NEA prepares decommissioning costs report

01 June 2017

The OECD-Nuclear Energy Agency (NEA) - together with the International Atomic Energy Agency (IAEA) - plans to publish new guidance on improving cost estimates of nuclear decommissioning projects. Simon Carroll, a senior analyst with the Swedish Radiation Safety Authority, told delegates at the Nuclear Decommissioning & Waste Management Conference Europe that the guidance addresses project risk and uncertainty in cost estimates "in a more comprehensive fashion" than existing practice.

The guidance has been produced by a joint team of experts from the OECD-NEA Decommissioning Cost Estimation Group (DCEG), which Carroll chairs, and from the IAEA.

"There is an ongoing and perhaps grave concern about potential cost overruns and escalating cost estimates for decommissioning projects," he told delegates at the conference, which took place in Manchester, England on 24-25 May.

"It is important that uncertainty and project risk are taken fully into account when developing estimates, so as to give a more complete picture of the possible project costs from the outset."

Other reports


The report, Addressing Uncertainties in Cost Estimates for Decommissioning Nuclear Facilities, is one of a series of documents providing guidance on decommissioning costing. The first, Nuclear Decommissioning: A Proposed Standardised List of Items for Costing Purposes - colloquially known as the Yellow Book - was published in 1999 as a joint initiative of the OECD-NEA, the IAEA and the European Commission.

A review of the Yellow Book in 2009 concluded that use of the cost structure it proposed was not universal, for example because national reporting requirements called for a different aggregation of costs. This conclusion led to the International Structure for Decommissioning Costing (ISDC), which the three same organisations published in 2012. The ISDC provides general guidance on developing decommissioning cost estimates and, through its itemisation, a tool for presenting estimates using a standard, common structure which facilitates completeness and comparisons between estimates. The use of the ISDC structure is encouraged as international good practice for presenting decommissioning cost estimates.

As well as the ISDC, Paris-headquartered NEA has produced guidance on international peer review of decommissioning estimates (2014) and the practice of decommissioning cost estimation (2015).

In addition to the cost estimation guidance, a review of the Costs of Decommissioning Nuclear Power Plants, was produced by an NEA Ad Hoc Expert Group on Costs of Decommissioning (COSTSDEC) and published last year.

The new report on uncertainties builds upon the ISDC by explicitly including consideration of project risk and uncertainties into decommissioning cost estimates in an integrated manner, Carroll said.

New terminology and concepts


Asked to explain the meaning of 'contingency' in the DCEG report, Carroll told World Nuclear News: "Contingency is basically any provision above your base cost. The ISDC uses contingency for only one part of that provision, but what we're saying is that we also want to take into account project risks - both threats and opportunities. Since contingency was already used by ISDC in a specific limited way, we needed to find a way to separate out the two concepts.

"Because the ISDC contingency is used to refer to uncertainty only within the defined scope of the project, we chose the term 'estimating uncertainty' for this provision. For the risk, that's more of a classical contingency for risks beyond the defined project scope, so we chose to call it risk, and distinguish between whether it's funded or not."

He stressed that for an international report, with US, British, German, Swedish, Italian and French input, finding a common terminology is a challenge - "there isn't one word or phrase that will fit for all".

In response to a question from Geoffrey Rothwell, principal economist at the NEA. Carroll said: "The ISDC used the word contingency for only part of what is basically covered by contingency in a more generic sense. So, it limited contingency to the in-scope uncertainty. If you're explicitly addressing out of scope uncertainty - so, the risks, the threats, the opportunities - that may impact on the project and distinguishing that from what the ISDC would call contingency, you need to have another term."

The ISDC is a "good tool", Carroll said, but it "only incorporates uncertainties related to the defined scope of your project".

"For a given project scope it allows you to factor in estimating uncertainty within that scope, but it does not put that project in the context of the risks that might occur during the execution of the project. It also doesn't adequately address the maturity of your scope definition. For these reasons we decided, together with the IAEA, to develop a new project that would try and address specifically decommissioning project cost uncertainties in a comprehensive and structured way, building on the ISDC structure."

The new report describes 'risk mitigation scope' as a process of successive iteration of the base scope.

"It is looking at your reference scenario and saying are we comfortable with it? Are there issues there that we think we want to refine and address by modifying our project definition somewhat, and how do we incorporate that into the total cost estimate? We recommend that you do that in the base scope rather than as a risk. So, you're basically adding scope and you need to reflect this in your project baseline estimate.

"Simple, but in practice what you need to do is multiple iterations over time before you come to the final project scope. For the purposes of communication and simplifying it into one statement, in the report we discuss the need for a multiple iterative process for optimising project design."

The new report is not prescriptive, Carroll said, but it does highlight the need to have a comprehensive understanding of the risks that may impact on project delivery. It describes a funded risk provision and unfunded risk.

"There may be some things that you transfer to another entity, be it a state or another risk holder, a contractor for example, or there may be some things just ultimately deemed so unlikely to occur that you don't fund for them. What we do argue in the report is that you need to be fully transparent about those judgement calls and the basis for making them, so you can give full understanding for what is funded for and why it is not funded for and the implications of that."

Carroll noted that the report "explicitly excluded" financing risk because the report focused on project risks.

"The broader financing issues - inflation and discounting and so on - are better addressed in the context of the financial arrangements," he said.

Stages of decommissioning


Asked how the new guidance should be adapted according to each project's stage of development, Carroll told WNN: "I don't think the application of the project cost estimation models differs in the development of an estimate itself, irrespective of the scenario you're in. Where I think the differences lie is, how the outputs of the proposed cost estimation models are used in the financing arrangements.

"Perhaps another way of looking at that issue is, estimates made during the operational life of a facility are used as inputs into long-term financing requirements, but the closer you come to doing the actual work, the cost estimation becomes the basis for the budget of your project. And then during the execution of the project, you have other project management tools that you can use to manage the overall delivery of the project.

"I think the transitions between the very early cost estimates that are used for financing purposes and the way they transition into a decommissioning project budget, that process is not that well examined. It's something we'll hopefully be looking at in the course of DCEG's work on benchmarking. The relationships between the estimates and the budget, and the budget and the budget outcomes, that's a genuine challenge that I don't think anyone has really squared."

Lack of information


Asked why the UK's Nuclear Decommissioning Agency's costs keep escalating, Carroll said, "I don't think it's so much that NDA got anything wrong. NDA had a limited amount of information about the project scope. Look at Sellafield, look at the huge amount of nuclear installations and the information gaps about the status of the facilities and activity in them, the limited amount of detail for many of the decommissioning projects to be undertaken, and then projecting those costs over a 120-year timeframe. There are major uncertainties, both in building up the basic estimate and then in projecting those costs into the future and coming down to a single number for those liabilities.

"The more information that you have, the more detail about what you're going to do to address those liabilities, it isn't any wonder that those liabilities change. The reporting system required NDA to produce a single number. They are taking to reporting the uncertainties around that number in their reporting now and if you look at the uncertainty spread they have, I think you'll get a better picture of what the real likelihood is."

Sharing data


Sharing nuclear decommissioning cost data is sensitive, but it is essential for gaining a better insight into decommissioning costs and also for managing decommissioning projects, Carroll said.

"The sensitivity arises when you publish cost data. Maybe there's a way, at what level of detail you report that information, or how the data is shared, that will allow you to share relevant information that will help us understand our projects better.

"As far as we can tell, no one has systematically tried to explore where the real barriers are and to what extent they are permeable. I hope the project will identify possibilities here."

Asked about the confidential peer review approach that the World Association of Nuclear Operators (WANO) uses, Carroll told WNN: "That's exactly one of the models that we're looking at. There are other ones: the OECD-NEA hosts an operational radiation exposure database, which includes decommissioning activities but it's broader than that.

"When this database was set up, everyone said, no you can't possibly share personnel exposure for activities, it's very sensitive. What they've established is a protected environment in which that data can be shared, and also one that both regulators and operators can learn from.

"It's success breeding success because at the beginning there was a reluctance to provide that information, but now people see its value and there is a willingness to share. It's exactly the same thing for WANO or INPO [US Institute of Nuclear Power Operators]. If a subgroup of entities wants to move forward and share information amongst themselves, then all well and good.

"These mechanisms exist, but one of the things I want us to do in DCEG's benchmarking project is explore different ways of data sharing and what might work and what might not work in the specific context of decommissioning costing."

Benchmarking


Benchmarking "means different things to different people", Carroll said, but "we're going to try and look more closely at how one might apply benchmarking approaches in the context of decommissioning costing".

He added: "The ambition is to gain better insight into the activity costs and the variations between them, be better able to relate estimates to actual costs, and allow us to develop further tools that might help us in decommissioning project delivery. That gives us some challenges.

"We have a lack of relevant cost data from decommissioning projects and there are real barriers to sharing that cost data. And at the moment, we have lots of estimates, we have very few costs and we don't really understand the relationship between our estimates and the costs, so those are the challenges that we have.

"We're going to look at how we might facilitate the sharing of sensitive cost data; are there ways we can encourage people to share relevant data and make it less sensitive, or provide assurances that the sensitivities will be taken into account when the data is shared.

"We're going to try and develop methods for systematically analysing estimates in relation to actual costs, probably at the activity level, and we're going to look at different methodologies for benchmarking. Hopefully together we will develop the way for a road map towards turning information into insights that can be used for decommissioning project delivery."

The new uncertainties report was produced by a joint OECD-NEA and IAEA group of experts which comprised about 20 members and will be published by the NEA this month. The DCEG's work on benchmarking will continue until the end of 2018.

Researched and written
by World Nuclear News