The economic organization of decommissioning nuclear power plants – an institutional economic analysis with case studies in the US, UK, and Germany

Abstract

Abstract. The process of decommissioning nuclear power plants (NPP) is a multidisciplinary task that involves technical, regulatory, financial, and organizational activities. In order to fully decommission and subsequently release a reactor from regulatory control, a multitude of tasks need to be realized, i.e., defueling the reactor core, storing spent nuclear fuel, decontamination work, deconstructing conventional buildings, etc. Decommissioning is thus an intricate good that includes the supply of a variety of services, which must be produced upstream or offered in parallel. This paper provides an economic analysis of different options of organizing (or: governing) the decommissioning process, so as to minimize the total costs for society, while of course respecting security standards set by the regulator. The costs of providing decommissioning result from the production and transaction costs. The former are largely determined by technical aspects and development of the decommissioning process, and the possibility of exploiting economies of scale and scope. Transaction costs, on the other hand, mainly result from coordination between the different tasks as well as the involved actors, often private and public actors with different target systems and equipped with different resources. Transaction cost economics (TCE) is used to identify coordination areas and applied to formulate propositions on how nuclear utilities, decommissioning service suppliers, and waste management companies can establish vertical coordination. Transactions in the decommissioning process take place in a regulated environment and are governed, at least partially, by some public actors. In general, market governance is often assumed to be the most efficient governance structure, but in this context, our hypothesis is that institutional constraints, uncertainty, and factor specificity may call for other governance forms (Williamson, 1985). First analyses of the actors and the potential of the decommissioning market suggest an only slowly evolving market with only a few specialized companies and their subsidiaries able to provide technologically demanding services (Seidel and Wealer, 2015; Volk et al., 2019), while small and medium companies are confronted with high barriers to entry into the market (EC, 2018). Nuclear countries have implemented quite different organizational models, varying from specific national decommissioning strategies implemented by a public agency to a relatively free choice of the strategy for plant operators (Wealer et al., 2019). In some countries, procurement laws have been put into place to create a competitive market. However, as the decommissioning market has evolved, challenges to the competitive ideal have arisen, i.e., market concentration and asymmetries of information. This oligopolistic structure combined with the increase in demand for decommissioning services gives rise to concerns regarding the functionality of the market. There are also key logistical issues that must be addressed, including supply chain bottlenecks and procurement strategies. A unified finding is that decommissioning is highly interlinked with nuclear waste management and is also the main source of uncertainty in terms of cost as well as the length of the decommissioning process, as the missing disposal solutions for high-level radioactive waste render it impossible to release the nuclear power plants from regulatory control.