Indo-US nuclear deal: Why is Modi pursuing what looks like a total loss in N-energy?

On 25 January, the airwaves were filled with self-congratulatory and self-satisfied messages about how “we” had “won” the “nuke deal”. Nobody was clear about what exactly we had won, and how, and why the Americans (superb negotiators) had apparently caved in to Indian demands. As I write this on Republic Day, there is still no concrete data. I was on a live TV panel with a CPI commentator and a BJP commentator (which suggests they saw me as a neutral commentator: ha, shame on you!), and all of us were forced to hedge, given the absence of clarity.

Indo-US nuclear deal: Why is Modi pursuing what looks like a total loss in N-energy?


The meager information I was able to gather was that the nuclear liability bill which India had held as a lakshmana rekha remains intact, but its teeth have been blunted via an end-run. Instead of foreign suppliers of equipment being liable for damages, a group of Indian power distributors (PSUs), Indian insurers (again GIC, a government entity), and the Indian government, will underwrite the cost of insurance to the tune of some Rs. 1500 crore. It appears that, therefore, the entire liability in case of a nuclear disaster will be borne by India one way or another.

This is startling. The cost of a nuclear disaster is extremely high; I read somewhere that Japan has spent over $25 billion in the aftermath of Fukushima, and counting. The cost in Chernobyl has been estimated at a direct cost of $15 billion, with long-term costs to Ukraine in the range of $300 billion. That is for nuclear accidents.

What if there are no accidents? What about the cost of nuclear waste cleanup and decommissioning of obsolete plants? The Hanford nuclear complex in the US state of Washington has so far experienced costs of $40 billion, and is expected to cost another $115 billion. The total effort is expected to last till 2046, after the reactor complex was shut down in 1989. There are 11,000 people involved in an ongoing effort. These are astronomical numbers, and are just estimates, as nobody really knows the true cost.

Admittedly, Hanford is the biggest nuclear complex in the US. But with the most advanced technology known to man, it is expected to take 57 years to clean up, and cost an astronomical amount that is a notable percentage of India’s current GDP. I’m afraid the sums simply don’t add up for nuclear power, purely from an economic point of view. The fully loaded cost (including decommissioning and waste management) of a unit of power would be probably 100 times that of a unit of conventional power today.

Given the high capital costs and the possible politically motivated embargos on uranium (which India doesn’t have much of, for instance the US reneged on its treaty obligations to supply Tarapur with uranium) the risk is too high. We would be paying good money to buy trouble in future. Now add the cost of potential terrorism and dirty bombs – no sane person would want this sort of liability, even in the absence of a meltdown as in Chernobyl.

Furthermore, the approval of this insurance agreement means that all suppliers, not only Americans, will now be freed from liability, and the Indian taxpayer would pick up the tab should there be, heaven forbid, a nuclear calamity. I will stick my neck out and suggest that despite the latest brouhaha, there is no reason to budge from nuclear skepticism.

On the other hand, it appears as though the time has come for solar power. Plummeting costs of photovoltaic panels, improvements in storage and transmission, and other technological factors now mean that solar lifecycle cost is approaching conventional costs in the West. Given India’s inherent availability of sunlight, I am of the opinion that we would be better off spending the billions needed for nuclear power on a crash program of research into solar power, and maybe even on subsidizing it heavily to kick-start it.

An International Energy Agency Study quoted by The Economist in “Special Report: Energy and Technology” recently says that cost of solar panels has fallen by “a factor of five in six years”, which I take to mean it’s fallen by 80 percent. New solar technology with 3D printed graphene can be applied to any surface as film or even as paint! Storage of intermittent solar energy, always a problem, can be eased in India by retrofitting home inverters-battery devices, which the entire middle class in India has thanks to the erratic grid. There is even a suggestion of using an electric car as a storage system; of course there is also feed-in-tariffs to be earned by selling your generated electricity to the grid.

Why, then, is the Modi administration pursuing what looks like a total loss in nuclear energy? I have tremendous faith in the capability and vision of the PM’s team. This is in contrast with the previous PM’s team: a startling report by M D Nalapat in the Sunday Guardian  alleges that India’s nuclear program has been knee-capped by not pursuing fast-breeder thorium technology, and in fact large amounts of thorium sands from the Kerala and Tamil Nadu coasts were exported in clandestine fashion (this has been a scandal in Kerala for years).

Therefore I have to believe the Modi team has a plan about the second-order effects of the so-called “nuclear deal” (I have previously termed this as first-class snake oil, and I see no reason to change my mind now). The second-order effects may well be to improve the prospects of Make in India and other programs in an indirect fashion.

The US continues to be the leader as far as the West is concerned. It was at their instance that oppressive anti-India regimes such as the Non-Proliferation Treat (NPT), Comprehensive Test Ban Treaty (CTBT), Nuclear Suppliers’ Group (NSG) and Missile Technology Control Regime (MTCR) were concocted largely to keep India nuclear-weapons-mukt (yes, with two of the most belligerent nuke powers next door!). But after the “nuke deal” was signed, India ceased to be a pariah with other countries as well and these regime became superfluous: Australia and Canada, despite earlier misgivings, have decided to export uranium to India.

A similar opening up of technology and capital may well happen as the result of this latest fuss. The PM is a clever marketer, and this would certainly be a way of signaling to the West that now that we have a “good conduct” certificate from Uncle Sam, India is a good prospect for them to work with. It would work too, especially as India will simultaneously be growing at 7+ percent as per the World Bank.

Another signal may well be to China and its all-weather proxy Pakistan. An India that is tilting towards America is the last thing China wants. Well, two can play at this game of shadow-boxing: the reverse string-of-pearls may well be coming together in an anti-China alliance between the US, Japan, Australia, Vietnam and India. (Alas, Obama has driven Russia into China’s arms through the senseless Ukraine misadventure). Of course, the ‘tilt’ would be for China’s consumption, and India should be working assiduously towards a G3, with itself as an alternative pole to the US and China.

If I were to put such a positive spin on what happened, the true test would be when it comes time to actually buy nuclear reactors. In my opinion, India should play the coy buyer (a good pointer would be the Harvard Business Review article “Eager Sellers, Stony Buyers”), demand all sorts of concessions, extended proofs of concept, and then finally say, “Nah!”. In other words, let the sellers salivate at the prospect, put lots of effort into it, and then get shafted. This happens all the time in business, so nobody has any right to complain: note convenient non-tariff barriers erected against India.

In the meantime, while making soothing noises about Western nuclear reactors, India should put in place a crash program on solar energy as well as on clean coal (new technology for coal, though expensive, makes it no more environmentally damaging than oil or gas powered reactors). Nuclear, I continue to feel, is a tar baby – it will be buy now in haste, and repent at leisure.

According to the Economist, “…it is hard to see the fortunes of nuclear energy reviving”, in the face of improved alternatives. Just as India leapfrogged land-line communications for wireless, and thus avoided the huge sunk cost of copper wire in the ground, it would be best if India avoided the hugely expensive nuclear route and instead invested in new solar technologies, despite teething-trouble uncertainties in the latter. India could well be a solar-energy superpower, with “energy so cheap that it won’t even be metered” – ironically nuclear energy’s siren-song sixty years ago. We are the kings of sunshine, with 300 day’s worth of intense radiation: one of the (few) benefits of being largely tropical in a global-warming world.

Investing now in nuclear power is a bad idea, nuclear deal ‘breakthrough’ notwithstanding.

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Updated Date: Jan 26, 2015 12:55:35 IST

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