ML19280F180
| ML19280F180 | |
| Person / Time | |
|---|---|
| Issue date: | 10/18/1984 |
| From: | Dircks W NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | Zausner E BOOZ-ALLEN & HAMILTON, INC. |
| Shared Package | |
| ML19280F181 | List: |
| References | |
| NUDOCS 8410310001 | |
| Download: ML19280F180 (8) | |
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OCT 181984 Mr. Eric R. Zausner Booz, Allen & Hamilton, Inc.
4330 Etst West Highway Bethesda, Maryland 20814
Dear Eric:
Thanks for sending me ycur paper on improving the outlook for the U.S. nuclear industry.
I've read it, and I had some other key members of the NRC staff review it also.
I will be interested in hearing more from you about the responses from the industry.
My own response is positive. Generally, I think you have the right idea on how this industry can recover and provide an essential energy mix for the country. As a matter of fact what you recommend is very much in line with the Comission Policy and Planning Guidance,1984. Two ef the Comission's major policy goals are the development of n method to certificate the designs of new standardized power plants. Under this concept designs would be valid for ten years. The statement should also impose tighter l control over the issuance of regulatory requirements for existing plants.
In addition, the Commission is considering ways to refonn current licensing practice. One step licensing is a basic goal of these licensing reform proposals Certificated plants plus pre-approved sites would be a significant advance to that goal.
Your suggestion for creation of a f acility and system for shop-fabricated power plants of standardized design is also consistent with NRC standardization efforts and one-step licensing proposal. Further, the concept of a manufacturing license _ received extensive review during the late 1970's; one was actually issued to Offshore Power Systems in 1982 for a shipyard-like facility in Jacksonvilie, Florida.
Your discussion of the Advanced Nuclear Development Corporation is good. The demands imposed on individual: utilities when they undertake the construction of a nuclear plant are enormom. The technology, the risks and the responsibilities seem so open-ended especially when combined with the lack of experience and the relatively small size of nost utilities. Certainly a corporation such as the one you described should be the structure around which this energy option should move in the future.
But why limit it to just the development of nuclear plants? Why not the
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operation of them? Here again, we face the need for unifonn standards of
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performance, in manregement, training operations, maintenance and quality K
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assurance. We need an expertise and discipline far different from that
/dO i associated with the operation of conventional power plants.
I would like to see an operating company own the facilities and sell the power to the utilities which would then distribute to their normal customers.
8410310001 841018 CF SUBJ RD-P5NUC PGMER CF
, Bulk electric energy should be like any other energy supply. Large base load facilities should be able to wheel their power to various base utility generating companies over transmission lines that should be viewed as common carriers. This, of course, is " blue sky" thinking.
It would require major reforms in regulatory thinking.
There are now ten or fifteen plants around the country on which construction has been suspended. Some of these plants, either because of economic regulations or tax treatment, are economic liabilities rather than economic assets to the individual utilities.
In my view, they are very rapidly becoming lost energy opportunities for the country.
In five to ten years we will need the energy these plants would be capable of providing.
It seems to me that some investments should be made to preserve these facilities for eventual operation by corporations that would be free to sell the power in response to national demand. Certainly it would be a step forward realizing your concept of a Nuclear Development Corporation any my vague notion of a nuclear energy operating corporation. We might both call this effort for the time being a strategic electric reserve.
The one problem I have with your paper is at the beginning.
I do not believe that the problems of the nuclear power industry are due solely to
" unanticipated and complex regulations which contributed to significant cost escalation ead untenable financial risks." Other well-recognized causes of higher than projected final cost are high interest rates, inflation, declining demand for electricity, and inadequate quality control and assurance during construction. These latter two factors also contribute to stretchout in construction completion schedules, a very substantial cause of cost overrun.
On balance, I believe you have laid out the conceptual framework for the future of the domestic nuclear industry. What can I do to help? Please keep me informed.
Sincerely, (Sigt.dEmm L Ditts William J. Dircks Executive Director for Operations Distribution tAentral files TOSB R/F WJDircks/EDO HRDenton/NRR EGCase/NRR RBMinogue/RES JFunches/NRR GEdison/NRR HBerkson/NRR EDO r/f MBridgers (14808)VStello KBowman(14808)
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TOSB R/F WDircks HDenton ECase RMinogue JFunches GEdison Mr. Eric R. Zausner HBerkson Booz, Allen & Hamilton, Inc.
ED0 R/F 4330 East West Highway MBridgers (14808)
Bethesda, thryland 20814 KBowman (14608 Deer Eric:
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Thank you for sharing your thoughts \\on improving the ou ook for the U.S.
nuclear industry.
I enjoyed reading \\your provocative aper "Toward Creating a Future for the Domostic Huclear Inddqtry".
I will e interested in hearing nore from you about the responses froa 'the industr.
My own response is positive.
I think tha thn essential concept of the paper is well foundea and presents a viable opti to be examined.
It is especially welcore because of its consistency with th. onmission Policy and Planning Guidance, 1984. As you may recall, two of th Commission's najor policy goals are the use of standardized power plants with signs that will be valid for many years in the future, and tighter control os r the issuance of regulatory requi rements.
In cddition, the Commission is con idering ways to refom current licensing practice. One approach that has been recommended is one-step licensing.
Your suggestion for creation of a facility and systen er shop-febricated s
power plants of standerdized design is ccnsistent with IQC standardization efforts and one-- tep licensing proposal.
Further, the co'ncept of a nanuf acturing license received extensive review during the late 1970s; one was issued to Offshore Power Systems in 1982 for a ship yard-like facility in J3cksonvi ~ le, F1orida.
The proposal to create an Advanced Nuclear Development Corporation also is consistent with NRC policy. The Cornission has long taken the position that the primary responsibility for construction and safe operation of nuclear power plants belongs to the utility industry. The IGC role is focused on issuing licenses and regulating the uses of nuclear energy to protact the public health and safety and the environment. Any actions taken by the industry to further attainment of these goals is welcome and encouraged to the extent that antitrust and other such laws are not violated.
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. Regarding the industry's current situation, I do not believe th>t the problems of the nuclear power industry are due solely to " unanticipated and complex regulations which contiibuted to significant cost escalation and untenable financial risks". Other well-recognized causes of higher than -ojected final cost are high interett rates, inflation, declining demand for.
tricity, end inadequate quality control and assurance during construction. Tnese latter two factors also contribute to stretchout in construction completion schedules, a very substantial cause of cost overrun.
On balance I believe you propose an exciting new oncept for the future ci the domestic nuclear industry.
I enco* rage your efforts in pursuit of crystallizing the concept. Please keep me reast of progress.
Sinc ely,
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\\- Jilliam J. Dircks Executive Director for Operations N
DISTRIBUTION Central File TOSB R/F W.. Dircks
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K. Bowman (14808)
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,R. Minoque Mr. Eric R. Zausner
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H. Berkson Bethesda, Maryland 20814
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Dear Eric:
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8 Thank you for sharing your thoughts on improving the outlool; for the U.S.
nuclear industry.
I enjoyed reading your provocative paper /"Toward Creating a Future for the Domestic Nuclear Industry".
I will be in.terested in hearing more from you about the responses from the industry.
,/
My own response is positive.
kgthinkthattheesse.1tia concept of the paper is well founded and presents a useful option to be examined.
It is especially welcome because of its consistency with the Commission / olicy and Planning P
Guidance, 1984. As you may recal, twn of the Comission's major policy goals are the use of standardized power} plants with design.s that will be valid for many years in the future, and tighter control over the issuance of regulatory requirements.
In addition, the Comission establis'hed a Regulatory Ref orm Task Group under the direction of Jim Tourtellotti to examine current practice and make recomendations for improvebent.
The reports of this task group have been under review by the Comission for some tide.
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Your suggestion for creation of a facklity and system for shop-fabricated power plants of standardized design s also c'ne which the Commission has long i
supported. The concept of a manuf acturing Jicense received extensive review during the late 1970s; one was issued to Offshore Power Systems in 1982 for a ship yard-like facility in Jacksonville., florida. An application to install two plants was submitted by Public Servjce Electric and Gase of New Jersey.
Even though no :cch reactors have been ordered yet, the concept is still j
consideredviableandpotentiallyvalua%1e.
The proposal to create an Advanced Nucle r Development Corporation also is consistent with stated NRC policy., The Comission has long taken -he position that the primary responsibility for const'ruction and operation of nuclear power plants belongs to the utility industry. The NRC role is focused on issuing licenses and regulating /the uses of nuclear energy to protect the public health and safety and th'e environmcInt. Any actions taken by the industry to further attainment of these gohls is welcome and encouraged to the extent that antitrust and other such laws are not violated.
I believe the creation of the Microelectronic and Ccapute'r Techiology Corporation (MCC) is a good example to follow and/ establishes prec6 dent.
I understand that a similar consortium of indusi.rv anc conservation grodps has been created to address major problems of envirupmental pollution. Their experience will teach valuable lessons.
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, Regarding the industry's current situation, I do not subscribe to the notion that the problems of the nuclear power industry are due, solely to unanticipated and complex regulations which contributed to significant cost escalation and untenable financial risks. Other well-recognized causes of higher than projected final cost are high interest rates, inflation, declining demand for electricity, and inadequate quality control and assurance during cons truction. These\\latter two factors also contribute to stretchout in construction completion schedules, a very substantial cause of cost overrun.
A 1983 study (see reference sheeti. )y Oak Ridge dational Laboratcry showed that for a project planned for completion in 1995, a 1% increase in inflation rate during construction causes an 8% increase /in total project cost, and that a one year delay can increase total project costs by 9% (assuming 8%
escalation in construction costs and 10.7% per year cost of money).
If these two factors occur together, the total additional cost for a completed project could be increased about ohe billion dollars.
t The sane report also forms the basis forr the following caveat concerning your proposal. The report finds t. hat capital investment costs per kilowatt hour electr'c [kW(c)] are sensitive to economics of scale and that these costs increase more rapidly as plant size js reduced. The investigators conclude that the cost per kW(e) is about 25%' higher at an 800 MW(e) plant than at a 1200 MW(e) plant. They do not address the probable costs at units as small as the 300 to 500 MW(e) range you are contemplating, but the suggested trend could make such snall plants economically unfeasible, unless there are compensating factors such as reduced uncertainty in construction time.
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On balance, I believe you proposeian excitirg new concept for the future of the domestic nuclear industry.
I encourage your efforts in pursuit of crystallizing the concept'. Please keep ne abreast of progress.
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Sincerely,
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\\WilliumJ.Dircks f
i Executive Director for Operations l
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Enclosure:
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Reference Sheet ll
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REFERENCE Bowers, H. I., L. C. Fulker, and M. L. flyers: Trends in Nuclear Power Plant
_ Capital Investment Ccst Estimates - 1976 to 1972.
HUREGICR-3500, ORNL/TM 8898, 1983.
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