity Net additions Outside OECD and Russia IEA Reference (WEO) 4152 GW10%45100 IEA Advanced5196.5 GW15%14950 US EIA4814.7 GW12%11072 Institute for Energy Economics (Japan) 4804.7 GWNA110100 Forecasts of International Capacity by 2030 GW per year is calculated by assuming no existing worldwide capacity is retired before 2030

28. Proliferation is the Big Problem 700 GWe net additions make a wedge EIA and IEA forecasts show near zero net growth in non-Asia OECD through 2030 Projected growth in India and China keeps nuclear at current fraction of supply (2-6%) Bulk handling facilities are the problem – reprocessing and enrichment