Making the way for nuclear energy in India
Business Standard, 11 November 2024
In India we tend to assume that anything to do with outer space is done by governments. But some of the best global knowledge on space travel is in private firms like SpaceX. Once the private sector gets going, it brings energy and innovation of a quality that is not found in state organisations. And so it is with nuclear energy. Private firms now build the safest, lowest cost and most innovative nuclear reactors of the world. At the time of the Indo-US nuclear deal, it was clear that the big generation plants that could be imported from France, Japan and the US had important attractions. In recent weeks, Google and Meta have placed orders for `Small modular reactors' from private firms. SMRs are typically 50 MW captive power plants.
In this article, the authors do not wish to be central planners, we do not wish to be the great leaders that will choose technologies or business models for the Indian economy. Indian energy policy should create conditions where private firms can evaluate whether it is optimal for them to buy such equipment.
How might this be achieved? What elements of the policy environment are required so that this field can evolve sensibly? This is a field which contains market failure. The usual toolkit of public economics should be trotted out: to understand the market failure, to envision policy pathways that are feasible under Indian conditions of state capability, which impose low costs upon the people. Alongside this, there is a need to remove restrictions which have no connection with market failure. This approach takes us to five areas of work for policy makers.
- If a private person in India wishes to buy a nuclear reactor from a foreign vendor, there should be no import restrictions or customs duties that interfere in the transaction, subject to security restrictions upon the operator.
- Discoms are generally not interested in high cost sources such as offshore wind or nuclear. Hence, the policy strategy adopted with nuclear should be similar to that used with offshore wind, with a clear mechanism for generators to find their own C&I customers.
- The fuel used in nuclear power plants can be used to make bombs. This creates security challenges. These security challenges are also seen in other sectors. For example, the state plays a leadership role in the safety of air travel, adding this unique contribution to an aviation sector made of private airports, private airlines and private aircraft manufacturers. Safety for private nuclear energy requires domestic regulations, international safeguards, and enforcement protocols. The regulatory architecture for nuclear security in India will need significant change.
Amendments to the Atomic Energy Act will be required to align Indian standards for the physical handling, storage, and transport of nuclear materials by private persons with the requirements of the International Energy Agency. A specialised cadre within the Central Industrial Security Force will be required for the security of private nuclear facilities. MHA and the Atomic Energy Regulatory Board will need to develop the capabilities for security clearances for private operators and regulatory oversight of the safety of private nuclear plants.- The global regime for civil nuclear liability channels full responsibility to the operator, and envisages litigation against the supplier by the operator only. This design gives a full focus for the operator to do a good job of running the plant. It also defines the conditions under which the best global firms will choose to sell in India.
In India, we got to the Civil Liability for Nuclear Damage Act (CLND Act), 2010, which has deterred foreign suppliers of reactors by placing liabilities upon them. This also complicated the possibilities for buying insurance, as insurers are hesitant to private coverage for supplier liability.
To address these concerns, the GoI issued FAQs in 2015, clarifying aspects of the CLND Act. However, FAQs are not considered as delegated legislation under the CLND Act and are therefore non-binding on the State. In the Indian legal system, when FAQs have contradicted a statute, courts have ignored them. Foreign suppliers are not reassured by FAQs and have avoided selling into India. Legislative amendment is the only viable solution.- The foundation of a sensible Indian energy industry remains the transition into the price system, where private persons make decentralised decisions on supply and demand, without the control of officials in government or in PSUs. This is the foundation within which multiple energy technologies on supply and demand -- including nuclear generation -- will fit into the energy system in a rational way. Private persons must form a speculative view about the fluctuations of prices in the future (including optimistic views about high prices in the evening peak) in order to justify their bet of purchasing nuclear reactors.
The field of nuclear electricity is opening up worldwide with important improvements in cost and safety. Nuclear energy in India could make important contributions on the problems of base load, grid stability, and creating conditions for more renewables. It is private persons that must make the risky investments of buying these plants. We are headed to a world with renewables generation and a variety of storage technologies that hold down the evening surge in the price [EiE Ep40]. Private persons who have a speculative view that storage will work poorly, that the evening surge will be quite considerable, may like to place the bet of buying nuclear reactors. Picking winners, choosing technologies, is the job of such private speculators and not the state.
The problem lies in the deep engagement of the Indian state in electricity and in nuclear energy. What is needed is a clarification of the role of the state, in both areas, where the state focuses on its role in addressing market failure, and in upholding economic freedom in all other respects. A program of economic reform is required in the five areas sketched above. If good progress is made in these areas in a few years, the highest outcome would be that nuclear reactors would become a choice that private Indian firms can evaluate.
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