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Nuclear deals and technology choice

R. Ramachandran

India's decision on importing nuclear systems should be dictated primarily by the right to reprocess the spent fuel and to use the separated plutonium in safeguarded breeder reactors.

EVEN AS the India-United States nuclear deal — to be formalised by the `123 Agreement' being negotiated — is yet to be concluded, and the changes to the guidelines of the Nuclear Suppliers Group (NSG) to enable export of nuclear technology and systems to India are yet to occur, potential nuclear technology suppliers are already jockeying for space in the Indian market that is set to open up.

While the Russian offer to site as many as six 1000 MWe VVER light water reactors (LWRs) at Koodankulam (where 2x1000 MWe units are currently being built) was made as far back as in 2000, subject to favourable international regime for nuclear trade with non-NPT signatories, France and the U.S. have come into the picture more recently. France had begun its exploratory visits to India even some months before the July 18, 2005, India-U.S. joint statement on nuclear cooperation, as if it had an inkling of possible changes in the restrictions on nuclear trade with India in the near future. France had, in fact, carried out detailed survey at Jaitapur in Maharashtra — one of the sites cleared for locating nuclear power plants — for setting up LWRs of Areva NP, formerly the French Framatome ANP, in which now Siemens has a 34 per cent stake. It is reliably learnt that the Jaitapur site is being developed with Areva's 1600 MWe European Pressurised Reactor (EPR) in perspective. Of course, if the trade regime does not change, the site will have Indian Pressurised Heavy Water Reactors (PHWRs).

According to sources in the Nuclear Power Corporation of India Ltd. (NPCIL), all the potential suppliers — AtomStroyexport of Russia's Federal Atomic Energy Agency, Areva NP of France, and General Electric (GE) and Westinghouse Electric Co. of the U.S. — are keen to supply all the reactors that India plans to import in the future. The visit of the head of the Russian Atomic Energy Agency, Sergei Kiriyenko, ahead of President Vladimir Putin's arrival in India is indicative of the Russian keenness to not only reiterate the earlier offer but to discuss possibilities beyond Koodankulam as well.

With the recent award on December 16, 2006, of the Chinese contract to build four LWRs to Westinghouse, some media commentators have begun to pitch for Westinghouse in the Indian context as well. The reactors that Westinghouse plans to sell to the State Nuclear Power Technology Corporation (SNPTC) of China are based on its latest reactor system AP1000, a 1100 MWe `Generation III+' LWR with an advanced modular design and passive safety features, which is claimed to bring down capital costs and construction time significantly to $1-1.2 billion/MWe and 36 months respectively. It is also stated to have a lifetime of 60 years. However, the Chinese plant, which is expected to become operational by 2013, will be the first such system to be built in the world and in that sense the technology is as yet unproven.

Though AP1000 is an upgraded version of Westinghouse's earlier 600 MWe AP600, no plant has been built based on the latter either. In fact, only in early 2006 the U.S. Nuclear Regulatory Commission (NRC) approved the final certification for AP1000 as a standard plant that can be licensed. It had type approved AP600 in 1999 and Westinghouse had submitted its application for certification of AP1000 in 2002. In September 2004, on the basis that many of the systems in AP1000 were identical to the already approved AP600, the NRC had granted the final design approval (FDA) on a fast track process so that Westinghouse could participate in the Chinese bidding process. The State Council in China had approved the setting up of 2x1000 MWe LWRs each at Sanmen (in the eastern Zhajiang province) and Yangjiang (in the southern Guangdong province) in September 2004 and the bidding process was opened in February 2005. The total price tag is about $5 billion for the nuclear part plus $3 billion for balance of plant systems.

The competing bids were from Areva (for its EPR) and AtomStroyexport (for its V-392 version of VVER-1000, same as those being built at Koodankulam), both of which have already built nuclear plants in China. The Areva and AtomStroyexport reactors are also based on advanced technologies, but they are called evolutionary Generation III technologies as against Generation III+ of AP1000. In particular, like AP1000, V-392 too has passive safety features. The first EPR unit is being built at Olkiluoto in Finland, (expected to go on stream in 2010), and V-392 based plants are being built in India and in Tianwan, China. One of the Tianwan units has already been connected to the grid.

More than the technological edge, which AP1000 may or may not have, it is the political backing at the highest level Westinghouse got that enabled it to win the Chinese contract. The speedy NRC approval of its design was only one element of that. Even before that, in April 2004, U.S. Vice-President Dick Cheney lost no opportunity to speak highly of the new Westinghouse reactor design. Soon after, in early October 2004, the then U.S. energy secretary Spencer Abraham met Chinese officials and assured them of the safety of AP1000 reactors. To add to the sales pitch, NRC Chairman Nils Diaz also made a public pronouncement of the safety of AP1000 reactors to the Chinese in late October 2004, which was long before the formal NRC certification.

The main reason for this political push to Westinghouse is clearly to use China as a test bed for the new reactors, which would provide the necessary boost to nuclear power in the U.S. Given the various incentives in the National Energy Policy of 2005 to the setting up of nuclear power plants in the U.S., a consortium of nine nuclear utilities NuStart Energy has been formed. NuStart Energy has already chosen AP1000 as the system for the Combined Licence (COL) application for new plants under the U.S. Department of Energy's nuclear 2010 programme. But more importantly, according to Westinghouse, the Chinese deal involves 5,130 U.S. jobs, three-fourths of which will be new. This recalls a similar remark by U.S. Secretary of State Condoleezza Rice at the Congressional hearings in April 2006. She stated that the India-U.S. deal would potentially create over 3,000-5,000 direct new U.S. jobs and 10,000-15,000 indirect jobs.

Two other factors seem to have determined China's choice of Westinghouse, which came after 22 months of protracted negotiations with all the three bidders. One, favourable financing terms, which China had insisted upon even while inviting bids. All the three governments had given firm guarantees and support arrangements to finance the deal. The French Coface company was to finance Areva. In fact, till the very end it seemed that Areva might get the contract given France's assurance of attractive financial terms.

Interestingly, even though Westinghouse is not a U.S. company — till October 2006 it was owned by the British Nuclear Fuels Ltd.(BNFL) when both BNFL and Westinghouse were bought over by the Japanese Toshiba — the U.S. Exim Bank approved in February 2005 a combination of loans and loan guarantees amounting to $5 billion to support the sale of AP1000 reactors, three times the previous Exim Bank approval for a project in China. Since such an Exim loan is subject to Congressional approval, it is of interest to note that, in June 2006, the House voted to bar the Exim Bank from proceeding with the financing arrangement. The Senate, however, rejected such a move. The issue is yet to be resolved by a joint Conference.

The second factor that played a key role in the Chinese final decision was that of technology transfer, which apparently became the deciding factor in the end, though diplomatic manoeuvring by the U.S. has played a definitive role. "The Chinese were very demanding," Samuel Bodman, the U.S. Energy Secretary, remarked after the signing of the Memoarandum of Understanding (MoU) with China.

From the Indian perspective, since all the three potential suppliers offer advanced technology systems, the choice should be dictated by national interests, most importantly the right to reprocess the spent fuel and to use the recovered plutonium in future safeguarded breeder reactors. Even though Westinghouse is now a Japanese company, U.S. laws and export controls will apply. This means any deal with Westinghouse will be governed by the `123 Agreement,' which will not allow reprocessing on Indian soil.

In contrast, the agreement with the Russians for Koodankulam allows India to reprocess the spent fuel and any future supplies from Russia are also likely to be based on a similar arrangement. Also, with the established performance of the Russian breeder BN-600 and with the higher capacity BN-800 being constructed, Russia is most advanced in breeder technology. A long-term nuclear cooperation with Russia can also give India access to that country's breeder technology and lessons from its proven experience. Also, significantly, since the Russian VVER-1000 design has already been type-approved by the Indian Atomic Energy Regulatory Board (AERB), there will be the obvious time saving (of even up to two years) in the setting up of nuclear power plants based on Russian VVERs.

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