From cradle to grave? : On optimal nuclear waste disposal

This paper analyses socially optimal nuclear plant operation and nuclear waste management. Two waiting rules are derived: the first characterizes the optimal continuation of electricity production, and the second gives the optimal nuclear waste disposal date. Both rules balance the cost and benefit of either continuing production or delaying waste disposal into a deep geological repository. In addition, multiple regulatory options are investigated. The optimized waste storage and disposal cost forms the payment that should be collected from the nuclear power firm into a nuclear waste fund. The properties of this payment and other regulatory options including a tax to be paid at the shutdown date of the plant are investigated, and it is shown that the money can be collected by a plant-specific constant fee targeted at firm's profit or output. Numerical illustration shows that waste disposal to a deep geological repository is a cost-minimizing solution only with very low interest rates. For interest rates above one percent it is optimal to store the waste in an on-ground storage facility in perpetuity.