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A Dynamic Programming Model of U.S. Nuclear Power Plant Operations

Listed author(s):
  • Geoffrey Rothwell

    (Department of Economics, Stanford University)

  • John Rust

    (Department of Economics, University of Wisconsin)

This paper presents a dynamic programming (DP) model of an electric utility's optimal policy for operating a nuclear power plant (NPP). The utility chooses the level of capacity utilization of the NPP as a function of signals about the NPP's current operating state. In each period the utility must determine whether or not to operate the reactor, or shut it down for preventive maintenance or refueling, or to permanently close the plant. Maintenance performed during periodic refueling outages partially ``regenerates'' the NPP, reducing the risk of unplanned forced outages in succeeding periods. Using monthly data on U.S. NPPs in the post-TMI era we estimate parameters of the utility's profit function, the failure processes that lead to unplanned forced outages, and the parameters governing the duration of refueling outages. These parameters imply an endogenous distribution of operating spells and capacity utilization levels that depend on the NPP's age, signals the operator receives about the NPP's current operating state, and the duration since last refueling. The estimates of the DP model reveal that utilities appear responsive to NRC regulation insofar as they impute a very high cost to unplanned and forced outages. Utilities are also highly averse to causing unnecessary wear and tear on their NPP's caused by stop/start operation of their NPP's including planned and unplanned outages. Overall, the DP model yields very accurate predictions of nuclear power generation including the impact of the relatively rare event of NPP decommissionings.

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Paper provided by EconWPA in its series Microeconomics with number 9502001.

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Length: 75 pages
Date of creation: 06 Feb 1995
Date of revision: 06 Feb 1995
Handle: RePEc:wpa:wuwpmi:9502001
Note: TeX file, Postscript version submitted, 75 pages
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  1. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
  2. Dubin, Jeffrey A. & Rothwell, Geoffrey S., 1989. "Risk and reactor safety systems adoption," Journal of Econometrics, Elsevier, vol. 42(2), pages 201-218, October.
  3. Rothwell, Geoffrey, 1996. "Organizational Structure and Expected Output at Nuclear Power Plants," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 482-488, August.
  4. Rothwell, Geoffrey, 1990. "Utilization and service : Decomposing nuclear reactor capacity factors," Resources and Energy, Elsevier, vol. 12(3), pages 215-229, September.
  5. David, Paul A. & Rothwell, Geoffrey S., 1996. "Measuring standardization: An application to the American and French nuclear power industries," European Journal of Political Economy, Elsevier, vol. 12(2), pages 291-308, September.
  6. David, Paul A & Maude-Griffin, Roland & Rothwell, Geoffrey, 1996. "Learning by Accident? Reductions in the Risk of Unplanned Outages in U.S. Nuclear Power Plants after Three Mile Island," Journal of Risk and Uncertainty, Springer, vol. 13(2), pages 175-198, September.
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