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25 May 2017 4:57 PM, Trends Mahesh Vyas

A risky push to accelerate nuclear power generation

In a bid to push nuclear power generation, the Union Cabinet executed its single largest clearance of nuclear plants to add 7,000 MW of generation capacity in the country, a push fraught with financial and non-financial risk, and probably a needless attempt to offset the possible abandoning of an existing large atomic energy project.

On May 17, the Union Cabinet cleared a proposal to indigenously build 10 atomic reactors. Each would have a capacity of 700 MW and so the total new capacity that would be added would be 7,000 MW.

The ten reactors would be built at Mahi Banswara in Rajasthan (4 units of 700 MW each), Chutka in Madhya Pradesh (2 units of 700 MW each), Kaiga in Karnataka (2 units of 700 MW each) and Gorakhpur in Haryana (2 units of 700 MW each).

This is apparently a big move in at least two ways. First, it is the largest Cabinet clearance of nuclear plants. Setting up of ten nuclear reactors is a big move. According to one report, the total investment in these 10 reactors would be of the order of Rs.1.05 trillion. Secondly, it aims to build all of these indigenously. The move is presented as an effort to boost the government’s Make in India programme and to create 33,400 jobs. These projects are expected to hand out manufacturing orders of close to Rs.700 billion.

According to the power and coal minister, Piyush Goyal, the 7,000 MW capacity to be created by the ten cleared nuclear reactors would be nearly equal to the current nuclear power capacity of 6,780 MW and, another 6,700 MW capacity is also under implementation. This gives the impression that the ten projects cleared by the Cabinet are new. But, they are not. All of them have been in existence for a long time.

Some land has been acquired and environment clearance has been received for the Gorakhpur project in Haryana. Similarly, environment clearance for the Kaiga project was also received earlier.

Information on all the projects that were given the Cabinet approval were available in the CapEx database. The projects were not making much progress. With a Cabinet approval, these may make progress in implementation now.

According to CMIE’s CapEx database, the number of nuclear power plants under various stages of implementation is 35 and the total capacity under consideration is 33,600 MW. The Jaitapur nuclear power project alone envisages setting up 9,900 MW of capacity (6 units of 1,650 MW each). Kudankulam envisages setting up another 6,000 MW of power generating capacity (6 units of 1,000 MW each). Units 5 and 6 of this project are reportedly waiting for clearance and a possible inking of a pact with Russia on June 1.

Mithi Virdi Atomic Power Project’s 6,000 MW (6 units of 1,000 MW each) could be in trouble because of the bankruptcy of its technology partner, Westinghouse.

The 500 MW Kalpakkam Power Project is expected to be commissioned in 2017-18; 700 MW from Kakrapar phase II would be commissioned in 2018-19; Rawatbhata’s 1,400 MW (2 units of 700 MW each) may be commissioned by 2020.

The power situation in India is reasonably comfortable today. Power generating companies see the price of power falling by the day. As a result, state governments are unwilling to sign long-term contracts to buy power. Demand for power has been weak and it is unlikely that this situation would change soon. Nuclear power is clean but it is not cheap.

The tariff for Kudankulam units 1 & 2 is Rs.3.89 per unit and for units 3 & 4 it is Rs.6.3 per unit. Part of the difference is because of inflation. This relatively high cost could make nuclear power plants non-competitive compared to other sources of electricity.

Given that demand is weak, nuclear power generation is risky and costly and that the price of alternate power sources, particularly solar power, is turning out to be extremely cheap, the decision to accelerate implementation of nuclear power plants, perhaps, merits a greater explanation from the government. Possibly, the emphasis on domestic supplies is an effort to offset the difficulties arising out of the bankruptcy of Westinghouse. But, given the comfortable power situation it may not even be necessary to offset the possible abandoning of the Mithi Virdhi project.

The emphasis on domestic supplies implies that these projects would have to be funded substantially through the Indian financial system. This would be long-term and risky financing in multiple ways.

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