BSR: A Giant Leap in Clean Energy Transition with Small Reactor Challenges

India is poised to take a monumental leap in its journey toward sustainable energy with the introduction of Bharat Small Reactors (BSRs)—a groundbreaking initiative to harness nuclear power for grid decarbonization. Spearheaded by the Nuclear Power Corporation of India Limited (NPCIL), the recently issued Request for Proposal (RFP) marks a pivotal moment in the nation’s energy strategy. Designed as compact and efficient Pressurized Heavy Water Reactors (PHWRs), these twin 220 MWe reactors aim to serve as a reliable, zero-carbon energy source for industries and the grid. This initiative signals India's commitment to innovative energy solutions that not only strengthen energy security but also align with global climate action imperatives because nuclear energy stands out as a highly efficient and environmentally sustainable power source, requiring minimal land per megawatt of capacity compared to other energy technologies. Its compact footprint makes it especially valuable in land-scarce country like India. Moreover, nuclear power boasts the lowest lifecycle carbon dioxide emissions among all major energy sources, including renewables, as it generates electricity without combustion. This unique combination of efficiency and environmental performance positions nuclear energy as a vital tool in combating climate change and supporting global decarbonisation efforts. While this approach may not align with the current international trend of modular, factory-built solutions, opening the nuclear sector to private partnerships represents a significant policy shift.

2. In this blog, we will delve deeper into the nuances of the RFP issued by NPCIL for the ambitious Bharat Small Reactors project with an aim to provide a concise summary of the proposal, discuss critical issues that need attention, and identify the leading power sector companies likely to qualify based on net worth criteria. It will also explore the expected project costs and calculate the estimated Levelized Cost of Electricity (LCOE), offering insights into the economic viability of this initiative. A detailed look into how uranium fuel will be sourced—both domestically and through imports—and managed throughout the project lifecycle will also be covered. Finally, the blog will examine the broader challenges, such as regulatory compliance, high eligibility thresholds, and the complexities of transitioning to nuclear power as a cornerstone of India’s decarbonization strategy.

3. Salient features of the RFP

The Request for Proposal (RFP) for the setup of 220 MWe Bharat Small Reactors (BSRs) outlines a comprehensive framework for industries to participate in India's nuclear energy expansion. Key features include:

             ·    Type and Capacity:

o  Deployment of Pressurized Heavy Water Reactors (PHWRs), with a combined capacity of 2 x 220 MWe, primarily for captive power consumption.

o   Operations will be managed by NPCIL.

·                   ·    Site Requirements:

• Land requirement: 331 hectares for a 1 km exclusion zone or 87 hectares for a 0.5 km radius.
• Safety compliance: Sites must avoid seismic zones and be distanced from potential hazards.
• Regulatory Framework: Adherence to Atomic Energy Regulatory Board (AERB) standards across all phases—siting, construction, operation, and decommissioning—is mandatory.
• Technical Specifications:
• Cooling systems: Options for natural or induced draft towers.
• Water requirements: Inland sites need 4800 m³/hr, while coastal sites use seawater.
• Implementation Timeline:
• Site approvals within 6–12 months.
• Construction period: Approximately 42-48 months post-approval.
• Operational life: 40 years, extendable.
• Decommissioning as per Atomic Energy Act guidelines.
• Commercial and Financial Aspects:
• Eligibility: Users must consume 2500 MUs annually and have a net worth of ₹3000 crores.
• Financial obligations: Users bear the CAPEX, OPEX, and decommissioning costs, with NPCIL expertise fees starting at ₹0.60/kWh, increasing by ₹0.01 annually.
• Earnest Money Deposit (EMD): ₹10 crores.
• Proposal Submission:
• Pre-proposal meeting on January 21, 2025.
• Submission deadline: March 31, 2025, 11:00 AM IST.
• Proposal opening: April 4, 2025, 2:00 PM IST.
• Submission process: Single-stage, sealed envelope with mandatory documentation (e.g., Integrity Pact, NDA).
• Additional Provisions:
• Exit Clause: Users cannot exit post-construction commencement, except under exceptional circumstances.
• Force Majeure: Includes natural or political events; NPCIL bears no liability under these conditions.
• Regulatory Oversight: AERB licenses required for all project stages, with periodic compliance checks

4.  Key Challenges: The Request for Proposal (RFP) offers a promising framework for industries to play a vital role in advancing India’s clean energy goals. However, it comes with substantial financial and regulatory commitments that pose significant challenges. A key concern is the project’s financial viability, as the entire burden of Capital Expenditure (CAPEX), Operational Expenditure (OPEX), and decommissioning costs falls solely on the user. This heavy financial responsibility risks deterring participation, particularly from industries that may find the investment and long-term obligations unsustainable.    

      a)   Financial Viability:

o   Entire financial burden (CAPEX, OPEX, taxes, and decommissioning) lies on the user.

o   High upfront costs and long payback periods may deter participation.

o Recommendation: Introduce cost-sharing mechanisms, financial incentives, or guarantees.

b)       Land Requirements:

o   Substantial land requirement (331 hectares for 1 km exclusion zone) limits participation.

o   Challenges in securing large contiguous plots.

c)       Water Requirements:

o   Inland sites require 4800 m³/hr of water, posing challenges in water-scarce regions.

o Recommendation: Introduce water conservation measures or alternative cooling technologies.

d)       Regulatory and Approval Delays:

o   Lengthy and complex approval processes involving AERB, DAE, and MoEFCC.

o   Potential delays in siting, construction, and operation.

o   Recommendation: Provide clear timelines and a single-window clearance system.

e)       Exit Clause:

o   Users exiting post-construction lose all investments, discouraging participation.

o   Recommendation: Allow more flexible exit options or partial compensation mechanisms.

f)        Tariff Regulation for Third-Party Sales:

o   Tariffs set by DAE could reduce commercial viability.

o   Recommendation: Clarify tariff mechanisms and allow competitive or market-based pricing.

g)       Expertise Fees:

o   Annual increase in NPCIL’s expertise fee (₹0.60/kWh, increasing by ₹0.01 annually) adds a growing cost burden.

o   Recommendation: Cap the expertise fee to ensure cost predictability.

h)       Force Majeure Provisions:

o   NPCIL’s liability excluded under force majeure, but user risks remain unaddressed.

o   Recommendation: Add provisions to share costs or pause obligations during such events.

i)         Spent Fuel and Decommissioning Costs:

o   Users bear responsibility for complex and costly spent fuel storage and decommissioning.

o   Recommendation: Provide detailed cost estimates and consider shared responsibilities with NPCIL.

j)         Ambiguities in Fuel and Heavy Water Management:

o   Unclear terms in the tripartite agreement for leasing and supply of fuel and heavy water.

o   Recommendation: Specify leasing terms, costs, and supply timelines.

k)       User Eligibility Criteria:

o   High thresholds (₹3000 Crore net worth and 2500 MUs annual consumption) limit participation to large players.

l)         Lack of Incentives for Early Completion:

o   No bonuses or incentives for timely or early project milestones.

o   Recommendation: Include reward mechanisms to encourage faster execution.

m)     Developer to be Captive User:

o   Long-Term Commitment: Developers must commit to consuming a majority (51% or more as per electricity rules) of the electricity generated for 40 years, which is an exceptionally long-time frame for industrial operations.

o   Changing Energy Needs: Industries may face fluctuations in electricity demand due to market conditions, technological advancements, or operational downsizing, making it difficult to consistently consume 51% of the output.

o   Risk of Overcommitment: Developers may overestimate their energy needs at the start of the project, leading to underutilization of the power plant capacity in later years.

o   Lack of Flexibility: The strict definition of captive consumption limits options for selling surplus power to third parties, even when industry requirements fall below the 51% threshold.

o   Regulatory Compliance: Ensuring compliance with captive user norms for 40 years could be administratively and legally challenging, especially with evolving regulations.

5. These issues highlight the need for revision in RFP to ensure greater feasibility and inclusivity for developers.Addressing these issues through cost-sharing mechanisms, streamlined regulatory approvals, and flexible agreements could significantly enhance the viability and attractiveness of this transformative project.

6.  User or Beneficiary?

In the context of the RFP, the "User" refers to the industrial or commercial entity responsible for setting up and consuming more than 51% of the net electricity generated by the Bharat Small Reactors (BSRs) and do third party sale for the rest. The User also serves as the Funding Provider, bearing the entire lifecycle costs of the project, including Capital Expenditure (CAPEX), Operational Expenditure (OPEX), and decommissioning. Additionally, the User acts as the Land Provider, ensuring the availability of suitable and compliant land for the nuclear power plant.

7. Why the Term "User"?

The term "User" emphasizes that the entity is not just a passive investor, but an active participant and end-user of the electricity generated. The structure allows the User to align the project with their industrial or commercial energy needs while maintaining operational collaboration with NPCIL with followings:

a)       Feeding into the Grid

·       Primary Purpose: The generated electricity is primarily for the User’s captive consumption.

·      Third-Party Sales: If the User wishes to sell surplus electricity to other customers, it may be fed into the grid for distribution to third parties.

b)     Regulation of Grid-Connected Electricity

Electricity fed into the grid will be regulated by the following authorities:

c)      Department of Atomic Energy (DAE)

·        Role: DAE determines the tariff for electricity sold to third parties as per the Atomic Energy Act, 1962.

·    Rationale: Since the project involves nuclear power, which is a strategic and regulated domain in India, DAE has overarching authority over its commercial aspects.

d)      State and Central Electricity Regulatory Commissions (SERCs and CERC)

·      Role: Regulatory commissions oversee compliance with:

o   Grid code requirements.

o   Scheduling and dispatch regulations.

o   Tariff structures for third-party sales.

·        Applicable Laws: Electricity Act, 2003 and relevant state regulations.

e)       Atomic Energy Regulatory Board (AERB)

·      Role: Ensures safety and compliance of nuclear facilities, including aspects that could impact grid stability or radiological safety during grid operations.

 

8. Eligible Power Companies meeting net-worth criteria

Among the listed companies, besides NPCIL (Nuclear Power Corporation of India Limited), NTPC Limited & L&T   have some experience with nuclear power projects. However, NPCIL is the project proponent in this case.

Other Power Companies Without Nuclear Power Experience

The following power companies while meeting the net-worth criteria do not currently operate in nuclear power:

• Tata Power
• Adani Power
• Power Grid Corporation
• NHPC
• JSW Energy
• NLC India
• SJVN
• Reliance Power
• Torrent Power

These companies primarily focus on thermal, hydro, solar, wind, and other renewable energy sources but lack experience in nuclear power generation.

9.   LCOE Calculation for Bharat Small Reactor

      Key Assumptions:

• Capital Cost: ₹15 crore per MW for a 440 MW plant.
• Plant Load Factor (PLF): 68.5%.
• Operational Life: 40 years.
• Discount Rate: 10%.
• Operation & Maintenance (O&M) Cost: ₹50 lakhs per MW per year.
• Fuel Cost: ₹2 per kWh. (basis worked out in para-13)
• Auxiliary Consumption: 11.75% (with cooling tower)

10. LCOE Calculation Details:

a)  Total Capital Cost:

₹15 crore/MW×440 MW=₹6600 crore

b)  Annual Electricity Generation:

440 MW×8760 hours/year×0.685=2,642,928 MWh/year or 2642.93 MU/year

c) Net Generation after Auxiliary Consumption= 2642.93*(1-.1175) =

2332.38 MU/year

c)  Capital Recovery Factor (CRF):

CRF=(r*(1+r) ^n) /((1+r) ^n−1), where r=0.10, n=40.

CRF≈0.10275

d)  Annualized Capital Cost:

₹6600 crore×0.10275=₹678.15 crore/year

f)       Operation & Maintenance (O&M) Cost:

₹0.5 crore/MW/year×440 MW=₹220 crore/year

g)      Fuel Cost (break-up in para-13):

₹2 per kWh×2642.93 MU/year=₹528.59 crore/year

h)     Total Annual Cost:

₹678.15 crore+₹220 crore+₹528.59 crore=₹1426.74 crore/year

i)        Estimated Levelized Cost of Electricity (LCOE):

LCOE=Total Annual Cost / Annual Electricity Generation. LCOE=₹1426.74 crore/year /2332.38 MU/year  ≈ ₹6.11 per kWh

Since final LCOE should also include NPCIL Expertise Fee: ₹0.60 per kWh, LCOE will be = ₹6.11 per kWh+₹0.60 per kWh =₹ 6.76 per kWh

 

Based on given assumptions, the Levelized Cost of Electricity (LCOE) for the Bharat Small Reactor project is approximately ₹6.76 per kWh inclusive of NPCIL expertise fee.

11. Fuel Supply Chain for Nuclear Reactors

a. Uranium Supply

• Source: Natural uranium, used as fuel in PHWRs, is procured and processed domestically or through imports.
• Domestic Sources:
• Uranium is mined and processed by Uranium Corporation of India Limited (UCIL), a public sector enterprise under the DAE.
• Domestic uranium mining operations include facilities in Jharkhand, Andhra Pradesh, and Meghalaya.
• Imported Uranium:
• Additional uranium is imported to meet demand, under international agreements and safeguards.

b. Fuel Fabrication

• Nuclear Fuel Complex (NFC):
• NFC, an entity under the DAE, fabricates the fuel assemblies required for PHWRs.
• It processes uranium into natural uranium dioxide (UO₂) pellets, which are then loaded into zirconium alloy cladding to form fuel bundles.

c. Heavy Water Supply

• Heavy Water Board (HWB):
• Another entity under the DAE, the HWB produces and supplies heavy water (D₂O), which acts as both a moderator and coolant in PHWRs.

d. Fuel Leasing and Supply Agreement

For the BSR project:

• A tripartite agreement among the User, NPCIL, and the DAE will govern the leasing and supply of fuel and heavy water.
• Ownership: The fuel, spent fuel, and heavy water remain the property of the DAE throughout the plant’s lifecycle.

e. Key International Agreements for Imported Fuel

India sources uranium under its civil nuclear cooperation agreements with countries such as:

• Canada, Kazakhstan, Russia, and Australia.
• These agreements ensure a steady supply of uranium for India’s safeguarded reactors, including those used for power generation.

f. Spent Fuel Management

• The spent fuel remains the property of the DAE and is managed under its guidelines.
• Long-term storage and reprocessing are overseen by DAE facilities.

g. Assurance of Supply

• DAE ensures a secure and continuous supply of fuel to meet the operational demands of the reactors.
• NPCIL facilitates the coordination between the User (industrial entity) and DAE for timely delivery and management of fuel. 

12. Annual Requirement of Fuel

To estimate the annual uranium requirement for a 220 MWe Bharat Small Reactor (PHWR), we consider the following factors and data:

Key Data and Assumptions

a)      Plant Load Factor (PLF):

o   PLF = 68.5% (as stated in the RFP, could increase to 72.5%).

b)      Annual Energy Generation per Reactor:

o   Rated capacity: 220 MWe.

o   Annual hours: 24x365=8760 hours/year.

o   Annual energy output (at 68.5% PLF): Energy=220 MW×8760 hours×0.685

    =1,321,716 MWh/year

c)      Twin Reactor Plant Output:

o   For two reactors: 1,321,716 MWh×2=2,643,432 MWh/year

o   = 2643 MU

d)      Fuel Consumption Rate:

o   PHWRs typically require about 27 kg of natural uranium per GWh (as per norms in the RFP, likely to reduce to 25 kg/GWh with efficiency improvements).

e)      Conversion to Uranium Requirement:

o   Total generation: 2,643.432 GWh/

o   Using 27 kg/GWh: Uranium Required=2,643.432 GWh/year×27 kg/GWh=71,373 kg/year 

71.37 tonnes/year

o   Using 25 kg/GWh: Uranium Required=2,643.432 GWh/year×25 kg/GWh=66,086 kg/year

o    66.09 tonnes/year.

j)        Estimated Uranium Requirement:

a.      71.37 tonnes/year at 27 kg/GWh.

b.      66.09 tonnes/year at 25 kg/GWh (if efficiency improves).

This is for the twin-reactor (440 MWe) plant operating at 68.5% PLF. Adjustments may be needed for different PLF values or operational conditions.

13. Fuel Price / KWh estimations

a. Components of ₹2 per kWh

The ₹2 per kWh accounts for Raw Fuel Cost of natural uranium, whether domestically mined or imported, Fuel Processing and Fabrication at Nuclear Fuel Complex (NFC) for Converting uranium ore into fuel-grade material and fabricating it into usable fuel assemblies, Heavy Water Costs required for PHWR, Fuel Transportation, Waste Management and Overheads and Safety Compliance:

b. Industry Benchmarks

The ₹2 per kWh value is derived from industry standards and benchmarks for nuclear reactors, ensuring that all associated costs beyond raw uranium are included. While the raw uranium cost alone may be lower, processing and ancillary expenses significantly add to the overall cost.

c. Raw Uranium Cost (~₹0.30 per kWh)

• Uranium Cost:
• For 70 MT of uranium at ₹10,000 per kg, the cost per kWh was calculated as approximately ₹0.26–₹0.30.
• Percentage of Total: 15%.

d. Fuel Processing and Fabrication (~₹0.60 per kWh)

• Processing Costs:
• Conversion of natural uranium ore into fuel-grade uranium dioxide (UO₂).
• Fabrication of fuel assemblies at the Nuclear Fuel Complex (NFC).
• Percentage of Total: 30%.

e. Heavy Water Costs (~₹0.50 per kWh)

• Role of Heavy Water:
• Acts as both moderator and coolant in PHWRs.
• The reactor requires regular replenishment of heavy water due to losses during operation.
• Costs:
• Heavy Water Board (HWB) charges are significant, given the high cost of producing heavy water.
• Percentage of Total: 25%.

f. Spent Fuel Management (~₹0.25 per kWh)

• Storage and Handling:
• Safe storage of spent fuel in on-site cooling ponds for 10 years.
• Transition to Away-From-Reactor (AFR) storage facilities for 25+ years.
• Reprocessing Costs:
• If reprocessed, costs for recovering usable material and managing radioactive waste increase.
• Percentage of Total: 12.5%.

g. Fuel Transportation (~₹0.15 per kWh)

• Transport Logistics:
• Secure transport of processed fuel from fabrication plants to reactor sites.
• Compliance with safety and regulatory requirements for radioactive materials.
• Percentage of Total: 7.5%.

h. Overheads and Safety Compliance (~₹0.20 per kWh)

• Safety and Oversight:
• Costs for regulatory compliance with the Atomic Energy Regulatory Board (AERB).
• Inventory reserves for continuous operation.
• Percentage of Total: 10%.

Summary of ₹2 per kWh Fuel Cost Breakdown

Component	Cost (₹/kWh)	Percentage
Raw Uranium	₹0.30	15%
Fuel Processing & Fabrication	₹0.60	30%
Heavy Water	₹0.50	25%
Spent Fuel Management	₹0.25	12.5%
Fuel Transportation	₹0.15	7.5%
Overheads & Safety Compliance	₹0.20	10%
Total	₹2.00	100%

The ₹2 per kWh figure is a comprehensive estimate covering the entire lifecycle of nuclear fuel, from procurement and processing to transportation, operation, and waste management

14. Conclusion

The Bharat Small Reactors  initiative represents a transformative step in India’s clean energy strategy, leveraging nuclear technology to balance economic growth with environmental sustainability. While the project offers immense potential to decarbonize the grid and enhance energy security, it faces critical challenges in financial feasibility, regulatory compliance, and operational implementation. Addressing these hurdles through cost-sharing frameworks, streamlined regulatory processes, and incentives for participation can make the initiative more inclusive and viable.

By tackling these barriers, the BSR project can serve as a benchmark for innovative energy solutions, aligning India with global climate action goals and bolstering its leadership in clean energy transitions. A collaborative approach among stakeholders, including industries, policymakers, and regulators, will be key to unlocking the full potential of this ambitious endeavour.