Why we need nuclear power
Prime Minister Narendra Modi signed an agreement early June with President Vladimir Putin for two more units of nuclear plants at Kudankulam. Earlier, the government announced an agreement with international companies to set up 7,000 MW of nuclear plants for Rs 70,000 crore based on our domestic technology. Its wisdom has been questioned by many commentators.
I have long argued that from a long-term perspective India needs to keep the nuclear power option alive. This is because we are short of oil, gas and even coal. More than 70 per cent of petroleum products, 40 per cent of gas and 20 per cent of coal consumption are based on imports. Our known extractable coal reserves will run out in about 40 years if our coal consumption keeps growing as it has over the past 25 years.
As a result in the report of the expert group on integrated energy policy in 2006 that I chaired, we had argued that for India, from a long-term perspective, renewable energy is inevitable and nuclear option should be retained as an insurance. Thus I had applauded the Bush-Manmohan Singh agreement on nuclear energy. The energy scene has changed dramatically since then and one needs to revisit that conclusion.
To push renewables, the government launched the National Solar Mission in 2009 with a target of setting up of 20,000 MW of solar plants by 2022. It was recognised that solar plants would need subsidy through a guaranteed price via feed-in-tariff (FIT) at which solar electricity would be purchased. However, to ensure that the subsidy does not kill competition and incentives to cut cost and innovate, the FIT was to be competitively bid. This has worked out beyond expectations. In the first auction in 2010, when the expected bid was Rs 15 per unit, the bid came to Rs 13.50. The latest bid in May 2017 asks for a FIT of Rs 2.44 per unit for a 500 MW plant at Bhadla Solar Park 3 in Rajasthan. There are, however, some subsidies involved in this. The plant has been provided guaranteed purchase of the power generated and the transmission and distribution charges have been waived. Even accounting for all these, the long-term levelised tariff would be around Rs 3 per unit. This may be compared with the average rate of Rs 3.20 per unit of coal power generated by NTPC, which owns some 50,000 MW of coal power plants. Besides, the price of solar photovoltaic (PV) plants is expected to fall further.
The threat of climate change and the concern for environmental pollution are likely to constrain the development of coal-based plants. Installation of electrostatic precipitators to trap particulate matter, fuel desulphurisation plants, etc, to reduce local air pollution will increase the cost of coal power. They will still not reduce carbon dioxide (CO2) emissions. CO2 emissions can be dealt with by capturing it from the exhaust and storing it underground. Apart from the long-term reliability of underground storage of CO2, the cost of carbon capture and storage (CCS) is quite high and requires more energy, so the cost of power would be some 30 to 50 per cent higher. Thus India cannot rely on coal power for long.
Solar power is available only when the sun is shining unless it is stored in some way. In a year, a solar PV plant of one KW capacity generates no more than 2,000 KWh of electricity, whereas a coal-based or nuclear plant can generate around 7,000 KWh/year per KW of capacity. To provide power when the sun is not shining, we need some balancing power. It could be coal-based, gas based, nuclear, hydro power or through stored electricity.
India’s potential for hydro power is 150,000 MW at 35 per cent load factor that means around 460 billion units per year. It is unevenly distributed across months. The generation from run-of-the river plants during the lean month may be as low as 10 per cent of generation during the peak month. If the country is to grow at seven or eight per cent till 2050 and even where energy efficiency is pushed, we will need around 8,000 bkWh. If we were to push electrical vehicles it could be as much as 12,000 bkWh.
Thus even when we have fully developed our hydro capacity, we will still need balancing power. Since gas has to be imported, it is a limited option. Nuclear plants have been run in the past with more or less constant load. However, with some design change it should be possible to run them in a load following mode. France has been operating some nuclear plants in this mode.
If the cost of battery storage comes down dramatically, we can envisage a system running entirely on solar, wind and limited hydro power. However, having some nuclear power helps diversify the system and adds to energy security.
The cost of nuclear electricity will depend on how it is financed. With a capital cost of Rs 10 crore per MW, with a debt/equity ratio of 4/1, debt interest of 12 per cent, return on equity of 15 per cent, and annual generation of 7,000 MWh, the capital charge is Rs 2.10/kWh. The operating cost at 2.5 per cent of capital cost comes to Rs 0.36/kWh and fuel cost for pressurised heavy water reactor is Rs 0.16/kWh. The total cost is Rs 2.62/kWh. If we compare these with similar financing charges of solar PV with storage that gives 6,000 MWh/year it will cost Rs 2.75/unit and cheap storage systems are yet to be developed.
Thus, if we can install the nuclear plants without delay and within budget, they are economically attractive. The decision to set up 7,000 MW of nuclear plants makes economic sense.