Impact of Rising Nuclear Power Costs on India’s Clean Energy Transition

Context

The cost of four reactors being built at the Kudankulam Nuclear Power Plant (KKNP) has jumped by almost 55% since the Russia-Ukraine conflict, a development that has led to worries regarding electricity tariffs, competitiveness of nuclear power and India’s clean energy goals.

Key Highlights

• Nuclear energy plays an important role in India’s energy transition strategy to make the country energy secure, low carbon and Net Zero by 2070. 
• Ongoing nuclear projects, however, are facing a significant challenge due to the increased construction costs, especially for the Kudankulam Nuclear Power Plant (KKNP). 
• The projected costs could impact the viability of electricity prices, investment decisions and the speed of the transition to clean energy in India.
• The project cost of Kudankulam Nuclear Power Plant (Units 3-6) has also gone from ₹89,470 crore to ₹1,38,330 crore, a rise of almost 55%.
• The main cause of cost increases was the Russia-Ukraine conflict, which has impacted global supply chains, equipment and logistics costs.
• Other ongoing nuclear projects such as:
  • Kaiga (Karnataka)
  • Gorakhpur (Haryana)
  • Rajasthan Atomic Power Project (Rawatbhata) have also witnessed significant cost revisions.

About Kudankulam Nuclear Power Plant (KKNP)

• Tirunelveli district, Tamil Nadu is the location.
• Developed in collaboration with Russia.
• It is based on VVER (Water-Water Energetic Reactor) technology, which is a variety of Pressurised Water Reactor (PWR).
• Planned capacity:
  • Six reactors.
  • The reactors are 1,000 MW in size.
• Status:
  • Units 1 and 2 are in operation.
  • Units 3 & 4 are anticipated to be switched on by 2027.
  • Units 5 and 6 will be finished by 2030.

Why Have Project Costs Increased?

• Global Factors

  • The Russia-Ukraine conflict had an impact on the global supply chain.
  • Rise in prices of imported nuclear equipment.
  • Increased freight and insurance costs.
  • Inflation in construction materials.
  • Exchange rate changes for purchased parts.

• Domestic Factors

  • Long construction periods.
  • Funding and interest expenses.
  • Delay in procurement and project implementation.
  • Changes in safety standards following worldwide nuclear accidents.

Why Do Rising Nuclear Costs Matter?

• Higher Capital Costs

  • The big investment needed in nuclear plants is upfront.
  • The percentage of capital expenditure in the Levelised Cost of Electricity (LCOE) is nearly 60% of the total LCOE.
  • This lengthens the construction time and will raise financing costs.

• Impact on Electricity Tariffs

  • If there is a cost overrun, this can be expressed as:
    • Higher electricity prices.
    • Increased burden on power distribution companies.
    • Lower consumption prices for consumers.

• Competitiveness

  • Expensive nuclear projects could be less competitive than:
    • Solar power.
    • Wind energy.
    • Hybrid renewable systems.

• Investor Confidence

  • An increased cost of the project has the potential to impact:
    • Private sector participation.
    • Foreign investment.
    • Technology partnerships.

Importance of Nuclear Energy for India

• Energy Security

  • Reduces reliance on fossil fuels.
  • Delivers stable, base-load electricity.

• Climate Commitments

  • Generates minimal amount of greenhouse gas emissions.
  • Helps achieve India’s “Net Zero by 2070” goal.
  • Helps achieve the target of increasing non-fossil fuel-based electricity capacity.

• Stable Electricity Supply

  • Nuclear energy is unlike other energy sources such as solar and wind power, which only generate electricity when conditions are favorable.

• Industrial Development

  • Encourages indigenous use of nuclear technology.
  • Enhances high tech manufacturing & scientific research.

Challenges Facing India’s Nuclear Programme

• Rising construction costs.
• Long implementation times for projects.
• High financing costs.
• Concern of the public about nuclear safety.
• Nuclear waste management.
• Acquisition of land and environmental clearances.
• Reliance on imported technology and components for reactors.

Government Initiatives

• Opening up the civil nuclear industry for private companies to participate.
• Encouraging collaboration with:
  • Russia.
  • France.
  • United States.
• Promoting indigenous 700 MW Pressurised Heavy Water Reactors (PHWRs).
• Growth of domestic production of nuclear power plants.

Way Forward

• Improve indigenous reactor technology, minimize dependence on imports.
• Improve project management to minimise construction delays.
• Encourage the production of nuclear components in the country.
• Spread international technology partnerships.Spread international technology partnerships.
• Keep track of project expenses and ensure on-time project completion.
• Implement a combination of nuclear and renewables in the energy mix.
• Improve the financing system to lower interest rates for long-term projects.

Source: The Indian Express

Mains PYQ

Q. With growing energy needs should India keep on expanding its nuclear energy programme? Discuss the facts and fears associated with nuclear energy. (2018)

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