Solar up, nuclear down: why India should not bark up the nuclear tree

QUICK PILL

The report

• The World Nuclear Industry Status Report was released last week
• It signals the imminent death of the nuclear power industry
• New nuclear plant constructions have gone from 15 to 3 in four years
• The West has not started a single reactor in the last 10 years

The reasons

• Technological advances in renewable energy
• Since 2000, wind power added 355 GW of electricity. Solar added 179 GW across the globe. Nuclear added just 20 GW
• Financiers do not want to back expensive, uninsurable and time-consuming nuclear new-builds
• Nuclear reactor builders are in financial trouble, according to credit rating agencies
• AREVA, the French firm in charge of the Jaitapur project, has lost eight billion euros in four years
• Not much improvement in nuclear technology in the last two decades

The impact

• Indian govt might stay bullish for strategic reasons. But other stakeholders have nothing to gain
• Good news for Koodankulam and Jaitapur villagers: the proposed plants that could harm them may never materialise

The latest World Nuclear Industry Status Report, released last week, reads like an imminent obituary for the nuclear industry.

The report is an annual feature, published by independent energy consultants Mycle Schneider and Anthony Frogatt, with India-specific contributions by Princeton University-based physicist M.V. Ramana.

Sliding towards insignificance

According to the report, it is not activists and apprehensive communities that are holding up nuclear projects.

Rather, the report presents a convincing tale of how technological advances in renewables and the aversion of financiers to the expensive, uninsurable and time-consuming nuclear new-builds are rendering the industry insignificant and may contribute to its long-overdue demise.

The report reveals how beneath the bombast of the nuclear sector lies a dismal story of lacklustre performance, inexcusable time and cost overruns and intractable design and safety issues.

Here are some key insights from the report:

• Japan has gone without nuclear power for a full calendar year for the first time since the first commercial nuclear power plant started up in the country 50 years ago.
• Nuclear plant construction commencements plunged from 15 in 2010 to three in 2014.
• Sixty-two reactors are under construction, of which at least three-quarters are delayed. All six Indian units under construction are beyond schedule.
• Koodankulam and Prototype Fast Breeder Reactor in Kalpakkam have been listed as "Under Construction" for 13 and 10 years respectively.
• The West has not started a single reactor in the last decade; all 40 reactors, except for one (Argentina) that started up over the past decade are in Asia (China, India, Iran, Japan, Pakistan, South Korea), or Eastern Europe (Romania, Russia, Ukraine).
• In 2014, India announced a target of 175 GW of renewables by 2022. Of this, 100 GW is to be solar, 60 GW wind, 10 GW biomass-based power and 5 GW small hydropower projects.

Growth of non-hydro renewables

Nuclear energy's underperformance is stark when set against how far younger technologies, such as solar and wind, have delivered.

"Since 2000, wind added 355 GW and solar 179 GW [globally] - respectively eighteen and nine times more than nuclear with 20 GW," the report notes.

Uninformed electricity planners and vested nuclear proponents are wont to dismissing solar and wind powered electricity as infirm power, pointing out that such electricity can only be generated when the sun shines or the wind blows.

But rapid advances in storage technology are already ironing out these problems.

Since 2000, wind power added 355 GW of electricity and solar 179 GW across the globe. Nuclear added just 20 GW

This trend is only intensifying. In the year under review, solar generation grew at over 38% globally, and wind at over 10%. Meanwhile, nuclear power generation grew at 2.2%.

The report brings good news for villagers in Koodankulam and Jaitapur. Their fears that the proposed Russian and French nuclear power plants will harm local livelihoods, health and economies may never materialise.

Reactor builders in financial trouble

For one, despite all the tall claims made periodically by French, Russian and Indian diplomats and heads of state, till date no commercial contracts - only agreements - have been signed with AREVA and Russia for reactors in Jaitapur and Koodankulam.

AREVA, whose reactors are proposed for Jaitapur, is in financial doldrums. It has lost eight billion euros in four years, and has a debt of 5.8 billion euros on an annual turnover of 8.3 billion.

The company's Hinkley Point C project, tomtommed as UK's nuclear revival after a long pause, is in a shambles.

"The selected builder, the French majority state owned company AREVA, that was also to provide 10% of the capital investment [for the Hinkley project], is technically bankrupt.

"The selected strategic investor, the French majority state owned group EDF supposed to bail out AREVA, struggles with a 34 billion euro (US$38 billion) debt load and chronically negative cash flow," the report notes.

India's nuclear liability law has been pointed at as the game-spoiler. But the annual status report suggests that nuclear equipment suppliers have far greater problems than our liability law.

For EDF, which acquired a majority stake in AREVA's reactor building subsidiary last June, AREVA itself is the liability it needs to watch out for.

After downgrading EDF stocks in April, credit rating company Moody's warned the state owned utility that its acquisition of AREVA stocks could be 'credit negative', as it could 'increase EDF's business risk profile and weigh on its credit metrics'.

In the lead up to its acquisition by EDF, Standard & Poor's, another credit-rating agency, revised EDF's outlook to 'negative'.

Brazil, China and India already generate more electricity from non-hydro renewables than from nuclear power

The French nuclear builder's new builds - the Olkiluoto-3 project in Finland and EDF's Flamanville-3 site in France - are both delayed for at least five years and have incurred massive cost overruns.

Jaitapur is not listed as a risk only because it is not even on the radar.

Russia's predilection for prolific announcements of new nuclear projects finds special mention in the report.

The report quotes Steve Kidd of the World Nuclear Association, a prominent nuclear lobby group, to put Russia's predilection for prolific announcements of new nuclear projects in perspective: "[It is] reasonable to suggest that it is highly unlikely that Russia will succeed in carrying out even half of the projects in which it claims to be closely involved (...)"

Within days of the report's release, AtomStroyExport Company's president Valery Limarenko told Financial Express that his company is expected to build 12 atomic power units in India, including the proposed four additional plants in Koodankulam by 2030.

What Limarenko did not reveal is how his company is skating on thin ice, financially.

According to the report, "In February 2015, Moody's downgraded Atomenergoprom - 100% subsidiary of Rosatom... to 'junk' (Ba1) and assigned a 'negative outlook'." Limarenko's company AtomoStroyExport is majority owned by Atomenergoprom.

Junk or Ba1 status means the company's finances are vulnerable, and that adverse financial, economic or business conditions will impair its abilities to meet its financial commitments.

Nuclear claims laid bare

If the 2015 status report has one message, it is that the pace of innovation and technological change in the renewables sector is the single most important adverse financial, economic and business risk for the nuclear sector.

But, plagued by its habitual lack of realism, the nuclear sector continues to believe that an exaggerated claim, if repeated many times, will somehow materialise.

In the decade following the Chernobyl disaster, the global nuclear industry began talking about a nuclear renaissance driven by Generation III+ designs. The emphasis was to have been on making the phenomenally expensive technology fraught with safety issues more affordable, safer and more buildable.

Now, nearly 20 years later, Generation III+ joins the nuclear industry's ever growing list of unkept promises. Not one Generation III+ has been commissioned till date, and all ongoing projects have overshot budgets and schedules.

While it may make sense for the Government of India to continue with its nuclear bullishness for diplomatic and strategic reasons, state governments and utilities faced with the real task of delivering affordable electricity have nothing to gain by betting on nuclear power plants.

With their 'short lead times, easy manufacturability and installation and rapidly scalable mass production', modern renewables can yield richer political dividends with electricity as a collateral.