Indian Nuclear Costs Revisited

I am a firm believer that if I want to learn something, I need to give myself permission to make mistakes. Last week I posted data on Indian nuclear costs, but I did not reckon with Indian accounting methods. Indian reactors appear to be built with appropriated rather than borrowed money. Thus no interest is paid on construction expenditures.

Except the Indian government is probably financing the reactors with borrowed money. Thus when Indians state the cost of a reactor, they state construction-related expenditures, but do not inclued accrued interest during the construction project. I suspect that the Chinese perform a similar trick. The give away is Indian electrical costs. The Indians apparantly calculate electrical costs on the basis of something similar to levelized costs. Thus I observed a discrepency between the cost the Indian Department of Atomic Energy announced for its reactors, and the reported cost of electricity from the reactors. The DAE, cleverly recovered the financing cost for their reactors, while not including those costs in press statements. Thus an Indian reactor sold to another country will be considerably more expensive than the price which the Indians announce for local reactors in their press statements. The cost of Chinese reactors is also probably higher than their official statements would suggest, and for similar reasons.

This leads me to a question regarding hydro-electricity. When a Federal agency builds a dam, the cost is justified by an accounting of benefits. Thus 20% of the costs may be calculated as being returned to the government through taxes indirectly derived fromn recreational activities created by the dam. Anothe 20% of the cost would be attributed to the economic benefit derived by making the river navigable. Another 20% would be attributed to flood control. Thus only 40% of the cost of the dam will be returned as revenue from the sale of electricity generated by the dam. No wonder hydroelectricity is so cheap.

Private electricity producers also get to benefit from the accounting tricks introduced by government financing. Consider the case of the Solar facility builder who gets 30% or more of his construction costs returned to him in the form of government subsidies for that construction. Now the solar contractor may include the amount of the subsidy in telling us how much the facility cost. But what he does not tell us is how much the subsidy benefited him in terms of the interest he did not have to pay,