India enters the nuclear renaissance

A Man from Mars Offers Advice

In October 2008 India's relationship with the global nuclear industry changed fundamentally after the Nuclear Suppliers Group (NSG), the international body that controls commerce in uranium for nuclear reactors, agreed for the first time to allow India to acquire nuclear fuel for its civilian reactors. In a closely linked event, the US Senate voted 86-13 to allow US firms to export nuclear fuel and technology to India.

These two events have created tremendous opportunities for India to open the door to international investments in new nuclear energy infrastructure. Building a nuclear energy industry in India to support 20-40 GW of new power over the next two to three decades will take every bit of ingenuity and wisdom the nation can muster. It's more than a moon shot. It is a trip to Mars.

Until October, India had lived for more than three decades outside the Nuclear Nonproliferation Treaty (NPT). This status severely limited its ability to get nuclear fuel for its installed base of less than 4 GW of nuclear power. None of its plants are larger than 500 MW, all are older and less efficient than current designs, and some have operated at half capacity, or even closed down, due to fuel shortages.

On a visit to India soon after the NSG’s decision, Hugh MacDiarmid, chief executive officer of AECL, a Canadian nuclear technology company, told the Globe & Mail that India's history of isolation meant it has not kept pace with western nuclear technology. India has also paid a price with rapid increases in fossil fueled plants and accompanying air pollution as well as greenhouse gases.

The nuclear renaissance

What will India's nuclear energy program look like a decade from now and what must it do to capitalize on tremendous opportunities to build and operate a dozen or more new nuclear power plants? To answer this question, it is useful to take the point of view of a metaphorical 'Man from Mars'.

The first thing he will see is that there has been a world-wide nuclear renaissance in which countries as close as China and as far away as the United States are reviving the nuclear energy industry as an answer to the global warming crisis. For instance, in the past year China has signed deals for two giant Areva European Pressurized Reactors (EPRs), four Westinghouse AP1000 Pressurized Water Reactors (PWRs) and two new reactors of Russian design. It has also built new capabilities in uranium enrichment and developed plans for spent fuel reprocessing.

In the United States there has been a rush of applications for licenses at the Nuclear Regulatory Commission (NRC) for projects worth at least $188 billion. In Europe two 1,600 MW Areva EPRs are under construction with one, the plant at Flamanville, scheduled to enter revenue service in 2012. The Man from Mars may conclude that India is now ready to join this renaissance.

Skeptics warn of 'hype' about nuclear energy Not everyone agrees with that this rosy view applies to India's case. Michael Krepon of the Henry Stimson Center, a US non-proliferation think tank believes that the promise of big dollars for new nuclear power stations is "pure fantasy." Brahma Chellaney, a professor of strategic studies at the New Delhi Centre for Policy Research agrees, believing that "from a commercial energy standpoint,...will turn out to be more hype than reality."

Full steam ahead for a fresh start

How would our Man from Mars apply these conflicting observations to India? Is it just hype? For India, now that the doors to uranium imports have been flung open, the country is likely to push full steam ahead to join the global nuclear renaissance to power its economy and reduce its greenhouse gas emissions.

Looking at India's small, fragmented, and government-controlled nuclear energy industry, the key question is, "what must India do to get a fresh start with nuclear energy?" According to an April 2009 assessment at the World Nuclear Organization, India has set a nuclear power development target of 40 GW over the next several decades. To achieve this objective, the Man from Mars would set out the following agenda:

Nuclear reactors: To get to 40 GW of nuclear power over the next 40 years, India could take a page from China's playbook. It could negotiate with international reactor vendors to transfer design information, via licensing and fee payments, to develop an indigenous reactor. Both Westinghouse and Areva have made deals with China, to varying degrees, along these lines. China is developing a localized design of the Westinghouse AP1000.

A standard design of 1,000 MW for India will yield huge efficiencies in terms of quickly training a workforce, maintenance, and most importantly, construction of economies of scale for long lead time reactor components. A standard design will also lower the cost per unit after the first two or three are built as a result of on-the-job learning that will take place with engineering procurement contractors. For an example of how this works, India should study Southwest Airlines in its singular singular use of the Boeing 737 aircraft for all revenue service.

Nuclear fuel: One of the chief concerns of the NSG is that India not develop domestic uranium enrichment capabilities because of the obvious implications for destabilizing its relationships with Pakistan and China. It is also a concern for the precedent it would set with the West in attempting to control Iran's rush to develop nuclear weapons. India will need to import finished nuclear fuel for the current and future nuclear reactors that it assigns for civilian use. This will be costly, but there is a way to pay for it from the back end of the nuclear fuel cycle.

Trained workforce: It takes time to train nuclear reactor operators. It takes even more time to train nuclear engineers. One of the strategies adopted by South Africa in its drive for a new nuclear build of 20 GW is that it is requiring international reactor vendors bidding on these contracts to include in their bids training of local workers to build and operate the plants. India could take a page from South Africa's playbook.

Spent fuel management: Spent fuel contains more than 90 percent of the original energy value of the original fuel bundles. It is a valuable resource. The potential solution for India to manage spent fuel is to sell it for reprocessing to France or Japan to be made into mixed oxide (MOX) fuel. It can then be burned in any of the more than two dozen reactors that are licensed to use it worldwide.

The revenue from these sales will help pay for import of nuclear fuel. Also, it avoids proliferation issues by getting spent fuel, with its small amounts of plutonium, out of the country just as quickly as it can cool off and be moved from wet to dry storage. India can reduce the costs of its requirements for enriched uranium by capitalizing on the revenue potential of its spent nuclear fuel. It can retrograde it for reprocessing to a contractor in another country. International Atomic Energy Agency (IAEA) inspections would account for all inventory as a confidence building measure.

However, for reasons of national pride, for provisioning its nuclear weapons program, and to insure a stable fuel supply for its civilian reactors, India is unlikely to take this advice.

It's not all roses

There are plenty of stumbling blocks that could stop any of these initiatives dead in their tracks. Oxford Analytica, a London-based consulting firm, in a paper published in October 2008 titled "Trouble Awaits Nuclear Investors," raised four key issues.

Economics: In the short term, natural gas plants are more attractive than nuclear reactors. The gas plants burn cleaner than coal, are a lot cheaper to build, and are much faster to generate a profit for investors. India will therefore have to develop loan guarantees to attract foreign direct investment for new nuclear power plants and also guarantee long-term deals for profitable rates-of-return for the utilities that operate them.

Foreign direct investment: India will have to change its legal foundation for development of new nuclear power plants to authorize foreign direct investment in them as well as allow private firms to build and operate nuclear power plants. Consortia of domestic and international firms will not develop new plants if India's government retains a statutory monopoly on development of new nuclear energy projects. Resolutions of indemnification issues will also have to be placed on the front burner for government policy action.

Fuel supply: There can be no doubt India would find itself at risk of being permanently embargoed from acquiring nuclear fuel and technology if it sets off a test of a nuclear device regardless of alleged necessity for deterrence relative to its relations with Pakistan or China.

Politics & economics: An energetic environmental movement in India could mobilize to stop new nuclear power projects. Class warfare over windfalls and wipe-outs resulting from locating new plants could arise similar to the issues faced by Tata Nano.

India will have to develop methods of gaining political acceptance for selecting sites for new nuclear power plants and sharing the benefits of electricity generation across the social and economic spectrum. There are undoubtedly other significant barriers, but these issues will likely make anyone's short list. India will need to address them, and soon, to move quickly down the road toward its goals.

On the road to a renaissance

To its credit India's political leadership has wasted no time hitting the road to promote co-operation for nuclear infrastructure development. India has signed bilateral agreements with France, Russia, and other nations, and held talks to buy uranium from diverse nations including South Africa and Brazil.

The U.S. news media has not taken India's drive for new nuclear business very seriously.  In particular the Wall Street Journal Environmental Capital Blog needs to do more homework on its citation of the UPI story that says the nuclear reactor market has tanked in India. 

It is true that American companies have not done well there so far compared to the competition.  This is due in part to delays in negotiating issues related to protection of intellectual property/technoloigy and indemnification of plants.  Plus, India has not yet passed domestic legislation allowing private companies to build and operate nuclear plants.  Yet, the country has done well with other offers.

• Last November Russia inked a huge deal with India to build four new reactors at Kudankulam with a combined generating capacity of 4,400 MW.
• Areva signed a deal in February 2009 for at least two 1,600 MW EPR reactors plus fuel to run them for 60 years. 
• GE-Hitachi signed an agreement with Indian companies to build reactors in March 2009.
• Westhouse has made several claims it will sign significant deals, but so far none have emerged from its discussion with Indian construction companies.

All of these agreements need further progress before they become the equivalent of what are understood in the U.S. to be engineering & procurement contracts that commit real money to break ground and build the facilities.

It isn't that the US isn't trying. In November 2008, a high level US delegation including US Nuclear Regulatory Commission Chairman Dale Klein, met the Prime Minister's special envoy Shyam Saran. Mr Klein also met members of India's nuclear establishment and committed to quick reviews of applications for export licenses from US nuclear firms seeking to do business in India.

An American trade delegation completed a trip in January 2009 in pursuit of $175 billion in new nuclear business over the next two decades. Ron Somers, the group's director, believes that India's entry into the nuclear renaissance, "is one of those historic, important, tectonic shifts in relations with another country."  So far the outcome of the trip has been some high-level agreements in principle, but no booked sales.

In March 2009 US vendors of nuclear technologies were appalled to read that India has informed the U.S. it plans to build a spent fuel reprocessing facility. This action pushes the envelope in the agreement between the two countries and could be a deal breaker for U.S. sales and technology transfer to India of nuclear reactors and fuel.

To pay for a massive new build with the French, India has successfully raised {e}8 billion (euros) to build two Areva 1,650 MW EPR reactors. Significantly, 70% of the money was raised by a consortium of 15 French banks. By comparison, the Russians only work for hard currencies and do not offer credit.  U.S. reactor vendors may seek financial support from various export and trade programs, but the sheer size of the deals could lock them out of this kind of help.  It is likely that U.S. deals will require a combination of Indian government funding and private investment.  For its part, India will have to guarantee the rate base to insure loans are paid back and that the ROI to investors is maintained over the life of the project.

Are there small reactors in India's future?

Smaller reactor designs in the range of 100- 300 MW, are obvious candidates for nations that don't have the billions for large units and want to rapidly provide electrical power to rural areas. India's economic geography and electricity transmission grid make it a candidate market for small reactors.

Assuming that the costs for a 100 MW light water reactor (LWR) unit's components are similar to a big one, $2,000/KW puts a 45 MW nuclear energy unit in a price range of $90 million. That's enough energy for 135,000 people in India. Ten of them in a resilient transmission and distribution network could supply most of the electricity needs of an entire city.

Several designs in addition to conventional LWR technology include nuclear batteries from Toshiba and Hyperion with refueling cycles of 10-20 years are on the horizon. South Africa's Pebble Bed design might also be of interest, but all of these radical new designs have yet to be licensed by any nation or proven in the commercial world. By 2015 these designs could achieve both objectives, and be ready for commercial off-the-shelf installation.

Advocates of small reactors point out that these plants, regardless of design, can be built in resilient networks, positioned like cell towers, but in an electrical grid. If one unit goes offline, the entire network does not shut down. On the other hand, a 1,000 MW unit has an all or nothing impact on a transmission and distribution network. Another benefit of smaller units is that they need less transmission infrastructure to reach nearby customers.

Taken together there may be opportunities for India to explore acquisition of small, easy to maintain, networks of reactors for a variety of civilian applications including process heat for industry such as oil & gas, chemical manufacturing, and food processing.

The future is complicated by limited vision

India's entry into the global nuclear renaissance is certainly a big deal. But the challenges and opportunities that await the nation will take decades to work themselves out.

Politicians are well known for visions limited to the next election, while the nation building program for nuclear energy could span more than one lifetime. The hope is India will have a few Men from Mars coming around to keep things on track. The last advice the 'Man from Mars' has for India is: "Don't try to do everything yourself. Get help from the global nuclear industry. Use it wisely, and use it in peace."

# # #

Idaho Samizdat ~ http://djysrv.blogspot.com