- Despite a longstanding domestic program, India will rely on foreign investment and expertise to expand its nuclear energy capacity in the near term.
- Ongoing nuclear deals will move forward throughout 2016, but underlying constraints will prevent India from meeting ambitious targets to expand its nuclear sector.
- India will continue to entertain multiple bidders for any new sites, but Russia will be the main provider in the short term as U.S., Japanese and French companies contend with legal hurdles.
For India, 2016 could be a transformative year in nuclear power. After years of isolation, India's nuclear energy sector is ready to grow, with several new reactors scheduled to come online over the next 12-24 months. New Delhi wants to expand nuclear capacity to meet growing energy needs for its population and economy. India's Feb. 4 ratification of the international Convention for Supplementary Compensation for Nuclear Damage, which seeks to increase reparation for damage caused by nuclear mishaps and encourage cooperation in nuclear energy and safety, was done in part to resolve concerns among potential foreign partners. India will need as much foreign investment and technology as possible to reach its ambitious goals.
But concerns about domestic liability laws remain, which could deter foreign investment and ultimately constrain India's hopes to expand nuclear power production. Electricity consumption in the subcontinent will rise in the coming years. All types of energy production can be expected to increase capacity. Foreign suppliers such as Japan, France and the United States can compete to meet this immense demand for nuclear energy, but Russia will continue to be India's preferred provider. India's aspirations of developing domestic thorium-powered reactors — a technology that would remove India's dependence on fuel imports altogether — have technical feasibility issues and remain a far-off dream. In the end, capacity overall will increase, but nuclear energy is destined to play a minor role in filling the country's growing energy appetite.
India's Nuclear History
India was one of the first countries to adopt nuclear power, turning its first commercial reactor online in Maharashtra state in 1969. But because India refused, and to this day still refuses, to sign the Nuclear Non-Proliferation Treaty, in part to maintain its capabilities in the face of Pakistan's and China's nuclear weapons programs, the global community placed sanctions on the country in the 1970s, isolating India's civilian nuclear program and stifling its growth. Exclusion denied India access to imported nuclear technology, equipment and fuel and severely restricted domestic development. By the 1990s, Indian nuclear power plants had some of the lowest actual output compared to potential output, if operating at full capacity, in the world. Fluctuating uranium supply also curbed the amount of nuclear power India could produce.
But in 2008, New Delhi signed the India-U.S. Civil Nuclear Agreement, separating its civilian and military nuclear operations to begin the process of opening up India's nuclear sector to foreign investment. In theory, it should have ushered in a new era for nuclear energy. Practical reality, however, was another matter. Subsidized electricity prices and a disjointed energy policy, in which five ministries sometimes compete for control of the whole energy sector, make it difficult to do business there in general. It makes it equally difficult to attract the foreign investment the country needs for nuclear power when protracted negotiations and delays are the norm.
Another deterrence for the nuclear sector is India's liability laws, which hold suppliers, rather than operators, directly liable in the event of an accident, the reverse of the scheme typically found in other countries. Though India has created a $220 million insurance pool and ratified the nuclear damage convention, the industry is still skeptical. The Indian Civil Liability for Nuclear Damage Act contradicts the international treaty, as there are still clauses in the domestic law that force suppliers to shoulder the burden in the event of an accident. It is ultimately unclear whether ratifying the convention will be enough to assuage such worries.
Today, India operates 21 nuclear power reactors, accounting for 5.8 percent of India's total energy generation capacity of 290 gigawatts (GW). The average size of its reactors is much smaller than the global average, an artifact of decades of isolated development. New Delhi's targets seek to have nuclear power reach a capacity of 14.6 GW by 2021 and 27.5 GW by 2032. The longer-term target is to account for a quarter of the nation's electricity by 2050, although reaching that goal is unlikely. Nuclear energy accounts for less than 3 percent of the total generation mix and 1 percent of India's overall energy consumption.
Projects Planned and Underway
To meet some of its goals, India is constructing six new reactors: five for power production and one as a domestic pilot project. In conjunction with Russian national nuclear corporation Rosatom, a second reactor at the Kudankulam site in Tamil Nadu is scheduled to finally commence operations in 2016 or early 2017 after years of delay. In addition, two new domestically developed reactors are scheduled to commence operations by the end of the year at the Rajasthan nuclear power plant. Another two reactors under construction at the Kakrapar plant in Gujarat had been scheduled to begin operation in late 2015 but have been delayed and are currently under review.
There are also several planned or proposed projects, including additional domestically developed reactors. But it is the efforts of foreign firms that will be the most important. Western firms will provide assistance in some large plants, yet the main obstacle continues to be red tape, since none of these foreign projects have even started despite the signing of bilateral agreements as early as 2009.
For example, Indian-French relations are expanding, as French President Francois Hollande's visit to India in January showed. But though India signed a memorandum of understanding with French electric company EDF, which took over operations of French nuclear company Areva last year, it was simply an update to an earlier agreement. Construction on the deal's Jaitapur project could start as early as 2017, but India's nuclear power operator NPCIL has concerns regarding the performance and cost of the French reactors, only slowing operations more.
Toshiba-Westinghouse and GE-Hitachi have been tapped to eventually supply six reactors each to the Mithivirdi and Kovvada sites. But as with the French and other projects, little to no actual progress has been made. India's civil liability laws continue to deter U.S., French and Japanese participation, although opinions could always change in 2016.
Given such uncertainty, Japan's response will perhaps be the most important to monitor. After all, the majority of parts from EDF-Areva, Toshiba-Westinghouse and GE-Hitachi come from Japan. Strengthening relations with New Delhi could benefit Tokyo as well as Washington, countering Chinese influence in the region. A memorandum of understanding between Japan and India was signed in December 2015 with regard to nuclear cooperation, though legal and technical issues are still being negotiated. Indian government officials have also said an agreement could be ratified as early as the second quarter of 2016. India will need it if it hopes to have a partner besides Russia in the near term.
As Western companies balked at India's liability laws, Russia took advantage of this relatively new open market. Of course, Russia does not export only nuclear technology to India, but Rosatom can be expected to be highly active there, especially since nuclear power provides Russia another avenue into the Indian economy as its defense sales weaken. An agreement signed in 2014 indicated that Russia's involvement could reach as high as 20 new reactors. During Indian Prime Minister Narendra Modi's first visit to Moscow in December 2015, the desire for at least a dozen reactors was also confirmed and included the designation of Andhra Pradesh as a likely location for several of these reactors. India may want to diversify nuclear suppliers, but New Delhi also views Russia as a reliable partner. India could benefit from the partnership with Rosatom as well because the corporation will source from Indian manufacturers, which works in favor of the "Make in India" initiative to build up the Indian economy.
India's appetite for electricity will grow, and we can expect to see capacity increases across all fuel types, including nuclear. When India emerged from 40 years of nuclear isolation almost a decade ago, expectations for foreign cooperation were high. However, India's potential to expand and reach its ambitious nuclear targets continues to be crippled by bureaucratic hurdles. Ultimately, nuclear power will contribute only minimally to India's overall energy portfolio.