Make Nuclear Indian Again: Why Toshiba’s Exit Is Not All Bad News
As foreign investments in nuclear falter, India should look inwards to develop its energy sector.
If India is really serious about its ambitions for nuclear power – as it should be given that it is a valuable source of baseload low carbon electricity – it needs to commit to locally made Pressurised Heavy Water Reactors (PHWRs). These are reactors which use water with ‘heavy hydrogen’, and are relatively more efficient.
No country in the world has developed a significant share of electricity generation from nuclear energy without building a sizeable chunk of its reactors through indigenous technology and resources. Predictability and standardisation of construction, costs, and design, are the foundations upon which nuclear power can be scaled.
Foreign Investments Hit Roadblocks
Deals for foreign reactors are increasingly mired in difficulties, forcing India’s long-term plan to generate 25% of electricity from nuclear power by 2050 seem difficult to achieve. Just this week, Toshiba failed to give details of its $6 billion write-down due to cost overruns in its US nuclear business, saying it needed further time to investigate the full impact.
Toshiba’s chairman announced his resignation and the company’s shares fell by as much as 9%. Toshiba is Westinghouse’s parent company. Westinghouse is in talks with the Nuclear Power Corporation of India Limited (NPCIL) to build six AP1000 reactors in Andhra Pradesh.
The deal was held up due to concerns over India’s liability law, which allows for suppliers such as Westinghouse to be held liable in case of any accident.
Westinghouse was not convinced by the steps the Indian government took to assuage their concerns over liability, including the creation of an insurance pool for liability amounting to Rs 1,500 crore. Sources suggest Toshiba will now back away from its role in the nuclear industry in both Britain and India, further complicating issues.
This isn’t the first time a foreign venture into India’s nuclear industry has hit a roadblock. Areva, which signed a deal with the NPCIL to build the 1,650 MW European Pressurised Reactors (EPRs) in Jaitapur, Maharashtra has since agreed to sell its nuclear business to EDF (a European energy company) after revealing huge losses in early 2015.
The long-term future of the EPR is in doubt as a result of the restructuring. Given that the EPR’s cost issues dragged Areva down with it, EDF may not be able to honour commitments to build more EPRs.
Cost is not the only issue. In 2015, the French nuclear safety authority found structural problems in the EPR’s reactor vessel owing to a higher-than-acceptable carbon content in the steel.
Then, as if all this was not enough, a fire broke out in the turbine hall of the reactor site in Flamanville, France last week. Although the incident was quickly contained and did not occur in the nuclear reactor area, it is nonetheless more unwelcome news for the prospects of the EPR.
All of this – the financial developments with Toshiba and Areva, safety concerns with the EPRs, as well as lingering questions over Indian nuclear liability law – point to a big question mark over the viability of foreign Light Water Reactors (LWRs) in India anytime soon.
In fact, the Central Electricity Authority (CEA) recently released its new Draft Electricity Plan and the document makes no plans for the six AP1000s or EPRs to come online anytime in the next decade.
The Way Forward
So how can we scale up nuclear power in the country? Well, four of the indigenous PHWRs are in construction at the moment – two in Rajasthan and two in Gujarat.
The biggest issue with nuclear power is the huge up-front capital cost. Globally, cheap credit is drying up and raising billions of dollars for nuclear infrastructure is a challenge. While foreign reactors come with financing options from abroad, domestic reactors need to find their own financing.
So far, NPCIL has used a mix of debt and equity financing to fund construction of nuclear reactors. A January 2016 amendment to the Atomic Energy Act however, will allow NPCIL to launch joint ventures with other cash-rich public sector utilities such as NTPC, Indian Oil Corporation, and Nalco, who have agreed to bring in Rs 10,000 crore each.
For now, it seems these ventures are earmarked for the more expensive LWRs (i.e. the foreign reactors), instead of the indigenous PHWRs. Current NPCIL equity surplus is about Rs 12,000 crore, which at an estimated cost for PHWRs of Rs 9 crore per MW, and a debt/equity ratio of 70:30, will only yield about 5000 MW more of the capacity in addition to what is already being built.
Owing to the various difficulties in importing foreign reactors, it seems more pertinent for the government to encourage NPCIL and the other PSUs to push their funding from LWRs to the indigenous PHWRs, which would mean financing for about 15,000 MW of capacity will be available.
Collaborations with other PSUs should also be explored, something which may be underway already, and greater budgetary support for NPCIL is a must. Mastering indigenous PHWR technology and its construction, financing, and operation will not only yield immense benefits in terms of cheap, low-carbon electricity for India, but it will also offer the potential for leadership in low-carbon energy going forward, if India can begin exporting its PHWR technology to other developing nations who are showing an interest in nuclear power.
India has been successfully deploying and running PHWRs commercially for the best part of 40 years. It’s time to back our own technology over untested and expensive foreign imports. The lessons of history in nuclear power development globally favour us, and it’s also precisely the sort of fillip the Make in India programme needs.
(Aniruddh Mohan is a Research Fellow at Tandem Research and a Humboldt International Climate Protection Fellow for 2017-18. You can follow him on Twitter @animohan11. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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