Central Bankers Stimulate Nuclear End That Evaded Activists

  • Interest rates near record lows cut funds for decommissioning
  • Industry faces $1 trillion of liabilities from retiring plants

Central banks may accomplish what a generation of anti-nuclear activists have failed to do: Force operators to finally decommission almost 150 reactors now sitting in limbo across the globe.

The plants have been shut down, either because they’re too expensive to run or because of concerns about their safety or age. They can’t send electricity to the grid, and they’ll need the special funds saved over decades for formal decommissioning and clean-up of radioactive waste.

In the past, many operators delayed decommissioning to allow growth in the clean-up funds. As the global economy weakened, however, and central banks kept interest rates low, the principal in some of those funds shrank. Last year in the U.S., seven of the 10 biggest funds lost money, falling to $43.7 billion, a drop of 1.1 percent. Now, with projected costs rising, industry advocates say owners are more likely to opt for full decommissioning before the funds decline further.

“One can’t rely as much on fund growth as in the past,” said Patrick Joseph O’Sullivan, a decommissioning specialist with the International Atomic Energy Agency. “It’s actually pushing utilities to think about bringing forward all this work because they’re not able to rely anymore on assuming high returns on investments.”

The change in emphasis comes 30 years after the April 26, 1986 explosion at the Chernobyl reactor spread radioactive fallout across Europe. That event, followed 25 years later by meltdown at the Fukushima plant in Japan, undercut nuclear as a power generator as low-cost options like natural gas and renewable energies became increasingly available.

A 2005 report by the IAEA forecast costs to shut a 1,000 megawatt reactor would range from 150 million euros ($169 million) to 750 million euros. In the U.S., the country with the most decommissioning experience, actual costs have ranged from $307 million to $819 million, according to the Nuclear Energy Agency.

Twenty-four U.S. decommissioning projects with site-specific estimates will require average clean-up funds of about $750 million per reactor, the U.S. Nuclear Regulatory Commission reported. Those costs jive with an estimate by Exelon Corp., which operates reactors at 15 U.S. nuclear power plants

Exelon estimates it will take $1 billion to decommission its 2-unit plant in Zion, Illinois. It told shareholders in February that “sustained low market prices or depressed demand” could accelerate “asset retirement obligation expense related to future decommissioning activities.” Exelon’s clean-up fund fell 2 percent to $10.3 billion last year.

Utilities operating in Germany including EON SE, RWE AG and Vattenfall SE have set aside funds deemed “acceptable” by regulators to cover 47.5 billion euros of estimated costs to decommission the country’s 17 reactors. Shares of those utilities jumped in February after reports that the German government would kick in an additional 17.7 billion euros to help store the radioactive waste.

“Understanding of these costs is fundamental for the development of estimates based on realistic decommissioning plans,” the Paris-based Nuclear Energy Agency said last month in a 260-page report prepared for regulators and utilities. “More and more questions are raised over the adequacy of the necessary infrastructure and human resources, as well as the ability and mechanisms to finance the costs.”

There are 438 nuclear reactors in operation worldwide and less than 4 percent of the power reactors built have been fully decommissioned. Fewer still have figured out how to store waste for the thousands of years it will remain dangerous. 

“For us, the trend toward early dismantling has important advantages,” said the IAEA’s O’Sullivan. “It will contribute to better burden sharing between current and future generations.”

About $200 billion will be spent worldwide in the next 20 years on decommissioning the world’s aging fleet of reactors, Thomas LaGuardia, an American nuclear engineer who is helping the IAEA to establish decommissioning guidelines, said in an interview. Nuclear operators that haven’t saved sufficient decommissioning funds may opt to put plants in safe storage until their accounts bulk up, he said.

Project management and environmental remediation companies in the U.S. and Europe could see their markets grow as utilities draw down decommissioning funds to shut aging reactors, Swedish radiation safety analyst Simon Carroll said in an interview.

“One person’s cost is another man’s income,” he said.

Sweden’s decommissioning fund fell 0.5 percent last year, Carroll said in an e-mail. The country reported on Tuesday that returns on it’s 59.3 billion krona ($7.3 billion) Nuclear Waste Fund also dropped 0.5 percent in 2015.

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