Nuclear energy and its discontents

Nuclear energy and its discontentsinventories of depleted UF6.  Those are over 700m
                              kgs.  The drawback is that the government’s
By  SUNIL  KEWALRAMANIprocess produces uranium oxide and hydrogen
       CHIEF INVESTMENT OFFICER,fluoride, which is not as pure as that required for
 GLOBAL MONEY INVESTORindustrial application.
      September 11, 2009    Reprocessing is a problem because it can
 Chart : First electricity production by nuclear energyproduce separated plutonium which is easier to divert
Experimental Breeder Reactor EBR-I, 20 Dec.1951,for weapons production than plutonium contained in
Arco, Idaho, USAhighly radioactive fuel. Case in mind is North Korea.
 At the outset, the Indo-US nuclear deal appearsBesides, commercial reprocessing plants produce so
path-breaking and allows India to regain itsmuch plutonium that keeping track of it all is rather
techno-commercial independence and sovereignty thatcumbersome and next to impossible. This makes it
we lost in 1978. The deal is supposed to contribute toeasier to divert plutonium enough for weapons without
sustainable development, energy sustainability and fightthe loss being detected.
against climate change.  Unlike solar and wind energy,   The progress of the global industry is by no
nuclear technology is the only one that can meetmeans guaranteed. Several factors may impede it.
power demand 24 hours a day, although disruptivePublic opinion may harden against nuclear power.
innovations in solar and wind energy can change that.Private sector investors may refuse to commit the
 It is believed that a stable, prosperous, ecologicallyvast sums that will be needed. A worldwide shortage
balanced India is good for the sustainability of theof skilled engineers and manufacturing facilities for
world.  However, it takes time to buy and set up newessential components is likely to be the greatest
nuclear reactors.  Cases in mind are French reactorsobstacle to delivering reactors fast enough to meet
in China and Russian reactors in Koodankulam India.demand. Practical solutions for the long-term storage
 The Olkiluto 3 reactor being built in Finland is moreof radioactive waste remain elusive.
than two and a half years behind schedule, and cost  Yet the most serious concern of all over the nuclear
overruns exceed Euros 2.5 Billion.renaissance remains the link to proliferation. Power
  Nuclear power provides 77 per cent ofstations are not, in themselves, much of a risk - the
France’s and 19.4 per cent of United State’sproblems lie in the uranium enrichment process, which
electricity today.  According to French Presidentcan be employed to develop both civil and military
Nicolas Sarkozy, each EPR (European Pressurizedversions of nuclear power.
Reactor) that replaces a natural gas-fired electricityTo understand why this issue is at the centre of the
plant saves two billion cubic metres, or 70.6 billion cubicUS administration's international programme, it is
feet, of natural gas each year, and that each EPR thatimportant to focus on the three key factors inspiring
replaces a coal-fired plant reduces CO 2 emissions bythe nuclear renaissance.
11 million tons.First, there is security of supply. Driven by the
   On June 26, 1954, at Obninsk, Russia, the nucleardevelopment of emerging economies such as China
power plant APS-1 with a net electrical output of 5and India, global energy demand could rise by as much
MW was connected to the power grid, the world's firstas 45 per cent by 2030, according to the International
nuclear power plant that generated electricity forEnergy Agency, which represents rich
commercial use. On August 27, 1956 the firstenergy-consuming countries. As concerns have grown
commercial nuclear power plant, Calder Hall 1, Eng-land,about the future availability of fossil fuels, which will be
with a net electrical output of 50 MW was connectedincreasingly provided by a small number of large
to the national grid.suppliers, energy consumers have come to see the
As of 30 June 2009 in 31 countries 436 nuclear powervirtue in diversifying their sources of supply.
plant units with an installed electric net capacity ofSecond, there is economics. The economics of nuclear
about 370 GW are in operation and 48 plants with anpower are fiercely contested, and highly sensitive to
installed capacity of 42 GW are in 15 countries underchanges in variables such as construction costs. What
construction.is unarguable, however, is that it provides an energy
As of end 2007 the total electricity production sincesource not linked to the oil price.
1951 amounts to 59,450 billion kWh. The cumulativeEven for oil- and gas-rich countries, such as Iran and
operating experience amounted to 12,750 years by thethe UAE, another Middle Eastern country keen to build
end of 2007.civil reactors, nuclear generation makes sense
Charts :because it frees up more of their hydrocarbon
Nuclear power plants under construction, June 2009resources for export. The earnings from those
(IAEA 2009, modified)exports "would easily pay for investment in nuclear
Nuclear share in electricity generation, 2008 (IAEAenergy", says Hans-Holger Rogner of the IAEA. Given
2009, modified)likely long-term oil and gas prices, "It makes economic
Number of nuclear reactors worldwide by age as ofsense."
March 2009 (IAEA 2009)Finally, there is the growing pressure to meet climate
Nuclear Power Plants, energy availability factor 1991 -change goals. The US and its allies accept that the
2008 (IAEA 2009)global struggle to cap greenhouse gas emissions
Nuclear energy provides about 15 per cent of themeans nuclear energy options must be available.
world's electricity. Some 30 nations generate nuclearNuclear energy is almost free of emissions and, if
power; 10 to 20 are expected to join them in the nextgrowing energy consumption is not to lead to soaring
10 years. At present there are 370 reactors inconcentrations of carbon dioxide in the atmosphere, it
operation. The International Atomic Energy Agency, theis likely to play an increasingly important role.
United Nations watchdog, reckons that 1,400 new New processing technologies are being developed to
reactors may be built between now and 2050.limit the amount and accessibility of weapons-grade
  This expansion is creating a conundrum for westernmaterials.  At an international level, governments need
policymakers, one with which the US administration isto strengthen current international anti-proliferation
now urgently grappling. Nuclear power may beefforts to give the IAEA (International Atomic Energy
necessary to help the world meet climate changeAgency) more information about a country’s
goals and guarantee energy supply. But it also bringsnuclear-related activities and IAEA inspectors greater
with it considerable security concerns. Detachingaccess to locations. Plants that enrich uranium for
peaceful nuclear energy from devastating weaponry ispower plants can also be used to enrich for bombs;
sooner said than done. The fuel for most modernthis is the path Iran is suspected of taking in developing
nuclear power stations - enriched uranium - in morea weapons program.  An ambitious expansion of
potent forms is used for nuclear arms. Washingtonnuclear power would require a lot more facilities for
and its allies do not want the expansion in civil nuclearenriching uranium, thus enhancing the potential risk.  A
power to allow any more nations to diversify intonuclear renaissance is expected to be led by countries
atomic weapons.in Middle East and Africa—where a nuclear-energy
MIDDLE EASTERN MARKETS :  The lucrative fusionprogramme could lead to development of surreptitious
of politics and businessweapons. 
In a few weeks Abu Dhabi will write nuclear history    To safeguard its monopoly, USEC (United
when it unveils the winner of a multibillion dollar tender,States Enrichment Corporation) and affiliates in the US
writes Peggy Hollinger. With the initial reactors set togovernment imposed trade barriers on foreign,
launch around 2016, the Emirate will be the first Arabprincipally European producers of uranium enrichment
state to have nuclear power. Where Abu Dhabi goes,services.  This, in turn motivated Europeans to build
others will follow: Saudi Arabia, Kuwait, Qatar andcompeting uranium enrichment plants in the US.  Since
Jordan have all voiced desire for nuclear power.the Europeans are using proven centrifuge enrichment
The budding new market has drawn considerabletechnology, which has substantially lower energy
political and commercial interest. Political concerns mayrequirements than USEC’s ancient gaseous
be of the highest order; how lucrative the nucleardiffusion plants; in an era of conservation of precious
business opportunities really are remains unclear.energy, the European technology deserves careful
The international interest in the Middle Eastern marketattention should the government feel going nuclear is
far outstrips its commercial value, says Steve Kidd, ofindeed the way to go. Urenco, the Dutch uranium
the World Nuclear Association. According to WNAenrichment company is building its new plant in New
estimates, outside of Iran only two nuclear reactors willMexico. Areva, the French nuclear engineering group, is
be operating in the region by 2020 and just four bysetting up shop in Idaho. Each of the new facilities will
2030. “It is not a lot compared to China where youproduce initially, 3m Separative Work Units, or SWUs
could win contracts for up to 40.”per year. 
One of the main reasons is clearly political. Nowhere is  The IEA has estimated that to keep the increase in
this better demonstrated than in France, home toglobal temperatures to acceptable levels, the world's
some of the world’s leading nuclear companiesnuclear capacity might have to increase more than
such as EDF, GdF-Suez and Areva. These firms –five-fold by 2050.
all among the bidders in Abu Dhabi – are key toolsGrowing international moves to put a price on carbon
in President Nicolas Sarkozy’s nuclear diplomacy indioxide emissions, likely to be given fresh impetus at
the Middle East: tough on Iranian enrichment ambitions,the forthcoming UN climate conference in Copenhagen
but open to selling know-how to those countries willingin December, also make nuclear power look more
to abide by international rules. “It is the best way toattractive.
show Iran that we are not against the Middle EastOpponents counter that even a large expansion of
having nuclear technology,” says one Frenchnuclear power would have only a small impact on the
government official.overall global level of emissions. Pro-nuclear experts
France also believes that there could be huge wideracknowledge that, while it may not be a crisis-solving
commercial gains to be had from nuclear deals,"silver bullet", it can be one of several "silver buckshot"
especially in defence and infrastructure. The Elyséethat, combined, can make a difference.
has sent Philippe Marini, a senator, to the region toIndia, a nation of 1.1 billion people—and one beset both
explore ways of bolstering French interests. Theby crushing poverty and a tumultuously expanding
recent decision to open the share capital ofeconomy—has 15 nuclear power reactors already at
state-owned Areva to sovereign wealth funds waswork. Eight more are under construction, more than in
one early result. “Civil nuclear power is clearlyany other nation. The Department of Atomic Energy
closely tied to political strategy,” notes Mr Marini.lauds the greenhouse benefits of nukes, but the main
Meanwhile, several Middle Eastern funds have struckimpetus is sheer gigawatt lust. That would include
deals with French companies.building reactors such as those at Kaiga Generating
The 1979 accident at the Three Mile Island plant inStation in a clearing in the jungled Western Ghats
Pennsylvania and the 1986 explosion at the Chernobylmountains about 20 miles inland from southwest India's
plant in the Ukraine, as well as the anti-nuclear movieseacoast. Coming upon the two 220-megawatt,
“The China Syndrome” paint a rather grimpressurized heavy-water reactors is like stumbling into
scenario of what a nuclear accident could entail.  Thea thumping big factory in the middle of Yellowstone
new generation of nuclear plants is designed to beNational Park. The region gets more than 15 feet of
safer, using fewer pumps and piping and relying morerain yearly, and its forest is home to increasingly
on gravity to move water for cooling the hot nuclearthreatened species.
core.  Nuclear reactors are contained inside a hugeBack near the Indira Gandhi center a 500-megawatt
structure of reinforced concrete with walls as much asbreeder reactor is under construction and set to start
five feet thick to make sure that even if a seriousup in 2010. Four more are to follow by 2020. India is
accident does occur, radiation is not released into thevery efficient at manufacturing plutonium fuel from their
environment. The Chernobyl reactor did not have suchoriginal uranium fuel load, which greatly increases the
a structure.  Even with these advances;  in Julyamount of energy they produce. But critics worry that
2008;  at a nuclear plant in Provence, France; 163the plutonium could possibly get in the wrong hands.
pounds, or 74 kgs, of untreated uranium leaked from aIn part because of proliferation concerns, the U.S. has
faulty tank during a draining operation, seeping into thesworn off such breeder reactors for the time being.
ground and then into rivers that flow into the Rhone. But outside powers have little leverage over India's
After this incident, a burst underground pipe at anothernukes. With few exceptions they are entirely
site north of Tricastin,  which leaked a tiny amount ofhomegrown. India gave itself little choice about going it
uranium inside plant grounds, and another accident atalone. In 1974, it set off an underground nuclear
Tricastin itself, when 100 employees wereexplosion using plutonium surreptitiously diverted from a
contaminated by radioactive particles that escapedtest reactor that Canada helped it build in the 1950s.
from a pipe. India became a nuclear pariah. Other countries
    The US nuclear industry has itself suffered fromsuspended technical assistance, and Canadian
decades of stagnation, with an ageing labour forceengineers walked off a job in Rajasthan. The Indians
and little entrepreneurial motivation.  USEC, afinished the plant themselves.
company that had a monopoly on producing theIndia is now enthusiastic masters of all things nuclear.
electric utilities’ fuel of the future, is itself facing aThe uranium fuel in Kaiga's reactors comes from
brownout.  It’s stock price has plummeted from $mines west of Calcutta; workshops in the south
11 two years back to $ 5 today. It has alienated itsprovide the plant with gleaming, 65-foot-high, 110-ton
utility industry customers and spent vast resources onsteam generators that drive electric dynamos. Control
construction of a complex new plant that has not metsystems, zircaloy fuel tubes, and 22-ton reactor
its original projections. The US Energy Policy of 2005components arrive from Hyderabad.
provides loan guarantees up to 80 per cent of theThe Obama administration and its main allies, believe
project cost, production tax credits of $ 18 per MWethey must strengthen the rules of the game before the
for new nuclear capacity through 2021 and insurancenext wave of reactors is built. The focus of their
protection up to $ 500 million against delays duringattention is a conference next May in New York,
construction. It is surprising that despite the industrywhich will review the 40-year-old nuclear
being in existence for over 50 years, it has still notnon-proliferation treaty. More than 160 countries will
been able to stand on its own legs.attempt to broker stronger rules that widen the use of
 According to the Department of Atomic Energy, Indiacivil nuclear power, while penalising those states that
has enough indigenous uranium for 10,000 MW oftry to diversify their programmes into weapons
nuclear power for 30 years. Present mismatch inproduction. However, suspicions and resentments
uranium availability is a consequence of poor foresightbetween the members of the nuclear club and those
and inadequate prospecting and mining.  Besides, theaspiring to join it mean reaching an agreement will not
planned 40,000 MW of nuclear power will cost no lessbe easy.
than $ 100 Billion or Rs 4 lakh crores.Securing tougher rules is only one part of US strategy.
   Nuclear power plants emit virtually no carbonOther ideas being considered include an IAEA proposal
dioxide, no sulfur, no mercury. Even when taking intoto create a small number of huge nuclear fuel banks
account “full life-cycle emissions”—includingthat will supply a large number of reactors. The merit
mining of uranium, shipping fuel, constructing plants andof this idea is that it will mean most countries have no
managing waste—nuclear’s carbon-dioxidejustifiable reason to enrich their own uranium in the
discharges are identical to the full life-cycle emissionsway Iran is currently seeking to do.
of wind and hydropower and less than solar power.Separately, other ideas are being promoted to ensure
 However, one study has determined that to make athe safety of nuclear materials. In particular, the US
significant contribution towards stabilizing atmosphericwants to promote a nuclear security conference in
carbon dioxide; about 21 new 1,000-megawatt nuclearWashington next March, one that aims to ensure
plants will have to be built each year over the next 50nuclear materials do not fall into the hands of terrorists.
years, including those needed to replace existing There are signs that some countries are prepared to
reactors, all of which are expected to be retired bystay out of uranium enrichment. The UAE, for example,
2050.  This indeed calls for a tall order.has said it has no interest in acquiring fuel cycle
 For two AP-1000 nuclear plants designed bycapability, and is open to the idea of importing fuel from
Westinghouse for Florida utility Progress Energy, thean international supplier.
estimated cost is $ 14 Billion (over $ 6000/kW).But there is also resistance. Some states that may
MidAmerican Energy Holdings, a power utility ownedwant to develop nuclear power, such as developing
by Warren Buffett’s Berkshire Hathaway, shelvedcountries belonging to the Group of 77 and the
its own nuke plan earlier this year, saying it no longerNonaligned Movement, say they need the confidence
made economic sense.that a reliable supply of nuclear fuel will be available. A
   There are only two vendors (Japan Steel Workssmall number of fuel banks, they say, cannot provide
and France’s Creusot Forge, part of Areva) whothat.
are able to supply critical reactor components. TheOthers, including such leading emerging economies as
biggest bottleneck is in the huge reactor vessels thatBrazil and Egypt, have refused to sign the NPT's
contain a plant’s radioactive core.  At present, only"additional protocol" that gives the IAEA the power to
one plant in the world is capable of forging the hugeconduct unfettered inspections of a nation's nuclear
vessels in a single piece, and it can produce only afacilities. Almost every country in the world, including
handful of forgings a year.  Besides, there is a severeIran, has signed the NPT - except India, Pakistan and
shortage of nuclear engineers.Israel. However, only 123 have signed the additional
    Of concern in any nuclear deal is the how theprotocol and only 91 have brought it into effect.
disposal of waste products can be handled safely andThere is some scepticism about the chances of a deal
economically.  When you produce enriched uranium,being reached at the NPT review conference in May.
you also produce depleted uranium, which is lessSuspicion that the US and other nuclear powers are
radioactive than the original ore, or natural uranium. setting the rules to suit their own ends remains high.
This comes in the form of uranium hexafluoride, whichThe last NPT review attempt in 2005 ended in a flop.
is a solid at room temperature.  The villain of theFour years on, the stakes have been raised. If the
piece in depleted UF6 is the fluorine, which, when it2010 conference goes the same way, the
disassociates from uranium, becomes a corrosive gas.consequences will be grim - for the world's security,
Most UF6 in the US is being stored in slowly rustingprosperity and climate.
metal containers in the open air, not a preferred 
solution for what becomes a corrosive gas if exposedNote : Mr Sunil Kewalramani is a WHARTON
to the atmosphere. The US government is building twoBUSINESS SCHOOL MBA and Chief Investment
facilities just to deal with the government’s ownOfficer, Global Money Investor.