The Myth Of Free Nuclear Energy

Prabir Purkayastha

THE Congress and its spokespersons have been on
overdrive selling a number of myths about the benefits of the India-US Nuclear
Deal. Foremost in that has been that of a mythical nuclear bus, which if we do
not hop on right now, will leave us in permanent electricity deficit. The bus
apparently carries free nuclear energy; all we need to do to tap into this free
source of energy is hop on to the bus. In this spin, it is this intransigent
Left, stuck in a time warp, which is causing India to miss the bus. The media
has been lapping up this vision of free nuclear energy, without any application
of either mind or checking up on the facts of nuclear energy. Given the
wide-spread credence that the myths about nuclear energy are being given, we are
now forced to spend some of our energy on de-constructing these myths.

Myth number 1, the 123 Agreement will give us
additional 40,000 MW of nuclear energy: The 123 Agreement does not provide us
even one MW of electricity. All that it does is it allows us to import nuclear
reactors and uranium fuel from outside. The imported reactors will have to be
paid for by us, and therefore setting up of nuclear power plants with imported
reactors will be from the total kitty we have for investments. In case we make
very large investments in plants with imported reactors, the money will have to
be taken out of either our future power sector investments or from other sectors
such as infrastructure, health, education, etc. As the Americans say, there is
no free lunch. If we want equipment, we will have to pay for it. And as we shall
see, importing nuclear reactors is the most expensive way of setting up power
plants.

If the 123 Agreement does not provide additional
power, what is its significance? India has been under nuclear sanctions since
1974, the first Pokhran explosion. At that time, the sanctions and the ensuing
isolation did damage our nuclear energy program quite severely. However, in the
last 30 years, we have come a long way and can build nuclear plants completely
on our own. Not only can we build nuclear plants with our technology, we can
also build it faster than others. The last plant commissioned in the US took 23
years to build. The latest European Union plant being built currently in
Finland, has already run up a delay of 18 months in the first 18 months of its
construction! Therefore, importing reactors or technology for reactors today is
far less important than 30 years back. As we shall see later, the cost of Indian
reactors, built with indigenous technology, is also much lower than
corresponding western reactors.

Myth number 2, there is a nuclear renaissance in the
world and all countries are turning to nuclear energy: The myth of a nuclear
renaissance has been created by the nuclear industry. In the 70s and 80s,
nuclear industry was building about 20 reactors a year in the US, Western Europe
and Japan. Currently, the number of reactors being built in Western Europe,
North America and South America is a grand total of 2! If we include Japan also
in these countries, the total number goes up to 3. The major growth of nuclear
energy is in Asia where countries such as India, China and Korea have seen major
growth of the energy sector itself. Where energy needs are growing, nuclear
energy is also growing. Even here, the proportion of nuclear energy as a
proportion of the total electricity sector is very small. China gets only 1.8
per cent of its electricity from nuclear plants, not very different from that of
India. Even if we take the future nuclear plants that China proposes to build,
nuclear energy is not going to be more than 5 per cent of its total installed
capacity.

It is important to note that out of 223 countries in
the world, only 30 have gone in for nuclear power. They have done so after
evaluating their energy options and taking decisions based on their energy needs
and energy sources available to them. Some, such as Japan and France, have
invested heavily in nuclear energy as they sought to be relatively free from the
imported sources of energy. For them, it was a case of energy security, as they
lacked either coal or oil/gas resources. Countries such as Germany and Sweden
are phasing out nuclear plants. UK has yet to decide whether to replace their
ageing nuclear plants or phase them out. Therefore, every country turning to
nuclear power is nothing but bunkum.

The US, which had invested quite heavily in nuclear
energy turned xaway from it due to huge overruns in costs and time. “Between
1975 and 1989, the average period required to complete a plant soared from 5
years to 12. The bill for a group of 75 first-generation plants totaled $224.1
billion (in current dollars), 219 per cent more than estimated” (Business Week:
Nuclear Power’s Missing Fuel, July 10, 2006). Most analysts agree that nuclear
plants, given their track record, are unlikely to find favour with investors in
the US.

The major hype about this so-called nuclear
renaissance has come from the global nuclear industry. This today, is a small
club, concentrated in only 4 countries – the US, France, Japan and Russia. If we
take the Russians out of this, there are only four major nuclear plant producers
– Toshiba owned Westinghouse (US-Japanese), GE-Hitach (US-Japanese), Mitsubishi
Heavy Industries (Japan) and Areva (French). GE and Westinghouse are big players
in the global energy market and are also big spenders in campaign contributions
to the Republicans. Bush and Cheney are known to be close to the energy lobby
and have pushed through a slew of measures to revive the dying nuclear industry
in the US. There is up to a half a billion available as subsidy for the first
six nuclear plants in the US, apart from numerous other measures such a soft
loans and government indemnity against time and cost overruns. Despite that, the
first licenses to construct and operate nuclear plants are as much as 5 years
away. Jim Rogers, the CEO of Duke Power, one of the companies proposing to build
a new nuclear plant in the US expressed his pessimism about Duke’s ability to
build this plant. About nuclear renaissance, he said, “I’m not a true
believer…. We’re talking about a renaissance in nuclear. I don’t see it.”

The nuclear industry is building only 3 reactors in
their home countries. The prospects of new nuclear plants do not look very
bright in any of these countries. That is why they are flogging this story about
a nuclear renaissance in India and elsewhere. It is nothing but hype to sell
their expensive reactors, which have few takers at home.

Myth number 3, nuclear power is going to be cheaper
than coal as it has very low operating costs: There are layers of lies built
into this statement. Yes, the operating cost of a nuclear plant is lower than
that of coal fired plants. However, the cost of electricity comes not only from
the operating cost but also its capital cost. We have to pay for the capital
cost of the plants also in the electricity charges we pay as consumers. And for
the record, the operating costs of nuclear plants are not as low as the
proponents of nuclear power are making them out to be.

CAPITAL COST

Let us accept the argument that nuclear energy has low
operating costs. The question is how much is the capital cost of imported
reactor-based nuclear plants? And when we convert these capital costs to the
cost that the consumer has to pay per unit of electricity, what will be that
cost? The calculations are quite simple. When we build a plant, we put in some
money, called equity and borrow the rest. This is called the debt equity ratio.
According to Central Electricity Regulatory Commission’s (CERC) norms, the debt
equity ratio for thermal plants is 70:30, we need to put in 30 per cent of the
total capital cost as equity and are allowed to borrow the rest. As per CERC
guidelines, the return on equity allowed which comes out of the tariff the
consumer pays is 14 per cent. The loans carry interests, and the interest
charges also come out of the tariff. Lastly, there is plant depreciation, which
is computed at 3.6 per cent of the plant cost. All these have to be included in
calculating the tariff. If we take only these components into account and the
cost of the plant as Rs 9 crore per MW (around $2000 per KW) and the accumulated
interests during construction, in which period obviously there is no sale of
electricity, the total capital cost including this interest is Rs 11.2 crore per
MW. The cost of electricity using just the capital cost of the plant alone for
imported reactors would be Rs 3.65 per unit as against the cost per unit from
coal including the fuel and all other operating costs of Rs 2.20-2.60, depending
on their distance from the coal mines. If we take plants at pit heads, the cost
committed by Reliance for the Sasan Ultra Mega Power Project is only Rs 1.19.
Even after using high cost imported coal, the cost of power from the Mundra
Ultra Mega Power project is Rs 2.26!

If we take indigenous reactors, the capital cost of
nuclear plants would be about two thirds of imported reactor based plants.
Nuclear power from Indian reactors would cost therefore quite a bit less than
that from imported reactors. Even then, it will be somewhat more expensive than
that of coal fired plants. However, taking into account the long-term scenario,
we need to keep nuclear option alive and should invest some money in nuclear
energy, particularly to develop Indian technology further in this area.

OPERATING COST

The operating cost per unit from imported reactors is
not as low as the UPA spokespersons are making it out to be. In the case of
Kaiga, the operating cost including fuel, heavy water and other operating cost
was computed by Nuclear Power Corporation to be Rs 1.48. If we add that to the
cost of capital, the cost of electricity becomes Rs 5.13! This is more than
twice that from coal fired plants. Therefore, the argument of cheap power from
imported nuclear plant is just sheer hogwash.
Recently, the NPC CMD, has claimed that Kudankulam would not be Rs 3.50-3.75 as
they had indicated earlier, but will be much lower. However, unless the NPC
comes clean on the basis of these calculations, we would consider it to be a
statement to justify import of nuclear reactors. Kudankulam was a special case,
with Russia agreeing to give us two reactors on soft loans and other
concessional terms. If we take the commercial reactors being built abroad, say
the Finnish reactor being built by Areva, the French company, its price has
already gone to more than $2,500 per KW (Rs 10 crore per MW), well above the
figure we have taken above. And we have yet to see the final price of Kudankulam,
which we will know only after it finishes construction. All international
studies have used $2000 per KW as the base cost of nuclear plants. At these
costs, the cost of electricity will be higher than any other source of
electricity such as gas, coal or hydro.

Myth number 4, we will run out of coal in 50 years, so
we need to build nuclear plants now: This is perhaps the most bogus of all
arguments. When geologists calculate mineral reserves, they take into account
what the country needs for the next 30 years. If this amount is available as
reserves, they then would say we can prospect for more only if we do not have
enough for the next 30 years. By this, we have more than adequate reserves of
coal.

The fraud that is performed on calculating coal is
first to propose that India will need astronomical amount of energy and then
argue that since we will run out of coal by 2050, we need to turn to nuclear
energy now. First, India has additional billions of tonnes of coal, which are
known to be there but not converted to firm reserves, as there is no immediate
need. Second, only 50 per cent of the known coal bearing areas have been fully
prospected. Third, we are still using very primitive methods for extracting
coal, wasting a huge amount of coal reserves. To find more coal reserves or mine
more efficiently, requires far less money than buying expensive reactors from
Westinghouse and GE!

However, when it comes to uranium fuel, the same
people claiming we will run out of coal do not calculate the same way about
uranium reserves. If we take the existing uranium reserves, we will run out of
these within next 70 years even if we do not add any new nuclear plant. If we
double the number of existing nuclear plants, we will run out of uranium in 35
years!

Myth number 5, we need nuclear energy to reduce global
warming: India’s position has been that our per capita emissions are one
twentieth to one tenth that of developed countries. Therefore, unless they are
willing to cap and bring down their emission levels, India will not take binding
commitments but will institute only voluntary measures. Recently, Pradipto Ghosh,
the former environment secretary has stated that the cost of limiting emissions
at this stage would hit Indian economy very hard and could cost us as much as
$2.5 trillion. Suddenly, we are making an about turn and are now willing to take
the most expensive route for power generation – imported reactors – for reducing
greenhouse gases!

Just for the record, even if we put in 40,000 MW of
nuclear energy, the reduction of greenhouse gases for not burning that amount of
coal will be of the order of 2.5 per cent, that is, by adding this 40,000 MW, we
will reduce our emissions by 2.5 per cent only. And this, with an additional
cost of Rs 2,20,000 crore that we would require for using the coal fired plants
as a route. Using other technologies such as Carbon dioxide sequestration
(putting back into the mines the CO2 burnt in the power plants) would be cheaper
than using the imported reactor route.

The worst part of the greenhouse gas argument is that
the US, which has consistently refused to limit its emissions – it is the sole
standout on Kyoto protocols – will now help India reduce its emissions by
exporting its expensive reactors for which there are no takers at home.

CONCLUSIONS

The Congress spokespersons have tried to relate the
current shortage of power to the slow growth of nuclear energy. The reality is
that for the last 17 years, successive governments have starved the power sector
of funds, pleading lack of capital. Suddenly, we have so much capital that we
are going to choose the most capital expensive route – that of imported reactors
– for building new power plants!

To justify the nuclear deal, they have constructed a
huge but imaginary shortfall in the year 2031-32, then zeroed in on nuclear
energy — that too with imported reactors — as the only path to salvation. Once
this false future of calamitous shortages is created, it’s that much easier to
rush the country into hasty decisions. This is not necessarily a new route; the
same one was taken during those bad old Enron days. The recurring image on this
route is now a nuclear bus about to leave from some unspecified terminal; if we
do not catch this bus today, we will be left in darkness by 2032. The reality is
that there is no nuclear bus leaving from anywhere. Nor will we be condemned to
darkness in 2032 if we do not to get on board of this mythical bus now.