Indian nuclear deals still complicated for US firms despite claims of Obama-Modi breakthrough

Energy Associated Press

India and America's declaration of a breakthrough in contentious nuclear energy cooperation has been met with a lukewarm response from industry and analysts. Few expect the potentially lucrative Indian market to suddenly become less complicated for U.S. nuclear companies.

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President Barack Obama's three-day visit to New Delhi raised hopes for concrete plans to tackle India's fossil fuel dependency and to resolve a four-year standoff over liability that prevented U.S. and Japanese nuclear energy development on Indian soil. Instead, there were vague commitments and public displays of chumminess between Obama and Prime Minister Narendra Modi.

The two leaders said they agreed to advance a 2008 civil nuclear deal long stalled by concerns about India's reluctance to allow U.S. tracking of fissile material. It has also been held up by American concerns with an Indian law that makes U.S. nuclear suppliers, not operators of nuclear plants, liable for accidents.

Since India passed the liability law in 2010, only government-backed nuclear firms in Russia and France have discussed entering India's market, annoying Washington which brokered India's special status as a nuclear nation despite its refusal to sign the global treaty on the non-proliferation of nuclear weapons.

The apparent U.S.-India breakthrough this week was in narrowing differences on the liability issue. U.S. Ambassador Richard Verma said "it's up to the companies what to do" after India gave an assurance the liability law would be interpreted consistent with international understanding.

If anything substantive was agreed, "it's very unclear," said Paris-based energy and nuclear policy consultant Mycle Schneider. "I don't think there's enough information out there that makes it possible to make a coherent statement."

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Modi has placed new urgency on India's nuclear ambitions, with the aim of vastly expanding atomic energy capacity to account for about half the country's total electricity supply by 2050. Nuclear power is one way India, the third biggest emitter of greenhouse gases, could cut its emissions and also reduce air pollution from coal-fired power plants. But it is both expensive and water intensive, testing two resources already in short supply in India.

In December, Modi reached a deal for 12 new Russian reactors, and in September secured access to Australian uranium. He was unable, however, to reach an agreement last year with Japan, a U.S. ally with decades of nuclear energy expertise.

Indian and U.S. officials said part of the solution to the liability impasse could be a $122 billion insurance scheme proposed by India. That would be funded by India's government and Indian nuclear companies, and be managed by the state-run General Insurance Corporation of India, according to Indian nuclear negotiator Amandeep Gill.

Analysts questioned how that would work in practice.

"If they agreed to limit U.S. industry liability, well how do they do that? You can agree in diplomatic terms, but what does that mean in a U.S. or an Indian court? It's unclear," Schneider said. He also said any insurance scheme would have to be in the order of hundreds of billions of dollars to make sense.

U.S. nuclear suppliers welcomed the agreement, though they said they were still reviewing the fine print.

GE Hitachi Nuclear Energy said it "applauds" efforts to resolve differences over the liability law. But it cautioned that the ultimate solution should be India's compliance with an international convention on compensation, establishing a global legal regime and compensation fund for nuclear accidents, while requiring that nuclear operators also maintain insurance.

An earlier deal with Westinghouse Electric Co. for a 6,600-megawatt nuclear plant has languished while the liability dispute raged. The Toshiba-backed company is still eyeing another $50 billion contract to build reactors in Modi's home state of Gujarat.

"We've lost some time and we've fallen a bit behind" with construction agreements with Indian builders on hold, Westinghouse CEO Daniel Roderick said in an interview Monday with Indian broadcaster NDTV.

"What I'm worried about is we could lose another two or three years if we don't really have a mandate from the government."

The liability insurance program would also likely mean that commercial nuclear projects become more expensive.

The U.S. is the sixth-largest investor in India and the two countries want to boost their trade to $225 billion by 2025 from last year's $62 billion.

"We're confident the breakthrough achieved at the summit level will lead to more investment," said Narendra Taneja, an energy adviser with the governing party.

On global warming, Obama was frank in saying industrialized and developing nations faced different obligations in cutting carbon emissions.

"The U.S. recognizes our part in creating this problem, and therefore we are leading the effort to combat it," he said Tuesday, before leaving for Saudi Arabia.

While acknowledging some think it unfair to ask a still-developing India to reduce its climate-warming carbon emissions, Obama said it was necessary or else "we don't stand a chance against climate change."

New Delhi has long refused to curb carbon emissions while most of its 1.26 billion people still live in dire poverty. Instead, India has pledged to reduce its emissions intensity — how much carbon dioxide it puts out per dollar of economic activity. It's also pledged a five-fold increase in solar capacity to 100 gigawatts by 2022 along with a 30-fold boost for wind to 60 GW.

Many of the agreements announced during Obama's visit centered on boosting energy cooperation in ways that could help wean India off fossil fuels.

"This was a strengthening of the partnership on all levels, with climate at the heart," said Anjali Jaiswal of the National Resource Defences Council. "This is a whole new level of engagement that we're seeing from India."

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