Jaitapur: A risky and expensive project -Suvrat Raju & MV Ramana
-The Hindu
Unless the government is transparent about details, it will be engulfed in yet another controversy
In December, the French company Électricité de France (EDF) submitted a “techno-commercial proposal” to the Indian government for the Jaitapur nuclear power project in Maharashtra. The idea of importing six nuclear European Pressurised Reactors (EPRs) was initiated by the United Progressive Alliance government more than a decade ago, but the project had made little progress due to concerns about the economics and safety of the EPRs, local opposition, and the collapse of the initial French corporate partner, Areva. Despite these problems, in the past few months, the Modi government has taken several high-level steps towards actuating the project.
In March 2018, EDF and the Nuclear Power Corporation of India (NPCIL) signed an “industrial way forward” agreement in the presence of Prime Minister Narendra Modi and French President Emmanuel Macron. Last month, after meeting the French Foreign Minister, Jean-Yves Le Drian, External Affairs Minister Sushma Swaraj announced that “both countries are working to start the Jaitapur project as soon as possible”. The urgency is inexplicable as it comes before the techno-commercial offer has been examined and as earlier questions about costs and safety remain unanswered. Moreover, with the Indian power sector facing surplus capacity and a crisis of non-performing assets (NPAs), a large investment in the Jaitapur project is particularly risky.
Delays and cost increases
It is clear that electricity from the Jaitapur project will be more expensive than many other sources of electricity, including solar and wind power. Using international estimates of capital costs for EPRs from the 2010-2012 period, and after adjusting for cost savings in India, we had shown in 2013 that first year tariffs from the project would be around Rs. 15 per kilowatt-hour (“Repeating Enron in Jaitapur”, June 21, The Hindu). Even this figure must be revised upwards to account for the construction experience with EPRs over the past five years. Across the world, EPRs have experienced delays and cost increases. The first EPR entered commercial operation in December 2018 at the Taishan site in China, five years later than originally projected. Its final capital cost was estimated by industry sources to be “40% over the original estimate”. The story in Europe is more dramatic. The EPR at Flamanville in France, for example, went from an expected start date of 2012 to 2020, and a cost estimate of €3.3 billion to €10.9 billion. Two EPRs have been planned at Hinkley Point in the U.K. Even before construction began, the estimated cost has risen significantly to £20 billion (about Rs. 1.75 lakh crore). The British National Audit Office assessed that the project “locked consumers into a risky and expensive project with uncertain strategic and economic benefits.”
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Unless the government is transparent about details, it will be engulfed in yet another controversy
In December, the French company Électricité de France (EDF) submitted a “techno-commercial proposal” to the Indian government for the Jaitapur nuclear power project in Maharashtra. The idea of importing six nuclear European Pressurised Reactors (EPRs) was initiated by the United Progressive Alliance government more than a decade ago, but the project had made little progress due to concerns about the economics and safety of the EPRs, local opposition, and the collapse of the initial French corporate partner, Areva. Despite these problems, in the past few months, the Modi government has taken several high-level steps towards actuating the project.
In March 2018, EDF and the Nuclear Power Corporation of India (NPCIL) signed an “industrial way forward” agreement in the presence of Prime Minister Narendra Modi and French President Emmanuel Macron. Last month, after meeting the French Foreign Minister, Jean-Yves Le Drian, External Affairs Minister Sushma Swaraj announced that “both countries are working to start the Jaitapur project as soon as possible”. The urgency is inexplicable as it comes before the techno-commercial offer has been examined and as earlier questions about costs and safety remain unanswered. Moreover, with the Indian power sector facing surplus capacity and a crisis of non-performing assets (NPAs), a large investment in the Jaitapur project is particularly risky.
Delays and cost increases
It is clear that electricity from the Jaitapur project will be more expensive than many other sources of electricity, including solar and wind power. Using international estimates of capital costs for EPRs from the 2010-2012 period, and after adjusting for cost savings in India, we had shown in 2013 that first year tariffs from the project would be around Rs. 15 per kilowatt-hour (“Repeating Enron in Jaitapur”, June 21, The Hindu). Even this figure must be revised upwards to account for the construction experience with EPRs over the past five years. Across the world, EPRs have experienced delays and cost increases. The first EPR entered commercial operation in December 2018 at the Taishan site in China, five years later than originally projected. Its final capital cost was estimated by industry sources to be “40% over the original estimate”. The story in Europe is more dramatic. The EPR at Flamanville in France, for example, went from an expected start date of 2012 to 2020, and a cost estimate of €3.3 billion to €10.9 billion. Two EPRs have been planned at Hinkley Point in the U.K. Even before construction began, the estimated cost has risen significantly to £20 billion (about Rs. 1.75 lakh crore). The British National Audit Office assessed that the project “locked consumers into a risky and expensive project with uncertain strategic and economic benefits.”
Please click here to read more.