Effect of Depreciation Method for Long-Term Tangible Assets on Sustainable Management: From a Nuclear Power Generation Cost Perspective under the Nuclear Phase-Out Policy

• Main Authors: SungSig Bang, SangYun Park
• Format: Article
• Language: English
• Published: MDPI AG 2021-05-01
• Series: Sustainability
• Subjects: nuclear phase-out policy; sustainable management; depreciation method; decelerated depreciation method; nuclear power; generation cost
• Online Access: https://www.mdpi.com/2071-1050/13/9/5270

The Korean Government has been implementing a nuclear phase-out policy since 2017. Nuclear power plants accounted for 30.0% of the total power generation in 2016; this figure fell to 25.9% at the end of 2019, and the average Capacity Factor (CF) of a nuclear power plant approximately dropped from 89.1% to 69.2%. The nuclear phase-out policy presents severe consequences for the sustainable management of the nuclear power industry. Accordingly, the purpose of this study is to analyze the effect of a decrease in the nuclear capacity factor under the nuclear phase-out policy on the depreciation cost per unit using the Straight-Line Method (SLM) and Decelerated Depreciation Method (DDM) and to provide recommendations from a sustainable management perspective. The results show that the decrease in CF of nuclear power plants has a negative impact on sustainable development of the nuclear power industry. DDM is more beneficial than the SLM during this initial stage of depreciation under the nuclear phase-out policy. In addition, in the early stages of projects or immediately after attracting large-scale investments, DDM can offer more positive signs for stockholders by calculating a smaller net loss or a higher net profit.