The Case Against Nuclear Power

Prepared for: Duke Power Board of Directors June 20, 2006

Nuclear Power is Costly

The leveled cost of nuclear power plant operations is more than that of both coal and gas fired facilities using optimistic models.

Raphs Graph Here

Source: MIT Report 2003

The cost disparity is even greater when current operational costs of $0.10-$0.15 are considered

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Our Competitors Agree . . .

Nuclear power has flunked the market test
Before 2015, 46 of 107 operational Nuclear plants will be decommissioned, many due to poor profitability Most were in operation for less than 25 years
Remain Operational 53%

Shut down 43%

Source: Scientists for Secure Waste Storage

During the 1990s, energy production from non-fossil fuel sources grew: 17% for solar cells
24% for wind turbines 1% for nuclear plants

30% 25% 20% 15% 10% 5% 0% Solar Cells Wind Power Nuclear Power

Rocky Mountain Institute Report 2001

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The Financial Risk is Unacceptable

History has shown that we cant model the expected costs and level of risk associated with nuclear construction projects adequately There are still lingering cost questions:
What do we do with spent fuel? What happens if the political and/or regulatory landscape changes? How much Goodwill could we lose with customers and future investors?

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Dealing with Spent-Fuel is Costly

There is no clear government or private strategy for dealing with nuclear waste
Re-processing

Permanent Storage

vs.

Costly and Inefficient. Varying political support Excess Plutonium Security threat

Yucca Mountain Overruns $800 million estimate $8 billion and counting Full before operational DoE mismanagement

As a result, we would incur unplanned storage costs Wet storage: $6MM/year Dry storage: $151MM capital outlay; $2MM/year
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The Political Landscape is As Good As It Gets

Republicans Control the White House and both Houses of Congress Oil at record highs public outcry The Energy Policy Act of 2005
more than $13 billion in cradle-to-grave subsidies and tax breaks unlimited taxpayer-backed loan guarantees limited liability in the case of an accident other incentives to build new nuclear reactors
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The Political Landscape is Not So Great Tomorrow

How much longer will this political climate last?
Presidents popularity in the 30 percentile range
Public companies increasing percentage of donations to Democrats

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Regulatory Risks Abound

Federal Regulations (NRC)
Costly application process Slow certification process

Local Regulations
Prices for electricity provided to retail customers are set by state PSCs under costbased regulatory principles any new power generation must be certified by the local PSC

Shoreham Nuclear Power Plant

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We Will Hurt Our Public Image

Many organizations oppose Nuclear Power 15 National 8 in Alabama and Georgia Residents oppose plants built near their homes The public is afraid Health, Security, Safety Protests are inevitable Lawsuits are probable Employee strikes are possible

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We Will Hurt Our Public Image

Anti-Nuclear protests, strikes and lawsuits
Lost $ Negative press Distractions Delays

Any security, safety or health violation would be devastating to Southern Company

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Proponents Ignore Real Costs

Production Costs
To show a nuclear advantage, typical production costs only use fuel and O&M costs. They exclude the cost of capital.

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Proponents Ignore Real Costs

Total Costs
A nuclear advantage exists only if large subsidies reduce part of capital costs and monetary value is assigned to emissions trade. (Kyoto Protocol)

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There are Several Missing Costs

Capital Costs
Federal subsidies used to reduce capital costs in analysis of nuclear plants while state subsidies for solar, wind, etc. are ignored. Many are FOAKE (first-of-a-kind engineering) designs but learning curves are typically used to show lower capital costs.

Long life (40 years) used to amortize costs but many shut down after only a fraction of that life due to regulatory changes or political pressures.
The last nuclear power plant to be commissioned in the U.S. in 1996 was in the pipeline for 24 years. From 1980 to 1995 more than half the reactors that had licenses were never built.
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Subsidies May Not Be Around Forever

Security Measures Subsidy
Security Cost >$1B and climbing
Physical security (building and equipment) Security personnel: 8,000+ armed personnel

Part of Capital or O&M Costs?

Infrastructure NOT counted in capital Security personnel NOT counted in O&M

Spent Fuel Subsidy

Temporary Holding Costs
Facilities (until opening of Yucca Mountain in 2020) Special containers

Transportation Costs
Special vehicles Security measures
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Can We Accurately Forecast?

Current and Future Prices
Can nuclear fuel prices stay low?
How long before the costs are passed on?

Look at what happened to natural gas

Many gas power plants built based on low gas prices are now bankrupt

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There are Alternatives

Safe Alternatives
Conventional Alternatives
Natural Gas--Clean Coal-- Improved efficiency and emissions

Renewable Alternatives

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Solar Wind Hydro Biomass Geothermal

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