Economics of ageing reactors

September 14, 2014

Economic realities of old reactors

http://www.japantimes.co.jp/opinion/2014/09/14/editorials/economic-realities-of-old-reactors/#.VBhIJhanq1s

Reported moves by power companies to consider decommissioning their older nuclear power reactors indicate that they are beginning to selectively evaluate their nuclear power plants by weighing the costs of meeting safety criteria that has been tightened in the wake of the 2011 disaster at Tokyo Electric Power Co.’s Fukushima No. 1 nuclear power plant.

The government appears ready to facilitate such moves in the hope that terminating the old and more risky nuclear reactors will, in turn, help win public support for reactivating idled reactors that clear safety screening by the nuclear watchdog — the Nuclear Regulation Authority (NRA).

Both the power industry and the government need to take a realistic view of the prospect of nuclear power in this country — where currently all of its 48 nuclear power reactors are idled amid safety concerns following the 2011 disaster.

The Abe administration should follow up on its pledge to reduce “as much as possible” the nation’s dependency on nuclear power to meet its energy needs, and set specific targets, including a timeline, toward that goal so that the utilities can proceed with restructuring their power generation facilities, including scrapping nuclear reactors that will no longer be viable either for economic or safety reasons.

Recent media reports that Kansai Electric Power Co. is moving to scrap the Nos. 1 and 2 reactors at its Mihama nuclear power plant in Fukui Prefecture — both of which began operating in the early 1970s and are more than 40 years old — were followed by a comment by trade minister Yuko Obuchi that the government would promote both the smooth decommissioning of aging reactors and the reactivation of reactors whose safety has been confirmed.

It is obvious that the government has in sight shutting down several nuclear power reactors that have become so old as to require an untenably high cost to meet the safety standards.

Under the new safety regulations introduced after the 2011 triple meltdowns at the Fukushima plant, nuclear reactors are in principle not allowed to operate for more than 40 years. Exceptions are allowed. Companies may be allowed to continue operating for up to 20 more years if they go through special inspections, including detailed checks on the decay status of their equipment such as the reactor pressure vessel — a process likely to require a major overhaul at huge cost, such as replacement of old power cables.

Meanwhile, the aging reactors introduced in the early days of the nuclear power industry typically have much smaller power output capacity than the reactors of subsequent generations, making it unlikely that their continued operation will make profits worth the investments.

Kansai Electric is not alone. In March, Chugoku Electric Power Co. President Tomohide Karita noted the company’s “option” of decommissioning the No. 1 reactor at its Shimane nuclear power plant, which began operating in 1974.

Kyushu Electric Power Co. is also reported to be weighing the possibility of not seeking an operating extension of the No. 1 reactor at its Genkai nuclear power plant in Saga Prefecture. Thirty-eight years have passed since it started up; it has the lowest output capacity among the utility’s six nuclear reactors.

Of the nation’s existing 48 nuclear power reactors, 18 are more than 30 years old. Seven reactors either have passed or are nearing the 40-year mark, and their operators need to apply to the NRA for safety screening by July next year if they plan to extend the reactors’ operation. The power companies are expected to make a decision as early as yearend on what to do with the seven reactors.

The post-Fukushima regulations require power companies to make additional investments to upgrade their plants’ resilience against natural disasters such as big earthquakes and tsunami as well as severe accidents.

Plants that are found to have active faults running under reactor buildings as a result of having the tightened standards applied to them will also face scrapping even if they have operated for fewer than 40 years.

Citing the cost of increased fuel imports to run thermal power plants and the burden of rising electricity charges, the Abe administration has pushed for reactivating idled nuclear reactors once they have been given the NRA’s safety nod.

Since July last year, the power companies have applied for NRA screening of a total of 20 reactors. Of these, only two — the Nos. 1 and 2 reactors at the Sendai plant of Kyushu Electric in Kagoshima Prefecture — have so far been approved for the process by the NRA. It is considered doubtful that the power companies will spend the money and time needed to restart the aging reactors.

The increased cost of meeting the safety regulations raises doubts about the government’s claims of the cost advantages in running nuclear power plants instead of other energy sources. There may be cases where power companies decide to discontinue some reactors even before the 40-year limit.

Trade Obuchi has indicated that the government may consider measures to help the power companies scrap the aging reactors smoothly.

Since discontinuing a nuclear reactor reduces the asset value of the plant facility, its operator would need to report losses from the cut — an additional financial burden on the firms suffering from years of losses due to rising fuel costs. The trade ministry is reportedly mulling changes to accounting standards to ease the burden of the power companies.

But operators of nuclear power plants are supposed to set aside the costs of decommissioning their reactors from the profits gained from power generation at the facilities.

The government should not offer special treatment for the power companies merely because of the massive costs involved, as that would contravene economic principles and become difficult for taxpayers to support.