OECD expands decommissioning cost benchmarks ahead of closure surge

The OECD's Nuclear Energy Agency wants to improve the accuracy of decommissioning cost estimates to optimize spending plans and improve forecasts on fund returns, agency experts told Nuclear Energy Insider.

International Atomic Energy Agency (IAEA) data show close to 150 reactors have ceased operating and up to 200 additional reactors are set to go offline in the next two decades. Most of these plants are in Europe, which has an aging fleet and where changes to government energy policy, higher safety requirements and wholesale price pressures have prompted a spate of early closures.

The number of European nuclear power plants in decommissioning is expected to rise from 76 in 2015 to around 110 in 2020, Jorg Klasen, Director Nuclear Decommissioning Services at German operator EnBW Kernkraft, said in May 2016.

Globally, only 16 reactors have so far completed decommissioning and the majority of these were in the U.S, OECD Nuclear Energy Agency (NEA) said in its 2016 report, “Costs of Decommissioning Nuclear Power Plants.”

The OECD-NEA highlighted the lack of actual cost data currently available for decommissioning planners. OECD-NEA analyzed data from a number of member countries with the aim of improving the benchmarking of decommissioning cost estimations against actual cost data.

Source: Nuclear Energy Insider Market Survey (2016). Responses from 300 industry participants.

Low wholesale power prices in Europe and U.S. have prompted many reactors to close ahead of expectations. In the U.S., many operators have deferred decommissioning while decommissioning funds are accumulated.

Simon Carroll, Chair of the OECD-NEA Decommissioning Cost Estimation Group (DCEG) warned the expected hike in reactor shut downs will require the execution of a much larger number of projects over a much shorter period than previously seen.

Carroll called for the nuclear industry to overcome an inherent reluctance to share cost data and experience from completed projects and those at advanced stages of decommissioning.

Governments and regulators are seeking more decommissioning cost data to assess the adequacy of funding and more data transparency would improve operators’ ability to develop cost-effective strategies and realistic cost estimates for their upcoming decommissioning projects, Carroll said.

“There is a need to identify ways to encourage timely data sharing and increase transparency and confidence in the numbers without creating problems in the marketplace. Having appropriate transparency and relevant data sharing will be a win-win for everybody,” he said.

Valuable data

The DCEG has started a project to benchmark nuclear plant decommissioning costs and explore ways of comparing actual costs with estimated costs, Carroll said. The group will aim to encourage the sharing of cost data while respecting concerns over sensitivity.

Other competitive energy sectors such as oil and gas have undergone greater external scrutiny and analysis of costs, providing greater data visibility for analysis, he noted.

For example, Oil & Gas UK's Decom North Sea (DNS) association expedited information sharing among its members to add value, improve efficiency and reduce costs in the decommissioning sector, he said.

Confidence in nuclear project costs would be boosted by sourcing valid, representative and comparable data from current and recently completed projects, Martyn Jenkins, Managing Director of Enkom Consulting, told Nuclear Energy Insider.

More detailed definitions and identification of risks and more clearly defined project deliverables would improve the robustness of estimates, he said.

Innovative technology and work programs can raise uncertainty over project duration estimates and changes to spending plans and funding availability must be factored into the estimates, Jenkins noted.

“The estimate needs to be reviewed as the project develops and you need to identify and factor in the changes to any numbers,” he said.

Operators may hold incomplete archives of amendments for older first generation nuclear power plants and this can introduce further risks to project durations and costs, he added.

Regulatory risks

While decommissioning costs can be driven by a number of site-specific issues, costs are also exposed to risks outside the control of project leaders.

Changes to regulations governing nuclear waste disposal, particularly on the management of low-level radioactive waste (LLW), can present a major challenge to estimating the costs of decommissioning, according to Geoffrey Rothwell, Principle Economist, OECD-NEA.

Although costs of decontamination and dismantling are likely to fall due to improved efficiencies, spending associated with terminating the site operating license can increase if different LLW storage and acceptance criteria protocols are introduced by regulators at a later date, Rothwell said.

Operators must set out decommissioning budgets that satisfy a range of bodies including local, regional, national and sometimes international regulators, he noted. Greater environmental awareness has also increased the number of external stakeholders which require the land to be safely returned to its original condition.

Decommissioning Trust Funds (DTFs) are designed to increase over time but Rothwell said operators should factor the risk of cost escalations into their fund return expectations and assume a zero rate-of-return on decommissioning fund interest.

“To deal with changing regulators and regulatory changes operators could use a zero discount rate, which assumes a rate of increase in decommissioning costs is equal to the rate of return from the decommissioning funds. So, you are putting aside a little bit more today to insure against overruns in the future,” he said.

By Karen Thomas