Jaitapur: A risky and expensive project

Mains Paper 2: Economy
Prelims level: Nuclear Power Corporation of India
Mains level: Infrastructure

Context

•  The French company Électricité de France (EDF) submitted a “techno-commercial proposal” to the Indian government for the Jaitapur nuclear power project in Maharashtra.
•  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.
•  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.
•  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 ₹1.75 lakh crore).

Impacts of PV projects

•  While nuclear costs have been rising, other low-carbon sources of electricity, especially solar energy, have become cheaper.
•  In 2010-11, tariffs for solar photovoltaic (PV) projects under the National Solar Mission were between ₹10.95 and ₹12.76 per unit.
•  But several projects approved under Phase II of the mission have been connected to the grid in the last year with tariffs below ₹5 per unit.
•  In recent auctions for solar PV projects, winning tariff bids in the range of ₹2 to ₹2.50 per unit have become routine.
•  The high capital costs of the EPRs are of particular concern because power-generating capacity in India has grown faster than demand causing projects to run into financial difficulties.
•  In March 2018, the parliamentary standing committee on energy listed 34 “stressed” projects, including NPAs and “those which have the potential to become NPAs”, with a cumulative outstanding debt of ₹1.74 lakh crore.
•  In this context, the government seems to be throwing caution to the winds by investing lakhs of crores in the Jaitapur project.
•  The NPCIL’s debts would ultimately be underwritten by the Indian government, if the project encounters financial difficulties, the costs would fall on Indian taxpayers.
  Safety problems
•  In addition to the high costs, safety problems with the reactor design and construction have emerged in several EPRs.
•  The most serious of these pertained to the pressure vessel, which is the key barrier that prevents the spread of radioactive materials from the reactor.
•  The Flamanville project was also found to have substandard welding in the reactor’s pipes.
•  The EPR at Olkiluoto in Finland encountered problems with vibrations in the pipe that connects the primary coolant system with the pressuriser, which maintains the pressure of the water circulating in the reactor.
•  These safety concerns are exacerbated by India’s flawed nuclear liability law.
•  If and when completed, Jaitapur “will be the largest nuclear power plant in the world”.
•  In the event of an accident, the nuclear liability law would require the public sector NPCIL to compensate victims and pay for clean-up, while largely absolving EDF of responsibility.

Way forward

•  The Indian law provides NPCIL with a limited opportunity to obtain compensation from EDF for the “supply of equipment with defects or sub-standard services”.
•  But the joint statement issued in March 2018 promises that the “enforcement of India’s rules” would be in accordance with the international Convention on Supplementary Compensation for nuclear damage, which severely limits the operator’s right of recourse.
•  This raises the disturbing possibility that the NPCIL may have promised not to exercise its right to claim compensation from EDF as allowed by Indian law.
•  In any event, there is a “moral hazard” here: since EDF can escape with limited or no consequences even after a severe accident.
•  It has little material incentive to maintain the highest safety standards, particularly if the requirements of safety come into conflict with the imperative to lower costs.
•  Such pressures might be accentuated by EDF’s poor financial state.
•  The Modi-Macron statement “emphasized the need for the project to generate cost-effective electricity”.
•  Unless it is transparent about these details, the Modi government may well find itself engulfed in yet another controversy involving overpriced French equipment.

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Prelims Questions:

Q.1) With reference to technologies for solar power production, consider the following statements:
1. To produce electricity, „Photovoltaics‟ uses semiconductors while Solar thermal systems use mirrors or lenses.
2. Photovoltaics work even with diffused radiation while solar thermal systems generally need large amount of direct solar radiation.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: C

Mains Questions:
Q.1) How much will the entire project cost, who will be accountable for cost increases and delays, and what is the precise arrangement that the government has reached with France on liability?