During the passage of the Nuclear Liability Bill, the Prime Minister pointed out that India had to retain the option of using nuclear power as a source of energy. Put it this way, the use of civilian nuclear energy is a ?just in case? option. Yet the scale of commitment and the impending plans for setting up reactors with French, US and Russian suppliers seem to indicate a much greater reliance on nuclear power than a ?just in case? role.
Civilian nuclear power was used to sell the strategic alliance with the US in the Bush-Singh deal. Of course, neither side named it as such. But here too there is a ?just in case? angle where the scenarios are China-centred. Yet that in itself does not prove the case for nuclear energy. Nuclear power generated energy is not cheap and it would be appropriate for any long-run planning to be clear about the cost price at which the supply would be forthcoming. Having just got rid of the middle-class subsidy for petroleum, the government would be well advised to desist from embarking on another horrendous expense.
After an early promise in the 1950s, nuclear energy flopped as a source of cheap electric power. The US had its big wake-up call in the Three Mile Island accident. Britain was enthusiastic about nuclear power and had several reactors built. Eventually when there was a move to privatise the nuclear power sector in the 1990s, it emerged that there were no buyers because the cost of supplying power to consumers made nuclear power a bad option. At the time, the UK government invited tenders for privatisation, it was already giving a billion-pound subsidy to make it viable.
Nuclear power has won new friends on the grounds that it is clean. Yet we need to know the price of carbon at which, even if it is clean, the source will be economical. I predict that the price of carbon required to make nuclear power feasible is much higher than any found in the carbon market thus far. Only the EU has experimented with this and it has consistently under-priced carbon. Copenhagen further undermined any case for a high carbon price.
The Nuclear Liability Bill focuses on accidents. Even if the probability is very low, the damage will have such high costs that the expected value of such an event is not negligible. This is so not only within the vicinity of the reactor but also far away. The effects of Chernobyl were felt up to the Atlantic coast, i.e., every country between Ukraine and Wales was affected by the radiation released.
But even more than that, the larger cost of nuclear power is of disposal of waste. The waste is toxic and has a half-life running into centuries. In the UK and the US, attempts to get local communities to agree to have facilities for burial of the waste have proved to be very controversial. The economic cost of storage of toxic waste, in ways that are completely safe, has to be faced openly. Any escape of the waste will have devastating consequences for which the expected value is difficult to compute.
There are, of course, alternatives. Oil is too frequently dismissed as being likely to run out or costing too much. I have lived with stories of oil running out for 40 years at least. Oil was cheaper in real terms compared to 1979 even when two years ago it was $140. Every week we hear of yet another oil find; the latest being Cairn?s in the K-G basin. Brazil and Ghana are on the map of oil producing countries that were not there 10 years ago. The hydrocarbons supply is assured for decades ahead.
There are alternative sources such as wind power, solar energy and biofuel. These are always dismissed as too small or too expensive. Solar energy is a curious step-child. I recall Panditji enthusing about solar cookers in the 1950s. There are many countries investing in solar energy, not just China.
Jairam Ramesh has been quoted recently as arguing that biofuel competes with agricultural land. If so, the price at which land is sold to biofuel industries should reflect this opportunity cost. It is not that all agricultural land must be preserved for food production. India needs high productivity in agricultural land, not just any old land. Even so, India?s energy policy is so bizarre that Andhra Pradesh has biofuel supplying companies it chooses to tax at 22.5%, in addition to all the other taxes biofuel pays when it is mixed with diesel. With that sort of muddle it would be easy to price biofuel out of India. Has anyone asked Andhra Pradesh about the logic of its policy?
Is there any logic at all in India?s energy policy?
The author is a prominent economist and Labour peer