France, which has 80 per cent nuclear electricity, has the lowest cost of electricity in Europe and the lowest per capita carbon emission; Korea and Japan prefer imported nuclear energy to other forms of energy; and China is investing heavily in nuclear energy in spite of its being the largest producer of coal in the world.
As part of the debate on the benefits of the India-United States nuclear agreement — on the nuclear energy option in India’s context — many opinions have been expressed on the economic viability of nuclear power. It is therefore useful to look at this question dispassionately. I do this from my position as Chairman of an Expert Committee set up by the Department of Atomic Energy for fixing nuclear power tariff.
We shall go back in history and take a look at the tariff for the first nuclear power station at Tarapur which is 95 paise per kwh. Only some of our older hydroelectric or thermal stations sell power at a lower cost. When this project was taken up, there were many critics, both Indian and foreign, who doubted the economic wisdom of Homi Bhabha. A distinguished American economist, Rosenstein-Rodin, sarcastically remarked that when a man is hungry, he will buy a loaf of bread and not a bakery. For more than 35 years, Tarapur has produced the lowest cost non-hydro power. The investment was amortised in 25 years; it has now completed 38 years of operation. The power station may continue to operate for 40 or even 50 years. The fuelling cost component is only about 25 paise.
The first three twin reactor pressurised heavy water reactors (PHWR) at Kalpakkam, Narora and Kakrapara, built with India’s own technology and equipment, have power tariffs in the range of 180-200 paise per kwh. The fuelling cost component is about 65 paise, and costs associated with heavy water, including a lease charge for the inventory and make-up for operating losses, account for about 47 paise.
The more recent PHWR units of Indian technology completed in the late 1990s and early years of this decade at Kaiga, Rajasthan 3 & 4 and Tarapur 3 & 4 have tariffs in the range of 270-285 paise per kwh. The higher construction cost of newer stations is the reason for the higher tariff for the second lot of power stations than the first lot. In all these cases, the operating life of the PHWRs has been taken as 25 years.
The present thinking in the nuclear industry is that Light Water Reactors (Pressurised Water Reactors, Boiling Water Reactors and VVERs of Russian design) using low enriched uranium as fuel can have a safe operating life of 40-50 years (some hold the view it could be even 60 years). The PHWRs we have built and may build in future should also have a life not less than 40 years. Some of the early PHWRs Canada and India built used for the coolant channel inside the reactor an alloy of zirconium that did not have adequate life under irradiation. In the Indian PHWRs of earlier design, it is being replaced with coolant channels made of an improved material which has a higher operating life. So our present and future PHWRs are expected to operate safely for at least 40 years.
The heavy water charges are recovered by levy of a lease charge, calculated in a manner that the full cost of heavy water would have been paid by the Nuclear Power Corporation of India, by the end of the operating life of the reactor.
A new factor is that there is an economic opportunity for the use of this heavy water in what are called Advanced Heavy Water Reactors. Such reactors are considered an appropriate choice for Uranium-233-Thorium systems. A 300-MW AHWR has been designed and construction work may start in 2008.
The tariff for power from present generation PHWRs should come down to 250 paise per kwh or less when we allow for a longer operating life and also adjust the heavy water charges downward, in view of its continuing use in a future generation of reactors. The fuelling cost of Indian PHWRs is higher than what it should be because the cost of natural uranium produced in India has been four or five times that of the international market price. This is due to the low grade ore available in India.
In the last year or so, the international price of uranium has flared up, in sympathy with the price of petroleum and hence the ratio of Indian price to global price is 2:1. However, this steep increase is expected to ease in the near future. If India accesses natural uranium at international prices, the fuelling cost could come down by some 15 paise per kwh. Taking all these factors together, for our future 700-MW PHWRs, we could expect a tariff in the range of 225-250 paise at current prices (or 5.5-6 U.S. cents/kwh).
We may now look at the cost of power from Koodankulam, where two VVERs of 1000 MW are being built with Russian collaboration. According to the present estimates, the tariff is likely to be in the range of 230-250 paise/kwh. Of this, the fuel consumption charge will be about 28 paise and the recovery on initial fuel inventory about 8 paise.
In calculating nuclear power tariffs, an allowance has been made for decommissioning charges at 2 paise per unit for PHWRs and 3.6 paise for VVERs. The difference is due to technological reasons. As far as spent fuel is concerned, it will be reprocessed and the plutonium and unburnt uranium recycled in future fast reactors. The fuel value of plutonium will be more than the cost of storage of spent fuel, reprocessing and of managing the separated high activity waste. Some critics have argued that there are hidden subsidies but this argument is not valid as India is committed to a closed fuel cycle.
We may now look at some comparative tariffs for power from other sources. According to the Central Electricity Regulatory Commission’s report for 2004-05, the coal-based pithead super thermal stations of the National Thermal Power Corporation have a tariff in the range of 100-175 paise per unit for units built in the period 1980-2000. On the other hand, the Dadri station near Delhi, away from the coalmines has a tariff of 225 paise. The NTPC gas-based stations have a tariff varying from 135 to 250 paise depending on their age (again 1980 to 2000). An important point is that about 60 per cent of the thermal power cost is due to fuel which will increase in step with inflation. In the case of nuclear power, for the PHWRs the fuel cost component is about 20 per cent and for the LWRs, it will be about 15 per cent. So nuclear power costs will increase at a much lower rate than inflation and hence the costs will be lower in the long run.
Some of the critics of nuclear power in India have failed to ask why France, which has 80 per cent nuclear electricity, has the lowest cost of electricity in Europe and also the lowest per capita carbon emission. They also do not ask why Korea and Japan, which import all forms of energy, prefer imported nuclear energy to other forms of energy. Nor do they ask why China is investing so heavily in nuclear energy, in spite of its being the largest producer of coal in the world.