The economics of nuke deal

The Indo-US civilian nuclear deal is a bilateral agreement on nuclear cooperation between India and USA, signed in New Delhi on March 2, 2006, following their Joint Statement on July 18, 2005 in Washington. However, full text of the agreement was released on August 3, 2007. This agreement is also known as “123 Agreement”, as Hyde Act (an internal law of the US) modified Section 123 of the US Atomic Energy Act of 1954, and permitted nuclear cooperation between the two countries on December 18, 2006.The International Atomic Energy Agency (IAEA – a UN agency of 144 member countries) approved the India Safeguards Agreement on 1st August 2008 under which 14 Indian nuclear reactors out of 22 are to come under IAEA safeguards by 2014. Further, the Nuclear Suppliers Group (NSG – a group of 45 member countries) approved a waiver of nuclear export guidelines that prohibit nuclear trade with non-members of Nuclear Non-Proliferation Treaty (NPT) on September 6, 2008. Thereafter, US Congress passed this deal on 1st October 2008. Now, India can obtain full access to international nuclear fuel market.The US, UK, France, Russia, and China tested nuclear weapons before 1967, and are free to possess nuclear weapons legally. India conducted its first nuclear test in 1974. Hence India was not recognised as a nuclear weapon state in the world. On 1st July 1968, NPT was launched for non-proliferation, disarmament, and right to peacefully use nuclear technology.Till date, NPT has been signed by 188 countries for getting access to civilian nuclear fuel and technology in exchange for compliance of IAEA’s safeguards that they are not diverting nuclear energy from peaceful uses to nuclear weapons. India, Pakistan, Israel and North Korea have not signed NPT as it creates two different groups of nuclear “haves” and “have-nots”.The Indo-US Civil Nuclear deal recognises India's "de facto" status even without signing the NPT on the basis of its clean proliferation record. Thus, this deal represents a tacit recognition of India as a nuclear weapon state in the world. Attempts by Pakistan to reach a similar agreement have been refused by the US as well as the international community.The deal is widely considered to help India in its soaring energy demands and a strategic partnership between the two countries. India is now the world's 5th largest consumer of energy, and its demand for electricity is expected to increase from 105 GW in 2008 to 400 GW in 2030. But availability was 89 GW in July 2008, causing deficit of 16 GW.To meet this demand, national energy capacity would have to increase by at least 5 per cent per annum. The deal is also environment friendly as India produces 64 per cent of its electricity from thermal, which produces air pollution and greenhouse gases, causing global warming. But nuclear power is the clean energy. The deal will promote economic growth by opening new trade and investment in civilian nuclear industry. It will help to ease global demand for crude oil and natural gas.The deal is also strategic in view of growing influence of China. Since the end of cold war in 1991, India has been moving closer to the US. The US recognises India as a major regional power in Asia and possible counterweight to China. Through this deal, India will get cooperation in civil nuclear energy, and the US will get a regional military and political ally. The deal will make separate identity of Pakistan from India in the “nuclear-havenots” group.Presently, 16 per cent of the global electricity comes from nuclear power. There are 439 nuclear power reactors with total capacity of 372 GW, operating in 31 countries of the the world. The US has 104 reactors producing 99 GW energy while France has 69 reactors producing 63.5 GW energy.France produced 77 per cent of its electricity from nuclear reactors in 2007. Pakistan has 2 reactors producing 400 MW energy. India has 17 reactors operating, 6 reactors under construction, and is planning an additional 10. Its current nuclear installed capacity is 4120MW.Nuclear energy can be the most powerful mean for India’s long-term energy security. India is the 9th nuclear capacity of the world. Its 17 nuclear power reactors are in operation at 6 locations i.e. Tarapore (Maharashtra) – 4, Rawatbhata (Rajasthan) - 4, Kaiga (Karnatka) - 3, Kakrapar (Gujrat) - 2, Kalpakkam (Tamil Nadu) - 2, and Narora (U.P.)- 2. The installed capacity of these reactors was 2.8 per cent of the total installed capacity (thermal, hydro and nuclear) of 145.6 GW as on July 31, 2008. India expects to add 25 GW nuclear capacities by 2020, subject to an opening of international trade. The contribution of Nuclear power in India’s electricity will increase to 10 per cent in 2020 and 25 per cent in 2050 as its large reserves of coal are inadequate to meet the demand.India has a meagre 1 per cent of global uranium reserves. Due to shortage of uranium, its nuclear reactors are operating at much below their capacity. After the deal, India could obtain sufficient supply of uranium. Australia has 23 per cent of world’s available resources of uranium and will be the key exporter to India. Generation IV reactors may be used for power generation in future. Such reactors are not necessarily fuel by uranium but by thorium, a more abundant fertile material that decays into uranium after being exposed to neutrons. India is possessing 25 per cent of the world's stock of thorium.Nuclear power plants offer the most economical way to generate electricity with environmental advantages. Fuel costs for nuclear plants are a minor proportion of total generating costs, though capital costs are greater than those for coal-fired plants. If the social, health and environmental costs of fossil fuels are also taken into account, nuclear is outstanding. NPCIL carried out a study on the 'Long term Cost Effectiveness of Nuclear Energy' in India. The costs of generation for nuclear and thermal power at 1997-98 price level are Rs 1.77 per KWh and Rs 1.86 per KWh respectively.The EU report (2001) shows that nuclear energy incurs about one tenth of the costs of coal. The World Nuclear Association (2005) quoted the average electricity generating costs per MWh at 5% discount rate for nuclear as US$ 26, coal as US$ 38 and natural gas as US$ 49. US cost figures (2005) for electricity production on an average Cent per KWh showed nuclear as 1.72, coal as 2.21, gas as 7.51 and oil as 8.09.The present measured resources of uranium in the world are enough to last for at least a century at the current consumption rate. Uranium has the advantage of being a highly concentrated source of energy, which is easily and cheaply transportable. One KG of natural uranium will yield about 20,000 times as much energy as the same amount of coal. Even a large fuel price escalation will have relatively little effect on final price of electricity. For instance, a doubling of the uranium market price would increase the electricity cost about 7 per cent, whereas doubling the price of natural gas would add 70 per cent to the cost of electricity.