The government’s recent approval to ten new nuclear reactors deserves to be carefully appraised.
By all accounts, nuclear power has had a bad year. In March, Westinghouse, the largest historic builder of nuclear power plants in the world, declared bankruptcy, creating a major financial crisis for its parent company, Toshiba. The French nuclear supplier, Areva, went bankrupt a few months earlier and is now in the midst of a restructuring that will cost French taxpayers about €10 billion. Its reactor business is being taken over by a clutch of companies, including the public sector Électricité de France, which is itself in poor financial health. In May, the U.S. Energy Information Administration announced that it expects the share of nuclear electricity in the U.S. to decline from about 20% in 2016 to 11% by 2050. The newly elected Presidents of Korea and France have both promised to cut the share of nuclear energy in their countries. And the Swiss just voted to phase out nuclear power.
Both Areva and Westinghouse had entered into agreements with the Indian government to develop nuclear plants. Areva had promised to build the world’s largest nuclear complex at Jaitapur (Maharashtra), while last June, Prime Minister Narendra Modi and U.S. President Barack Obama announced, with great fanfare, that Westinghouse would build six reactors at Kovvada (Andhra Pradesh). The collapse of these companies vindicates critics of these deals, who consistently pointed out that India’s agreements with Areva and Westinghouse were fiscally irresponsible. If these projects had gone ahead, Indian taxpayers would have been left holding the bag — billions of dollars of debt, and incomplete projects. This narrow escape calls not only for a hard look at the credibility of those members of the nuclear establishment who advocated these deals for a decade, but for a comprehensive re-evaluation of the role of nuclear power in the country’s energy mix.
Therefore, the government’s recent decision to approve the construction of ten 700 MW Pressurised Heavy Water Reactors (PHWRs) deserves to be scrutinised carefully. Strictly speaking, there is little that is new in this decision. A list of all the sites where the PHWRs are to be constructed had already been provided to Parliament by the United Progressive Alliance government in 2012. But delays with the first 700 MW PHWRs already under construction, the changed international scenario for nuclear energy, and the ongoing reductions in the cost of renewable energy all imply that these earlier plans are best abandoned.
It doesn’t come cheap
First, although the 700 MW PHWRs are cheaper than imported reactors, their electricity is likely to be costly. These reactors are commercially untested, since the largest PHWRs constructed so far in India are the 540 MW twin units at Tarapur. There are two 700 MW PHWRs under construction at Rawatbhata (Rajasthan) and Kakrapar (Gujarat), but these have been delayed by over two years, and the government has not revealed the resultant cost increases.
Nevertheless, assuming a capital cost of ₹10 crore per megawatt, suggested by the government’s press release on its decision, and using the pattern of expenditure seen at Rawatbhata and Kakrapar, a rough estimate suggests that the cost of electricity during the first year of operations at these reactors is likely to be around ₹6 per unit at current prices. The Central Electricity Regulatory Commission’s published tariffs show that almost all currently operating Indian coal, natural gas and hydroelectric power plants produce cheaper electricity.
Even prices for solar power have dropped below those of nuclear power. For example, the winning bid at the auction for the Bhadla Phase-IV Solar Park in Rajasthan held last month was ₹2.44 per unit, which is fixed for 25 years. This is not an isolated example, but part of a trend of falling prices in the renewable sector.
In fact, the government’s tariff model makes nuclear power appear more competitive than it really is. The capital invested in any plant yields no returns while the plant is being constructed. At the end of construction, the government fixes a tariff by calculating a rate of return on the nominal amount of capital invested, disregarding the value this amount could have accumulated during this idle time. As a result, the effective rate of return on equity invested in nuclear energy is significantly lower than the rate of return provided by other sources of electricity that have shorter gestation periods. Nuclear power would be even less economically attractive if a methodology that consistently incorporates the time value of capital were to be used to establish tariffs.
While announcing its decision, the government claimed that these plants would “generate more than 33,400 jobs in direct and indirect employment”. But this number ceases to be impressive when viewed in the context of the planned capital expenditure of ₹70,000 crore. The relevant factor in assessing the employment opportunities provided by a project is not just the total number of jobs produced but the ratio of the jobs produced to the capital invested.
A widely cited study by three analysts from the University of California, Berkeley, found that nuclear power created only 0.14 job-years per gigawatt-hour of electricity produced. In contrast, solar photovoltaic sources were more than six times as labour intensive, creating about 0.87 job-years per gigawatt-hour of electricity. Since solar energy is cheaper, this comparison is even more unfavourable to nuclear power when viewed in terms of jobs created per rupee spent.
Bad fit for climate change
The government also argued that these reactors would bolster “global efforts to combat climate change”. While climate change is indeed a grave problem, it is not the only environmental problem confronting us. Nuclear power poses its own set of threats to the environment and public health, and is therefore an inappropriate tool to mitigate climate change.
All nuclear reactors produce radioactive waste materials because each fission event involving nuclei of uranium or plutonium gives rise to radioactive elements called fission products. Some of these remain radioactive for hundreds of thousands of years. Despite decades of research, nuclear waste remains an unavoidable long-term problem for the environment.
Nuclear reactors are also capable of catastrophic accidents, as witnessed in Fukushima and Chernobyl. A single nuclear disaster can contaminate large tracts of land with radioactive materials, rendering these areas uninhabitable for decades. More than 30 years after the accident at Chernobyl, about 650,000 acres are still excluded from inhabitation.
The people’s concerns
Local communities are keenly aware of the hazardous nature of nuclear power. Since the 1980s, every new site chosen for a nuclear plant has been greeted with a protest movement. Sometimes, these movements have succeeded in forcing the cancellation of plans, including at two sites in Kerala and one site in West Bengal. More recently, the plan to establish a plant near Patiala seems to have been dropped.
Other communities have been less lucky. In some proposed sites, such as Fatehabad (Haryana), the government has succeeded in using financial incentives to counter opposition to nuclear construction, in essence exploiting the economic vulnerability of the local population. But protests continue at other sites, such as Chutka (Madhya Pradesh). The sad irony in Chutka is that some of the affected people were previously displaced by the Bargi dam, and are now being asked to move a second time. Their plight typifies the social dynamics associated with nuclear power. The risks and costs are borne overwhelmingly by poor rural communities, who consume only a tiny fraction of the electricity that is generated.
The government claims that its recent decision displays “India’s commitment to sustainable development”. But does the path to sustainable development run through a source of electricity that is expensive, hazardous and antithetical to equity?
By all accounts, nuclear power has had a bad year. In March, Westinghouse, the largest historic builder of nuclear power plants in the world, declared bankruptcy, creating a major financial crisis for its parent company, Toshiba. The French nuclear supplier, Areva, went bankrupt a few months earlier and is now in the midst of a restructuring that will cost French taxpayers about €10 billion. Its reactor business is being taken over by a clutch of companies, including the public sector Électricité de France, which is itself in poor financial health. In May, the U.S. Energy Information Administration announced that it expects the share of nuclear electricity in the U.S. to decline from about 20% in 2016 to 11% by 2050. The newly elected Presidents of Korea and France have both promised to cut the share of nuclear energy in their countries. And the Swiss just voted to phase out nuclear power.
Both Areva and Westinghouse had entered into agreements with the Indian government to develop nuclear plants. Areva had promised to build the world’s largest nuclear complex at Jaitapur (Maharashtra), while last June, Prime Minister Narendra Modi and U.S. President Barack Obama announced, with great fanfare, that Westinghouse would build six reactors at Kovvada (Andhra Pradesh). The collapse of these companies vindicates critics of these deals, who consistently pointed out that India’s agreements with Areva and Westinghouse were fiscally irresponsible. If these projects had gone ahead, Indian taxpayers would have been left holding the bag — billions of dollars of debt, and incomplete projects. This narrow escape calls not only for a hard look at the credibility of those members of the nuclear establishment who advocated these deals for a decade, but for a comprehensive re-evaluation of the role of nuclear power in the country’s energy mix.
Therefore, the government’s recent decision to approve the construction of ten 700 MW Pressurised Heavy Water Reactors (PHWRs) deserves to be scrutinised carefully. Strictly speaking, there is little that is new in this decision. A list of all the sites where the PHWRs are to be constructed had already been provided to Parliament by the United Progressive Alliance government in 2012. But delays with the first 700 MW PHWRs already under construction, the changed international scenario for nuclear energy, and the ongoing reductions in the cost of renewable energy all imply that these earlier plans are best abandoned.
It doesn’t come cheap
First, although the 700 MW PHWRs are cheaper than imported reactors, their electricity is likely to be costly. These reactors are commercially untested, since the largest PHWRs constructed so far in India are the 540 MW twin units at Tarapur. There are two 700 MW PHWRs under construction at Rawatbhata (Rajasthan) and Kakrapar (Gujarat), but these have been delayed by over two years, and the government has not revealed the resultant cost increases.
Nevertheless, assuming a capital cost of ₹10 crore per megawatt, suggested by the government’s press release on its decision, and using the pattern of expenditure seen at Rawatbhata and Kakrapar, a rough estimate suggests that the cost of electricity during the first year of operations at these reactors is likely to be around ₹6 per unit at current prices. The Central Electricity Regulatory Commission’s published tariffs show that almost all currently operating Indian coal, natural gas and hydroelectric power plants produce cheaper electricity.
Even prices for solar power have dropped below those of nuclear power. For example, the winning bid at the auction for the Bhadla Phase-IV Solar Park in Rajasthan held last month was ₹2.44 per unit, which is fixed for 25 years. This is not an isolated example, but part of a trend of falling prices in the renewable sector.
In fact, the government’s tariff model makes nuclear power appear more competitive than it really is. The capital invested in any plant yields no returns while the plant is being constructed. At the end of construction, the government fixes a tariff by calculating a rate of return on the nominal amount of capital invested, disregarding the value this amount could have accumulated during this idle time. As a result, the effective rate of return on equity invested in nuclear energy is significantly lower than the rate of return provided by other sources of electricity that have shorter gestation periods. Nuclear power would be even less economically attractive if a methodology that consistently incorporates the time value of capital were to be used to establish tariffs.
While announcing its decision, the government claimed that these plants would “generate more than 33,400 jobs in direct and indirect employment”. But this number ceases to be impressive when viewed in the context of the planned capital expenditure of ₹70,000 crore. The relevant factor in assessing the employment opportunities provided by a project is not just the total number of jobs produced but the ratio of the jobs produced to the capital invested.
A widely cited study by three analysts from the University of California, Berkeley, found that nuclear power created only 0.14 job-years per gigawatt-hour of electricity produced. In contrast, solar photovoltaic sources were more than six times as labour intensive, creating about 0.87 job-years per gigawatt-hour of electricity. Since solar energy is cheaper, this comparison is even more unfavourable to nuclear power when viewed in terms of jobs created per rupee spent.
Bad fit for climate change
The government also argued that these reactors would bolster “global efforts to combat climate change”. While climate change is indeed a grave problem, it is not the only environmental problem confronting us. Nuclear power poses its own set of threats to the environment and public health, and is therefore an inappropriate tool to mitigate climate change.
All nuclear reactors produce radioactive waste materials because each fission event involving nuclei of uranium or plutonium gives rise to radioactive elements called fission products. Some of these remain radioactive for hundreds of thousands of years. Despite decades of research, nuclear waste remains an unavoidable long-term problem for the environment.
Nuclear reactors are also capable of catastrophic accidents, as witnessed in Fukushima and Chernobyl. A single nuclear disaster can contaminate large tracts of land with radioactive materials, rendering these areas uninhabitable for decades. More than 30 years after the accident at Chernobyl, about 650,000 acres are still excluded from inhabitation.
The people’s concerns
Local communities are keenly aware of the hazardous nature of nuclear power. Since the 1980s, every new site chosen for a nuclear plant has been greeted with a protest movement. Sometimes, these movements have succeeded in forcing the cancellation of plans, including at two sites in Kerala and one site in West Bengal. More recently, the plan to establish a plant near Patiala seems to have been dropped.
Other communities have been less lucky. In some proposed sites, such as Fatehabad (Haryana), the government has succeeded in using financial incentives to counter opposition to nuclear construction, in essence exploiting the economic vulnerability of the local population. But protests continue at other sites, such as Chutka (Madhya Pradesh). The sad irony in Chutka is that some of the affected people were previously displaced by the Bargi dam, and are now being asked to move a second time. Their plight typifies the social dynamics associated with nuclear power. The risks and costs are borne overwhelmingly by poor rural communities, who consume only a tiny fraction of the electricity that is generated.
The government claims that its recent decision displays “India’s commitment to sustainable development”. But does the path to sustainable development run through a source of electricity that is expensive, hazardous and antithetical to equity?
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