Nuclear Decommissioning: Paying More for Greater, Uncompensated Risks

Nuclear Decommissioning: Paying More for Greater, Uncompensated Risks

Executive Summary
August 8, 2016

This executive summary provides a brief overview of the issues explored in the Kleinman Center for Energy Policy’s report, "Nuclear Decommissioning: Paying More for Greater, Uncompensated Risks." 

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Low gas prices, increasing penetration of renewable energy, weak demand, and significant capital expenditure requirements at nuclear power plants are challenging reactor economics and prompting premature retirements, defined as retirement before license expiration. Most public dialogue about these retirements has centered on support or opposition for public policies to keep these plants operating.  Justifications for such subsidies typically focus on retention of local jobs, and on how these plants provide reliable baseload power at a low cost.  There are also significant concerns about losing zero carbon power, which is critical to meeting national and international climate change goals. 

However, seemingly absent from the dialogue is a focus on the imposition of new costs and risks, which are both accelerated upon plant retirement.

Decommissioning is the process of decontaminating the plant site and releasing the plant owner’s nuclear operating license. While there are some concerns about plant licensees having access to sufficient funds to pay for the full cost of actual plant decontamination, the bigger issue surrounds the fate of spent nuclear fuel and high-level radioactive waste. 

U.S. and international experts agree that permanent geologic (i.e. underground) disposal of highly radioactive spent nuclear fuel is the safest and most secure way to manage this waste, which remains hazardous for thousands of years.  The federal government signed contracts with owner/operators (i.e. licensees) of nuclear power plants, committing the government to taking custody of nuclear waste for disposal in a federally-controlled geologic disposal repository, beginning in 1998.  Electric utility owner/licensees of nuclear generation paid upfront fees to the government to enable the construction of the geologic repository. These licensee fees were recovered from electricity ratepayers that received the benefits of low-cost nuclear power. These per-kilowatt-hour fees were deposited into a restricted federal fund called the Nuclear Waste Fund (NWF), now valued at $34.3 billion, and these funds can only be used in support of the geologic disposal site. However, the disposal site hasn’t been built and there are no plans underway for its construction.

Seemingly absent from the dialogue is a focus on the imposition of new costs and risks, which are both accelerated upon plant retirement.

As a result, licensees are forced to temporarily store this spent fuel waste on-site at the plant, most of the time in dedicated facilities.  Licensees must expend significant costs to construct, operate, maintain, and secure these facilities located on the same site as the plant.  This reality prevents full release of the licensee’s land and license, creating ongoing liabilities. Licensees have successfully fought the federal government in court for its failure to accept waste, per contract agreement.  As a result, taxpayers have reimbursed about $5.3 billion in licensee costs associated with ongoing on-site storage of high-level radioactive waste.  These costs will continue to accumulate until the federal government accepts all of the contracted waste, a figure currently estimated to be between $29 billion and $50 billion.

Public dialogue about nuclear plant retirements should begin to focus on four main themes that result from the facts above:
 
  • Increased Risks with Distributed Interim StorageExperts agree that long-term storage of high-level radioactive waste is simply not as safe or secure as permanent geologic disposal. In America, geologic disposal has been pursued, but so far has proven to be politically infeasible.  As a result, for decades, nuclear plants have been forced to store waste on site.  When a nuclear plant closes, the plant site will be converted to a “temporary” but indefinite waste storage facility. Absent a significant change in political will, America will end up with a collection of distributed interim storage facilities dotting its landscape, potentially in perpetuity.  This distributed interim storage “solution” increases risks, compared to a single geologic disposal site.
     
  • Shifting Costs to Taxpayers with No Refund to RatepayersOn-site, interim storage facilities will need to be constructed, secured, maintained and monitored in perpetuity, or until a federal geologic repository and/or reprocessing facility is established. These are new costs, not envisioned when plant licensees signed agreements with the federal government for geologic disposal of waste. Licensees will be forced to build and maintain these interim storage facilities at a significant expense. As a result of licensee’s successful litigation against the federal government, taxpayer funds ranging from $29 billion to $50 billion will be used to reimburse the licensee’s interim storage costs, plus the government’s cost of litigation. And these costs will continue to grow by $500 million per year if the government doesn’t begin accepting waste in 2025. Many of these taxpayers will be the same ratepayers that paid fees to construct the geologic repository, for which no plans are underway to construct.  By law, the $34.3 billion in ratepayer funds accumulated in the NWF can only be used for activities related to the geologic repository.  However, no refund has been offered to these ratepayers, even though they paid for permanent disposal that hasn’t materialized, and taxpayers are paying additional (i.e. not transferred from ratepayer funds) costs for interim storage.
     
  • Imposing Uncompensated Risk on CommunitiesBecoming the indefinite home to tons of highly radioactive nuclear waste upon plant retirement—with all the attendant risks—was certainly not the original expectation for communities that agreed to host nuclear power plants.  Furthermore, these communities are home to many of the same electric ratepayers who contributed funds to build a geologic disposal repository so this waste would have a safe, secure, and permanent home far from their backyards. Lastly, when a nuclear power plant shuts down, the host community is no longer receiving benefits (i.e. low cost, reliable, carbon-free electricity) from the plant.  The community is receiving no compensation for serving as a nuclear waste storage site, nor is the community being paid a premium for the additional risks associated with such storage activity. Essentially, these ratepayer/communities have paid to reduce risk, but have in fact received more risk.
     
  • Licensee’s Ability to Pay for DecommissioningThe U.S. Nuclear Regulatory Commission (NRC) requires licensees to provide upfront financial assurances that funds can and will be available to pay for decommissioning costs.  However, there are considerable analysis and data indicating NRC’s formula to calculate required minimum decommissioning costs is flawed and understates costs.  Licensees are required to provide site-specific decommissioning cost analysis near the time of plant retirement.  However, premature retirement accelerates the need for decommissioning funds to be available and reduces the time for these funds to appreciate.  More research is needed to understand if parent companies of current at-risk plants have the ability to pay for actual, site-specific decommissioning costs.  It is unclear who would pay decommissioning costs in the case of licensee/parent company bankruptcy.

It is important to understand that plant licensees did not create the distributed interim storage “solution” that is forcing ratepayers and taxpayers to pay more for increased risks.

The realities of nuclear decommissioning and premature plant retirements may meaningfully impact local politics and should be transparently reviewed as part of contemporary energy policy discourse.


This executive summary provides a brief overview of the issues explored in the Kleinman Center for Energy Policy’s report, "Nuclear Decommissioning: Paying More for Greater, Uncompensated Risks." 

DOWNLOAD FULL REPORT

The author wishes to acknowledge helpful comments of an earlier draft from Dr. Jim Hines. Any remaining errors are the responsibility of the author alone.