During Japanese Prime Minister Shinzô Abe’s visit to India last week, Japan and India reportedly made progress on a nuclear deal that they have been discussing for more than seven years. The governments did not actually conclude the deal: the Joint Statement released by the Prime Ministers only includes a droll phrase welcoming the “agreement reached... on the Agreement… for Cooperation in the Peaceful Uses of Nuclear Energy” and expresses the hope that “this Agreement will be signed after the technical details are finalized”.
These “details” include deep concerns about India’s growing weapons arsenal within Japan’s polity that even Mr. Abe’s militaristic government has found difficult to ignore. Nevertheless, even the prospect of an India-Japan nuclear deal is worrying because it takes the country a step closer to the construction of untested and expensive reactors. Moreover, despite the Narendra Modi government’s “Make in India” rhetoric, the agreement will primarily benefit multinational corporations based in Japan.
Although the debate on reactor imports in the past few years has largely focused on France, Russia and the United States, Japan is an important background player in this market. Except for the Russian VVER reactors at Kudankulam, in Tamil Nadu [which is the Vodo-Vodyanoi Energetichesky Reaktor or Water-Water Power Reactor and a pressurised water reactor], Japanese corporations have a key role in the three other reactor designs that the government is planning to import: the Westinghouse AP1000 reactors for Mithi Virdi (Gujarat), the General Electric (GE) Economic Simplified Boiling Water Reactors (ESBWR) for Kovvada (Andhra Pradesh), and Areva’s European Pressurised Reactors (EPRs) for Jaitapur (Maharashtra). The Japanese company, Toshiba, holds a controlling stake in Westinghouse. The ESBWR was developed by GE in collaboration with Japan’s Hitachi. Finally, the EPR is so large that Japan Steel Works is one of the few companies in the world that can forge some of its critical components. The India-Japan nuclear deal is meant to clear the way for these Japanese corporations to sell their wares in India.
Nuclear suppliers have a clear interest in this deal. A global downturn in the nuclear industry after the Fukushima disaster in 2011 has left them with serious commercial difficulties. GE, which built the Fukushima reactors, was considered a “laggard” in the industry even before its reputation was damaged by the accident. It has since struggled to find buyers for its ESBWR design, which was certified by the U.S. Nuclear Regulatory Commission only last year. Last month, Toshiba announced that from the time it acquired the company in 2006, Westinghouse had accumulated a net operating loss of $290 million. Areva is now virtually bankrupt — its rating downgraded to “junk” by Standard & Poor’s — after billions of euros in recent losses. Its reactor division may be taken over by the French state-run Électricité de France, and possibly Mitsubishi.
Need for new markets
Nor is there any scope for reactor sales within Japan. The Fukushima disaster, which has not been contained even after four years, continues to remind many Japanese of the dangers of nuclear power. A commission established by the Japanese Parliament emphasised the role of poor safety practices in the Japanese nuclear industry and went so far as to state that “this was a disaster ‘Made in Japan’”. Despite a strong push by the Abe government, nuclear power finds little support in the country. A poll conducted by a Japanese national newspaper Asahi Shimbun in 2014 found that 77 per cent of respondents supported a phase-out of nuclear power.
It is not surprising, therefore, that Japanese nuclear corporations have turned to India as a market for their technology. But there are good reasons for India to resist this sales pitch. Even with domestic Indian reactors, nuclear power has been an expensive source of electricity, but with imported reactors the costs become prohibitive. This is, in large part, due to the astronomical capital costs of reactors. Since none of the reactor designs being considered — the AP1000, the ESBWR, and the EPR — are operational anywhere in the world, cost figures must rely on projections, and these have been rising with each passing year. For example, just this month, it was reported that the total costs of the two AP1000s being built in the U.S. state of Georgia might rise to $21 billion, significantly more than the initial projection of $14 billion. Likewise, the latest estimate, from September 2015, of the cost of the EPR being built at Flamanville (France) is €10.5 billion ($11.6 billion), up from €3.2 billion.
Costly proposition
It is straightforward to translate this into a final tariff, using techniques that we described in a paper for the Economic and Political Weekly in 2013. Even accounting for a reduction in construction costs in India, a reactor that costs $11.6 billion in Europe is likely to lead to a first-year tariff of about Rs.19 per unit of electricity. For perspective, recent winning bids at auctions from coal and solar power have been in the range of Rs.4.50 to Rs.5.50 per unit of electricity.
The Indian government claims that it would reduce costs by manufacturing reactor components in India, and concomitantly promote India’s domestic manufacturing industry. However, the deal with Japan shows that this is mostly empty rhetoric. In a press briefing last year, the Joint Secretary (East Asia) explained that India’s motivation in pursuing a nuclear agreement with Japan had to do with its belief that “in the area of nuclear technology there are certain advantages which rest with Japanese industry, in large-scale forgings for example”. Of course, if key reactor components are forged in Japan, they cannot simultaneously be “made in India”.
Disaster in the making?
Another problem with the proposed reactors has to do with safety. The reactors under consideration are untested, and provide no empirical track record of safe operation. Although the industry produces some calculations, using a technique called probabilistic risk assessment to claim that these reactors are safe, these techniques are unreliable both on theoretical and empirical grounds. Indeed, given the complexity of the new designs, it is only natural to expect construction difficulties that will also impact safety. Just a few months ago, Areva announced that it had found serious flaws in the fabrication of the pressure vessel of the EPR under construction in Flamanville. The industry is itself well aware of the possibility of a devastating accident, as is clear from its constant efforts to alter India’s liability law and pre-emptively insulate itself from the consequences of a disaster.
GE’s CEO, Jeffrey Immelt, explicitly stated earlier this year that he would not invest in India without legal indemnity: “I am not going to put my company at risk... there is no project that is worth it.” One lesson that India should definitely learn from Japan has to do with the danger of giving in to such threats. More than 50 years ago, Japan succumbed to pressure from nuclear suppliers and instituted a law to indemnify them. Consequently, when the GE reactors at Fukushima suffered an accident, in part due to a design defect that had been pointed out decades earlier, GE was protected from any claims by victims. The cost of the clean-up, estimated at about $200 billion, has been borne almost entirely by Japanese taxpayers. Of course, multinational suppliers would like to institute the same outrageous arrangement in India, but there is no reason that the government should oblige them.
Citizens in both India and Japan have expressed their serious concerns about this deal and India’s nuclear imports. Recently, 13 villages near Jaitapur passed a joint resolution against that nuclear plant. Large protests have also taken place at Kovvada and Mithi Virdi. Before Mr. Abe’s visit, the mayors of Hiroshima and Nagasaki took the unusual step of jointly writing to their Prime Minister asking him to reconsider the deal with India. It is revealing that the leaders of “Asia’s largest democracies” have entirely ignored these voices on the ground, and instead moved to bail out the multinational nuclear industry.
