Nuclear Energy: DOE's Next Generation Nuclear Plant Project Is at
an Early Stage of Development (20-SEP-06, GAO-06-1110T).	 
                                                                 
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. This	 
testimony, which summarizes a GAO report being issued today	 
(GAO-06-1056), provides information on DOE's (1) progress in	 
meeting its schedule for the Next Generation Nuclear Plant	 
project and (2) approach to ensuring the project's commercial	 
viability. For the report, 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-06-1110T					        
    ACCNO:   A61185						        
  TITLE:     Nuclear Energy: DOE's Next Generation Nuclear Plant      
Project Is at an Early Stage of Development			 
     DATE:   09/20/2006 
  SUBJECT:   Energy demand					 
	     Energy planning					 
	     Energy policy					 
	     Energy research					 
	     Nuclear energy					 
	     Program evaluation 				 
	     Research and development				 
	     Electric energy					 
	     Electric power generation				 
	     Financial analysis 				 
	     Nuclear powerplants				 
	     Next Generation Nuclear Plant Project		 
	     Nuclear Power 2010 Program 			 

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GAO-06-1110T

     

     * Summary
     * Background
     * DOE Has Made Initial Progress Toward Meeting Near-Term Miles
     * DOE Is Pursuing a More Technologically Advanced Approach Tha
     * Concluding Observations
     * GAO Contact and Staff Acknowledgments
          * Order by Mail or Phone

Testimony

Before the Subcommittee on Energy and Resources, Committee on Government
Reform, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 1:00 p.m. EDT

Wednesday, September 20, 2006

NUCLEAR ENERGY

DOE's Next Generation Nuclear Plant Project Is at an Early Stage of
Development

Statement of Jim Wells, Director Natural Resources and Environment

GAO-06-1110T

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here to discuss the Department of Energy's (DOE)
progress on its Next Generation Nuclear Plant demonstration project. My
testimony is based on our report being issued today, entitled Nuclear
Energy: Status of DOE's Effort to Develop the Next Generation Nuclear
Plant ( GAO-06-1056 ). As you know, the administration's National Energy
Policy calls for the greater use of nuclear power and hydrogen to meet the
nation's growing energy needs. The purpose of the Next Generation Nuclear
Plant project is to establish the technical and commercial feasibility of
producing both electricity and hydrogen from an advanced nuclear reactor.
DOE has been engaged since fiscal year 2003 in research and development
(R&D) on such a plant. The Energy Policy Act of 2005 formally established
the Next Generation Nuclear Plant as a DOE project and set further
requirements for the project's implementation, including obtaining a
license from the Nuclear Regulatory Commission (NRC) to operate the plant
and completing the project by fiscal year 2021.1 DOE estimates the total
cost of the plant to be approximately $2.4 billion. The act also
designated DOE's Idaho National Laboratory as the lead laboratory and
construction site for the plant and gave it responsibility for carrying
out cost-shared R&D, design, and construction with industry partners. The
Idaho National Laboratory has considerable experience with nuclear energy
technologies. Since 1949, 52 nuclear reactors have been designed and
tested at the site.
	
DOE has chosen the "very-high-temperature reactor," which is cooled by
helium gas, as the advanced reactor design for the Next Generation Nuclear
Plant. As its name implies, this reactor would operate at a much higher
temperature than existing nuclear power plants-up to about 950 degrees
Celsius (1,742 degrees Fahrenheit). This temperature would be roughly
three times the temperature of a light water reactor, which is cooled by
water and is the technology generally in use in the United States and
around the world. Despite the high temperature, there is general agreement
that a gas-cooled reactor offers the potential for improved safety. In
addition, 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. 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.

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

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 the 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. The report concluded that the uncertainties
associated with the project appeared manageable and that the project's
objectives could be achieved.2 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 project.3 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 DOE's R&D plans to ensure the
project's success.

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.4 In an effort to
improve cost and schedule performance, 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 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.5

2Idaho 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).

3The 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.

4GAO, 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).

My testimony discusses the results of our report being issued to you today
and addresses DOE's (1) progress in meeting its schedule for the Next
Generation Nuclear Plant and (2) approach to ensuring the commercial
viability of the project, including how DOE has implemented the
recommendations of the two advisory groups. For the report, we analyzed
DOE's project plans, interviewed DOE and Idaho National Laboratory
officials, and observed R&D efforts at Idaho National Laboratory.
Furthermore, we reviewed the two independent assessments of the project
and how DOE had responded to their recommendations. 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. We performed our work from April to September
2006 in accordance with generally accepted government auditing standards.

                                    Summary

DOE has prepared an R&D schedule designed to support the design and
construction of the Next Generation Nuclear Plant by fiscal year 2021, as
set forth in the Energy Policy Act of 2005. Initial R&D results have been
favorable, but DOE officials 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. DOE plans to initiate
design work in fiscal year 2011, but only if the R&D results support
proceeding with design and construction of the plant. With regard to
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. In the long term, NRC will
need to address "skill gaps" related to the agency's capability to license
a gas-cooled reactor such as the Next Generation Nuclear Plant. A 2001 NRC
assessment identified these skill gaps, but the commission has taken
limited action to address them because until recently it had not
anticipated receiving a license application for a gas-cooled reactor.

5GAO, 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).

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. The higher temperature would result
in more efficient fuel use and hydrogen production and thus would be a
more economically attractive plant. In addition, DOE is seeking industry
involvement on the design of the plant and the business considerations for
deploying it. In some cases, DOE officials' views on how best to achieve
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. For example, 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.

DOE believes accelerating the project would increase project risk-for
example, the risk of cost overruns or a failure to meet project
specifications-and would 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.

                                   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.6 According to DOE officials, the department has
three priorities for promoting nuclear energy. The first priority is
deploying new advanced light water reactors under the Nuclear Power 2010
program. The second priority is the Global Nuclear Energy Partnership,
launched in February 2006. The partnership's objectives 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. The third priority is
R&D on the Next Generation Nuclear Plant. According to DOE officials, the
department remains committed to this project even though the Global
Nuclear Energy Partnership has assumed a higher priority.

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.7 In 2002, the Generation IV
International Forum (together with DOE's Nuclear Energy Research Advisory
Committee) identified what it considered the six most promising nuclear
energy systems for further research and potential deployment by about
2030. DOE has selected one of the six advanced nuclear 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
International Forum members.

6While DOE is the federal agency tasked with promoting nuclear energy, NRC
is responsible for ensuring public health and safety with regard to
nuclear power.

7Members 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.

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. 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, and on technologies 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. In addition, Japan and China have
built small gas-cooled reactors.

 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, which divides the project into two phases.
For the first phase, DOE has been conducting R&D on fuels, materials, and
hydrogen production. 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. If R&D results at that time do not support the decision to proceed,
DOE may cancel the project. Assuming a request for proposal is issued, DOE
is planning to choose a design by 2013 from among those submitted by
reactor vendors. 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.

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.

Initial research results since DOE initiated R&D on the Next Generation
Nuclear Plant project in 2003 have been 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. 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 the 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. 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.8 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.

8Under 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.

DOE is also at the beginning stages of R&D on other key project areas such
as the hydrogen production system for the plant and materials development
and testing. For example, Idaho National Laboratory successfully completed
a 1,000-hour laboratory-scale test of one of two potential hydrogen
production systems in early 2006. 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. DOE also has selected and procured
samples of graphite-the major structural component of the reactor core
that will house the nuclear fuel and channel the flow of helium gas-and
designed experiments for testing the safety and performance of the
samples. Nevertheless, much of the required R&D for the graphite has not
yet begun and is not scheduled to be completed until fiscal year 2015.

Regarding licensing of the plant, DOE and NRC are in the process of
finalizing a memorandum of understanding that will establish a framework
for developing a licensing strategy. As required by the Energy Policy Act
of 2005, DOE and NRC are to jointly submit a licensing strategy by August
2008.9 NRC has drafted a memorandum of understanding and submitted it to
DOE, but its approval has been delayed by additional negotiations on
details of the agreement. Nevertheless, NRC has already taken certain
other actions to 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, which is structured toward light water
reactors.

In addition to 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.10
Furthermore, NRC identified a "critical" skill gap in inspecting the
construction of a gas-cooled reactor. As a result of its 2001 assessment,
NRC issued a detailed plan in 2003 to address the gaps in expertise and
analytical tools needed to license advanced reactors, including gas-cooled
reactors. However, NRC has since taken limited steps to enhance its
technical capabilities related to gas-cooled reactors because, until
recently, it had not anticipated receiving a license application for a
gas-cooled reactor.

9The 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.

 DOE Is Pursuing a More Technologically Advanced Approach Than 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-with regard to size, fuel type, and
the coupling of electricity generation and hydrogen production in one
plant-compared with the recommendations of the Independent Technology
Review Group and the Nuclear Energy Research Advisory Committee. These
technological advances require substantial R&D on virtually every major
component of the plant. For example, the advanced uranium fuel composition
that DOE is researching is not proven and requires fundamental R&D.

The Independent Technology 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 plant's 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 for the plant, such as producing hydrogen at a cost low
enough to be competitive with gasoline. Furthermore, DOE is beginning to
obtain industry input to help the department develop an approach for
ensuring the commercial viability of the plant. DOE initiated two efforts
in July 2006 to obtain input from industry on the design of the plant and
the business considerations of deploying the plant. Specifically, DOE
announced its intent to fund multiple industry teams to develop designs
(and associated cost estimates) for every aspect of the plant, including
the reactor and hydrogen production technology, by May 2007. In addition,
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. Until DOE develops a better understanding of the
business requirements for the Next Generation Nuclear Plant, 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.11

10As 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.

As recommended by the Independent Technology Review Group, DOE revised its
R&D plans to lessen the technological challenges of designing and building
the Next Generation Nuclear Plant. Most importantly, it 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, this small reduction is significant because it enables DOE to
use existing metals rather than develop completely new classes of
materials.

DOE, however, has not adopted other recommendations-in particular to
revise its R&D plans 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.12 The Independent Technology
Review Group considered DOE's fuel R&D plan on an advanced uranium fuel
composition 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. Nevertheless, DOE has continued to focus on the
advanced uranium oxycarbide fuel because it has the potential for better
performance. DOE officials also told us that the most significant
challenge with regard to the fuel is not its composition but rather the
coatings, which is independent of the fuel kernel composition. To respond
to the 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.

11The pebble bed design 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, 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.

12The fuel is composed of a small uranium kernel that is coated with
several protective layers. Whereas the more widely researched fuel kernel
is composed of uranium dioxide, the advanced composition incorporates both
uranium dioxide and uranium oxycarbide.

The Nuclear Energy Research Advisory Committee also recommended that DOE
re-evaluate the project's dual mission of demonstrating both electricity
and hydrogen production. Although the advisory committee did not recommend
what the project's focus 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.

Moreover, a key Nuclear Energy Research Advisory Committee recommendation
was to accelerate the project and deploy the plant much earlier than
planned by DOE in order to increase the likelihood of participation by
industry and international partners. 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. However, DOE officials
consider the advisory committee's 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 also
proposed accelerating the schedule, though 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 a short 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 fiscal year 2007 budget
submission) to $100 million.

DOE officials believe that the laboratory's current proposed schedule is
the best option for the plant and stated that they would consider
accelerating 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.

                            Concluding Observations

While DOE is making progress in implementing its plans for the Next
Generation Nuclear Plant, these efforts are at the beginning stages of a
long project and it is too soon to determine how successful DOE will be in
designing a technically and commercially viable plant. As we note in our
report, it is also too soon, in our view, to support a decision to
accelerate the project. Accelerating the schedule 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. 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.

Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions that you or other Members of the Subcommittee may
have.

                     GAO Contact and Staff Acknowledgments

For further information about this testimony, please contact me at (202)
512-3841 or [email protected]. Raymond H. Smith Jr. (Assistant Director),
Joseph H. Cook, John Delicath, and Bart Fischer made key contributions to
this testimony.

(360763)

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Highlights of GAO-06-1110T , a testimony before the Subcommittee on Energy
and Resources, Committee on Government Reform, House of Representatives

September 20, 2006

NUCLEAR ENERGY

DOE's Next Generation Nuclear Plant Project Is at an Early Stage of
Development

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.

This testimony, which summarizes a GAO report being issued today
(GAO-06-1056), provides information on DOE's (1) progress in meeting its
schedule for the Next Generation Nuclear Plant project and (2) approach to
ensuring the project's commercial viability. For the report, 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 work that remains to be conducted. For example,
while researchers have successfully demonstrated the manufacturing of
coated particle fuel for the reactor, the last of eight planned fuel tests
is not scheduled to conclude until 2019. DOE plans to initiate the design
and construction phase 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. 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, and DOE has implemented some (but not all) of the recommendations
made by two advisory groups. 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 committee was concerned that the time frame for
completing the plant is too long to be attractive to industry, 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. GAO believes DOE's
problems with managing other major projects call into question its ability
to accelerate design and completion of the Next Generation Nuclear Plant.

Actual Size and Magnified Views of the Coated Particle Fuel
*** End of document. ***