Power generation using nuclear energy is cheaper and safer
Since the very inception of the Rooppur Nuclear Power Plant (RNPP) project, the corresponding unit cost of generating electricity—per kilowatt-hour (kWh)—has been a subject of much speculation. I have yet to see someone come up with deterministic quotes backed up by a convincing economic and financial analysis. From financial and technical standpoints, the RNPP project is the largest megaproject in the history of Bangladesh. It is, therefore, very important to evaluate the economic feasibility of this project.
A total of 2,400MW of electricity from the two VVER-1200 reactor units of the power plant is expected to be added to the national power grid by 2024. Russia is funding 90 percent of the total investment cost of USD 12.85 billion, which is about USD 11.38 billion. This state credit is to be repaid over a period of 28 years along with an interest rate of Libor plus 1.75 percent, and capped at four percent. And there is a provision to extend the period for another 10 years, if necessary. Bangladesh will bear the remaining 10 percent of the project cost, i.e. USD 1.26 billion.
To analyse the economic aspects of this project, the service period of the two units has been fixed at 60 years. The construction period is six years. The inflation rate is expected to change at a steady rate of six percent per year against the local currency. For the US dollar, the inflation rate changes at a steady rate of two percent and at a tariff rate of 25 percent. The exchange rate of one US dollar has been fixed at Tk 80. A linear depreciation rate has been considered for the total economic lifetime of the two plants. The discount rate has been fixed at 10 percent considering the growing economy of Bangladesh. The fuel cost and the operation and maintenance cost are capped at USD 11.2 and USD 14.5 per megawatt-hour (MWh), respectively, with the lower limits set at USD 4.5 and USD 7.82 per MWh. In comparison, the global average rate for the fuel cost is USD 6.28 per MWh, and the operation and maintenance cost is USD 12.79 per MWh.
Given the international practices, the cost for waste management and decommissioning of the reactor units is estimated to be nine percent of the total investment, which amounts to about USD 1 billion. The plant capacity factor of the two plants has been varied from a minimum of 50 percent to a maximum of 90 percent. The average plant capacity factor of thermal power plants in our country is 50 percent. On the other hand, the average plant capacity factor of nuclear power plants is 90 percent and the plant capacity factor of VVER-1200 reactors is 93 percent.
A total of nine case studies have been conducted with the 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 USD 11.2 and the low fuel cost of USD 4.5, as well as between the high operation and maintenance cost of USD 14.5 and the low cost of USD 7.82. The case studies have been modelled 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 1kWh) stands at 8.25 cents (Tk 7) under the maximum fuel cost, maximum operation and maintenance cost, and minimum plant capacity factor of 50 percent. The minimum selling price per unit is 4.38 cents (Tk 3.72) under the minimum fuel cost and operation and maintenance cost, and the maximum plant capacity factor of 90 percent. On the other hand, if the maximum fuel cost and the highest operation and maintenance cost are considered with the plant capacity factor of 75 percent, the selling price per unit stands at 6.38 cents (Tk 5).
From the case studies with a fixed discount rate of 10 percent, the internal rate of return (IRR) is found to be 13-20 percent. As the IRR is 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 operation and maintenance cost per megawatt-hour of USD 8-14. It should be noted that the operation and maintenance cost is estimated close to the global average.
Now, let's see how the cost of generating electricity from nuclear energy fairs against other energy sources. According to the Bangladesh Power Development Board (BPDB) sources, the selling price of per unit electricity generated using gas is 3.31 cents, while it is 10.31 cents for coal-fired power, 21.70 cents for furnace oil-fuelled power, 28.43 cents for diesel-fired power, 6.83 cents for electricity imported from India, and 15.23 cents for solar power. The unit generation cost of electricity from gas is the lowest, followed by nuclear power. It is further observed that the cost of electricity generation using coal is almost double than that of using nuclear power, and the cost of electricity generation from diesel is the highest. Electricity generation from solar energy can be done at an affordable cost, compared to furnace oil and diesel. In the cases of independent power producers (IPPs), rentals and quick rentals, the costs of power generation per unit is even higher.
Next, let's look at the international context in relation to the cost of generating electricity from our nuclear power plant. Russia is building two reactors in Belarus and Hungary that are similar to the reactors in the RNPP project, with almost similar investment and loan terms. The minimum unit selling prices of electricity in Belarus and Hungary are 8.3 and 7.28 cents, respectively. In this case, it is seen that generating electricity from nuclear energy in our country is cheaper than in Belarus and Hungary. The average unit selling price of electricity from nuclear power in Bangladesh is 6.32 cents, which is about 37 percent less than the global average selling price (10 cents). The economic analysis shows that power generation from the RNPP project is economically competitive at both national and international levels, and is less risky in terms of investment. However, if the construction period is more than six years, the favourable condition may deviate. If the currency exchange rate is Tk 85, the cost of power generation per unit will not increase much. If the lifespan of the two units is taken to 20 years more, 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 US, commented that nuclear power generation in Bangladesh was nothing short of interesting and internationally competitive. He added that although the initial cost is a bit higher, the four percent interest rate and the operation and maintenance cost of USD 8-14 per MWh has helped make the project cost-competitive internationally.
Here, I would like to mention a relevant issue. After a comparative analysis of the technical and financial aspects between Russia's Generation-3 (VVER-1000) and Generation 3+ (VVER-1200 and VVER-1300 TOI) reactors, I had given my opinion to select the VVER-1200 model—which has the highest proven safety features—at a technology selection policy-making seminar on July 5, 2015. In this regard, I published an article titled "How should the reactor of Rooppur be?" (Prothom Alo, August 2, 2015). The reason for mentioning this is that the financial matter is closely related to reactor technology. Generating electricity from nuclear energy is very environmentally-friendly and economic. 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 ancillary infrastructure, and adapt the technology by creating skilled manpower.
Dr Md Shafiqul Islam is a researcher and writer, and a professor at the Department of Nuclear Engineering in Dhaka University.