Journalist | Writer | Analyst
25 April 2011
Rush in now, repent later
You really have to hand it to the nuclear industry. In any other sphere of the economy, a major industrial disaster is likely to have adverse, long-term financial consequences for the company or companies whose product or activity was involved in the accident, regardless of actual cause or legal liability. Thus, the people of Bhopal may still be paying for the poisonous gas which descended over their city in December 1984 but Union Carbide became such a toxic brand that it eventually went bust. Last year’s oil spill in the Gulf of Mexico has also blown a large hole in the profits of BP. But under the perverse economic logic of the nuclear industry, disasters like the one unfolding at the Fukushima-Daiichi nuclear power plant in Japan only mean more business for the world’s biggest atomic energy vendors.
According to Dan Yurman, a consultant for firms connected to the American nuclear industry, two giant nuclear consortia are forming to manage the clean-up of the Fukushima site. “The first consortium is composed of General Electric and Hitachi, with support from Exelon and Bechtel. The second group is led by Toshiba which is partnered with the U.S. branch of Areva, the French state-owned nuclear giant. Babcock & Wilcox and The Shaw Group are part of the Toshiba team,” he writes in his excellent and authoritative blog, Nuke Notes. Incidentally, cleaning up isn’t really their core competence. GE, Hitachi, Areva, Babcock & Wilcox and Toshiba are all in the business of building components for nuclear power plants.
In case readers have failed to spot the irony, let me be blunt about what’s going on here. First, you get paid to sell a reactor in a foreign country. Then, under an international liability regime that is explicitly designed to favour you, the entire burden for site remediation and victim compensation in the “highly unlikely” event of an accident is shifted on to the plant operator. Finally, if and when that “highly unlikely” accident does occur, you are not only insulated from any financial claims but you actually get paid even more handsomely to come in and help clean up the mess!
Exactly how much money are we talking about? Yurman estimates the cost of decommissioning the six reactors at the site could be as much as $12 billion and would take more than a decade to complete. “Industry experts agree this won’t be an ordinary job of tearing down a safe and cold reactor. For instance, to remove the spent fuel from Unit 4, a giant superstructure will have to be built around the devastated secondary containment structure to safely load the hot fuel assemblies underwater into special transportation casks.” Indeed, so lucrative is this project that the two consortia — which consist of companies that otherwise fiercely compete with each other for contracts and projects — “are reported to be having exploratory talks to combine forces.”
As for the $12 billion required to pay these companies for the clean-up, where is such a huge sum likely to come from? From the victims of the accident, the Japanese people, who else! “The Japanese government is said to be considering a form of receivership for the Fukushima site which would allow taxpayer funds to cover clean-up costs and pay compensation to people forced to evacuate their homes within the 13 km government defined danger zone around the plants,” notes Yurman.
As far as the Indian debate over nuclear energy is concerned, the unfolding Fukushima scenario poses an urgent challenge on three different fronts: estimating the true cost of nuclear power, assigning liability in the event of a nuclear accident in a way that is both equitable and efficient, and ensuring the highest possible standards of safety and regulation. As of today, despite the government’s ambitious plans for the construction of 20 or more nuclear reactors across the country, there is little or no clarity or transparency on these vital issues.
The Indo-U.S. nuclear agreement — which paved the way for actualisation of these grand targets — led to intense political divisions at the time it was being negotiated but the debate over the optimum energy mix for India must be conducted independently of those fault lines. The deal may have been sold to the Indian and global public as a cheap and green solution to the country’s power shortage but its primary economic utility today lies in presenting our planners with a wider set of energy options. A door has been opened for India to access nuclear material and technology which was unfairly denied to it in the past but any decision to walk through that door and fill our shopping cart must be based on a sound cost-benefit analysis.
Post-Fukushima, we now know, for example, that the cost of clean-up in the event of a “low-probability” event must also be factored in to the equation. Once the $12 billion bill the Japanese taxpayers are going to be saddled with to permanently entomb the highly radioactive reactors there is retrospectively fed into the cost of electricity that the Tokyo Electric Power Company (TEPCO) generated over the years, the true per unit tariff is likely to be much higher than the figure TEPCO worked with when the decision to build the reactors was originally made.
Here in India, the Planning Commission should now go back to the drawing board and ask itself whether it still makes financial sense to produce electricity at any given location through large and expensive imported reactors when there may be cheaper options available over the medium term. It may still be that nuclear energy makes economic sense but it is vital that the decision we take be based on a realistic assessment of actual and probabilistic costs over the entire life cycle of a nuclear plant.
As for liability, the Manmohan Singh government owes a debt of gratitude to those who criticised it during last year’s debate over the controversial liability law. If the watered down version had been passed, as the American nuclear industry was insisting, our leaders would be running for political cover today.
Fukushima is a confirmation of the need for tough liability legislation, especially since the cause of the accident lay, at least partly, in deficient design. As the 16 leading nuclear scientists who recently sent a letter on nuclear safety to the International Atomic Energy Agency (IAEA) Director General noted, “It appears that, in the siting and design of the Fukushima-Daiichi nuclear plants, an unlikely combination of low-probability events (historic earthquake plus historic tsunami leading to loss of all electrical power) was not taken sufficiently into account.” Rational liability laws are essential for ensuring the nuclear vendor pays adequate attention to safety in coming up with his designs. Optimum safety can only be built in if the vendor is forced to internalize the cost of an accident, something liability laws in Japan and elsewhere do not do. The Indian law is an improvement over the prevailing global model but post-Fukushima, many will argue for its further strengthening.
“We are confident that only nuclear power that avoids being a threat to the health and safety of the population and to the environment is acceptable to society,” the 16 nuclear scientists, including Anil Kakodkar, former head of the Department of Atomic Energy (DAE), said in their letter. They added: “It is necessary to ensure that national nuclear safety regulators in all countries are fully independent in their decision-making on nuclear safety and to assure their competence, resources and enforcement authorities.”
Unfortunately, India today has no such body of regulators.
Even on paper, the “autonomous” Atomic Energy Regulatory Board cannot remotely be called “fully independent” since it reports eventually to the Atomic Energy Commission, which, in turn, is chaired by the head of the DAE. As Prashant Reddy, a research associate at the National University of Juridical Sciences in Kolkata, has noted, “This is like making the Securities & Exchange Board of India [SEBI] responsible to the Bombay Stock Exchange and then expecting SEBI to function as an independent, autonomous regulator.” The government is understood to be working on a proposal to create a truly independent regulator for the nuclear industry but what eventually emerges from its internal review process is anybody’s guess.
Meanwhile, the decision to push ahead with construction activity at Jaitapur and other places has evoked a strong negative reaction from local communities. Opposition parties like the Shiv Sena may be trying to exploit people’s fears but the government’s failure to be open and transparent in its conduct at the grassroots level is what has created fertile ground for protest. Radioactive pollution, in the “low-probability” event of an accident, has a half-life of hundreds of years. Will the skies fall upon us if Jaitapur and other projects are put on hold for a fraction of that time, so that citizens at large — and the concerned local communities — can be convinced through argument and debate that putting up nuclear plants in their backyard is a safe and economical way of generating electricity?