Does nuclear power have a role in our climate change strategy?

Nuclear power has many advantages. It neither emits CO2 nor creates air pollution. Disposal of radioactive waste does pose a problem, but it is manageable. And unlike RE which is intermittent, presenting challenges for grid management, nuclear power provides a steady supply—precisely what we need to replace coal-based power.

These considerations suggest that we should scale up nuclear power much beyond its current 3% share of total electricity in India. Two reasons for its limited growth globally in recent years are safety and high costs. A third that is relevant in India is our policy framework which makes nuclear power a public sector monopoly.

The safety issue is easily shown to be overstated. Although Germany has shut down its last reactors, other advanced countries are working to scale them up. France relies on nuclear energy for about 70% of its power and expects to continue at this level. The US gets 20% of its electricity from nuclear power and this could increase in the future. The UK, South Korea and even Japan—the site of the 2011 Fukushima accident—are planning to increase the share of nuclear power in their electricity mix.

The cost of nuclear power is a major concern. The Central Electricity Authority recently estimated the capital cost of nuclear power plants at 2.5 times that of coal-based plants (though there are fuel savings that offset some of this differential). However, cost comparisons are heavily affected by assumptions and methodologies.

Coal-based power appears relatively cheap today only if we disregard its high social costs on account of CO2 emissions and also air pollution. A $25 per tonne CO2 tax ( the minimum recommended by the International Monetary Fund) would raise costs of coal-based power in India by at least 50%. RE is much cheaper, but it is intermittent. Introducing storage batteries at grid scale would at least double the cost of RE in the foreseeable future, although one can hope that storage costs will decline as grid-scale batteries get cheaper.

On balance, there is a good case for expanding the share of nuclear power in India. China is targeting a 10% share of nuclear power in its energy mix by 2035. If we were to target the same share by 2040, then considering the additional power demand on account of electrification—a key element of the energy transition—our nuclear power capacity would have to expand from 6.8GW today to around 65GW. Our current target is only to have 22.5GW capacity by 2031.

A key constraint on achieving these ambitious targets is the present institutional framework which requires that nuclear power stations in India can only be run by public sector undertakings (PSUs). This has effectively given NPCIL a monopoly and its record on meeting targets is poor. Ending this monopoly and allowing new entrants, with new capabilities and management cultures, could help reduce implementation times and thereby also lower costs.

As noted above, the government has announced that NTPC will collaborate with NPCIL through a joint venture (JV) and will set up 4.2GW of combined nuclear power capacity at two sites in India by 2035. Bringing NTPC into the nuclear sector is a welcome step, but the joint venture arrangement does not provide the same flexibility as allowing NTPC to enter this area independently.

Ideally, we should go even further and allow private players to enter this sector in due course. This should be combined with strong institutional arrangements for a suitably empowered independent regulatory authority that will enforce safety standards on all operators. The private sector can bring in both technology and capital. The extent to which the private sector will respond depends on many factors, including policy stability and regulatory transparency, but enabling their participation remains the first step.

A possible halfway house is to allow both NPCIL and NTPC to form JVs with private companies including foreign companies. As experience is gained, we could move to allowing majority private sector ownership in this area, as is the case in some countries. Allowing JVs with foreign companies with technology would allow us to explore the possible involvement of French and Japanese firms in setting up nuclear power plants in India. South Korea, in partnership with US firms, is commercializing small modular reactors (SMRs), which are typically under 300MW in capacity.

SMRs represent a new technology which may be especially relevant for India. They could reduce costs by enabling prefabrication of reactor units in factories, which would yield scale economies. They could also be installed in existing sites of coal-based power plants that are to be phased out in the country’s transition to net zero. This is something that NTPC might find especially attractive.

Public-private partnerships as described above would involve some investment by the public sector, but there could be substantial additional financing from a combination of bilateral official credit and loans from sovereign wealth funds. The International Finance Corporation could be an important source of such credit. One possible step to facilitate this is through the classification of nuclear power as “green”, or at least zero-carbon.

Finally, bringing private companies into the country’s nuclear power sector would require an amendment of the Civil Liability for Nuclear Damage Act, 2010, which extends liability to suppliers of nuclear equipment in case an equipment failure leads to a disaster. The Act is not in line with current international practice where the liability is strictly limited to the operator, and which can be covered by insurance (or a public backstop). A review of this legislation is highly desirable and could be entrusted to the Niti Aayog.

To summarize, as the world seems set to resume expansion of nuclear power, there is a distinct possibility of new developments like SMRs, passive safety designs and even advanced nuclear fuels and new fuel cycles. These innovations could reduce costs. We need to be well placed to benefit from these developments, but this calls for a comprehensive rethink of our domestic policy constraints that could otherwise prevent us from participating fully in this process.

Montek S. Ahluwalia, Utkarsh Patel & Rahul Tongia are, respectively, former deputy chairman, Planning Commission and currently distinguished fellow at the Centre for Social and Economic Progress (CSEP), associate fellow, and senior fellow at CSEP.