The Promise of Power

My latest article on nuclear power written for wealth insight

Nuclear power has been projected as the energy on which future growth will depend. But, it's neither feasible nor desirable...

Earlier this month, I had the opportunity to attend the book launch of "The Power of Promise" by MV Ramana. The book discusses Nuclear Energy in India and its outlook – a subject that needs greater public debate. In the context of an energy deficient India, nuclear power has often been projected as the panacea, the energy fount on which future growth of the economy will depend. The case for nuclear power is based on two major argument (a) it is cheap (b) it is non polluting and abundant.

Marshalling rare facts from a secretive nuclear establishment, Ramana argues that nuclear power as a major source of India's energy plan is neither feasible nor desirable.

Nuclear power: more expensive than coal
In 2003, an interdisciplinary study by researchers at MIT came to the conclusion "In deregulated markets, nuclear power is not now cost competitive with coal and natural gas". This study was updated in 2009. The conclusion remains: "the prospects for nuclear energy as an option are limited, the report finds, by four unresolved problems: high relative costs; perceived adverse safety, environmental, and health effects; potential security risks stemming from proliferation; and unresolved challenges in long-term management of nuclear wastes."

Ramana's conclusion is similar. He compares cost of power generated from coal to that generated from nuclear plant – using assumptions that are grossly in favour of the nuclear alternative. He assumes that coal fired generators last a decade less than nuclear reactors, have to pay more for fly-ash disposal (they don't). Simultaneously, the radioactive waste disposal in nuclear power plants is supposed to cost only 2 paise per unit (it will likely cost a lot more). Additionally, he assumes that coal travels 1,400 kms to reach the power plant (over 33 per cent of coal fired generators are either at the pit head or increasingly near ports where the coal can be imported). Despite all these assumptions, at any cost of capital over 4 per cent, coal based power generators are cheaper than the nuclear alternative on the basis of levelised tariffs.

Safety: a significant concern
None of the above factors in the cost that needs to be paid for security, and potential health issues. It is pertinent to note the response of various government departments with regard to preparedness in case of nuclear accidents. While reacting to the Parliamentary standing committee discussing the nuclear liability bill, the ministry of water resources remarked "The Secretary, water resources, was of the opinion that any nuclear incident may induce radioactive contaminations in surface, ground water bodies, and other water resources. However, he stated that the Ministry does not have any facility for testing water quality".

The Secretary, Ministry of Health and Family Welfare while deposing before the Committee mentioned that her Ministry is "nowhere (ready) to meet an eventuality that may arise out of nuclear and radiological emergencies." She further mentioned that while drafting the Bill the Department of Atomic Energy did not consult them. She added: "Since the response system to deal with any kind of emergency of such type, the hospitals are not well-equipped, it is natural that mortality and morbidity due to multiple burn, blasts, radiation injuries and psycho-social impact could be on very high scale and medical tackling of such a large emergency could have enough repercussions in the nearby areas of radioactive fall out."

Proponents of nuclear power maintain that the likelihood of a nuclear accident remains remote – not so. Incidents like the recent accident in Japan illustrate that the best systems are prone to failure and in a densely-populated country like India, can lead to disastrous consequences. As Ramana pointed out in his speech – if the manufacturers are really so confident of their equipment being safe, why are they insisting on shielding themselves from nuclear liability – clearly there remain a real and non-trivial risk of nuclear disaster.

Is the DAE plan feasible?
In 1964, Bhabha stated "There is little doubt that before the end of the century, atomic energy will be producing a substantial part of the power in India, and therefore practically all the addition to our power generation will come from it at that time". In 1972, Homi Sethna, chairman AEC, predicted that India would have 43GW of nuclear generating capacity by 2000. In reality, in 2000, India had 2.7GW.

In September 2009, the PM stated that India will have 470 GW of nuclear power capacity by 2050. To put this in perspective, out of the total generation of over 200GW in India, less than 5GW is currently nuclear. Can we really expect almost a 100 fold increase in nuclear power generation capacity over the next 40 years?

India's plan for rapid growth of nuclear power is contingent on using fast breeder reactors (FBR). FBR's generate plutonium and are supposed to provide fuel for the next reactor – a sort of chain reaction allowing unlimited amounts of fuel! However, Ramana's analysis reveals that when adjusted for the time taken for a reactor to generate enough fuel to power up the next, the theoretical rate at which reactors can be built, reduces by 60 per cent of what the DAE estimates. In other words, "a fast growth of breeder reactors is not even theoretically, let alone practically, achievable."

Rosier in the future
As with many government estimates, the future seems rosier than history would suggest. A recent example is the criticism that the government's economic mandarins are reserving for CSO's advance GDP growth estimate of 5 per cent for 2012-13. Responding to the CSO's decade low figures, the Deputy Chairman of the Planning Commission reacted "I think it (growth projection of 5 per cent in 2012-13) is very low. I have been told that CSO has taken data from April to November (2012-13) and they just projected it (advance estimates)". Hasseb Drabu's comment is worth noting - "The sources and methodology adopted by the CSO are laid out by the System of National Accounts 2008, the latest version of the international statistical standard for national accounts, adopted by the United Nations Statistical Commission (UNSC). ...In this context, it will be enlightening to know which system of national accounts in the world is not based on past data. Also, what other data can official national accounts possibly be based on?"

There cannot be a better time to warn of rosy projections based on views, not data, as we enter the Budget Session. As investors, we need to keep assumption firmly rooted to reality. And yes, India's quest for renewable energy needs to be strongly focussed on the solar option – where paradoxically, the government plans to impose an additional import duty!