Generating electricity using nuclear energy is cheaper and safer

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A trailer transports a reactor pressure vessel, which will be installed at the Rooppur nuclear power plant, from a plant in Russia in August 2020. Photo: Collected

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A trailer transports a reactor pressure vessel, which will be installed at the Rooppur nuclear power plant, from a plant in Russia in August 2020. Photo: Collected

Since the very beginning of the Rooppur Nuclear Power Plant (RNPP) project, the corresponding unit cost of power generation – per kilowatt hour (kWh) – has been the subject of much speculation. I have yet to see anyone come up with deterministic quotes backed by compelling economic and financial analysis. Financially and technically, the RNPP project is the largest megaproject in the history of Bangladesh. It is therefore very important to assess the economic feasibility of this project.

A total of 2,400 MW of electricity from the plant’s two VVER-1200 reactors is expected to be added to the national electricity grid by 2024. Russia is funding 90% of the total investment cost of $ 12.85 billion, or about $ 11.38 billion. This State credit is repayable over a period of 28 years with an interest rate of Libor increased by 1.75% and capped at 4%. And there is a provision to extend the 10-year period, if necessary. Bangladesh will bear the remaining 10 percent of the cost of the project, or $ 1.26 billion.

To analyze the economics of this project, the service life of the two units has been set at 60 years. The construction period is six years. The inflation rate is expected to move at a constant rate of 6% per year against the local currency. For the US dollar, the inflation rate changes at a constant rate of 2% and at a tariff rate of 25%. The exchange rate for one US dollar has been set at 80 Tk. A linear depreciation rate was considered for the total economic life of the two plants. The discount rate was set at 10 percent in view of Bangladesh’s economic growth. Fuel cost and O&M costs are capped at $ 11.2 and $ 14.5 per megawatt hour (MWh), respectively, with lower limits set at $ 4.5 and $ 7.82 per MWh . In comparison, the global average tariff for the cost of fuel is $ 6.28 per MWh, and the O&M cost is $ 12.79 per MWh.

Based on international practice, the cost of waste management and reactor decommissioning is estimated at nine percent of the total investment, which amounts to approximately $ 1 billion. The capacity factor of the two factories varied from a low of 50 percent to a high of 90 percent. The average capacity factor of thermal power plants in our country is 50 percent. On the other hand, the average capacity factor of nuclear power plants is 90%, and the capacity factor of VVER-1200 reactors is 93%.

A total of nine case studies were conducted with plant capacity factors of 50 percent, 75 percent, 80 percent, 85 percent and 90 percent. These are subject to change between the high fuel cost of $ 11.2 and the low fuel cost of $ 4.5, as well as between the high O&M cost of $ 14.5 and the low cost of 7.82 USD. The case studies were modeled using the FINPLAN tool developed by the International Atomic Energy Agency (IAEA). Analysis of the results shows that the minimum selling price of electricity per unit (1 unit means 1 kWh) is 8.25 cents (Tk 7) below the maximum fuel cost, the maximum operating cost and maintenance requirements and the minimum plant capacity factor of 50%. The minimum selling price per unit is 4.38 cents (Tk 3.72) below the minimum fuel cost and O&M costs, and the maximum plant capacity factor of 90%. On the other hand, if the maximum fuel cost and the highest O&M costs are factored in with the plant capacity factor of 75 percent, the selling price per unit s ‘amounts to 6.38 cents (Tk 5).

Based on the case studies with a fixed discount rate of 10%, the internal rate of return (IRR) is 13-20%. The IRR being higher than the discount rate, this makes the RNPP project economically attractive. The main reason is due to the low interest rate of four percent and the low O&M cost per megawatt hour of $ 8-14. It should be noted that the cost of operation and maintenance is estimated to be close to the world average.

Now let’s see how the cost of producing electricity from nuclear energy compares to other energy sources. According to sources from the Bangladesh Power Development Board (BPDB), the selling price per unit of electricity produced from gas is 3.31 cents, while it is 10.31 cents for coal-fired electricity, 21.70 cents for oil-fired electricity, 28.43 cents for diesel. -electricity fired, 6.83 cents for electricity imported from India and 15.23 cents for solar energy. The unit cost of producing electricity from gas is the lowest, followed by nuclear. It is further observed that the cost of generating electricity from coal is almost double that of using nuclear power, and the cost of generating electricity from diesel is the highest. raised. Electricity generation from solar energy can be done at an affordable cost, compared to fuel oil and diesel. In the case of independent power producers (IPPs), rentals and quick rentals, the costs of generating electricity per unit are even higher.

Next, let’s look at the international context in relation to the cost of producing electricity from our nuclear power plant. Russia is building two reactors in Belarus and Hungary that are similar to the reactors of the RNPP project, with almost similar investment and loan conditions. The minimum unit selling prices for electricity in Belarus and Hungary are 8.3 and 7.28 cents, respectively. In this case, it is found that the production of electricity from nuclear energy in our country is cheaper than in Belarus and Hungary. The average unit selling price of nuclear power in Bangladesh is 6.32 cents, about 37% lower than the global average selling price (10 cents). The economic analysis shows that the electricity production of the RNPP project is economically competitive at the national and international levels, and is less risky in terms of investment. However, if the construction period is longer than six years, the favorable condition may deviate from it. If the exchange rate is 85 Tk, the cost of producing electricity per unit will not increase much. If the lifespan of both units is extended to another 20 years, it is possible to get electricity at a lower price.

Looking at the numbers, Jacopo Buongiorno, a distinguished professor at the Massachusetts Institute of Technology (MIT) in the United States, said that nuclear power generation in Bangladesh is just interesting and internationally competitive. He added that although the initial cost is a bit higher, the interest rate of four percent and the O&M costs of $ 8-14 per MWh helped make the project internationally competitive. .

Here I would like to mention a relevant question. After a comparative analysis of the technical and financial aspects between the Russian Generation 3 (VVER-1000) and Generation 3+ (VVER-1200 and VVER-1300 TOI) reactors, I gave my opinion to choose the VVER-1200 model — which has the highest proven safety features – at a Technology Selection Policy Development Seminar on July 5, 2015. In this regard, I published an article titled “How Should the Rooppur Reactor Be?” (Prothom Alo, August 2, 2015). The reason for this mention is that the financial question is closely linked to the technology of the reactors. The production of electricity from nuclear energy is very ecological and economical. The Gen-3 + VVER-1200 reactor with modern safety features is extremely unlikely to fail like Chernobyl or Fukushima. Now it is necessary to complete the construction work on time with the auxiliary infrastructure and adapt the technology by creating a skilled workforce.

Dr Md Shafiqul Islam is a researcher and writer, and a professor in the Department of Nuclear Engineering at the University of Dhaka.


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