India aims to significantly increase its nuclear energy capacity by 2031, but faces challenges from legal uncertainties, lack of suitable land, and ambitious timelines.
This report is from this week's CNBC's Inside India newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Saint-Paul-lez-Durance is a small town of about 1,000 people in the south of France, featuring a picturesque 15th-century château and a handful of shops. Yet, its quaint charms were not the only reason that attracted Indian Prime Minister Narendra Modi this week.
Saint-Paul-lez-Durance is also home to Cadarache, one of the world's preeminent centers of nuclear research. \This initiative aims to enhance domestic nuclear capabilities, promote private sector participation, and accelerate the deployment of advanced nuclear technologies such as Small Modular Reactors (SMRs), the government said in a statement. Small modular reactors, that produce under 300 megawatts of electricity, have been touted as the answer to several challenges the nuclear industry faces. The industry says SMRs, which will be manufactured in modules elsewhere and assembled onsite, will reduce construction time and cost, which have tended to come in multiple times the initial estimates. In fact, the government says it will build five modular reactors in under a decade using the funds, helping it reach its self-imposed target of 22.4 gigawatts of nuclear power capacity by 2031. \Nuclear energy accounts for about 3% of India's generation capacity currently, with plans to increase capacity from 6.7 gigawatts to 22.4 gigawatts by 2031. While the goals are certainly ambitious, the challenges look daunting, if not outright impossible to overcome. The International Energy Agency and investment banks Bernstein and Royal Bank of Canada, for instance, say India's nuclear ambitions are quite simply unachievable. Even with China's track record for infrastructure development, it took the country about 15 years to set up its first modular reactor Linglong One. Analysts say it will be 'pleasantly surprising' if India were to beat this time scale. 'While it absolutely merits a whole-hearted attempt on India's part - from a stock market analyst perspective it is too far to be ... priced in today,' said Bernstein analyst Nikhil Nigania. 'There is a low likelihood that even indigenous SMR would be operational in India by 2033 against has planned.' \A tender for a 220-megawatt Bharat Small Reactor, which isn't modular, puts all the financial risks of building a nuclear power plant onto the private sector — under the 'Civil Liability for Nuclear Damage Act' — while the state-owned power company NPCIL retains many of the benefits, including ownership and control of the power plant. The CLND Act, which sees companies and their suppliers on the hook for any nuclear accident in India, is viewed by some industry experts as the bane of the private sector. They say if it were not for the law, construction of the world's largest nuclear power plant would now be underway in India. French-state-owned nuclear giant EDF, which operates more than 60 nuclear power stations in France and the U.K., submitted its plans in 2021 to build six reactor units that would generate 9.6 gigawatts of carbon-free energy. Yet, earlier this year, it said the existence of the CLND had prevented it from pushing ahead. 'In addition to the country risk, which includes a substantial tax dimension, the conditions related to the scope of nuclear liability in India must be met, and the project's financing plan must be secured before the final contracts are signed,' EDF said in a bond prospectus document issued earlier this year. U.S. nuclear giant Westinghouse Electric Company, meanwhile, proposed to build six 1,200 megawatt AP1000 reactors, which have been tried and tested in the U.S. as well as in China, more than a decade ago. Yet, no progress has been made on the deal since then. 'Westinghouse, the supplier of high output nuclear power plants, remains skittish about sales to India with the absence of durable assurance of limited liability in the event of an accident,' said Ashley Tellis, senior fellow at the Carnegie Endowment for International Peace. \The concerns have not gone unnoticed. The Indian government has said it intends to amend the laws preventing companies like EDF from entering the nuclear sector. 'For an active partnership with the private sector towards this goal, amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act will be taken up,' said Finance Minister Sitharaman in the budget speech to Parliament. Amending the statute books is just a first step for India, however, as it looks to make some headway in meeting its nuclear goals. Another key factor holding up the construction of these rotund machines has been finding suitable land. Nuclear scares of the past, including the Fukushima nuclear disaster of 2011, have repeatedly been used by locals to protest against having plants built in their backyard. The foundation stone for the 1,600-megawatt Kudankulam Nuclear Power Plant, situated in the coastal state of Tamil Nadu, was laid in 2002. But even after two decades, only two units are operational, and the remaining four face delays due to opposition from local communities
NUCLEAR ENERGY INDIA SMRS CIVIL LIABILITY FOR NUCLEAR DAMAGE ACT EDF WESTINGHOUSE
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