Weekly Update: Solar makes more sense than nuclear for India

31 December 2013 |

Recent reports indicated that India’s Department of Atomic Energy (DAE) is in an uncomfortable situation as the cost of power from its new nuclear power projects appears to be too high (refer). It has been reported that the cost per unit at the 9,900 MW Jaitapur Nuclear Power Plant is around INR 9 (EUR 0.11/ USD 0.15) per kWh. At the 6,000 MW Mithi Virdhi Nuclear Power Plant costs may even be as high as INR 12 per unit (EUR 0.15/ USD 0.20).

  • Due to the risk perception of nuclear power, many projects face opposition from the public leading to significant delays
  • Renewable sources of power are much more promising in terms of cost and speed
  • Currently, India needs to look at all available sources of power, including nuclear, to meet its power deficit and rapidly rising demand

The high cost of nuclear power is explained by the capital costs of installing nuclear power plants which are in excess of INR 300 million (EUR 3.75 million, USD 5 million) per MW, with the Mithi Virdhi Nuclear Power Plant costing nearly INR 400 million (EUR 5 million, USD 6.7 million) per MW. Capital costs for the American made reactors are substantially higher than the INR 220 million (EUR 2.8 million, USD 3.7 million) per MW negotiated price with Russia for units at the Kudankulam nuclear plant in Tamil Nadu. Besides including waste disposal costs, the higher cost of nuclear power is also explained by India’s nuclear liability clause, which has increased insurance expenses for cautious international firms (refer). The projects are implemented in collaboration with international companies such as Areva from France and Westinghouse Electric from the US.

Average consumer power tariffs in India are currently at around INR 5.5 per unit (EUR 0.07/ USD 0.09). The average pool purchase cost at which utilities buy power is around INR 4 per unit (EUR0.05/ USD 0.06) for new projects. Moreover, due to the risk perception of nuclear power, many projects face opposition from the public, which in turn may lead to significant delays. In theory, a nuclear power plant takes five to seven years for commissioning. In reality, however, this timeline is often much longer, even decades as in the case of the Kudankulam nuclear plant in Tamil Nadu. A look at India’s ambitious five year plan projections for nuclear power since the 1950s as compared to the reality, shows that nuclear power has time and again failed to meet expectations.

Renewable sources of power, by comparison, are much more promising. They are, to begin with, significantly cheaper. Wind power is already competing with coal power across India at prices of INR 4.5 per unit (EUR 0.06/USD 0.08). The cost of solar power is now at around INR 8 per unit (EUR 0.10/ USD 0.13) and this is expected to fall in the long run. A second major advantage is speed: EPC companies across India are now constructing utility-scale solar projects in a matter of months, if not weeks.

In the current context, India needs to keep its energy portfolio diverse and look at all the sources of power available, including nuclear, to meet its power deficit and rapidly rising demand. However, the strategic emphasis should be on renewables. Solar power is even more uniquely positioned as it can be generated in a distributed manner. This means that it competes with the cost of power at the consumption end as compared to the generation end and that the significant commercial and technical grid losses can be avoided.

Solar power will require strategic emphasis beyond a certain limit, as it will require investments in strengthening of the grid in terms of green corridors and smart grid implementation. Solar power being an intermittent power source provides supplementary power when compared to nuclear which provides base load (firm power). Therefore, as the focus on renewables increases, smart grids and ancillary grid infrastructure will be required to balance out the variability of generation and provide a stable and more efficient power.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

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