High construction cost to double power generation cost

The cost of per kilowatt power production from Rooppur Nuclear Power Plant in Bangladesh will be 9.36 cents compared to 5.34 cents from a similar plant in Tamil Nadu’s Kudankulam, India.

The high construction cost of Rooppur Nuclear Power Plant is said to be the reason behind the excessive cost of would-be power production.

In Bangladeshi currency, the production cost of per unit electricity from two reactors of the RNPP will be Tk 7.94 while their establishment costs are $12.65 billion, according to a research released by Springer-Verlag GmbH, Germany, earlier this year.

In Indian currency, the production cost of power from Kudankulam 3 and 4 plants will be Rupee 3.93 since their construction costs are about $5.38 billion.

A research paper written jointly by academics Gour Gobinda Goswami and Umama Rahman of North South University in Bangladesh and Mehdi Chowdhury of Bournemouth University Business School in the UK estimated the levelized cost of electricity from nuclear power plants using a financial model in both countries.

The levelized cost of electricity, or levelized cost of energy, is a measure of the average net present cost of electricity generation for a generator over its lifetime.

The university researchers made a comparative study on two power plants since their construction and found them almost identical in terms of electricity generation.

Both Bangladesh and India have taken financial and technical assistance from Russia for establishment of the reactors.

Using the discounted present value method developed by Du and Parsons (2009), MIT (2003; 2009; 2018), and Singh et al. (2018), the researchers noted that the India’s levelized cost of electricity from power plant would be lower than that in Bangladesh for several reasons.

The research finds that the construction cost is more than double in Bangladesh compared to that in India; further, Bangladesh incurs an additional external cost of $187.5 million, finds the research.

Since Bangladesh is establishing its first nuclear power plant, it bears a setup cost of different facilities like telecommunications, transportation, waterline establishment and gridline establishment while Kudankulam 3 and 4 are India’s 25th and 26th nuclear power reactors, according to the paper.

It said that the cost per unit of nuclear power in Bangladesh would be 70 per cent higher than in a comparable plant in India which was mainly because the construction cost was more than double in Bangladesh than in India.

A part of the reason of high construction costs is 69 per cent higher cost of interest during the construction of nuclear power plant here while the other reason is 69 per cent higher overnight costs, observed the researchers.

Former World Bank Dhaka office chief economist Zahid Hussain noted that the research paper could have been more meaningful had the researchers explained why there was a big difference in construction costs of the reactors in two countries.

‘The question remains unanswered though,’ he said.

Zahid said that the research should give more information about Kudankulam 1 and 2 reactors built at a cost of $2.6 billion to produce 1,000 megawatts of electricity by 2016 after their start in 2002.

That the RNPP’s two reactors have a capacity to produce 1,200 megawatts of power but are almost five times more costly as shown in the research than Kudankulam 1 and 2 reactors built 10 years ago looks surprising, he added.

According to Policy Research Institute executive director Ahsan H Mansur, the construction cost of the country’s first nuclear power plant was very high since its contractor was appointed without any international bidding.

Terminating the contract process not transparent, Mansur said that the country could have produced the same amount of power at less than $3 billion.

He argued that the country’s debt sustainability would come under serious stress because of loan repayment to Russia taken for the nuclear power plant.

The first installation of $569 million payment in loans is due in March 2027.

The researchers, however, hinted that the power plant would be profitable if the government could sell out per kilowatt of electricity at above Tk 7.94.

They said that in Bangladesh the cost of producing electricity was always higher than the price of electricity.

The power sector had been subsidized by Tk 52,260 crore over the past 10 years due to higher production costs against the lower sale price, they argued.

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