ECONOMICS OF NUCLEAR POWER IN INDIA

"Nuclear Power is a genuine economic option in terms of Long Range Marginal Cost (LRMC) advantages for power supply at locations far remote from coal reserves , particularly if hydel sources are not available in these areas" Prof. Yoginder K. Alagh, Union Minister of State for Power ,Govt. of India.(1996-1998) India is poised to embark upon a comprehensive nuclear power programme with an emphasis on a new series of nuclear power plants, including some of higher capacities. In a bid to achieve rapid growth in the installed nuclear power capacity, a revised Nuclear Power Programme is being formulated. In India, the total nuclear installed capacity is 1840 MWe as compared to 3,46,000 MWe of the world. India's nuclear power programme I believe, is at a threshold and is now set for rapid expansion as a distinct possibility. There are three reasons to prioritise nuclear power plant. The first reason is that in terms of Long Range Marginal Cost (LRMC) advantages, nuclear power is a genuine economic option for power supply at locations far remote from coal reserves, particularly if hydel sources are not available in those areas. Further, the teething problems faced during indigenising the technology used in manufacturing nuclear power equipments in the mid 80s were over by the early 90s. Today, India is one of the few countries which is entirely self reliant in this field, more so than comparable countries like South Korea. The third feature is that in recent years, India's nuclear power plants have been running at good capacity utilisation levels. PLFs are now close to design levels and this means costs are close to normative levels. We can now look at details.
TABLE - 1 LEAD DISTANCE FOR COAL MOVEMENT TO LOAD CENTRE POWER PLANTS ( UNIT = KMS ).

Load Centre Plants Region (Rail) NORTH 1033 WEST 631 SOUTH 230 NORTH EAST 478 (On the Basis of Garo Hills = Notional) NA = Not Available

All Load Centre Plants (Rail & Sea) 1033 2221 230 478

Coastal Plants NA 3836 NA NA

Source : Energy Modelling for India : Towards a Policy for Commercial Energy by Prof. R. Sengupta, Planning Commission. A country should choose an optimal mix between thermal, hydro, nuclear, renewable and nonconventional energy sources. In fact there is no standard prescription to choose this optimal mix, but it should be studied in detail specifically for each country as solutions differ for every country. Thus, India has to choose its own mix and proceed accordingly. While economic considerations are one of the important inputs to choose such a mix, there are others too. For example, one of the reasons why Japan is going for Nuclear Power in a big way is to ensure energy security. This seems to be applicable for India also, especially in view of the technological control regime prevailing in the world. The question of feedstock for meeting energy needs has to be modelled taking into account transport costs of inputs and transmission costs. This work was done systematically for the first time in a Planning Commission sponsored study on Energy Modelling for India by Ram Prasad Sengupta. Table - 1 gives the lead distance of coal movements to load centre power plants. Table - 2 gives the LRMC/Unit of energy supply at Busbar in different regions of India. The advantage of nuclear feedstock in the West and the South is clear. Table - 3 gives the results of optimal supply alternatives in the year 1999/2000 from different sources. Again, these results will need some more fine tuning

with recent data but primarily, are robust enough to hold.

Table - 2 LONG RUN MARGINAL ECONOMIC COST OF SUPPLY PER UNIT OF ENERGY AT BUSBAR 1984-85 PRICES. BASE LOAD UNIT : Rs. /KWh HYDRO COAL COAL IMPORTED NUCLEAR GAS C. C. FUEL LIGNITE LC PH COAL 500 MWe LC WH oil OC Min Max 1.010 NORTH 0.820 0.812 -0.820 0.912 0.778 0.824 0.700 1.245 (0.769) 0.972 WEST 0.740 0.782 0.872 0.780 0.867 0.714 0.714 1.300 (0.769) 0.720 0.987 SOUTH 0.770 0.770 0.887 0.800 0.885 0.832 0.756 0.740 1.210 (0.745) 0.985 EAST 0.697 0.774 0.886 --0.767 0.962 0.874 1.228 (0.743) NORTH 0.855 1.081 ---0.727 0.862 1.070 1.436 -EAST (0.828) Cost of Import of Base Load Power from North-east . Gas C.C. = 0.962, Hydro Min = 1.078, Hydro Max = 1.473 C.C. = Combined Cycle O.C. = Open Cycle Figures in the Brackets are for 1987-88 Prices of Petroleum Products.

Considering the projected demand for electricity in the medium and long terms in the country, it is imperative to utilise all possible sources of energy. Although large parameters in new electricity generation systems are expected to be from thermal and hydel power plants with all the prevailing constraints, nuclear power is definitely a viable option to supplement the energy requirements of the country. The progressively increasing role of nuclear power will be at locations away from coal mines to relieve to the extent possible, the load on transportation infrastructure for movement of coal. In the long run, the nuclear option will be called upon to play an increasing role for the augmenting power generation in the country upto 10 to 15 %. At present, among available energy, apart from coal and hydro, nuclear energy is the only attractive alternative which can fill the increasing gap between demand and supply. It is necessary to develop nuclear power, independent of short term economic considerations, also for the following reasons :Long-term need to develop alternative energy systems; Utilisations of Uranium resources and large amounts of Thorium the country is endowed with. It is estimated that indigenous thorium deposits can sustain about 300,000 MWe of electricity generation capacity for about 300 years; The necessity to diversify the energy resources for energy security and energy independence; Saturation effects that may throttle other technologies like constraints in transport and infrastructure; To limit green house gases such as carbon dioxide from thermal stations; To limit long term energy needs which cannot be met by the limited fossil resources which are also required for consumption in sectors other than the power industry; Keeping abreast with nuclear power technology among the developed and developing countries,

especially in Asia; The nuclear power industry is almost totally indigenous for the entire nuclear fuel cycle. Thus, installation of nuclear power plants can give a fillip to other Indian industries. It is worth noting in this context that countries such as China, which have larger resources of coal than India are developing nuclear power at a rapid pace. Japan, South Korea and South East Asia are also increasing their nuclear power capacities in a big way. Even Indonesia with good oil reserves, Thailand, Malaysia and Vietnam etc. are going for nuclear power in a big way. In the long run, nuclear option will be called upon to play an increasing role for augmenting power generation in the country upto 10 to 15%. Nuclear power in India has been established as a safe, environmentally benign and economically viable source of power generation. The operating performance during the previous financial year has shown remarkable improvement and NPCIL has generated 7983 MUs and achieved and overall capacity factor of 60% and thus made a net profit of 156.3 crores in the financial year 1995-96. The main reasons for unsatisfactory performance of nuclear power plants are turbine failure and boiler failure. The average tariff for older power station of NPC varies from 63 paise to 147 paise. It is necessary to improve the operational performance of NPC in respect of PLF, plant availability, ratio between cost and generation and tariff for generating internal resources for financing the expansion programme of the corporation. Argument in a Nutshell The economics of nuclear power in India depends on the cost of electricity generated by a nuclear power plant vis-a-vis cost of generation of electricity from coal fired thermal power plant. The coal deposits in India are concentrated in the Eastern regions. The setting up of a coal fired power plant in Western India and in the North-west, entails transporting coal over distances exceeding 1000 Km. as the distance involved in the transportation of coal from a mine mouth exceeds 1000 Km., the economics of nuclear power becomes favourable. There is a feeling in certain quarters that nuclear power is more capital intensive and requires a large fraction of imported components. This does not seem to be true for the following reasons : If one considers the total investment in a power plant, and all associated facilities such as fuel cycle facilities including coal mine development and investment needed to transport coal, the difference between the two options may not be significant at all. Further, the method for comparison such as single station cost and system cost also influence the feasibility of the coal vs. nuclear power plant. The comparison between coal and nuclear options on the basis of station cost method may give misleading results. The reason being that the single station method fails to take an analytical account of system interactions. This could result in the plant being pushed lower down in the operational merit order as it ages and as new, more advanced plants with lower marginal operating cost join the system. Table - 3 LONG RUN MARGINAL COST OF SUPPLY PER UNIT OF ENERGY AT CONSUMER POINT 1999-00 PRICES. BASE LOAD UNIT : Rs/KWh COAL COAL IMPORTED NUCLEAR GAS C. C. FUEL HYDRO LIGNITE LC PH COAL 500 MWe LC WH oil OC Min Max 0.993 NORTH 0.988 0.978 -0.938 1.099 0.937 1.217 0.843 1.500 (0.927)

WEST SOUTH EAST

0.892 0.928 0.840

0.942 0.928 0.933

1.051 1.069 1.067

0.940 0.964 --

1.045 1.066 --

0.860 1.002 0.924 0.876

0.860 0.911 1.159 1.039

NORTH 1.302 ----EAST Cost of Import of Base Load Power from Northeast. Gas C.C. = 0.962, Hydro Min = 1.078, Hydro Max = 1.473 C.C. = Combined Cycle, O.C. = Open Cycle

1.171 (0.927) 1.189 (0.898) 1.187 (0.895) 1.289 (0.988)

0.867 1.566 0.892 1.458 1.053 1.480 1.030 1.730

(Figures in Brackets Correspond to 1987-88 Prices of Petroleum Products). On the other hand, the preferred for analysis of future investment options in a country like ours which has inter-connected grid system is the analysis of total system cost. In a dynamic sense, the demand will be changing and the initial plant mix will be sub-optimal and composed of plants with various age of plant characteristics. Inclusion of costs associated with environmental degradation due to coal-fired thermal power plants in the total cost-benefit analysis make nuclear power, a favorable option. Energy experts in India differ on the role of nuclear power in the future. In the 21st century, with the exhaustion of the reserves of oil and natural gas, the prices of oil in the international market are likely to build up. With the rise in the prices of oil, nuclear power will turn out to be cheaper than coal. The capacity mix in India is dominated by coal-fired thermal capacity to the extent of 75%. The requirement of coal and transportation of coal by the end of IXth plan requires major investments in coal productions and railway transportation systems. Excessive dependence on coal for generation of electricity also makes us dependent on labour who are engaged in the mining of coal and transportation of coal. Dislocation in coal production due to any reason may cause major dislocation in the electricity production system. Therefore, for the security of the electricity supply system, it is necessary to have diversity in the installed capacity and reduced dependence on the coal based production system. IXth Plan Programme The 15th Electric Power Survey of India has estimated that by the end of IXth Plan, 570 billion units of electricity will be required to be generated at power stations busbar. Further, peak demand at busbar will be around 96,000 MWe. For IXth Plan 32,000 MW capacity projects have been identified which includes 880 MWe from nuclear power projects. This corresponds to 2.74% of the identified projects for the IXth Plan. In view of difficulties in availability of coal and liquid fuels, the importance of nuclear power has increased. Measures to reduce costs and improve economics of nuclear power which need to be followed up seriously by DAE are as follows : Simplifying and standardising the designs of reducing the system complexities to reduce costs. Building a larger number of successive units with one time commitment and standardised design to reduce manufacturing cycles, manufacturing costs and overall project costs. Reducing the gestation period for nuclear power projects by improving construction, planning and methodology, better project management, etc., as well as by streamlining clearances from AERB, MOEF, Pollution Control Board etc. Significantly, with a view to expedite fresh generating capacity addition in the private sector, a decision has been taken that competitively-bid power projects with an

investment of upto Rs. 1000 crores that have been exempted from seeking the Central Electricity Authority's (CEA) approval will henceforth not require environment clearance either. Improving the plant load factor of existing nuclear power plants. Possibility of joint sector projects and private sector participation to mobilise additional financial resources should be explored. R & D on specific development tasks in the field of nuclear power technology should be fully supported by the Government as a part of the national policy. There is a need for standardised system for annual revision of tariff. The problem of shortage of funds would be solved to a large extent when tariffs are fixed on an objective basis for power generation from different sources. While economics is an important consideration for harnessing any energy source, I would like to recall Dr. Bhabha's remark made four decades ago. He said ' No power is costlier than no power' meaning lack of power could impose a severe economic penalty. With the national electrical peak capacity deficit estimated at about 29%, the loss production in the economy due shortage of power is enormous. The case for a higher priority to nuclear power is now impressive and deserves very serious considerations in the Ninth Plan. The Prime Minister has personally supervised a more active policy on power sector planning and reform.