The India-Japan nuclear deal is today less significant than it would have once been
Seven years of rollercoaster negotiations over an India-Japan civil nuclear energy deal came to fruition on Wednesday when Japan’s Parliament, the Diet, approved the pact. Opposition parties voiced protest against the deal, highlighting concerns that India has provided insufficient guarantees for Japan’s right to terminate the agreement in the event of New Delhi conducting a nuclear test. Nonetheless, the ruling coalition pushed the accord through with a majority vote. The agreement is set to take effect in early July.
Japanese Prime Minister Shinzo Abe believes that nuclear exports are key to kick-starting a Japanese economy stuck in a holding pattern for more than two decades. For India, the deal represents hope that the 2008 waiver it received from the Nuclear Suppliers’ Group might finally begin paying off given that so far it has had limited tangible benefits for the country’s power industry. The deal with Japan is also a necessity for enabling India’s bilateral nuclear deals with other countries. Key elements of certain reactors like the AP 1000 and EPR, including safety components and domes, are a near-Japanese monopoly.
Erosion of Japan’s might
However, circumstances in the nuclear industry, both globally and specifically in Japan, are undergoing tumultuous changes, making the India-Japan deal less significant than it would have once been. Recent developments have diminished Japan’s previously formidable nuclear capabilities, calling into question its very survival as a nuclear exporter of heft.
The most dramatic example is that of Toshiba, once a titan of the Japanese nuclear reactor industry that is currently struggling to stay afloat following the enormous losses and eventual bankruptcy of its U.S. nuclear unit, Westinghouse Electric. After writing down Westinghouse’s value (the U.S. company had a total debt of $9.8 billion), Toshiba declared a net loss of $9.9 billion for the fiscal year that ended on March 31. At a news conference, Toshiba’s president, Satoshi Tsunakawa, put it baldly, stating, “We have all but completely pulled out of the nuclear business overseas.” A decade ago, Toshiba was dreaming of a big global expansion when it bought Westinghouse for $5.4 billion with plans to install 45 new reactors worldwide by 2030.
Hitachi Ltd., another nuclear heavyweight, also booked ‘an estimated ¥65 billion ($588 million) write-down for fiscal 2016 related to a stalled laser-based uranium enrichment joint venture with General Electric in the United States’. The company said ‘demand for nuclear fuel in the U.S. was unlikely to grow as strongly as had been expected’.
Meanwhile, Japan’s third major, Mitsubishi Heavy Industries, is in trouble too. Its French partner, Areva, is mired in losses and undergoing a major restructuring. Areva logged losses equivalent to more than $700 million in 2016, marking its sixth year in the red.
For the moment, Hitachi and Mitsubishi are not giving up on their overseas nuclear businesses. In February, Hitachi partnered with the Exelon Corp group to promote a nuclear power project in the U.K. And according to Nikkei, Mitsubishi has reached a broad agreement to purchase about 15% of Areva’s reactor unit, investing $366 million for the stake. This will boost Mitsubishi’s total investment in Areva to more than 70 billion yen ($636 million).
Whether such a move is wise in the current context is questionable. In the aftermath of the 2011 Fukushima nuclear disaster, the nuclear industry is facing a global crisis. Stricter safety regulations have spiked the costs of constructing plants and ‘some countries have become more cautious about new reactors. Germany, for example, once a committed nuclear champion, has decided to pull out of nuclear power altogether by 2022’. Last year, Vietnam scrapped plans for nuclear plants thought to be a sure win for Japanese builders. And the feasibility study for a planned Turkish project is dragging on far longer than anticipated.
In Japan there has been no domestic construction on a new reactor for the past eight years, since a unit at the Tomari plant on the island of Hokkaido came on stream in 2009. Hitachi, Mitsubishi and Toshiba are all focussing on repair and maintenance of existing plants (most of which are idle) rather than on construction of new ones.
Emergence of viable options
‘The emergence of cheap shale oil and gas has made competition in the energy sector tougher than ever, while wind and solar power generation are also growing as viable, alternative energy sources’. According to the International Atomic Energy Agency (IAEA), just three nuclear reactors started construction worldwide last year, and only 51 were begun between 2010 and 2016. In contrast 20 to 30 new were being built every year in the 1960s and 1970s.
The IAEA still expects global nuclear capacity to grow, until at least 2030, although it thinks the increase could be just 1.9% over the whole period. Faster growth will depend principally on the pace of demand in China, South Korea, eastern Europe and India.
In India, the cabinet decision last month to set up 10 nuclear reactors with a combined capacity of 7,000 megawatts, comes against this backdrop.
A recent Observer Research Institute study concludes that it is highly feasible for India’s installed nuclear power capacity to rise to 40-50 gigawatts (GW) by mid-century, up from its current installed 5.78 GW capacity. For Japan’s nuclear industry this is an opportunity that might not knock twice, yet even if grabbed unreservedly, it might still not be enough to revive the archipelago’s flailing nuclear ambitions.
Seven years of rollercoaster negotiations over an India-Japan civil nuclear energy deal came to fruition on Wednesday when Japan’s Parliament, the Diet, approved the pact. Opposition parties voiced protest against the deal, highlighting concerns that India has provided insufficient guarantees for Japan’s right to terminate the agreement in the event of New Delhi conducting a nuclear test. Nonetheless, the ruling coalition pushed the accord through with a majority vote. The agreement is set to take effect in early July.
Japanese Prime Minister Shinzo Abe believes that nuclear exports are key to kick-starting a Japanese economy stuck in a holding pattern for more than two decades. For India, the deal represents hope that the 2008 waiver it received from the Nuclear Suppliers’ Group might finally begin paying off given that so far it has had limited tangible benefits for the country’s power industry. The deal with Japan is also a necessity for enabling India’s bilateral nuclear deals with other countries. Key elements of certain reactors like the AP 1000 and EPR, including safety components and domes, are a near-Japanese monopoly.
Erosion of Japan’s might
However, circumstances in the nuclear industry, both globally and specifically in Japan, are undergoing tumultuous changes, making the India-Japan deal less significant than it would have once been. Recent developments have diminished Japan’s previously formidable nuclear capabilities, calling into question its very survival as a nuclear exporter of heft.
The most dramatic example is that of Toshiba, once a titan of the Japanese nuclear reactor industry that is currently struggling to stay afloat following the enormous losses and eventual bankruptcy of its U.S. nuclear unit, Westinghouse Electric. After writing down Westinghouse’s value (the U.S. company had a total debt of $9.8 billion), Toshiba declared a net loss of $9.9 billion for the fiscal year that ended on March 31. At a news conference, Toshiba’s president, Satoshi Tsunakawa, put it baldly, stating, “We have all but completely pulled out of the nuclear business overseas.” A decade ago, Toshiba was dreaming of a big global expansion when it bought Westinghouse for $5.4 billion with plans to install 45 new reactors worldwide by 2030.
Hitachi Ltd., another nuclear heavyweight, also booked ‘an estimated ¥65 billion ($588 million) write-down for fiscal 2016 related to a stalled laser-based uranium enrichment joint venture with General Electric in the United States’. The company said ‘demand for nuclear fuel in the U.S. was unlikely to grow as strongly as had been expected’.
Meanwhile, Japan’s third major, Mitsubishi Heavy Industries, is in trouble too. Its French partner, Areva, is mired in losses and undergoing a major restructuring. Areva logged losses equivalent to more than $700 million in 2016, marking its sixth year in the red.
For the moment, Hitachi and Mitsubishi are not giving up on their overseas nuclear businesses. In February, Hitachi partnered with the Exelon Corp group to promote a nuclear power project in the U.K. And according to Nikkei, Mitsubishi has reached a broad agreement to purchase about 15% of Areva’s reactor unit, investing $366 million for the stake. This will boost Mitsubishi’s total investment in Areva to more than 70 billion yen ($636 million).
Whether such a move is wise in the current context is questionable. In the aftermath of the 2011 Fukushima nuclear disaster, the nuclear industry is facing a global crisis. Stricter safety regulations have spiked the costs of constructing plants and ‘some countries have become more cautious about new reactors. Germany, for example, once a committed nuclear champion, has decided to pull out of nuclear power altogether by 2022’. Last year, Vietnam scrapped plans for nuclear plants thought to be a sure win for Japanese builders. And the feasibility study for a planned Turkish project is dragging on far longer than anticipated.
In Japan there has been no domestic construction on a new reactor for the past eight years, since a unit at the Tomari plant on the island of Hokkaido came on stream in 2009. Hitachi, Mitsubishi and Toshiba are all focussing on repair and maintenance of existing plants (most of which are idle) rather than on construction of new ones.
Emergence of viable options
‘The emergence of cheap shale oil and gas has made competition in the energy sector tougher than ever, while wind and solar power generation are also growing as viable, alternative energy sources’. According to the International Atomic Energy Agency (IAEA), just three nuclear reactors started construction worldwide last year, and only 51 were begun between 2010 and 2016. In contrast 20 to 30 new were being built every year in the 1960s and 1970s.
The IAEA still expects global nuclear capacity to grow, until at least 2030, although it thinks the increase could be just 1.9% over the whole period. Faster growth will depend principally on the pace of demand in China, South Korea, eastern Europe and India.
In India, the cabinet decision last month to set up 10 nuclear reactors with a combined capacity of 7,000 megawatts, comes against this backdrop.
A recent Observer Research Institute study concludes that it is highly feasible for India’s installed nuclear power capacity to rise to 40-50 gigawatts (GW) by mid-century, up from its current installed 5.78 GW capacity. For Japan’s nuclear industry this is an opportunity that might not knock twice, yet even if grabbed unreservedly, it might still not be enough to revive the archipelago’s flailing nuclear ambitions.
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