US nuclear power fleet aims to cut costs by 30%: industry official

Washington (Platts)--8 Dec 2015 517 pm EST/2217 GMT

The US nuclear power industry has launched a wide-ranging initiative with the goal of cutting its electricity production costs by 30% by 2018, an industry official said Tuesday.

Maria Korsnick, chief operating officer of the Nuclear Energy Institute, said during a media briefing at the National Press Club in Washington that despite record-high capacity factors achieved by US nuclear power plants in recent years, the average production cost of the electricity they generate rose significantly from 2002 to 2014.

NEI said in a statement Tuesday announcing the initiative that "total electric generating costs at US nuclear plants have increased 28% -- to an industry average $36.27/MWh -- over the past 12 years," including fuel, capital and operation and maintenance costs.

Since 2013, Entergy's Vermont Yankee and Dominion's Kewaunee in Wisconsin have been permanently shut "for economic reasons," and Entergy has announced it will shut its Pilgrim in Massachusetts and FitzPatrick in New York in the next two years "largely due to financial losses," NEI said.

"We are operating in markets with a glut of natural gas at historically low prices, concurrent with low electricity demand nationally," Korsnick said in the statement. "We are seeking to redesign fundamental plant processes to significantly improve operational efficiencies and effectiveness, and in the process make nuclear energy facilities more economically viable."

NEI said in a fact sheet provided at the briefing that "[a]n analysis at one US nuclear plant site found that supervisors spent over half their time on administrative duties and only 14% of their time supervising employees. In addition, little time was being spent on process improvement efforts or problem-solving activities."

Other factors contributing to increased productions costs, Korsnick said during the briefing, include significant increases in regulation of nuclear plants and electricity markets that do not adequately recognize and compensate the benefits of nuclear power, such as its reliability in extreme weather, she said during the briefing.

Industry working groups have identified initial potential savings in several areas, including improvements in corrective action programs, work management, engineering, security and regulatory efficiency, she said.

Korsnick said the groups' recommendations are being reviewed by a steering committee of chief nuclear officers from companies that operate power reactors.

Preliminary estimates indicate that the potential savings identified by the working groups could result in "30% cost savings across the industry," amounting to "hundreds of millions of dollars" annually, Korsnick said. Korsnick emphasized that the initiative is being closely coordinated with the US Nuclear Regulatory Commission, and "safety reviews are built into the process" of selecting and implementing the savings proposals.

In fact, by encouraging operators to take a fresh and critical look at practices and procedures at nuclear plants, the initiative is expected to enhance safety, she said.

Korsnick said in response to a question that the initiative is considering various proposals to modify regional electricity markets to better value the benefits of nuclear power, including low-carbon portfolio standards that would provide additional compensation to carbon-free generators using funds from a surcharge on electricity sold in the state adopting the standard. Exelon, operator of the country's largest nuclear fleet, has proposed such a standard be adopted in Illinois, saying that would benefit its economically struggling nuclear plants and help assure reliable electricity supply.

Such market reform proposals, however, are far more complex than plant-specific efficiency improvements, and so would take longer to consider and implement, Korsnick said.

Proposals approved by the steering committee will be either offered for adoption by individual nuclear plants at their discretion or, in the case of actions that must be undertaken by the industry as a whole to be effective, submitted for a vote of NEI's Nuclear Strategic Issues Advisory Committee, a standing group of chief nuclear officers, Korsnick said. Initiatives approved by that committee are binding for the entire industry.

--Steven Dolley, steven.dolley@platts.com
--Edited by Derek Sands, derek.sands@platts.com

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