Sometimes a deal delayed is a deal unconsummated. American firms bidding to supply nuclear power plants to India have been hung up on liability laws passed in the wake of the Bhopal disaster and other catastrophes. Reuters covered the issue back in 2010:
A stalled nuclear liability bill, delays in land acquisition and political squabbling are hobbling foreign investors keen for a share of India’s newly opened civilian nuclear energy market worth about $150 billion.
Since a 2008 U.S. deal ended India’s nuclear isolation of more than three decades, firms in the United States, Russia, France, Canada and Britian have scrambled for a foothold in the energy-starved country, which aims to double the share of nuclear power on its grid to more than 8 percent over two decades. …
But protests over the liability bill seeking to limit damages to private nuclear operators and suppliers in case of an accidents has put the government on the backfoot, and delayed the entry of U.S. commercial nuclear firms.
Earlier this year a breakthrough was announced through some creative reading of the law, as reported in The Hindu:
Two weeks after U.S. President Obama announced that India and the U.S. have reached a “breakthrough understanding” on the civil nuclear deal, the Ministry of External Affairs (MEA) put out a press release to explain the agreement that India and the U.S. have reached, in order to enable commercial negotiations to begin.
In a press release, the Ministry has answered 19 frequently asked questions (FAQs) that make it clear that the government is not making changes to the Civil Liability for Nuclear Damages Act (CLND) 2010, but will read the Act to mean that supplier’s liability is not a mandatory part of the contracts to be signed.
The need for supplier’s liability has been raised in the recent past after the Fukushima nuclear plant disaster in Japan raised questions about the manufacture of the reactor and parts, and the possible damages of as much as $200 billion. However U.S. manufacturers and even Indian suppliers have raised concerns over India’s CLND law saying that it would be unviable for them to conduct nuclear business in India with the risk of that kind of liability being “channelled” to the suppliers.
The Ministry of External Affairs makes it clear that immediate liability for any incident would be channelled only to the operator, in this case PSU Nuclear Power Corporation of India Ltd. (NPCIL).
Now WorldPress.org reprints an article from Gateway House: Indian Council on Global Relations, by Amit Bhandari, suggesting it may be too late for the suppliers of nuclear power because of that upstart, solar power:
Hard on the heels of falling oil prices and affordable shale comes another dramatic energy change for the industry: the falling cost of solar energy. This has many implications, but the most immediate impact is on the nuclear power industry, large parts of which may have just become obsolete. This means that the new nuclear power plants being planned by India, especially those with foreign collaboration, must be reconsidered and scrapped if they are financially unviable.
Most significant is the impact on the India-U.S. nuclear deal, held up by the liability clause to enable these reactors, and a sticking point in the bilateral negotiations for several years. Technological advances have addressed an issue that negotiators couldn’t resolve.
This transformation environment is the result of U.S.-based renewable energy major SunEdison winning, on Nov. 4, the bid to supply solar electricity in India at a record-low price of Rs 4.63 per kilowatt-hour (kWh). News reports indicate that as many as nine companies offered to supply solar electricity for less than Rs 5 per kWh, indicating this isn’t a one-off bid delinked from market prices. This price is still some way off from the cost of electricity supplied by government-owned utilities such as National Thermal Power Corporation, National Hydel Power Corporation and the Nuclear Power Corporation of India—which sell electricity at prices ranging from Rs 2.7 to 3.3 per kWh. However, NTPC, NHPC and NPCIL have lower electricity costs because many of their plants are old and fully depreciated, bringing down the fixed costs and therefore the average cost of supply. These utilities are also the lowest-cost suppliers of electricity in India.
With other suppliers and newer power plants, especially nuclear, the equation is reversed. The electricity tariff from the under-construction Units 3 and 4 of the Kudankulam Nuclear Power Project will be Rs 6.3 per kWh. The latter price can increase in case of cost and/or time overruns, which are common in nuclear power projects globally and in India.
The turbulence in the general power industry has been fascinating, even as American gas prices fall to unforeseen lows due to Saudi Arabian production levels. In this case, nuclear power suppliers may find themselves without a market if India can make solar work. Certainly during some seasons, such as winter, generally the sun is not obscured much by clouds; but during the monsoon season, will it work? If, of course, the monsoon stays on schedule; my work colleagues in Pune (3 hours out of Mumbai) have told me that the monsoon is less dependable than it used to be. It may be wiser to have nuclear in hopes that they do receive the rains they depend upon for crops. On the other hand, given the limited liability demanded by the suppliers, it’s a little difficult to justify such a proposal – if the suppliers are not on the financial hook, why should they be trusted? Given the Bhopal disaster, it’s easy to understand Indian distrust.
