Environmental Protection
Agency
Radiation Programs
Washington DC 20460
December 1980
Radiation
&EPA
Economic Impacts of
40CFR 191:
Environmental Standards
and
Federal Radiation
Protection Guidance
for
Management and Disposal
of Spent Nuclear Fuel,
High-level and Transuranic
Radioactive Wastes
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EPA-520/4-80-014
Economic Impacts of 40 CFR 191:
Environmental Standards and Federal
Radiation Protection Guidance for
Management and Disposal of Spent Nuclear Fuel,
High-level and Transuranic Radioactive Wastes
Andrew J. Leiter
December 1980
U.S. Environmental Protection Agency
Office of Radiation Programs
Washington, DC 20460
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FOREWORD
This report is a supporting document to the Environmental Protection
Agency's Draft Environmental Impact Statement, Environmental Standards and
Federal Radiation Protection Guidance for Management and Disposal of Spent
Nuclear Fuel, High-Level and Transuranic Wastes, (to be published). The
report assumes that the reader already has an understanding of the coverage
and rationale for these proposed standards and guides. Therefore, very
little background information on the development of the standards has been
presented in this report. For more information about the standards, the
reader should refer to the Draft Environmental Impact Statement.
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TABLE OF CONTENTS
Page
1. EXECUTIVE SUMMARY 1
2. INTRODUCTION 10
3. COMMERCIAL WASTE MANAGEMENT 14
3.1 Overview 14
3.2 Impact of Standard on Waste Management Costs 15
3.2.1 Economic Impacts of the Reference Waste
Management Program 16
3.2.2 Incremental Impacts of the Standard 24
3.3 Impact of Standard on Nuclear Power Growth 42
4. MILITARY WASTE MANAGEMENT 46
4.1 Overview 46
4.2 High-Level Waste 48
4.2.1 The Cost of High-Level Waste Management 48
4.2.2 Impact of Standard 52
4.3 Transuranic Waste 57
5. REFERENCES 62
APPENDIX A - METHODOLOGY FOR ESTIMATING THE ECONOMIC IMPACT
OF THE COMMERCIAL WASTE MANAGEMENT PROGRAM A-l
A.I Overview A-l
A.2 National Impact Analysis A-4
A.3 Regional Impact Analysis A-14
A. 4 Summary A-l 5
A. 5 REFERENCES, Appendix A A-18
APPENDIX B - ESTIMATION OF THE TOTAL COST OF THE REFERENCE
COMMERCIAL WASTE MANAGEMENT PROGRAM B-l
REFERENCES, Appendix B B-4
iii
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TABLES
Page
1. Summary of Economic Impacts of EPA High-Level
Waste Standards . . . 6
2. National Average Impacts of Reference Commercial
Waste Management Program, 1990 21
3. Cost Components for the Management and Disposal
of Commercial Spent Fuel and the Expected Impact
of Standard 26
4. Estimated Total Cost of Defense High-Level
Waste Management Alternatives 49
5. Cost Components for Reference Defense
High-Level Waste Management Program - Glass,
Onsite Geologic Disposal 54
6. Existing DOE TRU Waste 58
A-l. Assumptions Used for Projected National Average
Economic Impacts of Waste Management A-8
A-2. Summary of Calculations Used in Estimating National
Impact (Direct) in 1990 of a 1 Mill/Kwh Unit Cost
of Waste Management A-12
A-3. Summary of Regional Impact (Direct)-1990-of a
1 Mill/Kwh Waste Management Charge A-16
iv
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1. EXECUTIVE SUMMARY
The Environmental Protection Agency, Office of Radiation Programs, is
developing environmental standards and Federal guidance providing radiation
protection from activities pertaining to the management and disposal of
spent nuclear fuel, high-level radioactive waste, and transuranic waste.
The standards and guides emerging from this development process are collec-
tively referred to in this document as the "high-level waste standard."
There are three major parts of this program an operations standard, a
disposal standard, and radiation protection guidance for disposal. The
operations standard imposes limits on exposures from any activity,
operation, or process (except for transportation) conducted to prepare
spent fuel, high-level or transuranic wastes for storage or disposal, the
storage of any of these materials, or activities associated with the
disposal of these materials. The disposal standard stipulates performance
requirements for the design of a disposal system which would permanently
isolate the radioactive wastes. The radiation protection guidance
provides general criteria which all Federal agencies should follow in
developing their disposal programs.
Several unusual circumstances concerning the high-level waste standard
preclude the use of a conventional type of analysis in estimating the
economic impact of the standard. The major problem is that the industrial
processes covered by these standards are not in operation today and are
not scheduled to take place until the latter part of the 1980's, at the
earliest. Much of the technology required by these processes has not been
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fully defined nor is there much technical experience to draw upon. Since
firm plans for the management and disposal of these wastes have not been
established, there is much uncertainty as to what would occur in the
absence of these standards. Another problem is that the standards focus
on providing an adequate level of environmental protection irrespective of
specific technology requirements. Therefore, the use of any technology is
possible under the standards, provided that the conditions of the standards
are met. The comprehensive risk assessment performed in support of the
standards does not establish any relationship between alternative risk
levels and technology requirements. Since this relationship has not been
derived, the costs of alternative risk levels required by the standards
cannot be determined. Consequently, an economic impact analysis of
regulatory alternatives covering different levels of environmental
protection cannot be performed.
Despite the high degree of uncertainty which is inherently character-
istic of an analysis of high-level waste management, a quantitative
economic analysis, based on available cost estimates and several judgmental
assumptions, has been developed. This analysis identifies a range of
potential effects which are used to assess the overall economic impact of
the EPA standards. It is felt that an economic analysis that is more
rigorous than this study cannot be justified in light of the uncertainties
involved.
The economic impacts of the high-level waste standard have been eval-
uated by assuming that some form of waste management and disposal would
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take place in the absence of the standard. Consequently, the impact
analysis involves estimating the incremental effect of the standard on a
reference waste management program. The reference program which was
assumed is based on disposal of the waste in a geologic respository.
Individual components of the program have been specified and estimates of
their likely costs have been derived.
Components of waste management and disposal which might be signifi-
cantly affected by these standards have been identified, and the expected
increases in the cost of these components due to the implementation of the
standards have been estimated. The range in the numerical estimates of
the economic impacts reflects uncertainty about the size of each impact,
but does not reflect the uncertainty associated with the occurrence of
this impact. If any of the assumed effects of the standards do not
materialize, the expected economic impact should fall below these
estimates, possibly even reaching zero.
Commercial and military high-level waste programs are considered
separately in the analysis. The costs of transuranic waste management
have also been addressed, but the impact of the standards on this waste
category could not be determined due to insufficient information.
Three components of the commercial waste management process may be
affected by the standards: research and development, encapsulation, and
disposal. Research and development costs may increase because of addi-
tional site evaluation and more research for improved control technologies
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than would otherwise have been conducted. Overall research and development
costs account for about six percent of total waste management and disposal
costs and are estimated to increase by about 50 to 100 percent as a result
of the standards. Encapsulation costs may be affected by the standards to
the extent that the standards might require more protective canisters.
This cost also represents about six percent of total waste management and
disposal costs and is estimated to increase by 40 to 130 percent due to
the standards. Disposal costs, which include constructing, operating and
backfilling a geologic repository, may be affected since the standards may
require the repository to be constructed in an alternative geologic medium
which may be more expensive to mine than the medium (salt) assumed in the
reference program. Disposal costs represent 21 percent of total ^aste
management costs and are estimated to increase by 30 to 100 percent as a
result of the standards.
Based on these^ estimates of the possible impacts and their relative
shares of total waste management and disposal costs, the overall impact of
the standards is expected to result in an increase in the total costs of
commercial waste management and disposal of about 10 to 35 percent. This
estimated increase in total costs is expected to increase the reference
waste management charge the unit cost that electric utilities (and
their customers) will pay for waste management services provided by the
Federal Government by 15 to 50 percent. The economic consequences of
this increase in the waste management charge have been evaluated under a
variety of economic assumptions, including a range of values for the
reference waste management charge and a range in the share of electric
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energy production derived from nuclear power. Table 1, Part A presents a
summary of the impact of the standards on the national average residential
electricity rate in 1990. The maximum impact of the standards is estimated
to be a less than one percent increase in the national average rate. The
conditions for this maximum impact are: a reference waste management
charge of 1.4 mills per kwh; a 33 percent nuclear share of electricity
generation in 1990; zero growth in the real price of electricity from, the
base year of 1977 to 1990; and a 50 percent increase in the reference waste
management charge due to the standards.
The annual cost of commercial waste management is assumed to equal the
projected revenues to be collected from the waste management charge levied
on electricity customers. Therefore, the annual cost of the EPA standards
in 1990 is estimated by multiplying the increase in the reference waste
management charge due to the standards by the nuclear-powered kilowatt-
hours of electricity projected for 1990. For this estimation, a single
forecast of 1990 nuclear electricity production 825 billion kwh and
ranges of values for the reference waste management charge and the incre-
mental effect of the standards were assumed. This annual cost collected
from electricity customers pertains only to the waste resulting from
nuclear-powered electricity generated in 1990 and involves waste manage-
ment activities which will take place some years after 1990. The cost
does not cover the waste management activities for commercial waste which
exists today nor that which is expected to accumulate between now and 1990.
As shown in Part B of Table 1, the annual cost of the standards in 1990
ranges from about $75 to $600 million (expressed in 1978 dollars). Total
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TABLE 1
Summary of Economic Impacts of
EPA High-Level Waste Standards
A. Impact on National Average Residential Electricity Rate, 1990
Impact of Reference Waste Management Charge
Standard on ( .6 mills/kwh) (1.4 mills/kwh)
Waste Manage- Realistic Maximum Realistic Maximum
ment Charge Case Impact Case Case Impact Case
15% increase .1% .1% .1% .2%
50% increase .2% .3% .4% .7%
B. Annual Cost of EPA Standards, Commercial Waste Management, 1990
(millions of 1978 dollars)
Impact of Standard
on Waste Management Reference Waste Management Charge
Charge (.6 mills/kwh) (1.4 mills/kwh)
15% increase
50% increase
$ 74
$248
$173
$578
C. Impact on Total Cost of Military High-Level Waste Management
Individual CostLow ImpactHigh Impact
Component (millions of 1978 dollars undiscounted)
Processing 220 220
Transportation 322 322
Disposal 0 137
Research & Development 156 311
Canisters 160 697
Impact on Total Cost 858 1687
Total Cost, Reference
Program 3692 3692
% Increase in Total
Cost of Reference
Program 23% 46%
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electric utility revenues in 1990 are projected to be about 130 billion
dollars (also expressed in 1978 dollars). Consequently, although the
potential impact of the standards, in absolute terms, appears large, it is
small relative to the total cost of electricity production.
Five potential impacts of the standards on the cost of military high-
level waste management and disposal have been identified. First, the
standards may influence the cost of processing high-level waste by
requiring the separation of long-lived technetium-99 for disposal. Second,
the standards may affect the canister cost by requiring a more protective
canister. Third, transportation costs may be significantly affected by the
standards if the standards eliminate the alternative of onsite disposal and
require wastes to be disposed in an offsite repository. Fourth, the dis-
posal cost may be affected by the standards if the selected geologic media
are more expensive to mine than the media assumed in the base case. Fifth,
research and development costs may be increased by requiring more extensive
site evaluation to take place and more research for improved control
technologies.
Estimates of the possible size of each of these impacts have been
developed and then summed to determine the overall effect of the standards
on the total cost of military waste management. These impacts are
expressed on a total project cost basis in 1978 dollars and pertain to
expenditures to be incurred over a period of years in the future which has
not yet been determined. Table 1, Part C shows the estimated incremental
cost for each component affected by the standards. Processing costs could
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increase by 220 million dollars. Additional cost of canisters due to the
standards may range from 160 to 697 million dollars. Additional transpor-
tation costs are estimated to be 322 million dollars. Disposal costs may
increase from zero to 137 million dollars. Research and development costs
could increase by 156 to 311 million dollars.
By combining all the estimates of the individual effects, the overall
impact of the standards on the total cost of military high-level waste
management is expected to range from .9 to 1.7 billion dollars. Compared
to a reference onsite geologic disposal program estimated to cost
3.7 billion dollars, the standards' impact may result in a cost increase
of 23 to 46 percent.
As stated above, these estimated impacts assume that each of the
potential effects of the standards on waste management costs occurs. To
the extent that some of the effects do not take place, the economic impact
of the proposed standards will be lessened, possibly even reaching zero.
In the case of commercial waste, if compliance with the standards can be
met by a repository constructed in salt, carbon steel canisters and no
additional expenditures for site evaluation and research on improved
control technologies, then the impact of the standards will be zero.
Likewise, if the conditions of the reference military high-level waste
program comply with the standards, then the standards' impact on the cost
of military waste management will also be zero.
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Since so much uncertainty exists concerning future waste management
activities, the selection of a reference program for this study is highly
speculative. If reference programs different from the ones used in this
analysis are assumed, the economic impacts of the standards will naturally
be different. However, since we have used relatively wide ranges of values
for (a) the cost of the reference commercial waste program, (b) several
economic and energy parameters, and (c) the size of the incremental effect
of the standards, we believe that the results of this analysis provide
reasonable bounds on the impacts regardless of the speculative nature of
projecting future waste management activities.
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2. INTRODUCTION
Economic impacts of regulatory policies are generally determined by
first deriving a baseline situation which presupposes the absence of the
regulation under investigation and, then, by estimating what developments
will take place in a situation which is subject to the regulation. The
difference in the relevant economic parameters between these two cases is
considered to be the economic impact of the policy. The reliability of
the estimated economic impact thus becomes a function of the ability to
forecast the circumstances of these two situations. The economic impact
of EPA's high-level waste standard cannot be estimated in a very rigorous
manner since many uncertainties exist concerning waste management
activities in the future. ^ With the aid of several judgmental
assumptions, however, a range of likely occurrences can be estimated which
are used to evaluate the potential economic impact of the standard.
A critical assumption of the analysis is that some form of waste
management will take place regardless of the EPA standard. Therefore, the
impact analysis involves estimating the incremental effect of the standard
on the waste management program that would occur in its absence. This
assumption appears reasonable since the issue of waste management has been
gaining increasing attention in the political sphere, as illustrated by
^This paper treats the operations standard and the disposal standard
as a single entity, unless stated otherwise. The reader should refer to
EPA 80 for background information on the development of each of the
standards.
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several recent developments. These developments include the President's
spent fuel policy announcement of October 18, 1977 and the subsequent
planning efforts of the Department of Energy (DOE),1 the formation and
reports of the Interagency Review Group on Nuclear Waste Management
(IRG 79), radioactive waste legislation passed by several states (e.g.,
California's moratorium on nuclear power expansion, pending a viable waste
management program)2, and the President's policy statement to Congress
of February 12, 1980 on radioactive waste management (CA 80).
The uncertainty involved in the estimation of the economic impact of
the standard stems from two sources: the inability to specify the form of
a "baseline" waste management program accompanied by reasonably accurate
cost information, and the generic nature of the standard with regard to
waste management technology. The primary reason for the first uncertainty
is that the processes involved pertain to a future program which is still
in the planning stages. Much of the required technology has not been
fully defined, nor is there much applicable technical experience from
which to make cost determinations. Besides technological considerations,
the costs of waste management can significantly be affected by political,
administrative, and economic factors. Many studies on waste management
costs contain contingencies of some sort to take into account unexpected
problems. In fact, one report, in its cost presentation, presumes that
(DOE 78a) for background on spent fuel policy.
2See testimony of Emilio E. Varanini, Commissioner, California
Energy Resources Conservation and Development Commission, in (HRP 77),
p.149, for background on the California legislation.
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even after disposal operations have begun and waste is placed in a
repository, a significant portion of the material will have to be retrieved
due to some technical difficulty and re-disposed of in another manner
(MHB 78).
Regarding the latter source of uncertainty, the standard does not
stipulate how waste should be managed (i.e., a specific disposal technol-
ogy), but rather it focuses on providing an adequate level of environmental
protection from waste management activities. The use of any technology is
possible under the standard, provided that the conditions specified in the
standard will be met. Since the standard does not require specific
technologies, and since the risk limiting capabilities of most of the tech-
nologies under consideration are. not yet thoroughly described, the impact
of the standard becomes hypothetical.
It is the conclusion of EPA, though, that waste disposal in a geologic
repository is the technology that is not only the most readily available,
but is also the method for which risk assessment methods are most advanced
(see EPA 80). Consequently, the economic impact analysis has been derived
within the framework of geologic disposal as the reference technology from
which to estimate the incremental effect of the standard.
Economic impacts are presented for two categories of high-level waste:
spent fuel from commercial reactors and waste products from military
weapons programs. The analysis for the former has been undertaken in
greater depth than that of the latter for a number of reasons. The groups
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affected by the commercial waste program that is, the producers and
consumers of nuclear power can be identified, and thus provide the
framework for a detailed economic impact analysis. Identifying individual
segments of the general population affected by national defense expendi-
tures is virtually impossible due to the "public good" nature of national
defense. In the case of a public good, all members of the population
benefit from its use, so that payment of the cost of production from
general tax revenues is an acceptable means of financing production.
Also, since most of the commercial waste to be disposed of has not yet
been generated, the benefits and costs of the activity which produces the
waste (nuclear power) must be factored into the decision-making analysis
about the type of waste management desired. In other words, the future
size of nuclear power industry will have a direct effect on the type of
waste management operations which are required. This consideration is
much less important for military waste management since substantial
amounts of defense waste already exist and which require s>ome form of
"management" regardless of the course of future defense activities.
Furthermore, analyzing the economic effects of waste management on the
future growth of the activity generating the waste is more relevant to
commercial nuclear power than to military weapons programs due to the lack
of feasible alternatives in the case of national defense. Another reason
for the greater attention given to commercial waste management is that the
financial planning process is at a more advanced stage than that for
military waste, so that more information on the cost of commercial waste
management and the methods of financing the program is available.
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3. COMMERCIAL WASTE MANAGEMENT
3.1 Overview
Economic impacts resulting from the EPA standard can arise in two
basic ways regarding the commercial waste management program.! First,
the standard may have an effect on the cost of waste management. Since
waste is a by-product of the generation of nuclear power, the standard can
alter the cost of nuclear power and thus the cost of the production of
electricity. Consequently, an impact on electricity rates is created
which in turn affects the consumers of electricity. The second type of
economic impact that the standard may have, also has an effect on
electricity rates, but in a less direct manner. This impact pertains to
the effect of the standard on the status of nuclear power as a socially
and economically viable energy source. A wide range of possible economic
impacts could be estimated depending upon one's scenario of the
relationship between the standard and the size of the nuclear power
industry. In the extreme case, an environmentally acceptable standard
could be devised which could not be met by existing or prospective waste
management technology, thereby causing ongoing waste management plans to
be scrapped. A likely consequence of this occurrence would be the decline
of the nuclear power .industry, a situation whose economic impact would be
lMWaste management" includes the handling and storage/disposal of
both spent fuel discharged from commercial reactors and high-level waste
generated from reprocessing. Under the general context of the term
"waste," no distinction between the two types of material is necessary.
When used in a specific sense, such as in the discussion of cost consider-
ations, differentiation between the two has been noted.
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far-reaching and significant in size. On the other hand, if the standard
is one for which compliance is clearly achievable, then the standard might
have a positive impact on the growth of nuclear power, perhaps due to the
elimination of environmental and political opposition. The result of this
situation would not be certain, but if nuclear power is employed in areas
where it has a cost advantage over alternative energy sources, then the
impact of the standard may be a decrease (or smaller increase) in
electricity rates.
This chapter structures the estimation of the economic impacts of the
EPA standard according to these two impacts the impact on waste manage-
ment costs and the impact on commercial nuclear power growth. Emphasis
has been placed on the former impact since little or no impact Js expected
in the latter case. This stems from the likelihood that the proposed
standard can be met by disposal in a geologic repository, and that the
cost of the reference waste management program and the incremental cost of
compliance with the standard are not significant enough to alter the
relative costs of alternative power plants (i.e., coal versus nuclear).
Section 3.2 examines the impact that the standard will have on waste
management costs while Section 3.3 discusses the relationship between the
standard and commercial nuclear power growth.
3.2 Impact of Standard on Waste Management Costs
As discussed in Chapter 2, the economic impact of the EPA standard
was assessed in terms of its incremental effect on the reference waste
management program which is assumed to occur in the future without the
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standard. The economic impacts of this reference program have been
evaluated in terms of price effects on residential electricity customers,
on both a nationwide and regional basis, and increases in customers' elec-
tric bills. The estimation procedure assumes that the percentage increase
in electricity rates due to waste management costs is the same for all
types of electricity users. Therefore, the direct price effects on commer-
cial and industrial customers are equal, on a relative basis, to those
estimated for residential users. The total annual cost of the waste
management program, as reflected by the projected revenues to be collected
from a waste management charge, was also estimated. By utilizing the
estimated effect of the standard on total waste management costs, the
economic impact of the standard was expressed in the same terms as the
impacts of the reference program.
Since the estimation of the economic impact of the standard is highly
speculative, ranges of values for key parameters were assumed in order to
bound the potential impact. Ranges for the cost of the reference program,
several economic and energy variables, and the size of the incremental
effect of the standard were used to produce these estimates. The reader
should, therefore, interpret the results of this analysis as providing
estimates of the bounds of the economic impacts rather than an estimate of
the most likely economic impacts of the standard.
3.2.1 Economic Impacts of the Reference Waste Management Program
The reference commercial waste management program is based on the
geologic disposal of spent fuel. The spent fuel waste form was chosen
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instead of high-level waste in light of the deferral on reprocessing and
the President's spent fuel policy (see DOE 78a). As a result of this
policy, most of the recent analyses of waste management costs use spent
fuel as the reference waste material for cost derivations. For the pur-
poses of this study, the cost components were chosen to be: the storage
of spent fuel after discharge from the reactor (covering both reactor-site
and away-from-reactor (AFR) storage); transportation of the spent fuel from
the storage site to a facility designed for encapsulation of the waste;
the encapsulation of the waste, which includes the necessary handling and
processing before disposal (and which is assumed to be carried out at the
disposal site); disposal in a geologic repository (designed with the
capability for retrieving the spent fuel); Government research and develop-
ment costs; Government overhead; and costs for decommissioning (of waste
management facilities) and post-operational activities. Substituting
processed waste instead of spent fuel would not significantly alter the
total unit cost of waste management since the majority of the costs are
common to both fuel cycles. Also, in the case of reprocessing, the added
cost of solidification of high-level liquid waste would be somewhat offset
by the reduced unit cost of disposal relative to the "once through" cycle
(ADL 77).
As part of the President's spent fuel policy, it is assumed that
utilities will be charged a one-time payment for waste management services
provided by the Government. The impact of the commercial waste management
program can be estimated by determining the cost to customers of nuclear-
powered electricity resulting from the incurrence of this waste management
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charge by utilities. Waste management costs expressed on the basis of
dollars per kilogram of heavy metall can be converted to an electricity
rate basis (mills/kilowatt-hour) by a single factor.2 The methodology
for estimating the economic impacts of increased electric rates from waste
management activities is explained in detail in Appendix A.
Estimates of the unit charge for waste management activities are
available from several sources, but the ones deemed most appropriate for
this analysis were the estimates presented in DOE's preliminary spent fuel
charge report (DOE 78b). As of this writing, these estimates are the
costs to utilities that are most likely to occur assuming implementation
of the spent fuel policy. Although these unit charges are not completely
applicable to estimating the total charges to utilities resulting from
waste management, since the costs included are only those for services
provided by the Government, the estimates nevertheless provide a realistic
lAssumed to be the same as the quantity of uranium contained in the
fuel elements before reactor loading (DOE 78b, p.21).
200E, in their preliminary spent fuel charge report (DOE 78b, p.23)
assumes a conversion factor of $250/kg = 1 Mill/kwh, based on an average
thermal efficiency of 34 percent and an average burnup level of
31,OOOMWDth/MTU. This conversion produces the direct fuel cycle cost to
electricity customers from utility expenditures tor waste management.
Indirect charges, which are the carrying charges for recovering the cost
of capital between the time revenues are collected by utilities and the
time expenditures are paid by the utilities, must also be examined. By
assuming that utilities pay for waste management services at the time the
electricity is produced (i.e., when revenues are collected), the indirect
charges become zero. If payment of expenditures takes place at the time
of the planned transfer of waste to the Government (i.e., some years after
revenue collection), then the indirect charge is negative, and the total
fuel cycle cost to ratepayers is diminished. See DOE 80b for more
information on total fuel cycle cost implications.
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range from which to begin estimating economic impacts. The sensitivity
analysis of the DOE report indicates charges ranging from $112 to $319 per
kilogram (DOE 78b, Table 7).l Adding $33/kg to each of these costs to
represent the cost of transportation of spent fuel to Government
facilities and converting to mills/kwh results in a range of direct fuel
cycle costs of .6-1.4 mills per kwh. We assume that utilities will pay
for waste management services at the same time that revenues are collected
from electricity customers so that the indirect fuel cycle cost is zero.
This assumption creates a "maximum impact" bias in the estimated charge
because if instead utilities make payment for waste management services at
the time the material is transferred to the Government the assumption
used in the DOE report a negative indirect fuel cycle cost results
which reduces the total charge to electricity customers. Technically
speaking, using both the estimates from the DOE report to represent the
direct charge and assuming utility payment at time of revenue collection
is inappropriate without an adjustment to the direct charge for payment at
a time "earlier" than that assumed in the DOE report. Earlier payments to
the Government for waste management services have the effect of not only
increasing the indirect charge but also decreasing the direct charge
(see DOE 80b for a discussion of the effect of time of payment on the fuel
cycle cost). Therefore, the direct charge, as used in this paper, is
overstated. However, since a wide range in this charge has been assumed
for estimating economic impacts, the effect of this overstatement becomes
insignificant.
dollar amounts in this report are expressed on the basis of
constant 1978 dollars, unless specified otherwise.
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Since the activities under analysis pertain to a future technological
process rather than an existing program, the economic impacts stemming
from a charge of .6-1.4 mills/kwh have been estimated for a future date at
which time, presumably, the waste management program will have been estab-
lished. The year 1990 has been selected as the date in which to calculate
the impact of the program. Two scenarios of energy/economic assumptions
were devised for estimating these impacts: a "maximum impact" case and a
"realistic" case. The former case represents assumptions that would
maximize the economic impact of the waste management program while the
latter scenario contains assumptions that are typically categorized as
"most likely" or "middle-of-the-road." The direct impact on residential
electricity customers was estimated on a national average basis for the
high and low waste management charge (.6-1.4 mills/kwh) and the two
energy/economic scenarios. The results are displayed in Table 2.
The relative impact on the 1990 U.S. average residential electricity
rate from the institution of a waste management charge ranges from an
increase of .4 to 1.4 percent. The absolute increase in the average
monthly residential electric bill ranges from a minimum of $.10 to a
maximum of $.74. The corresponding percentage increases in the electric
bill were .3 to 1.4 percent. The minimum percentage increase in the
monthly residential electric bill is smaller than the minimum percentage
increase in the electricity rate because of the assumption in the
"realistic" energy/economic scenario of a nonzero (but inelastic) price
elasticity of demand for electricity (see Appendix A for more details).
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TABLE 2
National Average Impacts of Reference Commercial Waste
Management Program, 1990
Charge for
Waste
Management
(mills/kwh)
.6
1.4
Relative Increase in
Residential
Electricity Rate, 1990
Maximum Realistic
Impact Case Impact Case
.6% .4%
1.4% .8%
Increase in Monthly
Residential
Electric Bill, 1990
Max imum
Impact
Absolute Relative
Increase Increase
$.32 .6%
$.74 1.4%
Realistic
Impact
Absolute Relative
Increase Increase
$.10 .3%
$.24 .7%
NOTE: Monetary figures are expressed in constant 1978 dollars.
21
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A regional analysis of the direct impact, of the reference waste
management program was also performed to see to what degree individual
areas of the country will be affected more than others. Regional variation
should account for an upward deviation in the average residential electri-
city rate of no more than 60 percent of the national impact (expressed on
a relative basis). The Boston and Seattle regions are expected to experi-
ence the greatest relative impact while the Denver region represents the
area with the smallest impact. Variation in regional impacts, on a
percentage basis, expected from waste management charges is diminished
because the areas with the highest shares of forecasted nuclear power
generation the New England and Middle Atlantic States also are the
regions with the highest electricity charge to customers.1 The higher
the price of electricity, the smaller the relative impact of the waste
management program. On an absolute basis, regional variation is estimated
to result in a maximum upward deviation from the national average impact
of about 100 percent, since the impact for the Boston region is about
twice the size of the impact for the total United States.
Secondary impacts resulting from the waste management charge that
is, higher prices for goods and services produced in the commercial and
industrial sectors have not been explicitly estimated but a brief
investigation of their expected magnitude indicates that the impact will
be insignificant (see Appendix A).
lit should not be concluded that the reason for these areas
exhibiting high electricity prices is the relatively large nuclear share;
the high prices are attributed to other factors.
22
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The total annual cost of the reference waste management program in
1990, as reflected by the projected revenues to be collected from a waste
management charge of .6 to 1.4 mills/kwh levied on consumers of nuclear
powered electricity in that year, ranges from about .5 to 1.2 billion
dollars (see Appendix A for the basis of this forecast). This cost does
not include the necessary expenditure for reactor-site storage of spent
fuel which is assumed to already have been passed on to ratepayers. Though
the total dollar amounts reflected in commercial waste management activi-
ties may be substantial, the economic disruption resulting from these costs
is small because the total costs of electricity generation are so much
larger. Total electric utility revenues for the year 1990 are projected
to be about $130 billion according to the assumptions of Appendix A.
Therefore, the estimated total cost for waste management in 1990 .5 to
1.2 billion dollars represents .4 to .9 percent of total revenues.
This annual cost collected from electricity customers pertains only
to the waste resulting from nuclear-powered electricity generated in 1990
and involves waste management activities which will take place some years
after 1990. The cost does not cover the waste management activities for
commercial waste which exists today nor that which is expected to
accumulate between now and 1990. The cost for the management of future
waste is expected to be passed on to electric utility customers according
to the principle of public utility regulation that current revenues should
be related to all the costs associated with the current generation of
electricity. In other words, the people who receive the benefits of
electric power should pay, to the degree possible, for all of the costs of
23
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that power, regardless of when these costs take place. Therefore, the
cost of managing the waste from each year's nuclear-powered electricity
generation should be included in that year's revenues, as this analysis
has assumed for 1990. It is uncertain how and by whom (i.e., future
ratepayers or stockholders) the cost for commercial waste which exists
today, and which has not been paid for by those who have received the
benefit of the electricity consumption, will be incurred. This will
depend on the actions of the individual State public utility commissions.
In Appendix B, we estimated the total waste management cost for
existing spent fuel and the fuel to be used in the future generation of
nuclear-powered electricity from 1980 through 1995. The total cost for
existing fuel is estimated to range from .9 to 1.5 billion dollars while
the waste management cost for the future spent fuel ranges from 6.7 to
15.7 billion dollars. The combined total cost for existing and future
waste is, therefore, 7.6 to 17.2 billion dollars. The waste management
cost for existing spent fuel represents about 10 percent of the combined
total cost (see Appendix B for the basis of these estimates).
3.2.2 Incremental Impacts of the Standard
The impact of the standard on the cost of the reference commercial
waste management program was estimated using the following procedure.
First, unit costs were developed for each of the individual components of
the waste management process to determine their relative importance.
Estimating the relative importance of the individual cost components is a
24
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key determinant in assessing the economic impact of the standard, since it
enables one to see what portion of the total cost of waste management and
disposal may be influenced by the standard. Second, the potential impacts
of the standard were identified and the affected cost components were
determined. Third, the size of each of the impacts was estimated. Fourth,
combining the estimates of the individual impacts with their relative
importance factors, produced an estimate of the overall effect of the
standard on total waste management costs.
Costs for waste management components are displayed in Table 3. These
costs are not engineering costs in the sense that they do not represent
specifically-defined facilities and processes. Rather, the costs are
average estimates gathered from a literature search of available studies
and pertain to generalized cost components. It must be emphasized that
these costs have been developed solely for the purpose of determining the
relative importance of the individual components. Different costs may
result in different percentage weights and, therefore, a different assess-
ment of the impact of the standard on total waste management costs.
However, only radically-different weights will significantly change the
economic impact estimates concluded by this analysis.
These costs are expressed on a unit cost basis dollars per kilogram
of heavy metal for normalization purposes. Using total costs for each of
the components would not be advisable since the different facilities
required in the waste management program possess varying waste handling
capacities and lifetimes of utilization. The best means of normalizing
25
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TABLE 3
Cost Components for the Management and Disposal of Commercial
Spent Fuel and the Expected
Cost
Component
a/
Cost"
($/kg)
Percentage
Distribution
(%)
Impact of Standard
Impact of Standard
Component
on Cost
Storage
Disposal
Research and
Development
Government
Overhead
Decommissioning
and Post-
operational
Activities
83
Transportation 33
Encapsulation 11
42
12
11
42.1
16.8
5.6
21.3
6.1
2.5
5.6
Covered by waste management
operations standard expected
to maintain status quo
Not covered by standard
Covered by both operations and
disposal standards might have
impact on encapsulation cost by
affecting canister type
Covered by both operations and
disposal standards might have
impact on cost of geologic dis-
posal by influencing the choice
of geologic medium
Standard may affect R&D cost by
creating impact on site evalu-
ation and increasing R&D for
improved control technologies
No impact expected
Not covered by standard
NOTE: These costs are based on the storage of spent fuel for ten years
and disposal of the fuel in a geologic repository capable of
retrievability.
a/
Costs are expressed in 1978 dollars (undiscounted).
26
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the costs of waste management activities is to use the unit cost basis.
Also, unit costs of waste management are more amenable than total costs to
analyzing the effect on electricity prices and consumers' electric bills,
the primary economic impacts of the commercial waste management program.
The assumptions on total costs and units of waste handled that underlie
the unit costs can be found in the references cited below.
Several studies have been made which provide estimates of the unit
costs of waste management activities. Wide ranges in these cost estimates
exist for some components due to the many uncertainties associated with a
future program which is still in the planning stages and based on technol-
ogy, some of which has not been demonstrated. The costs developed here
represent what the costs of waste management will be at a time which is
free from technological, political and administrative constraints. In
other words, these costs assume that all facilities and services are
operating according to proven technology and designed receipt rates of
waste material, and also experiencing no effects from interruptions of
operations due to administrative policies or unexpected fluctuations in
demand.
The primary data source which was utilized was the TRW study performed
for DOE (TRW 78) and which provided the input cost data for DOE's prelim-
inary analysis of spent fuel-related charges (DOE 78b). The virtues of the
TRW report are that it provides the necessary detail on waste management
cost components that several studies lack and the scenarios which were
examined relate very closely to the type of situation which the unit costs
27
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in this document are assumed to represent, as explained above. This
approach, referred to in the TRW report as the "venture methodology,"
addresses all the costs associated with constructing, operating, filling
and decommissioning a single encapsulation and disposal facility. Since
this methodology covers all the costs incurred throughout the entire
economic life of the facility, issues such as the annual receipt rates of
waste materials, unused capacity, and salvage value of unused portions of
the facility need not be addressed. This scenario approximates a
situation which is free from the effects of fluctuating demand and
administrative constraints. However, the TRW study is designed to cover
only the costs to the Government of its planned waste management program,
and thus omitted other costs of the waste management process which are
borne by the private sector but are subjected to the application of the
EPA standard. Gaps in the TRW study were filled by using data from other
references in order to generate a reasonable and complete categorization
of costs which are relevant to analyzing the impact of the standard.
Since the activities included in the waste management process take
place over a period of several years, the time value of money should be
considered when deriving costs for the entire process. For the purpose of
determining what portion of waste management costs might be affected by
the EPA standard, it was assumed that values for the individual components
should not be discounted but that their costs be weighted equally with
regard to time. Utilizing undiscounted costs for this purpose appears to
be reasonable considering that the impact under analysis is one that will
take place in the future when all waste management activities will be
28
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occurring simultaneously (involving different units of waste). The
question of what activities are influenced by the standard thus pertains
to a single point in time. Since discounting results in less importance
attributed to those activities taking place at the end of the process (for
a given unit of waste), it seems more reasonable to establish relative
magnitudes of cost components by using undiscounted costs. When the issue
at hand changes to determining the economic impact of the entire waste
management process, then discounting should be included in the analysis
since the impact is estimated by converting the cost to prices or one-time
charges assigned to the unit of output of which the waste is a by-product,
namely a kilowatt-hour of electricity. The one-time charge or price
effect essentially takes place at the time the electricity is produced and
must reflect the costs associated with handling the waste for a subsequent
number of years. The concept of discounting is reflected in the metho-
dology employed in the DOE spent fuel charge report and, therefore, is
included in our estimates of the impacts of the reference program.
The basis for the estimated costs in Table 3 are described in the
following paragraphs.
An extremely wide range of estimates exists for storage costs of
spent fuel (assumed to be for ten years), according to the literature.
The major source of this large divergence in cost is the assumption on
whether storage takes place at the reactor site or at a centralized APR
facility, which is more expensive. The House Committee hearings revealed
storage costs varying from $15 to $200 per kg (HRP 77, p.195). From the
29
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TRW study, the unit cost of APR storage is calculated by dividing the
total undiscounted cost (excluding trust fund for decommissioning) by the
total quantity of APR shipments. This results in estimates of $154 and
$175 per kg (1978 dollars) for the two cases which utilize an APR facility
(TRW 78, Tables A-2, A-3, A-6, and A-7). The Energy Information Adminis-
tration (EIA) report to Congress assumed a cost of $60/kg (1978 dollars)
for reactor-site storage (DOE 77a, Table 9-3). Other sources provided
estimates of $50/kg (1976 dollars, APS 78, Table 16) and $80 to $150/kg
(1977 dollars, ADL 77, p.188). Determination of an appropriate estimate
was made by taking a weighted average of the unit costs of reactor-site
storage and APR storage, the former assumed to be $60/kg and the latter,
$175/kg. The selection of the relative weights for the two types of
storage was not a straightforward process. In the TRW report, the two
cases which utilized an APR facility assumed that approximately 19 and 29
percent of all spent fuel that was transferred to a repository were stored
for variable lengths of time at an APR facility. However, since the spent
fuel was not stored at the APR facility for the entire storage period the
relative weight for APR storage costs should be lower than these percen-
tages. Also, the need for APR storage arises from the fact that, in the
absence of a repository for the waste, existing reactor-site storage is
nearing capacity. Once the disposal facilities are on line and transfers
are made from the reactor sites to the repository, the long-term need for
an APR facility diminishes. This situation is assumed in the DOE spent
fuel charge report (DOE 78b) where in the reference case, APR operations
begin in 1983 and end in 1991. For the purposes of this paper, weights of
30
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20 and 80 percent were assigned to AFR and reactor-site storage costs,
respectively. Consequently the weighted average unit cost is $83/kg.
The transportation cost assumed in this paper is $33/kg, taken from
the TRW report which estimated the cost of transporting spent fuel from an
APR storage facility to a repository (TRW 78, p.6-2). This assumption
approaches the middle of the range of several estimates presented in the
House Committee report (HRP 78, p.129) which was between $8 and $50 per kg.
The encapsulation cost was derived by taking the average of the
undiscounted unit costs (excluding trust fund for decommissioning) of the
encapsulation cost center from the two TRW "venture" scenarios (TRW 78,
Tables A-2 and A-4, for units of spent fuel and Tables A-6 and A-8 for
total undiscounted costs). The two unit costs were $10 and $11 per kg so
that $11 was assumed to be the appropriate unit charge. This cost compares
to a range of $8-14/kg (1977 dollars) estimated in the Arthur D. Little
study, assuming carbon steel canisters (ADL 77, p.193). A study performed
for the Natural Resources Defense Council (NRDC) assumed for the reference
case encapsulation costs which also were $ll/kg (MHB 78). Most of the
other studies combined the encapsulation cost with the disposal cost.
The cost of waste disposal in a geologic repository with retrievabil-
ity was estimated from the TRW report. Undiscounted unit costs (excluding
trust funds for decommissioning and post-operational activities) were cal-
culated for the two "venture" cases as $41 and $43 per kg. This source
estimated costs of the repository assuming its location in underground salt
31
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deposits. Costs include the mining, storing and backfilling of the salt,
ventilating all shafts and tunnels, receiving of spent fuel shipments and
emplacement of the canistered spent fuel in the repository while main-
taining the retrievability. The average of the two costs, or $42/kg, was
assumed for the waste disposal cost. This estimate is comparable to the
(undiscounted) unit cost of $46/kg (1977 dollars) derived in the ADL study
for retrievable storage in a geologic repository in bedded salt (ADL 77,
Table B-23). The unit disposal costs used in the NRDC study (MHB 78),
derived from the repository construction and operations costs in the
reference scenario, was $53.5/kg. The majority of studies on waste
disposal costs did not provide sufficient detail to determine their
comparability with the above references. The cost based on the TRW study
was used for consistency with the other cost components.
The costs of Government research-and-development and overhead were
taken from the TRW report. R&D costs included in the study are those
related to the considerations of alternativ.e geologic media and are
estimated at $520 million (1978 dollars), covering the period- 1978
1986. This estimate excludes the $40 million spent on R&D prior to 1978
since this cost has already been sunk, while there has been no attempt at
forecasting R&D expenditures beyond 1986. Expressing this total cost on a
unit basis is somewhat arbitary since it involves a judgment as to the
number of units over which to spread this cost. The unit cost has been
estimated here by taking the ratio of the $520 million to the total
quantity of spent fuel handled in each of the four TRW scenarios (TRW 78,
Table A-l). These ratios ranged from $8 to $14/kg; the average, $12/kg,
32
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was assumed to be the R&D cost. Government overhead in the TRW report,
defined as all non-R&D expenses to the Government not directly associated
with the operation of the other cost centers (TRW 78, p.8-1), was assumed
to be a constant annual expenditure, $13 million per year. Ranges of unit
costs for each of the four scenarios were calculated by dividing this
total annual cost by both the maximum and minimum quantities of spent fuel
handled in any year throughout the time period (TRW 78, Tables A-2 through
A-4). These ratios produced estimates ranging from $2 to $7/kg so that
$5/kg was assumed to be the overhead cost.
Costs for decommissioning and post-operational activities of waste
management facilities were also provided by the TRW study. These costs
cover the activities associated with the encapsulation facility and the
geologic repository. The cost of decommissioning the AFR storage facility
was excluded due to the small relative share of this type of storage
assumed in this paper. Decommissioning of reactor-site storage is closely
related to the decommissioning of the reactor itself and is outside the
scope of this analysis. Undiscounted unit costs were calculated for
decommissioning and post-operational activities at the two facilities with
the ratio for the two "venture" scenarios resulting in $10 and $12 per
kg. The average, $ll/kg, was assumed to represent this cost.
Based on the sum of these unit costs, the relative magnitude of each
cost component in the waste management process was estimated. These
relative shares are also indicated in Table 3. The most significant cost
is storage, with a 42 percent share of the total costs. Disposal and
33
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transportation costs account for 21 and 17 percent, respectively, while no
other individual component represents greater than 6 percent of the total.
Several potential effects of the standard on waste management
activities have been identified which may result in significant economic
impacts. It is uncertain at this time whether these effects will in fact
take place, so that it is possible the overall economic impact of the
standard could even be zero. For the purpose of this analysis, however,
each of the potential effects is assumed to occur. The potential effects
of the standards are: (a) eliminating certain geologic media from consider-
ation of repository sites, thereby affecting the cost of waste disposal;
(b) influencing the selection of canister type; (c) forcing additional site
evaluation than would otherwise be conducted; and (d) forcing additional
research and development activities for improved control technologies.
The primary basis for these impacts is the requirement of the radiation
protection guidance that each of the barriers of the disposal system (as
opposed to the overall disposal system) be designed to reduce releases as
low as reasonably achievable. This requirement is expected to necessitate
the selection of a very protective geologic medium, canister type and
waste form, even though less protective barriers might comply with the
numerical performance requirements of the standard.
Storage-related activities, although covered by the waste management
operations standard, are not expected to be adversely affected by the
standard. This part of the waste management process is an already ongoing
activity as utilities, for the most part, have been storing their spent
34
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fuel at reactor-site basins. The standard is not expected to have any
impact on storage costs since the reactor-site storage experience indicates
that no additional expenditures will be necessary for compliance. In the
case of AFR storage, the cost of this planned facility already includes
allowance for conforming with existing environmental standards as stated
in the DOE spent fuel charge report: "Standards of construction, including
environmental standards, would be commensurate with commercially licensed
nuclear storage facilities" (DOE 78b, p.17). In other words, the EPA
standard is expected to maintain the status quo with regard to the cost of
storing spent fuel.
Government overhead costs are also not expected to be affected by the
EPA standard. Transportation, decommissioning and post-operational
activities are not covered by the standard so that there is no impact on
those segments of the waste management process.
Each of the cost components can therefore be classified according to
its relation to the standard in one of three ways: the component is not
addressed by the standard; the component is addressed by the standard, but
no impact on the cost is expected; and, it is addressed by the standard,
and some impact can be expected. Three of the components encapsulation,
disposal, and research and development fit the last category since it
is EPA's judgment that the standard may influence the cost of waste
management in the areas of canister selection (encapsulation), choice of
geologic medium (disposal), and additional research for improved control
technologies and site evaluation (R&D). The percentage shares indicated
35
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in Table 3 show that approximately 22 percent of total waste management
costs (transportation, decommissioning and post-operational activities)
are not addressed by the standard. An additional 45 percent of the total
cost (storage and Government overhead) is addressed by the standard, but
on the basis of radiation protection experience in the nuclear industry,
no impact on cost is expected. The result is that only 33 percent of the
total waste management cost is expected to be influenced to some degree by
the standard.
The following paragraphs describe the procedure by which the size of
the standard's impact on the three affected cost components disposal,
encapsulation and research and development was estimated. As stated at
the outset of this paper, the uncertainty level of quantitative estimates
pertaining to high-level waste management is extremely large so that
accurate assessments of the standard's impacts are not possible at this
time. However, based on the cost information that currently exists plus
several judgmental assumptions, some simplified estimates can be made
which at least place a range on the size of the impacts.
Disposal costs cover all the activities involved in constructing,
operating and backfilling the geologic repository and represent 21 percent
of total waste management costs. The standard may affect disposal costs
by influencing the choice of geologic medium in which to place the
repository. Therefore, the size of this impact was estimated by analyzing
the relative costs of disposal for alternative media. DOE's commercial
waste GEIS (DOE 79b) and its accompanying technology document (DOE 79c)
36
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provided sufficient cost information in which to make this relative cost
determination. In the GEIS, it is estimated that disposal costs, expressed
on a levelized unit cost basis, for a repository in granite or basalt, the
most expensive media, are 30 to 100 percent greater than disposal in salt,
the least expensive medium and the medium assumed in the reference waste
management plan (DOE 79b, p.3.1.134). Factors which are considered in
this 30 to 100 percent relative cost range are the different fuel cycles,
alternative values for the cost of capital, and different time frames for
mining the repository (accelerated mining versus continuous mining).
Consequently, if the standard effectively eliminates the use of salt as
the medium for a repository, the maximum impact of the standard can be
expected to approximate this range.
Encapsulation costs, which represent 6 percent of total waste
management costs, may be affected by the standard to the degree that the
standard may require a more protective canister than would otherwise be
the case. The size of this impact has been estimated by first determining
the relative cost of canisters produced from alternative metals and then
by determining the percent of the total encapsulation cost that is
represented by the cost of canisters. Unit costs for spent fuel canisters
constructed of carbon steel, stainless steel, and titanium were presented
in the ADL study cited earlier (ADL 77, p.193). These canister costs are
in the ratio of 3:1 for stainless steel versus carbon steel, and 7.5:1 for
titanium versus carbon steel. Cost information obtained from Battelle
Pacific Northwest Laboratories, the contractor for DOE's GEIS, confirmed
the relative cost factor for stainless steel versus carbon steel as their
37
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estimates resulted in a ratio of about 3.5:1 (BNL 80). Based on the ADL
relative cost factors, it is therefore estimated that canister costs,
assuming carbon steel as the base case canister type (the assumption
employed in DOE's GEIS), may increase by 200 to 650 percent due to the
standard.
Besides the cost of canisters, the encapsulation cost component
includes the cost of constructing and operating the encapsulation facility.
Therefore, in order to estimate the impact of the standard on total encap-
sulation costs, we must know the percent of the encapsulation cost that is
accounted for by the canisters. Estimates of this percentage were avail-
able, indirectly, from two sources the TRW study and the technology
document which is the companion to DOE's commercial waste GEIS. Based on
information presented in the TRW report (TRW 78, p.4-6) it was estimated
that the canister cost represents about 10 percent of the total encapsul-
ation cost. According to the cost estimates reported in DOE's commercial
waste technology document (DOE 79c, p.5.7.91), the canister cost share of
total encapsulation costs is expected to be 18 to 29 percent; the larger
share pertains to Federal ownership of the facility and the smaller share
assumes private ownership. Based on this information we have assumed a
share of 20 percent.
Therefore, assuming that the canister cost represents 20 percent of
the total encapsulation cost and that canister costs may be increased by
200-650 percent, it has been determined that the impact of the standard on
the encapsulation cost may result in an increase of 40 to 130 percent.
38
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Research and development costs appear to be the area where the
standard may have its most significant impact in terms of the likelihood
of occurrence but not necesssarily in the size of the impact since these
costs represent only 6 percent of total waste management costs. We believe
that the standard will affect the site evaluation for DOE's planned
geologic repositories. It is possible that individual sites which are
otherwise suitable may not possess the specific characteristics necessary
for the site to comply with the disposal standard. Regardless of whether
the standard would rule out a potential site for a repository, it may be
assumed that the standard may have the impact of increasing R&D costs by
forcing a closer examination of prospective sites before final selection.
Also, more research and development on improved control technologies
(e.g., more durable containers) might be required as a result of the
standard. The size of the impact on this cost component which is attribu-
table to the standard has been estimated on a purely judgmental basis. We
have assumed that the standard will cause R&D costs to increase by 50 to
100 percent, the upper limit being a maximum impact which is probably an
overstatement.
Based on these estimates of the size of the potential impacts and
their relative share of total waste management costs, it is therefore
concluded that the overall impact of the standard may result in an
increase in total waste management costs of about 10 to 35 percent. As
indicated above, though, the impact of the standard may in reality be zero
if the conditions of the reference waste management plan are not affected;
that is, if, after implementation of the standard, compliance can be met
39
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by a repository constructed in salt, carbon steel canisters and no
additional expenditures for site evaluation and research on control
technologies. The percentage increase in total cost estimated in this
analysis does provide a realistic range of the size of the impact of the
standard, assuming that the impacts do materialize.
The economic impact of the EPA standard is assumed to have an incre-
mental effect on the estimated impacts of the reference program. The EPA
standard has been estimated as possibly increasing the total cost of waste
management by about 10 to 35 percent. To determine the size of the incre-
mental effect of the EPA standard, its expected impact should alternatively
be stated in terms of the percentage increase in the charge to customers
of nuclear-powered electricity which results from the incurrence of these
waste management costs by utilities. Since a portion of the estimated
total cost of waste management (spent fuel storage at reactor sites) is
already included in electricity rates, the range of activities encompassed
by the charge to utilities for waste management services provided by the
Federal Government is smaller than the coverage of activities represented
by total waste management costs. Consequently, the 10 to 35 percent
estimates of the impact of the standard on total waste management costs
need to be adjusted. The waste management charge to electricity customers
is assumed to represent two-thirds of the coverage represented by the
total cost of waste management activities. Therefore, the 10-35 percent
increase in total costs, adjusted by this fraction, translates into
approximately a 15 to 50 percent increase in the charge to consumers of
nuclear-powered electricity, which could be attributed to the EPA standard.
40
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An alternative, and more direct, method of estimating the impact of
the standard on the reference waste management charge was also derived for
comparison purposes. In DOE's recent environmental impact statement on
the charge for spent fuel storage, the reference case spent fuel charge
was broken down by individual cost components (DOE 80b, Table III.A.3).
The costs of encapsulation, geologic repository, and research and develop-
ment, were increased by the percentage changes estimated above to determine
the overall effect of the standard on the total charge. This calculation
resulted in an increase in the charge of 16 to 44 percent, which is very
similar to the 15 to 50 percent estimated impact of the standard.
According to the analysis described in Appendix A and summarized in
Section 3.2.1, the reference commercial waste management program has been
estimated to result in a direct price increase in the national average
residential electricity rate in 1990 of .4 to 1.4 percent. The EPA
standard has been estimated as potentially resulting in an incremental
increase of about 15-50 percent of this direct price effect. These two
independent estimations together indicate that the maximum effect of the
EPA standard will be an increase in the national average residential
electricity rate of less than 1 percent. As also explained above, the
total annual cost of the reference waste management program in 1990 (as
reflected by the projected revenues to be collected from a waste management
charge in that year and which excludes the cost of reactor-site storage of
spent fuel) is estimated to range from about .5 to 1.2 billion dollars.
Therefore, by increasing the waste management charge by 15-50 percent, the
annual cost of the EPA standard in 1990 is estimated to range from about
41
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75 to 600 million dollars, providing that the assumed impacts actually
take place.
As mentioned at the outset of this paper, the economic analysis has
been derived with the assumption that the EPA standard can be met by dis-
posal in a geologic repository. If compliance with the standard cannot be
met by geologic disposal, then either one of two types of economic impacts
will probably occur. If the standard can be met by an alternative disposal
method, such as sea-bed disposal, then price effects similar to those
under a geologic disposal program may result (DOE 79b), but with an
expected maximum upward deviation as large as a factor of 2 or 3 (times
the .4-1.4 percent increase associated with the reference geologic waste
management plan) (BNL 74). However, the costs of alternative disposal
concepts have not been developed to a degree which would be considered
reliable and useful for economic analysis. The second type of economic
impact that might take place pertains to the impact on nuclear power
growth and is addressed in the next section.
3.3 Impact of Standard on Nuclear Power Growth
The analysis developed in Section 3.2 and Appendix A emphasizes that
a key factor in determining the size of the economic impact of the waste
management program and the EPA standard is the relative importance of
nuclear power in this country's future energy use. Therefore, an
important area to investigate is the relationship of the standard to the
future growth of the nuclear industry. The critical underlying issue to
be determined is whether compliance with the standard is compatible with
42
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the reference waste management plan. The analysis in Section 3.2 and
Appendix A assumes that compliance with the standard is technologically
feasible. If compliance with the environmentally acceptable standard is
not feasible, then significant economic consequences can be expected to
take place as the role of nuclear power in the generation of electricity
will most likely diminish. If this situation is expected to occur, then
an in-depth examination of the economic impacts, based upon postulated
scenarios of the mix of nuclear power and alternative energy sources,
would most certainly be required. Estimation of these impacts is beyond
the scope of this project, but other studies (MA 77, PUF 79) have forecast
significant economic disruptions resulting from a "non-nuclear" option.
Assuming that compliance with the standard is feasible, the analysis
in Section 3.2 and Appendix A further assumes that the nuclear share of
electricity generation is unaffected by both the reference waste manage-
ment program and the EPA standard. The basis for this assumption lies in
the belief that the cost of the reference program and the incremental cost
of the standard is of a sufficiently small magnitude so that the relative
costs of alternative power plants (i.e., coal versus nuclear) are not
changed by the inclusion of these costs in the nuclear option. This belief
is supported by the following two industry sources. The testimony of
Mr. J. Edward Howard, Vice President, Nuclear, of Boston Edison Company,
before a House Subcommittee investigating nuclear power costs (HRP 77),
states:
Although costs of waste management will differ depending
upon whether or not reprocessing is permitted, the
43
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economic effects of waste management in either the
reprocessing or throwaway fuel cycle is sufficiently
small in relation to total power production costs so as
to be nondeterminative in any decision-making regarding
the nuclear option.
Researchers at Commonwealth Edison Company concluded much the same
about waste management costs in an article on the economics of nuclear
power (RO 78):
...the fuel cycle services the Government provides will
be billed to the utilities without subsidy, like the
enrichment services. Even if this estimate turns out
to be 100 percent low, its impact on overall generation
costs will not be enough to change the competitive
position of nuclear power compared with coal.
The Department of Energy in their EIS on the spent fuel storage
charge also concludes that "the nuclear decision is, on balance,
considered to be unaffected by the fee..." (DOE 80b, Page 11-10).
Although the analysis of this paper assumes no impact of the standard
on the growth of nuclear power, a situation could result in which the
standard might have a positive impact on the future expansion of the indus-
try. If one assumes that an important obstacle affecting the growth of
nuclear power is the public concern about radioactive waste disposal, then
elimination of this obstacle might provide some stimulus to nuclear expan-
sion. The public may perceive the EPA standard as providing sufficient
protection from radiation exposure associated with the waste material so
that this obstacle may, to some degree, be removed. If this conjecture
were to hold, then the standard would be responsible for a positive impact
on nuclear power growth. To the degree that the standard results in the
44
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substitution of "less costly" nuclear systems for "more costly" fossil
fuel systems, substantial economic benefits may be realized. However,
because of the uncertain likelihood of the EPA standard eliminating public
concern and affecting utility decision-making, this potential impact
cannot be determined at this time.
45
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4. MILITARY WASTE MANAGEMENT
4.1 Overview
Analyzing the economic impact of the EPA standard on the military
waste management program involves limitations beyond those associated with
the commercial waste program. Even before one attempts to estimate the
incremental impact of the standard, limitations are encountered in
assessing the economic impact of the military waste management program
itself. These limitations stem not only from the difficulty in specifying
a "baseline" waste management program, which we have seen is also charac-
teristic of the commercial waste management program, but, in addition, from
the "public goo/1" nature of the military waste program.
The military waste management program is the result of the development
of nuclear weapons used for national defense purposes. National defense
is termed a "public good" which implies that all members of the population
benefit from its use, and that one individual's consumption of the good
does not affect another individual's consumption. The provision of the
good is made by the Government and financed by tax revenues in order to
provide benefits to the general population. The public-good nature of the
military waste management program thus makes it impossible to identify
individual segments of the general population who are affected by this
program and its accompanying expenditures. This situation is the opposite
of the commercial waste management program in which the producers and
consumers of nuclear power the activity both generating the waste
material and which has financial responsibility for the waste management
46
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expenditures can be identified and in which a microeconomic analysis
can be performed. In the case of military waste, only a macroeconomic
analysis can ideally be developed, and that is limited to the extent that
cost and public finance information as well as analytical tools, such as
macroeconomic models, are available.
Unfortunately, the relevant information necessary for a macroeconomic
impact analysis of the military waste program is not available, the conse-
quence of a program whose stage of financial planning has lagged behind its
commercial counterpart. In the Department of Energy documents which have
addressed the costs of military waste management alternatives (DOE 77b,
DOE 77c and DOE 78c), and in other DOE actions to date, no attention has
been focused on how the required expenditures will be financed. Prelimin-
ary project cost estimates on the different alternatives have been the only
economics-related information which has been generated. Information such
as the time-frame over which these expenditures can be expected to be
incurred as well as the impact on the Federal budget as a result of the
program, needs to be developed before the economic impact of the program
can be estimated. Therefore, very few conclusions about the economic
aspects of the program, as well as the incremental impact of the EPA
standard, can be forthcoming at this time.
This chapter is organized into two major sections which pertain to the
two types of military waste material that are covered by this standard
high-level waste and transuranic waste. Section 4.2 addresses the
47
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management of high-level waste and estimates the economic impact of the
standard. Section 4.3 covers the management of transuranic waste.
4.2 High-level Waste
4.2.1 The Cost of High-level Waste Management
Cost information on the military high-level waste management
alternatives was furnished by DOE and is shown in Table 4. These numbers
represent DOE's best estimates, but it should be noted that these estimates
are based on preliminary engineering designs which, according to DOE, are
expected to change significantly. Estimates were provided for each of the
three military waste sites (Savannah River, Hanford, and Idaho Falls) and
for four different waste management alternatives. These alternatives
include the continuation of the present storage mode, conversion of the
waste material to glass and disposal in an onsite surface facility, conver-
sion to glass and onsite geologic disposal, and conversion to glass with
offsite geologic disposal. Technically speaking, the costs for individual
sites cannot appropriately be summed together since DOE cautions that they
are based on different levels of engineering concepts, but for the purposes
of this paper it was felt that little distortion would result from this
summation.
The waste inventories upon which these costs are based are also quite
different. Costs for high-level waste management at Hanford pertain to
the inventory of accumulated waste through 1971. The Savannah River
estimates are based on a projected 1985 inventory of waste while the costs
48
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TABLE 4
Estimated Total Cost of Defense High-Level
Waste Management Alternatives
(Millions of 1978 Dollars)
Alternative
Savannah River Hanford Idaho Falls
Total
Continue Present- Storage
Convert to Glass, Onsite
Surface Disposal
Convert to Glass, Onsite
Geologic Disposal
Convert to Glass, Offsite
Geologic Disposal
296
2138
624
1603
5*'
370
925
4111
1770
1795
1705
1780
217
376
3692
3951
a/
Operating and capital costs do not include full recovery costs for the
geologic repository.
b/
Annuity for routine surveillance,
Source: Letter from Sheldon Meyers, DOE, to James E. Martin, EPA,
March 12, 1979.
49
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for Idaho Falls assume quantities of waste expected to be accumulated by
the year 2000.
As Table 4 indicates, the total cost for the three disposal alterna-
tives (excluding the status quo option) ranges from $3.7 billion for onsite
geologic disposal to $4.1 billion for onsite surface disposal, with offsite
geologic disposal estimated at $4.0 billion. The maximum variation in cost
is relatively small, approximately 10 percent. However, it should be men-
tioned that the selected waste management alternative may differ for the
individual sites. On an individual site basis, the maximum relative spread
in the cost of waste management alternatives was 21 percent for Savannah
River, 11 percent for Hanford and 73 percent for Idaho Falls. The impact
of the relatively wide range for Idaho Falls on the combined sum for the
three sites is diminished by the fact that its total expenditures are much
smaller than those for the other two sites. For a given alternative, the
cost at Idaho Falls is only 13 to 23 percent of the estimate for Hanford.
Consequently, even if different alternatives are selected for the indi-
vidual sites, the variation in the total cost of military waste management
appears at this time to be very small. This conclusion assumes that the
alternative of continued storage in the present mode is an unacceptable
long-term waste management alternative. As Table 4 shows, the total costs
for any of the three disposal alternatives is higher than the cost of
maintaining the status quo by about a factor of four.
As discussed above, very little can be said at this time about the
economic impact of the military waste management expenditures. Total
50
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costs have been presented for military waste management rather than unit
costs, as in the case of commercial waste management, since there is no
meaningful economic unit in which to express the economic impacts, such as
a kilowatt-hour of electricity. However, if these costs could be expressed
on an annual basis, they could then be related to the nation's Gross
National Product (GNP), the budget outlays of the Federal Government, or
the budget outlays of the Department of Energy to gain some perspective as
to their relative importance. The information necessary to do so in a
judicious manner is generally not available, but if we make some simplified
assumptions, the task can be accomplished. If we assume that these total
costs, about 4 billion dollars, are intended to be spent over a period of
10 years, then the average annual cost is roughly $400 million (time value
of money considerations aside). In fiscal year 1978, the budget outlays
for DOE were 5.9 billion dollars (ERP 79). Therefore, the annual outlays
for military waste management would represent about 7 percent of the
FY 1978 DOE budget. For comparison purposes, the $400 million annual cost
of military waste management would represent .089 percent of FY 1978 budget
outlays for the Federal Government and .019 percent of the 1978 GNP
(ERP 79). If the assumption is changed so that the costs of waste manage-
ment pertain to 15 years, the average annual expenditure would be about
4.5 percent of the DOE outlay for FY 1978. An investigation in much
greater depth is necessary before a degree of significance can be attri-
buted to these expenditures, as well as a determination of their economic
consequences.
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4.2.2 Impact of Standard
The economic impact of the standard on the military high-level waste
management program was estimated in a manner similar to the procedure
followed for commercial waste, even though the results could not be stated
in as detailed a fashion due to the inherent limitations of the analysis,
discussed above. First, a reference waste management plan was assumed in
which the individual cost components and their values were specified.
Second, the potential impacts of the standard on this reference program
were identified. Third, the size of each of the impacts was estimated to
the degree possible. Finally, these estimates were summed to determine
the overall impact of the standard on the total cost of the reference
program. Since the financing plans for the expenditures required by the
military waste program have not yet been developed, very little can be
said at this time about the economic consequences of the reference program
or the incremental effect of the standard on the program.
Selecting a reference military waste management plan for evaluating
the economic impact of the standard requires judgment as to actions which
might occur in the absence of the standard. Three alternatives appear
credible: (a) long-term surface or near-surface storage at the three
existing high-level waste sites; (b) geologic disposal, onsite; and
(c) geologic disposal, offsite. From EPA's experience with the public
workshops on criteria for radioactive waste management, it is felt that
there is sufficient sentiment against option (a) so that it is very
unlikely that this option will occur, even if the EPA standard is not
implemented. Both options (b) and (c) have received significant attention,
52
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but given past concerns about the transportation of radioactive wastes, we
feel that onsite geologic disposal would be the most likely course of
action without the standard. Therefore, the reference military high-level
waste management plan assumed for this analysis is the operation of an
onsite geologic repository at each site.
Table 5 presents the estimated total cost of the reference high-level
waste management program detailed by individual cost component. The esti-
mates are based on data presented in DOE defense waste documents and a
response by DOE to an EPA request for cost information (DOE 78c, DOE 77b,
DOE 77c, DOE 79a). As discussed earlier, these estimates contain a high
degree of uncertainty and are expected to change substantially as refine-
ment of the waste management program proceeds. The individual cost
components are waste retrieval, processing (which includes the costs for
radionuclide removal, decontaminated salt disposal, and immobilization),
canisters, transportation, storage/disposal, research and development, and
decommissioning. As Table 5 indicates, the processing cost is by far the
largest cost component, accounting for 60 percent of the total cost of
3.7 billion dollars.
Five potential impacts of the standard have been identified and
pertain to each of the cost components of Table 5 except waste retrieval
and decommissioning. First, the standard may influence the cost of
processing waste by requiring the separation of long-lived technetium-99
for disposal. In the reference program, technetium-99 would be left in
processed salt cake and stored in existing on-site tanks. Second, the
53
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TABLE 5
Cost Components for Reference Defense High-Level Waste
Management Program - Glass, Onsite Geologic Disposal
(Millions of 1978 Dollars)
Cost Component
Cost
Percent of Total Cost
Waste Retrieval
Processing
Canisters
Transportation
Storage/Disposal
R&D
Decommissioning
233
2204
198
27
456
311
263
6.3
59.7
5.4
0.7
12.4
8.4
7.1
TOTAL
3692
100.0
54
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standard may affect the canister cost by requiring a more restrictive
canister. Third, transportation costs may be significantly affected by
the standard if the standard eliminates the onsite disposal alternative
and requires wastes to be disposed in an offsite repository. Fourth, the
disposal cost may be affected by the standard if the selected geologic
media are more expensive to mine than the media assumed in the base case.
Fifth, research and development costs may be increased by requiring more
extensive site evaluation to take place and more research for improved
control technologies.
The impact on high-level military waste processing due to the
standard requiring the separation of Tc-99 has been estimated to result in
a 10 percent increase in the reference processing cost. This estimate is
based on discussions with scientists specializing in this type of
technology. Based on the processing cost presented in Table 5, the size
of this impact is estimated at approximately $220 million.
The impact of the standard on the cost of canisters was estimated in
a manner similar to that employed for commercial high-level waste in which
the cost of alternative metals was compared to a reference canister type.
The canister cost of Table 5 reflects the use of carbon steel canisters
for the waste at the Hanford site and stainless steel canisters for
Savannah River and Idaho Falls. Using the same cost factors relating
carbon steel, stainless steel, and titanium canisters, that were assumed
in the commercial waste encapsulation analysis, the impact on canister
cost was estimated by assuming, first, the use of only stainless steel
55
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canisters at all sites and, second, the use of titanium canisters at each
site. This calculation resulted in an incremental impact over the
reference canister cost of 160 to 697 million dollars. The percentage
impact on this cost component is different than that for the commercial
waste encapsulation cost since it includes only the cost of the canisters
themselves and not the cost of constructing and operating the encapsulation
facility. The relative impact is also different because, for commercial
waste, carbon steel was assumed to be the reference canister type for all
canisters.
The impact of the standard on transportation cost was estimated by
assuming the differential in transportation costs between the onsite and
offsite geologic repository scenarios of the DOE reports (DOE 78c,
DOE 77b, DOE 77c, DOE 79a). This differential was 322 million dollars.
The standard's impact on storage/disposal cost was assumed to range
from 0-30 percent. In the commercial waste analysis, it was stated that
the maximum cost differential for alternative geologic media is 30-100
percent, representing the disposal cost differential for a repository
constructed in basalt versus salt. This differential is not appropriate
for military disposal costs since salt is not the reference medium for any
of the three military waste sites. The impact of the standard on storage/
disposal cost is therefore estimated to range from zero to $137 million.
The impact of the standard on R&D costs is assumed to be the same as
that for the commercial program, namely an increase of 50 to 100 percent.
56
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Based on the estimate of R&D costs contained in Table 5, this impact is
assumed to result in an increase of 156-311 million dollars.
Combining all the estimates of the individual impacts yields the
result that the overall impact of the standard on the total cost of
military high-level waste management is expected to range from .9 to
1.7 billion dollars. Compared to a reference onsite geologic disposal
program costing $3.7 billion, the standard's impact may result in a cost
increase of 23 to 46 percent. As discussed in the commercial waste
section, this estimate assumes that each of the impacts identified above
will actually take place. To the degree that these impacts do not
materialize, the impact of the standard will be diminished.
4.3 Transuranie Waste
Transuranic (TRU) waste is defined as material containing more than
ten nanocuries of transuranic activity per gram of material (IRG 79). TRU
wastes result primarily from the reprocessing of spent fuel and the
fabrication of plutonium in nuclear weapons production. In light of the
deferral on reprocessing, virtually all of the existing TRU waste has been
generated from weapons production and is, therefore, a component of
military waste management.
TRU waste from weapons production exists in a buried or
retrievably-stored form at several DOE sites, as shown by Table 6. As of
January 1977, the inventory of accumulated DOE TRU waste totalled nearly
15 million cubic feet, of which 88 percent is buried while 12 percent is
57
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TABLE 6
Existing DOE TRU Waste
Sitfi
Hanford, WA
Idaho Falls, ID
Los Alamos, NM
Oak Ridge, IN
Savannah River, SC
Nevada Test Site
4i 11 ions of cubic
fa)
Buried Wastev '
5.40
2.30
4.10
0.20
1.00
0.01
feet as of 1/1/77)
Retrievably Stored Waste
0.27
1.28
0.06
0.05
0.06
0.01
(b)
TOTAL
13.00
1.72
(a)
These are approximate volumes of TRU waste included in the buried
low-level waste. Burial of DOE TRU waste ceased in 1974 (most
sites in 1970).
(b)
Does not reflect any potential volume reduction.
Source: Report to the President by the Interagency Review Group on
Nuclear Waste Management, March 1979, p.D-17.
58
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in retrievable storage. Of the total that is buried, 42 percent is at the
Hanford site, 32 percent at Los Alamos and 18 percent at Idaho Falls.
Approximately 74 percent of the total retrievable TRU waste is located at
Idaho Falls, while Hanford accounts for an additional 16 percent.
Long-term waste management plans for TRU waste are currently being
developed by each of the sites. Two sites Idaho Falls and Savannah
River have produced alternatives documents which have been prepared to
further aid in the formulation of a waste management plan (DOE 79d,
DOE 79e). These reports pertain to the management of TRU waste in retriev-
able storage only. As in the case of high-level waste, both commercial and
military, these plans are a long way from being implemented. Nevertheless,
these documents provide rough estimates of projected quantities of TRU
waste and the costs involved in their "management." It is expected at this
time that TRU waste will be disposed of in a manner similar to high-level
was£e, namely, in a geologic repository. Therefore, the range of costs
presented here covers only the geologic disposal alternatives, both onsite
and offsite, and does not consider other alternatives such as surface
storage. All cost estimates are preliminary in nature and may vary
substantially due to the high degree of uncertainty.
The volume of TRU waste retrievably stored at Idaho Falls is projected
to reach 2 million cubic feet by 1985, an increase of about two-thirds over
the 1977 inventory. Costs for the alternatives which include offsite geo-
logic disposal of TRU waste are estimated to range from 756 to 778 million
dollars. These costs cover the activities involved in waste retrieval,
59
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processing (which includes incineration and immobilization by slagging
pyrolysis), packaging, shipment and disposal of TRU waste (alternatives 3,
4 and 6). Estimated costs for alternatives which include the same method
of retrieval and processing but involve disposal in an onsite geologic
repository (alternatives 5a and 5d) are 801-807 million dollars.
The amount of retrievable TRU waste at Savannah River is projected to
double by 1990, reaching 122,000 cubic feet. Waste management alternatives
covering retrieval, processing, packaging, shipment and disposal in an
offsite geologic repository (alternatives 4 through 9) are estimated to
range in cost from 184 to 221 million dollars. The cost for the same
alternatives but with onsite geologic disposal are estimated at 290-327
million dollars. It is stated in the report that the reason for the
onsite disposal alternatives being more costly than offsite disposal is
that all the costs are borne by Savannah River in the former case while in
the latter case disposal costs are shared by several sites. However,
since the complete cost of offsite disposal may not be reflected in the
assumed "payment fee," this comparison of onsite/offsite waste management
costs may be misleading. More detailed and definitive cost information is
required in order to make such an assessment.
The EPA standard applies to TRU wastes which contain more than
100 nanocuries of transuranic activity per gram of waste. Therefore, the
standard, by definition, covers the waste management activities of only a
portion of the quantities of TRU waste discussed above.
60
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The impact of the standard on TRU waste management cannot be
determined at this time. Following the same procedure used in estimating
the impact of the standard on high-level waste management is not possible
due to the very high degree of uncertainty which is characteristic of the
TRU waste management program. Specifying a reference waste management
plan with detailed cost components requires more information than is
presently available, and identifying the impacts attributable to the
standard and estimating their size would be sheer speculation.
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5. REFERENCES
(ADL 77) Arthur D. Little, Inc., Technical Support for Radiation
Standards for High-Level Radioactive Waste Management,
"Effectiveness of Engineering Controls," Task B Report (Draft),
prepared for the U.S. Environmental Protection Agency, Office of
Radiation Programs, August 1977.
(APS 78) American Physical Society, Review of Modern Physics, "Report to
the American Physical Society by the Study Group on Nuclear Fuel
Cycles and Waste Management," Volume 50, Number 1, Part II,
January 1978.
(BNL 74) Battelle Pacific Northwest Laboratories, High-Level Radioactive
Waste Management Alternatives (BNWL-1900), Volume 1, prepared
for the U.S. Atomic Energy Commission, May 1974.
(BNL 80) Telephone communication with Carl Unruh, Battelle Pacific
Northwest Laboratories, January 18, 1980.
(CA 80) President Carter's policy statement to Congress on the
radioactive waste management program, February 12, 1980.
(DOE 77a) U.S. Department of Energy, Energy Information Administration,
Annual Report to Congress, Volume II, 1977, DOE/EIA-0036/2.
(DOE 77b) U.S. Energy Research and Development Administration,
Alternatives for Long-Term Management of Defense High-Level
Radioactive Waste, Hanford Reservations, Richland Washington,
ERDA 77-44, September 1977.
(DOE 77c) U.S. Energy Research and Development Administration,
Alternatives for Long-Term Management of Defense High-Level
Radioactive Waste, Idaho Chemical Processing Plant, Idaho
Falls, Idaho, ERDA 77-43, September 1977.
(DOE 78a) U.S. Department of Energy, Report of Task Force for Review of
Nuclear Waste Management (Draft), February 1978, DOE/ER-0004/D.
(DOE 78b) U.S. Department of Energy, Preliminary Estimates of the Charge
for Spent-Fuel Storage and Disposal Services, July 1978,
DOE/ET-0055.
(DOE 78c) U.S. Department of Energy: Draft Environmental Impact State-
ment , Long-Term Management of Defense High-Level Radioactive
Wastes, Savannah River Plant, Aiken, South Carolina,
DOE/EIS-0023-D, July 1978.
(DOE 79a) Letter from Sheldon Meyers, DOE, to James E. Martin, EPA,
March 12, 1979.
62
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(DOE 79b) Department of Energy, Draft Environmental Impact Statement,
Management of Commercially-Generated Radioactive Waste,
Volume 1, April 1979, DOE/EIS-0046-D.
(DOE 79c) U.S. Department of Energy, Technology for Commercial
Radioactive Waste Management. May 1979, DOE/ET-0028.
(DOE 79d) U.S. Department of Energy, Alternatives for Long-Term
Management of Defense Transuranic Waste at the Savannah River
Plant, Aiken, South Carolina, July 1979, DOE/SR-WM-79-1.
(DOE 79e) U.S. Department of Energy, Environmental and Other Evaluations
of Alternatives for Long-Term Management of Stored INEL Trans-
uranic Waste, Revised December 1979, DOE/ET-0081 (Revised).
(DOE 80a) U.S. Department of Energy, Department of Energy Study on Spent
Nuclear Fuel Storage. March 1980, DOE/SR-0004.
(DOE 80b) U.S. Department of Energy, Final Environmental Impact
Statement, U.S. Spent Fuel Policy, Charge for Spent Fuel
Storage, Vol. 4, May 1980, DOE/EIS-0015.
(EPA 80) U.S. Environmental Protection Agency, Draft Environmental Impact
Statement, Environmental Standards and Federal Radiation
Guidance for Management and Disposal of Spent Nuclear Fuel,
High-Level and Transuranic Wastes, (to be published).
(ERP 79) Economic Report of the President, Transmitted to Congress,
January 1979.
(HRP 77) Hearings before a Subcommittee of the Committee on Government
Operations, House of Representatives, Nuclear Power Costs,
Part 1, September 12, 13, 14, and 19, 1977.
(HRP 78) Twenty-third Report by the Committee on Government Operations,
Nuclear Power Costs, House Report No. 95-1090, April 26, 1978.
(IRG 79) Report to the President by the Interagency Review Group on
Nuclear Waste Management, March 1979, TID-29442.
(MA 77) Manne, Alan S., ETA-MACRO: A Model of Energy-Economy
Interactions, Stanford University, prepared for Electric Power
Research Institute, December 1977.
(MHB 78) MHB Technical Associates, Spent Fuel Disposal Costs, prepared
for Natural Resources Defense Council, August 31, 1978.
(PUF 79) Public Utilities Fortnightly, "The Cost of Closing Down All
Nuclear Plants," January 4, 1979, p.23.
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(RO 78) Rossin, A.D. and T.A. Rieck, "Economics of Nuclear Power," in
Science, August 18, 1978.
(TRW 78) TRW, Economics of National Waste Terminal Storage, Spent Fuel
Pricing Study, report prepared for U.S. Department of Energy,
May 1978, Y/OWI/SUB-78/42512/2.
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APPENDIX A
METHODOLOGY FOR ESTIMATING THE ECONOMIC-IMPACT
OF THE COMMERCIAL WASTE MANAGEMENT PROGRAM
A. 1 Overview
This section discusses the methodology used in estimating the economic
impact of the waste management program. The methodology is presented in a
generalized form so that it is applicable to analyzing impacts resulting
from any increase in the cost of nuclear-powered electricity, regardless of
the cause. The starting point for this estimation procedure is the unit
cost, expressed in mills per kilowatt-hour, which can be attributed to the
program under investigation. The impacts estimated in this section are
normalized and correspond to a cost increase of 1 mill/kwh. The impacts
are proportionally related to the unit cost so that impacts from a program
can be determined by means of scaling the normalized impacts by the
relative proportion of the unit cost under analysis to the normalized unit
cost.
The procedure employed to estimate the economic impacts focuses on
measuring the direct effect on consumers, namely the expected increase in
electricity rates to residential customers. The increase in cost affects
the utility by raising its total revenue requirements. As discussed
below, this impact is determined by assuming the complete pass-on of the
cost to the customers. In response to the impact on revenue requirements,
an increase in the rate charged to residential customers is estimated.
Studies prepared for the Federal Government and the electric utility
-------
industry (TBS 77, PE 75) both assume that the increase in rates for each
type of customer will be equal to the percentage increase in total revenue
requirements. Since residential and commercial customers have higher
average rates than industrial users, the absolute increase in their rates
is greater.1 An estimate of the absolute increase in the average
monthly residential bill is then derived by multiplying the absolute
increase in the residential rate by an estimate of the average monthly
usage. This absolute increase is then compared to an estimate of the
average bill in effect without incurring the cost of the program under
investigation, to obtain the relative impact. Finally, and most
importantly, the impacts are adjusted for coverage of the industry
affected by an increase in the cost of nuclear power, namely, the percent
of electricity generated from nuclear power plants.2
A review of several studies analyzing the economic impacts of
pollution controls on the electric utility industry (TBS 76, TBS 77,
PE 75, PE 76, TA 73, CEQ 72) shows that a convention exists whereby costs
to utilities are assumed to be passed on entirely to their customers.
These studies indicate that this is a relatively safe assumption in light
of the fact that the industry is composed of regulated monopolies.
!ln 1977, average revenue per kilowatt-hour (expressed in 1977
dollars) was 37.8 mills for residential, 38.4 mills for commercial and
23.3 mills for industrial users, with the average for all customers
(including street and highway lighting, other public authorities, and
railroads) being 32.1 mills (EEI 77).
^See Table A-2 for a detailed explanation of the estimation
procedure.
A-2
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However, as one source (CEQ 72) explains, in reality, state regulators
sometimes do not allow the utilities to wholly pass on their cost increases
to its customers and, depending on the nature of the increase, they may
decide that it should be shared among both the customers and the company's
stockholders, in which case the utility would merely absorb some portion
of the increased cost. Consequently, the convention of wholly passing on
costs to customers is a worst-case assumption (with regard to measuring
direct impacts on consumers), and one that is used in this paper. 1
Another related issue of importance is the fact that rate increases
granted by the State commissions will generally take place after the incre-
ased cost has already been incurred so that, depending on the degree of
"regulatory lag," some amount of time will elapse before an "equilibrium"
position is reached. There is evidence that for the last several years
this lag is increasing (TEK 80). This consideration, though, is not too
significant for this analysis due to the long-run nature of the waste
management situation and its inherent lack of a need for fine-tuning,
stemming from the many uncertainties associated with the program and the
cost estimates.
In addition to the direct impacts calculated on both a national and
regional level, secondary impacts on consumers from higher electricity
ilhe impact of the waste management charge on individual utility
cash flows and stockholders' rate of return will depend on the treatment
of this incremental cost by state public utility commissions. Based on the
small size of this charge, it appears that these potential effects will be
insignificant even if the entire cost is not passed on to customers.
A-3
-------
rates are also addressed. These impacts pertain to the effect on the
prices of all goods and services resulting from an increase in the price
of electricity (charged to commercial and industrial users). Also, total
annual expenditures resulting from a 1 mill/kwh increase in the cost of
nuclear-powered electricity are estimated on a nationwide basis.
A.2 National Impact Analysis
The increase in the cost of nuclear power is related to the revenue
requirements of the utilities in order to make an economic evaluation of
the impact of the additional cost under investigation. Total revenue
requirements reflect the total cost of producing electricity (TBS 77,
EPA 76). Revenues cover both capital and operating costs, as well as a
rate of return for investors, and conveniently combine all these elements
into a single measure. Also, revenue requirements reflect the amount that
customers will actually pay (assuming 100 percent of the cost is passed on
to customers) for waste management activities. An increase of 1 mill/kwh
for the unit cost of waste management translates into a 1 mill/kwh increase
in the total revenue requirement of nuclear power plants. Average revenue
per kilowatt-hour in 1977 for all customers (and all types of generating
plants) was 34.5 mills (expressed in 1978 dollars, per DOE 78, Table 16-5).
Since the activities under analysis pertain to a future technological
process rather than an existing program, economic impacts have been
estimated for a future date at which time presumably the waste management
program will already have been instituted, and the country's nuclear
capacity will have been expanded. The year 1990 has been selected.
A-4
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Estimation of future economic impacts requires a baseline forecast of
several key parameters. Among these are the following:
Real price of electricity
Price elasticity of demand for electricity
Consumption of electricity
Relative share of electricity generation by nuclear power
The relationship of these forecasted parameters to the size of the
economic impacts is relatively straight-forward. The higher the rate of
growth in the real price of electricity the smaller is the relative impact
of waste management. The greater (in absolute value) the price elasticity,
the smaller the increase in the customer's bill due to a waste management
charge.1 The higher the level of electricity consumption, the larger
the absolute impact on the customer's bill (relative impact remains the
same, regardless of the amount of electricity consumed.) Finally, the
greater the share of electricity generated from nuclear power, the larger
the economic impact of waste management.
Because an evaluation of the impacts is so dependent on these para-
meters, care was taken in developing the assumptions for their projected
values. Two sets of assumptions were devised for analyzing the impacts, a
^This holds for elasticities in the range of 0 to -1. For elastic-
ities greater (in absolute value) then -1, the greater the price elasticity
the larger the decrease in the customer's bill, attributable to a price
increase. See page A-7 for an explanation of the relationship of price
elasticity to total revenue (price times quantity) or, in this case, the
customer's electric bill.
A-5
-------
"maximum impact" case and a "realistic" case. The "maximum impact"
scenario assumes a forecast for each parameter that would maximize the
economic impact of the waste management program. None of the assumptions
are likely to occur let alone all four simultaneously. The "realistic"
case is based on independent estimates for each parameter that are typi-
cally categorized as "most likely" or "middle-of-the-road." Table A-l
presents the assumptions used in each case. A brief review of the basis
for each assumption is presented next.
Over the period 1950-1970, the real price of electricityl decreased
each year. Beginning in 1971, this trend has been reversed as (with the
exception of 1973) the real price has been rising steadily. In the
maximum impact scenario, we have assumed no growth in the real price of
electricity, or alternatively stated, that the total revenue requirement
and the residential electricity rate in 1990 (expressed in 1978 dollars)
assume the values for the base year 1977. For the realistic case, an
average annual growth rate of 0.5 percent is assumed for the price of
residential electric power while the total revenue requirement is assumed
to increase at an annual rate of 0.8 percent, based on recent projections
from the Department of Energy (DOE 78, Table 16-5).
Price elasticity of demand measures the degree of sensitivity that
consumers have with regard to the amount of a product purchased and the
*As measured by the ratio of the consumer price index (CPI) for
electricity to the CPI for all items.
A-6
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price charged for the product. In simple terms, the elasticity is
expressed as the ratio of the percentage change in quantities purchased to
the percentage change in the price. The price elasticity in most situa-
tions is a negative number, which reflects the inverse relationship of
price changes and quantities demanded (assuming a down-sloping demand
curve). In the price elasticity formula, though, a minus sign is inserted
before the ratio in order to make the elasticity number positive. This is
done for convenience in discussing elasticities. However, empirical
studies generally refer to the price elasticity as a negative number which
is directly estimated from a regression analysis (see TA 75). For this
reason, discussion of price elasticity estimates in this paper will treat
the measure as a negative number, but statements about the size of the
elasticity will pertain to the absolute value of the number.
A price elasticity between 0 and -1, referred to as inelastic, implies
that in response to a price increase, consumption will be somewhat dimin-
ished but that the total revenue from the sale of the good, namely the
product of the price and quantity, will be increased. This stems from the
fact that the percentage increase in price is greater than the percentage
decrease in quantity demanded. An elasticity greater (in absolute value)
than -1, called elastic, means that both the quantity demanded and the
revenues generated will decrease as a result of a price increase since the
percentage increase in price is less than the percentage decrease in
quantity demanded.
A-7
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TABLE A-l
Assumptions Used for Projected
National Average Economic Impacts of Waste Management
Parameter Maximum Impact Case Realistic Case
Growth in Real Price of
Electricity(a)
Residential Rate 0 0.5%
Total Revenue Requirements 0 0.8%
Price Elasticity of
Demand for Electricity 0 -0.2
Growth in Consumption of
Electricity (kwh per Residential
Customer)(a) 5% 1.3%
Relative Share of Electricity
Generation by Nuclear
Power, 1990 33% 22%
(a) Average annual growth rate, 1977-1990
Note: Base year values are:
- Total revenue requirements, 1977=34.5 mills/kwh (1978 dollars)
- Residential electricity rate, 1977=40.6 mills/kwh (1978 dollars)
- kwh per residential customer per month, 1977=724.
The source for the total revenue requirement and the residential electri-
city rate is Department of Energy, Energy Information Administration,
Annual Report^to Congress 1978, Volume III, Table 16-5. Monthly residen-
tial consumption for 1977 was derived from the annual estimate found in
Edison Electric Institute, Statistical Yearbook of-the Electric Utility
Industry for 1977.
A-8
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Several studies of the price elasticity of demand for electricity
have been made (TA 75) and much of the empirical evidence to date has
indicated that the long-run elasticityl may be as high as -2. However,
the studies of the economic impacts of utility pollution regulations cited
earlier (TBS 77, PE 75) assume that the price elasticity is zero. For the
maximum impact scenario, a zero price elasticity was chosen, thereby
assuming that one's demand for electricity is not affected by the change
in price. In .this case, the relative impact on the electric bill is the
same as the relative impact on the price of electricity. For the
realistic case, an elasticity of -.2 was assumed, based on the DOE
analysis contained in their annual report to Congress (DOE 78, Table A-2b).
The level of consumption of electricity in the future is a key deter-
minant of the size of the absolute impact on the consumer's electric bill,
but does not affect the relative impact. Based on forecasts from DOE (DOE
78, Tables 16.3 and 17.1), a growth rate of 1.3 percent per year in
kilowatt-hours per residential customer was used in the realistic case
(based on a 1977-1990 average annual rate of 3.16 percent for total resi-
dential kwh and 1.85 percent for total number of households-assumed to
equal the number of residential customers). For -the maximum impact case,
an annual growth rate of 5 percent was assumed, the rate assumed in the
analysis performed in 1975 by National Economic Research Associates, Inc.
(PE 75). The long-term historical annual growth rate in kwh per
^Long-run elasticities are generally greater (in absolute value)
than short-run elasticities since purchasing behavior in response to price
changes can be altered more easily over time.
A-9
-------
residential customer, as measured over the period 1957-1976, was 5.2
percent. However, this rate of growth has diminished significantly the
last few years. From 1970 through 1976 the average annual rate was 2.8
percent. Consequently the use of the 5 percent growth rate for the
forecast is consistent with the intent of the "maximum impact" scenario.
The importance of the relative share of electricity generated by
nuclear power in the analysis is obvious. For the realistic case, the
1990 share projected by DOE' s midcase forecast was assumed 22 percent,
up from about 12 percent in 1977 (DOE 78, Table 12-3). The installed
nuclear capacity assumed in this forcast is 152 GWe. For the "maximum
impact" case, a nuclear share of 33 percent was assumed. This represents
the relative share estimated by DOE in their "nuclear ordering upswing"
scenario for the year 1995 and implies a nuclear capacity of 269 GWe (DOE
78, Table 12-6). Assuming DOE's 1995 nuclear forecast for 1990 is also
*
consistent with the purpose of the maximum impact scenario.
Applying the assumptions of Table A-l to the base year values of the
parameters and following the procedure outlined earlier, one can derive the
absolute and relative impacts on the national average residential elec-
tricity rate and monthly residential electric bill in 1990. Under the
maximum impact conditions, the average rate is estimated to increase by
.39 mills/kwh or 1.0 percent, while the average monthly residential bill
should rise by $.53, also 1.0 percent. For the realistic case, the
expected impacts are a 0.6 percent rise in the national average rate or
.25 mills/kwh, and an increase in the monthly electric bill of $.17 or
A-10
-------
0.5 percent. Table A-2 presents the calculations used in estimating the
direct economic impacts for each case.
In addition to estimating the economic impacts of the commercial waste
management program in terms of the effects on electricity prices and
customers' electric bills, an estimate was made of the total cost repre-
sented by a 1 mill/kwh charge on nuclear power generated in 1990. This
estimate should provide a measure of the annual cost of the program. The
estimate was derived by utilizing assumptions about the following
parameters: total electricity generation, percent of electricity gener-
ation provided by nuclear power, total electricity sales, and the total
revenue requirement. A single set of assumptions was developed which
corresponds to the "realistic" scenario discussed above.1 Based on
these assumptions, the total cost of a 1 mill/kwh charge levied on nuclear
power generated in 1990 is estimated to be $825 million or 0.6 percent of
total revenues of $130 billion.
1-The assumptions used in the estimating procedures are as follows:
1. Total electricity generation: 2124 billion kwh in 1977 (EEI 77,
Summary) and an annual growth rate of 4.4 percent for the period 1977-1990
(DOE 78, Table 16-3).
2. Nuclear share of electricity generated in 1990: 825 billion kwh
or 22 percent of total generation (DOE 78, Table 12-3).
3. Total electricity sales: 1951 billion kwh in 1977 (EEI 77,
Summary) and an annual growth rate of 4.3 percent for the period 1977-1990
(DOE 78, Table 16-3).
4. Total revenue requirement: 34.5 mills/kwh in 1977 and 38.3 mill/kwh
in 1990, which corresponds to an annual growth rate of 0.8 percent
(expressed in 1978 dollars per DOE 78, Table 16-5).
A-ll
-------
TABLE A-2
Summary of Calculations Used in Estimating National
Impact (Direct) in 1990 of a 1 Mill/Kwh
Unit Coat of Waste Management
Absolute increase in residential electricity rate ( fl rr) equals:
MC
wm x rr x X NUC
1990
^1990 -
where
"1990 = "1977 x (1+rrGR1977-90)
Relative increase in residential electricity rate (2rr) equals:
A rr
rr!990
Absolute increase in monthly residential electric bill ( A MEB) equals:
" MEB
1990
where MEB - rr x
= ("l990+irr) *
x[l+(Ed x 2 rrj]}
Relative increase in monthly residential electric bill (ZMEB) equals:
A MEB
Symbols: RR = Total revenue requirements (mills/kwh)
rr = residential electricity rate (mills/kwh)
RRGR = Average annual growth rate of total revenue requirement
(percent)
rrGR = Average annual growth rate of residential electricity
rate (percent)
MC^ Unit cost of waste management (mills/kwh)
%NUC = Relative share of electricity generated by nuclear power
(percent)
MEBmc = Monthly residential electric bill, as a result of unit
cost (dollars)
MEB - Monthly residential electric bill, without unit cost
(dollars)
KWHGR = Average annual growth rate of monthly electricity consump-
tion per residential customer (percent)
KWH = Monthly electricity consumption per residential customer
(kwh)
Ed = Price elasticity of demand for electricity
Maximum Impact Case Realistic Case
RR qq = 34.5x(l+0.0)13 - 34.5 mills/kwh RR1QOn " 34.5x(l+.008)13
Iy*° - 38.3 mills/kwh
"1990 «.6x(l+0.0)13 - *0.6 mills/kwh
= 43.3 mills/kwh
Arr = x 40.6 x .33 - .39 mills/kwh A rr " -^ x 43.3x.22 - .25 mills/kwh
34.5 38.3
39 25
2rr = - - = 1.0 percent Zrr =,-5-7 0.6 percent
40.6 43'3 -
= 40.6x(l+.05) x724 = $55.43 MEB= ^3-3x(l+.013)1J x 724
$37.08
(4°'6 + <39)
13 {(l+.013)13x 724 x[l+(-.2 v .0063)
{(1+.05) x724 x[l+(0x.01)]} t,_ ,.
=$55.96 =$37.25
A MEB - $55.96 - $55.43 = $.53 A MEB = $37.25 - $37.08 - $.17
*MSB ^g - 1.0 percent ZMBB =$377^ ' °
Note: All dollar amounts are expressed in 1978 dollars.
A-12
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Secondary or indirect impacts of higher electricity prices may take
place as a result of the rise in prices of goods and services produced in
the commercial and industrial sectors. The extent of these impacts is
basically a function of two factors a rise in the price of electricity
to these users, and the relative share of electricity costs in the overall
expenses of these firms. On the latter point, several studies (TBS 76,
CEQ 72) concur that electricity costs represent only a few percentage
points of the output of most industries. Regarding the size of the elec-
tricity rate increase, we have seen that for a 1 mill/kwh incremental cost
of nuclear power there is only a slight impact on the prices paid by resi-
dential customers and since it was assumed that this incremental cost had
the same relative impact on all electricity users, it follows that there
will also be very little impact on commercial and industrial customers.
Secondary impacts were estimated in one study (TBS 76) which concluded
that they were insignificant while corresponding to a direct impact of
6.7 percent oir a 2.1 mills/kwh (1975 dollars) increase in consumer charges
in 1985. The rate increase in that study is much greater than the increase
associated with a 1 mill/kwh incremental cost of nuclear power, as esti-
mated above (see Table A-2), so that only minimal secondary impacts can be
expected. In order to ascertain the secondary impacts of a hike in
electricity prices in a reliable fashion, the use of a macroeconomic or
input-output model would be required. However since the size of the price
increase under analysis here is so small, it appears unwarranted to expend
the necessary resources for such an exercise.
A-13
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A.3 Regional Impact Analysis
A regional impact analysis was also performed to determine the degree
of variation in the national estimates. As in the national case, the
direct regional impacts on consumers from waste management are dependent
upon the cost of producing electricity and the nuclear power share of elec-
tricity generation. The average residential electricity rate varies by a
factor of more than 3 while the forecasted share of nuclear power in 1990
ranges from over 50 percent in the New England region to less than 2 per-
cent for the Mountain States. The unit cost of waste management is assumed
to be the same for every region due to the national scope of the radioac-
tive waste problem. In reality, transportation costs would vary by region
according to each utility's location to waste management facilities.
However, since transportation costs are a relatively small portion of the
program's total cost, about 15 percent (see Section 3.2, Table 3), a
uniform cost for the entire waste management process was assumed.
In view of the size of the impacts on a nationwide basis, a single
set of assumptions on the economic/energy parameters was used to develop
the regional estimates. The assumptions used in the estimation were no
growth in the real price of electricity for each region (from a 1978 base
year), zero price elasticity of demand, and relative nuclear power shares
which were based on a regional forecast from DOE which was presented in
their 1977 report to Congress (DOE 77, Table 10-13).! Since the price
iRegional forecasts of nuclear power generation were not presented
in the 1978 report to Congress (DOE 78); hence the forecasts for 1990 in
the 1977 report were used. The difference in the two forecasts on a
national level are a 26 percent nuclear share in 1990 according to the
1977 report, and a 22 percent share estimated in the 1978 report.
A-14
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elasticity of demand is assumed to be zero, the relative impact on the
residential electric bill is identical to the percentage increase in the
residential electricity rate. Table A-3 summarizes the impact on the
residential rate for each of the ten Federal Regions. Despite the
regional differences in residential rates and the relative importance of
nuclear power, the estimated impacts from a 1 mill/kwh cost of waste
management ranged only from a high of 1.2 percent for Region I (Boston)
and Region X (Seattle), to a low of 0.1 percent for Region VIII (Denver),
compared to a national average of 0.8 percent. One observation worthy of
note which serves to soften the diversity of regional impacts (expressed
on a relative basis) from the waste management program, is that the areas
with the highest shares of forecasted nuclear power generation the New
England and Middle Atlantic States also represent the regions with the
highest electricity charge to residential customers.1 The higher the
price of electricity, the smaller is the relative impact of the waste
management program. As noted in the national analysis, because the direct
impact on consumers is so small, secondary impacts were not calculated.
A.4 Summary
This appendix estimates the economic impacts associated with a
1 mill/kwh unit cost of the waste management program. Direct impacts to
consumers on a national average basis are estimated to result in elec-
tricity rates in 1990 increasing by 0.6 percent ("realistic" case) to
lit should not be concluded that the reason for these areas
exhibiting high electricity prices is the relatively large nuclear share;
the high prices are attributed to other factors.
A-15
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Federal Region
No. and Office
Location
TABLE A-3
Summary of Regional Impact (Direct)-1990-
of a 1 Mill/Kwh Waste Management Charge
Residential
Percent of Electricity
Electricity Rate without
Generated by Charge, 1990
Nuclear Power (mills per
kwh)
54.3
63.3
46.4
36.3
42.5
36.3
40.2
35.7
42.6
18.5
40.9
Note: Dollar amounts are expressed in 1978 dollars.
Sources: Nuclear shares are from the Department of Energy, Energy Information
Administration, Annual Report to Congress, Volume II, 1977. The
residential electricity rate was derived by calculating Institute,
Statistical Yearbook of the Electric Utility Industry for 1976 and
adjusting all rates to 1978 by the relative change in the consumer
price index for electricity from 1976 to July,1978 (18.6 percent).
Under the "maximum impact" assumptions, the real price of electricity
remains the same from 1978 - 1990. The increase in the residential
rate of electricity reflects the uniform pass-on of 1.2 mills per kwh,
adjusted for nuclear power coverage. The 1.2 mills/kwh charge is
derived by multiplying the ratio of the waste management charge to
the national average total revenue requirement in 1990 (1.0 / 34.3),
times the national average residential electricity rate in 1990 (40.9
mills/kwh).
1976
I
II
III
IV
V
VI
VII
VIII
IX
X
Boston
New York City
Philadelphia
Atlanta
Chicago
Dallas
Kansas City
Denver
San Francisco
Seattle
Total U.S.
33
14
11
9
14
1
9
2
9
.3
.6
.9
.0
.2
.5
.0
0
.9
0
.2
1990
53
38
25
27
28
17
19
1
25
18
25
.3
.4
.9
.4
.6
.7
.3
.5
.9
.5
.9
Increase in
Residential
Rate Due to
Charge
(mills per
kwh)
0.64
0.46
0.31
0.33
0.34
0.21
0.23
0.02
0.31
0.22
0.31
Percent
Increase in
Residential
Rate Due to
Charge
1.2
0.7
0.7
0.9
0.8
0.6
0.6
0.1
0.7
1.2
0.8
A-16
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1.0 percent ("maximum impact" case), in real terms. Regional variation
should account for an upward deviation of about 50-60 percent of the
national average impact. Secondary impacts on consumers have not been
explicitly estimated, but are expected to be insignificant. The total
annual cost of waste management in 1990, as reflected by the projected
revenues to be collected from a waste management charg£ of 1 mill/kwh
levied on electricity consumers in that year, is estimated to be about
$825 million or 0.6 percent of total revenues.
As discussed at the beginning of this section, economic impacts from
the waste management program or any other nuclear-related program, can be
estimated from these normalized impacts by scaling them according to the
relative proportion of the unit cost to the 1 mill/kwh assumption. This
method will provide a reasonable estimate of the direct impact of higher
electricity prices for any range of incremental costs. However, the larger
the incremental cost under consideration, the greater the need to examine
more closely the secondary impacts of the higher prices.
A-17
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REFERENCES for APPENDIX A
(CEQ 72) U.S. Council on Environmental Quality, U.S. Department of
Commerce, and U. S. Environmental Protection Agency, The Economic
Impact of Pollution Controls, A Summary of Recent Studies,
March 1972.
(DOE 77) U.S. Department of Energy, Energy Information Administration,
Annual Report to Congress, Volume II, 1977.
(DOE 78) U.S. Department of Energy, Energy Information Administration,
Annual Report to Congress 1978, Volume III.
(EEI 76) Edison Electric Institute, Statistical Yearbook of the Electric
Utility Industry for 1976.
(EEI 77) Edison Electric Institute, Statistical Yearbook of the Electric
Utility Industry for 1977.
(EPA 76) U.S. Environmental Protection Agency, A Preliminary Analysis of
the Economic Impact on the Electric Utility Industry of Alterna-
tive Approaches to Significant Deterioration, February 5, 1976.
(PE 75) Perl, Lewis J. and Joe D. Pace, The Costs of Reducing S02
Emissions from Electric Generating Plants, A Report to the
Electric Utility Industry Clean Air Coordinating Committee,
National Economic Research Associates, Inc., June 1975.
(PE 76) Perl, Lewis J. and Thomas K. Fitzgerald, Estimated Costs for the
Electric Utility Industry of Non-Significant Deterioration
Amendment Currently Considered by the United States House of
Representatives, National Economic Research Associates, Inc.,
July 15, 1976.
(TA 73) Tarquin, Anthony J., Dowdy, Jack A., and Howard G. Applegate,
"Cost of Air Pollution Controls in the Power Industry," in Public
Utilities Fortnightly, Vol. 91, No. 7, March 29, 1973.
(TA 75) Taylor, Lester D., "The Demand for Electricity: A Survey," in
Bell Journal of Economics and Management Science, Volume 6,
Spring 1975.
(TBS 76) Temple, Barker & Sloane, Inc., Economic and Financial Impacts of
Federal Air and Water Pollution Controls on the Electric Utility
Industry, report prepared for the U.S. Environmental Protection
Agency, May 1976.
A-18
-------
(TBS 77) Temple, Barker & Sloane, Inc., Economic Analysis of Section 316
(B) Regulations on the Steam Electric Power Generating Industry,
report prepared for the U.S. Environmental Protection Agency,
October 20, 1977.
(TEK 80) Teknekron, Inc., Review of New Source Performance Standards for
Sulfur Dioxide Emissions from Coal-Fired Steam Generators, ongoing
study prepared for the U.S. Environmental Protection Agency.
A-19
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APPENDIX B
ESTIMATION OF THE TOTAL COST OF THE REFERENCE
COMMERCIAL WASTE MANAGEMENT PROGRAM
This appendix describes the procedure by which the total cost of the
reference commercial waste management program was estimated. Costs are
developed separately for existing and future spent fuel (the waste form
assumed in the reference program). In both cases, the total cost was esti-
mated by multiplying a unit cost by the appropriate number of total units.
The Department of Energy estimates that about 6000 MT of spent fuel
have accumulated by the end of 1979 (DOE 80a). According to DOE's prelim-
inary spent fuel charge report, the charge for "disposal only" (as opposed
to interim storage and disposal) was estimated as ranging from $112 to $214
(1978 dollars) per kilogram of spent fuel (DOE 78b, Table 7). Adding
$33/kg to each of these unit costs to represent the cost of transportation
of the spent fuel to a repository site, increases the total unit cost to
$145 to 247 per kilogram. Applying these unit costs to the existing
inventory of spent fuel results in a total cost ranging from .87 to 1.482
billion dollars. This total cost covers transportation to a repository
site, encapsulation, disposal, research and development, Government
overhead, decommissioning (of the repository and the encapsulation
facility) and surveillance.
-------
For future waste, we estimated the cost pertaining to the spent fuel
resulting from the cumulative generation of nuclear powered electricity
projected for 1980 through 1995. The following forecast of nuclear
kilowatt-hours was assumed:
Year Nuclear Kwh (Billions)l
1979 255
1985 570
1990 825
1995 1115
The annual generation of nuclear-powered electricity was estimated
for 1980 through 1995 by linear interpolation. The sum of the generation
for each year of this time period totaled 12,244 billion kwh. As in the
case of existing spent fuel, the unit cost of waste management was derived.
from estimates in DOE's preliminary spent fuel charge report (DOE 78b,
Table 7). A range in the unit cost was assumed by using the lowest
estimate of the charge for "disposal only" ($112/kg) and the highest
estimate for "storage and disposal" ($319/kg). Adding $33/kg to each of
these costs to represent the cost of transportation of spent fuel to
Government facilities (either at an AFR storage site or a repository site)
and converting to a direct fuel cycle cost (using a conversion factor of
$250/kg = 1 mill/kwh) results in a unit cost of waste management ranging
from .6 to 1.4 mills per kwh. Applying these unit costs to the cumulative
nuclear power generation projected for 1980 through 1995 results in a
total cost of 6.746 to 15.742 billion dollars. As explained in Chapter 3
'The estimate for 1979 is from DOE 80b and the projections are from
DOE 78a, Table 12.3.
B-2
-------
of this document, this cost is a sum of annual revenues to be collected
from electric utility customers at time of generation to pay for the cost
of waste management activities which will take place several years after
electricity generation. This cost includes AFR storage for a portion of
the spent fuel, transportation to both an AFR storage site and repository
site, encapsulation, disposal, research and development, Government
overhead, decommissioning (of the repository, encapsulation, and AFR
storage facilities) and surveillance. This cost does not include the cost
for storage of spent fuel at reactor sites.
The sum of the waste management costs for both existing spent fuel
and the fuel to be used in nuclear-powered electricity generation from
1980 through 1995 ranges from 7.6 to 17.2 billion (1978) dollars. The
cost for existing spent fuel represents about 10 percent of the combined
total cost.
B-3
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REFERENCES for APPENDIX B
(DOE 78a) U.S. Department of Energy, Energy Information Administration,
Annual Report to Congress 1978, Volume III.
(DOE 78b) U.S. Department of Energy, Preliminary Estimates of the Charge
for Spent-Fuel Storage and Disposal Services, July 1978,
DOE/ET-0055.
(DOE 80a) U.S. Department of Energy, Department of Energy Study on Spent
Nuclear Fuel Storage. March 1980, DOE/SR-0004.
(DOE 80b) U.S. Department of Energy, Energy Information Administration,
Monthly Energy Review, August 1980.
B-4
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TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completing)
1. REPORT NO. ' 2. 3. REC
EPA 520/4-80-014
4. TITLE AND SUBTITLE Economic Impacts of 40 CFR 191: Envi- s. REP
ronmental Standards and Federal Radiation Protection
Guidance for Management and Disposal of Spent Fuel, e. PER
High-Level and Transuranic Radioactive Wastes
7. AUTHOR(S) 8. PER
Andrew J. Leiter
9. PERFORMING ORGANIZATION NAME AND ADDRESS 10. PR
Office of Radiation Programs (ANR-460)
U.S. Environmental Protection Agency 11. co
Washington, D.C. 20460
12. SPONSORING AGENCY NAME AND ADDRESS 13. TY
Office of Radiation Programs (ANR-460)
U.S. Environmental Protection Agency 14. SP
Washington, D.C. 20460
16. SUPPLEMENTARY NOTES
IPIENT'S ACCESSION NO.
ORT DATE
December 1980
FORMING ORGANIZATION CODE
FORMING ORGANIZATION REPORT NO.
OGRAM ELEMENT NO.
NTRACT/GRANT NO.
PE OF REPORT AND PERIOD COVERED
DNSORING AGENCY CODE
16. ABSTRACT '
This report estimates the potential economic impacts of EPA's proposed standards
and guidance for the management and disposal of spent fuel, high-level, and transuranic
radioactive wastes. The economic analysis assumes that the standards and guidance will
have an incremental effect on the reference waste management programs that are assumed
to take place in the future. Both commercial and defense waste management programs
are covered. For the commercial sector, the impact of the standards on electricity
rates is investigated.
17. KEY WORDS AND DOCUMENT ANALYSIS
a. DESCRIPTORS b. IDENTIFIERS/OPEN ENL
Economic Analysis
Environmental Standards for Radioactive
Waste Management
Spent Fuel
High-Level Radioactive Waste
i
ED TERMS c. COSATI Field/Group
- . . .
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