For very many years I have been a supporter of nuclear power plants, on the premise “Bomb No, but Power Yes”. When I got involved with the Climate Change issue, I studied different energy forms in depth. I then started to have unresolved questions on nuclear energy, but initially took the view that it still fell in the category of ‘Necessary Evil’ since Climate Change is a bigger evil and emergency steps are needed to switch to a low carbon path. But, over a period of time, as I assessed the feasibility of different energy paths for our country, I have veered to the point of view that while (climate change criminal) coal is a Necessary Evil for us in the middle term, (low carbon) nuclear qualifies as a Needless Evil. Let me explain why.

One issue that becomes very emotive the world over is the issue of nuclear safety. While one side keeps citing Three Mile Island, Chernobyl and Fukushima, the other side says “Just three in fifty years!  Look at how many die in coal power pollution and even road accidents. Do you then stop driving?”  The intricacies of many debates on the design and construction of nuclear plants, on how Chernobyl is different (what else do you expect from Socialist Russia?) and Fukushima is different (40 year old GE Plant, weak container design, not adopted any more) leave most laypersons way behind. In all such cases, most people look for ‘experts’ to help form their opinions. And different people choose different experts!
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<h3>Market Perception of Risk</h3>

What is intriguing, though, is the stand taken by a known neutral expert in the market economy of today’s world – the insurance industry. It has consistently established – after assessing the probability of an accident and its consequent financial damage – that full insurance cover is out of reach for any nuclear power station in the world. Hence no nuclear plant could be established until the government of the country decided to foot the final bill. It all started with the Price-Anderson Act in the USA in 1957 when that government felt – against the advice of some insurers - that this fledgling industry in a new technology area needed some support to its first movers to stabilise in the field. The Act was to have a lifetime of 10 years and limited the liability of the plant operator – in case of an accident, irrespective of the cause of the accident – to a fixed amount and transferred the balance liability to the shoulders of the taxpayer and the affected person. Half a century later – after the setting up of 440 plants worldwide, nearly one quarter of them in the USA –the nuclear industry is apparently still in infancy. Because the Price Anderson Act is still alive, the latest extension for a further 20 years coming in 2005.

India passed its own Civil Liability for Nuclear Damages Act last year as part of its indirect commitment made in the Bush-Manmohan deal. It restricts the liability of the operator to Rs.1500 crores (with provision to increase it in future), part of which it can pass on to the supplier of equipment if the incident was as a result of supplier fault, provided an agreement to that effect had been signed between the two parties. (It may be recalled that the Bill as introduced put the liability cap at 500 crores with recourse to the supplier, only if he had caused the damage wilfully or with gross negligence, but that Bill had to be amended under pressure. We should also know that the US and other governments are putting pressure on our government – on behalf of the GEs, Westinghouses and Arevas of this world - to amend the Act to remove even this conditional and limited liability recourse to the plant supplier. In response to this pressure, our government has further diluted the suppliers’ liability in the recently notified Rules. Yet, the US is not satisfied. Another strategy to appease them might be to ratify the Convention on Supplementary Compensation of the IAEA – which prohibits supplier liability - before the end of this year, as committed to Hillary Clinton, and then go to the Parliament to amend the Act, claiming that we would otherwise be violating international law!)

Everywhere, governments too were scared of taking on the total liability themselves. They wanted the victim of the accident to shoulder the ultimate burden. The Price Anderson Act restricts the tort right of an individual to sue for damages; the Congress decides how much a victim gets. In Canada, the Parliament will decide in each case, not the courts. Our government is more clever – the government appointed Claim Commissioner will decide what the affected person gets; no further recourse to courts unless there is gross failure of justice.

Why all these complicated arrangements? Why even restrict the constitutional rights of the people? It seems to be because the estimated damage – estimates preceding Chernobyl, like the 1957 Brookhaven Report, commissioned by the American regulatory authority that mentioned 3400 deaths and $7 billion damage – from nuclear power accidents, however small the probability, was huge. There are varied estimates that the Chernobyl damage, inflation adjusted, is of the order of 150 to 600 billion dollars. Fukushima is now estimated to cost anywhere between 100 and 250 billion dollars over the next 10 years. If Fukushima had happened in the USA, the plant operator will pay 300 million dollars, all other nuclear plant operators will pitch in with 11 billion dollars; the rest from the State and the victims. In Canada, just 75 million Canadian dollars would be due from the plant operator. In India, the plant operator (with recourse to supplier, if possible) will fork out 1500 crores of the bill that could be between Rs 5 lakh crore to Rs 12 lakh crore.

What this brings out is that nuclear power is uninsurable under market conditions. What the market says is that nuclear accidents will happen, however rare, and when they do, the damage will be too large and for too long a period to be acceptable to it. 25 years on, Chernobyl is still playing out, and vast tracts of land are still unusable. (In Fukushima, it is now being admitted that those temporarily evacuated from a 30 KM radius cannot get back for at least a decade.) All such accidents are due to human errors – either in design or operation. Nothing can be completely safe. Complex technologies are more vulnerable – there are known unknowns and unknown unknowns. It is not a question of whether another Fukushima will happen, it is when – and where. A scholarly study lists 99 nuclear accidents that caused at least one death or damage above $50,000, seven of them in India. (Nuclear is anathema not just for power plant insurance; every other insurance policy too has a nuclear exclusion clause. Just check the fine print in your medical insurance or ULIP.)

However, the more serious disturbing issue is the moral hazard – the private company that knows it is not fully liable for its actions can be tempted to save on the safety cost. This subsidy disadvantages less risky but costlier technologies. And unlike the past, our country’s future nuclear plan factors in a large segment of imported private reactors. It is also our stated policy that private players will enter nuclear plant operation too (with Reliance already getting ready to do so.)
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<h3>Market Perception of Cost</h3>

When I began looking at nuclear power costs, in order to assess what would be the theoretical cost of nuclear power if it were to be fully market insured, I was surprised to find that this was not the only subsidy it was getting. There was much more (R&D, capital subsidies, loan, price and purchase guarantees, waste disposal, decommissioning etc.,) – and even after all that, nuclear power was still too costly for the market to take. I go by the assessment of some analysts that the reason why the USA has not built a single nuclear plant on its soil in the last 30 years (though American companies were building them in other countries) is not merely due to the Three Mile Island accident, but has also to do with the cost of the power produced. Obama now vigorously follows the policy initiated during the Bush regime to come out of this nuclear hibernation. Even so, the only nuclear plants being considered now are those that have signed (Enron style) cost plus sale of power to the utility companies, and even these are unable to get any bank to finance them, even after the US government has said it will stand guarantee for 90% of the loan. Banks are sceptical because nuclear power projects have the unparalleled reputation for huge time and cost overruns, usually of the order of 200 to 300 percent. Credit Rating agencies in the US routinely lower the ratings of utility companies that operate nuclear power stations. In the USA, interest on bank loans is also market determined – a risky investment fetches higher interest. The going market rate for nuclear power loan is 15%, four times that for coal power. Wall Street clearly votes against nuclear power.

An oft-quoted study on nuclear power cost is by the pro-nuclear Massachusetts Institute of Technology, which understates the cost of a nuclear power plant (despite realising that it keeps going up 15% a year) and does not factor in many subsidies. Its finding shows nuclear power to be 30% costlier than coal power. The Union of Concerned Scientists – an organization I respect for its reasoned positions and which says it is not pro- or anti-nuclear power – has published a report that details the real cost of nuclear power generation, quantifying most of the subsidies. It comes to the conclusion that the value of the subsidies is larger than the current price of electricity: “This means that buying power on the open market and giving it away for free would have been less costly than subsidizing the construction and operation of nuclear power plants”, says the report. The Chairman of Exelon, the largest nuclear power producer in the USA has categorically said that his company would not go in for a new plant unless the price of gas for gas power plants doubles and a further carbon tax of $25 per tCO2 is levied on them. In his candid farewell to his colleagues in the nuclear power industry, when he retired from his post in August 2011, he bluntly gave them his “forecast for the next several years – that the business of new nuclear will be miserably hard and extremely challenged by economics”.

Not surprising then, that a Citigroup report in 2009 found that “The Economics Says No” to “New Nuclear”. Categorically stating, “No nuclear power station has ever been built to our knowledge where the developer takes the power price risk”, the report finds its future capital costs to be going up and no new plant coming up in the UK unless offered financing guarantees, minimum power prices and government backed off-take agreements.

Disposal of the dangerous used nuclear fuel – which needs to be safe-kept and protected for tens of thousands of years – and decommissioning of a nuclear plant after its life and protecting it, also add significantly to nuclear power cost and involve subsidies. Governments everywhere charge a nominal amount per unit of power sold and take responsibility for waste disposal, estimated to cost several times that amount. No practicable solution for long term storage has been found yet. Currently, the waste that continues producing heat is kept in large swimming pool like tanks (easier targets for terrorists) and after it cools down in a few years, can be transferred to dry casks (steel container surrounded by concrete), though many do not do this transfer. The only practicable long term solution seems to be to bury it deep down the earth in a careful location not likely to face seismic disruptions or water flows. The only such project in the world, undertaken by the USA (Yucca Mountain), looks to be on the way to abandonment after costing 8 billion dollars. The dangerousness of the waste fuel can be minimized if it is re-processed and used again, something that is too costly for the western countries to take up. But not for India, which says it gives us better fuel security to recycle the waste and does not admit that it is the waste that gives it the plutonium for the bomb. It is because of the latter that this issue is shrouded in secrecy in India and none can put a number to its cost in power generation. The Department of Atomic Energy takes over all spent fuel from the power plants, with no further cost to them. Jairam Ramesh admitted earlier this year that waste management needs to be addressed in a “much more credible fashion,” but said no problem would arise till 2020-30!

Another cost aspect that does not get quantified, is the public perception of nuclear risk. Studies have shown that incidents like Chernobyl and Fukushima make the public perceive the nuclear risk to be higher than what rational analysts will determine to be the case. This can be compared to how one reacts to the actual tsunami damage, versus the many ‘silent tsunamis’ being played out. The trust deficit between the nuclear establishment the world over, and the general public, does not help much. (One classic example of this is the estimation of Chernobyl damage. ‘Only 57 deaths,’ touted strongly for very long, still does the rounds, even after a IAEA-WHO sponsored study of 2005 – which restricted itself to “most contaminated areas” – put up a number of 4000 thyroid cancer deaths. There is an outcry against this number, with some peer-reviewed studies over all contaminated areas placing the number at 200,000 to 985,000.) Public protests are more widespread against nuclear, than against coal power. (The only identified geological repository for nuclear waste in the world, the Yucca Mountain in Nevada in the USA, is being abandoned, not merely due to protests there, but also due to protests all along the way the waste will be carried to that place.)  All over the world, several nuclear facilities have been abandoned half way, after sinking large sums of money. This, too, adds to the overall cost. (One classic example is the Shoreham nuclear plant, 60 miles from Manhattan in New York, which sent $6 billion – Rs.30,000 crore – down the drain as the local government did not allow it to start after completion in 1984, as a result of public protest.)

<h3>True Cost of Coal</h3>

When one thus looks at the true cost of nuclear power – inclusive of the social cost – shouldn’t one look at similar costing of all other energy sources as well, especially coal?   There have been many studies in the West that have computed the external cost of coal (many not factoring in climate change). The lowest estimate among them find the environmental cost of coal power (including morbidity and mortality from pollution) to be of the order of 100% of the present grid power cost (which means its real cost is twice the market cost.)  But then, adding climate change cost will take it through the roof. This brings me to the question of climate change and nuclear power.

Climate Change is a matter of great urgency: there is no time to lose, emergent action is called for, including in India. In this article, I will not go into the totality of the climate change mitigation imperative, but only look at how to generate whatever electricity we think we need for the future. Nuclear is certainly low carbon, on a full life cycle basis, though its carbon footprint is multiple times that of wind or solar. Coal should certainly go out of the window as early as possible.
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<h3>Renewable Alternative</h3>

As on date, renewables have limitations of availability, continuity, land use and cost. (In India, we have far more sunlight available as compared to the West.) Serious thinkers like James Lovelock, George Monbiot and James Hansen have come to the view that nuclear energy needs to be accepted as Necessary Evil, because climate change cannot be fought without nuclear too in the basket. Their view is that it is not practicable for renewables alone to grow as rapidly as needed for a transition to a low-enough carbon economy. There are many others who differ from them and say that the heavy upfront investment in nuclear crowds out the needed boost to the renewable sector, and there is full possibility for energy efficiency and renewables to meet the emission reduction targets.

Germany, which has set itself a ‘40% reduction by 2020’ target for Greenhouse Gases, has taken on the additional burden of totally phasing out its 23% nuclear dependence by 2022 (as announced by right-wing Chancellor, Angela Merkel, who got elected saying she will set up more nuclear plants, but turned full circle after Fukushima happened.) It is confident of achieving this primarily through renewable technologies – with 35% electricity coming from it in 2020. (Italy doubled its renewable investment in 2010, while its people voted 94% against nuclear power in a referendum. Austria, Sweden, Netherlands, Belgium and Spain too have decided to freeze or phase out nuclear power.) All of this is getting speeded up by the ongoing drop in renewable energy costs. (Polysilicon, the raw material for solar photo-voltaic panels, has dropped 93% in price between February 2008 and October 2011; if it had happened to Oil, it would be selling at $10 a barrel, says Bloomberg)
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<h3>India’s Energy Mix and Costs</h3>

Most of the debate above is centred on the reality of the western world. Our situation is different. We need to look at our energy mix and our costs. Currently, more than two thirds of our electricity comes from coal, and less than 3% from nuclear. The spate at which future coal plants are being ordered shows that the coal share is set to further increase in the medium term. Coal is truly dirty energy, in terms of local pollution as well as global climate change. It causes more damage to people’s health in our country than in the richer countries because of our lax environmental regulations and laxer enforcement of them. Added to the climate change imperative, there is no question that we should get away from this energy as fast as possible, even if the scale for this is decadal in nature in realistic terms. Coal is the cheapest scalable energy available to us today on market price basis.

My assessment is that our government’s decision to increase the nuclear share in the energy basket is minimally influenced by cost considerations, to some extent by ‘energy security’ considerations, and largely by defence and foreign policy considerations. The dominance of the last in decision-making gives short shrift to not only economics, but to safety considerations as well. Nothing else can explain the rash promise to France to buy the highly questionable Areva reactors for Jaitapur. No reliable data is available of the actual nuclear power cost in India, all of it in government hands. In 2007, Prabir Purkayastha estimated nuclear power cost at more than twice the cost of coal power. That was based on the imported reactor (overnight) cost of Rs.9 crores. It would be surprising if the first reactor planned at Jaitapur – currently talked about as Rs.14 crore to Rs.20 crore per MW – ends up costing less than Rs.30 crores a MW. (India’s record of reactor cost overrun is similar to the rest of the world. One report states that eight 220 MW reactors set up during the nineties, estimated to cost a total of Rs.2000 crores, ended up costing 7500 crores; 3.7 times the original plan. Another report of 75 reactors set up in the USA, shows the final cost to be 3.2 times the planned cost, at constant dollars.)
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<h3>India’s Renewable Option</h3>

If nuclear is the only alternative to coal, it will have a strong case, whatever its cost. Because, coal has to be phased out at any cost. (I am not going into the issue of the Carbon Capture technology – capturing the CO2 produced by the coal plant and burying it in the earth – as it still has certain question marks and will take a couple of decades to mature.)  Alternatives exist in the form of renewable technologies like wind, solar, micro hydel, biomass, geothermal, ocean power etc., at different stages of development or scale up potential. Wind and Solar are in the lead now, but they are considered by many to be unsuitable to address the base load issue, as they cannot produce energy continuously, and storing of energy is costly as of now. This perception is changing rapidly.

There has been a long history of western nations grossly under-investing in renewable energy development, but that has changed now. Even the market has seen its potential in the near term and has started to invest heavily. (Siemens, a major player in the nuclear plant field, has announced, post-Fukushima, that it is exiting that business line as it sees a bleak future ahead. It is investing vigorously in renewable energy. Stock analysts in the West are bullish on solar companies and bearish on nuclear business. Venture capitalists like Vinod Khosla, who are experts at judging which technologies will grow in the future, are pouring money into solar. China, which, two years back, set itself a 2020 target of 20,000 MW solar power, has now revised it to 50,000 MW.) My assessment is that, for peak load purposes, solar will reach grid parity in India within ten years, solar thermal and photo-voltaic in equal measure. It may take a little longer for base load (with energy storage). If one factors in the distribution benefit of this decentralized energy, parity will be even sooner.

A May 2011 KPMG report points out that utility scale solar PV for peak load and solar thermal, with storage for base load, will reach grid parity before 2020. Many in India are not very aware of the Concentrated Solar Power (CSP) technology – a fast growing energy technology – where you focus the diffused sunlight onto a pipe or vessel containing molten salt that gets heated up and can be taken to a boiler to produce steam and electricity in the conventional manner. Several such projects are coming up in India now. The advantage of this technology is that part of the molten salt produced in the day can be stored in an insulated vessel, to be used in the night hours or even for two or three sunless days in winter time. Spain expects this technology to reach grid parity in 2014 and supply 3% of its electricity by 2015. The US Department of Energy aims to get this technology reach grid parity by 2015.

There is still the issue – not yet fully resolved – if plausible renewable growth worldwide can match the pace at which coal needs to be replaced. It is, however, a no brainer that renewables can easily – and cost competitively – fill the ‘void’ created in India if its future nuclear plan is abandoned.

<h3>True Cost of Power Should Be the Starting Point</h3>

Power costs are based on market determined prices. My view is that the starting point for drawing up a long term energy plan should be the determination of the true cost of each type, adding to the market cost the external – health, environmental – costs and subsidies, direct and indirect. I have looked at some numbers on these, but cannot get into a detailed discussion on this now.

My impressionistic assessment is that the true generated cost of coal power, from a (high efficiency) plant ordered today, will be of the order of Rs.5 (at the lowest estimate, not factoring climate change) for a unit of electricity. Wind power would cost lower than that, and solar (both PV and thermal) will be two and a half times as much, for large-sized plants. Nuclear too will be of the same order, for imported reactors that form the major part in the near future. In the next couple of decades, true nuclear power cost will go up (its learning curve is near flat as many different designs get built) as more and more safety features are added under public pressure, while wind and solar will decline substantially. (Many do not realize that the solar electricity learning curve is pretty steep, of the order of 15-30%.)

There are, of course, many other factors that need to be taken into account in determining the energy mix for the future. But, this true cost estimation, as I said, should be the starting point. Energy return on energy invested is one of the factors to be considered in the carbon constrained situation we are in – where there is a limit to the amount of CO2 we can afford to park in the atmosphere – given the substantial upfront energy investment we have to make (largely using fossil fuels) for nuclear plants as well as renewable energy plants.

It is because of this high true cost, and a weighing of cost-benefit, that I regard the nuclear option to be the choice of the last resort and a Needless Evil. (Coal is a Necessary Evil because the cost-benefit weighs in its favour in the short to medium term.) I would still keep a very small window open to it until a full, detailed and transparent analysis is made of the full costs and other implications of all energy forms. For us, in India, nuclear seems to make very little difference to any future low carbon strategy. Contributing to just 2.3% of our electricity production and 2.7% of installed capacity now, the capacity share is expected to go up to just 3.4% by 2020 if ‘determined effort’ is made, says the Low Carbon Expert Group set up by the Planning Commission. Do we really need this icing on the cake at such cost and trouble?
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<h3>What Should We Demand?</h3>

My suggestion is that people’s movements should demand of our government that it should initiate an open debate on the future energy policy, and make available all cost and safety information on nuclear power. One major objective of the policy should be to phase out coal share as rapidly as practicable. In the meantime, coal power should be made a lot safer than now, for those living around the power plants and coal mines. The demand should be that all future nuclear plants should be put on hold – and so should coal plants too – until such a time-bound review of policy is carried out, public consultations are held and debated in the parliament.
The other demands could be:

<ul>
• A truly independent nuclear regulatory authority

• Safety audit of existing plants by the independent regulatory authority and making it public

• Making public previous safety audits and actions taken

• Repeal of the Nuclear Liability Act

• No ratification of IAEA’s Convention on Supplementary Compensation.</ul>