April 5, 2011

Market Alert
U.S. Nuclear / Natural Gas Scenarios

Contact: Brannin McBee at bmcbee@bentekenergy.com

U.S. to Review Nuclear Power: How Much Could Natural Gas Benefit?

 The re-assessment of risk associated with nuclear

generation could result in the temporary
curtailment or permanent retirement of nuclear
facilities, thereby increasing demand on other fuel
sources to cover the lost generation capacity.
 If all U.S. nuclear generation units were replaced
by gas-fired facilities, gas demand would increase
by 27%.
 Nuclear plants in the U.S. with the same boiler and
containment design as the Fukushima Daiichi facility in
Japan represent 20% of installed nuclear capacity in
the U.S. Replacing the lost generation from these
units with natural gas would increase natural gas
demand by 5%.
 If U.S. nuclear facilities in high-risk seismic areas
were shut down and the generation from these
facilities was replaced by natural gas, demand for
gas could increase by 3%.
Background

The tragic events which have unfolded in Japan over the past three weeks have brought much
attention to the use of nuclear fuel as an electricity generation source. Across the globe, the safety of
nuclear energy is being questioned. Germany suspended plans to extend the life of its nuclear power
plants. Switzerland halted plans to construct new plants. In the U.S., Pres. Barack Obama has
ordered the Nuclear Regulatory Commission to conduct a "comprehensive review" of the safety of all
U.S. nuclear facilities.

While it is extremely unlikely that a significant number of existing plants will be retired, the re-
assessment of risk associated with nuclear generation could result in some curtailment of nuclear
generation, thereby increasing demand on other fuel sources to cover the lost generation capacity.
This analysis looks at the potential impact on natural gas demand from possible curtailments in U.S.
nuclear generation capacity. The assessments included here are “what if” scenarios, and are not
intended as projections or forecasts.

Analysis

In 2010, nuclear generation met 20% of electricity needs in the U.S. In a scenario where regulators
curtail 100% of nuclear generation capacity, and if the entirety of this generation were met by natural-
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gas-fired generation units, natural gas demand would have been 27% higher (16.2 Bcf/d). Due to the
availability of other generation sources (i.e. coal-fired) and constraints on gas-fired generation
capacity, there is little chance such a scenario could occur. It is provided here to put the numbers in
perspective.

A more likely scenario is a regulatory determination that nuclear facilities in high-risk seismic areas
should be shut down. If the generation from these facilities was met by natural gas, natural gas
demand would be expected to increase by 3%. In another scenario, regulators could retire nuclear
plants with the same boiler design as the Fukushima Daiichi facility in Japan. Again assuming all
power generation were to be replaced by natural gas, gas demand would increase by 5%.

The U.S. nuclear generation units are not spread equally across the states, which creates significant
natural gas basis pricing implications if portions are taken offline.

Two graphical presentations of this data are attached at the end of this market alert. The first graphic
shows the location of U.S. nuclear facilities overlaid on a map of high seismic areas. The data
indicates that 12.8 GW of such boilers are in high-risk seismic areas. The second graphic indicates
the potential natural gas use by region if all nuclear facilities are shut down and are replaced by
natural-gas-fired generation. Note that these are “what if” scenarios only, and are not meant as
projections of either temporary or permanent regulatory action.

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 Source: BENTEK Energy, USGS
• Eight nuclear power plants, or 12,834 MW of capacity, are located in 16%g and above seismic
locations:
• 12% of U.S. nuclear generation capacity
• Gas demand equivalent of the 2010 generation output from these facilities is 1.96 Bcf/d
• Seismic data represents magnitude of horizontal shake in a 50-year period
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 Replacement of 2010 Nuclear Generation with Natural Gas
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% of gas demand by region (2010)

% of U.S. gas demand (2010)

6 27%
Complete Retirement 41%
35% 16
5 Boiler Type Risk
14
4 Seismic Risk
31% 12
Bcf/d

Bcf/d
3 10

2 8
16%
10% 10% 8% 8% 6
1 8%
14%
6%
11% 11% 2% 4 5%
3%
0 2
0
Total U.S.

• The Southeast Region is most at-risk of incremental gas demand due to regulatory measures.
• Across the three scenarios, natural gas demand could potentially increase 3% to 27%.
• Risk associated with boiler and containment type is higher than the seismic risk.

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