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The Energy Journal
Volume 12, Special Issue

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Chapter 2 - Decommissioning Costs and British Nuclear Policy

Gordon MacKerron

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-2View Abstract

The topic of decommissioning economics is not an isolated activity. As Gordon MacKerron shows in this chapter, decommissioning economics are linked to other, often national considerations. The advanced age of the British reactors, plus the government's desire to privatize the entire electrical utility industry, brought decommissioning to the front of public debate unexpectedly early in Britain. As decommissioning estimates have come under closer attention, they have tended to rise from early estimates. Today, the estimated costs are much higher than in the U.S. So far, the funds for this activity are only paper provisions. It appears that one source of higher costs will be increased regulatory requirements. Titus, nonengineering factors are beginning to affect decommissioning costs, as they have other nuclear costs in Britain and elsewhere. MacKerron concludes that the final costs of decommissioning are likely to be higher than estimated originally.

Chapter 3 - Utilities and Decommissioning Costs: The Meeting of Technology and Society

Kenneth P. Ballard, Margot E. Carl Everett, Willard C. Everett

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-3View Abstract

Nuclear energy policy is impacted by several groups, including regulatory agencies, public interest organizations, private business, and academic research. As policy bends and changes, no group is affected more strongly than public utility companies. The principal reason for such sensitivity is that the utility companies, more than any of the other players in the decommissioning business, are the link between technology and society. This chapter presents the utility view of decommissioning within the context of PG&E's nuclear power stations at Diablo Canyon and Humboldt Bay. The discussion includes special utility problems, such as inherent uncertainties and the causes for over- and underestimating. Among the conclusions is that the overall discussion of decommissioning technology is developing outside the commercial marketplace and will likely lead to inefficiencies, and that the various social costs and ramifications of decommissioning need much more attention.

Chapter 4 - Federal Regulation of Decommissioning Economics

Robert Wood

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-4View Abstract

As we move deeply into the new territory of large-scale decommissioning, countries around the world are looking to the United States for guidance and experience in establishing their own approaches. In the U.S., the Nuclear Regulatory Commission is the lead agency responsible for public health and safety issues linked to commercial nuclear power. This responsibility includes assuring adequate funds for decommissioning. In this chapter, Robert Wood introduces us to the regulations and positions of the NRC regarding decommissioning financing. The issues include why the NRC chose external funding mechanisms, how the funds should be collected and invested, the relationship between the NRC and state agencies, and fund assurance in a variety of cases including possible accident and bankruptcy. While this discussion will serve as an overview of the most significant aspects of decommissioning financing, it also introduces us to other chapters which focus on the relationships of the NRC with the states and electric utility companies.

Chapter 5 - State Regulation of Decommissioning Costs

Peter M. Strauss and James Kelsey

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-5View Abstract

Even though the NRC has jurisdiction over setting regulations governing financial assurance for decommissioning, the states have the specific responsibility of setting rates for fund accumulation. Each state must include many factors in determining the appropriateness of the rate requests from the utility companies under this jurisdiction, including plant size, date of decommissioning, and configuration of the nuclear component (single or multiple units). It also must decide on proper contingency factors, estimation methodology, the likelihood of early retirement, and whether fund accumulations will include amounts for the removal of nonradioactive components and site restoration. In this chapter the authors discuss the results of their survey of how 37 state utility commissions treat these factors.

Chapter 6 - Divided Authority: Federal Vs. State Policy Roles in Decommissioning Economics

Scott M. DuBoff and Daniel F. Stenger

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-6View Abstract

The previous two chapters individually examined the federal and state roles in regulating nuclear power plant decommissioning. In this chapter, attorneys Scott DuBoff and Daniel Stenger take a legal look at these issues, comparing the radiological obligations and responsibilities which dominate at the federal level and the economic obligations and responsibilities which dominate at the state level, They do this by examining how the NRC addressed the state role in its new rule on decommissioning, and by looking at the applicable regulatory provisions of several states. The authors conclude that the present dual system of regulation presents a potential for conflict on decommissioning economics, particularly with regard to the adequacy of fund accumulation.

Chapter 7 - The Cost of Decommissioning U.S. Reactors: Estimates and Experience

Gene R. Heinze Fry

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-7View Abstract

Decommissioning is in its infancy, but our cost experience includes several dozen small, experimental reactors plus the 72 MWe Shippingport reactor. Decommissioning is only beginning at large reactors, but the insights already accumulated allow some use of this experience in future estimates. In this chapter, Gene Heinze Fry compares generic cost estimates plus the data for a total of 21 closed U.S. reactors. Despite the common assumption about the efficiencies that will come with more decommissioning experience, Fry finds a complete lack of scale economies. This could have implications for rates of collection, sufficiency of accumulated funds, and equity issues tied to future generations.

Chapter 8 - Applying Construction Lessons to Decommissioning Estimates

Robin Cantor

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-8View Abstract

One of the standard practices in estimating costs for new procedures is to apply past experience. In this chapter, Robin Cantor uses prudency hearings and other data from power plant construction to illuminate some of the pitfalls likely to be encountered in preparing estimates for power plant decommissioning. Two of the most tempting pitfalls are scale and learning economies. She suggests that these presumed economies have had less impact on keeping construction costs down than expected, and that they also are unlikely to have much effect on decommissioning costs. Ignoring such evidence, she suggests, could result in decommissioning cost estimates that are too low and collection strategies that are inadequate. This finding has implications for future generations and future decommissioning options.

Chapter 9 - Greenfield Decommissioning at Shippingport: Cost Management and Experience

William Murphie

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-9View Abstract

Although there are many indications that nuclear power plants are likely to stay on site for a period of 60 to 100 years after closure, there are also several reasons to remove the facility from the landscape, such as the desire to use the site for a new power plant or other purpose, safety, and aesthetics. Such removal is underway in several countries including Japan, the United Kingdom, and Germany. In this chapter, William Murphie gives us a unique look at the internal cost management and engineering planning experience acquired during the first U.S. commercialsize plant removal, recently completed at the Shippingport Atomic Power Station near Pittsburgh. The project was especially valuable as it provided a detailed comparison between estimated and actual costs. Some of the more important findings were that (1) detailed advance planning is cost effective, (2) labor costs can result in significant increases in total costs, (3) waste disposal costs can bring about substantial discrepancies between planned and realized costs, and (4) actual costs were within 10 percent of the estimated costs. Although there are several differences between the Shippingport reactor and other power plants, this project afforded the nuclear community an early opportunity to gain insights into many of the contingencies that may occur with full dismantlement.

Chapter 10 - Estimating the Costs for Japan's JPDR Project

Satoshi Yanagihara and Mitsugu Tanaka

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-10View Abstract

There has been an international flavor of cooperation in the commercial development of nuclear power. This cooperation is most strongly established with the development of strategies for decommissioning. Many countries are beginning this phase at about the same time; Japan, Canada, Germany, and the United States all are involved in dismantlement projects. This chapter, along with the next four chapters, addresses various aspects of the methodological approaches being developed to estimate decommissioning costs. Each country has adopted a different strategy for reactor decommissioning, taking its political and technical situations into consideration.Japan also has its own strategy of reactor decommissioning, reflecting the geographic and economic positions peculiar to Japan. The Japan Power Demonstration Reactor (JPDR) decommissioning program is in the process of establishing a decommissioning data base and a cost estimation methodology, as well as developing new technology for reactor decommissioning. Various information about the JPDR dismantling has been accumulated in the decommissioning data base, which will be used for: (1) planning future decommissioning of commercial nuclear power reactors; (2) verifying the developed code system for management of reactor decommissioning; and (3) managing the ongoing JPDR dismantling. The computer code system developed in this program is expected to contribute to studying cost estimation and the optimization of decommissioning plans for commercial nuclear power reactors.

Chapter 11 - Generic Approaches to Estimating U.S. Decommissioning Costs

Richard I. Smith

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-11View Abstract

The estimation of decommissioning costs has certain common features, regardless of country or state. In the U.S., the NRC has taken this into account as they worked on the development of generic estimates. The author of this chapter, Richard Smith, has been at the center of this effort for more than a decade. In this chapter, he summarizes three principal methods that have been used in cost estimates in lite U.S.: the linear extrapolation approach, the unit cost factor approach, and the detailed engineering approach which he helped to develop at Pacific Northwest Laboratory in Washington state.

Chapter 12 - A Private Contractor's Approach to Decommissioning Costs

Thomas LaGuardia

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-12View Abstract

Generic cost estimates are important in giving a general impression about the magnitude of the overall task of decommissioning. Site-specific cost estimates, however, are necessary for each individual power plant so that differences in design, site, and history will be reflected as accurately as possible. Thomas LaGuardia has more experience in preparing such estimates than anyone else in the U.S. In this chapter he gives an insider's view of cost estimates which will be valuable to the utility operator who wants to know whether an estimate is adequate without being overinflated, to the regulator who is responsible to the citizens, and to the public who ultimately will pay the bills. He discusses various types of contracts such as fixed price, time and materials, cost-plus -fixed-fee, and utility-to-DOC fixed price, recommending the use of fixed-price contracts for subcontractors and a cost-plus-fixed or incentive fee for the primary contractor. He stresses the need for site-specific estimates.

Chapter 13 - Decommissioning Plans and Costing in Germany

Ulrich Losch horn and Herbert Hollmann

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-13View Abstract

Prior to reunification, within the borders of the Federal Republic of Germany there were seven reactors of different types and at various stages of decommissioning or planning. In this chapter, Ulrich Loschhorn and Herbert Hollmann highlight several factors which influence economic costs, including timing of dismantlement, site-specific features, lack of final repository, licensing framework, and political scenarios. It is apparent from this discussion that procedures, timing, key considerations, reasoning, and ultimate goals regarding decommissioning are similar from one country to another, with most countries facing similar challenges at about the same time. Although this means that each country can learn from the others' experience, there is also little experience to use as signposts along the way.

Chapter 14 - Strategy, Planning and Costing for Decommissioning in Canada

Nihal D. Jayawardene and Peter D. Stevens-Guille

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-14View Abstract

Ontario Hydro, the public-owned electric utility in Ontario, Canada, is one of the three largest nuclear utilities in the world. Decommissioning of its CANDU nuclear stations will begin about 2012 when the first station at Pickering is scheduled to be shut down after an operating period of 40 years. Other stations at Bruce and Darlington will be shut down and decommissioned subsequently. The cost of these operations is being charged to customers and is calculated using the annuity method. In this chapter, Nihal Jayawardene and Peter Stevens-Guille describe Ontario Hydro's decommissioning policy, financial planning and method of funding future decommissioning costs. One policy requirement is that future generations should not have to pay for decommissioning costs; deferring costs far into the future is not financially prudent. The current status of public opinion in Canada on decommissioning and radioactive waste management, including the tourism value of a decommissioned reactor, also is discussed.

Chapter 15 - Managing Qualified Nuclear Decommissioning Trust Funds Under Uncertainty

Howard Hiller

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-15View Abstract

Funds for the eventual decommissioning and removal of nuclear power plants are accumulating. The amount will total many tens, perhaps hundreds of billions, of dollars. One of the ingredients in setting aside these funds is managing them so as to assure that just enough cash is on hand at the time of decommissioning to meet all required expenses at the lowest possible net present value cost to utility ratepayers. As with any investment, there can be a variety of opinions. For this reason, it is important to consult several sources for advice on the investment of such nuclear decommissioning trust funds (NDTs). The next three chapters provide such advice from the perspective of three different firms. The first, by Howard Hiller, stresses the importance of an adaptive approach, pointing out that the most difficult question is the choice of investment maturities. Hiller employs a simulation methodology to quantify the riskcost characteristics of strategies along the maturity spectrum--from short to long-term. He identifies some of the unique uncertainties inherent in decommissioning and brings these uncertainties into his analysis. He concludes that the steepness of the municipal yield curve can be exploited even in the presence of inflationary uncertainty.

Chapter 16 - Historical Lessons for Nuclear Decommissioning Trust Fund Investment

M. Didi Weinblatt, Salvatore D'Elia and Theresa A. Havell

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-16View Abstract

One way we can attempt to judge the best investment strategy for nucleardecommissioning trust funds (NDTs) is to examine past after-tax returns of variousinvestment options. The authors of this chapter make such an evaluation. Theynote that no passively managed asset class allowed in qualified NDTs hasproduced real after-tax returns. They conclude that an active, rather than apassive, investment strategy is necessary, and they stress the advisability ofshortand intermediate -term fixed-income securities such as municipal bonds.However, when the authors applied the hypothetical 15 percent tax rate proposedin a new Congressional bill (HR 4653), several asset classes did provide realaftertax returns.

Chapter 17 - Investment Strategies for Externalized Nuclear Decommissioning Trusts

Thomas R. Tuschen

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-17View Abstract

This chapter constitutes the third view of nuclear trust fund investment. It addresses several overall strategies of such investment by identifying the types of trusts, investment objectives, risk considerations, and the historical record. The author uses a fund adequacy analysis to examine expected cost growth, expected fund value, actual cost growth vs. expected cost growth, and actual fund value vs. expected fund value. He believes that while the long-term goal of such nuclear decommissioning trust (NDT) investment is quite definable, the practical ability to meet the goal is limited. Under the current requirements, he considers the realistic prognosis for a real return on investment to be low, if not zero, even with the close monitoring that will be needed.

Chapter 18 - Confronting Uncertainty: Contingency Planning for Decommissioning

Bruce Biewald and Stephen Bernow

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-18View Abstract

Contingency factors are a standard ingredient in all types of estimated costs. The actual contingency figure used, however, is always open to question. Given the absence of large-scale decommissioning projects, the long future time reference, the history of early shutdowns, and possibility of accidents, there continues to be a substantial controversy regarding the contingency level that is most appropriate. In this chapter, Bruce Biewald and Stephen Bernow present a critical review of the matter of contingency factors, arguing that current common levels in the neighborhood of 25 percent are too low.

Chapter 19 - Decommissioning and Nuclear Waste Policy: Comprehensive or Separable?

Duane Chapman

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-19View Abstract

Waste handling is one of the tasks most likely to drive up decommissioning costs. This expense is derived from the large volumes of waste involved, from public apprehensions about its safe and prudent disposal, and from the uncertainties associated with long-term on-site storage of waste as is the current practice. Current U.S. nuclear policy addresses low-level waste (LLW) separately from high level waste (HLW), military waste separately from civilian waste, and even has different packaging requirements for different types of LLW. These differences mean that there are different disposal sites, different transportation routes, and reduced economies of scale. In this chapter, Duane Chapman argues for a more comprehensive consideration of this waste.

Chapter 20 - A Cost/Benefit Perspective of Extended Unit Service as a Decommissioning Alternative

James G. Hewlett

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-20View Abstract

Some people consider life extension (and its cousin, license renewal) analternative to decommissioning. The reasons for the popularity of suchalternatives include presumed cost effectiveness, retention of scarce power plantsites, and the continued ability to pass on waste storage expenses as a cost ofservice. In this chapter, James Hewlett addresses nuclear power plant lifeextension- -which he calls NUPLEX--in its economic garb, starting with a look atthe common utility presumption that life extension of a nuclear plant will allowit to produce electricity at a lower rate than new coal generation. Thispresumption, he argues, may not be supportable by analysis. He concludes thatthe deferral of constructing new replacement capacity would result in costsavings only if both the level and escalation rate of the operating costs forthe refurbished unit fall substantially from 1986 levels. Therefore, it is unclearwhether the deferral of the construction of new capacity would result in the costsavings, although it definitely shifts the financial burden into the future.

Chapter 21 - The Projected Influence of Extended Unit Service

M.E. Lapides

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-21View Abstract

If the operational life of a nuclear power plant can be extended, decommissioning will be delayed. In effect, this is an alternative to decommissioning. Is this a sensible or desirable option? In this chapter, M.E. Lapides evaluates the cost, environmental consequences, and funding impacts of delaying for 20 to 30 years. One of his conclusions is that the impacts of decommissioning on any of these three categories will be insignificant to the decommissioning decision. A contrasting view was offered in Chapter 20.

Chapter 22 - Financial Implications of Early Decommissioning

James G. Hewlett

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

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.

Chapter 23 - The Expanding Decommissioning Focus: A Comparison of Coal and Nuclear Costs

Daniel H. Williams

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-23View Abstract

Are nuclear power plants the only industrial facilities that deserve decommissioning attention? Absent the radiation hazards of nuclear facilities, does it matter if other types of industrial equipment are decommissioned? If they are decommissioned, is the cost and effort large enough to really worry about? Daniel Williams examines these and other questions; by comparing the costs of decommissioning at comparable coal and nuclear power plants. Williams argues that the nuclear industry is setting the standard among industries in planning and preparing for decommissioning, and that the nuclear experience provides information that can be applied to the decommissioning of all types of facilities.

Chapter 24 - The Optimal Time to Decommission Commercial Nuclear Reactors

Geoffrey S. Rothwell

DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-24View Abstract

One of the key questions related to decommissioning is its optimal timing. In this final chapter, Geoffrey Rothwell integrates the findings presented in Nuclear Decommissioning Economics by proposing a model of discounted decommissioning costs. The real cost of decontaminating a reactor is specified as a function of its size, the volume of radioactive material, radiation exposure regulation, and the rate of productivity change in the decommissioning industry. The model allows calculation of an optimal waiting period between reactor shutdown and decommissioning. The optimal waiting period decreases with tighter radiation exposure regulation and higher inflation rates for radioactivewaste burial.