    Nuclear Energy: Status of DOE's Effort to Develop the Next
    Generation Nuclear Plant (20-SEP-06, GAO-06-1056).

    Under the administration's National Energy Policy, the Department
    of Energy (DOE) is promoting nuclear energy to meet increased
    U.S. energy demand. In 2003, DOE began developing the Next
    Generation Nuclear Plant, an advanced nuclear reactor that seeks
    to improve upon the current generation of operating commercial
    nuclear power plants. DOE intends to demonstrate the plant's
    commercial application both for generating electricity and for
    using process heat from the reactor for the production of
    hydrogen, which then would be used in fuel cells for the
    transportation sector. The Energy Policy Act of 2005 required
    plant design and construction to be completed by 2021. GAO was
    asked to examine (1) the progress DOE has made in meeting its
    schedule for the Next Generation Nuclear Plant and (2) DOE's
    approach to ensuring the commercial viability of the project. To
    meet these objectives, GAO reviewed DOE's research and
    development (R&D) plans for the project and the reports of two
    independent project reviews, observed R&D activities, and
    interviewed DOE, Nuclear Regulatory Commission (NRC), and
    industry representatives.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-06-1056
        ACCNO:   A61186
      TITLE:     Nuclear Energy: Status of DOE's Effort to Develop the
    Next Generation Nuclear Plant
         DATE:   09/20/2006
      SUBJECT:   Electric energy
    	     Electric power generation
    	     Energy demand
    	     Energy research
    	     Financial analysis
    	     Nuclear energy
    	     Nuclear powerplants
    	     Program evaluation
    	     Research and development
    	     Program goals or objectives
    	     Program implementation
    	     Next Generation Nuclear Plant Project

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO Product.                                                 **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ******************************************************************
    GAO-06-1056

         * Results in Brief
         * Background
         * DOE Has Made Initial Progress Toward Meeting Near-Term Miles
              * DOE Has Developed an Overall Schedule to Initiate the Proces
              * DOE Has Made Initial Progress Developing Fuel and Materials
              * DOE and NRC Have Started Work on a Licensing Strategy
         * DOE Is Pursuing a More Technologically Advanced Approach Com
              * The Plant Must Be Commercially Viable and Attract Utilities
              * DOE Has Implemented Some Recommendations to Lessen the R&D R
              * DOE Has Not Implemented Recommendations to Accelerate Design
         * Concluding Observations
         * Agency Comments and Our Evaluation
         * Appendix I: Scope and Methodology
         * Appendix II: Comments from the Nuclear Regulatory Commission
         * Appendix III: GAO Contact and Staff Acknowledgments
              * GAO Contact
              * Staff Acknowledgments
                   * Order by Mail or Phone

    Report to the Chairman, Subcommittee on Energy and Resources, Committee on
    Government Reform, House of Representatives

    United States Government Accountability Office

    GAO

    September 2006

    NUCLEAR ENERGY

    Status of DOE's Effort to Develop the Next Generation Nuclear Plant

    GAO-06-1056

    Contents

    Letter 1

    Results in Brief 6
    Background 7
    DOE Has Made Initial Progress Toward Meeting Near-Term Milestones for the
    Next Generation Nuclear Plant 10
    DOE Is Pursuing a More Technologically Advanced Approach Compared with
    Other Options in an Effort to Ensure the Plant's Commercial Viability 17
    Concluding Observations 24
    Agency Comments and Our Evaluation 25
    Appendix I Scope and Methodology 26
    Appendix II Comments from the Nuclear Regulatory Commission 28
    Appendix III GAO Contact and Staff Acknowledgments 29

    Figures

    Figure 1: Next Generation Nuclear Plant Project Schedule 11
    Figure 2: Remaining Year-to-Year Projected Costs of DOE's Next Generation
    Nuclear Plant Project, Fiscal Years 2007-2021 12
    Figure 3: Actual Size and Magnified Views of the Coated Particle Fuel for
    the Next Generation Nuclear Plant 13
    Figure 4: The Anticipated Size of the Next Generation Nuclear Plant
    Reactor Pressure Vessel Compared with Light Water Reactor Pressure Vessels
    Currently in Use 20

    Abbreviations

    DOE Department of Energy

    NRC Nuclear Regulatory Commission

    R&D research and development

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

    United States Government Accountability Office

    Washington, DC 20548

    September 20, 2006 September 20, 2006

    The Honorable Darrell E. Issa Chairman Subcommittee on Energy and
    Resources Committee on Government Reform House of Representatives The
    Honorable Darrell E. Issa Chairman Subcommittee on Energy and Resources
    Committee on Government Reform House of Representatives

    Dear Mr. Chairman: Dear Mr. Chairman:

    Over the coming decades, energy demand in the United States is expected to
    continue a pattern of dramatic growth. According to the most recent data
    from the Department of Energy's (DOE) Energy Information Administration,
    electricity use is projected to rise by 50 percent between 2004 and 2030.
    To help meet the expected growth in electricity demand, DOE is engaged in
    a variety of efforts to promote the use of nuclear energy as part of the
    administration's National Energy Policy. In the near term, DOE is
    supporting the deployment of new commercial nuclear power plants that
    improve on the current fleet of plants operating in the United States. DOE
    is also engaged in long-term research and development (R&D) on advanced
    nuclear reactor designs that are intended to offer safety and other
    improvements over the current generation of nuclear power plants and
    expected to be ready for commercial deployment in the 2020-2030 time
    frame. In particular, DOE has engaged in R&D since fiscal year 2003 on
    what it refers to as the Next Generation Nuclear Plant, a project to
    demonstrate one of these advanced nuclear reactor designs. Over the coming
    decades, energy demand in the United States is expected to continue a
    pattern of dramatic growth. According to the most recent data from the
    Department of Energy's (DOE) Energy Information Administration,
    electricity use is projected to rise by 50 percent between 2004 and 2030.
    To help meet the expected growth in electricity demand, DOE is engaged in
    a variety of efforts to promote the use of nuclear energy as part of the
    administration's National Energy Policy. In the near term, DOE is
    supporting the deployment of new commercial nuclear power plants that
    improve on the current fleet of plants operating in the United States. DOE
    is also engaged in long-term research and development (R&D) on advanced
    nuclear reactor designs that are intended to offer safety and other
    improvements over the current generation of nuclear power plants and
    expected to be ready for commercial deployment in the 2020-2030 time
    frame. In particular, DOE has engaged in R&D since fiscal year 2003 on
    what it refers to as the Next Generation Nuclear Plant, a project to
    demonstrate one of these advanced nuclear reactor designs.

    In October 2004, DOE approved a decision to begin development of a
    full-scale demonstration of the Next Generation Nuclear Plant. DOE
    determined that a full-scale demonstration would best meet the need for
    new nuclear energy technology capable of being combined with a facility
    for producing hydrogen. Under the administration's National Hydrogen Fuel
    Initiative, hydrogen is envisioned to be used in fuel cells for the
    transportation sector as an alternative to imported oil. The demonstration
    plant is intended to establish the technical and commercial feasibility of
    producing both electricity and hydrogen from an advanced nuclear reactor.
    Because of the long-term nature of the project and the high risk and costs
    associated with the R&D required to build the plant, DOE determined that
    private industry would be unlikely to possess the resources or willingness
    to take on such a project without financial support from the federal
    government. DOE estimates the total cost of the In October 2004, DOE
    approved a decision to begin development of a full-scale demonstration of
    the Next Generation Nuclear Plant. DOE determined that a full-scale
    demonstration would best meet the need for new nuclear energy technology
    capable of being combined with a facility for producing hydrogen. Under
    the administration's National Hydrogen Fuel Initiative, hydrogen is
    envisioned to be used in fuel cells for the transportation sector as an
    alternative to imported oil. The demonstration plant is intended to
    establish the technical and commercial feasibility of producing both
    electricity and hydrogen from an advanced nuclear reactor. Because of the
    long-term nature of the project and the high risk and costs associated
    with the R&D required to build the plant, DOE determined that private
    industry would be unlikely to possess the resources or willingness to take
    on such a project without financial support from the federal government.
    DOE estimates the total cost of the plant (part of which is planned to be
    funded by industry) to be approximately $2.4 billion, which includes R&D,
    design, and construction. Of this amount, DOE has budgeted about $120
    million for the project from fiscal year 2003 through fiscal year 2006.

    Subsequent to DOE's initiation of R&D for the plant, the Energy Policy Act
    of 2005 formally established the Next Generation Nuclear Plant as a DOE
    project and set forth further requirements for the project's
    implementation.1 In particular, the act calls for the project to be
    divided into two phases. In the first phase, DOE is to conduct R&D and
    select the initial design parameters for the plant by September 30, 2011.
    In the second phase, DOE is to continue R&D, develop a final design,
    construct the plant, and begin operation by September 30, 2021. The act
    designates DOE's Idaho National Laboratory as the lead laboratory and
    construction site for the plant and directs the laboratory to carry out
    cost-shared R&D, design, and construction activities with industrial
    partners.2 In addition, the act requires that a license to construct and
    operate the demonstration plant be obtained from the Nuclear Regulatory
    Commission (NRC) and that DOE and NRC jointly submit a licensing strategy
    to the Congress by August 2008. This provision of the act is consistent
    with the Energy Reorganization Act of 1974, as amended, which provides NRC
    with licensing and regulatory authority over DOE's nuclear reactors
    operated for the purpose of demonstrating their suitability for commercial
    application.3

    The advanced reactor design DOE has chosen for the Next Generation Nuclear
    Plant is the "very-high-temperature reactor." This reactor design is
    different from the current fleet of commercial nuclear power plants
    operating in the United States (or anticipated for near-term deployment)
    in a number of key aspects. For example, whereas the current fleet is
    composed of light water reactors cooled by water, the
    very-high-temperature reactor would be cooled by helium gas. Additionally,
    as its name implies, the very-high-temperature reactor would operate at a
    much higher temperature than existing nuclear power plants-up to about 950
    degrees Celsius (1,742 degrees Fahrenheit), or roughly three times the
    temperature of a light water reactor.4 DOE chose the very-high-temperature
    reactor design from among six advanced reactor designs under development
    internationally. DOE is also conducting R&D on these other advanced
    reactor designs, which have unique characteristics that could allow their
    use in specialized circumstances, such as in developing countries or
    remote locations.

    1Pub. L. No. 109-58 (2005).

    2Idaho National Laboratory, one of DOE's national laboratories operated
    under contract by Battelle Energy Alliance, LLC, was first established in
    1949 as the National Reactor Testing Station for conducting nuclear
    reactor experiments. Since its establishment, 52 nuclear reactors have
    been designed and tested at the site. On February 1, 2005, two previous
    DOE laboratories at the site-the Idaho National Engineering and
    Environmental Laboratory and Argonne National Laboratory-West-became the
    Idaho National Laboratory. One of the laboratory's missions continues to
    be the development of advanced nuclear energy technologies.

    342 U.S.C. S: 5842.

    Despite the high temperature, there is general agreement that a gas-cooled
    reactor such as the very-high-temperature reactor offers the potential for
    improved safety. For example, a loss-of-coolant accident in a light water
    reactor has the potential to cause a meltdown of the reactor core, and
    light water reactors are designed with backup systems to provide emergency
    cooling. In contrast, the very-high-temperature reactor would be designed
    to be passively cooled in the event of a loss-of-coolant accident,
    eliminating the need for an active emergency cooling system. Other
    attractive features of the very-high-temperature reactor influenced DOE's
    decision to choose it as the design for the Next Generation Nuclear Plant.
    In particular, DOE considers the very-high-temperature reactor to be the
    nearest-term advanced nuclear reactor design that operates at temperatures
    high enough to generate the heat (called "process heat") needed to produce
    hydrogen. Furthermore, the very-high-temperature reactor design builds
    upon previous and current experience, both in the United States and
    abroad, with gas-cooled reactors. For example, DOE worked on
    high-temperature gas-cooled reactor technology throughout the 1980s and
    early 1990s, and two small gas-cooled reactors are currently in operation
    in China and Japan.

    Over the course of the last several years, two independent groups have
    reviewed DOE's plans for the Next Generation Nuclear Plant. The
    Independent Technology Review Group-coordinated by Idaho National
    Laboratory and composed of an international group experienced in the
    design, construction, and operation of nuclear systems-issued a report in
    2004 on the design features and technological uncertainties of the
    very-high-temperature reactor.5 The report concluded that the
    uncertainties associated with the project appeared manageable and that the
    objectives of the project could be achieved. In 2006, as required by the
    Energy Policy Act of 2005, DOE's Nuclear Energy Research Advisory
    Committee also completed an initial review of the Next Generation Nuclear
    Plant.6 The advisory committee reviewed DOE's R&D plans in light of the
    Independent Technology Review Group's report and recommended that DOE
    accelerate the project. Both reviews also made recommendations to modify
    the project's R&D plans in order to ensure the success of the project.

    4The operating temperature refers to the temperature of the helium gas as
    it exits the reactor core.

    In September 2005, DOE stated that the department had decided to focus on
    successfully completing critical R&D before committing to proceed with
    design and construction of the Next Generation Nuclear Plant. According to
    DOE, this decision was based on the recognition of the significant amount
    of R&D remaining, as indicated by the results of the independent review of
    the plant conducted in 2004 as well as DOE's discussions with industry.
    DOE stated that the R&D would address key technical uncertainties and that
    the results would be used to make a determination to initiate design
    activities. In the meantime, DOE has prioritized other nuclear initiatives
    over the Next Generation Nuclear Plant.

    DOE is managing the Next Generation Nuclear Plant under its project
    management process for the acquisition of capital assets, which sets forth
    planning requirements that have to be met before DOE may begin design or
    construction activities. The goal of these requirements is to complete
    projects on schedule, within budget, and capable of meeting performance
    objectives. Our reviews of DOE's management of other major projects have
    found that project management has long been a significant challenge for
    DOE and is at high risk of waste and mismanagement.7 In an effort to
    improve cost and schedule performance on major projects, DOE issued new
    policy and guidance on managing and controlling projects in 2000, but
    performance problems continue on major projects. For example, we testified
    in April 2006 that DOE's fast-track approach to designing and building the
    Waste Treatment Plant Project (at DOE's Hanford site in southeastern
    Washington state) increases the risk that the completed facilities may
    require major rework to operate safely and effectively and could increase
    the project's costs.8

    5Idaho National Engineering and Environmental Laboratory, Design Features
    and Technology Uncertainties for the Next Generation Nuclear Plant,
    INEEL/EXT-04-01816 (Idaho Falls, Idaho; June 30, 2004).

    6The Nuclear Energy Research Advisory Committee was established in 1998 to
    provide independent advice to DOE on complex science and technical issues
    associated with the planning, management, and implementation of DOE's
    nuclear energy program.

    7GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January
    2005); and High-Risk Series: An Update, GAO-03-119 (Washington, D.C.:
    January 2003).

    In the context of these issues, you asked us to (1) determine what
    progress DOE has made in meeting its schedule for the Next Generation
    Nuclear Plant and (2) examine DOE's approach to ensuring the commercial
    viability of the project, including how DOE has implemented the
    recommendations of advisory groups.

    To address these objectives, we analyzed DOE's project plans, interviewed
    DOE and Idaho National Laboratory officials about progress made in meeting
    key R&D milestones, and observed R&D efforts at Idaho National Laboratory.
    Furthermore, we reviewed the two independent assessments of the project,
    issued by the Independent Technology Review Group and DOE's Nuclear Energy
    Research Advisory Committee, and how DOE had responded to their
    recommendations. We interviewed DOE and Idaho National Laboratory
    officials regarding the assessments and the advantages and disadvantages
    of alternative approaches proposed by the two independent reviews for
    design and construction of the plant. We also reviewed NRC documentation
    related to the development of a licensing strategy for the Next Generation
    Nuclear Plant, and we interviewed DOE and NRC officials regarding
    licensing issues. Finally, we attended the American Nuclear Society's 2006
    annual meeting, which included a number of sessions on nuclear fuels and
    materials R&D related to advanced nuclear energy systems, including the
    Next Generation Nuclear Plant. Because of the project's long time frame,
    we focused primarily on DOE's progress in meeting near-term milestones,
    specifically in completing the first phase of the project as defined in
    the Energy Policy Act of 2005. (App. I presents a detailed discussion of
    our scope and methodology.) We performed our work from April to September
    2006 in accordance with generally accepted government auditing standards.

    8GAO, Hanford Waste Treatment Plant: Contractor and DOE Management
    Problems Have Led to Higher Costs, Construction Delays, and Safety
    Concerns, GAO-06-602T (Washington, D.C.: Apr. 6, 2006).

                                    Results in Brief

    DOE has prepared R&D plans designed to support design and construction of
    the Next Generation Nuclear Plant by fiscal year 2021, as set forth in the
    Energy Policy Act of 2005. DOE officials said they consider this schedule
    to be challenging, given the amount of R&D that remains to be conducted.
    For example, DOE officials told us that researchers have successfully
    demonstrated in a laboratory setting the manufacturing of nuclear fuel for
    the reactor, which is critical to the plant's operation. The first of
    eight planned experiments to irradiate the fuel in order to test how well
    it performs will not begin until early in fiscal year 2007, and the final
    experiment is not scheduled to end until fiscal year 2019. R&D on other
    critical components of the plant-for example, materials capable of
    withstanding the high operating temperature planned for the plant and the
    technology for producing hydrogen using heat generated by the reactor-is
    also at an early stage. Consistent with the time frame set forth in the
    Energy Policy Act of 2005, DOE plans to initiate the second phase in
    fiscal year 2011, but only if the R&D results support proceeding with
    design and construction of the plant. With regard to meeting the schedule
    for licensing the Next Generation Nuclear Plant, DOE and NRC are in the
    process of finalizing a memorandum of understanding so that the two
    agencies can work together to develop a licensing strategy by August 2008,
    as required by the Energy Policy Act of 2005. The act authorizes DOE to
    transfer funding to NRC for the purpose of developing a licensing
    strategy, and NRC has determined that it will participate in the project
    to the extent that DOE provides funding to support NRC's efforts. DOE
    plans to transfer funds to NRC once the memorandum of understanding
    between the two agencies is finalized. In the long term, NRC will need to
    address "skill gaps" related to its capability to license a gas-cooled
    reactor such as the Next Generation Nuclear Plant. An assessment completed
    in 2001 identified these skill gaps, but NRC has taken limited action to
    address them because until recently it had not anticipated receiving a
    license application for a gas-cooled reactor.

    DOE's approach to ensuring the commercial viability of the Next Generation
    Nuclear Plant is to significantly advance existing gas-cooled reactor
    technology in order to support the development of a plant design that
    utilities and other end users will be interested in deploying to help meet
    the nation's energy needs. For example, if successful, DOE's R&D would
    enable the reactor to operate at a higher temperature compared with other
    high-temperature gas-cooled reactors, which would result in more efficient
    fuel use and hydrogen production and thus a more economically attractive
    plant. In addition, DOE is seeking input from industry on the design of
    the plant and the business considerations for deploying it. In some cases,
    DOE officials' views on how best to achieve the technological advances and
    ensure the commercial viability of the plant differ from the two
    independent advisory groups that have reviewed DOE's plans, and DOE has
    implemented some (but not all) of the advisory groups' recommendations.
    For example, in accordance with a recommendation of the Independent
    Technology Review Group, DOE lessened the need for R&D on advanced
    materials by lowering the planned operating temperature of the reactor
    from 1,000 degrees Celsius to no more than 950 degrees Celsius. In
    contrast, DOE has not implemented recommendations to scale back other
    planned technological advances or accelerate its schedule for completing
    the plant. The Nuclear Energy Research Advisory Committee had recommended
    accelerating the schedule to make the plant more attractive to industry
    compared with other advanced gas-cooled reactors that may be available
    sooner and thus attract greater industry participation. Idaho National
    Laboratory, the project integrator for the Next Generation Nuclear Plant,
    has also proposed accelerating the schedule, but to a lesser extent. In
    particular, the laboratory's proposed scheduled would begin design earlier
    than planned by DOE and, as a result, require more funding in the near
    term. DOE believes accelerating the project would increase project
    risk-for example, the risk of cost overruns or not meeting project
    specifications-and require significant additional resources that are not
    in keeping with the department's current priorities. According to DOE
    officials, additional R&D conducted early in the project would reduce
    overall project risk but would require additional resources. However, DOE
    has limited funding for nuclear energy R&D and has given other projects,
    such as developing the capability to recycle fuel from existing nuclear
    power plants, priority over the Next Generation Nuclear Plant.

    In commenting on a draft of this report, DOE and NRC commended the
    accuracy of the report and provided technical comments, which we
    incorporated, as appropriate.

                                       Background

    One of DOE's strategic goals is to promote a diverse supply of reliable,
    affordable, and environmentally sound energy. To that end, DOE is
    promoting further reliance on nuclear energy under the administration's
    National Energy Policy.9 According to DOE officials, the department has
    three priorities for promoting nuclear energy:

               o  The first priority is the deployment of new advanced light
               water reactors under the Nuclear Power 2010 program. Announced in
               2002, this program is a cost-shared effort with industry to
               identify sites for new plants; develop and bring to market
               advanced technologies based on the current fleet of light water
               reactors; and demonstrate new NRC regulatory processes for
               combining the construction and operating licensing of new
               plants.10

               o  The second priority is the Global Nuclear Energy Partnership,
               launched in February 2006. The objectives of the partnership are
               to demonstrate and deploy new technologies to recycle nuclear fuel
               and minimize nuclear waste, and to enable developing nations to
               acquire and use nuclear energy while minimizing the risk of
               nuclear proliferation.

               o  The third priority is R&D on the Next Generation Nuclear Plant.
               In addition to promoting nuclear energy, this project is intended
               to support the president's National Hydrogen Fuel Initiative by
               demonstrating an advanced nuclear energy system capable of also
               producing hydrogen for use in fuel cells in the transportation
               sector. DOE's Office of Nuclear Energy is conducting R&D on the
               Next Generation Nuclear Plant and ultimately will be responsible
               for the design and construction of the plant. According to DOE
               officials, the department remains committed to the Next Generation
               Nuclear Plant even though the Global Nuclear Energy Partnership
               has assumed a higher priority since its announcement in February
               2006.

               DOE is engaged in R&D on the Next Generation Nuclear Plant as part
               of a larger international effort to develop advanced nuclear
               reactors (Generation IV reactors) that are intended to offer
               safety and other improvements over the current generation of
               nuclear power plants (Generation III reactors). DOE coordinates
               its R&D on advanced nuclear reactors through the Generation IV
               International Forum, chartered in 2001 to establish a framework
               for international cooperation in R&D on the next generation of
               nuclear energy systems.11 In 2002, the Generation IV International
               Forum (together with DOE's Nuclear Energy Research Advisory
               Committee) published A Technology Roadmap for Generation IV
               Nuclear Energy Systems, which identified the six most promising
               nuclear energy systems for further research and potential
               deployment by about 2030. The six technologies were chosen based
               upon a series of goals covering four broad areas: sustainability,
               such as minimizing the amount of nuclear waste produced by the
               reactor; the economic attractiveness of the reactor; safety and
               reliability; and decreased likelihood of material being diverted
               to weapons programs.

               DOE has selected one of the six Generation IV systems-the
               very-high-temperature reactor-as the design for its Next
               Generation Nuclear Plant, in part because it is considered to be
               the nearest-term reactor design that also has the capability to
               produce hydrogen. According to DOE officials, the
               very-high-temperature reactor is also the design with the greatest
               level of participation among the Generation IV members.
               Furthermore, the very-high-temperature reactor builds on previous
               experience with gas-cooled reactors. For example, DOE conducted
               R&D on gas-cooled reactors throughout the 1980s and early 1990s,
               and two gas-cooled reactors have previously been built and
               operated in the United States.12 If successful, the Next
               Generation Nuclear Plant would represent an improvement over these
               previous reactors. One of the earlier reactors was smaller than
               the Next Generation Nuclear Plant, and the other experienced
               numerous technical problems during its operating life, such as
               problems with moisture entering the reactor. In addition, the Next
               Generation Nuclear Plant is intended to produce much higher outlet
               temperatures, enabling high-temperature applications such as the
               production of hydrogen.

               The basic technology for the very-high-temperature reactor also
               builds on previous efforts overseas, in particular
               high-temperature gas-cooled reactor technology developed in
               England and Germany in the 1960s. In addition, the technologies
               for the Next Generation Nuclear Plant are being advanced in
               projects at General Atomics in the United States, the AREVA
               company in France, and at the Pebble Bed Modular Reactor company
               in South Africa. Furthermore, Japan and China have built small
               reactors that are demonstrating the feasibility of some of the
               planned Next Generation Nuclear Plant components and materials.

                DOE Has Made Initial Progress Toward Meeting Near-Term Milestones
    				for the Next Generation Nuclear Plant

               DOE has developed a schedule for the R&D, design, and construction
               of the Next Generation Nuclear Plant that is intended to meet the
               requirements of the Energy Policy Act of 2005. While initial R&D
               results are favorable, DOE officials consider this schedule to be
               challenging given the amount of R&D that remains to be conducted.
               To meet the requirement to develop a licensing strategy for the
               plant by August 2008, DOE and NRC are in the process of finalizing
               a memorandum of understanding so that the two agencies can work
               together.

               DOE Has Developed an Overall Schedule to Initiate the Process of
    			  Selecting a Final Design in Fiscal Year 2011 and Complete the Plant
    			  in Fiscal Year 2021

               DOE has scheduled the Next Generation Nuclear Plant project to
               meet the requirements of the Energy Policy Act of 2005, which
               divides the project into two phases. For the first phase, DOE has
               been conducting R&D on fuels, materials, and hydrogen production.
               The R&D program is scheduled to continue through fiscal year 2019.
               DOE also recently announced its intent to fund several studies on
               preconceptual, or early, designs for the plant. DOE plans to use
               the studies, which are expected to be completed by May 2007, to
               establish initial design parameters for the plant and to further
               guide R&D efforts.

               DOE is planning to begin the second phase in fiscal year 2011 by
               issuing a request for proposal that will set forth the design
               parameters for the plant. Under DOE's project management process,
               DOE must make a decision to go ahead with the project before
               issuing the request for proposal. If R&D results at that time do
               not support the decision to proceed, DOE may cancel the project.13
               Assuming a request for proposal is issued, DOE is planning to
               choose a design from among those submitted by reactor vendors by
               2013. Construction is scheduled to begin in fiscal year 2016, and
               the plant is expected to be operational by 2021. In addition, DOE
               is planning for the appropriate licensing applications for the
               plant to be submitted for NRC review and approval during the
               second phase of the project. See figure 1 for the overall Next
               Generation Nuclear Plant project schedule.

    9While DOE is the federal agency tasked with promoting nuclear energy, NRC
    is responsible for ensuring public health and safety with regard to
    nuclear power. NRC's current regulatory activities include reactor safety
    oversight, license renewal of existing plants, and licensing of new
    reactors, including the Next Generation Nuclear Plant.

    10The previous method required a licensee to obtain a construction license
    and later obtain an operating license.

    11Members of the Generation IV International Forum include Argentina,
    Brazil, Canada, the European Atomic Energy Community (Euratom), France,
    Japan, South Africa, South Korea, Switzerland, the United Kingdom, and the
    United States. In July 2006, DOE announced that China and Russia are also
    expected to join the forum.

    12The Peach Bottom Unit One reactor was in operation in Pennsylvania from
    1967 to 1974, and the Fort St. Vrain reactor was in operation in Colorado
    from 1979 to 1989.

    13Similar decisions to proceed with or cancel the project must also be
    made at other key points, such as before construction begins.

    Figure 1: Next Generation Nuclear Plant Project Schedule

    As scheduled by DOE, the Next Generation Nuclear Plant project is expected
    to cost approximately $2.4 billion, part of which is to be funded by
    industry. According to DOE officials, the department budgeted about $120
    million for the project from fiscal years 2003 through 2006. This amount
    includes about $80 million for R&D on the nuclear system of the plant and
    about $40 million for R&D on the hydrogen production system. In addition
    to funding amounts already provided, figure 2 shows remaining year-to-year
    cost projections for the project for fiscal years 2007 through 2021. The
    projections are based on estimates developed by Idaho National Laboratory,
    which adapted a cost estimate created by the General Atomics company for
    its high-temperature gas-cooled reactor design. The projections account
    for differences between the General Atomics design and the
    very-high-temperature reactor and include an estimate of the cost of
    designing and building the hydrogen plant. According to DOE officials, the
    laboratory's figures are preliminary but provide an order-of-magnitude
    estimate of the funding required for R&D, design, and construction.

    Figure 2: Remaining Year-to-Year Projected Costs of DOE's Next Generation
    Nuclear Plant Project, Fiscal Years 2007-2021

    Note: Developing and constructing the hydrogen production facility is
    projected to cost $289 million, while the reactor system is projected to
    cost approximately $2 billion-a total of almost $2.3 billion from 2007
    through 2021. These amounts do not include operating the Next Generation
    Nuclear Plant.

    DOE Has Made Initial Progress Developing Fuel and Materials Needed for the Plant

    Initial research results since DOE initiated R&D on the Next Generation
    Nuclear Plant project in 2003 are favorable, but the most important R&D
    has yet to be done. For example, DOE is planning a series of eight fuel
    tests in the Advanced Test Reactor at Idaho National Laboratory.14 Each
    test is a time-consuming process that requires first fabricating the fuel
    specimens, then irradiating the fuel for several years, and finally
    conducting the postirradiation examination and safety tests. DOE is at the
    beginning of this process. In particular, DOE officials said they have
    successfully fabricated the fuel for the first test and addressed previous
    manufacturing problems with U.S. fuel development efforts in which
    contaminants weakened the coated particle fuel. (As shown in fig. 3,
    coated particle fuel is composed of a small uranium kernel that is coated
    with several protective layers.) However, the irradiation testing of the
    fuel in the Advanced Test Reactor has not yet begun. The first test is
    scheduled to begin early in fiscal year 2007 and to be completed in fiscal
    year 2009. The eighth and final test is scheduled to begin in fiscal year
    2015, and the fuel testing program is scheduled to conclude in fiscal year
    2019. As a result, DOE will not have the final results from all of its
    fuel tests before both design and construction begin.15 While DOE has
    carefully planned the fuel tests and expects favorable results, a DOE
    official acknowledged that they do not know if the fuel tests will
    ultimately be successful.

    14The Advanced Test Reactor has been in operation since 1967 and is
    designed to study the effects of intense radiation on reactor materials
    and fuels. The reactor is capable of simulating years of radiation
    exposure in a matter of weeks or months.

    Figure 3: Actual Size and Magnified Views of the Coated Particle Fuel for
    the Next Generation Nuclear Plant

    15Under DOE's fuel R&D plan, the results from the first six tests would be
    available before construction begins, and the results from the final two
    tests would be available before completion of the plant.

    Other key areas in which DOE is at the beginning stages of R&D include the
    hydrogen production system for the plant and materials development and
    testing:

               o  Idaho National Laboratory successfully completed a 1,000-hour
               laboratory-scale test of one of two potential hydrogen production
               systems in early 2006, and DOE needs to conduct additional R&D to
               determine which of the two systems is the most promising.16 In
               particular, DOE is planning to build small demonstrations of one
               or both systems by fiscal year 2011 in order to further test their
               performance and their ability to be scaled up to larger systems.
               DOE ultimately plans to complete a commercial-scale hydrogen
               production system for demonstration by fiscal year 2019, which
               will allow time to test the system before linking it to the
               very-high-temperature reactor.

               o  DOE has selected and procured samples of graphite-the major
               structural component of the reactor core that will house the fuel
               and channel the flow of helium gas-and designed experiments for
               testing the safety and performance of the graphite samples. This
               activity is essential because the graphite used in earlier
               gas-cooled reactors in the United States is no longer in
               production. The selection and procurement of the graphite samples
               is a significant accomplishment because DOE had to choose from
               many possible graphite candidates, and manufacturing each sample
               can take 6 to 9 months. Nevertheless, much of the required
               graphite R&D has not yet begun and will not be completed for many
               years. For example, the first test to irradiate graphite samples
               in the Advanced Test Reactor in Idaho is scheduled to begin in
               November 2007, and according to DOE's most recent materials R&D
               plan, final graphite studies will be completed in fiscal year
               2015.

               If DOE's R&D program is successful and the Next Generation Nuclear
               Plant is designed and built, there are additional areas of R&D
               that will ultimately be required. For example, the
               very-high-temperature reactor design would produce large amounts
               of irradiated graphite waste, and DOE has not yet determined how
               it would dispose of the graphite.

               DOE and NRC Have Started Work on a Licensing Strategy

               DOE and NRC are in the process of finalizing a memorandum of
               understanding to develop a licensing strategy. As required by the
               Energy Policy Act of 2005, DOE and NRC are to jointly submit a
               licensing strategy by August 2008.17 The act requires the
               licensing strategy to include, among other things, ways in which
               current NRC licensing requirements will need to be adapted to the
               Next Generation Nuclear Plant and other R&D activities that may be
               required on the part of NRC in order to review a license
               application. The memorandum of understanding between the two
               agencies will establish a framework to develop a licensing
               strategy and will include organizational responsibilities,
               procedures for agency interaction, planned work products, and
               funding responsibilities. NRC drafted a memorandum of
               understanding and submitted it to DOE, but its approval has been
               delayed by additional negotiations between the two agencies on the
               details of the agreement. As a result, according to the program
               manager for the Next Generation Nuclear Plant, DOE has yet to
               transfer funds to NRC for the purpose of developing a licensing
               strategy, as authorized by the Energy Policy Act of 2005, even
               though DOE has approved a transfer of $250,000 for fiscal year
               2006 and plans to transfer $2 million in fiscal year 2007.

               Although they approved the draft memorandum of understanding, the
               NRC commissioners have expressed concerns about allocating agency
               resources to the Next Generation Nuclear Plant project because the
               agency anticipates an influx of up to 18 license applications for
               new light water reactors in the near future. As a result, NRC has
               determined that these upcoming applications will have priority
               over the Next Generation Nuclear Plant in order to ensure their
               timely review and approval. Furthermore, NRC has determined that
               it will participate in the Next Generation Nuclear Plant project
               only to the extent that DOE funding will support.

               Nevertheless, NRC has taken certain actions that will support
               licensing the Next Generation Nuclear Plant. In particular, NRC
               has been developing a licensing process that could be used for
               advanced nuclear reactor designs and that would provide an
               alternative to its current licensing framework. Under the current
               framework of regulations, an application for an advanced reactor
               design must first undergo a detailed review by NRC in order to
               determine which technical requirements, originally developed
               specifically for light water reactors, are also applicable to
               advanced reactors. Furthermore, NRC must determine whether the
               license application presents issues that are not addressed by the
               current framework. In an effort to provide an alternative to this
               process, NRC issued a proposal in May 2006 (for public review and
               comment) for licensing requirements that would be "technology
               neutral" while still focusing on reactor safety and performance.
               Under the new technology-neutral framework, the licensing process
               would establish general safety requirements that could be applied
               either to light water reactors or non-light-water reactors, such
               as the Next Generation Nuclear Plant. These high-level safety
               requirements would be supplemented by technology-specific
               regulatory guidance.

               Aside from developing a licensing strategy, NRC will need to
               enhance its technical capability to review a license application
               for a gas-cooled reactor, such as the Next Generation Nuclear
               Plant. In 2001, NRC completed an assessment of its readiness to
               review license applications for advanced reactors. The assessment
               identified skill gaps in areas such as accident analysis, fuel,
               and graphite, which apply to gas-cooled reactors.18 Furthermore,
               it identified a "critical" skill gap in inspecting the
               construction of a gas-cooled reactor. As a result of the 2001
               assessment, NRC issued a detailed plan in 2003 to address gaps in
               expertise and analytical tools needed to license advanced
               reactors, including gas-cooled reactors. However, since issuing
               the plan, NRC has taken limited steps to enhance its technical
               capability related to gas-cooled reactors because, until recently,
               it had not anticipated receiving a license application for a
               gas-cooled reactor. In addition to training NRC employees, NRC
               officials said that they plan to rely on expertise from industry,
               DOE national laboratories, and international research programs,
               and that how and when these gaps are addressed will ultimately
               depend on the schedule and technology selected for the Next
               Generation Nuclear Plant. Furthermore, NRC officials said that
               addressing these skill gaps will be difficult given the potential
               influx of license applications for advanced light water reactors.

      DOE Is Pursuing a More Technologically Advanced Approach Compared with Other
            Options in an Effort to Ensure the Plant's Commercial Viability

               DOE is beginning to obtain input from potential industry
               participants that would help DOE determine its approach to
               ensuring the commercial viability of the Next Generation Nuclear
               Plant. In the interim, DOE is pursuing a more technologically
               advanced approach compared with the recommendations of the
               Independent Technology Review Group and the Nuclear Energy
               Research Advisory Committee. DOE has implemented some of the
               recommendations to scale back the technological advancements being
               pursued, but DOE officials said that a number of the
               recommendations would not help ensure the commercial viability of
               the project. In particular, DOE has not implemented the
               recommendation to accelerate design and completion of the plant.

    The Plant Must Be Commercially Viable and Attract Utilities That Would Build the
    Plants to Help Meet the Nation's Energy Needs

               The objective of designing a commercially viable Next Generation
               Nuclear Plant is recognized in the Energy Policy Act of 2005 and
               in DOE's justification of the need for the plant. For example, the
               act directs DOE's R&D to examine reactor designs that, among other
               things, are economically competitive with other electricity
               generation plants and that are more efficient and cost less than
               existing reactors.19 The Independent Technology Review Group
               concluded that, in addition to cost and performance, the most
               important consideration for commercial viability would be to
               reduce the risk associated with deploying new technologies. The
               review group cautioned that attempting to achieve too many
               significant technological advances in the plant could result in it
               becoming an exercise in R&D that fails to achieve its overall
               objectives, including commercial viability. Another key factor
               likely to affect the plant's commercial viability is the time
               frame for its completion. For example, the commercial
               attractiveness could be affected by competition with other
               high-temperature gas-cooled reactors under development and
               potentially available sooner, such as one in South Africa,
               although these other reactor designs would also need to be
               licensed by NRC before being deployed in the United States.

               DOE acknowledges the risk of designing and building a plant that
               is not commercially viable and has taken initial steps to address
               this challenge. For example, DOE has established what it considers
               to be "aggressive but achievable" goals, such as producing
               hydrogen at a cost low enough to be competitive with gasoline, and
               other goals consistent with targets identified by the Independent
               Technology Review Group, which included industry representatives.
               Furthermore, DOE initiated two efforts in July 2006 to obtain
               input from industry, although these efforts are at an early stage
               and it is too early to determine their outcome. DOE is seeking
               industry input in two areas: (1) the design of the plant and (2)
               the business considerations of deploying the plant. With regard to
               the design of the plant, DOE announced its intent to fund multiple
               industry design teams to complete studies by May 2007. According
               to DOE officials, the industry design teams would develop
               preconceptual designs (and associated cost estimates) for every
               aspect of the plant, including the reactor and hydrogen production
               technology. DOE considers the studies to be an important first
               step that could help focus R&D for the Next Generation Nuclear
               Plant. With regard to the business considerations of deploying the
               plant, DOE began participating in meetings with representatives
               from reactor vendors, utilities, and potential end users in order
               to obtain their insight into the market conditions under which the
               plant would be commercially viable, such as the cost of
               electricity.

               Until DOE develops a better understanding of the business
               requirements for the Next Generation Nuclear Plant, DOE's R&D
               plans are supporting multiple design options. For example, DOE is
               conducting R&D to support two distinct designs of the
               very-high-temperature reactor-pebble bed and prismatic
               block-rather than focusing on one design that may ultimately be
               found to be less commercially attractive.20 DOE officials told us
               the department's role is to determine the technical limits of the
               plant, which industry can then use to propose specific designs
               considered to be commercially viable. Assuming that the R&D
               supports proceeding with the project, DOE intends to select from
               among designs proposed by industry. DOE officials said that the
               selection would be based on objective and transparent criteria,
               such as the ability of the proposed design to be licensed by NRC-a
               key requirement for the commercial viability of deploying
               additional plants.

               DOE Has Implemented Some Recommendations to Lessen the R&D Required for the
               Plant

    			  Compared with other high-temperature gas-cooled reactors,
               including the two reactors operating in China and Japan, the Next
               Generation Nuclear Plant represents a technological advance with
               regard to size, operating temperature, fuel type, and the coupling
               of electricity generation and hydrogen production in one plant.
               These technological advancements require substantial R&D on
               virtually every major component of the plant. Examples of how the
               Next Generation Nuclear Plant advances existing technology include
               the following:

               o  DOE is conducting R&D on an advanced uranium fuel composition
               that could improve the safety and performance of the
               very-high-temperature reactor compared with the reactors in China
               and Japan and R&D efforts in France and South Africa. However, the
               performance of the advanced fuel composition is not proven and
               requires fundamental R&D.

               o  The thermal power of the very-high-temperature reactor design
               is expected to be up to 60 times greater than the reactors in
               China and Japan. The larger reactor creates significant
               challenges-for example, with regard to manufacturing the pressure
               vessel, which houses the reactor core. According to DOE officials,
               the pressure vessel would be more than twice as large as a light
               water reactor pressure vessel, and there is currently only one
               steel manufacturer, in Japan, that has the potential to scale up
               its production to produce such a vessel. (See fig. 4 for an
               illustration of the anticipated size of the very-high-temperature
               reactor pressure vessel.)

               Figure 4: The Anticipated Size of the Next Generation Nuclear
               Plant Reactor Pressure Vessel Compared with Light Water Reactor
               Pressure Vessels Currently in Use

               o  The plant would extend the application of nuclear technology
               into a new area-the use of process heat from the reactor for the
               production of hydrogen or other applications, such as water
               desalination. Currently, no nuclear reactor is coupled with a
               hydrogen plant, although related R&D is being conducted overseas.
               The inclusion of hydrogen production requires R&D on the
               technology for transferring the heat from the reactor to the
               hydrogen plant and introduces considerations not present in other
               nuclear plants, such as how an equipment failure in the hydrogen
               plant could affect the operation and safety of the reactor.

               o  DOE aims to operate the reactor at a higher temperature than
               other gas-cooled reactors-up to 950 degrees Celsius-which
               increases the fuel and materials R&D needed for the plant and may
               require R&D on materials not previously used in nuclear plants.
               According to DOE officials, the gas-cooled test reactor in Japan
               has reached a comparable temperature, but just for short periods
               of time. The goal of operating at the higher temperature is to
               more efficiently use fuel, generate electricity, and produce
               hydrogen.

               As recommended by the Independent Technology Review Group, DOE
               revised its R&D plans to lessen the technical challenge of
               designing and building the Next Generation Nuclear Plant. Most
               importantly, DOE reduced the planned operating temperature of the
               reactor from 1,000 degrees Celsius to no more than 950 degrees
               Celsius. According to Idaho National Laboratory officials, the
               small reduction is significant because it means that less R&D is
               required to develop advanced materials to build the reactor. In
               particular, it enables DOE to use existing metals rather than
               develop completely new classes of materials. Another example of a
               recommendation that DOE has implemented is to focus on an indirect
               power conversion cycle, which uses an intermediate heat exchanger
               to transfer the heat from the reactor to the electricity
               generation system. In contrast, a direct cycle, in which the same
               helium gas that cools the reactor flows directly to the system
               that generates electricity, would be more efficient but would
               require the development of new power conversion technology. An
               indirect cycle still requires R&D-specifically, on the
               intermediate heat exchanger-but relies on existing power
               conversion technology.

               DOE, however, has not adopted other recommendations-in particular,
               to revise its R&D plan to focus on a uranium dioxide fuel kernel,
               which has been more widely used and researched than the advanced
               uranium oxycarbide fuel kernel DOE is currently researching.21 The
               Independent Technology Review Group considered DOE's fuel R&D plan
               more ambitious than necessary and concluded that focusing on the
               more mature fuel technology would reduce the risk of not meeting
               the schedule for the plant. The Nuclear Energy Research Advisory
               Committee also suggested that refocusing the fuel R&D would allow
               DOE to accelerate its schedule. The recommendation to refocus the
               fuel R&D is significant because-as generally agreed by DOE, NRC,
               and industry officials-fuel R&D is one of the most important
               technical challenges to the plant. Not only must the fuel perform
               to design expectations, but it must also be licensed as safe by
               NRC. Nevertheless, DOE has continued to focus on the advanced
               uranium oxycarbide fuel because it has the potential for better
               performance. In addition, DOE officials said that the fuel R&D
               program is focused on the most significant challenge-the fuel
               coatings, which is independent of the fuel kernel composition. To
               respond to the Independent Technology Review Group's
               recommendation, DOE decided to test the performance of the two
               types of fuel kernels side-by-side as part of its fuel R&D plan.

               The Nuclear Energy Research Advisory Committee also recommended
               that DOE re-evaluate the dual mission of demonstrating both
               electricity generation and hydrogen production.22 Although the
               advisory committee did not recommend what the focus of the Next
               Generation Nuclear Plant should be-electricity generation or
               hydrogen production-it wrote that the dual mission would be much
               more challenging and require more funding than either mission
               alone. Instead, DOE's R&D is currently supporting both missions,
               and DOE officials said they consider the ability to produce
               hydrogen (or to use process heat for other applications) key to
               convincing industry to invest in the Next Generation Nuclear Plant
               rather than advanced light water reactors similar to the current
               generation of nuclear power plants operating in the United States.
               Furthermore, Idaho National Laboratory officials said that while
               the option of re-evaluating the dual mission remains open,
               including both missions would allow utilities that may invest in
               the plant greater flexibility in meeting the needs of the markets
               they serve.

    			  DOE Has Not Implemented Recommendations to Accelerate Design and
    			  Completion of the Next Generation Nuclear Plant

               A key recommendation of the Nuclear Energy Research Advisory
               Committee was to accelerate the project and deploy the plant much
               earlier than planned by DOE. The advisory committee based its
               recommendation on the assumption that participation in the project
               by industry and international partners would be greater if the
               project were accelerated because of a greater interest in
               near-term projects. Representatives of the Nuclear Energy
               Institute, which represents utilities that operate nuclear power
               plants, also told us that accelerating the project would increase
               the probability of successfully commercializing the plant. As one
               possible approach to acceleration, the advisory committee further
               recommended that DOE design the Next Generation Nuclear Plant to
               be a smaller reactor that could be upgraded and modified as
               technology advances. For example, the initial fuel for the plant
               would be designed to be easily replaced with more advanced fuel.
               Under this approach, DOE would determine the plant size that could
               be scaled up to support full-size commercial application. DOE
               officials estimated that accelerating the project as recommended
               by the advisory committee would reduce the project's total cost by
               about 20 percent. However, DOE officials consider the schedule
               high risk and doubt that the degree of acceleration recommended
               could be achieved. Furthermore, according to DOE officials, a
               smaller reactor would require the same R&D as a larger reactor but
               would not support future NRC licensing of a full-scale plant,
               which is critical to the plant's commercial viability.

               Idaho National Laboratory officials also consider the schedule
               proposed by the advisory committee to be high risk, potentially
               resulting in the need to redo design or construction work.
               Nevertheless, the laboratory has proposed accelerating the
               schedule, but to a lesser extent than recommended by the advisory
               committee. According to laboratory officials, if DOE does not
               begin design sooner than currently planned, too much R&D and
               design work will be compressed into the shorter time frame after
               DOE begins design in fiscal year 2011, and the department will not
               be able to complete the plant by fiscal year 2021. Consequently,
               the laboratory has proposed beginning design earlier than planned
               by DOE, which would also reduce the scope of the R&D by focusing
               on fewer design alternatives. The laboratory's proposed schedule
               would result in completing the plant up to 3 years earlier than
               under DOE's schedule. While the laboratory's proposed schedule
               would slightly reduce the project's total cost estimate, it would
               require that DOE provide more funding in the near term. For
               example, in fiscal year 2007, Idaho National Laboratory estimates
               that R&D on the very-high-temperature reactor design would need to
               be increased from $23 million (the amount requested by DOE in its
               budget submission) to $100 million.

               DOE officials said that the laboratory's proposed schedule is the
               best option for accelerating the plant and that they would
               consider it if there were adequate funding and sufficient demand
               among industry end users to complete the project sooner. In
               addition, DOE officials said that even if the schedule is not
               accelerated, increasing the funding for the project would enable
               additional R&D to be conducted to increase the likelihood that the
               plant is completed by fiscal year 2021. For example, DOE officials
               stated that its current R&D plans for the very-high-temperature
               reactor design could support doubling the department's fiscal year
               2007 budget request of $23 million. However, DOE has limited
               funding for nuclear energy R&D and has given other projects, such
               as developing the capability to recycle fuel from existing nuclear
               power plants, priority over the Next Generation Nuclear Plant.

               We consider it too soon for DOE to determine, based on its early
               R&D results and interactions with industry, whether DOE should
               accelerate or maintain its current schedule for design and
               completion of the Next Generation Nuclear Plant. DOE's problems
               with project management call into question the department's
               ability to successfully accelerate its schedule for the plant. The
               risk of similar problems in managing the Next Generation Nuclear
               Plant is complicated by the fact that the responsible office
               within DOE-the Office of Nuclear Energy-does not have previous
               experience in managing a design and construction project of this
               size.

               Concluding Observations

    			  DOE is making progress in implementing its plans for the Next
               Generation Nuclear Plant, including R&D and efforts to involve
               industry stakeholders. However, these efforts are at the beginning
               stages of a long project not scheduled to be completed until
               fiscal year 2021. Consequently, it is too soon to determine how
               successful DOE will be in designing a technically and commercially
               viable plant. Furthermore, in our view, it is too soon to support
               a decision to accelerate the project, as recommended by the
               department's Nuclear Energy Research Advisory Committee, to ensure
               that the plant will be attractive to industry participation and
               investment. Accelerating the project would require that DOE narrow
               the scope of its R&D and begin designing the plant before having
               initial research results on which to base its design decisions.
               This could result in having to redo work if future research
               results do not support DOE's design decisions. In addition, DOE
               has only recently begun to systematically involve industry in the
               project in order to obtain industry views on issues such as the
               design of a commercially viable plant and the market conditions
               under which a plant would be competitive with other options. Such
               input is critical to key decisions, such as whether DOE should
               design a less technologically advanced plant that is available
               sooner rather than a larger, more technologically advanced plant
               that requires more time to develop. Finally, DOE's history of
               problems managing large projects on budget and within schedule
               raises concerns about the department's ability to complete the
               Next Generation Nuclear Plant in the time frame set forth in the
               Energy Policy Act of 2005, and accelerating the schedule would
               only add to these concerns. Given these considerations, we do not
               support at this time the Nuclear Energy Research Advisory
               Committee's recommendation-which DOE has not implemented-to
               accelerate the schedule for the Next Generation Nuclear Plant. DOE
               will be in a better position to make any future decision to
               accelerate its schedule once it has obtained more research results
               and information from industry stakeholders about the design and
               market conditions needed for a commercially viable plant.

               Agency Comments and Our Evaluation

    			  We provided a draft of this report to DOE and NRC for their review
               and comment. In oral comments, DOE stated that the report's
               description of the Next Generation Nuclear Plant project
               accurately summarizes the many interviews, presentations, and
               program documents DOE provided to us. DOE also provided technical
               comments, which we incorporated, as appropriate. In its written
               comments (see app. II), NRC commended GAO's effort to ensure that
               the report is accurate and constructive. We incorporated, as
               appropriate, NRC's clarifying comments regarding NRC licensing of
               the Next Generation Nuclear Plant.

               We are sending copies of this report to interested congressional
               committees, the Secretary of Energy, the Chairman of the Nuclear
               Regulatory Commission, and other interested parties. We will also
               make copies available to others upon request. In addition, the
               report is available at no charge on the GAO Web site at
               http://www.gao.gov.

               If you or your staff have any questions about this report, please
               contact me at (202) 512-3841 or wellsj@gao.gov. Contact points for
               our Offices of Congressional Relations and Public Affairs may be
               found on the last page of this report. GAO staff who made major
               contributions to this report are listed in appendix III.

               Sincerely yours,

               Jim Wells Director, Natural Resources and Environment

               Appendix I: Scope and Methodology

    			  To determine the Department of Energy's (DOE) progress in meeting
               its schedule for the Next Generation Nuclear Plant, we analyzed
               DOE's project plans, interviewed DOE and Idaho National Laboratory
               officials, and observed research and development (R&D) activities
               at Idaho National Laboratory, including experiments being
               conducted to test the performance of materials for use in the
               plant and to model the flow of helium gas in the reactor core. We
               reviewed project plans for the major R&D components of the
               project, including fuel, materials, and hydrogen production. We
               also reviewed the sections of the Energy Policy Act of 2005
               requiring the establishment of the Next Generation Nuclear Plant
               as a DOE project and DOE's guidance on program and project
               management for the acquisition of capital assets (DOE order
               413.3). We compared DOE's schedule for the Next Generation Nuclear
               Plant with the requirements set forth in the act and in DOE's
               order. Because of the project's long time frame, we focused on
               DOE's progress in meeting near-term milestones, specifically in
               completing the first phase of the project as defined in the act.
               At the time of our review, DOE had completed the first step in its
               project management process (approval of mission need), and we
               reviewed DOE's statement of mission need for the Next Generation
               Nuclear Plant, which documented this step.

               Regarding the progress of DOE and the Nuclear Regulatory
               Commission (NRC) in developing a licensing strategy for the Next
               Generation Nuclear Plant, we reviewed the draft memorandum of
               understanding between DOE and NRC for establishing the guiding
               principles for interactions between the two agencies. In addition,
               we reviewed documentation relating to the approval of the draft
               memorandum of understanding by the NRC commissioners, including
               the written comments of each of the five commissioners. To gain a
               further understanding of NRC licensing of gas-cooled reactors, we
               reviewed NRC's advance notice of proposed rule making, issued May
               2006, on a technology-neutral framework for reactor licensing;
               NRC's Future Licensing and Inspection Readiness Assessment, which
               was issued in October 2001 and evaluated, among other things, NRC
               skill gaps related to the licensing of gas-cooled reactors; and an
               April 2003 NRC research plan to support licensing of advanced
               reactors. Furthermore, we interviewed officials from DOE's Office
               of Nuclear Energy; NRC's Office of Nuclear Regulatory Research,
               which has responsibility for programs related to advanced reactor
               designs; and Idaho National Laboratory.

               To examine DOE's approach to ensuring the commercial viability of
               the project, we analyzed the reports of two independent advisory
               groups that reviewed the project-a 2004 report of the Independent
               Technology Review Group, which was coordinated by Idaho National
               Laboratory and composed of an international group experienced in
               the design, construction, and operation of nuclear systems; and a
               2006 report of DOE's Nuclear Energy Research Advisory Committee,
               which provides independent advice to DOE on science and technical
               issues associated with the planning, management, and
               implementation of nuclear energy programs. We interviewed DOE and
               Idaho National Laboratory officials regarding the reports'
               recommendations, and we interviewed the chairmen of both advisory
               groups to gain further insight into the recommendations. (The
               chairman of the Independent Technology Review Group was working as
               a consultant for Idaho National Laboratory at the time we
               interviewed him.) In addition, we analyzed Idaho National
               Laboratory's March 2006 Preliminary Project Management Plan for
               the Next Generation Nuclear Plant. This plan discusses the risks
               associated with the project and presents three options for
               scheduling the R&D, design, construction, start-up, and testing of
               the plant. We interviewed representatives of two of the primary
               companies that have conducted R&D and designed high-temperature
               gas-cooled reactors (the South African Pebble Bed Modular Reactor
               company and General Atomics, based in San Diego, California). We
               also interviewed Nuclear Energy Institute officials; the president
               of the National Hydrogen Association; a representative of DOE's
               Argonne National Laboratory with experience in advanced reactor
               design and assessment of the safety of gas-cooled reactors; and
               nuclear energy and materials experts from the Union of Concerned
               Scientists, an independent nonprofit organization. Finally, we
               attended the American Nuclear Society's 2006 annual meeting, which
               included a number of sessions on nuclear fuels and materials R&D
               related to advanced nuclear energy systems, including the Next
               Generation Nuclear Plant; and we observed a meeting of industry,
               DOE, and Idaho National Laboratory officials regarding the
               structure of a public-private partnership to develop the plant.

               We performed our work from April to September 2006 in accordance
               with generally accepted government auditing standards.

               Appendix II: Comments from the Nuclear Regulatory Commission

    			  Appendix III: GAO Contact and Staff Acknowledgments

    			  GAO Contact

    			  Jim Wells, (202) 512-3841 or wellsj@gao.gov

               Staff Acknowledgments

    			  In addition to the contact named above, Raymond H. Smith Jr.
               (Assistant Director), Joseph H. Cook, Bart Fischer, and Fatima Ty
               made key contributions to this report. Also contributing to this
               report were John Delicath, Doreen Feldman, Mark Goldstein, Keith
               A. Rhodes, and Rebecca Shea.

               GAO�s Mission

    			  The Government Accountability Office, the audit, evaluation and
               investigative arm of Congress, exists to support Congress in
               meeting its constitutional responsibilities and to help improve
               the performance and accountability of the federal government for
               the American people. GAO examines the use of public funds;
               evaluates federal programs and policies; and provides analyses,
               recommendations, and other assistance to help Congress make
               informed oversight, policy, and funding decisions. GAO's
               commitment to good government is reflected in its core values of
               accountability, integrity, and reliability.

               Obtaining Copies of GAO Reports and Testimony

    			  The fastest and easiest way to obtain copies of GAO documents at
               no cost is through GAO's Web site ( www.gao.gov ). Each weekday,
               GAO posts newly released reports, testimony, and correspondence on
               its Web site. To have GAO e-mail you a list of newly posted
               products every afternoon, go to www.gao.gov and select "Subscribe
               to Updates."

               Order by Mail or Phone

    			  The first copy of each printed report is free. Additional copies
               are $2 each. A check or money order should be made out to the
               Superintendent of Documents. GAO also accepts VISA and Mastercard.
               Orders for 100 or more copies mailed to a single address are
               discounted 25 percent. Orders should be sent to:

               U.S. Government Accountability Office 441 G Street NW, Room LM
               Washington, D.C. 20548

               To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax:
               (202) 512-6061

               To Report Fraud, Waste, and Abuse in Federal Programs

    			  Contact:

               Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail:
               fraudnet@gao.gov Automated answering system: (800) 424-5454 or
               (202) 512-7470

               Congressional Relations

    			  Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400
               U.S. Government Accountability Office, 441 G Street NW, Room 7125
               Washington, D.C. 20548

               Public Affairs

    			  Paul Anderson, Managing Director, AndersonP1@gao.gov (202)
               512-4800 U.S. Government Accountability Office, 441 G Street NW,
               Room 7149 Washington, D.C. 20548

    16One system, the thermochemical cycle, uses a series of chemical
    reactions to convert water to hydrogen and oxygen. The other system,
    high-temperature electrolysis, uses electricity to produce hydrogen from
    steam. In August 2006, DOE announced its intent to fund two projects to
    partner with industry to study the economic feasibility of producing
    hydrogen at existing commercial nuclear power plants. According to a DOE
    official, whereas the projects at existing plants would use existing
    technology for electrolysis of water, the high-temperature electrolysis
    being studied for the Next Generation Nuclear Plant would be based on
    electrolysis of steam, which is expected to be a more efficient and
    economical means of producing hydrogen.

    17The act also directs DOE to seek NRC's active participation throughout
    the duration of the project-for example, to avoid design decisions that
    would compromise safety or impair the accessibility of safety-related
    components for inspection and maintenance.

    18As defined in the Future Licensing and Inspection Readiness Assessment,
    published by NRC in September 2001, skill gaps occur when individuals with
    technical expertise are working in other areas within the agency, are near
    retirement or are expected to leave the agency, or do not exist in the
    agency.

    19Section 641 of the act provides that the prototype plant should be based
    on R&D activities supported by the Generation IV Nuclear Energy Systems
    Initiative carried out under another provision of the act. In conducting
    the Generation IV initiative, the Secretary of DOE is directed by section
    952(d) of the act to look at project designs that meet these criteria.

    20The pebble bed design, which is the focus of R&D in South Africa and
    China, uses fuel particles formed into billiard-ball-size graphite spheres
    that slowly move through the reactor core in a continuous refueling
    process. In the prismatic block design, which is being advanced in France
    and Japan and by General Atomics in the United States, fuel particles are
    formed into cylindrical rods that are loaded into large graphite blocks
    making up the reactor core, which is periodically refueled in a batch
    process.

    21Whereas the more widely researched fuel kernel is composed of uranium
    dioxide, the advanced composition incorporates both uranium dioxide and
    uranium oxycarbide.

    22The Energy Policy Act of 2005 directs that development of
    high-temperature hydrogen production technology be one of the major
    project elements and that the plant be used to generate electricity, to
    produce hydrogen, or to both generate electricity and produce hydrogen.

    (360698)

    www.gao.gov/cgi-bin/getrpt? GAO-06-1056 .

    To view the full product, including the scope
    and methodology, click on the link above.

    For more information, contact Jim Wells at (202) 512-3841 or
    wellsj@gao.gov.

    Highlights of GAO-06-1056 , a report to the Chairman, Subcommittee on
    Energy and Resources, Committee on Government Reform, House of
    Representatives

    September 2006

    NUCLEAR ENERGY

    Status of DOE's Effort to Develop the Next Generation Nuclear Plant

    Under the administration's National Energy Policy, the Department of
    Energy (DOE) is promoting nuclear energy to meet increased U.S. energy
    demand. In 2003, DOE began developing the Next Generation Nuclear Plant,
    an advanced nuclear reactor that seeks to improve upon the current
    generation of operating commercial nuclear power plants. DOE intends to
    demonstrate the plant's commercial application both for generating
    electricity and for using process heat from the reactor for the production
    of hydrogen, which then would be used in fuel cells for the transportation
    sector. The Energy Policy Act of 2005 required plant design and
    construction to be completed by 2021.

    GAO was asked to examine (1) the progress DOE has made in meeting its
    schedule for the Next Generation Nuclear Plant and (2) DOE's approach to
    ensuring the commercial viability of the project. To meet these
    objectives, GAO reviewed DOE's research and development (R&D) plans for
    the project and the reports of two independent project reviews, observed
    R&D activities, and interviewed DOE, Nuclear Regulatory Commission (NRC),
    and industry representatives.

    DOE has prepared and begun to implement plans to meet its schedule to
    design and construct the Next Generation Nuclear Plant by 2021, as
    required by the Energy Policy Act of 2005. Initial R&D results are
    favorable, but DOE officials consider the schedule to be challenging,
    given the amount of R&D that remains to be conducted. For example, while
    researchers have successfully demonstrated in a laboratory setting the
    manufacturing of nuclear fuel for the reactor, the last of eight planned
    experiments to test fuel performance is not scheduled to conclude until
    2019. DOE plans to initiate the design and construction phase, which also
    would continue R&D work, in fiscal year 2011, if the R&D results support
    proceeding with the project. The act also requires that DOE and NRC
    develop a licensing strategy for the plant by August 2008, and the two
    agencies are in the process of finalizing a memorandum of understanding to
    begin work on this requirement.

    DOE is just beginning to obtain input from potential industry participants
    that would help determine the approach to ensuring the commercial
    viability of the Next Generation Nuclear Plant. In the interim, DOE is
    pursuing a more technologically advanced approach, compared with other
    options, for ensuring the plant's commercial viability, and DOE has
    implemented some (but not all) of the recommendations made by two advisory
    groups for improving the project. For example, as recommended by one
    advisory group, DOE lessened the need for R&D by lowering the reactor's
    planned operating temperature. In contrast, DOE has not accelerated its
    schedule for completing the plant, as recommended by the Nuclear Energy
    Research Advisory Committee. The recommendation was based on concern that
    the time frame for completing the plant is too long to be attractive for
    industry participation, given that other advanced reactors may be
    available sooner. However, DOE believes the approach proposed by the
    committee would increase the risk of designing a plant that ultimately
    would not be commercially viable. Historically, problems with DOE's
    management of other major projects call into question its ability to
    accelerate design and completion of the Next Generation Nuclear Plant.

    DOE's Schedule for the Next Generation Nuclear Plant
    *** End of document. ***