bellefonte white paper

8/2/2019 Bellefonte White Paper

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BELLEFONTEUNIT1

TennesseeValleyAuthority

BellefonteUnit1OpportunityforanUnrealizedAsset

August2011


2/14

BellefonteUnit1Completion

Introduction

Witharenewedvisionofnationalleadershipinnuclearenergy,TVAislookingtotheunfinishedBellefonteproject.

The1,600acresitewithtwopartiallycompleteBabcock&WilcoxpressurizedwaterreactorsnearHollywoodand

Scottsboro,Alabama,remainsanunrealizedasset.

TVAhaswrestledwithBellefontesfatesinceconstruction,whichbeganin1974,wassuspendedin1988because

ofslowinggrowthinelectricitydemand.NowTVAsIntegratedResourcePlan,completedin2011,predictsmore

energycapacitywillbeneededbytheendofthedecade.TheIRPidentifiesnuclearastherighttechnologytomeet

thechallengewhilekeepingreliabilityhighandratescompetitive.Further,studiespointtothecompletionof

BellefonteUnit1asthepreferred,leastcostoption.

Withanoutputof1,260megawatts,BellefonteUnit1couldbethelargestreactorinTVAsnuclearfleet.Itwould

beazero

carbon

powerhouse

with

the

capacity

to

replace

acoal

fired

power

plant.

That

could

be

critically

importantas TVAtransitionstolowercoalutilizationunderamajorcleanairagreementwiththeEnvironmental

ProtectionAgencyandsetsitscoursetoleadthenationinlowcostandcleanerenergyby2020.

InAugust2011,theTVABoardofDirectorsapprovedthe$4.9billioncompletionofBellefonteUnit1inthe2018

2020timeframe.Thisdocumentreviewssomeoftheissuesconsideredbytheboardthatimpactedthatdecision.

Issues

PROS

Currentfacilities

already

address

aportion

of

the

NuclearRegulatorCommission'ssafetyrequirementsfromFukushima

Maintainsreliablepowertomeetincreaseddemands

AllowsTVAtoretireagingcoalplants

EnablesTVAtoachieveitsrenewedVision lowrates

Providesanewsourceofclean,safe,reliable,affordableenergy

Utilizesexistingassettodeliveranewnuclearplantata savingsofover$1.9billioncomparedtothenextbestnuclearalternative

Leveragesexperiencecompleting,restartingidledprojects(WattsBarUnits12,BrownFerryUnit1)

Createsjobs

Fewerairemissions

Hassupportfromlocal,regionalresidents

CONS

Publicconcerns

over

nuclear

safety

Regulatory/licensingissuesovercontructionpermit

FirsttimeU.S.licensingofB&W205reactor

PostJapanrequirements

Statutorydebtlimitandcostofproject

Ageofexistinginfrastructure

Longtermmanagmentofnuclearwaste


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BellefonteUnit1 3

TennesseeValleyAuthority Bellefonte Unit1Completion

BackgroundInformation

TheBellefonteProjectbeganinthe1970saspartofTVAsplantomeetfuturedemandwithnucleargeneration.At

thetime,electricitydemandwasforecasttorise7percentayear.Butprojecteddemandfelldramaticallyasthe

economyslowedinthe1980s,andTVAfounditselfwithmorebaseloadunderconstructionthanitcoulduse.

Nuclearprojectsweredeferred,includingBellefonteUnit2in1985andBellefonteUnit1in1988.Whendemand

revivedinthe1990s,TVAchosetofinishWattsBarUnit1ratherthanBellefonteUnit1largelybecauseofits

similarityindesignandoperationtoSequoyah,thesisterplanttoWattsBar.

In1994,TVAsaiditwouldnotcompleteBellefonteUnit1withoutafinancialpartner.Thisbeganadecadelong

searchforanewoptionforBellefonteasacombinedcylenaturalgasplant,anationaldefensetritiumplantforthe

DepartmentofEnergyoracoalgasificationplant.In2006,TVAaskedtheNuclearRegulatoryCommissionto

withdrawitsconstructionpermitforBellefonte,transferredorsoldsome$60millioninpartsandequipmentover

thenextfewyears,andofferedthesitetotheNuStartutilityconsortiumasthemodelorreferencesiteforanew

combinedconstructionandoperatinglicenseforanewreactordesign,theWestinghouseAP(AdvancedPassive)

1000. AlthoughSouthernCompanysPlantVogtlenuclearsiteinGeorgianowservesthisNuStartrole,TVAcould

maintaintheoptionofeventuallybuildingoneortwoAP1000sattheBellefontesite,asBellefonteUnits3and4.

Inearly2008,withcommoditypricesrising,includingthecostofconstructionmaterials,TVArevivedinterestin

completingBellefontesunfinishedoriginalreactors. AtTVAsrequest,theNuclearRegulatoryCommission

reinstatedBellefontesconstructionpermit.SeveralindepthstudieslaterconfirmedBellefontescontinuing

viabilityandpotentialasamodernnuclearfacility.BellefonteUnit1wasabout88percentfinishedwhentheunit

wasplacedindeferredstatusin1988.Thoughequipmentupgrades,updatesandreplacementsareneeded,

Bellefonte

Unit

1s

infrastructure

is

sound

and

the

facility

is

considered

about

55

percent

complete

today.

1974....ConstructionStarted Nuclearexpansionprogram

1985....ConstructionSlowed Slowereconomy/projectedloadgrowthdropped

1988....PlantDeferred Longonbaseloadpower

1992....CompletionEngineeringRestarted Maintainedunderassetpreservationprogram

1993....NRCConstructionLicenseReactivated Maintainedunderassetpreservationprogram

1994....CompletionEngineeringCeased BothWattsBarandBellefonteweregoodoptions didnotneedboth

2005....Layup&PreservationCeased Collapseofpowermarketscontinuedtoevaluateoptions

2006....ConstructionPermitsWithdrawn Duetopromiseofalower costoptionwithAP1000 *in2007,TVAdecidedtofinishWattsBar

2009....ConstructionPermitsReinstated FivekeystudiesdeterminedthatBellefontewasthebetteroptionthantheAP1000

BellefonteTimeline

TVAhada10yearperiodofnorate

increasesbetweenOct1987andOct1997


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TheNeedforNewEnergy

TVAsIntegratedResourcePlan(IRP)identifiedaneedfor7,500megawattsofadditionalcapacityby20182020to

maintainsystemreliability.NuclearexpansionispresentinamajorityoftheIRPssuggestedpoweroptions.

AlthoughtherecessionhasreducedelectricitygrowthintheTennesseeValleytoabout1percentannually,TVAhas

aneedfornewbaseloadgenerationwiththeretirementof18agingcoalfiredunitsbytheendof2017underthe

EPAagreement,andtwoadditionalunitssubsequentlyidentifiedforidlingatJohnSevierFossilPlantbytheendof

2012. ThiswouldmarkTVAsfirstcoalplantretirementsincetheWattsBarSteamPlantleftservicein1982.

BellefonteUnit1couldreplacetheequivalentoffiveto10coalunits,therebyreducingTVAssmog,hazeandacid

raincontributingemissionsbynearly11milliontonsofcarbondioxide,34,000tonsofsulfurdioxide,900tonsof

nitrogenoxideand300poundsofmercuryannually.

CapacityShortfall2010 2020

Overitsfull20yearhorizon,theIRPidentifiesupto5,900megawattsofnewnucleargenerationby2029.That

meansevenwithadditionalenergyefficiency,naturalgas,renewablesandhydropumpedstorage,TVAcouldstill

needuptothreenewreactors,includingtheWattsBarUnit2reactornowexpectedtocomeonlinein2013.

FinishingBellefonteUnit1wouldmeetasubstantialportionofTVAsfuturegeneratingneedsatalowercostper

installedkilowatt.ADetailedScoping,EstimatingandPlanningstudyontheBellefontesitecompletedin2010

estimatedconstruction

costs

of

$3,120

to

$3,360

per

kilowatt

to

complete

the

Bellefonte

Unit

1reactor,

compared

with$3,300to$4,900perkilowatttobuildanewAP1000,asBellefonteUnit3,expressedin2010dollars.TVA

expectstosavemorethan$1.5billionbycompletingBellefonteUnit1ratherthanbuildinganAP1000,asomewhat

smallerreactorwhosefinaldesignrequirementsarestillunderNRCreview.

Asshowninthechartsbelow,Bellefonte(oneortwounits)wasselectedin33of48(69percent)IRPcasestudies.

In82percentofthosecases,thebestinservicedatefellbetween2018and2020. Theassumptionsunderwhich

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2012 2013 2014 2015 2016 2017 2018 2019 2020

PlannedEEDR Bellefonte1 CapacityGap CapacityNeedMW


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BellefonteUnit1 5


Bellefontewasapreferredassetsupportstherobustnessofthepotentialvalueoflowcostnuclearpowerina

numberofpossiblefutures.

BellefontesSupplementalEnvironmentalImpactStatement(SEIS)consideredstudiesthatsuggestedenergy

efficiencycouldplayabiggerroleinTVAspowerportfolio.However,thereportssaidmajortechnicalandpolicy

changesmaybeneccesary.InTVAsservicearea,thelevelofparticipationandinvestmentbydistributorcustomers

wouldalsobeanuncertainty.TheSEISconcludedthatsubstantialpolicy,legislativeandbehavioralchangesmust

occurbeforeTVAcanrelyextensivelyondependablecapacityfromconservationmeasuresasasubstituteresource

forbalancinggenerationandload.

Inaddition,theIRPsfinalplanningdirectionmovesTVAtowardsaportfoliocomprisedofbothEnergy

Efficiency/DemandResponseandnuclear.TVAismovingforwardwithanexpandeduseofEnergy

Efficiency/DemandResponse

within

its

capacity

plan.

Over

the

next

decade,

TVAs

generating

portfolio

will

be

a

morediverseandbalancedmixwithnuclear,coal,gasandrenewableresourceseachaccountingforabouta

quarterofTVAstotalgeneratingassets,consistentwithTVAsvisionofcleanerairandmissiontostablerates.

Renewables

1880%

Hydro

6,19515%

Nuclear

10,71926%

Coal

9,24423%

Gas

8,60821%

Purchases

2,1025%

EE/DR

3,96310%

GenerationMixby2022

61%

3%

18%

18%

BLN1InServiceYearWhenSelected

2 01 8 2 0 19 2 02 0 2 02 2

2018- 2020

2022

18%

82%

Bellefonte Unit 1 In-Service Year Was Between

2018-2020 82 Percent of Time When Selected

33

15

0

5

10

15

20

25

30

35

Bellefonte1or2Units NoNuclearUnits

Frequencyof

Nuclear

Unit

Selection

(outof48IRPcasesrun)


6/14

TheSEISindicatedthatcountingtooheavilyonsomerenewableenergysources,suchaswindandsolar,wouldbe

impracticalbecauseof intermittentreliabilityandlimitedenergystorage.InstallationsequaltoaBellefonteUnit1

reactoralsowouldrequireahugefootprint.ThereportestimatedaBellefontesizedsolarpowersystemwould

require193solararraysof50megawattseachcovering89squaremiles.Forwind,some2,783turbineswouldbe

requiredspreadoutover436squaremiles,morethanhalfthesizeoftheGreatSmokyMountainsNationalPark.

TVAhasrecentlycontractedforupwardsof1350MWsofwindenergyfromtheMidwestandGreatPlainsinan

efforttohaveabalancedportfolio.

EngineeringIntegrity

TheDesign,Scoping,EstimatingandPlanning(DSEP)studyontheBellefontesite,completedin2010aftersome

150,000laborhoursandhavinggeneratedsome8,500pagesofdetailedreports,foundthematerialconditionof

theplantsystem,structuresandcomponentsareconsistentwiththatexpectedforaplantthathasbeendeferred

forover20years.Manycomponentswillneedtobereplacedorrefurbishedtomeetdesignorperformance

standards.Usingallknownavailabletechnologiesvisualinspection,coredrilling,ultrasoundandacoustic

soundingTVAinvestigatedgroundwaterintrusionatBellefonteUnit1,andfoundnoindicationofcompromiseor

degradationto

the

foundation.

The

containment

building

had

no

water

intrusion

at

all.

Theposttensioningstructuralsupportforthecontainmentbuildingwasevaluatedafteroneofthe185vertical

steelcabletendonsthatanchorthecontainmentinbedrookcameloosein2009. Arootcauseanalysisfound

stresscorrosioncrackinginthetendoncouplingcausedbymechanicalgreasethathadbeencontaminatedwith

sulfites,whichintroducedmoisture.Inspectionsindicatedthisproblemwasisolatedtotheonecoupling.Overall,

theDSEPreportconcluded:Theplantisstructurallysound;andfoundnoengineeringconcernsthatwould

preventtheBellefonteprojectfromproceedingforwardtocompletion.

TVAalsoevaluateddesignandstructuralissuesthatledtocontainmentwallgappingordelaminating atthe

Crystal

River

Nuclear

Plant

in

Florida.

TVA

determined

Bellefonte

Unit

1s

containment,

strength

of

concrete

and

greaterdensityofrebarminimizesthepossibilityofsimilarproblemsatBellefonte.Additionally,unlikeatCrystal

RiverUnit3,steamgeneratorscanberemovedandreplacedatBellefonteUnit1throughahatch,eliminatingthe

needtocutaholeinthecontainment.

TVAdeterminedtheexistingvalueofBellefonteUnit1versusnewnuclearconstructionforthesamecapacityis

$1.9billion.Thisincludeselectrical,piping,valves,rebarandsteel,concreteandsiteinfrastructure. AfterTVA

terminatedtheBellefonteconstructionpermitsin2006,someequipmentwassoldortransferredtootherTVA

facilitiesaspartofanassetrecoveryeffort.Thisincludedsteamgenerators,severalfeedwaterheaters,large

pumpsandmotors,demineralizedwaterandcondensatestoragetanks,maincondensertubesandsomepiping

andvalves

in

the

turbine

building.

In

2008,

TVA

contracted

astudy

that

determined

what

was

removed

and

where

ithadbeenlocated.TVAhasmaintainedallqualityassurancerecordsfortheentirelifeoftheplantinanonsite,

climatecontrolledvaultforuseinfuturelicensing.


7/14

BellefonteUnit1 7


BellefonteExistingFacilities

Essentially,alloftheexistingpowerplantbuildingscanbeused,includingacoolingtower,alongwiththereactor

vesselandinternals,piping,cabletrays,instrumenttubingandmuchoftheinstalledelectricalcable.Everyplant

systemwouldbeevaluatedandequipmentreplacedorrefurbishedtolikenewcondition.Theageofthebase

facilitiesisnotexpectedtolimitthe40yearoperatinglicensingperiodforthereactor.Itisfurtheranticipatedthat

theunitcouldoperateforupto60yearsfollowingfutureevaluationsinaccordancewithNRCslicenserenewal

program.

Componentsremoved

or

sold

during

the

asset

recovery

project

would

be

replaced

at

acost

of

about

$390

million.

Overhalfofthisamountwouldbefornewstreamgenerators.Thesereplacementsarepartofsome$2.1billionin

newequipmenttomeetcontemporarysafetymarginsandindustryrequirements.Majorareasforinvestment

wouldincludeamoderncontrolroom,newsteamgenerators,aredesignedmainturbine,digitalinstrumentation

andcontrols,maintransformersandswitchyard,andenergyefficientlighting,plumbingandinsulation.

RespondingtoFukushima

AnNRCtaskforcehasrecommendedsafetyimprovementsforU.S.nuclearplantsinresponsetotheearthquake

andtsunamithatcrippledtheFukushimanuclearplantinJapaninMarch2011.Therecommendationsinclude

requiringplants

to

have

the

capability

to

cope

with

blackouts

of

up

to

72

hours,

backup

systems

to

assure

cooling

ofspentfuelrodsandsufficientmarginsforbeyonddesigneventsinvolvingearthquakesandflooding.

TheBellefonteplantalreadyisarobustlydesignedandconstructedfacilitywithmanyadvanceddesignfeatures

installedorplannedtobeinstalledtocopewithnaturaldisasters,includingFukushimatypeevents,maximum

floodsanddamfailures.


8/14

NuclearGenerationDevelopmentandConstruction9

ContainmentDesign

TheBellefonteUnit1reactorbuildingconsistsofaposttensionedconcreteprimarycontanmentstructureanda

freestandingreinforcedconcretesecondarycontainmentstructureorshieldbuilding.Theprimarycontainment,

whichhousesthereactorpowerconversionandcoolantsystems,hasaleaktightsteelliner.Thisissurroundedby

afreestandingsecondarycontainmentcomposedofareinforcedconcreteshell.Theprimarycontainmentcan

withstandpressuresof50poundspersquareinchassociatedwithalossofcoolantaccident.Thesecondary

containmentisdesignedtoresistvariouscombinationsofsevereseismicactivity,highesttornadowindvelocities,

externalmissilesandwaterpressurefromnormalandaccidentconditions.

AdditionalFukushimarelatedmodifications,whichcouldbeaddedtoBellefonteUnit1asitiscompletedrather

thanretrofitted

later

as

with

existing

nuclear

plants,

would

address

the

loss

of

AC

power

by

installing

backup

air

cooledandwatercooleddieselgenerators,enhancementstomaintainDCpowertosafelyshutdownequipment

andinstrumentation, anadditionalDCpowerpumptomaintainsealcooling,andanadditionalpumpwith

independentwatersupplyandheatexchangertoaddwatertospentthefuelpoolandmaintaincooling.

UsedFuelManagement

Bellefonteisdesignedtostoredischargedusednuclearfuelonsiteinspentfuelpoolsforaminimumoffiveyears

(theaveragetimeforspentfueltocoolbeforeitcanbeplacedindrycaskstorage)anduptoapproximately15

yearsdependingonhowquicklythepoolsarefilled.TheBellefontefuelpoolstoragedesignisperhapsthesafestin

thenation

as

the

independent

pools

for

each

unit

are

protected

within

separate

reinforced

concrete

structures

capableofwithstandingearthquakes,tornadoesandexplosions. Bellefontesusedfuelisexpectedtobestored

eitheronsiteoroffsiteusingdrycaskstoragetechnologyafteritisremovedfromthespentfuelpool. Drycask

storageisanestablishedtechnologyinwhichusedfuelisstoredinsteelcanisters.Thismethod,whichreliesonair

tocooltheusedfuel,canstoreusedfuelformanydecadesifneeded.

Finaldispositionofusedfuelremainsanunresolvednationalpolicyissue.Thereareseveralsolutionsavailable

todaybutsustainedpoliticalandpolicysupportforanyofthemhasprovenelusive.Ultimatedisposalforatleasta

ContainmentDesign


9/14

BellefonteUnit1 9


portionofthespentfuelwillrequireageologicalrepository.Afteryearsofresearchandlicensingpreparation,

CongresseliminatedfundingforageologicrepositoryatYuccaMountaininNevada.Intheinterim,theNRCand

others,suchastheMassachusettsInstituteofTechnologyandmostrecentlytheBlueRibbonCommission,which

wasappointed

by

the

administration

to

review

the

national

policy

on

used

fuel,

have

concluded

that

fuel

can

be

safelystoredindrycasksfor100ormoreyears,thatthereistimetodevelopabettersolutionandthatasolution

canbeavailablebythetimeneeded.

TVAandotherscontinuetosupportthereprocessingofspentnuclearfuel,whichallowsmuchoftheremaining

energyvalueinthefueltobeusedagainandatthesametimereducethevolumeofremainingwasterequiring

disposal.Manycountries,includingFrance,Russia,Britain,Japan,ChinaandIndia,arealreadyreprocessingspent

fuelorareinthefinalprocessofitsimplementation.

Thevolumeofusednuclearfuelthatmustbemanagedisactuallyrelativelysmall.TheNuclearEnergyInstitute

(NEI)estimates

the

total

volume

of

spent

nuclear

fuel

from

all

of

the

commercial

reactors

in

the

United

States

since

theindustrybeganinthe1950s(about66,000metrictons)wouldfillonefootballfieldaboutsevenyardsdeep.

InJuly2011,theBlueRibbonCommissionissueddraftrecommendations,including:

Aconsentbasedapproachtositinganddevelopingnuclearwastemanagementanddisposalfacilities.

Aneworganizationtodevelopandimplementaprogramforthetransportation,storageanddisposalofnuclearwaste.ThishasbeenlooselycallFedCorpinsomepreviousdraftlegislationand

hasbeenmodeledonastructuresimilarinconcepttoTVA.

AssuredaccesstotheNuclearWasteFundandtoannualnuclearwastefeepayments. Utilitiespay0.1

cents/kwh

for

every

kwh

generated

from

nuclear

plants

into

this

fund

each

year.

Promptdevelopmentofoneormorepermanentdeepgeologicalfacilities. Prompteffortstodeveloponeormorecentralinterimstoragefacilities.

LicensingandLegalIssues

BellefontesBabcock&Wilcox205pressurizedwaterreactorshaveneverbeenlicensedintheUnitedStates.The

205referstothe205fuelassembliesinthereactorcore. Four205plantswereordered:BellefonteUnits12,

WashingtonNuclearUnit1andtheMulheimKarlichplantinGermany.OnlytheGermanplantwasfinished.It

operatedatahighcapacity(88percent)for13months,19871988,butclosedattheendofitsfirstfuelcycleover

politicaland

administrative

issues.

TheB&W205isanextgenerationdesignbasedonthesmallerBabcock&Wilcox177designnowusedatseven

licensednuclearunitsintheUnitedStates.TVAcancitetheexperiencesofthosesimilarplants,whichoperatedat

over92percentcapacitybetween20042009,andtheGermanplantinitslicenseapplication.


10/14

TheageofBellefontesbasefacilitiesisnotexpectedtolimitthe40yearNRClicensingperiod.Bellefonteisthe

sameageasWattsBarandyoungerthanBrownsFerry,Sequoyahandmostotherreactorsnowoperatingsafely

andreliablyintheUnitesStates.OfalltheU.S.operatingreactorsthathaveappliedfora20yearextensiontotheir

original40yearlicense,norequestshavebeendenied.Seventyoneofthecountrys104reactorshavebeen

grantedanextension,indicatingthatfacilityagewouldnotsignificantlyinfluencethereasonablelifeexpectancyfo

Bellefonte.

ApetitionispendingbeforetheU.S.CourtofAppealsinWashington,D.C.,that,ifsuccessful,couldrequireTVAto

obtainnewconstructionpermitsforBellefonte.TheconstructionpermitforBellefonteUnit1wasissuedin1974

andhasbeenextendedseveraltimes.AtTVAsrequest,theNRCwithdrewthepermitin2006andthenreinstated

itatTVAsrequestin2009.PetitionersclaimTVAmustnowapplyforanewconstructionpermit. NRC

commissionersfoundbya21votepreviouslythattheNRChadauthorityundertheAtomicEnergyActtoreinstate

Bellefontesoriginalpermits.

TheexistingconstructionpermitforBellefonteUnit1expiresonOctober1,2011.TVAhasappliedforanextension

of

the

permit

until

2020.

Under

NRC

regulations,

TVAs

timely

request

for

an

extension

allows

the

permit

to

remainineffectuntiltheNRCcanactontheextension.

ExperienceatOtherSites

TVAhasshownwithWattsBarUnit1andBrownsFerryUnit1thatitcansuccessfullycompleteandoperatea

nuclearreactorafteranextendedidlingordeferral.Lessonslearnedfromtheseexperienceswouldbeappliedto

BellefonteUnit1.Broadly,theyincludedevelopingtheregulatoryframeworkforlicensing,integratedscheduling,

projectcontrols, completedengineeringpriortobeginningconstruction,hiringandacultureofcollaboration

amonganexpectedconstructionworkforceofupto2,800employees.

Thevalue

of

those

projects

is

clear.

Browns

Ferry

Unit

1,

which

returned

to

service

in

2007

after

a$1.9

billion

investment,isexpectedtoachievepaybackby2017,evenwhencomparedwithrecentlyreducednaturalgas

prices.Oncetheprojecthitsitspaybackperiod,BrownsFerryUnit1isexpectedtosavecustomersabout$22

millionpermonthinavoidednaturalgaspowerpurchases.Overitslifetime(assuminganother30yearsof

operation)thesavingsfromBrownsFerryUnit1couldamountto$660million.

Since1997,ayearafterbecomingthelastnewnuclearplanttocomeonlineintheUnitedStates,WattsBarUnit1

hasoperatedatanaveragecapacityof89percent.TheBrownsFerrystationhasaveraged90percentoverthe

sameperiod.AndtheSequoyahplanthasoperatedat91percent.TheaveragefortheentireU.S.nuclearindustry

was87percentduring19972010.

Currently,TVAsnuclearreactorsrepresentafifthofTVAsgeneratingcapacityyetproduceathirdofTVAs

electricity.Thisindicatesthevalueofnuclearscontinuous,24/7baseloadcontributiontoTVA.

ComparingAlternatives

VariousalternativestoBellefonteUnit1wereconsideredindetailintheBellefonteSupplementalEnvironmental

ImpactStatementandtheIntegratedResourcePlan.Insummary,forlargebaseloadpowerneedstherearethree

alternatives:nuclear,naturalgascombinedcycleandcoal.Sometypesofenergyefficiencyimprovementscan


11/14

BellefonteUnit1 11


reducepowerinawaythatoffsetsbaseloadneeds,butEnergyEfficiency/DemandResponseisbetterappliedto

mediumandpeakingenergyreductions.

Nucleargenerally

costs

more

to

build

but

less

to

operate

than

the

other

baseload

energy

sources

coal

and

naturalgas.Nuclearalsoproducesnocarbonemissions,whichcarryuncertainregulatorycostsinthefuture.A

combinedcyclegasplantwouldbethenextbestalternativetoBellefonteUnit1.Butcombinedcyclegasplants

aresubjecttogreaterfuelpricevolatilityand,thoughcleanerthancoal,stillreleasesignificantlymoregreenhouse

gasemissionsthananuclearplant.Reliabilityofcombinedcyclegasisgood,butnuclearhasproventobebetter.A

combinedcyclegasplantwouldonlydispatchabout60percentofthetimebasedonforecastedmarketpricesover

thenext10to15years.TVAsnuclearreactorshavedemonstratedcapacitycloseto90percent.Acombinedcycle

gasplantmayneedtobereplacedin30years.BellefonteUnit1isexpectedtobeabletooperateforatleast60

years.

TVAremains

interested

in

other

nuclear

generation

designs.

But

TVA

determined

that

completing

Bellefonte

Unit

1

offersacostandschedulingadvantageoveranAP1000.TVAestimatesBellefonteUnit1couldbecompletedfor

about$4.9billionin96to108months.BuildinganAP1000wouldcostabout$6.3billionandrequire110to122

months.TheAP1000wouldalsobeabout140megawattssmallerthantheuprateddesignplannedforBellefonte

Unit1.

SouthernCompanyanditspartnershavesaidthetwoAP1000reactorstheyarebuildingatSouthernsVogtlesite

nearAugusta,Ga.,willcost$14billion,includinginterest. (Theconsortiumhasreceived$8.3billioninnuclearloan

guaranteesfromtheU.S.DepartmentofEnergy. TVAisnoteligibleforguaranteesduetoitsstatusasafederal

agency.)Althoughconstructionhasntbegun,thereareconcernsaboutpotentialscheduledelaysandcost

increases.In

aJune

2011

report,

William

Jacobs,

anuclear

engineer

appointed

by

the

Georgia

Public

Service

CommissiontomonitortheVogtleproject,saidunresolveddesigncertificationissueswiththeAP1000reactorsare

amongseveralfactorsthatcouldinflatecostsandcreateconstructiondelays.

MitigationofKeyMarketandRegulatoryRisks

AsignificantbenefittoBellefonteUnit1isitsabilitytomitigatecertainkeymarketandregulatoryrisks.Risk

reductionforapowerportfoliothatincludesBellefonteUnit1isprimarilyafunctionof(1)lessexposuretomore

volatilefossilfuelcosts,aswellas(2)potentialcarbonemissionscoststhatwouldnegativelyimpactpredominantly

fossilbasedpowerportfolioswithbasicallynomarketinstrumentsforhedging.Asapartofitsintensiveand

detailedIRP

process,

and

as

part

of

specific

business

case

assessments,

TVA

analyzed

numerous

risks,

including:

LoadgrowthTVAanalyzedtherelativevalueofexpansionatBellefonteevenwhenloadsaredramaticallylowerthanplanned.IntheIRP,nuclearexpansionwasindicatedinmostportfoliosexceptthose

characterizedbyflattonegativeloadgrowthrates,oftenwithnoCO2regulation.

NaturalgaspricesNuclearexpansionatBellefonteislowercosteveninscenarioswherenaturalgaspricesarelowerthanTVAsforecast.


12/14

CO2regulationIfacostforemittingcarbonisincluded,productioncostsforfossilpowerwillrise,makingnuclearpoweranevenmoreattractivesourceofelectricity.

ConstructioncostsUndercurrentforecasts,constructioncostswouldneedtoincreasebyapproximately30percentbeforecompletingtheBellefonteunitwouldhavenegativerateimplicationscomparedwiththe

nextbestalternative.

Financials

DeliveringreliableelectricityatthelowestratesfeasibleispartofTVAsstatutoryimperativeundertheTVAAct.

ThefinancialchallengeforTVAwouldbetocompleteBellefonteUnit1withoutasubstantialrateimpactand

withoutexceedingTVAs$30billionstatutorydebtlimitsetbyCongress.TVAsfinancialguidingprinciplesassume

thatcapitalinvestmentswillberecoveredoverthelifetimeoftheassetsandfinancedwithnewdebtratherthan

revenues,orthroughalternativefinancingthatdoesnotcountagainstthestatutorydebtlimit.Alternative

financinghasincludedtheuseofsaleleasebacks,prepaymentsofenergybycustomersandotherarrangements.

TVAcurrentlyhasabout$24billioninbondsoutstanding.

RateImpact

AnanalysisperformedaspartofTVAsroutineplanningprocessessupportscompletionofBellefonteUnit1

overagasalternative(thenextleastcostoption)basedontheimpactonrevenuerequirementsexpressedin

termsofrates,includingcostrecoveryofcapital,financing,andoperatingandmaintenancecosts.TheTVA

staffestablishedthathavingBellefonteintheportfolioprovidesforloweraveragerates.Theanalysisalso

showsthatforthefirstfewyearsoftheBellefonteproject,debt,interestandO&Mcostsaregreaterthanfuel

andCO2savings.Butby2023,thistrendreversesandratepressuresdecline.

LongtermtermcostsareimprovedwithBellefontecomparedtootherbaseloadoptionswhenthetotalcosts

arecompared.ThechartbelowcomparesBellefonteUnit1costsagainstother nuclearalternativesthestillunlicensedAP1000reactorandthemPowerSmallModularReactor(SMR)concept aswellascoaland

naturalgascombinedcycleastheywouldbeforecastin2020.Thenaturalgascombinedcycleisshownwith

botha50percentand90percentcapacityfactortoshowthedifferenceincostdependingontheamountof

productionachieved.Overthenextdecade,TVAmodelsshowthistypeofgenerationmightonlybecalledon

toproducepower60to70percentofthetimebasedontheincrementalcostofthefuel.Boththecoaland

thenaturalgascostareshownwiththepotentialimpactofCO2costs.In2020,theCO2costisforecasttobe

$16/tonrisingto$27/tonlaterthatdecade.Also,shownonthischartisthepotentialrangeforfurthercost

escalationswiththeAP1000newreactor,basedonreportsfromtheVogtleprojectinGeorgia.


13/14

BellefonteUnit1 13


TotalCost FY2020/kWh

0

2

4

6

8

10

12

Bellefonte1&2

Average2520MWe

Bellefonte1

1260MWe

AP1000

Single1120MWe

mPowerSMR

TwoTwinpacks

576MWe

Supercritical

CoalNoCCS

NaturalGas

Comb.Cycle

$6.50/mmbtu

cents/kWh

6.9cents/kWh

AccountingConsiderations

InJuly2005,theTVABoardapprovedtheamortizationandinclusionintoratesofTVAs$3.9billioninvestmentin

thedeferrednucleargenerationunitsatBellefonteNuclearPlantovera10yearrecoveryperiodbeginningin2006.

Theamountisincludedasacurrentregulatoryassetonthebalancesheet.

AsoftheendofFY2011,TVAwillhaveamortized$2.3billionoftheregulatoryassetforBellefonte,leaving$1.6

billiononthebalancesheet.Onebilliondollarsoftheremainingregulatoryassetbalancewillcontinuetobe

amortizedwhiletheremaining$600millionwillbetransferredtocompletedplantwhentheconstructionis

finished.Uponcommercialoperation,Bellefontewillbedepreciatedoveritsusefullife.


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SupportforNuclearPower

TVAandnuclearpowerisviewedfavorablybythecommunitiessurroundingitsnuclearplantsaccordingtorecent

publicopinionsurveys.AlthoughtheBellefontecommunityhasbeensubjecttoarollercoasterrideduetothe

numerousstartsandstopsofworktocompletetheplantsincethemid1980s,electedofficialsandbusiness

leadershavesupportedTVAanditseffortstomakeuseoftheexistingfacilities.

Asurveyofresidentswithinthe10mileradiusofBellefontefindsalargemajoritysupportscompletingtheplant.

Thesurveyalsofindsfavorableattitudestowardnuclearenergyandthenearestoperatingnuclearpowerplant.

Thesurveyof300fulltimeresidentslivinginthevicinityoftheBellefontesitewasconductedJune1618,2011.It

waspartofanationwidepublicopinionsurveythatexcludedresponsesfromhouseholdsinwhichsomeone

workedatanuclearplant.

ConcerningBellefonteUnit1completion,86percentfavoritand13percentareopposed.Ofthese,66percent

stronglyfavorcompletionand8percentstronglyopposeit.Themainreasonsinfavor:jobsandtheeconomy,the

needforpowerandtoplanforthefuture,andaffordableelectricity.Themainreasonagainst:concernabout

safety.

J.D.Powers2011ElectricUtilityResidentialCustomerSatisfactionStudyalsofoundmajoritysupportfornuclear

energy.Thesurvey,basedonresponsesfrommorethan98,000onlineinterviewsconductedfromJuly2010

throughMay2011,found57percentofcustomerssupportbuildingnuclearpowerplantsintheUnitedStates.

AmongthoseawareoftherecentnuclearcrisisinJapan,supportwasevenhigherat60percent.Threeoutoffour

supportersofnuclearcitedthebenefitofreducingdependenceonforeignoil.Thesurveyfound70percentof

customerslivingwithin50milesofanuclearplantsupportnuclearenergy.

Conclusion

TheBellefonte

Unit

1project

has

been

thoroughly

evaluated

for

over

two

years

with

every

evaluation,

including

theIRP,concludingBellefonteUnit1wouldbethebetterchoiceforcapacitybetween20182020.Thisisanoption

thatwouldofferfewerairemissions,couldreplaceretiringcoalfiredbaseloadgenerationandwouldhaveminimal

newenvironmentalimpactsonanexistingsite.Itcouldtakeadvantageofnearly$2billioninunrealizedassetvalue

atthesite,helptheregionaleconomybycreating2,800constructionjobsand650permanentjobs,andprovidea

newsourceofreliable,lowcostpowerfortheTennesseeValley.

bellefonte white paper

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