Nuclear power is not cheap

Though nuclear power currently constitutes only about 3 per cent of the country’s generating capacity, the Department of Atomic Energy ...

Though nuclear power currently constitutes only about 3 per cent of the country’s generating capacity, the Department of Atomic Energy (DAE) plans to increase its capacity by a factor over eight in the next 15 years or so. The DAE claims that nuclear power is the solution to our energy needs and that it is cheaper than electricity from coal-based thermal plants that are far away from coal mines. This claim is not borne out if one compares the costs of generating electricity at the Kaiga atomic power station and the Raichur Thermal Power Station VII — both plants of similar size and recent vintage, and far away from coal supplies.

The cost of generating electricity depends on three main underlying costs: the capital cost, the annual fuelling and operations and maintenance costs, and the waste management expenses. Another variable is the choice of discount rate, a measure of the scarcity of capital. Official bodies like the Central Electric Authority and Planning Commission use a 12 per cent nominal discount rate while planning and evaluating projects. The capital cost includes the construction cost of the generating facility and, in the case of nuclear reactors, the cost of the initial loading of fuel and heavy water. Specifically, the construction cost of the Kaiga I & II plants was Rs 2,896 crore, and that of the RTPS VII station was Rs 612 crore; the Kaiga III & IV plants under construction are projected to cost Rs 3,282 crore. The initial loading costs for two 220 MW reactors are Rs 1045 crore for the heavy water and Rs 184 crore for the uranium.

Several assumptions have to be made in order to estimate generation costs. These assumptions have all been chosen to be favourable to nuclear power. One is that the Kaiga III & IV plants will be built on schedule at the estimated cost. Thus far, all of the DAE’s nuclear reactors — including Kaiga I & II — have had time and cost overruns. Second, following the DAE, one assumes that the enormous costs of dealing with radioactive nuclear wastes, which are extremely long lived and represent a burden to future generations, is offset by the plutonium recovered through the expensive method of reprocessing.

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However, for RTPS VII, the cost of waste (ash) disposal is taken to be Rs 174/tonne, much more than current practice. A third assumption is that all plants operate at 80 per cent efficiency (load or capacity factor). Fourth, the lifetime of the Kaiga reactors (without any major refurbishment) is taken as 40 years, whereas RTPS VII is assumed to operate only for 30 years. Finally, following the Expert Committee on Fuels for Power Generation, the effective cost of domestic coal with calorific content of 3,750 kCal/kg at the Raichur plant — assuming that the coal is transported from a mine nearly 1500 km away — is taken to be Rs 1,412/tonne. The corresponding cost for imported coal with calorific content of 5,400 kCal/kg is Rs. 2,175/tonne.

Armed with these assumptions, one can calculate the (levelised) costs of generating electricity at these stations using standard methods. These calculations show that at the 12 per cent nominal discount rate, and assuming a 6 per cent inflation rate, each unit of electricity from the Kaiga stations is about 33 to 40 per cent more expensive than from RTPS VII. Only for discount rates of 8.33 per cent or lower does nuclear power from Kaiga I & II stations become cheaper than thermal power from RTPS VII. While there is debate on the appropriate discount rate for public investments, there can be no doubt that 8.33 per cent is a low rate for long-term investments, especially in a country with multiple and more pressing demands for capital. All of this is for an optimistic capacity factor of 80 per cent. If the capacity factor is only 75 per cent, then nuclear power is cheaper than coal power only for discount rates lower than 7.7 per cent. These estimates are almost completely based on experiences with actually constructed power plants. Past experience also shows that the DAE’s rosy projections of costs coming down in the future should be viewed with scepticism.

Nuclear power plants, therefore, have been and remain a costlier way of trying to address India’s electricity needs than coal-based thermal plants. It is time to stop throwing good money after bad, stop constructing more nuclear reactors, and focus on other sources of power, including incorporating measures to reduce the pollution impacts of coal power, as well as energy conservation measures.

Ramana is fellow, Centre for Interdisciplinary Studies in Environment and Development, Bangalore, and Amulya K. N. Reddy is on the Board of Directors of the International Energy Initiative