<p>The economics of nuclear power are highly significant to the energy transition required by climate change.  The problems associated with upfront costs are frequently discussed.  While this is clearly a problem it seems one that is fairly well modelled by conventional economics, with upfront costs being balanced against longer term profits.</p>
<p>A more unique feature of the nuclear industry that is less discussed is that a significant amount of the cost comes at the end of the life cycle.  There are technical and financial challenges in both decommissioning nuclear power plants and dealing with the waste.  These challenges are &quot;long tailed&quot; in two ways, they come after the money has been earned and they are highly uncertain.</p>
<p>The only place I could find this breifly discussed is the World Nuclear Industry Status Report.  <a href="https://www.worldnuclearreport.org/IMG/pdf/wnisr2022-v3-hr.pdf" rel="nofollow noreferrer">The 2022 one </a> refers to the <a href="https://www.worldnuclearreport.org/IMG/pdf/wnisr2018-v2-hr.pdf" rel="nofollow noreferrer">2018 one &quot;for more details&quot;</a>.  My reading of this, summarised in the quotes below, is that when building the nuclear plants we are currently decommissioning they did not really think about it, what is in place appears insufficient and there is no way to recover any overspend from those who made the profit.  It is worth noting that this focuses on the costs of decommissioning the site, it does not cover the costs of disposing of the waste, <a href="https://en.wikipedia.org/wiki/Asse_II_mine" rel="nofollow noreferrer">which has in the past been under estimated</a>.</p>
<p>It seems the inability to accurately account for these casts that occur after the revenue generation stage could hinder decision making, for example in choosing between nuclear and renewable energy investment, or between large nuclear plants and small modular plants (<a href="https://doi.org/10.1073/pnas.2111833119" rel="nofollow noreferrer">especially considering the waste implications</a>).</p>
<p>Are there any economic methods that can appropriately account for costs such as this?  I would be interested in the answer from a purely theoretical or from a practical standpoint.</p>
<blockquote>
<p>decommissioning was rarely considered in the reactor design, and the costs for decommissioning at the end of the lifetime of a reactor were usually discounted away, and thus, subsequently, largely ignored. However, as an increasing number of nuclear facilities either reaches the end of operational lifetimes or are already shut down permanently, the challenges of reactor decommissioning are coming to the fore, and also attract increasing public attention.</p>
<p>Due to its high capital intensity and long-term nature, reactor decommissioning is intimately related to financial issues. Internationally, there are many different approaches to secure the financing of the nuclear backend, but all countries more or less face the same challenges: a risk of insufficient or unavailable financial resources, underperformance of the funds, a possible bankruptcy of the operator, and foremost the underestimation of future costs.</p>
<p>Going forward, decommissioning in the U.S. faces a challenge of efficient dismantling, and of financing the process in a context of low electricity prices placing a further strain on the competitiveness of nuclear power plants, and low provisions on behalf of the companies.</p>
<p>These developments are problematic as limited-liability companies are only financially liable—in the case of an accident or other legal dispute—up to the value of their assets. Therefore, if the decommissioning funds are exhausted, such a third-party company could declare bankruptcy, leaving the bill for the taxpayer. Indeed, EnergySolutions is already running out of money for the decommissioning of the Zion units and the State of Vermont petitions before the Atomic Safety and Licensing Board of the Nuclear Regulatory Commission (NRC) for leave to intervene in the plans and hearing request due to underestimated risks to the ratepayers.</p>
<p>Approximately 70 percent of the U.S. utilities—generally traditional, rate-regulated utilities—collect decommissioning money from customers reactor specific in Nuclear Decommissioning Trust funds (NDT), while the remaining operators must provide financial assurance through one of the other two methods (a prepayment; a surety, insurance, or parent-company guarantee).</p>
<p>There is an increasing risk that the NDT will not be sufficient to cover all the decommissioning costs in the foreseeable future due to the underestimation of future costs and a significant number of early closures. Especially the premature shutdowns due to deteriorating economic conditions appears to be a key problem as in most cases the NDT is built up year by year over the expected lifetime of the reactor. A recent audit by the U.S. Office of the Inspector General concludes that the cost estimates should be based on the best available knowledge from research and operational experience, but with the NRC estimation formula being based on studies conducted between 1978 and 1980, this is hardly the case. The audit recommended among other things that the funding formula be re-evaluated to determine whether a site-specific cost estimate would be more efficient.</p>
</blockquote>

CC BY-SA 4.0
2024-06-18T18:28:51.840Z
Welcome to the site and you raise an important issue.  Just to be clear, I can imagine three distinct questions here: 1) How to account for (measure) the costs of decommissioning and waste disposal _when those costs are incurred_? 2) How to _predict_ before approving a project what those costs will be, so as to inform the decision whether to approve or not? 3) How to ensure that the firm who stands to profit from the project (or someone at least) will accept responsibilty for those costs? If I understand correctly you are asking about 1 and 2.
Adam Bailey
CC BY-SA 4.0
2024-06-18T19:23:01.210Z
@AdamBailey I suspect my answer will show my lack of understanding, but to illustrate my point if I was asking about a traditional manufactured good, then the "solution" that "economics" has is ensuring that the firm who paid the costs stands to profit from the project.  This means that society does not need to measure or predict the cost/benefit of different options, the market will sort it out.  Is there a similar logic for this sort of situation?
User65535
CC BY-SA 4.0
2024-06-20T15:35:13.467Z
I think this question suffers from bad use jargon. Economics = Social science that studies relationship between various alternative goals people have and scarce resources. Economic methods = some empirical/statistical model or theoretical models. My best guess based on your comments is that you actually want to ask whether private companies in some sort of market have ways or incentives to account for these costs
1muflon1
CC BY-SA 4.0
2024-06-20T15:48:59.390Z
@1muflon1 Perhaps I could put it like this: Karl Marx and Adam Smith were economists who proposed different economic methods for managing society such that the decisions around the creation and use of the means of production are optimal for society.  Their models were based on the value of the means of production being positive.  From the above document it sounds like the more "Marx like" options such as the Nuclear Decommissioning Authority in the U.K is A solution, but does "economics" have a more "Smith like" one to apply to newly proposed reactors that has not been shown to fail?
User65535
CC BY-SA 4.0
2024-06-20T18:00:38.390Z
@User65535 well that is not actually 100% correct, A) Smith didnt invented or proposed a system. If you read Wealth of Nation he was describing how markets operate based on his very rudimentary non-statistical empirical and sometimes anecdotal observations. He discussed policies he thought worked and policies that didnt work, but he didn't invented/proposed new system merely described or made argument for already existing systems/policies that spontaneously emerged in society by accident. It would be like saying Darwin proposed "system of evolution" whereas he simply proposed mechanism
1muflon1
CC BY-SA 4.0
2024-06-20T18:04:49.240Z
to explain the natural process. Similarly, Marx mainly attempted to describe and model the economic system of his day using some old or also some of his new theories. Also when it comes to socialism/communism its actually just a set of policies that are not somehow novel. Its not like he was first person to have idea of propertyless society, in fact his ideal society was based on hunter-gatherer societies which he considered non-exploitative, and his proposals/policies were his attempt at recreating some sort of moneyless property-less and classless prehistoric societies in industrial setting
1muflon1
CC BY-SA 4.0
2024-06-20T18:08:39.830Z
B) Nuclear Decommissioning Authority is not a Marxist solution from political economy perspective. A Marxist solution would be to have fully nationalized system where the nuclear plants are owned by workers and they decide what to do with them. C) Then in that case again your terminology is incorrect. There is one economics like there is one physics, there are numerous economic theories like there are numerous physics theories. Either you can be interested in numerous positive theories which are some economic models (although still from your Q its not clear exactly what models e.g. are you
1muflon1
CC BY-SA 4.0
2024-06-20T18:10:32.583Z
looking for models of optimal firm investment choice or government regulation? Or are you interested in normative analysis (e.g. political economy) which looks at what is optimal under different normative criterions like for example what would be optimal liberal, utilitarian, rawlsian etc energy policy?
1muflon1
<energy-economics>
Does economics have a solution to the long tail of costs in nuclear power?
User65535
# Does economics have a solution to the long tail of costs in nuclear power?

(Asked by: username_0 on 2024-06-18)

The economics of nuclear power are highly significant to the energy transition required by climate change. The problems associated with upfront costs are frequently discussed. While this is clearly a problem it seems one that is fairly well modelled by conventional economics, with upfront costs being balanced against longer term profits.

A more unique feature of the nuclear industry that is less discussed is that a significant amount of the cost comes at the end of the life cycle. There are technical and financial challenges in both decommissioning nuclear power plants and dealing with the waste. These challenges are "long tailed" in two ways, they come after the money has been earned and they are highly uncertain.

The only place I could find this breifly discussed is the World Nuclear Industry Status Report. [The 2022 one](https://www.worldnuclearreport.org/IMG/pdf/wnisr2022-v3-hr.pdf)  refers to the [2018 one "for more details"](https://www.worldnuclearreport.org/IMG/pdf/wnisr2018-v2-hr.pdf). My reading of this, summarised in the quotes below, is that when building the nuclear plants we are currently decommissioning they did not really think about it, what is in place appears insufficient and there is no way to recover any overspend from those who made the profit. It is worth noting that this focuses on the costs of decommissioning the site, it does not cover the costs of disposing of the waste, [which has in the past been under estimated](https://en.wikipedia.org/wiki/Asse_II_mine).

It seems the inability to accurately account for these casts that occur after the revenue generation stage could hinder decision making, for example in choosing between nuclear and renewable energy investment, or between large nuclear plants and small modular plants ([especially considering the waste implications](https://doi.org/10.1073/pnas.2111833119)).

Are there any economic methods that can appropriately account for costs such as this? I would be interested in the answer from a purely theoretical or from a practical standpoint.

> decommissioning was rarely considered in the reactor design, and the costs for decommissioning at the end of the lifetime of a reactor were usually discounted away, and thus, subsequently, largely ignored. However, as an increasing number of nuclear facilities either reaches the end of operational lifetimes or are already shut down permanently, the challenges of reactor decommissioning are coming to the fore, and also attract increasing public attention.
>
> Due to its high capital intensity and long-term nature, reactor decommissioning is intimately related to financial issues. Internationally, there are many different approaches to secure the financing of the nuclear backend, but all countries more or less face the same challenges: a risk of insufficient or unavailable financial resources, underperformance of the funds, a possible bankruptcy of the operator, and foremost the underestimation of future costs.
>
> Going forward, decommissioning in the U.S. faces a challenge of efficient dismantling, and of financing the process in a context of low electricity prices placing a further strain on the competitiveness of nuclear power plants, and low provisions on behalf of the companies.
>
> These developments are problematic as limited-liability companies are only financially liable—in the case of an accident or other legal dispute—up to the value of their assets. Therefore, if the decommissioning funds are exhausted, such a third-party company could declare bankruptcy, leaving the bill for the taxpayer. Indeed, EnergySolutions is already running out of money for the decommissioning of the Zion units and the State of Vermont petitions before the Atomic Safety and Licensing Board of the Nuclear Regulatory Commission (NRC) for leave to intervene in the plans and hearing request due to underestimated risks to the ratepayers.
>
> Approximately 70 percent of the U.S. utilities—generally traditional, rate-regulated utilities—collect decommissioning money from customers reactor specific in Nuclear Decommissioning Trust funds (NDT), while the remaining operators must provide financial assurance through one of the other two methods (a prepayment; a surety, insurance, or parent-company guarantee).
>
> There is an increasing risk that the NDT will not be sufficient to cover all the decommissioning costs in the foreseeable future due to the underestimation of future costs and a significant number of early closures. Especially the premature shutdowns due to deteriorating economic conditions appears to be a key problem as in most cases the NDT is built up year by year over the expected lifetime of the reactor. A recent audit by the U.S. Office of the Inspector General concludes that the cost estimates should be based on the best available knowledge from research and operational experience, but with the NRC estimation formula being based on studies conducted between 1978 and 1980, this is hardly the case. The audit recommended among other things that the funding formula be re-evaluated to determine whether a site-specific cost estimate would be more efficient.

**Tags:** energy-economics
> **Comments:**
> **username_1**: Welcome to the site and you raise an important issue.  Just to be clear, I can imagine three distinct questions here: 1) How to account for (measure) the costs of decommissioning and waste disposal _when those costs are incurred_? 2) How to _predict_ before approving a project what those costs will be, so as to inform the decision whether to approve or not? 3) How to ensure that the firm who stands to profit from the project (or someone at least) will accept responsibilty for those costs? If I understand correctly you are asking about 1 and 2.  
> **username_0**: @AdamBailey I suspect my answer will show my lack of understanding, but to illustrate my point if I was asking about a traditional manufactured good, then the "solution" that "economics" has is ensuring that the firm who paid the costs stands to profit from the project.  This means that society does not need to measure or predict the cost/benefit of different options, the market will sort it out.  Is there a similar logic for this sort of situation?  
> **username_2**: I think this question suffers from bad use jargon. Economics = Social science that studies relationship between various alternative goals people have and scarce resources. Economic methods = some empirical/statistical model or theoretical models. My best guess based on your comments is that you actually want to ask whether private companies in some sort of market have ways or incentives to account for these costs  
> **username_0**: @1muflon1 Perhaps I could put it like this: Karl Marx and Adam Smith were economists who proposed different economic methods for managing society such that the decisions around the creation and use of the means of production are optimal for society.  Their models were based on the value of the means of production being positive.  From the above document it sounds like the more "Marx like" options such as the Nuclear Decommissioning Authority in the U.K is A solution, but does "economics" have a more "Smith like" one to apply to newly proposed reactors that has not been shown to fail?  
> **username_2**: @User65535 well that is not actually 100% correct, A) Smith didnt invented or proposed a system. If you read Wealth of Nation he was describing how markets operate based on his very rudimentary non-statistical empirical and sometimes anecdotal observations. He discussed policies he thought worked and policies that didnt work, but he didn't invented/proposed new system merely described or made argument for already existing systems/policies that spontaneously emerged in society by accident. It would be like saying Darwin proposed "system of evolution" whereas he simply proposed mechanism  
> **username_2**: to explain the natural process. Similarly, Marx mainly attempted to describe and model the economic system of his day using some old or also some of his new theories. Also when it comes to socialism/communism its actually just a set of policies that are not somehow novel. Its not like he was first person to have idea of propertyless society, in fact his ideal society was based on hunter-gatherer societies which he considered non-exploitative, and his proposals/policies were his attempt at recreating some sort of moneyless property-less and classless prehistoric societies in industrial setting  
> **username_2**: B) Nuclear Decommissioning Authority is not a Marxist solution from political economy perspective. A Marxist solution would be to have fully nationalized system where the nuclear plants are owned by workers and they decide what to do with them. C) Then in that case again your terminology is incorrect. There is one economics like there is one physics, there are numerous economic theories like there are numerous physics theories. Either you can be interested in numerous positive theories which are some economic models (although still from your Q its not clear exactly what models e.g. are you  
> **username_2**: looking for models of optimal firm investment choice or government regulation? Or are you interested in normative analysis (e.g. political economy) which looks at what is optimal under different normative criterions like for example what would be optimal liberal, utilitarian, rawlsian etc energy policy?  

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## 0 answers

