The Fukushima incident in 2011 led to abrupt suspension of Japan’s nuclear power
plants. However, the Japanese Cabinet approved the Fifth Basic Energy Plan in July 2018 calling for nuclear energy to account for 20-22 per cent of power generation by 2030. Nuclear power
will remain a substantial part of the energy portfolio of the United States (20 per cent) and the European Union (20 per cent). China has an energy profile similar to India’s, with coal having a pre-dominant share. It is aiming to increase the share of nuclear power
from two per cent currently to 10 per cent by 2030. In India’s case, nuclear power accounts for two per cent of the energy profile.
Germany has chosen a different path, deciding to phase out nuclear power, which will be replaced by renewables. Germany has the advantage of a regional grid to provide balancing power when wind or solar are not available. Interestingly, the balancing power is provided by countries such as Czech Republic, based on nuclear power. Germany also has the advantage of access to piped gas from Russia, which is half the price of LNG. Japan does not have this luxury. India shares Japan’s predicament on both counts.
Is expansion of the nuclear sector — with high capital expenditure and a high tariff (initially) — justified in the Indian context at a time of stress in the power sector? There were two events last year, which validate the case for nuclear power: The release of the report of the Inter-governmental Panel on Climate Change (IPCC) in October 2018, and the spike in oil prices following US withdrawal from the Iran nuclear accord.
The IPCC report underlined the need for pursuing a more ambitious target for de-carbonisation of the global economy by limiting global warming to 1.5 degrees C, rather than two degrees C. A MIT study released around the same time says that nuclear power has to be part of the energy mix in any pathway to a 1.5° C future. The report, captioned The Future of Nuclear Energy in a Carbon Constrained World, points out that “the cost of incremental power from renewables increases dramatically” as the world seeks deeper reduction in carbon emissions. Inclusion of nuclear power helps “minimise or constrain rising system costs”.
The second event was the hike in oil prices following the Donald Trump administration’s decision to withdraw from the Iran nuclear deal last May. The Indian crude oil basket price has gone up from $47.6 per barrel to $70.59 since 2017. At the current import level of four million barrels per day, an increase of $10 per barrel adds more than Rs 100,000 crore to the annual oil import bill. In the case of nuclear power plants, the fuel cost is negligible.
India’s per capita power consumption stands at one-third the world average. As the economy picks up, with completion of the national grid, and introduction of electrical vehicles, the demand for electricity is bound to go up in the medium to long term. This will have to be met within the constraints of increasingly stringent emission standards. This can only be done by nuclear power, not renewable, which are intermittent sources of energy, and cannot provide base-load power.
Nuclear power has to be cost-competitive with other sources of energy. This requires taking into account the levelised cost of energy over the entire plant life of 60 years in the case of nuclear power. Cost comparisons with renewables should take into account the cost of balancing power, which is not reflected in the tariff structure of wind and solar power in India. This refers to the cost of power from alternate sources, when wind or solar are not available. Similarly, comparisons with coal should include external costs.
Coal has to be supplemented with nuclear power to meet incremental demand. The argument is even more compelling, since coal production will reach a plateau by 2035.
The integrated energy policy document had assumed a target of 63 Gw of installed nuclear power by 2032. This would bring the share of nuclear power to 10 per cent of total installed capacity. Ramping up installed nuclear power capacity from 6.7 Gw to 63 Gw by 2032 would require considerable financial resources. A study by VIF, Nuclear Power: Imperative for India’s Development, had estimated capital expenditure in the range of Rs 920,000 crore until 2032. Assuming a debt-equity ratio of 70:30, this means equity infusion of Rs 276,000 crore over 14 years or Rs 20,000 crore per annum. Is this too much for government to provide to a strategic sector? This is less than the annual budget of the ministry of tourism for 2018-19, which was Rs 20,150 crore.
Part of the resources could come from joint ventures between NPCIL and public sector enterprises such as NTPC and IOCL. These are however dormant, and need to be activated. UAE and UK have decided to raise equity from vendors supplying equipment against a commitment to let them run plants with agreed feed-in tariff. This requires amending the existing Atomic Energy Act. The ongoing negotiations with Rosatom, EDF/Areva and Westinghouse should be brought to an early conclusion. The condition for entry into the Indian market should be increased localisation of production. This will be in keeping with the Make in India programme.
Indian vendors should form strategic tie-ups with international majors to be part of the international supply chain. Rosatom is already executing projects in India. We also need to bring in other players. Westinghouse does not have a production base. Tie-ups with them would ensure greater localistion of production in India.
Nuclear power plants with a plant life of 60 years will remain in operation well into the second half of this century. The choice of energy mix cannot be determined on the current demand-supply situation or tariff structures. The price of carbon will increase. An increased share of nuclear power in India’s energy profile is a development imperative, not a luxury.
The writer is distinguished fellow, Vivekananda International Foundation