, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

During his recently concluded visit to India, Xi Jinping expressed China’s interest in participating in India’s nuclear energy market. The sector is expected to be worth at least $150 billion and India’s small domestic nuclear energy capacity cannot handle the rapid ramp up the country’s energy crisis demands. Foreign vendors have been in discussions with Delhi since the India-US nuclear agreement but have so far been vexed by India’s unconventional nuclear liability law. Presently, India is looking to source 40 light water reactors from Rosatom, Westinghouse, General Electric, and Areva; Beijing hopes that its three nuclear developers – China General Nuclear Corporation, China National Nuclear Corporation, and China Power Investment Corporation will receive a piece of India’s nuclear pie in the next round.

While China’s nuclear dream is very impressive and tempting, there are several considerations India must keep in mind. The foremost among these is the vendor’s nuclear safety and regulatory history. At a quick glance, China’s nuclear industry appears just as competent and competitive as any other in the world. China has not had a single nuclear accident scored above 2 on the International Nuclear Events Scale and the country has been constantly improving its standards since its first civilian nuclear reactor went online. After the earthquake-tsunami at Fukushima, the Beijing ordered a full review of its safety precautions to ensure – and reassure – that its reactors were not similarly vulnerable.

However, China’s nuclear establishment is not known for its transparency and concerns have been voiced at regular intervals. Presently, China has 20 nuclear power plants operating and another 28 are being constructed. Of these, most will have the CPR-1000 reactor, the Chinese version of the French 900 MW M310 unit. These reactors have had some problems which the Chinese have been reticent to admit: in 1998, for example, one of the reactors at Qinshan suffered a critical failure and had to be rebuilt because of defects in the welding of the steel vessel that contained the reactor. Worse, these reactors will be operating on technology a century old by the time they are decommissioned.

There is great concern over the process by which China buys or builds its reactors. As one US embassy cable complained, “all reactor purchases to date have been largely the result of internal high level political decisions absent any open process.” To be fair, the United States might be exaggerating the seriousness of the matter to promote its own reactors instead but such concern has also been voiced within China. He Zuoxiu, a Chinese scientist involved in developing the country’s first nuclear device, has warned against the rapid expansion of nuclear facilities without the congruent expansion of intellectual infrastructure to license, construct, and operate the additional reactors. Fan Bi, a senior official at China’s State Council Research Office, agrees. In an article that appeared only a few months before the Fukushima accident, Fan wrote, “If the current momentum of development continues, if too many nuclear power projects are started too quickly, it could jeopardize the healthy, long-term development of nuclear power… Safety is the lifeline of the nuclear power industry.” Others would add transparency of safety and regulatory mechanisms to that list.

Areva, who is involved in constructing two of its latest 1,650 MW EPRs at Taishan, has expressed its concerns over the project. “It’s not always easy to know what is happening at the Taishan site,” said one official. The collaboration was not at a level that the French firm desired, admitted another official, explaining, “One of the explanations for the difficulties in our relations is that the Chinese safety authorities lack means. They are overwhelmed.” Autorite de Surete Nucleaire, the French nuclear regulatory authority, has given few details about its worries in China. However, the body has published hundreds of documents and closely monitored the work at Olkiluoto, Finland, with whom they have better relations.

Yet another concern is the quality of indigenously manufactured reactor components. One former vice president of CNNC confessed that though Beijing puts great emphasis on nuclear safety, “companies executing projects do not seem to have the same level of understanding.” This is encouraged by the cosy relationship between China’s state-owned nuclear regulators and state-owned operators, as well as by a revolving door that allows employees to move easily between government and industry. The formulation of cogent policy is even more challenging due to divided responsibility for the country’s nuclear governance between multiple government departments and bureaucracies. China’s quest for rapid growth only exacerbates these problems of weak regulation, poor implementation, and faulty manufacturing. Given India’s own questionable policies on nuclear transparency and accountability, it would be natural for Chinese firms to replicate their behaviour at home in India as well.

To be fair to China’s nuclear industry, it has also shown remarkable eagerness to achieve the world’s highest standards in safety. It has voluntarily been through a dozen of the IAEA’s OSART (Operational Safety Review Team) missions and subjects all its civilian nuclear facilities to annual inspections by the World Association of Nuclear Operators. Though the details of the reports are private, they confirm that the reactors are operated in conformance with international protocols and standards.

Nonetheless, these accolades are for reactor operation, not construction. China’s suitability as a nuclear partner is in doubt when its export potential is stretched to the limit by its domestic expansion plans – China hopes to add 250 GW of nuclear power between now and 2040, bringing ten reactors online every year. China’s three nuclear enterprises will be hard-pressed to construct and provide post-completion support to their international clients.

For domestic nuclear enthusiasts, one hope is that between international inspections, peer reviews, and collaboration with international entities with a good safety culture, India’s nuclear enclave will also develop greater transparency and accountability. India has never had a nuclear accident rated above 3 on the INES and though an IAEA inspection gave Rajasthan’s nuclear power units a good evaluation, fears abound due to ignorance of the general populace and poor communication by the authorities. The lack of independence of India’s nuclear regulatory authority is also of some concern. Given China’s record on transparency, these values will hardly be inculcated in the Indian establishment via a nuclear partnership with Beijing.

China is a below-par partner on another level too: technology transfer. India has always made the transfer of technology a key component of its high-tech purchases, hoping these would compensate for its own inadequacies in research & development. However, Beijing has little new technology to offer; nuclear energy took off in China only in the late 1980s and Beijing also bases its nuclear decisions on the degree of technology transfers vendors are willing to provide. Like India, China also intends to leapfrog stages of nuclear development via reverse engineering and emerge, initially under license, as a major exporter of nuclear products and services. India would be better served by dealing directly with more mature vendors in France, Canada, Russia, and the United States.

Unlike other sectors, nuclear partnerships are long-term relationships. The life of an average reactor nowadays is 40-60 years and during that time, the vendor is always in the picture. Many reactor contracts nowadays come with a lifetime guarantee of nuclear fuel and support as well and it is not easy to change suppliers as Ukraine recently discovered. Is India willing to enter into a 60-year marriage with a country that denies Indian firms fair market access, props up a neighbouring state with nuclear weapons and missiles against India, has claims on Indian territory, and with whom regular skirmishes along the border are not unusual?

China’s interest in India’s nuclear programme is, to put it politely, curious. Beijing has consistently vetoed Delhi’s application to join the Nuclear Suppliers Group and yet it wishes to enter India’s nuclear market. China may have calculated its policy based on India’s nuclear liability law – as it exists, the law inhibits private foreign vendors such as Westinghouse or GE from competing in the Indian market by imposing new and large insurance premia. The state-owned enterprises of Russia and China, however, will find it easier to provide for the necessary guarantees. If India sticks to its present nuclear liability law, the smaller number of vendors in India’s nuclear bazaar is to China’s advantage. A normative nuclear liability law, however, negates that advantage and leaves China with little to offer.

India must insist on any nuclear cooperation with China to be contingent upon Beijing’s unconditional support to India’s membership to the NSG; China is presently trying to finagle a place for its ally Pakistan along with India in the body and such hyphenation runs contrary to Delhi’s long-stated position. An uncompromising attitude on the NSG costs India little for China has no nuclear unique selling point. The policy of barring India’s entry into the NSG while hoping to enter its nuclear market run contrary to each other.

India’s nuclear establishment has borne the price of four decades in the non-proliferation wilderness. Consequently, it remains in a diminished capacity and sorely needs an infusion of capital and talent. However, China is an unsuitable partner for India in a venture as complex and as strategic as nuclear energy for technical as well as geopolitical reasons. As with telecommunications, it would not be judicious for India to allow China into its nuclear energy market.

This post appeared on Daily News & Analysis on September 23, 2014.