KIIT LAW SCHOOL

KIIT UNIVERSITY, BHUBANESWAR-751024

PROJECT ON ECONOMICS OF GROWTH AND DEVELOPMENT

NUCLEAR TRADING-ITS IMPLICATION ON THE ECONOMIC GROWTH AND DEVELOPMENT OF INDIA

Submitted By: Ayan Roy Satyajit Surjyakant Sen

Submitted to: Prof. Suryaprakash Misra

ACKNOWLEDGEMENT
I hereby thank my teachers, friends and well wishers and all the members of the KIIT LAW SCHOOL, who have been constantly helping me by giving their invaluable suggestion for improvement of my project. However, the mistakes, deficiencies if any are my own. Finally, I wish to extend my deepest gratitude to Prof. Suryaprakash Misra for his constant support and encouragement. Thanks for your anticipation.

INTRODUCTION Nuclear energy is produced with the use of a controlled nuclear reaction i.e. nuclear fission. Many nations use nuclear power plants to generate electricity for both civilian and military use. Some people favor an expansion of nuclear power plants because this form of energy is considered cleaner than fossil fuels such as coal, although nuclear power comes with a number of problems which must be addressed, including the safe disposal of radioactive waste products. The process of generation of nuclear power starts with the mining and processing of uranium and other radioactive elements. These elements are used to feed the reactor of a nuclear power plant, generating a reaction known as fission which creates intense heat, turning water in the plant into steam. The steam powers the turbines, which generate electricity and feed the electricity into the electrical grid. One of the advantages of nuclear power is that it does not produce greenhouses gases. It does, however, produce hazardous waste. Spent nuclear fuel is radioactive and extremely dangerous, requiring a substantial infrastructure to secure the power plant and to handle the fuel. Unfortunately, some nations do not have adequate measures for handling their spent fuel in place, and it is not uncommon to see temporary solutions for the storage of nuclear material which last for decades. Cost to set up nuclear power plant Because of the large capital costs for nuclear power, and the relatively long construction period before revenue is returned, servicing the capital costs of a nuclear power plant is the most important factor determining the economic competitiveness of nuclear energy. The investment can contribute about 70% to 80% of the costs of electricity. The discount rate chosen to cost a nuclear power plant's capital over its lifetime is arguably the most sensitive parameter to overall costs In general, coal and nuclear plants have the same types of operating costs (operations and maintenance plus fuel costs). However, nuclear has lower fuel costs but higher operating and maintenance costs. The cost per unit of electricity produced (kWh) will vary according to country, depending on costs in the area, the regulatory regime and consequent financial and other risks, and the availability and cost of finance. Costs will also depend on geographic factors such as availability of cooling water, earthquake likelihood, and availability of suitable power grid connections. So it is not possible to accurately estimate costs on a global basis.

Generally, a nuclear power plant is significantly more expensive to build than an equivalent coalfueled or gas-fueled plant. However, coal is significantly more expensive than nuclear fuel, and natural gas significantly more expensive than coal thus, capital costs aside, natural gasgenerated power is the most expensive. An overview of the Indian Energy Sector Indias major mineral resources include coal, iron, manganese, mica,

bauxite, titanium, chromites, limestone and thorium. India meets most of its domestic energy demand through its 92 billion tones of coal reserves (about 10% of world's coal reserves). India's huge thorium reserves about 25% of world's reserves is expected to fuel the country's ambitious nuclear energy program in the long-run. India's dwindling uranium reserves stagnated the growth of nuclear energy in the country for many years. However, the Indo-US nuclear deal has paved the way for India to import uranium from other countries.[ India is also believed to be rich in certain renewable sources of energy with significant future potential such as solar, wind and bio-fuels. In recent years, Indias energy consumption has been increasing at one of the fastest rates in the world due to population growth and economic development. During the 5-year period ended March 31, 2007, the CAGR of consumption of petroleum products was approximately 3.6%, compared to a CAGR for GDP of 7.6% for the same period. Despite the overall increase in energy demand, per capita energy consumption in India is still very low compared to other developing countries. India is world's 6th largest energy consumer, accounting for 3.4% of global energy consumption. Due to India's economic rise, the demand for energy has grown at an average of 3.6% per annum over the past 30 years. In June 2010, the installed power generation capacity of India stood at 162,366 MW while the per capita energy consumption stood at 612 kWH. The country's annual energy production increased from about 190 billion kWH in 1986 to more than 680 billion kWH in 2006. The Indian government has set an ambitious target to add approximately 78,000 MW of installed generation capacity by 2012. The total demand for electricity in India is expected to cross 950,000 MW by 2030.About 70% of the electricity consumed in India is generated by thermal power plants, 21% by hydroelectric power plants and 4% by nuclear power plants. More than 50% of India's commercial energy demand is met through the country's vast coal reserves. The country has also invested heavily in recent years on renewable sources of

energy such as wind energy. As of 2008, India's installed wind power generation capacity stood at 9,655 MW. Additionally, India has committed massive amount of funds for the construction of various nuclear reactors which would generate at least 30,000 MW. In July 2009, India unveiled a $19 billion plan to produce 20,000 MW of solar power by 2020. Electricity losses in India during transmission and distribution are extremely high and vary between 30 to 45%. In 2004-05, electricity demand outstripped supply by 7-11%. Due to shortage of electricity, power cuts are common throughout India and this has adversely effected the country's economic growth. Theft of electricity, common in most parts of urban India, amounts to 1.5% of India's GDP. Despite an ambitious rural electrification program, some 400 million Indians lose electricity access during blackouts. While 80 percent of Indian villages have at least an electricity line, just 52.5% of rural households have access to electricity. In urban areas, the access to electricity is 93.1% in 2008. The overall electrification rate in India is 64.5% while 35.5% of the population still lives without access to electricity. According to a sample of 97,882 households in 2002, electricity was the main source of lighting for 53% of rural households compared to 36% in 1993. Multi Commodity Exchange has sought permission to offer electricity future markets. Power to all by 2012 The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This mission would require that the installed generation capacity should be at least 200,000 MW by 2012 from the present level of 144,564.97 MW. Power requirement will double by 2020 to 400,000MW. Objectives
     

Sufficient power to achieve high GDP growth Reliable power Quality power Optimum power cost Commercial viability of power industry Power for all

Strategies


Power Generation Strategy with focus on low cost generation, optimization of capacity utilization, controlling the input cost, optimisation of fuel mix, Technology upgradation and utilization of Non Conventional energy sources

Transmission Strategy with focus on development of National Grid including Interstate connections, Technology upgradation & optimization of transmission cost.

Distribution strategy to achieve Distribution Reforms with focus on System upgradation, loss reduction, theft control, consumer service orientation, quality power supply

commercialization, Decentralized distributed generation and supply for rural areas.

Regulation Strategy aimed at protecting Consumer interests and making the sector commercially viable.

 

Financing Strategy to generate resources for required growth of the power sector. Conservation Strategy to optimise the utilization of electricity with focus on Demand Side management, Load management and Technology upgradation to provide energy efficient equipment / gadgets.

Communication Strategy for political consensus with media support to enhance the general public awareness.

Rural electrification Jharkhand, Bihar, Uttar Pradesh, Orissa, Uttranchal, Madhya Pradesh etc are some of the states where significant number (more than 10%) of villages are yet to be electrified.
  

Number of Villages (1991 Census) - 593,732 Villages Electrified (30 May 2006) - 488,173 Village level Electrification % - 82.2%

INDO-US NUKE DEAL The landmark Indo-US civil nuclear deal will boost bilateral economic ties and address "shared concerns" on energy security and climate change amid deepening strategic relations. Financially, the U.S. also expects that such a deal could spur India's economic growth and bring in $150 billion in the next decade for nuclear power plants, of which the U.S. wants a share. It is India's stated objective to increase the production of nuclear power generation from its present capacity of 4,000 MWe to 20,000 MWe in the next decade. However, the developmental economic advising firm Dalberg, which advises the IMF and the World Bank, moreover, has done its own analysis of the economic value of investing in nuclear power development in India. Their conclusion is that for the next 20 years such investments are likely to be far less valuable economically or environmentally than a variety of other measures to increase electricity production in India. India will be able to build more nuclear power plants. At presents it has 15 functional plants with an additional seven under construction. It had not satisfactorily addressed India's concerns about the right to reprocess the spent fuel and the status of guaranteed fuel supplies for the imported reactors. As per the deal, India did not agree to open all its nuclear facilities to international inspection. Instead, it ingeniously divided its facilities into 'civilian' and 'military' ones and agreed to open only the former to international inspection. According to the available information India will place 14 out of its 22 plants under the civilian list. Delhi considers the nuclear energy as the answer to its ever growing needs for power. With this deal, India will not have to exercise constraint on the US or Russian arsenal because of their huge stockpiles of fissile material. To cope up with increasing demand for energy due to rapid globalization and industrialization, the nuclear deal is the need of the hour. We know that the conventional sources of energy like coal and petroleum are limited and cannot cater to the energy requirements for a long term. As they are bound to exhaust one day, we will have to look for some alternative sources of energy so that we may achieve a sustainable development. The uranium has an immense store of energy which can be exploited successfully. Earlier India was not allowed the access to global nuclear and high tech market, which imposed a big hurdle in the path of India's economic growth. And India's civilian nuclear energy aspirations were being thwarted due to shrinking

domestic uranium ore capability. It was due to this reason that the Government has taken such bold and innovative step which will push us into an era of economic stability and sustainable development. The nuclear deal has put an end to three decades of India's isolation from the world of commerce in nuclear technology. No doubt the nuclear deal will satisfy the country's quest for energy. India is emerging as a leading power of the world. Many industries are being set up. It is becoming a hub of economic activities. We must take initiatives in building a modern and vibrant India; for these proper and adequate supplies of latest technology, various inputs and modernization of Indian infrastructure is essential. Technology collaboration with the US will lead us to the path of prosperity, progress and stability, will again come into operation. The energy generated from the nuclear plants will be sufficient to meet the demand for the new few years. We will have enough stockpile of uranium to meet our increasing demands. Once the nuclear deal comes into operation, we will have access to cleaner, more efficient, affordable and diversified energy technologies. It will be on top priority to safeguard the environment against pollution so as to achieve a smoke free generation of electricity. The benefits of nuclear deal are not only confined to energy sector but will also help in getting access to dual use technology, space, pharmaceuticals etc. It will build closer ties in space exploration, satellite launch and in the commercial space area through mechanisms such as UsIndia working group in civil space co-operation. It will also accelerate the pace of scientific and technological development through joint research and training, carrying out experiments and the establishment of public-private partnerships. Both the countries will engage in exchange of information and knowledge on various issues, examine the gravity of various problem in each other's country and work in collaboration to solve these problems. Really India's future depends a lot on the nuclear deal.
Most scientists agree that pollution is contributing to global warming and to climate change. This can hurt agricultural production and harm all living beings on our planet. We must, therefore, reduce pollution that causes global warming. This requires environment friendly energy sources clean and green energy.

Any means of producing electricity involves some wastes and environmental hazard. The nuclear industry is unique in that it is the only energy-producing industry that has taken full responsibility for the disposal of all its wastes and meets the full cost of doing so. Nuclear energy also does not contribute to global warming. Also the cost of fuel for a nuclear power station is very much less than for an equivalent coal fired power station. Electricity from nuclear reactors in many regions is competitive with electricity produced from coal, even after providing for management and disposal of radioactive wastes and the decommissioning of reactors. So, nuclear energy will be a clean and an affordable source of energy. Presently, only 3% of Indias energy needs are met from nuclear sources. India plans to produce 20,000 MWe from the nuclear sector by 2020, increasing from the very low level of 3,700 Mwe at present. Increased share of nuclear power in the Indian energy mix will diminish the reliance on fossil fuels and reduce carbon emissions from India. Many countries are actively developing nuclear power. It is of particular interest to rapidly growing and populous economies like China and India. No country would want to be too dependent on a single energy source. Therefore, it is not a question of coal, hydro or nuclear but that we need a combination of various renewable sources of energy to ensure our energy security in years to come. Indian nuclear scientists also wish to participate in global research projects so that our science and technology can develop. Nuclear science and technology have a high applicability in the field of medicine, in irradiation and storage of food. Nuclear energy will enable us to meet the twin challenges of energy security and environmental sustainability. It will also have major spin-offs for the development of our industries, both public and private. The 123 Agreement between India and United States of America would put an end to technology denial regimes against India that have been in place for three decades and end Indias nuclear isolation. It will open the doors for India to have civil nuclear cooperation as an equal partner with the USA and the rest of the world.

Nuclear trading and Waste Management The management and disposal of high-level radioactive spent fuel from the nuclear fuel cycle is one of the most intractable problems facing the nuclear power industry throughout the world. No country has yet successfully implemented a system for disposing of this waste. The concurrence with the many independent expert reviews that have concluded that geologic repositories will be capable of safely isolating the waste from the biosphere. However, implementation of this method is a highly demanding task that will place great stress on operating, regulatory, and political institutions. For fifteen years the U.S. high-level waste management program has

focused almost exclusively on the proposed repository site at Yucca Mountain in Nevada. Although the successful commissioning of the Yucca Mountain repository would be a significant step towards the secure disposal of nuclear waste, we believe that a broader, strategically balanced nuclear waste program is needed to prepare the way for a possible major expansion of the nuclear power sector in the U.S. and overseas. The global growth scenario, based on the once-through fuel cycle, would require multiple disposal facilities by the year 2050. To dispose of the spent fuel from a steady state deployment of one thousand 1 GWe reactors of the light water type, new repository capacity equal to the nominal storage capacity of Yucca Mountain would have to be created somewhere in the world every three to four years. This requirement, along with the desire to reduce long-term risks from the waste, prompts interest in advanced, closed fuel cycles. These schemes would separate or partition plutonium and other actinides and possibly certain fission products from the spent fuel and transmute them into shorter-lived and more benign species. The goals would be to reduce the thermal load from radioactive decay of the waste on the repository, thereby increasing its storage capacity, and to shorten the time for which the waste must be isolated from the biosphere. The analysis of the waste management implications of both once-through and closed fuel cycles, taking into account each stage of the fuel cycle and the risks of radiation exposure in both the short and long-term. Future technology developments could change the balance of expected costs, risks, and benefits. For our fundamental conclusion to change, however, not only would the expected long term risks from geologic repositories have to be significantly higher than those indicated in current assessments, but the incremental costs and short-term safety and environmental risks would have to be greatly reduced relative to current expectations and experience. Further conclusion is that waste management strategies in the once-through fuel cycle are potentially available that could yield long-term risk reductions at least as great as those claimed for waste partitioning and transmutation, with fewer short-term risks and lower development and deployment costs. These include both incremental improvements to the current mainstream mined repositories approach and more far-reaching innovations such as deep borehole disposal. Finally, replacing the current ad hoc approach to spent fuel storage at reactor sites with an explicit strategy to store spent fuel for a period of several decades will create additional flexibility in the waste management system. This study suggests that not only is the waste management got to be proper but it also needs to have a proper say on the environment.

CONCLUSION

Substantial environmental damage has already been caused by the profligate use of energy by the industrialized countries. In the effort to limit further damage most cost-effectively, it is possible to calculate mitigation costs associated with clean technologies using a mutually agreed framework along the lines of that above. But it must be remembered that any benefits in the form of mitigation cost payments to developing countries that did not cause the damage in the first place, would amount to only token payments falling far short of any plausible level of just compensation. In that context, any assessment of possible Clean Development Mechanism (CDM) options for India must recognize that while coal-based power plants will continue to play a major role in India for many years to come, research, development and demonstration (RD&D) is needed to solve environmental problems related to the disposal of ash and emissions of greenhouse gases and acid gases. RD&D is also needed to increase the share of non-conventional sources like solar, biomass and wind in the energy mix. Nuclear power is of importance to India because it has a large, well-qualified and potentially unlimited resource base (based on a closed fuel cycle approach), does not emit GHGs and, depending on location, has potentially favorable economics versus coal. In the long term, if we are to preserve the environment, it will be necessary to tap this source to the maximum extent feasible.

REFERENCES Websites  http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8UWO7ZCT6ac&refer= energy  http://energybusiness.in/carbon-trading-develop-regional-basis-experts/  http://en.wikipedia.org/wiki/Nuclear_power_in_India  http://www.rajputbrotherhood.com/knowledge-hub/essay/an-essay-on-the-indo-usnuclear-deal.html  http://www.thaindian.com/newsportal/india-news/indo-us-nuclear-deal-important-tomaintain-economic-growth-pm_1005526.html Articles  http://web.mit.edu/nuclearpower/pdf/nuclearpower-ch1-3.pdf  http://www.ias.ac.in/currsci/feb102006/326.pdf.  http://carnegieendowment.org/files/singh_visits_washington.pdf  http://www2.ans.org/pi/brochures/pdfs/power.pdf  http://www.iaea.org/Publications/Booklets/GreenhouseGas/greenhousegas.pdf  http://pmindia.nic.in/India%E2%80%99s%20Nuclear%20Energy%20Programme%20and %20the123%20agreement.pdf\  http://www.cygnusindia.com/pdfs/Nuclear%20Energy%20in%20IndiaSynopsis%20%20TOC.pdf