ML19309C027

Forwards Response to 780530 Inquiry Re NRC Need for Power Determination Procedures.Need for Power Determinations Made by NRC Are Part of NEPA Reviews Required Prior to CP or OL Issuance

ML19309C027
Person / Time
Issue date:	07/19/1978
From:	Hendrie J NRC COMMISSION (OCM)
To:	Judith Weaver HOUSE OF REP.
Shared Package
ML19309C013	List: ML19309C012 ML19309C027 ML19309C035 ML19309C036 ML19309C038
References
NUDOCS 8004080048
Download: ML19309C027 (10)

Text

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..r* "If UNITED STATES -...; -;;;.43.: 'LVGossick

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July 19,'1978 ELD

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Millie Groff

=2E cFRCE cF THE SFeld "J:5 CH AIRt.!AN DMuller SECY-78-0774 CA PDR

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sa The' Honorable Jim Weaver United States House of Representatives f.D==

Washington, D.,C.

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Dear Congressman Weiiver:

1--

The enclosed material is in response to your questions of May 30, 1978 b@=

concerning the Nuclear Regulatory Commission's need for power deter-

;;.s mination procedures.

"Eg ss The ne'ed for power determinations made by NRC are part of the NEPA

.:==

reviews required prior to issuing a construction permit or operating lic' nse for a propcsed nuclear power plant.

These determinations are 1....

e usually complex and require judgment on the part of the staff as to the

."55 accuracy and reliability of the projections.

Both the staff's deter-

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minations and the applTcant's determinations are subject to review by am the Atomic Safety & Licensing Boards.

Enclosed is a recent letter.to me

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which identifies some of the issues the Boards face in resolving the need for power issue.

57s 5 I trust this information is respons.ive.to your needs.

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\\ Sincsrely, hlll!

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Joseph M. Hendrie

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Chairman

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7iim Enc.1osures:

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Responses to questions.

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Letter from Marvin M. Mann,.ASLBp

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.z RESPONSES TO CONGRESSMAN JIM WEAVER'S OUESTIONS

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QUESTION 1.

Under what provisions of law is the NRC required to deter-5-t==-

mine the need for any specific nuclear generating facility prior to licensing such facility?

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.The National Evironmental Policy Act of 1969, as amended (NEPA), requires F=g.

NRC to determine need for the facility prior to licensing.

NEPA was construed by the Court in Calvert Cliffs' v. AEC, 449 F. -2d 1109 (D.C.

g-[;[; 2 2

y Cir.1971) as requiring a systematic analysis and weighing of a project's f=

environ = ental and other costs and benefits.

In this analysis, the envi

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=st ronmental impacts of constructing and operating a nuclear facility are

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-+:m balanced against the benefits derived from the power produced.

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.:.-s.u OUESTION 2.

Do any statutes, guidelines or regulations mandate a normative

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approach to need for power determinations?

Is there any 5,5 mandate that -- other things being equal -- some sources of Viii=i energy, such as conservation or solar, are "better" than i=:i=

others?

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3

RESPONSE

.fM The law (statutes, regulations, guidelines) does not mandate any particular Ef-E approach.to need for power determinations.

Nor is there any mandate i"

that, other things being equal, some sources of energy such as conserva-f.

tion.or solar are "better" than others.

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~~ QUESTION ~3.

What alternatives to such a facility (nust be considered prior to a positive determination of need? Conservation?

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Renewable energy sources?

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$;21 Conservation and expected shifts to end-use renewable e'nergy sources are, as they impact demand, an integral part of the staff's need for

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power. analysis.

To the extent that we expect them to 1.ower future

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growth in demand, we reduce the need for new capacity.

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Alternative forms of electric generation are not considered prior to the

]j NRC's determination.of need for power.

However, if the staff's need for

(==3 power analysis concludes that there is a need for additional capacity, Ig.

this in no way sanctions a nuclear facility.

The need for power analysis E~

,=:27 simply demonstrated that for any one of a number of reasons, a substantial

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u amount of new baseload'~ generating capacity is required and it remains imd for the analysis of alternhtives to consider all potential ways to meet

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Factors that may constitute

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.need include systems reliability and energy load requirements, and the

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need to diversify the sources of energy and reduce reliance on scarce fossil fuels.

The staff, in its alternatives analysis, evaluates what

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type of generation addition' is warranted based on the existence of a

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demonstrated technology, comercial availability, economics, and environ-'

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~ QUESTION"4'."E~ln~ det,ermining'"need for power". does the NRC consider the cost-effectiveness of the proposed nuclear facility versus

- -a the cost-effectiveness of conservation programs or renewable energy programs?

If so, how?

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RESP 0NSE

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The staff evaluates the expected conservation savings to see if they can

.5 eliminate the need for the proposed nuclear addition.

In most cases, jM EEE expected savings are simply not adequate.

One could argue that potential

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savings could be both adequate and cost-effective, but the NRC cannot

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require utility customers to conserve electri' city.

The staff views its

[.lig responsibility as evaluating. capacity needs based on expected demand hjj.ij

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which means that only expected conservation savings within the time ME a

period under review are considered.

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Er The cost-effectiveness (including environmental impacts) of the proposed nuclear facility versui^the cost-effectiveness of other energy sources

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is, in general, treated in 'the alternatives section.

However, in recent If:hf EN~

years this type of analysis has been limited to the coal alternative, fg

.because coal is the only other fuel which is readily available with com-g, parable capacity (MWe) that can be brought on-line in the same general time frame.

In the case of renewable energy sources, the staff analysis

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typically evaluates the potential for adding electric capacity from

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solar, wind p' wer, hydro, geothermal, municipal waste, etc., and concludes o

whether sufficient capacity will be realized within the time frame under-E

' consideration.

Essentially, these sources, if they are commercially

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available at all, may contribute tens of MWe to as much as several r.ar. dred MWe vs. a proposed nuclea'r facility of 1000 to 2000 MWe.

Conse-E1 c,uer.tly, because of their limited availability the staff centends that

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a full cost analysis for such alternatives is not necessary.

It should

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be noted that the staff continually monitors developments in the area,

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' and with advancements in technology cost-effectiveness analyses may well v=m be required for scheduled additions further' off in the future.

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=.i.ig 00ESTION 5.

Does the NRC use the marginal cost of a proposed nuclear IT facility when comparing the cost-effectiveness of such a bg:=

facility versus that of alternatives?

p.3Ijj E75 RESP 0NSE i-sm IEis We wculd not characterize our cost-effectiveness review as a traditional EU=h 5

marginal cost analysis where the incremental unit is a unit level of

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output-(kWh).

However, the cost estimates presented in our environmental 7:==

impa'ct statements technically can be viewed as marginal costs because we

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compare the economic c.,osts of generating electricity from a nuclear unit.

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-mg.9 The NRC.only performs a cost-effectiveness analysis for the proposed

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nuclear facility and those energy sources judged viable by the stpff.

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In recent years, low sulfur and high sulfur coal plants and the proposed

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nuclear addition have been. subject to a detailed cost-effectiveness

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5 review.

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,In each' case, the NRC estimates 30 year present worth total generating

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[.j.g costs (in millions of ist year operation dollars).

Factors considered include:

capital costs; taxes; insurance; fuel, including the cost of disposing' of spent fuel or the waste products of fuel reprocessing;

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on cost projection computer codes (CONCEPT and OMSCT) developed at the lrr....

Oak Ridge National Laboratory as well as numerous independent studies l.;,:::

available in the literature.

In addition, the staff ex' presses total generating costs in levelized mills /kWh.

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These analyses require in assumption regarding the expected level of

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energy to.be generated by the facility.

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capture the sensitivity of cost of this assumption.

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QUESTION 6.

a)

In assessing the need for power, does the NRC accept

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the applicant's forecasted demand for bulk electric hie 6"f!

power?

b)

Are 1,oad management techniques considered as alternatives?

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Rate structure refinements as conservation incentives?

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d)

What reserve requirement is assumed for need determina-tion purposes?

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RESPONSE

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a)

No.

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In 1976, the staff initiated a research contract with the Oak Ridge EE National Laboratory titled, " Forecasting Electricity Demand by States in n

t,he United States on an Annual Basis." The intent of the project is to

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improve NRC's capability for assessing the need for power forecasts of appli. cants.

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4.=Te~f.orecisting model produced by this res~earch" effort has become, by

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far, the most important component in the staff's need for power analysis i.!!!=?

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as it provides a well structured and credible basis on which to evaluate

?'.75 the reasonableness of the applicant's projections of growth.

It has

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..4 already been well integrated into numerous environmental statements and

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licensing board hearings.

A testimony to the success of this research r."

. is the growing interest expressed by many state energy offices and state

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.public utility comissions, as well as the U.S. Department of Energy, in sis!#

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adopting this model in the discharge of their responsibilities.

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., _N Future. tasks associated with this research effort include

demand

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foreqast for utility service area; analysis of elasticities among regions;

=5f u1 analysis of' electricity costs; and forecast of generation capacity.

The

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{:l importance of these tasks cannot be understated.

With their completion',

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the NRC will not only possess a most reliable mechani.sm to forecast need 4!.5:{

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for capacity on a service area basis but also will have significantly

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advanced the state-of-the-art in econometric forecasting of electricity

=I' demand and our general understanding of the price-quantity response.

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b) and c) Load management techniques and rate structure refinements are

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treated within the need for pwer review as factors affecting the growth CX.1 n-in demand and thus to the extent that the NRC reviewer finds that they will diminish future growth they will, in turn, limit 'the need for new i.s. =

-capacity.

Even though the ~ staff may evaluate the likely impacts of load

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" management or rate restructure, the staff cannot require such actions.

Ef If we find that the state public utility commissions and utilities plan

. to institute any of these measures, then this is included in the NRC b.h EEE) need for power analysis.-

==me The staff has recently developed Environmental Standard Review Plans

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.(ESRP's) which provide guidance to the NRC reviewers charged with perform-

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ing the environmental. impact statement review.

The analysis procedure contained in the draft ESRp 8.2.2 (Factors Affecting Growth of Demand)

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contains the fol. lowing guidance on Price and Rate Structure:

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=fE Tfie reviewer will determine how and to what extent the applicant

.has considered price response in demand forecasts.

Where the

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applicant has developed and/or used an econometric model, the EEis reviewer will identify the applicant's price elasticities and M.5 fore' casted growthJ.ates for the price of electricity.

In addition,

. sEl the reviewer may obtain independent forecasts of growth in the real

"7 price of electricity.. These forecasts will be compared with the

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treatment price of the applicant's analyiis.

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The reviewer will consider alternative rate structures that would Et?...

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moderate load growth or reshape load curves.

The rate structures

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to be considered include peakload pr. icing, inverted rates, and flattened rates.

The reviewer will analyze the applicant's present

==E attempts and future plans to~ improve the system load factor via rate restructuring (e.g., higher tail rate during peak periods and' demand charges that are based-on maximum demand) and will estimate

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anticipated effects on annual electricity consumption and peakload demand.

- In add.ition,'other. load management measures that are expected to be in

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operation on the applicant's systems are evaluated as to their impact on.

i"' a demand and adju.stments are made.

For example, all interruptible load i+:-:: s contracts are deducted from the system's

.:ak demand before system

=d reliability measures are taken.

Similarly, if a utility has a program

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in which select appliances are periodically turned off by the utility in W

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an effort to curtail peak demand, the total impact on load is estimated i,jjji

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and peak demand is so reduced.

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d)

In all cases, the NRC staff will review filings by the Electric E;l.;

Reliability Council and Power Pools 'i which the applicant is a partici-

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pant to determine if the applicant's reliability standard is consistent hEgg

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with their criterion.

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=m Because of large differences in sizes of systems, system generating con-y;g figurations, and load duration curves, variations in acceptable reserve

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margins are frequently noted.

However, on average, the acceptable

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reserve. margin criteritwill fall within a 15% to 25% range which is s=

consistent with FERC's findings.

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OUESTION 7.

Does the NRC use -- or has it ever experimented with --

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"end-use energy analysis" as a means for determining need E

for power?

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. RESPONSE Demand

• forecasts are of course an integral part of the NRC's need for

i-power analysis.

The end-use energy analysis is one the staff is very

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much aware of and its progress is continually being monitored.

In T

. evaluating demand, the staff (1) develops its own independent forecast E"

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(see response to Sa); (2) systematically analyzes the forecasting method-ology (s) and assumptions employed by the applicant; and (3) utilizes

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o-her models that are geographically compatible with the service areas 1

under re. view.

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- Whereas-the staff's forecasting effort is econometric in nature (the research team involved in this forecasting effort has close interaction

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with those conducting end-use energy analyses in the residential, com-

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mercial, and industrial sectors), others will-on occasion utilize end-

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u'se energy analysis.

In general, the staff v'iews these models as method-

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When used by others, the staff will review the

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' assumptions embedded in these forecasts for reasonableness.

For example,

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projected average kWh consumption per end-use and saturation levels are liib checked against other independent sources in the literature.

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OUESTION 8.

Presuming theoretical determination that conservation

..sa programs or renewable energy efforts could more cost-F5 effectively meet the energy needs of a state or region,

.:=il has the NRC the authority or responsibility to refuse

===e-an application for a license? Under what provision of

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law? What" procedure for implementing such programs obtain in such a case?

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RESPONSE

i 55 In the N.RC's opinion the fact that certain measures can be theoretically

.5.:5 determined to be more cost-effective is not sufficient to refuse an application for a license.

In making demand evaluations, the staff must be rea'sonably sure that cus.tomers of electricity will adoot conservation

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measures in a timely manner and that end-use renewable energy sources

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are available -- so as to negate the need for-the proposed nuclear sa 35i=g addition.

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