No, nuclear power isn't the answer to all our problems!

With commercial generation close to 50 MW, financial investment to power a 125 MW nuclear capacity makes no sense!

Khurram Lalani October 29, 2012
Nuclear based electricity production has always been touted as a technology viable for the future. Proponents of nuclear power see the technology as an important contributor to energy independence, supplying electricity at cheap rates without significantly harming the environment.

However, a more substantive analysis of its economic feasibility, hidden costs and environmental impact indicates that nuclear power is far from an optimal electricity production technology than it is generally considered in our part of the world.

The most overwhelming concern for the nuclear power industry is its high capital cost. Although operating expenses generally remain low, plant construction costs are exorbitantly high with timetables completely unpredictable. Of the 75 plants that have come online in 1986 in the US, all of them exceeded initial cost estimates by a range of 209%-381%. Current estimates are generally around $4,000-6,000 per kilowatt range but as the experience suggests, costs hike are likely to be volatile and steep.

This high and unpredictable rise in the cost of building nuclear power plants is generally attributed to several factors.

The construction of nuclear power plants takes a considerable amount of time, ranging from a minimum of seven years as in the case of China to as long as 30 years as in the case of the US. Such long lead times mean vulnerability to commodity pricing (steel, copper) which rise and fall abruptly and distort original cost estimates.  Moreover, the nuclear industry is a specialised industry where manufacturing shortages are quiet normal.

In the reactor parts manufacturing industry, for instance, high capital costs create substantial barriers to entry that prohibit competition and allow for monopoly pricing of needed supplies. Japan Steel Works, for example, is the only manufacturer of specialty 600-ton steel ingots. The demand for its specialised product is immense and supply very low which keeps the prices high. This also means that buyers often have to wait in line to get the due supplies, which delays construction timetables and keep the costs high.

Lastly, financing costs add up because plants take years to get built; even a one percent loan can make a significant impact on cash flows and profitability of an $8 billion project. Due to all these factors, The Economist noted in 2001, that nuclear energy which was advertised as “too cheap to meter” will only be remembered as “too costly to matter.”

Pakistan made an ambitious start to their nuclear policy with the International Atomic Energy Agency and Pakistan Atomic Energy Association (PAEC); they decided to produce eight 600 MW nuclear power plants between 1982-1999 and nine 600 MW in addition to seven 800 MW between 1991-2000.

On the contrary, it has only managed to achieve 400 MW of installed nuclear capacity, which provides a meagre 2% of Pakistan’s electricity supply from nuclear power despite hefty investment all these years. The construction lead time also depicts a stark picture, with both the plants taking long lead times for construction and experiencing frequent safety and operational issues.

The cost figures are equally distressing.

Both the current reactors, KANUPP and Chashma, have cost more than a billion dollars while producing almost next to nothing on the grid. KANUPP only produces 50 megawatts while CHASNUPP-I produces 300 MW. KANUPP came into commercial operation in 1972 and is said to have out lived its 30 years of life, but has been given a 10-year extension by PAEC which intends to keep it going for a few more years with repairs and replacements, posing significant safety and operational issues.

One wonders if, in a country like ours where energy needs are growing rapidly with rising population, a 30 year financial investment to power 125 MW nuclear capacity like KANUPP (commercial generation today is close to only 50 MW) makes any sense or not.

It is also evident that PAEC will become irrelevant without these nuclear power plants and will continue to ask for high operation and maintenance support, primarily for its own survival.

Read more by Khurram here.

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Khurram Lalani A Fulbright scholar at the University of Delaware, Center of Energy and Environmental Policy, Khurram's interests include research in energy finance, energy policy and political economy of the environment.
The views expressed by the writer and the reader comments do not necassarily reflect the views and policies of the Express Tribune.

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