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Chapter 22 - Financial Implications of Early Decommissioning

There are three generalized timing possibilities for decommissioning: at the end of the original operating license, after some period of life extension, or sometime before the end of normal service. In this companion piece to his discussion of life extension in Chapter 20, James Hewlett addresses the third option. Premature decommissioning can arise--as it did for Unit 2 of Three Mile Island--from an accident, or--more commonly-because it may be cheaper to close the facility than to have it continue in operation. The economic implication of premature closure is one of potentially insufficient fund accumulation. As Hewlett points out, the decision to close a plant is complicated by decommissioning considerations; for example, the decision could depend in part on the status of the accumulated funds. Such a decision also can influence plans for new construction since it may delay the time of closure for existing plants. State regulatory bodies in the United States influence such decisions through their control over rates of return. In the end, decommissioning cost considerations often influence decommissioning timing.

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Energy Specializations: Energy Investment and Finance – Project Finance; Nuclear Power – Markets and Prices; Nuclear Power – Policy and Regulation

JEL Codes:
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Nuclear plant early retirement, Decommissioning timing, Operating costs

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-22

Published in Volume 12, Special Issue of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.