US decommissioning costs fall as operators implement learnings

U.S. nuclear decommissioning cost estimates dipped in 2017 as industry learnings consolidated estimates, while strong capital markets hiked decommissioning funds, the latest figures from the Callan Institute show.

As the U.S. nuclear industry prepares for a surge in decommissioning activity, new figures indicate the industry is improving cost estimation practices.

Total U.S. decommissioning cost estimates fell by 2.5% in 2017 to $88.8 billion, ending a decade of year-on-year increases, according to a new report from the Callan Institute. Since 2014, total cost estimates have stabilized in a range between $88.1 billion and $91.0 billion, the data shows.

Several operators reduced cost estimates last year, while some estimates were unchanged and a number of others increased, Julia Moriarty, Senior Vice President and Co-Manager of Callan’s Capital Markets Research Group, told Nuclear Energy Insider.

Estimates fell for several plants performing immediate decommissioning under the DECON procedure, such as Southern California Edison’s SONGS plant and Pacific Gas and Electric's Humbolt Bay plant, Moriarty said.

"There are a few factors at play…I would say that costs are better predicted as time goes by and more plants move into decommissioning," Moriarty said.

            US decommissioning cost estimates

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Source: Callan Institute's 2018 Nuclear Decommissioning Funding Study

A recent re-evaluation of decommissioning costs at Duke Energy's 860 MW Crystal River 3 plant in Florida showed how growing industry expertise is helping to lower cost estimations. Duke Energy is nearing the end of major license termination activity at Crystal River 3 under a deferred decommissioning (SAFSTOR) plan.

In June, Duke Energy submitted its latest decommissioning cost estimate for Crystal River 3 at $895.9 million. Back in 2013, Duke Energy estimated total decommissioning costs at $1.2 billion including around $286 million expected in 2013-2017.

The latest cost estimates followed an updated decommissioning cost report by sector specialists TLG Services, delivered to Duke Energy in May.

The reduced cost estimate since 2013 is mostly due to actual costs incurred, but costs have also been “about 10% lower than anticipated,” Duke Energy said.

To form the estimate, TLG used new information and learnings from ongoing completed decommissioning programs, including its estimations for the Shippingport and Cintichem projects, completed in 1989 in 1997, it said.

“Modifications [to the 2013 methodology] were incorporated where new information was available or experience from ongoing decommissioning programs provided viable alternatives or improved processes,” TLG said.

Decommissioning operators are using economies of scale and the latest technology advancements to shorten decommissioning procedures and cut costs.

More recently, growing demand for decontamination and dismantling (D&D) services has spawned new decommissioning joint ventures and business models involving the transfer of plant ownership to specialist decommissioning groups.

Funding boost

Under U.S. regulations, decommissioning costs must be met by a Nuclear Decommissioning Trust Fund (DTF) which totalled $743 million for Crystal River 3 at the end of 2017.

DTF's are expected to grow over time, through a range of investments in equity and fixed income securities, as well as real estate, private equity, and/or hedge funds, depending on the operator.

The latest figures from Callan show that strong capital markets in 2017 raised fund balances significantly.

Total U.S. DTF balances hiked by 8.7% in 2017 to $69.3 billion, Callan said in its report.

The year-on-year increase can be "attributed largely to capital market performance in 2017, which saw the U.S. stock and bond markets up approximately 21% and 4%, respectively," the report said.

As a result, assets as a percentage of costs rose to an 11-year high of 81% for investor-owned utilities, while public power utility funding rose to almost 60% of costs.

The capital market rises in 2017 were a welcome boost for operators facing continuing margin pressure from low wholesale prices.

Operators were able to increase DTF balances while reducing annual operator contributions for the third straight year. Total annual operator contributions fell $40 million (13.4%) in 2017 to $258 million, Callan figures show.

"In 2017, investor-owned contributions were half of their 2008 level while public power contributions were roughly a quarter of their 2008 level," Callan noted.

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