Fission statement

Obama and Modi want to sell nuclear power to India that is too dangerous and expensive even for US

Only two new nuclear plants are being built in the US and even they are way over budget.

The recent “breakthrough” in the nuclear talks between Indian Prime Minister Narendra Modi and US President Barack Obama has raised more questions than answers. The biggest question of them all is the issue of the liability nuclear equipment suppliers will have to face in case of a nuclear disaster. There is word that an insurance pool will be created to indemnify foreign suppliers and cover the liability. So let us look at this issue of the nuclear insurance pool more closely and then examine the nuclear industry in the US.

Last year, before the Russian corporation Rosatom and Nuclear Power Corporation of India finalised the framework agreement for building two additional reactors at Kudankulam, the Department of Atomic Energy claimed that the General Insurance Corporation had offered an insurance package to the Russians. However, a Right to Information application to the GIC revealed that no such offer had been made.

Unidentified officers at the Department of Atomic Energy subsequently told the press that GIC’s initiative had not worked out and that the Finance Ministry had been approached to help with the formation of the nuclear insurance pool. Over the course of over one year, seven RTI applications were filed, three to GIC and four to the Department of Atomic Energy, United India Insurance and Insurance Regulatory and Development Authority. The replies to each only added to the mystery of the nuclear insurance pool.

In an article dated 26 September, 2010, former IRDA Chairman J Hari Narayan said: “We are awaiting the Nuclear Bill becoming a law. Then we would provide the framework for providing insurance cover for nuclear accidents.” Four years later, in an RTI reply dated 8 September, 2014, the insurance regulator said, “IRDA as on date had not prepared any draft framework for providing insurance cover to Indian Nuclear Plants.”

The United India Insurance went a step further and stated in its RTI reply dated 12 September, 2014, that it had not provided any capital for the pool, nor had it received any communication from the GIC about the pool. It did however mention that the matter was in the development phase, as opposed to the claim in the media that the nuclear insurance pool was at an advanced stage.

Funding the pool

In a recent press briefing, Joint Secretary of Ministry of Corporate Affairs Amardeep Singh said that the GIC and other Indian nuclear insurance companies will raise Rs 750 crore ($125 million) for the insurance pool, while the remaining Rs 750 crore will come from the government. It is unclear how the government would fund this pool now given that it had declared its inability to do so earlier. Two options are considered as possibilities: providing catastrophe bonds or sovereign guarantee.

Catastrophe bonds, or cat bonds, are generally offered for a specific set of risks generally linked to natural disasters. There is little experience in this decade-old field to support a risk related to human error – an inherent risk in nuclear power plants.

As for sovereign guarantees, the reality is that it is not unlimited so providing it to one project would reduce the availability of funds for another project. Also, rule 3(3) of the Fiscal Responsibility and Budget Management Rules, 2004, limits the volume of sovereign guarantees undertaken in a financial year to 0.5% of the GDP. India’s GDP currently stands at $1.8 trillion – 0.5% of this would amount to a little over $9 billion. Providing sovereign guarantee to nuclear plants would reduce the volume, if needed, for other infrastructural development projects, such as the Japanese high-speed bullet train Shinkansen.

Whichever way the pool is funded, there is also the issue of the liability’s size. For the sake of comparison, let us look at the Fukushima nuclear accident in 2011, which has cost more than $100 billion. According to a Japanese National Diet report, that accident was caused by a fault in design. Since General Electric supplied those reactors, the fault therefore lies with the company. But, in the absence of supplier liability, the Japanese taxpayers have had to pay for the accident.

The proposed Indian nuclear insurance pool of Rs 1,500 crore ($250 million) would cover only about 0.3% of the cost of the Fukushima disaster. It is understood that Rs 1,500 crore is the limit set in the Nuclear Liability Act, but it is important to note that the Act was passed by the Parliament before the Fukushima accident. In the light of that tragedy, the government must relook at the limit.

Nuclear industry in US

The Indian government must also consider the fact that nuclear power in the US is on the decline. Nuclear-generated electricity today accounts for less of the US energy mix than it did before the highly-touted “nuclear renaissance”. As former chairwoman of the US Nuclear Regulatory Commission Allison Macfarlane, an Obama appointee, said last month: “The predicted nuclear renaissance did not materialise.” In fact, more new nuclear reactors have been cancelled in the US than are under construction. So, nuclear corporations want to sell to India those same reactors that are too expensive to find buyers in the US.

There are only two new nuclear plants (four reactors) under construction in the US. Both these are past schedule and each more than a billion dollars over budget. In South Carolina, the site of two Westinghouse AP1000s, these costs translate into a tenfold rate increase for local consumers. South Carolina ratepayers are now shelling out $500 more per year for electricity than they did five years ago merely to pay for the new nuclear plant. The current estimate for the two reactors is $11 billion ($1.2 billion over budget) and it is hard to believe costs will not rise. The cost for the same reactors across the South Carolina border, in Georgia, is already $14 billion ($2 million for every day of delay).

This abysmal track record mirrors the history of nuclear construction in the US. The first 75 nuclear reactors experienced $100 billion in cost overruns. And those cost increases occurred before the meltdown at the Three Mile Island caused nuclear construction to become even more cost prohibitive. The supposed nuclear renaissance was premised more on industry propaganda than progress in controlling nuclear power costs. No-one in the US is now ordering new nuclear reactors and those that have are likely experiencing buyer’s remorse.

Future is renewable energy

In the US, as in India, the future of electricity is not nuclear. It is renewable energy. Solar, especially rooftop solar, represents an existential threat to the monopolistic model of producing electricity via large base-load electric plants like nuclear reactors. As nuclear power plant costs continue to rise, the cost of solar power is dropping precipitously. According to a recent report of Deutsche Bank, solar power will be cost competitive in the US next year and in 80% of the rest of the world, including India, in 2017.

Obama and Modi should have focused their efforts on fostering the revolution that is occurring in renewable energy. It is better for their people, their pocketbooks and the planet. If Obama and Modi want to prevent the most catastrophic consequences of climate change, they need to support solutions that are fast and affordable. Nuclear power is neither.

Rather than bow to the demands of foreign corporations, India should stand firm. If nuclear power was as safe and green as its proponents contend, then India’s liability law should not have been an issue. But the truth is that it is not. One need only look to Japan to see that now, a few years after the Fukushima disaster, radiation from the triple meltdowns is still leaking into the Pacific Ocean. The only thing green about nuclear power is the foliage growing in the abandoned villages that surround Fukushima.

The authors work with the non-governmental environmental organisation Greenpeace.

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This article was produced by the Scroll marketing team on behalf of Hindustan Unilever and not by the Scroll editorial team.