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System 80+ nuclear facility on DOE's Savannah River Site, that would sell electricity and sell services to the government (tritium production and plutonium disposition). By locating the facility on a government site and by selling services to the government, in addition to electricity sales, the private venture would be economically viable. In fact, it is the most viable approach for deploying new ALWRs in the U.S. in the near future. Unfortunately, DOE has been unwilling to seriously consider our privatization proposal -- which is described below.

Tritium Production and Plutonium Disposition

ABB Combustion Engineering, has teamed with seven other companies and proposed a plan to the Department of Energy for the deployment of a privatized multipurpose reactor facility on DOE's Savannah River Site. Our team includes several other large engineering companies -- in particular, Stone & Webster Engineering Corporation, Duke Engineering & Services, Raytheon Engineers & Constructors, and BNFL, Inc. We originally developed an interest in this concept in late 1992, when Congress requested that DOE consider the possibility of a multipurpose reactor that could (1) produce tritium, (2) consume excess weapons plutonium as fuel, and (3) generate electricity, as a way to offset the government's costs. We felt that our System 80+ ALWR design (the same one that has been undergoing NRC review for the past decade, as part of DOE'S ALWR program) was ideally suited for such a mission -- especially since our design already included features needed for consumption of plutonium fuel. Since we were nearing the end of the review process at the NRC and were about to begin bidding the design as a fixed price turnkey offer overseas, we felt that we would be in a unique position to allow the project to proceed quickly and, very importantiy, to be privatized. Not surprisingly, the National Academy of Sciences' reports on plutonium disposition identify our System 80+ design as the most efficient and least-cost reactor model available for disposition of excess weapons plutonium, if a new reactor were to be used.

In March 1994 we submitted to DOE a Program Plan for organizing a consortium that would privately finance, build, own, and operate the multipurpose reactor facility on DOE's Savannah River Site. The facility would consist of two System 80+ standardized units, along with a fuel manufacturing building. The consortium would be formed as an Independent Power Producer that would contract to sell electricity to utilities throughout the Southeastern U.S. and contract with DOE to provide two services: irradiation of tritium-producing targets and disposition of excess weapons plutonium, by consuming it as fuel. Thus, DOE would only have to purchase the services that it needs, rather than purchase and operate the entire facility. Besides minimizing the government's costs, this has the distinct advantage that it allows the government to avoid billions of dollars in outlays to build new facilities for production of tritium and disposition of plutonium over the next ten years. Instead, the engineering, licensing, and construction would be done with private financing. DOE would then begin paying fees for services rendered, after the facility goes operational. Based on our initial cost estimates to build and operate the multipurpose reactor facility and our market analysis of future electricity prices in the southeastern U.S., we estimate that the electricity sales would cover about 90% of the costs. The remainder would be charged to DOE for the services that it receives. Since the plutonium disposition mission can be well defined upfront, before DOE has to make contractual commitments, we proposed that DOE pay a fixed annual fee for disposition of excess weapons plutonium -- currently estimated at $78 million per year in constant 1995 dollars.

Since the long term needs for tritium production are not as easily defined, and may be subject to
change, we proposed that DOE pay a variable annual fee for irradiating targets. The fee would
cover lost electricity sales, if any, when tritium is being produced. To produce tritium at the rate
of 3/8 of the 1988 goal (DOE's current upper limit estimate), we estimate the variable fee could
be as high as $53 million per year. However, if no tritium were being produced, then no fee
would be have to be paid. This gives DOE the maximum flexibility in contracting for the
service. Compared to the alternative of DOE building a new dedicated facility for tritium (e.g.,
the accelerator), our approach avoids the risk that billions of dollars might be spent to build a
facility and then later find that it is no longer needed, or is incorrectly sized.
Our Plan proposes that the initial effort to organize the project and establish power sales
agreements be paid by DOE. At the end of that period, there would be a financial closing and the
privatized project would then proceed, without the need for DOE funding until the facility goes
operational and services are being provided. We would pay back the initial DOE funding, if
DOE agrees to go forward with implementation of the project. The requirement that DOE pay
the initial funding before the project goes forward recognizes the reality that many major DOE
initiatives are subject to changing political and world events, which are outside the control of the
our team.

In September 1995, we submitted an Alternate Plan to DOE -- to address the Department's concerns about the difficulty in establishing long term power sales agreements with utilities. The Alternate Plan focuses upon the use of a single System 80+ reactor, which dramatically reduces the amount of private capital that must be raised and the amount of electricity that must be sold. The Alternate Plan also uses a greatly simplified method of selling electricity from the plant, by using a power marketer and selling at the market prices for electricity, when it is generated. This will increase uncertainty in electricity revenues, which would then have to be borne by the consortium and the federal government; however, it will assure that the effort to launch the private venture will succeed. Although we still believe that our original March 1994 Program Plan is achievable and in the government's best interest, we feel that the Alternate Plan represents a fall-back scenario that assures a successful outcome.

In its Record of Decision on Tritium Production in December 1995, DOE announced that it
would pursue a parallel track for the next three years to (1) continue research & development of
an accelerator, and (2) evaluate the use of one or more of the existing 110 commercial nuclear
plants that are currently operating in the United States. DOE's decision acknowledged that the
existing reactor option would have the least cost, least risk, shortest schedule, and minimum
environmental impact. However, because of concerns about adopting a policy that allows
production of nuclear weapons material in commercial nuclear plants that were originally
constructed for purely peaceful purposes, DOE felt justified in pursuing the accelerator research,
in parallel. Press reports and internal DOE documents indicate that DOE plans to devote 85 to
90% of its tritium budget, over the next several years, for the accelerator research.
In its decision, DOE dropped any further consideration of a new ALWR for this mission, even
though its own consultant's estimate shows that a new large ALWR (using our System 80+
design as a reference) would likely cost the federal government about $12 billion less to build
and operate than the accelerator, in undiscounted 1995 dollars. For reference, the consultant

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estimated that the accelerator will cost between $12 billion and $27 billion to design, construct, and operate (also in undiscounted 1995 dollars) -- at the 3/8 goal tritium production rate.

On top of this, we have notified DOE that we believe that there are a number of errors in the consultant's analyses and that the cost difference between the ALWR and the accelerator is even greater than the consultant calculated. Although DOE has provided responses, they have not adequately addressed our concerns and we believe that our original comments remain valid. DOE also dropped any consideration of our proposed new privatized multipurpose reactor, even though its Record of Decision noted that one of its own laboratories, Oak Ridge, had provided a cost estimate which showed that our concept would cost the federal government billions of dollars less than DOE's estimate for the accelerator, while also fulfilling another DOE need -- the disposition of excess weapons plutonium. (As a side note, the Oak Ridge analysis was performed in response to a request from the Energy & Water Appropriations Conference Committee -- which had asked DOE to evaluate the feasibility of a multipurpose ALWR, during the FY-95 budget process. The report was due to the Committee a year ago this month. Although the draft report was completed on schedule. DOE has still not released it to Congress.)

In spite of the dramatically higher cost for the accelerator, DOE justified the accelerator's selection over a new ALWR on the basis that the accelerator has less environmental impact and less licensing risk. However, both of these arguments are fallacious. DOE's assertion that the accelerator has less environmental impact than a new ALWR is fatally flawed because DOE failed to include the environmental impact of generating the 300 to 600 Megawatts of electricity that the accelerator will require during operation. Its inclusion would show that the new ALWR has less environmental impact than the accelerator -- especially when it is also acknowledged that the new ALWR will avoid the need for an equivalent amount of fossil fueled electric generating capacity in the region, thus, creating an environmental benefit. We strongly suspect that DOE's segmentation of the accelerator's environmental impact is not consistent with the National Environmental Policy Act and could make the accelerator vulnerable to court challenge, at some time in the future, by those who do not want tritium production to be restarted. On the subject of licensing risks, it appears that DOE has not given due credit to the “one step licensing” provisions provided in the 1992 Energy Policy Act. It is now possible to obtain the permits to both build and operate a new ALWR nuclear plant before construction is even started. Furthermore, we are talking about using a standardized ALWR plant design that has already been reviewed and certified by the NRC. DOE has invested about half a billion dollars in the ALWR program during the last decade, in cost-share with the nuclear industry, with the primary goal to receive NRC Certification of these safer, new reactor designs. In an ironic and bizarre twist of fate, DOE is now saying that these designs are not acceptable for use by DOE -- even though their own cost analyses show the ALWR to be less expensive than the accelerator that they selected. Concerning licensing of the accelerator, it should be noted that DOE recently announced plans for seeking outside regulation of all its facilities. There are no current licensing guidelines or processes for licensing an accelerator like the one proposed for tritium production. This is true licensing uncertainty. In the end, DOE will run the same risks of intervenor challenges. during licensing of a new tritium production facility, from those groups opposed to resumption of tritium production -- no matter which technology is used.

To summarize this issue, we believe that DOE's decision to drop the large AL WRs from further consideration for tritium production is not supported by the facts. DOE now proposes to commit over 85% of its tritium budget to research on an unproven accelerator design that, by estimates from DOE's own consultant, will likely cost the federal government on the order of $12 billion more than the large ALWR (we think that the cost gap is even larger). Furthermore, if DOE would include our proposed concept for a new privatized multipurpose reactor, DOE would then have a more cost-effective, reliable alternative to the existing reactor option. DOE would still have the flexibility of purchasing irradiation services -- be it from an existing reactor or a new one, on a government site.

Additional Material for the Record

Improving the
Environment

An Evaluation of DOE's Environmental

Management Program

Committee to Evaluate the Science, Engineering, and
Health Basis of the Department of Energy's

Environmental Management Program

National Research Council

National Academy Press
Washington, D.C. 1995

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