Nuclear Energy 2014 - 2015:
Recognizing the Value
Annual Briefing for the Financial Community
February 12, 2015
Today’s Briefing
• The business and policy environment
• 2014 recap: Key events and activities
• Looking forward: 2015 and beyond
The Business and Policy Environment
The Cost of Replacing
Nuclear Generating Capacity
($ per MWh)
$49.81
$50.10
$53.70
$57.30
$42.53
$28.22
Lowest-Cost
Average All
Single-Unit
Nuclear Plants Existing Nuclear Nuclear Plant
(Lowest 25%)
Plants
New CC
($4.00 gas)
New CC
($4.50 gas)
New CC
($5.00 gas)
Sources: Nuclear plant costs are 2011-2013 averages from Electric Utility Cost Group. Cost
for single-unit nuclear plant is 2011-2013 average for seven small (approx. 600 MW) nuclear
plants like Kewaunee, Vermont Yankee. Gas-fired combined cycle plant costs from NEI
financial model: Debt at 5.0%, 15% return on equity, debt/equity structure of 50/50. Capital,
O&M and fuel cost assumptions for natural gas are from the Energy Information
Administration’s Annual Energy Outlook 2013. CC = combined cycle.
“The Kewaunee
power plant
needed much less
than the cost of a
new [gas-fired
combined-cycle
plant] to cover the
costs of continued
operation.”
- The Value of US
Power Supply
Diversity, IHS
Energy, July 2014
Nuclear Energy’s Solid Value Proposition
Safe, Reliable Electricity 24/7 Plus …
Supports
Grid
Stability
Provides
Price
Stability
Runs
When
Needed
(Fuel on
Site)
Provides
Clean Air
Compliance
Value
Contributes
to Fuel and
Technology
Diversity
(Portfolio
Value)
Avoids
Carbon
Emissions
Anchors the
Local
Community:
Jobs, Tax
Base
Nuclear Energy Does Matter
Spotlight on Nuclear Energy’s Value
• Powering through the Polar Vortex
- Value of baseload capacity with firm
fuel supply
• EPA Clean Power Plan proposal to reduce CO2
emissions by 30% by 2030
- Cannot be achieved and sustained without
preserving existing nuclear generating
capacity and building new nuclear capacity
FERC Initiatives to Address Market Issues
• Technical workshop on
capacity markets
(Sept. 2013)
• Lessons learned from Polar
Vortex (April 2014)
• 3 technical workshops
on price formation in
energy markets
• Order to RTOs on fuel
assurance (Nov. 2014)
FERC Recognizes Value of Baseload Capacity
“[T]he Commission is right now actively considering – both
how our capacity markets are designed, and whether the
full value of a baseload plant is included in the payments
they’re getting from the
capacity market, but also
whether we have the right
set of products out there,
that will incent the
resources that can provide
reliability ….”
 Arnold Quinn, Director, FERC Division of Economic and Technical
Analysis, at joint FERC-NRC Meeting, May 28, 2014
The Evolution at PJM:
From April …
“I think we may look at potentially paying
more for firm winter fuels. And obviously I
think nuclear would easily fall into that …. [I]t
concerns us when nuclear units start to
prematurely retire, only because we're not
going to get them back once they go. And so
we are taking a very hard look at our markets,
and we may be coming to you with changes if
our markets are not paying enough.”
 Michael Kormos, Executive Vice President, PJM, at FERC
Workshop, April 1, 2014
The Evolution at PJM:
From April to December
“[T]he PJM Board has authorized the filing
of a Capacity Performance initiative at FERC.
…Stronger incentives within the existing
capacity market structure should be
established to encourage needed investment
by both new and existing resources. PJM is
acting now to begin reversing trends in
generation performance and fuel security
that will continue to deteriorate reliability.”
 Terry Boston, PJM President and CEO,
December 3, 2014
Impact of Plant Shutdowns in Illinois
• PJM analysis for Illinois Commerce
Commission:
- $307 million-$437 million annual increase in
load payments in ComEd zone
- $752 million-$1.3 billion annual increase in
load payments in PJM
- “Significant thermal and voltage violations”
• NEI analysis:
- 2,500 direct jobs lost; 9,000 direct
and indirect
- $2.4 billion in direct lost economic value;
$3.6 billion direct and indirect
Preventing Electric Sector Carbon Emissions
U.S. Electric Power Industry CO2 Avoided
Million Metric Tons 2013
Nuclear
Hydro
Wind
-128.6
-203
Geothermal
-12.7
Solar
Wind
13.4%
-7.1
Nuclear
63.3%
Hydro
21.2%
-588.5
Source: Emissions avoided are calculated using
regional and national fossil fuel emissions rates
from the Environmental Protection Agency and
generation data from the Energy Information
Administration.
U.S. Carbon-Free
Electricity Sources
2013
Solar
0.7%
Geothermal
1.3%
Industry Recommendations for EPA’s
Clean Power Plan
• States should demonstrate how they intend to preserve
existing nuclear capacity in State Implementation Plans
• Power uprates completed after 2012 should count
toward compliance
• License renewals after 2012 should be considered new
capacity and count toward compliance
• Plants under construction should not be part of
rate-setting formula, should count toward compliance
when operating
Growing Recognition of Nuclear
Energy’s Value
• FERC, EPA, RTOs, states recognize value
of nuclear power plants, consequences
of nuclear plant shutdowns
- Electricity consumers lose long-term,
low-cost power at stable price
- Jobs, state and local economies suffer
- Reliability at risk
• Initiatives underway to monetize
that value
“Vernon [is] now
facing the loss of its
largest employer and
taxpayer, significant
budget cuts, and
mounting questions
about its financial
footing.”
̶ Patricia O’Donnell
Chair
Board of Selectmen
Vernon, Vermont
2014 Recap: Key Events and Activities
Record Capacity Factor in 2014
• U.S. reactors set
•
•
record capacity
factor: 91.9%
Nuclear plants
generated 798.4
billion kWh in 2014
Refueling outage
duration declined
again:
2014: 37.2 days
2013: 41 days
2012: 46 days
U.S. Nuclear Plant Capacity Factor
100
80
91.8% in 2007
91.1% in 2008
90.5% in 2009
91.2% in 2010
88.9% in 2011
86.4% in 2012
90.9% in 2013
91.9% in 2014*
60
40
20
0
1990
1996
2002
2008
2014
Source: Energy Information Administration
* NEI estimate
Snapshot of U.S. Nuclear Plant Costs
($ per MWh)
•
•
•
•
Average generating costs decreased 9 percent – from
$45/MWh in 2012 to $41/MWh in 2013
Capital spending down significantly
Fuel costs up slightly, operating costs down slightly
$6.4 billion in capex, 25% decrease from $8.6 billion
in 2012
2013 Generating Cost
9.81
2013 Average
Generating Costs
49.69
40.83
34.50
27.67
7.69
Fuel
O&M
Capital
23.33
First
Fleet Single
Quartile Average Unit
Sites
MultiUnit
Sites
Total generating cost = fuel + capital + operating.
Excludes Crystal River 3, Fort Calhoun, San Onofre 2 and 3, and
Kewaunee. Vermont Yankee did not provide data for 2013.
Source: Electric Utility Cost Group.
Nuclear Plant Capital Spending Trends
(2013 Billions of $)
Distribution of
Capex in 2013
4.4
4.0
3.0
3.2
2.5
2.2
2.2
1.9 1.9
1.8
1.7
1.4
1.6 1.6 1.7
0.5 0.4 0.5 0.4 0.4
Uprates, Extended
Operation
Equipment
Replacement
2009
2010
Regulatory
2011
2012
Other
2013
Source: Electric Utility Cost Group
Nuclear Power Plant Cost Trends
2005-2013
150%
Regulatory CapEx
100%
Fuel O&M
50%
Licensing O&M
Security O&M
0%
Engineering & Equipment
Reliability O&M
-50%
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Electric Utility Cost Group
Watts Bar 2 Nears Completion
Progress at Vogtle, Summer
Progress at Vogtle, Summer
Status of New Plant Licensing
Projects with applications for combined construction/operating licenses
under review by the Nuclear Regulatory Commission
Company/Site
Design
(# Reactors)
Nuclear Innovation North America:
South Texas Project 3 & 4
ABWR (2)
Dominion Resources: North Anna 3
ESBWR (1)
Duke Energy: William States Lee 1 & 2
AP1000 (2)
Duke Energy: Levy County
AP1000 (2)
DTE Energy: Fermi 3
ESBWR (1)
Florida Power & Light: Turkey Point 6 & 7
AP1000 (2)
$740 Billion Global Nuclear Energy Market
Over Next 10 Years
Worldwide Development
 69 reactors under construction
 183 reactors on order or planned
64
Planned
31
Under
Construction
25
9
China
Russia
22
6
India
Sources: International Atomic Energy Agency; World Nuclear Association; U.S. Department of Commerce
U.S. Participation in Global Market
Supports Strategic Objectives
• U.S. technology among the most innovative
reactor designs
• Enhances U.S. ability to achieve nonproliferation
goals, influence global safety practices
• NRC approval of reactor designs considered the
“gold standard”
• Global sales create tens of thousands of U.S. jobs:
- Domestic manufacturing of key components and fuel
- Design, engineering and other services
FLEX Strategy Enhances Safety
• FLEX provides additional
layer of protection against
extreme, unexpected
scenarios that are beyond
the plants’ design basis
• Focus on maintaining key
safety functions
Emergency equipment is pre-staged on truck flatbeds at
national centers, ready to be shipped by truck or aircraft
• Each nuclear plant site
maintains backup portable
safety equipment, shares it industrywide if needed
• National response centers opened in 2014 in Memphis and
Phoenix
National Response Centers Open in 2014
Five full sets of emergency backup
equipment is stored at the national centers
Emergency equipment is equipped with color-coded
electrical connections for “plug and play” installation
Stable Outlook for Used Fuel Management
• Court ordered DOE to reset
Nuclear Waste Fund fee to zero
= $750 million annual saving
• Court ordered NRC, DOE to
resume Yucca Mountain
licensing
• Government program requires
restructuring, including new
management entity
• Tangible interest in developing
interim storage facility
Used fuel storage at interim facility
Status of First License Renewal
Applications for License Renewal
74 Reactors Approved
8 Reactors
Intend to
Renew
17 Reactors
Under
Review
Steam generator replacement
in progress
Source: Nuclear Regulatory Commission
Nuclear Energy Replacement Scenarios
If all U.S. nuclear capacity retires at 60 years …
22.2
54.6
New Nuclear Capacity Needed
to Maintain 20%
Existing Nuclear Capacity
100 GW
(16.4% of U.S.
electric supply)
2030
72.4 GW
(11.4% of U.S.
electric supply)
2035
Nuclear Energy Replacement Scenarios
If all U.S. nuclear capacity retires at 80 years …
18.1
22.9
New Nuclear Capacity Needed
to Maintain 20%
Existing Nuclear Capacity
104 GW
(17% of U.S.
electric supply)
104 GW
(16.4% of U.S.
electric supply)
2030
2035
Looking Forward: 2015 and Beyond
Policy, Politics and Priorities
America’s Power Supply Challenge:
Fuel Diversity at Risk
• As much as one-third of
today’s coal-fired capacity may
be lost in next 5-10 years
• 342,000 megawatts of gasfired generation built since
1995 (75% of all new capacity)
• Renewables will expand, but
they’re not baseload
Impacts of Losing Electricity Diversity
• $93 billion increase in cost of
•
•
•
•
electricity per year
25% increase in retail power prices,
along with increased price volatility
$200 billion reduction in GDP each
year due to higher electricity prices
1 million fewer jobs resulting from
lower GDP
$2,100 increase in electricity costs per
year for the typical household
Age of U.S. Generating Capacity: Replacing
Today’s Infrastructure A Major Challenge

Approx. 411 GW (34% of installed capacity) 10-30 years old

Approx. 432 GW (35% of installed capacity) 31-50 years old
Other
Capacity
373,763
361,428
Nuclear
217,351
58,068
49,140
< 10
10 - 29
Plant Age
30 - 49
107,678
50+
Source: Ventyx
Nuclear Energy’s Unique Value Proposition
Safe, Reliable Electricity 24/7 Plus …
Supports
Grid
Stability
Provides
Price
Stability
Runs
When
Needed
(Fuel on
Site)
Provides
Clean Air
Compliance
Value
Contributes
to Fuel and
Technology
Diversity
(Portfolio
Value)
Avoids
Carbon
Emissions
Anchors the
Local
Community:
Jobs, Tax
Base