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