U.S. nuclear power plants: Continued life or replacement after 60? 
Background 
Nuclear power plants generate approximately 20 percent of U.S. electricity, and the plants in operation today are often seen as attractive assets in the current environment of uncertainty about future fossil fuel prices, high construction costs for new power plants (particularly nuclear plants), and the potential enactment of GHG regulations. Existing nuclear power plants have low fuel costs and relatively high power output. However, there is uncertainty about how long they will be allowed to continue operating. 

The nuclear industry has expressed strong interest in continuing the operation of existing nuclear facilities, and no particular technical issues have been identified that would impede their continued operation. Recent AEOs had assumed that existing nuclear units would be retired after 60 years of operation (the initial 40-year license plus one 20-year license renewal). Maintaining the same assumption in AEO2010, with the projection horizon extended to 2035, would result in the retirement of more than one-third of existing U.S. nuclear capacity between 2029 and 2035. Given the uncertainty about when existing nuclear capacity actually will be retired, EIA revisited the assumption for the development of AEO2010 and modified it to allow the continued operation of all existing U.S. nuclear power plants through 2035 in the Reference case.

The modified assumption in the Reference case implies that the operating lives of some nuclear plants will be more than 60 years. To address the uncertainty about whether such life extensions will be allowed, an alternative Nuclear 60-Year Life case was developed, assuming that all the existing U.S. nuclear power plants will be retired after 60 years of operation. 

Discussion 
The Atomic Energy Act of 1954 authorized the U.S. Nuclear Regulatory Commission (NRC) to issue operating licenses for commercial nuclear power plants for a period of 40 years. The 40-year time frame was derived from accounting and anti-trust concerns, not technical limitations [69]. The law allows the NRC to issue operating license renewals in 20-year increments, provided that reactor owners demonstrate that continued operations can be conducted safely. As of July 2009, the NRC had granted license renewals to 50 of the 104 operating reactors in the United States, allowing them to operate for 60 years. Fifteen additional applications are under review, and the owners of 21 other units have announced that they intend to file for 20-year license extensions. The NRC has yet to deny an application for a 20-year extension [70]. Previous AEOs assumed that all of the 104 existing units would operate for a total of 60 years, provided that they remained economical. 

In December 2009, the Oyster Creek Generating Station in Lacey Township, New Jersey, became the first nuclear power plant in the United States to begin its 40th year of operation. With Oyster Creek and other nuclear plants of similar vintage just beginning to enter their first period of license renewal, it probably will be at least 5 to 10 years before there is any clear indication as to whether plant operators will be likely to seek further extensions of their plants’ operating lives. 

For the AEO2010 Reference case, EIA assumed that the operating lives of existing nuclear power plants would be extended at least through 2035. Assuming that the NRC continues to approve license extensions, the decision to operate a facility is an economic one made by plant owners. Aging plants may face increased operation and maintenance (O&M) costs and capital expenditures, which generally decrease their profitability. Revenue projections are dependent on electricity prices, which are uncertain due to variations in fossil fuel prices, regional economic growth, and environmental regulations. Thus, even if the costs of operating nuclear plants do not change, changes in electricity prices can affect their profitability when their generation is sold at market-based rates.

Between 1974 and 1998, 14 commercial nuclear reactors in the United States were retired. The circumstances of each retirement were unique to the particular plant, but the common thread was that the expected cost of continued operation was higher than expected revenues, and there were less costly generating options available. Highly competitive natural-gas-fired generation could have been a factor in those retirements. Natural-gas-fired combined-cycle plants were the favored option for new capacity during the 1990s, when natural gas prices were relatively low and it was widely believed that they would remain low for the foreseeable future. In contrast, real O&M costs for nuclear power plants had increased by 77 percent during the 1980s [71], owners faced the risk that new NRC regulations might require prohibitively expensive retrofits, and there was widespread concern State public utility commissions would not allow full cost recovery for expenditures on nuclear plants. 

The economics of existing nuclear power plants are more favorable today, because natural gas prices are higher, the nuclear plants are performing well, and the potential enactment of GHG regulations increases uncertainty about fuel and operating costs for power plants that burn coal and natural gas. To date, there have been no announced plans to retire any of the 104 operating U.S. commercial nuclear reactors. To the contrary, the NRC and the nuclear power industry are preparing applications for license renewals that would allow continued operation beyond 60 years, the first of which is scheduled to be submitted by 2013. In February 2008, DOE and the NRC hosted a joint workshop titled “Life Beyond 60,” with a broad group of nuclear industry stakeholders meeting to discuss this issue [72]. The workshop’s summary report outlined many of the technical research needs that participants agreed were important to extending the life of the existing fleet of U.S. nuclear plants.

Several concerns were expressed at the DOE/NRC workshop. Because heat, water, and radiation can have long-term effects on the materials they are in contact with in nuclear power plants, more effective monitoring may be needed as the systems age, which could require updates to instruments and controls. Over the next several years, research is being focused on identifying problems that aging facilities might encounter and formulating potential solutions. Until that research has been completed, it will be difficult to estimate any cost increases that may result from extending the age of reactors. 

Future cost increases may reflect only routine expenditures, or they could involve major capital projects, such as the replacement of reactor vessels, containment structures, or buried piping and cables. To date, no plans or cost estimates for such potential modifications have been made public; however, they have the potential to be very expensive, and they could require extended plant shutdowns. While a plant is out of operation, the generation lost will have to be replaced, probably with expensive power purchased on the spot electricity market. 

For most existing nuclear plants, decisions about retirement or life extension ultimately will be based on the cost and feasibility of all the measures needed for a plant to continue to operate safely and economically. It is difficult to anticipate future operating costs, but it can be helpful to compare current operating costs with the total levelized costs of new nuclear power plants in order to gauge the magnitude of increases in O&M costs that would make retirement an option from an economic standpoint. For instance, with current O&M costs at the most expensive nuclear units in operation averaging approximately 3.5 cents per kilowatthour [73] and total levelized costs for new baseload capacity ranging from 8 cents to 11 cents per kilowatthour, the operating costs of existing nuclear power plants would have to increase substantially before it would be economical to retire even the most expensive units. 

Nuclear plant owners also face the risk of future regulations that could require expensive upgrades. Such a rule was recently the subject of the Supreme Court case Entergy Corp v. Riverkeeper [74], which focused on whether or not the EPA could conduct cost-benefit analyses to determine whether a plant needed to replace open-cycle cooling water systems with closed-cycle systems. A retrofit of such magnitude would be costly and thus could alter the relicensing decision for a particular facility.

The AEO2010 Reference case assumes an additional O&M cost of $30 per kilowatt for nuclear power capacity after 30 years of operation, which is meant to represent the various programs that must be undertaken in order to ensure continued safety. Even with this added cost, no retirements of existing nuclear power plants are projected by 2035 in the Reference case. 

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Figure source

Alternative case 
If all the existing nuclear power plants in the United States were retired after 60 years of operation, the impacts on electricity markets, fuel use, and GHG emissions would be substantial. Therefore, AEO2010 includes an alternative Nuclear 60-Year Life case, which assumes that no existing nuclear power plant will receive a second license extension, and all of them will be retired after 60 years. The 60-year retirement assumption is not meant as a hard-and-fast rule but as a possibility that allows examination of the impact of retiring existing nuclear capacity from the generation mix. 

A total of 30.8 gigawatts of capacity at operating U.S. nuclear power plants—or approximately one-third of the existing fleet—will have been in operation for at least 60 years by 2035. The Nuclear 60-Year Life case assumes that all of that capacity will be retired between 2029 and 2035. Figure 29 shows the locations of the plants that would be retired, which are spread fairly evenly across the regions where nuclear power capacity is prominent.

In the Nuclear 60-Year Life case, retirement of the plants shown in Figure 29 results in the construction of additional replacement capacity beyond the capacity additions already projected in the Reference case (Table 8). Of the additional capacity built in the Nuclear 60-Year Life case, only about 2 gigawatts is nuclear. Instead, the retired nuclear capacity is replaced almost exclusively with coal and natural gas capacity, which in the absence of policies regulating GHG emissions remains more economical than either nuclear or renewable plants. 

Reflecting the different projections for generating capacity additions in the two cases, the projected nuclear share of total generation in 2035 is only 13 percent in the Nuclear 60-Year Life case, compared with 17 percent in the Reference case. Total generation in the Nuclear 60-Year Life case is 1 percent lower than in the Reference case. CO₂emissions are higher in the Nuclear 60-Year Life case, because nuclear power is replaced with fossil fuels. Again, however, the difference between the projections is less than 1 percent, because most of the capacity replacing the retired nuclear plants is fueled by natural gas. 

U.S. electricity prices in 2035 in the Nuclear 60-Year Life case are 4 percent higher than those in the Reference case. In regions where the retirements are scheduled to occur, the price increases are slightly larger: compared to the Reference case, electricity prices in 2035 are 7 percent higher in the North American Electric Reliability Council (NERC) Midwest Reliability region and between 5 and 6 percent higher in the NERC regions in the Northeast, mid-Atlantic, and Southeast. In regions where no retirements occur, there are still small price increases relative to the Reference case, because natural gas prices are higher in the Nuclear 60-Year Life case. Building new capacity to replace the retired nuclear plants is more expensive than allowing their continued operation, and the higher costs are passed on to consumers in the form of higher electricity prices. Natural gas prices also are higher in the alternative case than in the Reference case, by 5.4 percent, because the additional new capacity is predominantly natural-gas-fired, and the increase in demand pushes up the price of natural gas. 

Finally, the assumed absence of new Federal policies to limit GHG emissions is crucial to the results of this analysis. In all likelihood, such policies would increase the cost of generating electricity from fossil fuels, improving the relative economics of new nuclear power plants and favoring construction of more nuclear capacity to replace the retired units.

Footnotes:
69. U.S. Nuclear Regulatory Commission, “Reactor License Renewal Overview” (February 2007), web site www.nrc.gov/reactors/operating/licensing/renewal/ overview.html.

70. U.S. Nuclear Regulatory Commission, “Backgrounder on Reactor License Renewal” (November 2009), web site www.nrc.gov/reading-rm/doc-collections/fact-sheets/license-renewal-bg.html.

71. U.S. Energy Information Administration, An Analysis of Nuclear Plant Operating Costs: A 1995 Update, SR/OIAF/95-01 (Washington, DC, April 1995), web site http://www.eia.gov/ftproot/service/oiaf9501.pdf.

72. U.S. Department of Energy and U.S. Nuclear Regula-tory Commission, “NRC/DOE Workshop on U.S. Nuclear Power Plant Life Extension Research and Development: Life Beyond 60” (February 19-21, 2008), web site http://sites.energetics.com/ nrcdoefeb08.

73. Federal Energy Regulatory Commission, “Form 1 – Electric Utility Annual Report: Data (Current and Historical),” web site www.ferc.gov/docs-filing/forms/ form-1/data.asp.

74. Supreme Court of the United States, “Entergy Corp. v. Riverkeeper, Inc., et al.,” No. 07-588 (October Term, 2008), web site www.supremecourtus.gov/opinions/ 08pdf/07-588.pdf.