Forging a new nuclear deal 

Forging a new nuclear deal 

Context

No progress on the India-US civil nuclear deal

No sign of any concrete contract: There is no sign yet of any concrete contract between an American company and the Indian authorities to build a reactor.

Reasons for the failure:

• GE-Hitachi refused to accept the formula on supplier liability

Instead, GE-Hitachi’s plans were shelved after it rejected the Obama-Modi agreement in January 2015, saying GE would not accept the compromise formula on supplier liability

• Toshiba-Westinghouse financial troubles

After a near-bankruptcy, Toshiba bought Westinghouse for just $4.6 billion to a Canadian consortium a deal that is now expected to be cleared by the end of 2018.

What now?

U.S. will send Westinghouse officials to India next week to reopen negotiations,

Indian government needs to consider various factors for renegotiations

Shifts in global politics, renewable energy technology, the U.S.’s commitment to India, and the supplier’s capacity and ability

The problem in detail:

1. Major cost overruns for Westinghouse in the US: The financial crisis was set off because Westinghouse went into major cost overruns, possibly worth more than $15 billion, in building four AP1000 reactors at two projects in the U.S., the same reactors as the ones meant for India.
2. 2. Projects were already 5 years over schedule: When work was halted on the Westinghouse projects in South Carolina, the construction was already five years over schedule.
3. Mean time to construct a reactor in India is 9 years: India’s past record with Russian projects (the only foreign collaboration operational so far) puts the mean time to construct a reactor here at nine years.
4. So reactors in India would be complete by 2029 only: This would mean that even if an India-U.S. techno-commercial contract is finally readied in 2019, and the ground breaking begins immediately, it may not see fruition until 2029, a good 20 years after the nuclear agreement was signed.

Other factors

• The Trump effect: pushing fossil fuels instead of renewable energy

Donald Trump’s presidency has taken a very sharp turn away from renewable energy, and even the promise of nuclear dollars have dimmed in comparison to the lucre of fossil fuels in America.

• India’s own requirements changed

India’s own requirements from the India-U.S. civil nuclear deal have changed considerably:

• • PHWRs in inland sites

Even as it makes a push for indigenous nuclear power plants, the Department of Atomic Energy is also advocating PHWRs in more inland sites in Rajasthan, Haryana, Karnataka and Madhya Pradesh, with concerns about too many nuclear projects dotting the southern coastline which lies along tsunami and earthquake faultlines, as the U.S. and French projects are 

• • Russian collaboration delivering much more value

India has also found much more comfort in its existing agreement with Russia’s Atomstroy export, that began with the Intergovernmental Agreement for Kudankulam 1 and 2 in 1988, and has kept a slow but steady pace in delivering reactors and operationalizing power projects.

• • Cost issues

Indo-French negotiations for six 1,650 MW European Pressurised Reactors (EPRs) in Maharashtra’s Jaitapur have dragged on for a decade on this count, with the Department of Atomic Energy announcing in 2013 that the cost “cannot go above” ₹6.50 per unit, and the French company Areva (the project has now been handed to EDF) clearly seeking more.

• More focus on stringent safety requirements

As the pressure to lower nuclear power tariffs increases, nuclear safety requirements have become more stringent, putting intense strain on all those in the business.

• Nuclear power losing its prominence in the energy

More countries now see nuclear power as a “base-load” option, to be kept as back-up for the unstable, but infinitely less costly and eco-friendly solar and hydroelectric power options.

Data

In 2016, for example, global wind power output grew by 16%, solar by 30%, but nuclear energy only by 1.4%.

Conclusion

As a result of all these changes, the India-U.S. civil nuclear agreement for commercial projects, as it was completed all those years ago, is now obsolete and reviving it will require a different template that takes into account India and the new global realities. The deal that was “done” is now dead. Long live a new deal.