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		 

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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

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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 [email protected]. 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 [email protected]

           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.

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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
[email protected].

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
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