India building nuclear white elephants
Power surplus country does not need baseload nuclear energy
“India to build 10 indigenous and two Russian nuclear reactors” makes for attention grabbing headlines. More so for a pseudo nationalistic political party. It appeals to its largely uneducated and semi-literate voter base, steeped in religious anachronism on one hand and fed on a dream of a “digital India.” For them, “nuclear” is immediately associated with high technology or with weapons to be used against the numero uno enemy — Pakistan. When the prime minister talks of such plans, people and the media lap it up without questioning the need or logic behind it.
The truth is that there is practically no need for any new power plant in India — especially nuclear. The Central Electricity Authority (CEA) predicts that by 2019, India will be a power surplus country. The peak power shortfall is already less than 1%
Let me explain this in simple language without much jargon or resorting to number crunching.
India is among the fastest growing economies in the world that is agreed. Growth needs to be fuelled by power and so the electricity usage must also increase as the GDP keeps growing. That’s also logical.
But compared to projections made, consumption has not increased as expected leading to a glut (excess capacity) and many coal fired power plants have been idled. The government is paying these companies even when they are not producing electricity because of the power purchase agreements (PPA) signed between the government and the power companies.
The world’s largest coal miner (Coal India Ltd. — CIL) is sitting on massive coal stocks because there is no demand. CIL now plans to close down as many as 37 coal mines in the year 2017–18.
About 25 gigawatts of coal-fired power-generating capacity is “stranded” and unused. That’s equivalent to the entire installed capacity of Pakistan.
Gas-fired plants, which can generate nearly 25 gigawatts of power, are running at less than a quarter of their capacity due to lack of demand.
A case in point is the Rattan India thermal power plant at Amravati in central India. The coal plant was commissioned in 2015. Now it is “idled” and redundant. Yet, it is costing the government Rs. 983 crores ($150million) a year to NOT produce electricity.
In polite economic terms these are called “stressed assets.” Popularly they are called duds or white elephants. Government will spend crores of tax payer money to keep them afloat and give various reasons for it.
But the fact is that these companies are “too big” or in most cases “politically too well connected” to fail and hence must be bailed out.
White elephants are all over in socialist/communist countries but they exist in capitalist systems as well. They are there so that promoters/contractors/politicians can make big personal wealth out of public wealth.
How and why has this happened in the power sector even though an estimated 50 million homes in India are still in the dark?
1) Over estimation of growth.
Successive governments have over estimated the manufacturing growth potential in India although agriculture has been the traditional growth driver. But instead of manufacturing, the services sector has shown a far better and consistent growth in the country. Global demand for manufactured goods has also been sluggish for many years and China is a fierce competitor. The Indian government’s GDP figures also need to be taken with a pinch of salt. China would notoriously fudge GDP data to show false growth until the truth came out via it’s electricity numbers. In case of India too, something similar is likely.
2) The distribution failure
Power produced at plants has to be transmitted long distances and then distributed to individual customers (industrial and retail) This transmission & distribution (T&D) network has been a huge constraint on electricity usage with large parts of the country totally left out of the network. Couple this with huge T&D losses caused by the long distances traversed, technical losses, power theft, free (or highly subsidized) power to agriculture, political interference in collecting arrears have made a complete mess of the sector. Predicting usage is difficult and many distribution companies (discoms) are in the red. In the earlier quoted case of Rattan India, the discom is Maharashtra State Enterprise, which is paying money for the 1200MW idled coal power plant.
It is pertinent to note that many of the above problems have arisen because of the centralized grid system wherein a central generation source keeps feeding the lower rungs. This system works best where
a) Manufacturing is concentrated in one region, or
b) The coverage area is not far flung.
India is a vast country and manufacturing is spread all across, cities have sprawled where villages once existed and thus there is a demand-supply mismatch.
The obvious solution to this is to decentralize the grid and set up a network of smaller grids (microgrids) which can work much more efficiently at ramping up or down the supply as per demand.
To achieve this, power plants must necessarily by smaller in size so as to optimize usage as per immediate needs. Thus, the days of Ultra Mega Power Plants (UMPP’s) are over.
This immediately puts nuclear power plants (NPP’s) into the firing line. One of the primary advantages, claimed by nuclear power companies, is that it provides “baseload” power i.e. it provides a constant level of power throughout the day and night. But the problem is that even when there is no requirement for power, NPP’s keep producing it. As per the PPA, the governments (states and/or centre) are committed to absorb this excess power. This huge amount of electricity has to be then auctioned off at far lower rates to other states which may have a demand at that time.
The power producers have nothing to lose. They get paid by the government for every unit of power output. The difference between this procurement price and the auctioned price is the losses which the government (tax payers) bear. This is one reason why the cost of electricity from NPP’s is so high for individual users. NPP’s cannot be switched on and off as per demand. Each shutdown has to be planned up to a year in advance and takes days to be taken off stream and then back on. Not only time, it is a costly affair too.
Now, having established that the country is near power surplus through its existing power plants, where is the need for adding baseload power? What is needed is better coverage of the generated power.
The solution to this, as mentioned above, is to have smaller power plants which can deliver on-demand power, have capability to service smaller areas where demand is fairly foreseeable and work in conjunction with other suppliers. It is here that renewables score over traditional power sources.
It used to be argued by the nuclear industry that the “sun does not shine and wind does not blow all the time” and hence nuclear is the only option. But rapid advances in grid technology (smart micro grids) as well as in battery storage have meant that baseload is in fact a huge disadvantage in a modern power grid. Such baseloads can be a liability for the system — both from the point of views of grid stability as well as economics.
What India needs is not more nuclear power plants but distributed smart micro grids across the country so that the 50 million homes can come out of the dark.
Such small, intelligent micro grids are already being set up across India and will change the power distribution scenario within a few years.
Even if we assume that India is dead serious about meeting it’s goals set in the Paris Agreement, the sheer speed and scale of renewables will make even new coal fired power plants economically unviable. Almost all existing coal plants will have to be idled to meet the Paris obligations. Of course, that is quite unlikely to happen in reality. Cost of nuclear power is at least 2 to 3 times more than coal. So will the government have the political strength to increase power tarrifs simply to meet climate goals? Unlikely, if not impossible.
It is very important to keep in mind that the average global construction time for a new nuclear power plant is eight years — in India it is over ten years.
Will nuclear power be even relevant after a decade?
The estimated cost for these ten indegenous nuclear reactors is between ₹70,000 to ₹100,000 crore — which from past experience will only go up significantly as work progresses. These investments are too big to be left stranded. While the government owned NPCIL will be the operator, the construction will be done by the private sector companies. Obviously, these companies will have to be paid these huge amounts regardless of whether NPCIL operates them or not.
The investment in these projects needs to be stopped now, because once the contracts are signed and construction begins, these will be irreversible and bleed the economy for decades.
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