Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/bsl/wpaper/2022-08.html
   My bibliography  Save this paper

An Ex-Ante Method to Verify Commercial U.S. Nuclear Power Plant Decommissioning Cost Estimates

Author

Listed:
  • Lordan-Perret, Rebecca

    (University of Basel)

  • Bärenbold, Rebekka

    (University of Basel)

  • Weigt, Hannes

    (University of Basel)

  • Rosner, Robert
Abstract
There are billions of dollars at stake in the US nuclear power plant decommissioning market. Approximately 100 nuclear power plants are still operating but will come offline and need to be decommissioned over the next few decades. The US Nuclear Regulatory Commission (NRC) mandates that the operators of these plants set money aside in segregated funds to finance decommissioning work. However, it is hard for external stakeholders to verify the cost estimations, which ultimately determine how much operators are required to save. In this paper, we develop a method to validate the existing cost models and calculate a contingency empirically for these models. We extend Reference Class Forecasting methods using adaptive kernel fitting and the Wilks' formula. Based on this method, and assuming a social tolerance for potential cost overruns of 20%, we calculate a new contingency of 48% of the estimated radiological decommissioning cost. After a "stress test" of the current decommissioning trust funds of operating reactor sites, we find that 48% of reactors we considered have sufficient funding-in many cases substantially more than required-and could therefore finance the potential scale of overrun. However, we find that 28 plants (52%) would fall short on average $211 million. Still, overruns at every plant are not a foregone conclusion because-while overruns are probable, based on past experience-the actual scale and frequency is not known. Nevertheless, our results add further evidence to the mounting call for the NRC to revise its cost models in light of new information.

Suggested Citation

  • Lordan-Perret, Rebecca & Bärenbold, Rebekka & Weigt, Hannes & Rosner, Robert, 2022. "An Ex-Ante Method to Verify Commercial U.S. Nuclear Power Plant Decommissioning Cost Estimates," Working papers 2022/08, Faculty of Business and Economics - University of Basel.
    • Handle: RePEc:bsl:wpaper:2022/08
    as

    Download full text from publisher

    File URL: https://edoc.unibas.ch/90289/1/20221116141600_6374e29023ba5.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Servranckx, Tom & Vanhoucke, Mario & Aouam, Tarik, 2021. "Practical application of reference class forecasting for cost and time estimations: Identifying the properties of similarity," European Journal of Operational Research, Elsevier, vol. 295(3), pages 1161-1179.
    2. Giorgio Locatelli, 2018. "Why are Megaprojects, Including Nuclear Power Plants, Delivered Overbudget and Late? Reasons and Remedies," Papers 1802.07312, arXiv.org.
    3. Ansar, Atif & Flyvbjerg, Bent & Budzier, Alexander & Lunn, Daniel, 2014. "Should we build more large dams? The actual costs of hydropower megaproject development," Energy Policy, Elsevier, vol. 69(C), pages 43-56.
    4. Callegari, C. & Szklo, A. & Schaeffer, R., 2018. "Cost overruns and delays in energy megaprojects: How big is big enough?," Energy Policy, Elsevier, vol. 114(C), pages 211-220.
    5. Renata Walczak & Tomasz Majchrzak, 2018. "Implementation Of The Reference Class Forecasting Method For Projects Implemented In A Chemical Industry Company," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2018(1), pages 25-33.
    6. Huimin Liu & Canhui Jiang & Yan Liu & Marcel Hertogh & Xue Lyu, 2018. "Optimism Bias Evaluation and Decision-Making Risk Forecast on Bridge Project Cost Based on Reference Class Forecasting: Evidence from China," Sustainability, MDPI, vol. 10(11), pages 1-29, October.
    7. Awojobi, Omotola & Jenkins, Glenn P., 2016. "Managing the cost overrun risks of hydroelectric dams: An application of reference class forecasting techniques," Renewable and Sustainable Energy Reviews, Elsevier, vol. 63(C), pages 19-32.
    8. Bruzelius, Nils & Flyvbjerg, Bent & Rothengatter, Werner, 2002. "Big decisions, big risks. Improving accountability in mega projects," Transport Policy, Elsevier, vol. 9(2), pages 143-154, April.
    9. Giorgio Locatelli & Mauro Mancini, 2012. "Looking back to see the future: building nuclear power plants in Europe," Construction Management and Economics, Taylor & Francis Journals, vol. 30(8), pages 623-637, April.
    10. Williams, Daniel G., 2007. "Scenario simulations do not yield results stochastically consistent with alternative Monte Carlo results: U.S. nuclear plant decommissioning funding adequacy (2000)," Energy Economics, Elsevier, vol. 29(5), pages 1101-1130, September.
    11. Williams, Daniel G., 2007. "U.S. nuclear plant decommissioning funding adequacy -- by individual funds, utilities, reactors, and industry-wide -- assessed by Monte Carlo and baseline trend methods: 1998, 2000, 2001, and 2004," Energy Economics, Elsevier, vol. 29(5), pages 1050-1100, September.
    12. Philippe Van Kerm, 2003. "Adaptive kernel density estimation," Stata Journal, StataCorp LP, vol. 3(2), pages 148-156, June.
    13. Lordan-Perret, Rebecca & Sloan, Robert D. & Rosner, Robert, 2021. "Decommissioning the U.S. nuclear fleet: Financial assurance, corporate structures, and bankruptcy," Energy Policy, Elsevier, vol. 154(C).
    14. Thordur Vikingur FRIDGEIRSSON, 2016. "Reference Class Forecasting In Icelandic Transport Infrastructure Projects," Transport Problems, Silesian University of Technology, Faculty of Transport, vol. 11(2), pages 103-115, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bah, Muhammad Maladoh, 2023. "Nuclear Decommissioning Profile USA," Working papers 2023/02, Faculty of Business and Economics - University of Basel.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anuja Shaktawat & Shelly Vadhera, 2021. "Risk management of hydropower projects for sustainable development: a review," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(1), pages 45-76, January.
    2. Herve Kabanda & Alex Romard & Fuze Yurtsever & Anjali Wadhera & Joshua Andrews & Craig Merrett, 2021. "Construction Time Estimation Function for Canadian Utility Scale Power Plants," Energies, MDPI, vol. 14(17), pages 1-16, August.
    3. Gumber, Anurag & Zana, Riccardo & Steffen, Bjarne, 2024. "A global analysis of renewable energy project commissioning timelines," Applied Energy, Elsevier, vol. 358(C).
    4. Brookes, Naomi J. & Locatelli, Giorgio, 2015. "Power plants as megaprojects: Using empirics to shape policy, planning, and construction management," Utilities Policy, Elsevier, vol. 36(C), pages 57-66.
    5. Simshauser, P. & Gohde, N., 2024. "3-Party Covenant Financing of ‘Semi-Regulated’ Pumped Hydro Assets," Cambridge Working Papers in Economics 2425, Faculty of Economics, University of Cambridge.
    6. Yakun Zhang & Wenzhe Tang & Colin F. Duffield & Lihai Zhang & Felix Kin Peng Hui, 2021. "Environment Management of Hydropower Development: A Case Study," Energies, MDPI, vol. 14(7), pages 1-12, April.
    7. Jenkins, G. & Olasehinde-Williams, G. & Baurzhan, S., 2022. "Is there a net economic loss from employing reference class forecasting in the appraisal of hydropower projects?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 159(C).
    8. Flyvbjerg, Bent & Bester, Dirk W., 2021. "The Cost-Benefit Fallacy: Why Cost-Benefit Analysis Is Broken and How to Fix It," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 12(3), pages 395-419, October.
    9. Locatelli, Giorgio & Invernizzi, Diletta Colette & Brookes, Naomi J., 2017. "Project characteristics and performance in Europe: An empirical analysis for large transport infrastructure projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 98(C), pages 108-122.
    10. Lindley, Ben & Roulstone, Tony & Locatelli, Giorgio & Rooney, Matt, 2023. "Can fusion energy be cost-competitive and commercially viable? An analysis of magnetically confined reactors," Energy Policy, Elsevier, vol. 177(C).
    11. Flyvbjerg, Bent & Ansar, Atif & Budzier, Alexander & Buhl, Søren & Cantarelli, Chantal & Garbuio, Massimo & Glenting, Carsten & Holm, Mette Skamris & Lovallo, Dan & Lunn, Daniel & Molin, Eric & Rønnes, 2018. "Five things you should know about cost overrun," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 174-190.
    12. Ayobami Solomon Oyewo & Javier Farfan & Pasi Peltoniemi & Christian Breyer, 2018. "Repercussion of Large Scale Hydro Dam Deployment: The Case of Congo Grand Inga Hydro Project," Energies, MDPI, vol. 11(4), pages 1-30, April.
    13. Giorgio Locatelli, 2018. "Why are Megaprojects, Including Nuclear Power Plants, Delivered Overbudget and Late? Reasons and Remedies," Papers 1802.07312, arXiv.org.
    14. Chapman, Paul & Quang, Cuong, 2021. "Major Project Risk Management: Reconciling Complexity during Delivery with the Inside View in Planning," SocArXiv j9sw8, Center for Open Science.
    15. Arbuckle, Evan J. & Binsted, Matthew & Davies, Evan G.R. & Chiappori, Diego V. & Bergero, Candelaria & Siddiqui, Muhammad-Shahid & Roney, Christopher & McJeon, Haewon C. & Zhou, Yuyu & Macaluso, Nick, 2021. "Insights for Canadian electricity generation planning from an integrated assessment model: Should we be more cautious about hydropower cost overruns?," Energy Policy, Elsevier, vol. 150(C).
    16. Köberle, Alexandre C. & Garaffa, Rafael & Cunha, Bruno S.L. & Rochedo, Pedro & Lucena, André F.P. & Szklo, Alexandre & Schaeffer, Roberto, 2018. "Are conventional energy megaprojects competitive? Suboptimal decisions related to cost overruns in Brazil," Energy Policy, Elsevier, vol. 122(C), pages 689-700.
    17. Callegari, C. & Szklo, A. & Schaeffer, R., 2018. "Cost overruns and delays in energy megaprojects: How big is big enough?," Energy Policy, Elsevier, vol. 114(C), pages 211-220.
    18. Geneviève Zembri-Mary & Virginie Engrand-Linder, 2023. "Urban planning law in the face of the Olympic challenge: Between innovation and criticism of exceptional urban regeneration," Local Economy, London South Bank University, vol. 38(4), pages 369-388, June.
    19. Coker, Ayodeji Ajibola Alexander, 2021. "Accuracy of in Medias RES and EX-Post Cost-Benefit Analyses: A Case of National Special Programme for Food Security, Nigeria," 2021 Conference, August 17-31, 2021, Virtual 314936, International Association of Agricultural Economists.
    20. Oyewo, Ayobami Solomon & Solomon, A.A. & Bogdanov, Dmitrii & Aghahosseini, Arman & Mensah, Theophilus Nii Odai & Ram, Manish & Breyer, Christian, 2021. "Just transition towards defossilised energy systems for developing economies: A case study of Ethiopia," Renewable Energy, Elsevier, vol. 176(C), pages 346-365.

    More about this item

    Keywords

    nuclear power; decommissioning; cost estimation; contingency; Wilks' formula; reference class forecasting;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bsl:wpaper:2022/08. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WWZ (email available below). General contact details of provider: https://edirc.repec.org/data/wwzbsch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.