India’s nuclear energy program has experienced several difficulties since India’s violation of the non-proliferation treaty, and legal obstacles remain even after the 2005 U.S.-India nuclear deal. However, the need to limit carbon emissions despite rapid growth requires that India expand nuclear energy as a percentage of its overall energy mix. Russia’s nuclear program, meanwhile, has developed efficient, high-performing plants and its companies are better able to cope with the Indian market’s unique risks due to strong state financial and political support. Thus, while the US and India failed to reach an agreement during President Obama’s recent state visit, Russian nuclear firms are able to fill the gaps created by US firms’ continued absence, and this opportunity will benefit India’s low-carbon development as well as Russia’s economic diversification into more high-value sectors.
Indian Nuclear Requirements, Russian Economic Needs
While President Obama’s recent visit to India exceeded expectations in terms of agreement on key regional issues in the joint statement issued thereafter, the lack of a clear resolution nuclear energy has been portrayed as a key shortcoming of the visit, and in practice leaves the Indian market closed to US firms while creating opportunities for state-backed companies, including Russia’s nuclear energy giant Rosatom and its subsidiaries. India has one of the world’s largest nuclear build programs and is actively seeking foreign partners to build and supply nuclear reactors due its long isolation from nuclear power plant technology markets.
Russia, meanwhile, is among the world’s leading exporters of nuclear energy-related products, and the nuclear energy sector, given high strategic priority by Russia’s central government, is a rare example of successful high-technology export development for the country. The lack of a US-India nuclear energy deal means that several Indian projects previously planned for American firms will likely be delayed or cancelled, creating room for additional purchases from other key nuclear exporters, including Russia, in order to meet India’s nuclear capacity targets. Absent a resolution of disagreements over India’s nuclear regulations, the coming years will likely see increased profits for Russian nuclear power plant and plant component producers and increased levels of Russo-Indian economic cooperation and interdependency.
India’s nuclear energy program has a long history of mediocre performance following the country’s exclusion from international component and plant technology markets due to its violation of the non-proliferation treaty in 1974. Little progress has been made despite the groundbreaking U.S.-India nuclear deal in 2005 due to India’s extraordinary accident liability stipulations which indemnify component suppliers. India currently has 21 operating reactors, the oldest of which first connected to the grid in 1969, and the world’s third-highest number of reactors under construction (six), yet the majority of previously constructed reactors have relatively low capacity and poor efficiency track records. India eventually plans to develop an indigenous nuclear power industry and increase nuclear generating capacity to 14.6 GWe by 2020, but to achieve these goals (and one should keep in mind that the country has regularly missed its nuclear energy targets) India needs access to superior foreign technology. Indigenous reactors based on the CANDU pressurized heavy water reactor (PHWR) design are more expensive and less safe than other international designs as they require the production of heavy water or deuterium to operate and use relatively volatile liquid sodium as a coolant. In other words, the demand is substantial.
Russia’s economy is clearly in a state of crisis largely due to the country’s inability to wean itself off of raw material exports and develop high-tech, high-value export products, and nuclear energy is one of the few promising industries in which may help remedy this problem. Russia has made developing its nuclear energy industry a clear strategic priority, and aims to have 43.4 GWe of new nuclear capacity constructed by 2030.
Russia’s nuclear firms have exported reactors to China, India, Iran, and Ukraine, and during a visit by President Putin in December 2014, these firms signed an agreement to construct 12 nuclear reactors in India by 2035. Each plant constructed will have a projected life of 40 to 60 years during which components, technical guidelines, and operations and maintenance expertise will have to be supplied to India by Russia. Similar to Westinghouse’s success in establishing its third-generation AP1000 design as the future for Chinese development, Russia has the potential to take a leading role in the development of India’s nuclear power market, which will likely see growth accelerate in the coming years. Indeed, prior to President Obama’s state visit Russia’s energy ministry issued a statement estimating the cost of electricity from Russian nuclear plants in India below that of their American counterparts.
India’s Legal Liabilities Limit Private Competitors
Clear gaps were left open by the lack of a resolution over India’s nuclear liability law during President Obama’s recent visit. Among India’s proposed reactors are six Westinghouse AP1000 units for construction in Gujarat, the first supposedly to be completed by 2020, and six GE ESBWR units in Andhra Pradesh. However, for-profit firms without state support such as GE and Westinghouse are unable or highly unwilling to bear the increased financial risk posed by the liability law, and GE has openly stated that they will not build nuclear reactors in India unless the law is changed. Government-backed firms such as Areva, on the other hand, can afford the risk – and the same is true for Russia’s Atomstroyexport. In order to meet its target of 40 GWe of capacity by 2032 without changing its legislation, India will have to consider other options than Westinghouse and GE, and Atomstroyexport is well positioned to take advantage of this need.
There are not necessarily large negative implications of this development. Sooner or later, Russia will hopefully have a different government that behaves less authoritarian and expansionist, and said hypothetical government will be better equipped to focus on governance and systemic reform rather than economic issues if the country has a strong, high-value manufacturing base. India, meanwhile, can continue regulating its nuclear sector as it sees fit without causing an increase in future carbon emissions. If anyone, it is US firms who lose out in the deal, but this is more due to the US government’s insistence that India comply with international industry norms and has little to do with direct competition from Russian firms. Ultimately, low carbon development and the use of alternative, non-carbon sources for energy is one of the few remaining issues where Russian and US policymakers can and should strive to find common ground.