Friday, July 18, 2008

The Myth Of Free Nuclear Energy

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From: Regi P George <>
Date: Fri, Jul 18, 2008 at 4:27 PM

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.


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.


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
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


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.

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