A review of the methods of economic analysis of nuclear power plants
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Nuclear power plants across the United States are reaching the end of their current operating licenses, forcing decision makers to think about the way forward. As they consider the best alternatives for dealing with aging nuclear plants, it is becoming increasingly important to have an accurate method for calculating the long-term costs of nuclear power plants. This report begins by investigating the methodologies currently used in these calculations. They focus on the uncertainty associated with deregulated electricity markets and can be broken down into two main categories: discounted cash flow and real options analysis. Next the report discusses the limitations of the current methodologies, focusing specifically on those aspects of evaluation that are currently eclipsed by electricity market uncertainty. Finally the report offers recommendations for addressing these limitations and creating a stronger analytical framework for calculating the lifetime cost of nuclear power plants.