Faultlines and fortunes
India has massive expansion plans for the nuclear sector over the next four decades along with 470,000 Mw by 2050. The enormity of the 2050 target can be appreciated by the fact that the total global capacity across 30 nations is around 400,000 MW at present.
India today operates 19 nuclear power plants, or NPPs, with a total capacity of 4,500 MW and is adding 5,000 MW with seven plants that are under construction and slated for commissioning by 2015. An NPP can take eight to nine years to come up, so India's nuclear power capacity is unlikely to cross 10,000 MW by 2020.
Still, the country has massive expansion plans over the next four decades: 20,000 MW by 2020, 63,000 MW by 2032, and 470,000 MW by 2050. To meet the 2032 target, for instance, India will have to add around 4,500 MW each year. The enormity of the 2050 target can be appreciated by the fact that the total global capacity across 30 nations is around 400,000 MW at present.
So far, the state-owned Nuclear Power Corporation of India Ltd or NPCIL has been the only owner and operator of NPPs. It is unlikely to be able to cope with the demands that a multi-fold capacity expansion will place on its organisation, managerial and technical capacities, and financial resources.
Fortunately, the government has signalled that it intends to invite the private sector (without direct foreign equity) to accelerate investments in nuclear energy.
By law and practice, policies and deliberations concerning NPPs remain opaque, driven as they are by a small group of interrelated government entities, namely, the Department of Atomic Energy (DAE), the Atomic Energy Commission (AEC), the Atomic Energy Regulatory Board (AERB) and the NPCIL. Little information is publicly available on the working of the sector.
Implementation of a large and fastpaced expansion programme would require systems and processes to be streamlined, roles of different entities to be clearly defined, and their performance made transparent and available to public scrutiny.
There have also been concerns about the independence of the sector regulator, AERB, which reports to the DAE. The DAE also has administrative control over NPCIL. Regulatory independence and credibility will be critical especially as the regulator will be called upon to work closely with a larger number of PSU and private investors, as also domestic and foreign participants. For this, capacities of sector entities and personnel would need to be substantially upgraded.
The other problem is public perception of nuclear energy, or, more specifically, the hazards around it. Project sponsors often spend the initial years fighting legal challenges, and resorting to police interventions in project area instead of moving ahead on construction. Dissemination of transparent and meaningful project information, sensitivity to the legitimate concerns of the affected population, market-guided compensation for acquired land, and serious attention to rehabilitating the affected could be the solution.
Also, today 's practice of Environmental Impact Assessment studies being prepared by consultants paid for by the licensee/operator needs to be reconsidered to enhance public confidence.
Another major issue in public acceptance is the uncertainty related to storage and disposal of nuclear waste. As yet, no country has found a reliable long-term solution to the problem, with plant sites often used for such storage. While India may not be able to solve the problem, what will help is provision of information on how the interim measures are expected to safeguard public health and environment until a superior solution is found.
High costs, big opportunities
Historically, cost estimates of NPPs have proven highly unreliable, often ending with significant cost increases and delays. Besides, several different definitions are used for different purposes (overnight costs, owner's costs, all-in costs, etc.) giving a wide range of costs. Estimated investment costs per MW today vary from $4 million to $9 million. The AEC has benchmarked costs at $1.6 million per MW, but its scope and basis is unclear.
Uncertainty of costs is even greater for the "new generation" plants, of fered by Areva , Westinghouse and GE-Hitachi. The first plant in an advance stage of completion, by Areva in Finland, has had a 75 per cent cost increase (at $5,500/KW), and a delay of 60 per cent. Areva has also announced a 50 per cent cost increase on plants it is building in France and China. It is safe to assume that capital requirement for building additional capacity of 50,000 MW in India would be $250 billion to $300 billion, to be incurred mostly in the 2015-2030 period.
Despite the challenges and uncertainties, the intended multifold expansion of nuclear energy in the country holds business opportunities of several billions of dollars for Indian and foreign industry. Even if only about half of the targeted new capacity of 53,000 MW - that is 25,000 MW - is added by 2032, it would involve an investment of around $150 billion. Much of the technology and core plant would be supplied by foreign suppliers, especially for the NPPs to be built in the early years, and the government has already entered into preliminary supply agreements with major technology and plant suppliers from Russia, France, and the US.
There will be massive and growing opportunities for the Indian industry and investors as well. An unintended benefit of 35 years of embargo on Indian nuclear energy sector has been the limited yet important development of indigenous capacity in selected areas of design, construction, and manufacturing needed for NPPs.
NPCIL has developed capability to design and build NPPs in the 220 MW to 700 MW capacity. It plans to build up to 10 such plants in the country, and also hopes to export some. Private sector construction major HCC, short for Hindustan Construction Company, has built several NPPs in the country. L&T has supplied steam generators and produced heavy components for 17 of India's pressurised heavy water reactors and can fabricate nuclear-grade pressure vessels and core support structures - making it one among a dozen major nuclear-qualified heavy engineering enterprises worldwide.
Development of such indigenous capacity, although significant, is somewhat limited in amount and scope. Substantial expansion of indigenous capabilities is critical for sustaining the planned rapid development of capacity. Several firms, then, are gearing up. HCC has formed a joint venture with a UK-based engineering and project management firm to undertake consulting services and nuclear power plant construction.
L&T has entered into agreements with several foreign NPP providers to produce components in India as well as in third country markets. It is also setting up a major plant for manufacture of heavy engineering components for nuclear reactors in collaboration with NPCIL and BHEL for the domestic and export market. BHEL has plans to supply components for the new-generation, 1,600 MW reactors as well as set up a JV with NPCIL and Alstom for turbines. Similarly, Bharat Forge is setting up a JV with Areva for casting and forging components.
The extent to which the Indian industry will succeed in turning the potential into reality will depend, in part, on its dynamism and innovative spirit; and also on the government's ability to put in place major institutional changes that are needed.
- The author is a former Chief Economist of the Asian Development Bank
Still, the country has massive expansion plans over the next four decades: 20,000 MW by 2020, 63,000 MW by 2032, and 470,000 MW by 2050. To meet the 2032 target, for instance, India will have to add around 4,500 MW each year. The enormity of the 2050 target can be appreciated by the fact that the total global capacity across 30 nations is around 400,000 MW at present.
So far, the state-owned Nuclear Power Corporation of India Ltd or NPCIL has been the only owner and operator of NPPs. It is unlikely to be able to cope with the demands that a multi-fold capacity expansion will place on its organisation, managerial and technical capacities, and financial resources.
Fortunately, the government has signalled that it intends to invite the private sector (without direct foreign equity) to accelerate investments in nuclear energy.
By law and practice, policies and deliberations concerning NPPs remain opaque, driven as they are by a small group of interrelated government entities, namely, the Department of Atomic Energy (DAE), the Atomic Energy Commission (AEC), the Atomic Energy Regulatory Board (AERB) and the NPCIL. Little information is publicly available on the working of the sector.
Implementation of a large and fastpaced expansion programme would require systems and processes to be streamlined, roles of different entities to be clearly defined, and their performance made transparent and available to public scrutiny.
There have also been concerns about the independence of the sector regulator, AERB, which reports to the DAE. The DAE also has administrative control over NPCIL. Regulatory independence and credibility will be critical especially as the regulator will be called upon to work closely with a larger number of PSU and private investors, as also domestic and foreign participants. For this, capacities of sector entities and personnel would need to be substantially upgraded.
The other problem is public perception of nuclear energy, or, more specifically, the hazards around it. Project sponsors often spend the initial years fighting legal challenges, and resorting to police interventions in project area instead of moving ahead on construction. Dissemination of transparent and meaningful project information, sensitivity to the legitimate concerns of the affected population, market-guided compensation for acquired land, and serious attention to rehabilitating the affected could be the solution.
Also, today 's practice of Environmental Impact Assessment studies being prepared by consultants paid for by the licensee/operator needs to be reconsidered to enhance public confidence.
Another major issue in public acceptance is the uncertainty related to storage and disposal of nuclear waste. As yet, no country has found a reliable long-term solution to the problem, with plant sites often used for such storage. While India may not be able to solve the problem, what will help is provision of information on how the interim measures are expected to safeguard public health and environment until a superior solution is found.
High costs, big opportunities
Historically, cost estimates of NPPs have proven highly unreliable, often ending with significant cost increases and delays. Besides, several different definitions are used for different purposes (overnight costs, owner's costs, all-in costs, etc.) giving a wide range of costs. Estimated investment costs per MW today vary from $4 million to $9 million. The AEC has benchmarked costs at $1.6 million per MW, but its scope and basis is unclear.
Uncertainty of costs is even greater for the "new generation" plants, of fered by Areva , Westinghouse and GE-Hitachi. The first plant in an advance stage of completion, by Areva in Finland, has had a 75 per cent cost increase (at $5,500/KW), and a delay of 60 per cent. Areva has also announced a 50 per cent cost increase on plants it is building in France and China. It is safe to assume that capital requirement for building additional capacity of 50,000 MW in India would be $250 billion to $300 billion, to be incurred mostly in the 2015-2030 period.
Despite the challenges and uncertainties, the intended multifold expansion of nuclear energy in the country holds business opportunities of several billions of dollars for Indian and foreign industry. Even if only about half of the targeted new capacity of 53,000 MW - that is 25,000 MW - is added by 2032, it would involve an investment of around $150 billion. Much of the technology and core plant would be supplied by foreign suppliers, especially for the NPPs to be built in the early years, and the government has already entered into preliminary supply agreements with major technology and plant suppliers from Russia, France, and the US.
There will be massive and growing opportunities for the Indian industry and investors as well. An unintended benefit of 35 years of embargo on Indian nuclear energy sector has been the limited yet important development of indigenous capacity in selected areas of design, construction, and manufacturing needed for NPPs.
NPCIL has developed capability to design and build NPPs in the 220 MW to 700 MW capacity. It plans to build up to 10 such plants in the country, and also hopes to export some. Private sector construction major HCC, short for Hindustan Construction Company, has built several NPPs in the country. L&T has supplied steam generators and produced heavy components for 17 of India's pressurised heavy water reactors and can fabricate nuclear-grade pressure vessels and core support structures - making it one among a dozen major nuclear-qualified heavy engineering enterprises worldwide.
Development of such indigenous capacity, although significant, is somewhat limited in amount and scope. Substantial expansion of indigenous capabilities is critical for sustaining the planned rapid development of capacity. Several firms, then, are gearing up. HCC has formed a joint venture with a UK-based engineering and project management firm to undertake consulting services and nuclear power plant construction.
L&T has entered into agreements with several foreign NPP providers to produce components in India as well as in third country markets. It is also setting up a major plant for manufacture of heavy engineering components for nuclear reactors in collaboration with NPCIL and BHEL for the domestic and export market. BHEL has plans to supply components for the new-generation, 1,600 MW reactors as well as set up a JV with NPCIL and Alstom for turbines. Similarly, Bharat Forge is setting up a JV with Areva for casting and forging components.
The extent to which the Indian industry will succeed in turning the potential into reality will depend, in part, on its dynamism and innovative spirit; and also on the government's ability to put in place major institutional changes that are needed.
- The author is a former Chief Economist of the Asian Development Bank
