Remarks of Secretary of Energy Samuel Bodman

It is an honor to address the leadership of an industry that is so important to America’s energy future.

I would particularly like to recognize the members of Congress attending this conference today in addition to Senator Pete Domenici… Senator Jim Inhofe and Representative Joe Barton… whose leadership is so important to the energy sector. Also, this organization’s new president, Admiral Skip Bowman… who served so long and so well at the Department of Energy. And one person who is not with us today… the Department of Energy’s longtime director of Nuclear Energy, Science and Technology, Bill Magwood… who is moving on to new opportunities after serving 11 years, under two Presidents and five Secretaries of Energy. I know the NEI is recognizing Bill for his leadership and important contributions… and I join in thanking him for his service… and wishing him all the best.

There are many good reasons why nuclear power… which produces about 20 percent of America’s electricity… is a cornerstone of President Bush’s National Energy Policy, which was unveiled four years ago this week and is making good progress in addressing many critical issues.

We all know that the demand for energy around the world is on the rise. The International Energy Agency recently predicted that global demand for energy will grow by about 60 percent over the next 25 years, with two-thirds of the increase coming from rapidly developing countries such as China and India. Economic expansion in those nations is accelerating the need for additional energy to fuel their booming industrial and transportation sectors, and to electrify vast rural regions.

The IEA’s energy outlook forecasts that worldwide demand for oil will increase from the current 82 million barrels a day to about 121 million barrels a day by the year 2030. It also predicts that the use of natural gas will likely double over the same period of time… with a similar escalation in the use of coal.

While the increased use of oil will go largely to fuel the transportation sector… much of the natural gas, and even more of the coal, will be used to meet the growing demand for electricity. The Department of Energy’s Energy Information Administration sees world electricity demand increasing nearly 75 percent by 2025.

As demand continues to climb, we must keep in mind that the fossil fuels upon which we increasingly depend are finite resources that will not last forever. As time goes on, they will become more and more expensive to find and produce. In addition, our traditional ways of using fossil fuels – burning them in power-plant boilers and in vehicle engines – causes pollution… such as carbon monoxide, sulfur dioxide, nitrogen oxides and mercury… as well as greenhouse gas emissions.

Clearly, we need to develop new sources of energy that reduce our dependence on fossil fuels… and help protect the environment. Under the guidance of the President’s National Energy Policy, we are working to develop these new energy sources. They include hydrogen fuel cells to power our vehicles… more-effective ways to produce wind and solar power… technologies to remove pollution and greenhouse emissions from coal… and improving our energy-efficiency across the economy, to recover the vast amounts of energy we currently waste.

But while we work to develop these new and better ways to produce and use energy for the future… there is one technology already in place that can reliably generate large amounts of electricity with no dependence on fossil fuels, no pollution, and no greenhouse emissions. And that technology is nuclear power.

Nuclear power plants in the eastern part of the United States have helped many states meet their federal Clean Air Act obligations. Since the mid-1970s, nuclear energy has enabled the United States to avoid emitting significant quantities of sulfur dioxide and nitrogen oxides. The 440 nuclear reactors now producing electricity around the world displace about 2.5 billion tons of carbon dioxide every year that would have been emitted using conventional coal-fired generation.

These advantages would seem to make nuclear power a leading choice for much of the new electric generating capacity being planned for the coming years. But, while recent world energy forecasts predict large increases in the use of oil, coal and natural gas over the next quarter century… they estimate only a very slight increase in the growth of nuclear power in comparison with other energy sources.

If none of America’s new generation capacity is nuclear, its percentage of our electricity production would drop from its current 20 percent to about 14 percent by 2025. I believe that allowing nuclear energy to undergo such a decline is economically and environmentally irresponsible.

Rather than becoming a decreasing percentage of our energy mix, nuclear power should instead be among our foremost options for ensuring that we have safe, secure, affordable, and environmentally responsible supplies of energy in the years to come. But, as we know, nuclear power has faced a number of significant challenges over the past several years… which is why this country has not begun construction of a new nuclear plant since the 1970s… and why no new U.S. nuclear construction projects are currently in the works.

The 103 nuclear plants in America today are operating safely and economically. But during their development and construction, the builders and owners of many of these plants had to overcome some major financial and regulatory problems. Plants that originally were projected to cost under a billion dollars ended up costing several billion dollars instead… and taking years longer to complete than anticipated – which caused the utility sector some serious financial hardship.

One reason for this was the overall economy at the time. The late 1970s… when many of these plants were being built… were times of high inflation and double-digit interest rates – conditions that had a huge financial impact on these capital-intensive projects. In addition, safety concerns were very much in the news at the time… which helped drive strong political opposition to nuclear power… and prompted the creation of complex and often-changing regulatory structures, which sent costs and investment risks even higher.

But in the nearly three decades since America started building its last nuclear plant, many things have changed. Advances in technology and, probably most importantly, significant improvements in the management of nuclear operations by U.S. utilities have made American nuclear power plants some of the safest, most efficient and most cost-effective industrial facilities we have. And new reactor designs will make the next nuclear plants even safer and more efficient than the current fleet.

Despite that progress, however, the high project-development costs and regulatory uncertainties – as well as some of the public concern – still remain in place. We must effectively address these challenges if we are to get the U.S. nuclear power industry moving again. This is why our Administration is at work on a number of initiatives to help boost the prospects of this important energy technology.

A centerpiece of the Administration’s effort is the Nuclear Power 2010 program, an effort to make sure our nation is ready to resume nuclear plant construction by the end of this decade. Nuclear Power 2010 involves the government and the private sector working closely together to complete and certify the most advanced nuclear power plant designs available today… and demonstrate the Nuclear Regulatory Commission’s "one-step" licensing process. This will be crucial to reducing the business risks associated with building new nuclear power plants in the United States.

Under this initiative, the Energy Department is working with utilities and industrial companies nationwide to set the stage for new nuclear construction. Already, the Nuclear Regulatory Commission is reviewing sites to confirm that they are qualified places to build the next plants. And two large industry consortia are proceeding with regulatory steps that could lead to the first U.S. nuclear plants in more than 30 years. If all goes well, we could see new plants on-line by 2014… and I believe our country will be the richer for it.

Despite this important progress, I understand that the perceived risks may still be too high for many utilities to make the decision to build. That is why President Bush has proposed that the U.S. government provide an additional element of risk reduction. As you know, he has proposed that we further streamline the licensing process… to reduce the prospect for unnecessary delays in the commissioning of a new plant. In his proposal, we would reform the NRC licensing process to significantly reduce the possibility for an additional public hearing after construction has been completed.

Current law allows another public hearing very late in the process, despite the ability of all interested parties to raise concerns and air their issues much earlier… before project sponsors have spent billions to build a facility. Significantly raising the evidentiary bar for this post-construction hearing introduces more certainty in the licensing process. And, it does so without relieving the project sponsors and developers of any responsibility to address public concerns or to comply with license conditions and safety requirements. We believe this licensing reform is good government, and makes good sense.

The President has further proposed that the government provide risk insurance to help give investors confidence that regulatory delays will not turn a good project into a bad investment. This insurance would cover half of the interest costs, operating and maintenance costs, and newly acquired construction costs accumulated during the second, third, and fourth years of a serious regulatory delay… up to a total of $500 million per reactor… for the first two plants of each of the two new designs. We would expect utilities that wish to have this insurance coverage to pay a premium of about 10 percent of the total coverage, perhaps over a period of years. However, we would propose to forego premiums for utilities that place firm orders for plants by December 31, 2008.

I believe that this is the appropriate level of assistance that the government should provide to encourage new plants at this point in time. I know there is still some discussion about other up-front financial incentives for new plants, but based on our analysis and what we have heard from many stakeholders, we do not think these incentives are needed. We believe the economic case to build new nuclear plants is already evident… and that it is time for the private sector to step up to the plate. Looking for up-front incentives now sends the message that nuclear power cannot stand on its own without special government assistance. I don’t think this is the right message to send to the American people, and I don’t think it’s true. So, instead of giving financial incentives, we are proposing to fix problems with the government permitting and regulatory system itself. We believe that by doing this, the government will start encouraging and stop impeding the construction of facilities we believe can be economically viable.

The President has been quite vocal about the need to think long-term when it comes to our nation’s energy security. For that reason, our Department is also working on the technologies to meet our needs for future decades. In this vein, one of our most important efforts is the Generation IV Nuclear Energy Systems Initiative. This initiative is focused on developing advanced nuclear technology for future plants… including facilities that produce energy products like hydrogen, in addition to electricity. Large-scale hydrogen production by nuclear power plants could be instrumental in strengthening our nation’s energy security… if hydrogen-fueled vehicles replace the cars and trucks that currently run on gasoline.

I was very pleased that, as one of my earliest acts as Secretary of Energy, I represented the United States in signing the world’s first multilateral agreement to develop next generation nuclear energy technologies. Through this agreement, the United States, working with the other countries of the Generation IV International Forum, will usher in the technologies that will power a future less dependent upon foreign sources of energy, more efficient, and more proliferation-resistant.

In addition to new reactor technologies and regulatory reforms, we also need to address the issue of spent nuclear fuel. After decades of debate with no firm action, this Administration has moved ahead with plans for a permanent nuclear waste storage repository at Yucca Mountain in Nevada. This project will fulfill a government obligation to the commercial nuclear power industry, and it will remove what has been a major impediment to new nuclear construction in this country. And we are committed to completing this important project.

Someday, science may develop new ways to deal with nuclear waste. And that is the focus of another Department of Energy program, the Advanced Fuel Cycle Initiative… which also involves experts from countries such as France and Japan. This effort has the goal of developing proliferation-resistant fuel treatments and transmutation technologies… that will enable a transition from the current once-through nuclear fuel cycle to a sustainable, closed fuel cycle for the future. Developing these technologies will reduce the cost of geologic fuel disposal… help the future spent-fuel repository operate more effectively… and support many of the new systems being developed under the Generation IV program.

While we in the United States have been working to address the impediments to nuclear construction in our own nation, nuclear energy programs have been moving forward in a number of other countries. France, for example, derives the majority of its electricity from nuclear plants. Nuclear power is also a major contributor in Japan, Sweden, and South Korea. Finland has recently begun adding new nuclear capacity, which will boost nuclear power’s share of its electricity production to 35 percent.

The largest new nuclear-construction program currently under way is in China… which has become the world’s second-largest generator of electricity from all sources. With its electricity demand expected to double within 20 years, China is the fastest-growing market in the world for nuclear power generation equipment. China has eight nuclear plants now under construction… and plans to build at least eight more by early in the next decade. By the year 2020, China plans to boost its nuclear electric generating capacity to 36,000 megawatts – up substantially from the 7,000 megawatts of nuclear capacity it has today.

These nations realize that the environmental benefits offered by nuclear energy far outweigh the environmental and economic impact of not having nuclear as part of their power-generation portfolios. It’s a sobering thing to consider. Without nuclear energy, the vast amounts of electricity the world will need in the future will be produced largely by coal and other fossil fuels. The increases in pollution and greenhouse gas emissions from this additional generation capacity would be huge, easily surpassing any hoped-for reductions under the Kyoto Protocol.

In addition to the things the government is doing to help clear the way for a new age of nuclear power in the United States, we also need to work with you in the nuclear power industry to help bolster public confidence in this important energy source. For too long now, the opponents of nuclear energy have successfully fanned many unfounded public fears about nuclear plants.

Political and popular opposition might be on the decline today… when nuclear power’s advantages are becoming more apparent in light of growing energy security and environmental concerns. But the anti-nuclear viewpoint is still out there, and it’s up to us to effectively address it through outreach and education… which I know is one of the Nuclear Energy Institute’s major goals. As part of this effort, the private sector also needs to work more closely with our nation’s universities… to ensure that enough nuclear engineers and other technical experts are being trained to build and operate these new plants.

Working together through all these initiatives, I believe we can improve the public’s understanding of what a nuclear power plant is and what it does – and what it can do in the future. I believe we can convince the financial community that nuclear energy is a sound investment. And I believe we can give our political leaders the confidence to support a strong and growing nuclear power industry in the years to come.

When the age of nuclear power dawned more than 50 years ago, President Dwight Eisenhower called upon the world to use this amazing new technology "to serve the peaceful pursuits of mankind." In his famous "Atoms for Peace" speech in 1953, Eisenhower foresaw nuclear energy’s ability to "serve the needs of agriculture, medicine and other peaceful activities," and he said that "a special purpose would be to provide abundant electrical energy in the power-starved areas of the world."

We have a historic opportunity today to help transform that early vision into reality. The prospects for nuclear energy are more promising today than at any time since its development. The world’s growing need for energy… and the need to expand our energy sources beyond traditional fossil fuels… set the stage for a revival of safe, clean, efficient and affordable nuclear power – as an important contributor to energy security and independence – here in the United States and around the world.

Thank you.

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