Speaker Name: William S. Lee
Speaker Title: Chairman and President
Speaker Company: Duke Power Company
Duke Power Company Website
I'm grateful to be here at Appalachian. It's a very important institution to the company that I work for--Duke Power. One hundred forty-eight of your graduates are my coworkers at Duke Power, and 28 of our officers and managers were educated at Appalachian State University. You have an important part to play in our future success and that's one of the reasons I'm glad to be here.
I'm also glad to be here because our company has recently made an additional commitment to western North Carolina by extending our business enterprise into five more counties to the west of us with the purchase of Nantahala Power & Light Company from Aluminum Company of America. We're delighted to have those employees on our team and those customers in our customer-base and those counties as our opportunity to serve and to work towards economic development.
I'm delighted to be here, too, simply because of the beauty of the environment in this part of our state. I have revered this area since I was a lad spending summers here and it's not only a visual but a nostalgic thrill for me to return.
But, I guess the real reason I'm glad to be here is because those of you who are studying at Appalachian have so much of the future in your hands. I am uplifted every time I rap with young folks knowing that you and your generation will be setting the course for this region, this state, this nation and, yes, for part of this world. Setting future policies will be in your hands and the hands of your peers, and one of your hopes for your experience while at Appalachian is to develop the proper tools to do that well. For you will see the resolution of important issues during your active adult years where you can exert your leadership and bring to bear your understanding. The result, I am confident, will be wise public policy decisions.
It excites me to be with you today because of the role you will play on issues so important to mankind and I use the word "mankind" with purpose. In 1987, the population of the planet on which we live passed five billion. When you are my age, the population of this planet will be nine billion--the same size planet, the same total resources. That assumes that present population control trends will continue and will be even more successful than they are today. The productivity of eighteen billion hands will have to feed those nine billion mouths. What's more, those nine billion minds will be aspiring to some greater fraction of the standard of living that we now enjoy. They'll want a bigger piece and the only way that standard of living can be increased is to increase productivity. There's no free lunch for you or me or the world; if we're going to enjoy more, we must produce more. You studied that in business and you know that it applies to each of us and not just the other fellow. Producing more will require energy, for only with the use of energy can we multiply the production of those eighteen billion hands. Whether it be a farm tractor that uses energy or a lathe or an aluminum smelter or loom or steel furnace or sawmill or cookie factory--they all take energy.
Where will that energy come from? That's a public policy question as well as a resource or environmental question. What will be the impact of those choices? That's another public policy question. Will that energy spectrum include more nuclear energy or not? That, too, is a public policy question.
I'm going to ask you to think about that one today. Will we have more nuclear energy? It's good and it's bad. So are its alternatives. We have it now; will we have it anymore? It's not a simple issue. Here's a partial list of the other concepts that are intertwined and will be impacted by the answer to the question of whether the U.S. will have any more nuclear power? We have the environment, we have the global warming concern from burning more carbon fuels, we have waste, nuclear waste, the waste products of burning carbon fuels, we have economics, we have safety, we have hunger, productivity, international competitiveness, standard of living, mid-East oil, standard of living in less-developed countries, education, and on and on and on. It's a very complex question for which I don't have the answer.
The world was introduced to the power of the mighty atom by a horrible event--the explosion of a weapon in 1945. Ever since then the public has been very uneasy and even frightened about anything with the word nuclear or atomic energy on it. Eight years later, President Dwight Eisenhower, addressing the United Nations, gave his "Atoms for Peace" speech in which he said that it was the new policy of the United States to harness the power of that atom, not for weapons, but for peaceful uses, and to deliver that energy, that power of the atom in the form of energy, to people in a form they could use.
A year later, in 1954, the Congress endorsed that concept and passed the Atomic Energy Act. Some of us went back to college quickly and began to study this new thing called nuclear. Three years later Duke Power made its first major nuclear commitment by joining with some partners and building the first nuclear reactor in the southeast near Columbia, South Carolina, on the Broad River. It was an experimental reactor; it was small, but we learned a lot.
But what about the future of Atoms for Peace? Will there be any more nuclear-generated electricity in this country? Lets look at the current status of it here and elsewhere and then try to answer the question of where nuclear energy might go locally in the Carolinas, in the U.S., and in the world.
After that experimental reactor was operated for five years in South Carolina, it was then successfully decommissioned. By that time we felt that the economics of nuclear energy and the competitive fossil energy were such that it led our company to make a major nuclear commitment in 1966. We decided to build our first large, commercial reactor to generate electricity. We've continued that program. Today we have seven generating units in our company's system using the atom and 66% of the electricity that we generate for the two Carolinas is nuclear, 32% is from coal and 2% from hydroelectricity.
Our track record has been excellent, but not perfect. We have seven nuclear generating units--three plants in South Carolina at Oconee, two in North Carolina at McGuire, and two right over the line in South Carolina at Catawba. We built those plants at the lowest construction cost per kilowatt of capacity of anyone in the United States and the thermal efficiency of those plants is the best in the United States. Oconee has generated more electricity and has had the longest continuous run of operation of any unit in the country. Those plants have been built, their costs of construction are behind us and they are serving us as a super-hedge against future inflation.
For example, the cost of fuel for one kilowatt hour coming out of those nuclear plants today is .6 of one penny. To generate the same kilowatt hour by coal costs 1.8 cents, or three times as much as the nuclear fuel. To generate by oil, even at $18.00 a barrel, costs three cents, five times as much as nuclear fuel.
Nevertheless, future growth for electricity needs in the Piedmont Carolinas, in fact in all of both Carolinas, will be by burning coal. We canceled six nuclear units and we would not commit to another one at this time. We foresaw a situation in the United States where neither the cost nor the schedule of building these plants was any longer under our control, and so we canceled them. One of them was part way out of the ground; you may have seen a movie made on that site recently. But we bit the bullet early rather than expose our customers and our investors to open-ended risk we could not control with our own management.
We as a nation have done the same thing. We have brought to a halt any further expansion of "Atoms for Peace." There are 109 nuclear generating units operating in the United States, including our seven. There are eight or nine more to be completed. There are a number that are completed but cannot operate. That's a rather preposterous thing we've done to ourselves as a nation. For example, we built a plant on the shore of New Hampshire that is still not in service because of concern about evacuation of people from a beach. The plant went through all the regulatory processes including evacuation studies, and the license was issued to build the plant at that location. Nine years and $5 billion later the plant is ready to run and there's been an election in that area and the newly elected officials say they don't like the old plan. Therefore, the plant can't run. Down the coast there's another one in the same pickle on Long Island at Shoreham. Another $5 billion monument to investor folly, discouraging investors from putting up money for future investment in nuclear energy in the United States.
If I announced to you here in this auditorium that Duke Power was going to build another nuclear plant, our stock would drop on the New York Stock Exchange before sundown and by tomorrow morning Duke Power would have itself another boy.
There are four problems that have contributed to this situation in the United States. They acted synergistically and brought the nuclear program in our country to a screeching halt.
The first I have already mentioned--public uneasiness and fear of atomic energy; also fear of the unknown. Atomic energy is a mysterious thing that many of us don't understand, just like some of us were afraid of computers a few years ago because we didn't understand them. That public uneasiness became a political issue which in turn brought about a paralysis with our paranoia over waste.
Another problem which brought it to a halt was the pace of regulatory change driven by political reaction to public uneasiness. Regulations began to change faster than the ink would dry on the old regulations. And you can't build a multi-billion dollar project of any kind where the rules are changed many times during the process if you plan to control the cost.
A third reason is that, coincidentally, a lot of this program was under way at a time when our nation was experiencing inflation and interest rates like none of us had ever seen in our lifetimes. That compounded the cost problems and thus increased the unpopular perception of nuclear energy.
The fourth reason why we failed in the program was the total inability of some U.S. utilities that were building these plants to cope with the pace of change of all of the above. Many of the companies in this business simply could not perform as this new technology demands.
Then we had the Three Mile Island accident, another failure in performance. After Three Mile Island, the industry realized that each of us was hostage to the performance of the weakest among us. We recognized that we were all in the same lifeboat, all must give up certain sovereignty and join together and strengthen one another. That was modeled after what hospitals do. You don't find federal regulation of hospitals. Instead, hospitals are regulated by peer groups--the hospital accreditation groups that come around consisting of doctors, administrators, pharmacists, nurses and dietitians--which review the performance of your hospital in your community to see if it's accredited to take care of you. That system has worked well. We emulated that in the nuclear industry and formed the Institute of Nuclear Power Operations in 1979 in the wake of Three Mile Island. The Institute has done well in the ten years since. The performance of U.S. nuclear plants has improved enormously. The load factor--that is, the amount of electricity generated each year by each plant--has gone up, the dosage of radioactivity to workers in the plant has gone down, and the waste generated by the plants has gone down. All of the other performance indicators for U.S. plants show they have improved as a result of strengthening one another much like hospitals do to improve performance.
Another indication of success of the Institute was that nuclear power owners from thirteen other nations came to us and said they would like to join in our program to achieve excellence in nuclear operations. They, too, recognized that government regulation cannot do it alone. Just like highway safety is largely in the hands of the drivers and is not assured by having a police force, so too, nuclear safety is largely in the hands of those who own and operate the facilities. Those thirteen other nations joined in the Institute and now the 200-odd nuclear plants in those fourteen nations are all working together to achieve excellence. They are all inter-connected by a real-time satellite-driven communications network. If anything happens in any one of those 200 plants, within a few minutes every other plant will know it, and lessons learned from that incident will follow quickly so that the other plants will know how to handle such an incident. Routine information is swapped. For example, if something happens to a bearing at the motor end of a shaft on a pump in the basement of a nuclear plant in Spain, the operator can go to a keyboard and say, "I've got this funny situation on a bearing on a pump model so-and-so. Has anyone else ever seen this problem?" The operators on shift that night at 200 other plants worldwide will receive that inquiry and maybe two or three have had the problem. They'll get back and perhaps say, "Yes, we had that problem last year, and here's what we did about it. This is the way it worked and it's fixed now." That sort of sharing of information bolsters the quality of operation for everybody.
Will nuclear come back in the United States? I think it will, but not for a while. I don't know whether it'll come back as a result of a crisis such as a Persian Gulf war or a crisis driven by concern about the greenhouse effect or whether it will come back through evolutionary stages by the gradual rising in prices of fossil fuels. But when it comes back, and if it does, it will be because the issue will have had leadership. Perhaps it will be yours. Our present plants will have performed well or it won't come back. We will have demonstrated credible disposal of the nuclear waste, or it won't come back. It must be perceived to be in the national interest, or we won't have any more. When it does come back it will come back with standardized plant designs, with predictable regulatory requirements that will hold still for the life of construction of a project or else investors won't put up their money. And, it will come back with a handful of highly competent entities, not 50 or 60 but a handful, that will design, build and operate those plants. You're going to participate in that public policy decision as to whether or not any of those things will happen.
Meantime, the world goes on. Worldwide there are 420 operating nuclear units on this planet; 109 are in the United States. So there are more than 300 not here. They generate 19 percent of the world's electricity. In this country it's 20 percent. In our company, it's 66 percent. Every day those nuclear plants are in operation around the world, they displace the equivalent of six million barrels of oil. You can imagine what the price of oil might be today, particularly to the less developed countries, if the worldwide demand was six million barrels a day higher. In the United States we use 17 million barrels a day. Can you imagine increasing the demand in the world equivalent to one-third of all we use as a result of not having these nuclear plants around the world? Nuclear power is an important and growing source of energy for the world.
Thirty other nations--31 including the United States--have nuclear energy. Some others in addition have nuclear plants that they're building. In Europe, the United Kingdom has renewed its commitment to nuclear energy. France has 70 percent of its electricity generated by nuclear, Belgium 66 percent, Sweden 45 percent. In the eastern bloc, Czechoslovakia, East Germany, Rumania, Hungary, Poland, and the U.S.S.R. are all increasing their programs. In Asia, we have Japan. Taiwan now has 49 percent of its electricity by nuclear, Korea 53 percent, and the needs of the People's Republic of China will boggle your mind. They have a billion people today. In your lifetime they'll have over a billion and a half people. They have an energy plan that involves thousands, not hundreds, of nuclear reactors in the People's Republic. We're now fifteenth in the world in terms of percentage of our electricity generated by nuclear and we have nuclear in our own hemisphere in Canada, Mexico, Argentina, Brazil and Cuba.
I went to Cuba last week as a part of this world association effort to look at their safety programs associated with the two Soviet reactors nearing completion in Cuba. They have eight more on order. I talked to Mr. Fidel Castro, Jr. who has a Ph.D. in nuclear physics from the University of Moscow (and who speaks English with less of an accent than I have) and he showed me the five priorities of the nation of Cuba. Those five are: education, health care, environmental protection, economic growth, and nuclear energy. He says they are not going to be dependent on imported oil. They are going to be competitive in the worldwide arena. That's why nuclear energy is one of their five national priorities.
Frankly, I went there concerned about the quality of their program and whether or not their reactors were safe. Since they are only 180 miles from Miami, I want them to be right. I came away realizing that nuclear energy is a national priority and the son of the president of the country is in charge of the safety program, and he is determined not to fail, having access to any national resources that he needs to assure safety.
So, it's happening worldwide. The number of reactors in service in the world is going to double and probably double again whether or not the U.S. ever builds another one. This points up the need for worldwide nuclear safety. Chernobyl taught us that radioactivity does not know political differences either. Thank goodness for the U.S.S.R.'s new policy of Glasnost. Because it's the only reason we've been able to persuade the Soviet Union and they in turn to persuade all of the eastern bloc countries. Now every nuclear owner in the world, including Cuba, is a member of the World Association of Nuclear Operators. We're working just as if it were a worldwide association of hospitals. It doesn't make any difference about a country's politics, we want the program to be excellent. If this cooperation does succeed, and I have very high hopes that it will, what sort of precedent would that set? What about international cooperation on hospitals and health care? What about agriculture? What about international cooperation in regards to nuclear waste? What about cooperation towards environmental protection?
This world association may give us yet another dimension to President Eisenhower's early phrase "Atoms for Peace." I truly hope so. You in this room and your generation, both here and worldwide, will decide the policy for our planet. You will specifically decide the energy policy for our nation. I expect that here among you are those whose understanding, whose trained disciplined approach to issues, ideas, and decisions, and whose ability to lead, will help our nation and our world find the very best answers to these tough policy decisions.