Nuclear power plant proposed to be built in India by USA not economical
The recent historic visit of USA President to India resulted into signing of many strategic agreements and one of the main highlights of the visit was resolution of nuclear liability and fuel tracking issues. But behind the euphoria, on closer scrutiny we would understand that even though the main irritants in civil nuclear deal seem resolved but proposed nuclear liability pool of Rs15bn to be contributed equally by Government of India and public sector insurance companies would be too little to be meaningful god forbid if some serious accident were to happen in future. Even assuming that USA companies like GE and Westinghouse would be going ahead (Though I have my doubts about their willingness to build nuclear power plants in India) to build nuclear power plants in India, the cost of such plants would be much higher compared to the recently built 1st unit of Kudankulam power project in Tamilnadu, India by Russian government company Rosatom.
| India's installed Nuclear power capacity and financials as on 31st March 2014 | |
| Nuclear power installed capacity (MW)* | 4780* |
| Gross power generation for FY13-14 (MU) | 34240 |
| Sales Revenue for FY13-14 (Rs bn) | 83.8 |
| EBIDTA for FY13-14 (Rs bn) | 38.4 |
| Profit after tax for FY13-14 (Rs bn) | 22.9 |
| Equity Capital (Rs bn) | 101.7 |
| Reserves (Rs bn) | 152.7 |
| Debt (Rs bn) | 177.8 |
Source: Nuclear power corporation of India (NPCIL), Steelanalyst.com Research
*Excluding 1000 MW power plant at Kudankulam as it started commercial operation only in Dec 2014
It would be interesting to know that 60% of the installed nuclear power capacity in India is about 25 years old and was built at an average capital cost of US$1,000/KW or US$1mn/MW taking current US$ exchange rate. The capital cost of the latest 1000MW nuclear energy reactor built by Russia at Kudankulam, Tamilnadu is about US$1,200/KW or US$1.2mn/MW. Russia signed an agreement with India in the recently concluded annual summit meeting between two sides at Delhi in December to build 12 more nuclear power reactors in India over 20 years. As per the agreement, 6 reactors would be built at Kudankulam for almost similar cost and terms while 6 reactors would be built at other suitable site with nominal increase in cost. This translates into power rates for Kudankulam plant to be about Rs3.5/unit or 5.6 cents/unit. The average rates for FY13-14 for nuclear power in India was about Rs2.9/unit or 4.5 cents/unit as can be calculated from the above table (assuming max 15% auxiliary consumption).
The historical average capital cost of nuclear power plants built by American companies like GE and Westinghouse in the world is about US$2,000/KW or US$2mn/MW. My understanding is that this would result into power rates of the proposed plant to be built in India by USA companies to be about Rs5.8/unit or 9.5 cents/unit which is almost double the rates given by Russian plant at Kudankulam. This rate is without considering the contribution of the companies towards nuclear liability pool which would only increase the rate further. So why should Indian people pay much higher rates when there are better economical alternatives available?
I would urge Indian government to negotiate with USA companies to bring down the cost substantially or else not to build the power plant with USA companies. Also, Indian government should insist on a written agreement from the suppliers guaranteeing highest quality and safety standards as the dilution of nuclear liability clause and creation of insurance pool should not become an excuse for not being accountable. Indian government should prepare a template based on operational and financial parameters of Kudankulam power plant to be followed by future nuclear power projects in terms of cost and performance.