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This thesis examines the social efficiency of nuclear power when the risks of accidental releases of spent fuel radionuclides from a spent fuel disposal facility are considered. The analysis consists of two major parts. First, a theoretical economic model of the use of nuclear power including the risks associated with releases of radionuclides from a disposal facility is developed. Second, the costs of nuclear power, including the risks associated with a radionuclide release, are empirically compared to the costs of fossil fuel-fired generation of electricity.
Under the provisions of the Nuclear Waste Policy Act of 1982, the federally owned and operated spent nuclear fuel disposal facility is not required to maintain a reserve fund to cover damages from an accidental radionuclide release. Thus, the risks of a harmful radionuclide release are not included in the spent nuclear fuel disposal fee charged to the electric utilities. Since the electric utilities do not pay the full, social costs of spent fuel disposal, they use nuclear fuel in excess of the social optimum.
An insurance mechanism is proposed to internalize the risks associated with spent fuel disposal. Under this proposal, the Federal government is required to insure the disposal facility against any liabilities arising from accidental releases of spent fuel radionuclides. Further, the spent fuel disposal fee would include a liability insurance premium to reflect the costs of this insurance. Thus, the nuclear utilities would be charged the full, social costs of spent nuclear fuel disposal and would have the incentive to use the socially efficient quantity of nuclear fuel.
The production costs of nuclear power are found to be less than the costs of producing fossil fuel-fired electricity. The cost difference is compared to a spent nuclear fuel disposal liability premium for a spent fuel disposal facility at Hanford, Washington, into the Columbia River. Since the estimated premium is found to be less than the cost difference between the two technologies, instituting the spent nuclear fuel disposal liability insurance proposal would not alter the relative costs of nuclear power and fossil fuel-fired electricity generation.
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