India and the United States have signed a controversial new agreement that is poised to open the Asian giant’s homegrown nuclear sector to foreign investment and expertize. But will the expected global recession dampen enthusiasm for investing in high-capital projects in developing countries?

India’s civil nuclear programme is well established, but it has been developed primarily without fuel or technological assistance from other countries – a consequence of its failure to sign the 1970 Nuclear Non-Proliferation Treaty.

Currently, India has an installed nuclear base of around 4 GW, with 15 small (90-200 MW) and two mid-sized (500 MW) nuclear reactors in commercial operation. It also has six under construction including two 950 MW reactors that are due to come online next year.

Four years ago the New Delhi government set a target of attaining 20 GW of nuclear capacity online by 2020, with the subsequent aim of supplying 25 per cent of electricity from nuclear by 2050. A target of 20 GW by 2020 is without doubt ambitious, so is it achievable?

If I had asked that question two or three months ago the answer would almost certainly have been “no”, based on indigenous fuel supplies. In the middle of this year, the country’s nuclear power plants were reported to be running at around half of capacity due to chronic fuel shortages.

As of last month, however, everything has changed. On 10 October India and the United States, after years of torturous negotiations, signed a nuclear deal, and just a few days prior India also inked a nuclear cooperation agreement with France. Under the Indian-US nuclear agreement the latter will for the first time in three decades give India access to nuclear fuel, reactors and technology to generate power.

According to the Confederation of Indian Industry, this is a lucrative deal, estimating it could produce some $27 billion in investment in 18 to 20 nuclear plants over the next 15 years. US companies are expected to be the main beneficiaries, and Westinghouse, for example, is reported to have created a new business strategy position specifically to pursue civil nuclear opportunities in India. However, other companies, from France and Russia for example, are also expected to compete for the business.

Things are also changing for India’s domestic players, with the government recently announcing that it intends to amend the law to allow private companies to be involved in nuclear power generation, and possibly other aspects of the fuel cycle. In anticipation of this, Reliance Power, GVK Power & Infrastructure and GMR Energy are said to be in discussions with overseas nuclear vendors including Areva, GE-Hitachi, Westinghouse and Atomstroyexport.

Furthermore, Indian companies that have successfully served their domestic nuclear market are now looking outside of India. One such company is Larsen & Toubro, India’s largest engineering group, which is preparing to supply heavy engineering components for nuclear reactors to international markets.

Thus, India’s nuclear sector looks set to receive a much-needed injection of international nuclear expertize, which if all goes to plan, is surely a positive thing in the fight to solve this rapidly growing economy’s chronic electricity deficit.

To build a nuclear power plant, however, requires a huge capital investment, and as the credit squeeze really begins to bite, could such high-capital projects become its latest casualty, particularly in developed economies? With continued turmoil in financial markets, falling oil prices and fears of economic recession, will investors become less willing to put up the billions of euros or dollars needed to build even a single nuclear power plant? There are signs that this may be happening already.

According to nuclear energy experts attending a recent conference, the credit crunch and economic slowdown may well slow down Italy’s multi-billion-euro plans to relaunch nuclear power. Back in May, Italy’s government pledged to lift its 20-year ban and to start building nuclear power plant by 2013.

If the economic slowdown continues, will we, particularly in the Western world, once again turn our back on nuclear? Only time will tell.

Best wishes,
Heather Johnstone
Senior Editor