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The Risk of Early Retirement of U.S. Nuclear Power Plants under Electricity Deregulation and CO2 Emission Reductions

During the next decade, most states in the USA will deregulate electricity generation. Nuclear power plants that were ordered and built in a regulated environment will continue to be regulated as nuclear facilities. However, under state deregulation the price they receive for their electricity will be set largely in non-regulated markets. This paper examines the competitiveness of the nuclear power industry with a probabilistic model to identify which nuclear power units face the highest risk of early retirement under deregulation. Projected outputs under both average-cost and marginal-cost pricing are compared with expected generation under continued rate-of-return regulation. Nuclear units at risk of early retirement are in regions with the lowest forecast prices or are old plants. But, if CO2 regulation targets an emission reduction to 9 % below projected 2010 levels (projected to be 24% above 1990 levels), there are only a few units at risk of early retirement after 2015.

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Energy Specializations: Nuclear Power – Markets and Prices; Nuclear Power – Policy and Regulation; Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
Q54 - Climate; Natural Disasters and Their Management; Global Warming

Keywords: Nuclear power, US, power plant early retirement, CO2 emissions, electricity generation, Pollution, deregulation

DOI: 10.5547/ISSN0195-6574-EJ-Vol21-No3-3

Published in Volume21, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.