Nuclear power pipedream

Nuclear power is back in the news again, with ambitious plans being unveiled for India going full speed ahead on this energy option. India's nuclear energy plan is based on the three-stage nuclear power programme drawn up by Homi Bhabha in 1954. The technology for the first stage, comprising setting up Pressurised Heavy Water Reactors (PHWRs), has stabilised, and 14 plants with an installed capacity of 2720 MW are under operation. In recent years even the capacity factor of the plants has improved to over 80 per cent. The second stage envisages setting up of Fast Breeder Reactors (FBRs) backed by reprocessing plants and plutonium-based fuel fabrication plants. The Fast Breeder Test Reactor (FBTR) reached criticality in October 1985. The next step in the second stage was to design and implement a 500 MWe Prototype Fast Breeder Reactor (PFBR), for which a detailed project report at an estimated cost of Rs 2,800 crore for construction at Kalpakkam has been prepared. The third stage is to be based on the thorium-uranium233 cycle to make use of the large domestic thorium reserves. An Advanced Heavy Water Reactor (AHWR) is being developed at the Bhabha Atomic Research Centre (BARC) to expedite the transition to thorium-based systems. Alongside the indigenous self-reliant three-stage programme, the Department of Atomic Energy (DAE) is looking to import Light Water Reactor (LWR) technology. The deal with the Russian Federation on setting up two 1000 MWe units at Kudankulam is a step in this direction. The DAE aims to have an installed nuclear capacity of 20,000 MWe by 2020. Recently, there has even been talk of 40,000 MWe capacity. Of the 20,000 MWe, the DAE envisages 7,000 MWe from LWR and 2,500 MWe from FBRs. Starting from the current capacity of 2,720 MWe the addition of 1,520 MWe at Tarapur and Kaiga is proposed during the Tenth Plan. With capacity additions at Kudankulam (2,000 MWe), Rawatbhata (440 MWe) and Kaiga (220 MWe) the capacity would be 6,880 MWe by 2008. The DAE hopes to reach the capacity of 9,935 MW by the end of the Eleventh Plan, though the schemes and locations for the balance capacity are yet to be decided. However, there are indications that the DAE has in mind the addition of 10 PHWRs of 500 MWe each, four FBRs of 500 MWe each and five LWRs of 1000 MWe each. Causes for scepticism There are several reasons to be sceptical of the feasibility of attaining the objective of 20,000 MWe of installed nuclear power capacity by 2020. These include issues such as availability of financial resources, access to technology, relative economics of nuclear power and regulatory and institutional aspects, besides the track record of DAE in achieving targets. To take the last one first, the Nuclear Power Profile formulated in 1984 envisaged setting up 10,000 MWe of installed nuclear power capacity by 2000. This involved setting up of 8x235 MWe and 12x500 MWe of PHWR units. As against this, 4x220 MWe and 6x500 MWe units were taken up for implementation, but the actual achievements fell far short. Besides financial constraints, inadequately detailed planning, the continuous struggle to stabilise indigenous technology, concerns for safety, low plant capacity factors, lack of cost competitiveness and, therefore, the inability to access larger pools of capital, contributed to the shortfall. Therefore, the installed capacity of today ? at 2,720 MWe, against the missed target of 10,000 MWe by 2000 ? provides a sobering context to view similar projections for the distant future. Technology Of the 20,000 Mwe, about half is to come from FBR and LWR technologies, neither of which is indigenously available today. The FBR technology has had problems the world over and is on the retreat. Of the 11 plants of capacity larger than 100 MWe, one never opened, seven have shut down and one more is to be shut down. While the LWR is the dominant technology of choice for creating commercial nuclear power capacity, apart from the deal with the Russian Federation for setting up two VVER-1000 reactors at Kodankulam, we have had no success in attracting investments by other foreign companies in spite of an open policy in this regard. According to the US Academy of Sciences, the VVER-1000 is not up to international safety standards, and would not be built, even in Russia. Finance In the absence of any private or foreign investment, the nuclear capacity addition would have to depend on budgetary support and the internal accruals of the NPCIL. Of the estimated outlay of Rs 7,300 crore for the 1,300 MWe capacity to be commissioned during the Tenth Plan, budgetary support of Rs 3,000 crore is proposed. The balance Rs 4,300 crore has to come from internal accruals or has to be raised on the balance sheet of NPCIL. The balance sheet of NPCIL shows shareholder funds of Rs 10,642 crore, including a Rs 6,383-crore equity base. With a gearing of less than one, there is some leeway for further leveraging. For the financial year 2001-02, the profit before tax of Rs 1,410 crore from operations reflects a modest 13 per cent pre-tax return on shareholder funds, though it is a big improvement on the previous years. If NPCIL maintains this performance, it should have no difficulty in financing the outlay required for the capacity to be commissioned in the Tenth Plan. However, this is based on two doubtful assumptions. The cost estimates at around Rs 5.5-6 crore per MWe are much lower than comparable international figures (Rs 8 crore) and perhaps have made no provision for decommissioning costs, which can be very high. Second, it assumes no time overruns with attendant implications for viability, which is contrary to past experience of the DAE. More important, this does not cover the funds requirement for the 2,660 MWe capacity to come on stream in 2008, which on rough estimates based on the conservative DAE norms would be of the order of Rs 15,000 crore. This financing gap leaves a big hole in the projections. On current reckoning, similar gaps are likely to persist in the period beyond 2008. Economics The bridging of this gap would depend on private investment and foreign technology, and investment being attracted to India's nuclear sector. This would depend on the cost of nuclear power being competitive against other fuels on a risk-adjusted basis. Nuclear power has higher up-front capital costs and longer and variable (particularly for FBR) gestation periods, which add both to the costs and risks. It also makes the viability of nuclear power dependent on the financial costs of capital. According to study, at a 10 per cent interest rate, nuclear power is not competitive in any country. The prime lending rate in India over the past 30 years has stayed much above this level. While recently interest rates have been moving downwards, the trend is too recent to serve as a credible basis for forming expectations over long time horizons of 30 years and above. Accountability India's nuclear power programme has historically grown as a part of its broader nuclear project and has not been subjected to much public scrutiny or open debate. The concerns on costs and safety have not been answered. From the point of view of ease of implementation of nuclear projects, things can only get worse as civil society and environmental groups start demanding answers and taking positions on specific nuclear power projects. It would be worth remembering that in the aftermath of the Three Mile Island accident, the average completion time for a nuclear power plant in the US stretched to 12 years. After the Chernobyl disaster, there has been large-scale political opposition to nuclear power in Europe. Austria has made itself a non-nuclear state by writing it into its Constitution. Except France and Finland, most of Europe seems decidedly anti-nuclear, even though lately there has been some rekindling of interest in nuclear power in the UK. Strategic and eco considerations The case for nuclear power is largely strategic, based essentially on our heavy dependence on import of hydrocarbons. Geo-strategic concerns arising from concentration of hydrocarbon reserves in the Gulf region and the impact of fluctuations of oil prices add weight to such arguments. But the bottomline is that nuclear power would have to be economically competitive. Of this there is not much sign yet, though it may get a boost if it were to be recognised as eligible for benefits under the proposed Clean Development Mechanism as it does come out as a green option from the global warming perspective. The projections of the DAE for creation of 20,000 MWe of nuclear power capacity by 2020 suffer from serious limitations. Apart from the proposed addition of 1,300 MWe during the Tenth Plan, which would take the installed capacity to 4,020 MWe by 2007 and, the 2,000 MWe of VVER capacity by 2008, the rest lacks a firm basis. Together, these would imply a capacity of 6,020 MWe. The IEA has forecast a nuclear power capacity of 6,451 MWe by 2020. While this appears rather pessimistic, it would be par for the course if India could achieve 10,000 MWe by 2020, which it had set for itself as the target for 2000 in 1984. More optimistically, a doubling of the capacity in the 10 years from 2010 to 2020, taking the total to 12,000 MWe, should serve as the upper bound.