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

Abstract:
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: Q54: Climate; Natural Disasters and Their Management; Global Warming, Q41: Energy: Demand and Supply; Prices, Q40: Energy: General, D40: Market Structure, Pricing, and Design: General, L98: Industry Studies: Utilities and Transportation: Government Policy, Q53: Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling, L51: Economics of Regulation, C53: Forecasting Models; Simulation Methods, D47: Market Design

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 bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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