Estimating the economic costs of nuclear power plant outages in a regulated market using a latent factor model

Minsoo Jeong and Jung S. You

Renewable and Sustainable Energy Reviews, 2022, vol. 166, issue C

Abstract: In this study, we analyze the economic consequences of nuclear power plant outages in a regulated market when information on production costs and pricing rules is hidden through regulations. By using a latent factor model with a market-specific structure, we uncover the hidden supply-side factors and estimate the prospective changes in electricity prices, welfare redistribution, and the increase in carbon emissions through the nuclear plant outage scenario analysis. By analyzing time series data from 2004 to 2018 in South Korea, we find that the one reactor outage at more than the average outage level would result in a reduction of US$ 7.04 million in total consumer surplus in the first 12 months following the outage and would increase greenhouse gas emissions by 697 kilotons, equivalent to an increase in social costs of US$ 33.8 million, in the first 12 months.

Keywords: Nuclear policy; Regulation; Electricity market; Greenhouse gas emissions; State-space model (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.rser.2022.112582

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