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May, 2006

Energy & Resources

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As has been the case for decades, nuclear power deeply divides public opinion. Proponents consider it to be safe, cost efficient, and environmentally friendly; critics consider it to be hazardous, economically inefficient, and the source of dangerous long-term pollutants for which there is no clear remedy. More than 50 years after the world's first nuclear power plant (NPP) that generated electricity for commercial use was officially connected to the Soviet power grid on June 27, 1954,1 nuclear power plant decommissioning and waste disposal remain perhaps the most contentious issues of all. As concerns over global warming mount and the price of oil and gas continue to rise, nuclear power is re-emerging as an alluring alternative energy source, particularly in fossil-fuel dependent countries such as the United States and United Kingdom. Nuclear power remains the only major fuel for the generation of electricity that is currently in commercial operation and which can reliably provide large volumes of base load power without producing greenhouse gases - a primary cause of global warming. Nuclear fuel's carbonless attribute could lead to a resurgence in construction of new nuclear plants. Reports indicate that several other regions of the world, in particular Asia, also intend to invest heavily in nuclear power in the short and medium term, adding a substantial amount of new nuclear generating capacity. More specifically, China has committed to spending upwards of US$50 billion (42.3 billion) over the next 15 years, adding roughly 30 new reactors which will increase its capacity from 8.7 million kilowatts today to 40 million kW by 2020.2 The new build sentiment is gaining momentum throughout Central Europe where roughly 18,000 MWe (megawatts electric) are either being planned or proposed. A total of 5 new reactors are planned and 16 new reactors are being proposed in Bulgaria, Czech Republic, Hungary, Lithuania, Russia, Slovakia, and Slovenia.3 Overall, worldwide nuclear capacity is projected to increase through 2030. Nuclear power directly contributes to the electricity supply of over half of the countries in the Organization for Economic Co-operation and Development (OECD). Nuclear power also contributes indirectly to the supply of some countries that import power from those that have excess supply. As shown by Figure 1 below, many countries are highly dependent on nuclear power for a substantial proportion of their electricity supply.

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Note: Percentages are rounded to the nearest whole number. Source: 2005-2006 Information Digest. US Nuclear Regulatory Commission, p. 29

U.S. Department of Energy, Energy Information Administration, "Unique Reactors." BusinessWeek, "Reactors? We'll Take Thirty, Please" October 3, 2005 p. 52. 3. World Nuclear Association, World Nuclear Power Reactors 2004-2005.
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Questions remain, however, about nuclear power. Have the concerns of its critics over decommissioning and waste disposal been answered? Does the nuclear industry simply have to present the solutions more effectively, or are there still unresolved technical issues? The purpose of this briefing is to review the different perspectives from around the globe on: - the science of decommissioning and waste disposal; - the responsibility for decommissioning and waste disposal; - alternative financing methods in use for the cost of decommissioning and waste disposal; - practical lessons learned to date from operators that have decommissioned plants; and - the implications for the construction of new nuclear power plants.

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Nuclear power is not the only energy source being used today to generate electricity. Plant owners can choose from a variety of fuels such as natural gas, coal, and petroleum as well as renewable sources like wind. The decisions made by major users of nuclear power reflect a number of political and economic interests that include long-standing policies on energy independence and security, global warming and the reduction of greenhouse gas emissions, and a lack of domestic natural resources. France, in particular, has gained a reputation for leading edge expertise in the use of nuclear power. Currently, France has 59 nuclear reactors operated by Electricite de France (EdF) with total capacity of over 63 GWe.4 The present situation is due to the French government deciding in 1974, just after the first oil shock, to rapidly expand the country's nuclear power capacity. This decision was made in the context of France having substantial heavy engineering skills but few indigenous energy resources. Nuclear energy, with the fuel cost being a relatively small part of the overall cost, made good sense in minimizing imports and achieving great energy independence and security. As a result of this decision, France now claims a substantial level of energy independence and almost the lowest cost of electricity in Europe. Over 90% of its electricity is nuclear or hydro.5 Sweden's electricity consumption has been rising and it has one of the world's highest individual levels of consumption: about 18,000 kWh/head.6 About half of domestic production is nuclear, and up to half is hydro, depending on the weather. Up to the late 1960s, the country's focus was on hydro electricity to power Sweden's growth. In 1965, it was decided to supplement

4.World 5.Ibid. 6.World 7.

Nuclear Association. Nuclear Power in France. February 2006.

Nuclear Association. Nuclear Power in Sweden. June 2005. Ibid. 8. World Nuclear Association. Nuclear Power in Japan. November 2005. 9. Ibid. 10. World Nuclear Association. Nuclear Power in South Africa. February 2006. 11. "China and South Africa in pebble bed alliance." Professional Engineering, March 23, 2005, p. 6. 12. World Nuclear Association. Nuclear Power in China. February 2006 13. Ibid.

this with nuclear power and to provide a buffer against high oil prices. This policy decision was reinforced by the first oil embargo of 1973-1974, at a time when Sweden depended on oil for about one-fifth of its electricity and demand was rising 7% per annum.7 In the mid-1970s, the nuclear push became a major political issue, and legislation was passed in 1977 to ensure proper waste management. This provided the basis for Sweden's world leadership in management in spent fuel. Despite being the only country to have suffered the devastating effects of nuclear weapons during wartime, Japan has remained committed to nuclear energy since 1973, where 55 reactors provide some 30% of the country's electricity.8 Japan's lack of ample supplies of indigenous energy resources has forced it to depend heavily on imports for some 80% of its primary energy needs, the majority of which have come from one source: the Middle East. This geographical vulnerability became critical due to the oil shock in 1973. At this time, Japan already had a growing nuclear industry, with five operating reactors.9 Re-evaluation of domestic energy policy has resulted in diversification, and in particular, a major nuclear construction programme. A high priority was given to reducing the country's dependence on oil imports. The South African government decided in the mid-1970s to build some 2000 MWe of nuclear capacity at Koeberg near Cape Town. The resulting Koeberg 1 and 2 reactors - owned and operated by state-owned utility Eskom - have supplied electricity since 1984 and 1985 respectively. Eskom supplies about 95% of the country's electricity and more than 60% of Africa's.10 South Africa's nuclear industry development was a result of geographical constraints involving inefficient attempts at moving coal and electricity from great distances within the country. Recently, South Africa and China have teamed to collaborate on some aspects of plans to build pebble bed demonstration plants.11 Perhaps the most ambitious nuclear new build plan announced to date has come from China. Mainland China has 9 nuclear power reactors in operation and a further 2 units under construction. A total of 27 new reactors have either been planned (approvals and funding in place, or construction well advanced but suspended indefinitely), or proposed (clear intention but still without funding and/or approvals).12 The continuing drive to increase nuclear capacity is a result of many factors. The government initially had projected annual growth in electricity demand of only 4.3%; by early 2004, demand had grown to 16% giving rise to severe power shortages.13 Most electricity produced in mainland China is supplied by fossil fuels - about 80%, mainly coal - and hydro power. Moreover, while coal is the main energy source in China, most reserves are in the north or northwest regions of the country and present an enormous logistical problem.

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Country New Build Drivers Decommissioning & Waste
Canada Eighteen reactors operable as of September, 2005 with two reactors in planning stages. Uses the CANDU (CANadian Deuterium Uranium) reactor system. Other reactors have been refurbished, extending operational lives to 2022. Nuclear Waste Management Organisation set up under 2002 Nuclear Fuel Waste Act to explore options for storage and disposal. Geological burial of nuclear waste 500 to 1000 metres in stable rock. Panel recommendation of spent fuel placed in deep geological repository. Seventeen experimental and commercial reactors have been shut down and are being decommissioned; five of these from East Germany following unification. Federal Office for Radiation Protection is responsible for building and operating final repositories for highlevel waste. Russian policy is to close the fuel cycle as far as possible and utilise recycled uranium. Spent fuel is stored mostly at reactor sites. Five civil reactors are being decommissioned. Centralised storage in Zheleznogorsk. Atomic Energy Act of 1988 established a 'polluter pays' principle under which Korea Hydro and Nuclear Power Co. Ltd, and Korea Nuclear Fuel Company are levied fees that are paid into a national Nuclear Waste Management Fund. Spent fuel is stored at reactor site pending construction of centralised storage facility by 2016.

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The operation of a nuclear power plant produces radioactive waste as a by-product of the fission process. According to the World Nuclear Association, this waste falls into four categories (see glossary). Of these four types, high level radioactive waste is by far the greatest concern. Disposal of low level waste is comparatively easy as the level of radioactivity and the half life of the radioactive isotopes in low level waste is relatively small. Storing the waste for a period of 10 to 50 years will allow most of the radioactive isotopes in low level waste to decay, at which point the waste can be disposed of as normal refuse. In contrast, most of the radioactive isotopes in high level waste emit large amounts of radiation and have extremely long half-lives - some longer than 100,000 years; any disposal solution needs to take into account both the very long timescales involved in waste disposal, and the high risk associated with the improperly discarded waste. This briefing considers only high level waste disposal.

Germany

Obtains close to one third of its electricity from nuclear energy using 17 reactors. Coalition government formed after 1998 federal elections featured a phaseout of nuclear; compromise agreement in 2000 to limit operational lives of nuclear plants to average of 32 years. Between 1986 Chernobyl accident and mid-1990s, only one nuclear power station was commissioned. Thirty-one reactors currently in operation, four under construction, one planned, and eight proposed. Electricity demand increasing 3% per annum. Imports close to 97% of energy requirements. Twenty reactors provide about 40% of electricity. Eight reactors planned.

Russia

South Korea

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- Very low-level waste, or exempt waste, contains negligible amounts of radioactivity and may be disposed of with domestic refuse. - Low-level waste (LLW) comprises the bulk of waste from the nuclear fuel cycle. It comprises paper, rags, tools, clothing, filters etc. which contain small amounts of mostly short-lived radioactivity. It does not require shielding during handling or transport and is suitable for shallow land burial. - Intermediate-level waste contains higher amounts of radioactivity and normally requires shielding. Shielding can be barriers of lead, concrete, or water which give protection from penetrating radiation such as gamma rays. Intermediate-level wastes typically consist of resins, chemical sludges and metal fuel cladding, as well as contaminated materials from reactor decommissioning. - High-level waste (HLW) contains the fission products and transuranic elements generated in the reactor core which are highly radioactive and hot. HLW accounts for over 95% of the total radioactivity produced. Source: World Nuclear Association The World Nuclear Association defines plant decommissioning as the removal of a reactor from service and the subsequent actions of safe storage, dismantling, and making the site available for unrestricted use. Because fission takes place within the reactor core, nuclear reactors therefore require careful decommissioning.

Spain

Spain is notable for power plant uprates rather than new build projects. It has a program to add 810 MWe to current capacity.

ENRESA established in 1984 as a stateowned company to take over radioactive waste management and decommissioning activities. It is now the only state-owned part of the nuclear fuel cycle in Spain. One reactor Vandellos-1 - was closed down in mid 1990 after 18 years of operation.

Ukraine

Heavily dependent on nuclear energy; 15 Best known reactor was Chernobyl. reactors generate half its electricity. Spent fuel is mostly stored on site Government commissioned two large though some fuel is sent to Russia for reactors and plans on building up to 11 reprocessing. Four Chernobyl reactors new reactors by 2030. are being decommissioned which are enclosed in a large shelter with international community assisting in a more durable structure. Government commitment to future of nuclear energy remains uncertain despite ambitious greenhouse gas reduction targets. No new build initiatives at present. Over 100 reactors provide 20% of electricity. Energy Policy Act of 2005 provides nuclear incentives. Nuclear Decommissioning Authority set up and funded under the 2004 Energy Act. Charged with cleaning up UK's legacy of nuclear wastes on 20 sites including 39 reactors. Onsite storage until taken over by Dept. of Energy for final disposition. Source: World Nuclear Association

United Kingdom

United States

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Already across the globe, hundreds of reactors have been decommissioned. As a result, a growing body of research on the most effective ways of decommissioning NPPs from both a cost and safety perspective is now available. Three main approaches to decommissioning have been developed. These are summarized in Figure 2 below.

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The ultimate disposal of vitrified wastes, or of spent fuel assemblies, without reprocessing, requires isolation from the environment for long periods. The most favoured method is burial in dry, stable geological formations some hundreds of metres deep.16 After being buried for roughly 1,000 years most of the radioactivity will have decayed. The amount of radioactivity remaining would be similar to that of the naturallyoccurring uranium ore from which it originated, though it would be more concentrated. After 40-50 years of burial, heat and radioactivity will have fallen to one thousandth of the level at removal. Combined with the fact that surface storage for 30-50 years is to be considered so that heat and radioactivity can dissipate to levels which facilitate handling and storage, to date there has been no practical need for final HLW repositories. The selection process for appropriate deep geological repositories is now under way in several countries, such as Australia, Germany, and Spain. The majority of countries using nuclear power do not as yet have large central repositories for the various types of waste. One exception is Finland, which has commenced the excavation work of the Olkiluoto Underground Rock Characterization Facility (ONKALO), where construction should be completed by 2010. There have also been proposals for international HLW repositories in optimum geology. A short-term solution adopted by many countries, including Germany, has been to build interim facilities until more permanent facilities become available. In the US, nuclear owners have looked past the stalled decision involving the proposed national repository at Nevada's Yucca Mountain, and are using what many experts envision as the short-term de facto solution: six-metre-tall concrete and steel casks.

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Immediate Dismantling (DCON)
Equipment, buildings and parts of the facility and site that contain radioactive contaminants are decontaminated to a level that permits removal of regulatory control and are dismantled to the extent necessary shortly after the cessation of operations. Residual radioactive waste is treated, packaged, and removed to an appropriate waste storage or disposal site.

Safe Enclosure (SAFSTOR)


The facility is placed in a safe stable condition and maintained in that state until it is dismantled and decontaminated to levels that permit removal of regulatory controls. During SAFSTOR, a facility is left intact with fuel being removed and radioactive liquids have been drained from systems and components and then processed. Radionuclide decay occurs during the period of safe storage, thus reducing the quantity of contaminated and radioactive material that must be disposed of during decontamination and dismantling.

Entombment (Entomb)
Radioactive structures, systems, and components are encased in a structurally long-lived substance such as concrete. The entombed structure is appropriately maintained, and continuous surveillance is carried out until the radionuclides decay to a level that permits removal of regulatory controls.

Source: Nuclear Energy Agency/OECD. "The Decommissioning and Dismantling of Nuclear Facilities: Status, Approaches, Challenges." 2002.

Based upon a review and analysis by DTT's Power and Utilities Industry Group of various country global decommissioning strategies and policy statements, it appears that countries are split between several options: immediate and deferred dismantling, immediate dismantling only, deferred dismantling only, and other options such as entombment. Those countries that considered deferred dismantling were not in agreement when choosing the timeframe. Deferral periods ran from 10 years (Japan) up to 80 years (Slovenia). Some European countries, notably France, the Netherlands, and the UK considered a wide range of deferral periods that include 25 to 50 years, 40 to 100 years, and 35 to 135 years, respectively.14 Moreover, the type of reactor used did not dictate any one strategy. Consider for example, the strategies chosen for pressurized water reactors. A number of countries chose the immediate dismantling option (Belgium, Germany, Italy, Slovenia, South Africa, Spain, Sweden, Switzerland, and the U.S.), while a second group of governments has opted for deferred dismantling (Brazil, France, Germany, Japan, and the Netherlands).15

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Across the globe, nuclear power plants have traditionally been built and operated by state-owned utilities. Many have been privatised over the last 20 years, but even in these cases, the boundary between the public and private sectors is more blurred than in almost any other sector that has passed from state to private ownership. The recent example of British Energy plc in the UK is informative in this regard. In 1996 the UK government privatized British Energy, the owner and operator of the eight most modern UK nuclear reactors, through a flotation on the London Stock Exchange. The company operated successfully until a fall in the price of electricity following a liberalisation of the energy markets forced the company to sell its output at a loss. Given the nature of nuclear power, British Energy did share other generating companies' option to mothball its plants, and, unlike some of its competitors, the company did not have its own distribution network to provide a retail market hedge against short-term troughs in wholesale market prices. Although the U.K. has a liberalised energy market and British

Organisation for Economic Co-operation and Development, Nuclear Energy Agency. Decommissioning Nuclear Power Plants: Policies, Strategies, and Costs, 2003, p. 38. 15. Ibid. p. 59 16. International Atomic Energy Agency. Scientific and Technical Basis for the Geological
14.

Disposal of Radioactive Wastes, 2003, p. 67.

Energy had been privatised, the U.K. government did not allow the company to fail, making loans and restructuring the company in order to keep it operating. Following this restructuring, the government has assumed the company's qualifying uncontracted nuclear liabilities and qualifying decommissioning costs. The rationale for the U.K. government's intervention in a liberalised market to support British Energy is clear: not only does British Energy generate a significant proportion of the country's electricity, but also, even in the event the company should fail its reactors would still need to be decommissioned and their remaining high level radioactive waste would require disposal. The costs associated with decommissioning and waste disposal cannot be avoided without creating a significant threat to public health and safety. The long-term nature of the decommissioning and waste disposal requirements is inherent in any NPP operation and creates unique financing and risk allocation issues. How can liabilities that extend well beyond the debt-raising capacity of even sovereign governments with high credit ratings be borne by the private sector? Can responsibility for the management of radioactive waste with half lives of tens of thousands of years be left in the responsibility of private companies, the most stable of which are only likely to have operated for decades? How have different countries sought to address this issue?

have recognised that a plant operator may cease to exist before decommissioning is completed. In this situation, several countries, most notably Spain, Belgium and the UK have established a governing body that will accept long term responsibility.

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The nuclear industry in the U.K. has undergone a fundamental and comprehensive restructuring as enacted into legislation by the Energy Act of 2004. The establishment of the Nuclear Decommissioning Authority in April 2005 marked a key milestone in the U.K. Government's policy to deal with their government-owned civil nuclear legacy built up over the last half century. With the UK nuclear legacy estimated as being in excess of 50 billion, and extending out for more than one hundred years, the task of nuclear decommissioning and site clean-up has been rightly perceived as being both technically challenging and contractually complex.

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The concept of deep geological disposal was first proposed more than 40 years ago by the U.S. National Research Council / National Academy of Sciences. Geological concepts have been refined since then and have involved much debate, discussion and R&D that have attempted to allay the fears over protecting society and the environment. While the debate continues, the scientific and technical community is generally convinced as to the soundness of this approach, and, as noted above in the case of Finland, political decision makers have also been convinced.

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Generally speaking, the responsibility for the establishment of laws and regulations surrounding decommissioning are borne by governmental agencies or ministries such as environment, health, or safety. European Union OECD countries are also bound by the terms dictated in the Euratom Treaty which establishes uniform safety standards to protect workers and the general public. The entity responsible for carrying out decommissioning activities is typically the organisation that operated the nuclear plant during the operational phase, but is sometimes a government agency. In many OECD countries, utilities operating nuclear power plants will be the party to undertake decommissioning either through their own staffs or specialised contractors. Sweden, however, is one country that has devised a unique approach to this issue. SKB is a special company owned by the Swedish nuclear power plant operators that is tasked with managing and disposing of radioactive waste from the Swedish nuclear power plants in a manner that complies with extremely stringent standards. With the approval of the government, NPP operators may engage SKB to conduct radioactive waste storage activities. However, even in this example, the plant operator remains ultimately responsible for decommissioning. In cases where a plant operator is unable to perform its required duties, the responsibility may fall on the regulator as is the case in Canada, or to the state, as in Finland. Further, some countries

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In a recent report, the OECD's affiliate - the Nuclear Energy Agency - noted that of the 26 countries taking part in a survey, all reported decommissioning costs of less than US$500 per kilowatt hour. Estimating nuclear dismantling and decommissioning costs is, however, a complex process. Studies show that many companies and regulators tend to underestimate the true cost of decommissioning, primarily due to rising costs for decommissioning and dismantling (D&D) equipment, labour, transportation, and waste storage. The U.S. General Accounting Office (GAO) found that the U.S. Nuclear Regulatory Commission (NRC) estimates for decommissioning were too low. In its report, the GAO recommended the NRC re-examine its estimates to determine whether they appropriately reflected all the costs that utilities and plant owners believe are needed to decommission their facilities. In a subsequent report, the GAO found that of 76 U.S. nuclear licenses reviewed, 36, or 47%, had not accumulated funds during the early years of their plants' operating life at a

rate that was sufficient for eventual decommissioning. However, the situation has recently improved to where most licensees have increased funding to make up the funding shortfalls from early years. Performing cost estimates for decommissioning projects serves multiple stakeholder needs. Government regulators need to be informed so that national policy decisions can be made and finetuned regarding the amount of funds needed to complete D&D projects. Utilities use cost estimates to plan for funding requirements and associated financial liabilities. Additionally, investor-owned utilities in the U.S. are required to disclose the extent to which a decommissioning fund is funded or under funded, particularly when under-funding might affect the company's long-term strategic goals. Decommissioning cost estimates should also serve as the basis for the initial contracting of the project and may involve outside vendors and internal personnel who will be part of cost accounting and scheduling functions.

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Decommissioning costs are only one part of the formula. Several countries have attempted to estimate costs for construction of waste repositories and the related issue of waste storage. In Canada, the industry-led Nuclear Waste Management Organization concluded in a recent report21 that deep geological disposal would eventually cost C$24 billion (17.5 billion) and require 60 years of additional study and construction before the first bundle of waste is buried. In Japan, the original Tokai-1 power station closed down on 1998 and will be decommissioned over 17 years.22 The first ten years will involve safe storage to allow the radioactivity to decay. All radioactive wastes will be classified as low-level and will be buried. The total cost is estimated to be about 93 billion yen - 35 billion for dismantling and 58 billion for waste treatment.23 The examples of Canada and Japan serve to illustrate the difficulty in agreeing on the appropriate method for estimating waste disposal costs.

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Cost estimates can be based on assumptions, past experiences and case studies. When a country lacks national decommissioning experience, estimates from other countries may be used as a guide given similar operating history, type and size of reactor, and years in service (adjusted for local economic conditions). These estimates can be fined-tuned over time as experience is gained. Where necessary, estimates from other types of long-lived assets (such as oil refineries, offshore rigs, or petrochemical plants) may also provide a useful baseline. By applying the principles of decommissioning economics, governments and utilities can better understand the associated costs and myriad number of decisions they will make such as: - How much will it cost the plant owner to completely decommission and dismantle the power plant? - When should the plant be shut down and decommissioned? - What decommissioning strategy will be chosen and by whom? - What options are available for accumulating, managing, and investing the decommissioning trust funds? - What is the cost-benefit to extending the plant's operating life when compared with shutting it down?

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o~=p~~K In many countries, the cleanup of the
site is typically dictated by a governmental body that issues regulations; meeting these regulations can be a principal cost driver for decommissioning and waste disposal. For example, the U.S. Environmental Protection Agency regulates pollution laws and dictates the resulting cleanup. Cleanup and remediation activities and standards will also be dictated by the laws of the state where the plant is located. Depending upon the operating country, there may be regulatory standards to be met involving allowable radiation doses for workers and the public, plus allowable radioactivity and discharges from sites. Nuclear power plant cleaning and waste remediation require extensive preparation, onsite reviews, and ongoing monitoring and surveillance activities that impact the ultimate cost.

o~=q=~=p. Reactor types differ as to physical size


and types of coolants used. Gas-cooled reactors are physically larger than their pressurized and boiling water counterparts and, therefore D&D activities for these reactors will cost more to perform. The internal infrastructure of a water reactor plant is designed so that the top is fully removable. This feature makes the reactor vessels readily accessible and greatly increases the speed at which decommissioning activities can be completed. In contrast, gas-cooled reactors are larger and have a permanent top which provides only limited access to the reactor vessel for fueling and de-fueling. When the reactor approaches the end of its operational life, the de-fueling process can take a number of years, thus increasing the total decommissioning cost.

International Atomic Energy Agency. Scientific and Technical Basis for the Geological Disposal of Radioactive Wastes, 2003, p.1. 18. Organisation for Economic Co-operation and Development, Nuclear Energy Agency. Decommissioning Nuclear Power Plants: Policies, Strategies, and Costs, 2003, p.10. 19. United States General Accounting Office. Nuclear Regulation: NRC's Decommissioning Cost Estimates Appear Low, July 1988, p.2. 20. United States General Accounting Office. Nuclear Regulation: Better Oversight Needed to Ensure Accumulation of Funds to Decommission Nuclear Power Plants, May 1999, p.3. 21. Nuclear Waste Management Organization, Choosing a Way Forward: The Future Management of Canada's Used Nuclear Fuel. 2005, p. 28. 22. World Nuclear Association. Nuclear Power in Japan. November 2005. 23. Ibid.
17.

k==o~=rK In OECD countries, the number of


reactors on individual plant sites varies from one to eight. The more units there are on a single site, the more the supporting infrastructure facilities can be shared. When considered on a cost per unit basis, site operating and decommissioning costs at multi-unit plants tend to be lower. During a decommissioning project involving one site, if some reactor units remain operational while others are being decommissioned, costs can be reduced for the shutdown unit as some of the costs will be marginal costs on top of the costs incurred in continuing to operate the other reactors.

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Generally speaking, the operational life of a nuclear power plant is thought to be about 40 years and in some cases, 60 given a 20-year extension on the operating license. Decommissioning activities may last 50 years or more. Given this lengthy life cycle, there may be a tendency by governments and plant owners to design and construct new nuclear plants while overlooking the impact decommissioning will have on future generations.

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Because decommissioning and waste disposal costs are a direct consequence of operating a reactor, it makes sense that funds to pay for decommissioning and disposal of the high-level waste are set aside during the operating life of that reactor. At the end of a reactor's operating life, it ceases to generate income; without a mandated accumulated fund, the cost of decommissioning and waste disposal will fall on the operator (which is unlikely to have sufficient cash reserves on hand), on the relevant local government, or a utility's electricity customers. In the majority case, the responsibility for the funding of decommissioning and dismantling activities rests with the owner through the 'polluter pays' principle. In many of the OECD countries, it is typically a requirement established by law or by the operating license that operators of nuclear facilities create and maintain mechanisms for decommissioning. In many countries, such as South Africa and South Korea, the regulator or relevant government agency has devised specific formulas, fees, or taxes to be used for funding decommissioning projects; in others, such as the Ukraine, international donors such as the G8 and EU made pledges to help construct a new confinement center to house 4 Chernobyl reactors. As shown in Figure 3 below, in the U.S., these formulae showing minimum amounts are based on reactor type and power level, P (in MW), in addition to an adjustment factor (the following amounts do not include adjustments for inflation nor the cost of removal and disposal of spent fuel or of non-radioactive structures and materials beyond that necessary to terminate the license).

i~K A large proportion - 20% to 40% by some estimates - of


decommissioning costs can be attributed to labour. Most countries have strong labour unions and/or regulations that dictate the number of hours that can be worked in a radioactive environment. Additionally, labour costs will vary between projects based upon the use of skilled versus non-skilled labour.

t~=`~~. Classification schemes that distinguish radioactive from non-radioactive waste differ from country to country. In some countries, the material which is cleared from the plant site can be recycled or re-used without additional regulatory controls. In others, there are greater restrictions placed on the waste that can lead to higher volumes of radioactive waste for disposal, thus incurring extra costs. Some countries permit low levels of radioactive materials to be stored onsite, whereas higher levels of radioactivity will require the more expensive option of deep geologic burial. Differences in these options and on radioactive and non-radioactive waste results in wide variances in total decommissioning costs. ^==t~K The sheer quantity of radioactive waste
resulting from decommissioning has a direct impact on costs. Reactor sites will have accumulated different levels of waste depending on their operating period. In addition, types of waste will vary, with some reactors using materials that may require special treatment, handling, and disposal such as heavy water, liquid metal coolant or graphite.

^~~==t~=oK As discussed above, the


waste produced from operating and decommissioning activities must be safely discarded. The availability of repositories for high-level and low-level waste can have a significant impact on the decommissioning strategy chosen. Where full consideration of the need for storage areas has not been given in time, the lack of suitable repositories can make interim solutions necessary that may not be cost effective. Additionally, the location and type of waste storage sites will also be major cost drivers. The transport of radioactive waste is expensive, as are deep geologic repositories when compared to near surface storage areas.

c=P
For a Pressurized Water Reactor (PWR):
> or = 3400 MWt (megawatts thermal) between 1200 MWt and 3400 MWt (for a PWR < than 1200 MWt, use P=1200 MWt

Millions:
$105 $(75+0.0088P)

For a Boiling Water Reactor (BWR):


> or = 3400 MWt between 1200 MWt and 3400 MWt (for a BWR < than 1200 MWt, use P=1200 MWt $135 $(104+0.009P)

Amounts shown are in January 1986 dollars and must be adjusted for inflation. Source: 10CFR Ch.150.75 (1/1/2005) US Code of Federal Regulations

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Global decommissioning funds are typically accumulated by the plant operator. This is done by allocating a proportion of the operational revenues paid by electricity customers, with the amounts accumulated being reviewed on average every 1 to 5 years depending on the government or regulator. Some funds, however, are raised by general taxes levied by local or national agencies. In Canada, the U.S., and Sweden, fund levels are reviewed by and agreed to with a governmental agency, while in Belgium and Spain, fund levels are governed by a waste authority. While there is a logical reason behind the accumulation of funds during operations to pay for eventual decommissioning and waste disposal, the question remains as to who should hold and manage these funds. What happens when an operator has prudently accumulated funds during the operating period, only to discover that actuarial estimates are found to be insufficient? Should shareholders in an operator have a potential exposure to the performance of the whole investment market as well as the exposure to the operations of an NPP? Some countries allow the plant owners to accumulate and manage their own funds under appropriate supervision. In Spain, for example, the National Organization for Radioactive Waste (ENRESA) collects and manages the funds because it is the agency that also carries out D&D activities. In Sweden, yearly fees for decommissioning and dismantling are proposed by the governing authority which then establishes the fee with an independent Board of the Nuclear Waste Funds; the independent board also manages the fund. The policy in Finland is somewhat similar. An independent agency manages the investment process and ensures that the fund meets government targets. Switzerland's and Hungary's funds are administered directly by the government. In roughly half of the countries that have nuclear power plants, the owner or operator is permitted to hold the decommissioning funds. Other countries allow a third party to hold and maintain the funds. Regardless of whether the plant owner or government holds the funds, they are nearly always managed as a separate fund and not part of the owner or government's financial assets. It is also worth noting that some countries have two separate funds: one for decommissioning activities and a second fund for waste disposal. Bulgaria and Switzerland maintain two such funds.

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Global commercial NPP development has now reached the stage in its life cycle when the owners of many of the plants must begin to address the practical issues of nuclear decommissioning. Seventy-five percent of existing nuclear capacity in OECD Europe is expected to be retired by 2030, either because reactors will have reached the end of their economic life or because of a change in political priorities. Belgium, Germany, and Sweden have decided to phase out nuclear power altogether, and Switzerland has decided on a freeze on adding capacity. As shown by the examples below, amid all the macro issues regarding public safety, cost, and long term containment, for the people managing decommissioning projects it is as often the micro issues regarding the day-to-day management of the project that are considered to be worthy of note.

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As utilities and NPP owners begin to plan their decommissioning projects, it is essential to examine and learn from the experiences of others. Prior to German reunification, there were seven reactors of different types and in various stages of decommissioning or planning.24 When making cost estimates, timing and logistics are key considerations. In addition, for legal reasons, availability and management of plant-specific documents (permits, site inspections, drawings, etc.) should be made a priority. The decommissioning of the Japan Power Demonstration Reactor (JPDR)25 suggests that: - detailed data analysis provides a basis for planning future decommissioning projects; - dismantling costs are intimately related to manpower expenditures, and should be recorded and analyzed during all stages of the dismantling process; and - decommissioning and dismantling projects depend on site specific conditions such as location and weather. It is therefore important to take these under consideration when making project estimates. The first U.S. commercial-size plant removal was conducted at the Shippingport Atomic Power Station26 near Pittsburgh, PA. The project was especially valuable as it provided a detailed comparison between estimated and actual costs. Some of the more important findings of the project were: - detailed advanced planning is a must and is cost effective; - labour costs can result in significant increases in total costs; - waste disposal costs can bring about substantial discrepancies between planned and realized costs; and, - actual costs were within 10 percent of the estimated costs. Source: International Association for Energy Economics, The Energy Journal, Volume 12, Special Issue, 1991

24. Loschhorn, Ulrich and Herbert Hollmann. "Decommissioning Plans and Costing in Germany." The Energy Journal, Volume 12, Special Issue, 1991, p. 173. 25. Satoshi Yanagihara and Mitsugu Tanaka. "Estimating the Costs for Japan's JPDR Project." The Energy Journal, Volume 12, Special Issue, 1991, p. 135. 26. Murphy, William. "Greenfield Decommissioning at Shippingport: Cost Management and Experience." The Energy Journal, Volume 12, Special Issue, 1991, p. 119.

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Public acceptance is essential to any meaningful debate on nuclear power. Because of high profile events such as Three Mile Island and Chernobyl, along with the recent run up in oil prices, global power blackouts, geo-political considerations for energy security (Russia and Ukraine), and global warming, new electricity generation using nuclear power is being given attention by both politicians and the public-at-large. When it comes to nuclear waste, however, polls reinforce the belief that waste is one of the general public's greatest fears. In an international survey carried out in March 1999, 71% of French respondents declared that they tended to distrust nuclear-waste management efforts.27 Since then, it appears that nuclear facilities generate more positive feelings - possibly due to the economic benefits such as jobs and community support than the issue of waste. Closing the gap between support for new plants and acceptance of waste initiatives will remain a challenge in the future. In a more recent survey conducted in the U.K., 62% of the population said they would support an energy policy that combines increased renewable energy technologies with cautious nuclear new-build.28 In contrast, only one in three people (36%) say they support the use of nuclear technology itself, suggesting that support for nuclear increases significantly when there is some reassurance that it would not be in place of renewable sources. The survey also revealed that there appears to be a misconception that nuclear and renewable energy are an 'either or' option. In reality, the U.K.'s future energy policy is likely to combine a diverse range of power generation sources in order to best address concerns surrounding energy security, the environment and the cost of generation. Additional concerns raised by the same survey indicated that public concerns relating to nuclear energy are: disposal of waste (52%), followed by accidental leakage (22%), terrorist attacks (12%), cost of decommissioning (4%), with 9% of respondents having no concerns. Going forward, the real challenge faced by Government as it approaches the energy policy review will be to better educate and inform stakeholders, including the public, on energy matters to ensure that opinions are not unduly affected by a fundamental lack of understanding the facts. As part of a tour of the Calvert Cliffs nuclear power plant in Maryland during June 2005, U.S. President George W. Bush delivered a speech on the benefits of nuclear power, saying,

the energy bill will help us expand our use of the one energy source that is completely domestic, plentiful in quantity, and environmentally friendly and able to generate massive amounts of electricity and that's nuclear power.29 President Bush went on to sign an energy bill into law several months following the Calvert Cliffs tour with incentives for the nuclear industry. Moreover, given a choice between building new nuclear plants and relying on oil imports from the Middle East, a majority of Americans surveyed support expanding nuclear capacity, according to electronic publishing company Rasmussen Reports, which specializes in public opinion polling.30 The most recent survey, conducted August 12-14, 2005 found that 55% of the respondents supported building new plants rather than oil imports. In a previous survey taken in June 2005, 44% supported new nuclear construction. An additional survey conducted in August 2005 by Bisconti Research Inc. and Quest Global Research Group found that 83% of Americans living in close proximity to nuclear power plants favour nuclear power, and 76% are willing to see a new reactor built near them.31 It appears that some major industrialized countries have enlightened their constituents as to the merits of nuclear power.

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If there is soon to be a second dawn for the nuclear power industry, then it is likely to be on different terms than the past. With budgets stretched and governments across the globe tending to pursue market solutions in all areas of the economy, it is difficult to imagine many countries pursuing an entirely government-led new nuclear programme. While governments cannot ignore the nuclear sector for the reasons set out elsewhere in this briefing, the private sector is likely to have a significant role if there is to be a renaissance in the nuclear power sector. The implications for the management of decommissioning and waste disposal of the shift from public to the private sectors are clear: private sector investors and lenders are likely to be unwilling to make the huge upfront investments in greenfield projects if their financial exposure to decommissioning and waste disposal cannot be understood and quantified from the outset with some confidence. In the future, detailed estimates of decommissioning costs should be an integral part of the investment analysis performed at the very beginning of the project.

CEA (Commissariat l'Energie Atomique), Public Opinion and Nuclear Waste, Spring, 2002. 28. Survey results published by Deloitte & Touche LLP on 2 December 2005. 29. The White House, Office of the Press Secretary, Presidential speech at Calvert Cliffs Nuclear Power Plant, June 22, 2005. 30. Survey Finds Nuclear Wins Out in Contest with Oil Imports, Nucleonics Week, August 25, 2005, p.9. 31. Nuclear Power Plant Neighbors Accept Potential for New Reactor Near Them by Margin of 3 to 1, Nuclear Energy Institute press release, October 12, 2005.
27.

For the public sector this means that if a government wishes to encourage new investment in NPPs in their country, regulation and legislation needs to be explicit and unequivocal as to where the responsibilities for funding and performing decommissioning and waste disposal lie. Research has found that most countries have established funds to finance the future cost of decommissioning and waste disposal. These funds are typically funded - in part at least - by the nuclear operator based on its operating revenues. Responsibility for decommissioning reactor sites is often borne by either the operator or a government decommissioning agency. In reality, this difference is often artificial as many nuclear operators remain wholly stateowned. None of these conclusions would appear to be incompatible with the private financing of a new NPP; payments to a decommissioning and waste disposal fund simply represent another operating cost to be included in the financial analysis. The private sector is likely to resist, however, an uncapped exposure to decommissioning and waste disposal costs. For example, if a government calculates the waste disposal levy based on the estimated cost of establishing a central repository in one site, but ultimately has to build a repository in a different, more expensive site, it seems unreasonable that a private sector operator should have to bear the financial consequences of this risk when it can do nothing to mitigate it. It is likely to be uneconomic for operators of a single or small fleet of NPPs to build their own repository and to remain cost competitive with other forms of electricity generation. Even though the nuclear industry is convinced as to the merits of the science for safe long-term disposal of high-level radioactive waste in deep geological depositories, significant segments of the population remain concerned over the decommissioning of reactor sites and the long-term disposal of waste. Indeed, perhaps the future of new nuclear plants is not only dependent on the economics and the science surrounding the issue, but on persuading public opinion as well.

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For more information, visit www.deloitte.com/energy, or contact the Energy & Resources leaders at the Deloitte member firms: Global Chris Nicholson Global Energy Leader Deloitte Touche Tohmatsu cnicholson@deloitte.com +1 703 251 3455 Western Europe Alastair Scrimgeour Partner, Corporate Finance Deloitte & Touche LLP United Kingdom ascrimgeour@deloitte.co.uk +44 20 7007 2993 Carl D. Hughes UK Head; Energy, Infrastructure and Utilities cdhughes@deloitte.co.uk +44 20 7007 0858 Xavier de Rollat Principal, Corporate Finance Deloitte & Touche LLP xaderollat@deloitte.co.uk +44 20 7007 1051 Elisabeth Avril Country Leader, France eavril@deloitte.fr +33 1 40 88 29 09 Christoph Dorn Country Leader, Germany Deloitte & Touche GmBH cdorn@deloitte.de +49 (89) 29036 8208 Jesus Navarro Gallel Country Leader, Spain Deloitte & Touche Espana, S.L. jenavarro@deloitte.es +34 91 514 5000 Jorma Tuominen Country Leader, Finland Deloitte & Touche Oy jtuominen@deloitte.com +358 207555345

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