Duke Energy Corporation (NYSE:DUK)
Wells Fargo Securities Research, Economics & Strategy, 2013 Energy Symposium Conference
December 11, 2013, 8:00 AM ET
Buzz Miller - President, Southern Nuclear Development and Executive Vice President, Georgia Power Company
Stephen Byrne - President, Generation and Transmission and Chief Operating Officer, SCE&G
Dhiaa Jamil - Executive Vice President and President, Duke Energy Nuclear
Neil Kalton - Wells Fargo
Neil Kalton - Wells Fargo
The first panel is the New Nuclear Landscape. And I think we'll just go ahead and get right into it. We have Buzz Miller from Southern Company; Steve Byrne from SCANA; and Dhiaa Jamil, I pronounce that correctly, right, from Duke. I was nervous about that. So let me dive right in.
First, I think we're very fortunate to have two companies on the panel, who are building new nuclear units in the U.S. And we certainly want to dive into that a little bit later in the panel. But I thought maybe to start off, we'd go very high-level, and just get everyone's thoughts and feel free to explain in anyway you want, everyone's thoughts on just the future of nuclear in the U.S. And I know it's a bit open-ended, but feel free to kind of discuss how you want.
Maybe we'll start with Dhiaa, if that's okay.
Well, Neil, thank you again for having us here. Starting with the obvious, and that is nuclear, is a very important part of the energy mix in the U.S., representing 20% of total generation. It is the only emission-free basedload generation and very highly reliable.
Speaking for our company, nuclear represents 50% of the energy that we deliver in our Carolina service territory. And it's one of the main reasons why our rates are competitive and lower than national averages, because of the size of the nuclear fleet. The reliability of the fleet has continually gotten better, which has contributed to also the lower rates. So nuclear represents a very important part of the portfolio.
I would tell you that when we started down the journey of, speaking for my company, speaking for the new nuclear build, the drivers were the projection of load and the gas prices at the time. Fast forward from the time that we submitted our coal application back in the 2006, 2007 timeframe is when we started working on it. Drivers have changed, but the need for nuclear had remained.
The 50% of energy that's generated from our nuclear fleet come from 11 nuclear units in the Carolinas. Most of them, if not all, will be needed to be retired within the next 20 years. The most recent ones are Robinson plant and Oconee plant will need to be retired in the early 30s. So the strategy that we currently have is nuclear niche to continue to be part of the portfolio. We need to be planning for replacement of the plants that will be soon retiring.
Neil Kalton - Wells Fargo
Well, obviously since we're building two new nuclear plants. We think the future of nuclear is bright, certainly in the state of South Carolina and in United States. And if you look worldwide there is a number of plants that are actually under construction. So I think worldwide nuclear is going to play a very pivotal roles.
I do believe that you'll see some plants that will not make it economically. Some plants will be challenged from a technology perspective that were build four or sometimes five decades ago that will be shutdown in the years to come, and that shouldn't really surprise us.
If you were to take a look at the 100 plants operating today, and say, 10 years from now where you still have a 100-plus, four more that are currently under construction, I would say probably not. So we'll continue to see a couple of the plants that will be shutdown. But we think it's viable.
If we get any kind of carbon regulation or legislation to the end-user then the effects will be the same. If there is any regulation or legislation on carbon, I think the companies that make a bet on nuclear will be seen us a lot more valuable.
So not to repeat, everything is said. But our fleet, we have six units, is running great. We learn every day how to run it better. We are obviously making the same investment at SCANA in two new units. We're glad we started the project. Project is going well.
Everything we look at for the future, and you think about the timing of retirement of our own units, we're going to take the steps necessary to make sure nuclear is a option in the future too for generation. So we're very bullish on nuclear. And it's going to be with us and part of our portfolio for a long time.
Neil Kalton - Wells Fargo
And staying on this topic a bit, one of the perceptions of nuclear I think it probably depends on the part of the country you're in is of nuclear, sort of a negative perception, right, in terms of new build as well. How would you characterize the support that you each have in your own states in the federal level as well? I wonder if you could speak to that what you see in your region of the country, in your neck of the woods?
Well, in the southeast, where we are, its overwhelming support for nuclear. If you look at the communities around our three operating plants, tremendous support and we're very engaged in the community. We've always in a regular environment we've always been part of the communities we serve in.
For the two new units at Vogtle, pre-Fukushima, post- Fukushima, incredible support. And the state legislators to the commission, all across the state we have every electric provider in Georgia as part of the new project at Vogtle. So really it sets up very well for us and we're very confident and support remain.
Federally, I think you can even see that, we have loan guarantees that continue to be in the news. We're optimistic those will come to fruition. And so we think even up through the federal level to your question that commitment is there for nuclear. People recognize, it's necessary for the future. And we feel like we're well set there.
I echo the same sentiments, because the three panels here, all operated in regulated portions of the country. So we enjoy tremendous support. South Carolina is arguably the most pronuclear state in the country. In excess of 50% of our power now comes from nuclear. In addition to seven operating reactors, we have two reactors under construction.
Westinghouse makes fuel right around Columbia, South Carolina, maybe still operates a couple of training reactors. We have the Barnwell, low-level radioactive waste disposal site, and the Savannah River Site has operated there since 1950-ish. So people in our state are accustomed to nuclear activities.
Our delegation is usually support of the governors. Public Service Commission has affirmed the decision to build nuclear, every opportunity they've had by a seven to nothing vote. So in the state huge support. Federally, Energy Policy Act of '05 created some interesting incentives to build nuclear that both Southern and SCANA tend to take advantage of. So that's very positive and very popular with us.
And the Nuclear Regulatory Commission, even though they are a regulator, they have been a very reasonable regulator. And in fact, they have done exactly what they've said they are going to do. So while we may have our tussles of times with the Nuclear Regulatory Commission from a federal perspective, they've been true to their word, done exactly what they've said.
And, Neil, I guess for us not to repeat what Buzz and Steve had mentioned, we also operate in other states. Steve covered South Carolina very well. We enjoy similar support in North Carolina. North Carolina, politically and from a regulatory point of view, very supportive of nuclear. They understand the value of the diversity of that fuel source. They also, both state, understand the great number of high-paying jobs that nuclear brings as well as the tax base from those nuclear sites.
We have 11 operating units in North and South Carolina and we're thankful for that location. But we also have a nuclear presence in Florida. And Florida is just like South Carolina, one of the most supportive states when it comes to nuclear. Recently there's been some legislation that had modified some of the treatment of nuclear, but despite that they are still a very supportive state, when it comes to nuclear.
Our presence in Ohio and Indiana is a little different. Ohio, not just nuclear, but baseload generation in general, the regulatory environment there makes it very difficult to pursue anything in that state. And similarly in Indiana, from a baseload point of view, I think it would be difficult at this stage. But where we operate, we really were in a very good part of the country, when it comes to nuclear.
Neil Kalton - Wells Fargo
So sticking with Florida, clearly had an issue with Crystal River and the decision to retire that plant ultimately. So I'd take from your comments that suggest that Florida, because of that issue view that on a case-by-case basis. And this happened but that didn't seem to cause any lingering effects on their thought process on nuclear, is that a fair statement? How would you characterize?
Our portfolio in Florida is significantly influenced by gas at this point, particularly when we plan to retire a couple of coal units that percentage will go even higher. Maintaining the option for fuel to diversity, particularly in Florida is very important. As you know, we have an application with the NRC for license AP1000 similar to Summer and Vogtle at the Levy site.
Recently, you read in the news that we are planning to terminate the EPC that should not be viewed as a lack of commitment to the plant. We want to maintain that coal as an option for our customers in Florida. The change in the legislation and the way the EPC contract was constructed, was constructed such that the licenses received by January 14, with the waste confidence issue and other issues, that's not going to be possible. So given the legislation change, it was prudent for us to plan to terminate the EPC contract after January, but remain focused on getting the coal in Florida.
Neil Kalton - Wells Fargo
And Steve and Buzz, maybe sticking with sort of the issues at Crystal River and SONGS we've had recently, are these events that give your state commissions pause or are they cognizant? Does it give them concern, as they see you pursuing nuclear? Or do they view this is sort of things that happen on a case-by-case basis and doesn't really impact their thought process on nuclear. I don't know if I'm articulating that well, but I think you get the point.
I think our commission has been hugely supportive of the new nuclear bill. When you look at issues at plants likes SONGS, where the steam generator replacement didn't go well. We've replaced 100 steam generators in this country, so since one of them that didn't go well shouldn't damn the whole industry. And I think our commission is really pragmatic on issues like that. So they are very supportive of nuclear.
They can look at the fleets that operate around us whether it's our reactors that's been operating safely and effectively for 30 years or the Duke Fleet where they get 50% of their generation from nuclear. Southern Company, the same way the six units that they currently operate. I don't think that our commission will think twice about issues like that.
And if you look at the number of plants that are being closed in this country, a handful of nuclear plants shouldn't really surprise us with all the fossil units that are slowing down and we're closing six of our older smaller coal plants. We shouldn't be surprised with the same things that bear out in nuclear.
To your question, the commissions obviously are interested and stay engaged in what's going on relative to the fleet. They recognize uniqueness of individual facilities and plants. And they do their due diligence and they know we don't have those issues. So for building Vogtle, I mean commission again has been very engaged in what's going on. They understand the technical side of it.
They have a construction monitor who is engaged and sees everything in a very transparent process. He is a experienced nuclear construction engineer, and I'm confident that Georgia PSC recognizes AP1000, that they feel our existing fleet is good and safe and they recognize the AP1000 as an advancement over that, so they're very committed to it.
Neil Kalton - Wells Fargo Securities
I'd like to shift a little bit to Summer and Vogtle, and I wonder if Steve and Buzz you can update us on what's going on at the facilities or where things stand in the process, the issues that you're facing? Just sort of the high, a very broad question, but maybe Buzz if you could start on an update on Vogtle and what we should be on the lookout for the next six to 12 months.
So Vogtle, if contrary what my title says, my job is to get Vogtle built, get ready to run it and get the investment recovery. And so if you just think of those three things, on getting it built, I would tell you and welcome any questions, it's going very well. From licensing, it was a huge success, continued licensing and the interaction with the NRC, as Steve said is a huge success. And the most important thing about building is, building it right, building it with quality because this is going to be asset. It's going to be 60-80 years, maybe even longer. And so it's going to have huge value.
And on the construction side where we've gotten design and things aligned right, construction has gone incredibly well and you're seeing as the second unit comes behind the first unit, you don't hear the same questions, you don't hear the same noise and we're being very successful about lessons learnt, so I'd say it's very positive there. And we're getting ready to run it.
We've got about 350 people already hired and in training that would be part of the 800 that would run the two units. A 100 of those are licensed operator candidates and they are in training for that. Simulators are running, classes are running, interaction with SCANA on that front is very aggressive. And so we're off to a great start there. We've got inflows accredited in our training facilities for both operations and maintenance and technical training we just received. So that's going very well.
And then on investment recovery, which most people hear, stay really thin to, but again our process in Georgia, well, if you see a lot about it, it's a very effective, it's a transparent process. Construction monitor is with our people to sight all the time, and I spend a lot of time with them. Every dollar we've submitted since we started this project has been approved by the commission. And so we're in a great place here. And it's our job, just keep going ahead, and I am confident that we'll get it going and we're going to get our recovery.
Very similar story for SCANA, I think the SCANA project and the Southern project are benefiting from the fact that we're both constructing and we're close to each other. We have similar structures from our regulatory bodies, both federal and state. We do a lot of things together. Buzz knows as much about my project as I do and vice versa, so I think that's very positive.
The level standardization has helped us. The fact that China is building a couple of years ahead of us has been a huge benefit to us. The ability to go over there and see what an AP1000 is going to look like is a tremendous benefit. We've seen that from things like our first basemat pours, you go from the first one to the second one, you get about a 10% or 15% improvement, 20% improvement, and the timeframe to pour has been really significant. So on-sight activities are going very well.
The thing that we didn't necessarily anticipate going as well as it is has been the economy. So a terrible economy is a great time to build a capital intensive project for a couple of reasons. One is the escalation factors are coming back lower than we had anticipated. So in South Carolina, we have what's called the Base Load Review Act, which allows us to recover the financing cost as we go.
Tremendous advantage. So it keeps the financing charges to the customers lower overall. We think it's going to save about $1 billion to our customers over the construction period and about $4 billion over the life of the plan. The interest rates are actually lower than we had anticipated and the inflation indices are lower.
So right now, when you look at our original ask of our public service commission, which was in 2008, approved in early '09, we're about $600 million-plus below that original ask. That's our latest forecast. So you look at $6.3 billion approval and about a $5.7 billion current estimated cost for our 55% share of the plan, that's kind of lot better than we had anticipated. So that's been hugely positive for us.
And then on workforce, obviously a bad economy is a bad time we're looking for, but if you're looking for employees it's a good time to be looking, so whether we're talking about craft employees for construction or the technical folks that will operate the plants, we've been very successful in getting and retaining both sites. So finally the construction of the sites going well, the financing is going to extremely well and the workforce is readily available.
So if you think about what Steve just said, and you go back eight years, when we started this thing, we started negotiating contracts. The risk profiles for these projects, hyperinflation was a concern, concern from a lot of you all, concern for us, where you're going to get craft labor was a concern, where you're going to get people to trained to the operators was a concern, where you're going to get [ph] forge in and where you're going to buy this equipment, how you're going to get this license through the NRCs.
So if you think from our perspective the whole project, and we're kind of in the construction, the detail of that, but it's been derisked hugely as time has gone on. I mean procurement, where you're going to get all of that. Half of the contract is buying lot of these large components. And it's been a great success. We've got some areas where we still have to work on it, but if you go to the sites now, all this equipment we talked about how you're going to do this has come into the site.
So it's very positive there, the craft supply has been very good. The down economy helped mitigate other people doing things, so the supply craft has been good. The escalation inflation rates helped us both to do things within our contract to fix more things and make it a win-win with the contractors.
So from where we were to where we are now, if you look to the risk, but we have derisked multiple things. Doesn't mean we don't have risks, and is not complex, but it's from where we were, we know so much more now and the strength of project is really up in itself.
Neil Kalton - Wells Fargo
Just want to ask a follow-up on the cost. Clearly there has been some elements to project where the cost have been higher than expected, but have more than been helped by, as you mentioned, escalation, lower escalation costs, lower financing costs. How do the commissions look at that? Will they sort of isolate, and say, okay, in this area you had more cost than what you thought, and you were helped by fortunate things or will they sort of look at things on a holistic type basis, and say overall this project is under the initial budget that you projected, any comments on that?
So I would check in. Our commission is going to look at it, I mean staff will look at things detail, but ultimately they're going to look at it holistically. If you take the Vogtle project and we have differences in what we submitted as far as escalation and things, but costs are sort of similar.
And the commission is going to look at those, and what they are seeing and what our contracts, both for us -- I'll speak for us, but I think both of us, we're not seeing what happened in the past with rising construction cost, what we're seeing is its first of a kind, it's taken a little longer in cases, but the behavior of the project isn't, the whole bunch of changes, that are making cost skyrocket. It's more time.
And to offset that, Steve talked about the Energy Policy Act, you have production tax credits, we have the loan guarantees. Those are direct offsets to consumer. They're going to look at it holistically. When we started this, we projected we put the plant in service. It'd be about a 12% rate impact.
And with all the benefits going in line with that and where we are now, we project 6% to 8% rate impact. So the commission has got to look at that. And I'll tell, they do their job, but they support this project and confident that it will remain that way.
Actually for us it's a same thing. When people look at whether a project is on budget, over budget, under budget, they don't care about the individual buckets of money, they care about the project. When we construct a coal facility or hydro facility or natural gas plant, there will be specific areas where we would have projected a cost will be over in some areas and under in other, so as long as you're coming on the budget, I don't think that the commission is going to care. So to forecast a price for a plant and 10 years later to come in on that budget, I think they will be very pleased with that.
Neil Kalton - Wells Fargo
I had also wanted to discuss the issues at the Lake Charles facility with the sub-modules and kind of update us on that and the efforts to move some of that off-sight and how things are going there?
Lake Charles facility is a Chicago Bridge & Iron facility, actually constructed as a Shaw facility and Chicago Bridge & Iron acquired the Shaw Group that produces modules, so the AP1000s are built with modular construction techniques, a lot like an aircraft carrier would be. So the premises we get in sub-modules from this Lake Charles facility, they truck them to our sites and then we assemble them inside a big building, and then we lift them with the world's largest train and put them in place in the excavation.
Sub-module delivery has been slower than anticipated. They've had some startup issues at the facility in Lake Charles, which you might expect from a brand new facility for first of the kind construction. But they've also had some work force issues and some quality issues. Now, that they're working their way through. CB&I management team seems to be very keen to get these problems behind them and working very hard to do that. But as an assistance to that facility, we decided to de-scope it. And when I say, we I'm talking about the consortium of Westinghouse and Chicago Bridge & Iron, but with support from the both utilities.
So what that means is that some of this activity is going on at that modular assembly facility will be moved elsewhere. So we take some of the sub-modules and move them to different facilities. CA-03 for example is a tank. That tank is going to be constructed now in different places. So for Southern, it's going to be in Florida, for our project it will be in South Carolina. That was the work originally proposed to do at the Lake Charles facility.
Some other modules for example, the shield building that was originally proposed to be constructed at the Lake Charles facility. That's not going to be done at Newport News, in Virginia. So they are accustomed to Department of Defense work, so they are accustomed to the kind of regulatory environment that we work in. So that work seems to be going very well.
Some of the things that were supposed to be done at the Lake Charles facility, we've done at our sites. There is a sleeve that goes around the reactor vessel call CA-04, which is a module. Those modules were constructed at the Vogtle site and at the Summer site by our onsite teams and those are already been installed inside the containment vessel. So again that's going very well. So the de-scoping in that facility is paying dividends for us.
I'll now let, Buzz, talk a little bit about relieving more of the pressure from Lake Charles by taking some of their work at the site and finishing up the paper.
To kind of put in perspective for everybody here, so the modules that get -- the question really pertains to is there is one or two on there about the size of this room. And you're basically building a pretty fab giant. It's like giant steel concrete room. That's the one that we've had troubles with. If you listen to what he said here, there is a lot of other modules, and so called module construction that have been built for putting them in place. They're going very well.
So it really focuses on a couple of big ones. And for the near-term, what we've done with Lake Charles at both sites is, and we knew going in back to risk, getting quality suppliers back into the right frame of mind was a risk. And so we've been very successful in all the other places, where we're getting things and we've wrestled here at Lake Charles.
Several things have happened. Lake Charles is owned by Shaw's, now owned by CB&I, the change in leadership has been very effective in getting that facility into better problem solving to support the project. What we have all collectively agreed to do is these pieces, say of the joint rooms, so it's pieces of wall and floors. Those are the sub-module. We've brought them to the site and with closer supervision and a better nuclear environment, we're getting done. The fabrication is done. It's just getting the paperwork right.
So it's perfect the way it's got to be for the NRC, making any small modification repairs that have to be made to be in full compliance. We're doing that. And some of you see at Vogtle that all of the CA-20, the one, the size of this room, in both sites, all of the parts are at sites now. At Vogtle, we'll have it piece together by the end of this year essentially. Still welding on it and shortly after the first of the year we expect to again the giant frame pick it up about 1,200 tons and put it in place.
As we go forward, just like we've done in a lot of other places and what you would expect us to do is, okay, we have our second unit, what you're going to do. And with the contractors, since they are contractors' responsibility, they've looked at other facilities. And so we're basically getting work out of Lake Charles, doing it in the best place now, and for the long-term looking at other suppliers to perform that same work that are capable of doing that. It's not really rocket science. I'm not saying it's easy, but its steel fabrication. You just have to do it right and do it the nuclear way. And you do that, and you get your processes in place, and it just like the rest of the construction, it can go very well. And that's what we will expect.
Neil Kalton - Wells Fargo
I'm going to pause here and see if there are any questions from the audience. Please feel free if you have the question. Just make it on nuclear. Any questions, anybody? Yes, and I guess we have a microphone coming around.
This question I guess goes more to Dhiaa. It has to do with what hurdles do you face I think to get approval to potentially purchase a piece of Summer? And does it make sense to still purchase or would you rather do your own build?
I don't see it's an either or. The role of Summer plays into our integrated resource plan. Naturally, we're negotiating a small piece from the Santee portion of Summer. That does not really do anything for our plants to build our own plant in South Carolina, Lee. Again, the way to think about this is Lee is a replacement strategy for our retiring plants.
Summer is taking advantage of an opportunity. If we can work, negotiate the right terms for our customers and for our shareholders, which we're continuing to do and I would acknowledge that in our view both Summer and Vogtle are monumentally important, not only for the nuclear industry, but also for the states where they're being built.
So those projects, we're cheering for both of them to be successful and looking forward to support in anyway we can, both of them. But from a negotiation point of view, of course, I can't go into details there. We're continuing active negotiation with Santee on the project.
I think as people are aware SCE&G own 55% stake in Summer 2 and 3, and the state of South Carolina through a utility called Santee Cooper owns 45% of stake. Santee was interested in divesting in some of that share and they've been talking to a couple of other counterparties, but certainly were in discussions with Duke.
From our perspective, it's Santee's piece to sell. So if they want to sell it that's fine. If Santee ends up continuing with the 45% ownership share, that's good with us. If Duke wants to buy in, that's good with us too. So we're happy either way.
Neil Kalton - Wells Fargo
Any other questions, at this time? Right, seeing none. One of the topics or concerns has been raised by investors is labor cost. And I wonder if you could speak to that sort of the trends you're seeing with your labor force, how sticky they are? Maybe, Dhiaa, I'll start with you.
So we are a labor intensive business in nuclear. We enjoy very low fuel cost, but very intensive labor cost. Labor cost has been rising. The focus has been, you take a look at this industry, the focus over the last couple of decades has been to improve reliability. And we've really build up processes, which are labor intensive, build up capabilities, which are costly to improve reliability. And we've been hugely successful as an industry.
If you remember capacity factors for nuclear back in the early 90s we're in the 70% range. Today as a fleet, fleet for the country, they are approaching 90 and in certain years they are going to be 90. What an incredible number for a size of the fleet in this country, over a 100 units, collectively over 90% speaks volume for the reliability and the success we have achieved.
Speaking for my company, this year we'll mark the 15 year, where we've had capacity factors over 90% for the 11 units. But we have now arrived a place, where we recognize the mountain regulations, will have an upward pressure on operating cost.
We have shifted our focus within the company and in the industry on ways to streamline processes, try to achieve the same level of reliability more cost effectively. There is an industry-wide effort to manage the cumulative effects of the regulations and cumulative effect of all the changes that have resulted in improved reliability, but never at the expense of safety or compromising safety or reliability, I must add.
There are two separate efforts industry-wide taken place, one through NEI to work with the NRC, to continue to risk inform regulations and stagger the regulations, the best way it make sense, in order to manage the cumulative effect. And separate industry sponsoring effort to manage the processes side of the cumulative effect.
We're really looking forward to make in headways in that. I would anticipate, because of the keen focus on safety and reliability, those things will not take place in the immediate near-term future. And I would allow two, three years for us to start seeing the fruits of those efforts.
Again, focusing back on our fleet, we've got a large fleet. We're fortunate in that we have just recently gone through a merger, which gives us levers that we would otherwise not have. It allows us to consolidate functions, drive out some cost. It allows us to switch to common platforms tools, which will allow us to more efficiently deploy resources between our sites. We're blessed to have all sites within driving range of each other.
And also the scale of the new company gives us leverage from economy of scale from a contract point of view. So we're looking for those levers to help us manage the rising cost of the business. And other colleagues in industry, we're watching and we share information very widely. Others in the industry are looking for similar efforts until the bigger effort until the bigger efforts start to paying dividends.
From a labor perspective for us we've been very fortunate, and as much as we've been able to hire what we need. Into our new nuclear project this year we've hired about 200 people, so 200 folks to one project in a one-year timeframe, that's a pretty monumental task, but this one we geared up for.
As Buzz pointed out earlier, we started looking at all of the risks of these projects, staffing them was going to be one of those. So we put a lot of time, effort and energy into the staffing, as have our consortium partners of Chicago Bridge & Iron and Westinghouse, and that all of us have been very successful at being able to attract and retain the workforce that we need.
And when I talk about 200 folks, those are the SCE&G folks that are not building the plants. These are the folks who are going to be training instructors and operators, and mechanics, and I&C techs and engineers, chemists, so we've been very fortunate. The state of South Carolina has probably one of the better technical college systems in the country and that technical college system is doing exactly what it's supposed to do in supplying business and industry with the talent and workforce that they need.
We recognized it long time ago that our normal pipeline for operators was going to dry out NSA nuclear navy, so as the navy scales back on the number of nuclear vessels and as they have fewer sailors on each of those vessels, and as competition for those sailors gets more intense, we recognize that we're not going to be able to supply all of our need for operators from the navy.
We are very successful when we hire folks that are local. They tend to stay with us a lot longer. So if we can get local folks that could tests that would be a tremendous advantage for us, because in the nuclear business if you want to progress to be a licensed operator or a senior licensed operator, you've got to pass a lot of tests and that's where some of the local folks were failing.
So the local technical college started a program for nuclear operators and they get to pass a lot of tests. So when they're finish, we know that they can take test and pass test. We get them for 10 weeks during the summer in a nuclear boot camp, so they get to see if they like nuclear and for some of them they won't like nuclear.
When we have them fighting fires, and on shift work, and simulators and tests, some people come to us and say, this isn't for me. So that's a good thing. If it figures out that they don't want to do that, they can stay in the program, get in a [ph] social study and if they want to go on to a four year college, their two-plus-two program.
The universities in state have responded tremendously. We get most of our engineering graduates -- our engineers come from either Clemson or University of South Carolina. So these folks that are local, they're going to stay there. They've got roots in the area. We hire a lot of folks that were formally in the navy that were stationed to Charleston at one point in time. So they've decided they like the state, perhaps they got married to somebody from the state and that somebody wants to come home.
So all three of us are fortunate that we are in an area where people want to relocate to and they like to live in. So you don't have too many days like today outside. It's generally sunny and warm and 75 degrees to 80 degrees all the time. So we've been very fortunate with the workforce.
Pretty much along the same lines, on professional staff for the operating fleet and for the permanent staff for Vogtle 3, 4, very successful. We use a lot of Georgia Tech engineers. For the more important jobs, we use Auburn engineers. And for lesser jobs we do hire some Alabama engineers. So we've been successful. We did something else with six operating units. We set up a program of really about five years ago between the new development and the operating fleet.
Having the MOU, we created between the two, and so the project actually has been hiring people that have been working at these operating units. So when we start bringing them back in, we're not robbing from the operating fleet all their talent, so to speak. So it's a combined training at our existing units and hiring people off the street, we've been successful.
On the craft labor front, both for the new construction, roughly you're going to peak about 4,000 to 5,000 people in craft labor during construction. And to fill those jobs over the life to power, it takes about 20,000 people coming through the gate, because if you don't hire them and they stay, you're bringing your different craft in, and as we said before, that was a concern early.
And so I'm being a little more specific different, but to get into what you need electricians, welders, carpenters, et cetera, pipe fitters, and we've been very successful. There is some upward pressure because the economy is starting to turn around and the Gulf Coast starting to see more construction, again. But we're adequately planned for that and covered by that, so it's been very good, very good, both on the professional labor front and the craft labor front in that pulling this off.
Neil Kalton - Wells Fargo
Just so the few minutes left and I wanted to conclude with a question on small nuclear design, there has been some talk about that in the recent years. And I want to get your impression if you think that that's viable alternative. If you think it's going to have a meaningful impact at some point here in the future? Dhiaa, maybe I'll start with u.
I think it's a very promising technology. We are closely monitoring the development of small modular reactors, I would tell you though, however, the technology is still in development stage, and there are other factors that need to be worked out for to really become commercially viable. We need to do a lot of work on the regulatory side, the NRC regulatory sides to take advantage of the smaller source term associated with the smaller reactor, and scale down some of the regulation that has to do with security, emergency planning, staffing, in order to really leverage the benefit of the smaller reactor. So much work ahead. We're keeping a close eye in collaborating with some of the main vendors there on technical panels. But it's something that we view that would be viable further down the future.
SMR technology as Dhiaa points out is still developing, but very promising. We partnered with one vendor, Holtec, and we've signed an agreement with them to help growing an SMR or small modular reactor to the Savannah River Site, which for a demonstration project would answer some of those questions, where you don't have to answer those questions relative to emerging planting zones and security that they pointed out, because the Savannah River Site already has those.
Holtec is a company that's been making nuclear components for decades, dry casks or spent fuel for example come from Holtec. So they first have to get a certified design, which will take a couple of years with the Nuclear Regulatory Commission. They're buying for a funding opportunity announcement, which would co-fund the design and development of these reactors. I think there are three or four vendors in the U.S. that are buying for that funding.
We anticipate an announcement on that any second now, but it's been any second now for a couple of months. So hopefully some time in early '14 we'll hear about that, but they are very promising. I think the market for those, the demonstration project like we will build in U.S., the market for those really is going to be overseas.
At places where their grids perhaps won't tolerate a 1,000 megawatt or 1,500 megawatt reactor, but they could take a 150 megawatt reactor. And the populations don't necessarily support the larger ones, they would support the smaller ones.
So I think for deployment and as part of the business plan for most of these companies that are developing these, I think their market in the short-term is going to be overseas. But you look at the coal plants that we're all retiring, generally they're going to be smaller older units. A replacement could certainly be a small modular reactor if as, Dhiaa points out, we can get the emerging planting zones, and security and staffing issues worked out.
But these older coal facilities all have water, property, land, transmission; they have roads, they have everything that you need, and workforce and counties that have lost tax base. So I think they're very promising, long-term promising for replacements for some of these smaller older coal units that we're all shutting down.
As everybody know, we support everything, and the concept is good. We want them to succeed. For us, we do track it and we have people assigned tracking it, and we analyze it. But predominantly we're going to keep focused on the task at hand. I don't have any doubts, when questions are answered about SMRs, which everyone it is, economics and licensing, the regulatory. I don't have any doubt. We can step into a leadership role and be involved as much as we need to be to. If it's good for our customers, we'll pursue it, and we'll address that when the right time comes.
Neil Kalton - Wells Fargo
I think we're out of time. Red lights flashing all over the place up here. So probably should conclude. I'd like to think the panelist for your time. And, Buzz, good luck to your Auburn Tigers in the championship game, we'll be watching.
Neil Kalton - Wells Fargo
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