Will the U.S.-India Civil Nuclear Cooperation Initiative Light India?

Executive Summary

The U.S.-India Civil Nuclear Cooperation Initiative seeks to foster the development of nuclear power generation in India, despite concerns about nonproliferation. Proponents claim this is necessary to meet electricity demand and GDP growth targets, reduce reliance on foreign sources of fossil fuels, and improve the environment. This chapter examines these assertions by assessing the current and future demand for electricity in India and the generation supply options available. Although focusing on electricity generation, for which nuclear technology is applicable, this report also recognizes that in terms of total energy needs India relies to a much greater extent on traditional biomass and cow dung than on electricity, a situation which will continue for some time. In terms of electricity, the analysis finds that generation capacity will have to increase significantly to meet demand and India cannot rely on any one supply source. While nuclear generation will contribute significantly after 2050, its contribution will remain marginal through 2016 and 2032. Even optimistic scenarios for the development of nuclear power in India, which is based on unproven thorium technologies, suggest nuclear would contribute only 9% of total generation capacity by 2032. Economic growth targets could be attained without significant increases in nuclear generation capacity and nuclear capacity will do little to reduce India’s reliance on foreign sources of oil and gas. Furthermore, given the dominance of coal in all of the electricity supply scenarios through 2032, clean coal technologies, demand side management, and renewable energy would have a greater impact on reducing carbon emissions than substitution based solely on nuclear energy. Although the development of nuclear energy today could aid in the eventual exploitation of India’s full nuclear potential required after 2050, it does not meet India’s energy needs as expressed by proponents of the U.S.-India Civil Nuclear Cooperation Initiative.

Introduction

The U.S. and Indian governments recently established an unprecedented strategic partnership on nuclear energy through the U.S.-India Civil Nuclear Cooperation Initiative, marking a significant shift in U.S. nonproliferation policy. To many observers the choice before the U.S. Congress was between “approving the deal and damaging nuclear nonproliferation, or rejecting the deal and thereby setting back an important strategic relationship.”1 In light of this important decision, it is vital to objectively evaluate the arguments and evidence that underpin the change in policy. While many strategies and geopolitical arguments have been discussed throughout this book, it is also important to weigh this decision on an economic scale to see whether it is well balanced. It is the aim of this chapter to test the economic arguments for the agreement against a rigorous fact base.

Proponents of the shift in U.S. foreign policy towards a stronger strategic partnership through civil nuclear cooperation with India put forth three main economic and resource arguments. The first is that nuclear energy will aid India in reducing its reliance on oil and gas. Secretary of State Condoleeza Rice asserted that “civilian nuclear energy will make [India] less reliant on unstable sources of oil and gas.”2 The second is that nuclear energy is necessary to sustain India’s GDP growth rate of 8-9%. Without nuclear energy, it is argued, India may not be able to sustain its GDP growth and achieve its targets for economic development. The third argument is that nuclear energy can reduce greenhouse gas emissions and improve climate change by substituting for coal-based electricity generation.

The ultimate question given the debate around U.S.-India civil nuclear cooperation is whether nuclear generation is needed to meet the electricity needs of India in the medium and long term and whether it contributes meaningfully to environmental improvements and energy independence to justify an expansion of nuclear power in India. In evaluating the validity and strength of the arguments for the agreement, this chapter will: (1) assess the current and future demand for electricity in India in the medium term to 2016 and the long term to 2032 to determine the gap between current supply and future demand; and, (2) review energy supply options by evaluating total potential capacity, relative costs, pace of development and technical constraints, the location of supply and demand, environmental issues, and the impact on energy independence.