Friday, April 1st 2016
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The deals have more to do with the financial well-being of US equipment suppliers than with the aspirations of India's electricity consumers
A report by the Institute for Energy Economics and Financial Analysis, an independent organisation in the US, has warned that India’s plans to import 12 nuclear reactors from ailing American equipment suppliers is financially fraught and irrelevant for India’s electricity needs.
The release of the report titled “Bad Choice: The Risks, Costs and Viability of US Nuclear Reactors in India” on Wednesday coincides with Prime Minister Narendra Modi’s visit to Washington to attend the Nuclear Security Summit.
The proposals for six Westinghouse Electric’s AP1000 reactors in Mithi Virdi, Gujarat, and the same number of GE-Hitachi’s Economic Simplified Boiling Water Reactor in Kovvada, Andhra Pradesh, are part of the Indian government’s return gift for Washington’s cooperation in concluding the Indo-US nuclear deal.
Matters of relevance
In January, Westinghouse had expressed hope of a significant announcement by Modi during his US visit. But that does not seem to have materialised. On March 30, Westinghouse Electric’s CEO Daniel Roderick told Reuters that he expected a deal to be signed in June. According to the article:
"He [Roderick] declined to say how much the deal would be worth, or the price per unit of electricity, but said India had judged Westinghouse to be a 'competitive energy source provider' and this would allow the contract to go on to the next phase."
If the institute's report is anything to go by, none of the 12 reactors proposed to be built by American suppliers will be competitive in terms of capital costs or electricity rates. In fact, the report even throws into doubt the relevance of the reactors as an energy source to reckon with in the near to mid-term.
If built, the 12 reactors will cost between Rs 6.3 lakh crore ($95 billion) and Rs 11 lakh crore ($170 billion). That will translate to unaffordable and obscenely high electricity tariffs. Levelised tariffs for the Kovvada project are expected to range from Rs 15.85 to Rs 26.04 per kilowatt-hour, for a project start date of 2032. The corresponding numbers for the Mithi Virdi reactor are between Rs 9.05 and Rs 17.75 per kWh. Contrast this with the steeply falling prices of solar electricity, which are expected to hover around Rs 3 per kWh in 2032.
Sole guinea pig
The wide range in capital and electricity costs reflects the uncertainties associated with any nuclear project, but particularly with the AP 1000 and ESBWR designs. The report notes that there are no reactors of either design currently operational anywhere in the world. AP1000 reactors are currently under construction in the US and China. In both locations, the reactors have suffered immense cost and time overruns.
GE’s ESBWR design has never been built. India will be the first and only guinea pig till date. Significantly, GE has declared that it is unwilling to risk building this untested design unless India clarifies its stance on indemnifying the equipment supplier from the financial consequences in the event of an accident.
However, reports indicate that Westinghouse is chomping at the bit to get going with the Gujarat project, where it hopes to supply six AP1000 units of 1,150 megawatts each. It has indicated an interest in Kovvada as well in case of a GE pullout. Westinghouse’s eagerness is understandable. Its losses have dragged its parent Toshiba into a massive controversy. The Japanese conglomerate admitted last November that its US-based subsidiary Westinghouse had incurred massive losses owing to delays in new plant constructions and cost overruns in the years after the Fukushima nuclear disaster.
While Prime Minister Narendra Modi is desperately wooing Westinghouse for a nuclear park in his home state, Toshiba is reportedly underinvestigation in the US for financial irregularities arising from its subsidiary’s losses.
Unviable projects
The deals that the Indian government is bending backwards to stitch up have more to do with the financial well-being of US equipment suppliers than with the aspirations of India’s electricity consumers or taxpayers. The numbers in the institute’s report suggest that unless the projects are heavily subsidised by taxpayers, electricity from the reactors proposed at Kovvada and Mithi Virdi will be too expensive for consumers to purchase. Apart from the nuclear risks, just the day-to-day operations of these plants will result in a financial and economic disaster for utilities, ratepayers and taxpayers.
The first new reactors in Mithi Virdi and Kovvada will take 11 to 15 years to build, assuming the projects manage to avoid likely delays. No electricity from the new reactors at Mithi Virdi and Kovvada should be expected until sometime between 2029 and 2032. This is the best-case scenario assuming construction starts in 2017.
But this is unrealistic. Land acquisition – a politically fraught process – has not even commenced at the two sites. Indian farmers do not part easily with their land. Any delay in land acquisition will further increase capital costs. Consequently, tariff rates will be even higher than what is estimated by the institute's analysts.
The report warns that:
“cost and schedule uncertainties associated with the Mithi Virdi and Kovvada projects will likely be even more pronounced if the Government of India pushes ahead with its Make in India program with respect to procurement of specialised components and/or erection and commissioning of the plants.”
An important reason for time and cost overruns in Westinghouse’s Chinese and US installations is the difficulty that vendors in the United States are having in meeting the design and quality specifications of the first-of-its-kind AP1000 model.
In the past, the Indian government has sought to thwart legitimate concerns about its opaque pursuits in nuclear projects by hinting at a foreign hand. Curiously, in this instance, the Institute for Energy Economics and Financial Analysis, the foreign hand that is questioning the viability of the reactor imports is American – just like the equipment suppliers that stand to make a quick buck at the cost of the Indian public. In fact, the author of the report, David Schlissel, has spent 40 years following the US nuclear industry.
That then leaves observers wondering why the Indian government is hell-bent on importing American nuclear reactors that even the Americans don’t seem to want. One thing is clear, though: financing these expensive US reactors will divert much-needed money from India’s planned commitments in renewable resources and energy efficiency to GE and Westinghouse’s American and Japanese shareholders.
Nityanand Jayaraman is a writer and activist from Chennai associated with the National Alliance of Anti-Nuclear Movements.We welcome your comments at letters@scroll.in.
Nuclear energy
Indo-US nuclear deal
Source link
The deals have more to do with the financial well-being of US equipment suppliers than with the aspirations of India's electricity consumers
A report by the Institute for Energy Economics and Financial Analysis, an independent organisation in the US, has warned that India’s plans to import 12 nuclear reactors from ailing American equipment suppliers is financially fraught and irrelevant for India’s electricity needs.The release of the report titled “Bad Choice: The Risks, Costs and Viability of US Nuclear Reactors in India” on Wednesday coincides with Prime Minister Narendra Modi’s visit to Washington to attend the Nuclear Security Summit.
The proposals for six Westinghouse Electric’s AP1000 reactors in Mithi Virdi, Gujarat, and the same number of GE-Hitachi’s Economic Simplified Boiling Water Reactor in Kovvada, Andhra Pradesh, are part of the Indian government’s return gift for Washington’s cooperation in concluding the Indo-US nuclear deal.
Matters of relevance
In January, Westinghouse had expressed hope of a significant announcement by Modi during his US visit. But that does not seem to have materialised. On March 30, Westinghouse Electric’s CEO Daniel Roderick told Reuters that he expected a deal to be signed in June. According to the article:
"He [Roderick] declined to say how much the deal would be worth, or the price per unit of electricity, but said India had judged Westinghouse to be a 'competitive energy source provider' and this would allow the contract to go on to the next phase."
If the institute's report is anything to go by, none of the 12 reactors proposed to be built by American suppliers will be competitive in terms of capital costs or electricity rates. In fact, the report even throws into doubt the relevance of the reactors as an energy source to reckon with in the near to mid-term.
If built, the 12 reactors will cost between Rs 6.3 lakh crore ($95 billion) and Rs 11 lakh crore ($170 billion). That will translate to unaffordable and obscenely high electricity tariffs. Levelised tariffs for the Kovvada project are expected to range from Rs 15.85 to Rs 26.04 per kilowatt-hour, for a project start date of 2032. The corresponding numbers for the Mithi Virdi reactor are between Rs 9.05 and Rs 17.75 per kWh. Contrast this with the steeply falling prices of solar electricity, which are expected to hover around Rs 3 per kWh in 2032.
Sole guinea pig
The wide range in capital and electricity costs reflects the uncertainties associated with any nuclear project, but particularly with the AP 1000 and ESBWR designs. The report notes that there are no reactors of either design currently operational anywhere in the world. AP1000 reactors are currently under construction in the US and China. In both locations, the reactors have suffered immense cost and time overruns.
GE’s ESBWR design has never been built. India will be the first and only guinea pig till date. Significantly, GE has declared that it is unwilling to risk building this untested design unless India clarifies its stance on indemnifying the equipment supplier from the financial consequences in the event of an accident.
However, reports indicate that Westinghouse is chomping at the bit to get going with the Gujarat project, where it hopes to supply six AP1000 units of 1,150 megawatts each. It has indicated an interest in Kovvada as well in case of a GE pullout. Westinghouse’s eagerness is understandable. Its losses have dragged its parent Toshiba into a massive controversy. The Japanese conglomerate admitted last November that its US-based subsidiary Westinghouse had incurred massive losses owing to delays in new plant constructions and cost overruns in the years after the Fukushima nuclear disaster.
While Prime Minister Narendra Modi is desperately wooing Westinghouse for a nuclear park in his home state, Toshiba is reportedly underinvestigation in the US for financial irregularities arising from its subsidiary’s losses.
Unviable projects
The deals that the Indian government is bending backwards to stitch up have more to do with the financial well-being of US equipment suppliers than with the aspirations of India’s electricity consumers or taxpayers. The numbers in the institute’s report suggest that unless the projects are heavily subsidised by taxpayers, electricity from the reactors proposed at Kovvada and Mithi Virdi will be too expensive for consumers to purchase. Apart from the nuclear risks, just the day-to-day operations of these plants will result in a financial and economic disaster for utilities, ratepayers and taxpayers.
The first new reactors in Mithi Virdi and Kovvada will take 11 to 15 years to build, assuming the projects manage to avoid likely delays. No electricity from the new reactors at Mithi Virdi and Kovvada should be expected until sometime between 2029 and 2032. This is the best-case scenario assuming construction starts in 2017.
But this is unrealistic. Land acquisition – a politically fraught process – has not even commenced at the two sites. Indian farmers do not part easily with their land. Any delay in land acquisition will further increase capital costs. Consequently, tariff rates will be even higher than what is estimated by the institute's analysts.
The report warns that:
“cost and schedule uncertainties associated with the Mithi Virdi and Kovvada projects will likely be even more pronounced if the Government of India pushes ahead with its Make in India program with respect to procurement of specialised components and/or erection and commissioning of the plants.”
An important reason for time and cost overruns in Westinghouse’s Chinese and US installations is the difficulty that vendors in the United States are having in meeting the design and quality specifications of the first-of-its-kind AP1000 model.
In the past, the Indian government has sought to thwart legitimate concerns about its opaque pursuits in nuclear projects by hinting at a foreign hand. Curiously, in this instance, the Institute for Energy Economics and Financial Analysis, the foreign hand that is questioning the viability of the reactor imports is American – just like the equipment suppliers that stand to make a quick buck at the cost of the Indian public. In fact, the author of the report, David Schlissel, has spent 40 years following the US nuclear industry.
That then leaves observers wondering why the Indian government is hell-bent on importing American nuclear reactors that even the Americans don’t seem to want. One thing is clear, though: financing these expensive US reactors will divert much-needed money from India’s planned commitments in renewable resources and energy efficiency to GE and Westinghouse’s American and Japanese shareholders.
Nityanand Jayaraman is a writer and activist from Chennai associated with the National Alliance of Anti-Nuclear Movements.We welcome your comments at letters@scroll.in.
Nuclear energy
Indo-US nuclear deal
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