Throwing diplomatic caution to the wind, General Electric CEO Jeff Inmelt held an intemperate news conference in New Delhi shortly after a disappointing meeting with India’s Prime Minister Narendra Modi.
What Inmelt said was that his firm has now ruled out trying to do business with India in the nuclear power sector.
He criticized India for being “out of step” with the rest of the world on a standard liability regime.
Inmelt’s blunt talk is a setback for the Obama Administration which last January during state visit by the President to India tried to paper over the differences between the two nations about the liability law. GE’s CEO isn’t buying it.
“I am not going to put my company at risk for anything – there is no project worth it,” Inmelt told CNBC.
And Inmelt accused India of deliberately moving the goal posts when it comes to nuclear liability. He said, “ India can’t re-invent the language on liability.”
“We have to get some common language on this. There is a standard liability regime that the rest of the world has adopted,” Inmelt said, and he urged India to “harmonize” its liability laws with those of other nations.
Separately, Inmelt said GE hopes to continue to sell medical equipment, jet engines, railroad equipment, and other durable goods to India.
Inmelt may have been spitting in the wind for all the good his comments did him since PM Modi’s Bharatiya Janata Party is the one that brought the liability law through parliament. It seems unlikely that Modi would do anything so contentious, relative to his political base as to try to set the liability law aside for an American company.
Significantly, Indian heavy industry firms have also complained to the government about the law both for the potential impact on them and on their loss of business with US firms.
PM Modi now heads to the US for a visit which includes a meeting with President Obama at the White House. It is likely Inmelt’s press event will be a topic of conversation, but it is unlikely that anything will change.
Heavy Impact on Indian Firms
Inmelt’s decision to pull the plug on his company’s plans to invest in nuclear energy with India has far reaching consequences for heavy industry firms in that country.
According to the World Nuclear Association, in March 2009 GE Hitachi Nuclear Energy signed agreements with NPCIL and Bharat Heavy Electricals Ltd (BHEL) to begin planning to build a multi-unit power plant using 1350 MWe Advanced Boiling Water Reactors (ABWR). BHEL planned to eventually develop the capability to manufacture large forgings for nuclear reactor pressure vessels.
This project was later listed by NPCIL as being for production of GE’s 1594 MW ESBWR following design approval of the ESBWR in September 2014 by the US Nuclear Regulatory Commission.
In May 2009 L&T was brought into the picture. The company signed an agreement with GE Hitachi to produce major components for nuclear reactors from its new Hazira plant. The two companies hope to utilize Indian capabilities for the complete construction of nuclear power plants including the supply of reactor equipment and systems, valves, electrical and instrumentation products for ESBWR plants to be built in India.
L&T said it “will collaborate with GEH to engineer, manufacture, construct and provide certain construction management services.”
All of these agreements are now dust in the wind, as far as ESBWRs are concerned for India’s new nuclear build, as GE cancels further commercial plans for these projects.
GE and NPCIL had plans for six 1594 MW ESBWR units at the Kovvada site in Andhra Pradesh. Assuming the cost of the units would be in the range of $4,000 per kWh, the 9600 MW of power represented by these now cancelled plans is equal to $38.4 billion in heavy industry spending that now will not take place. The bulk of business losses will fall on Indian firms and their workers.
Impact on India’s nuclear plans
The current nuclear fleet in India consists of 4.3 Gwe of power most of which are aging PHWR units. Two new Russian built VVERs at Kudanlulam are just entering revenue service this year. India’s plans for building 20 Gwe of new nuclear plans rest mostly on an indigenous design of a 700 MW PHWR. It takes two of these units to barely equal one ESBWR.
While the official list of plans also has slots for Westinghouse AP1000s and Areva EPRs, only Areva is trying to break ground on a plant for two units in Jaitapur. So far that hasn’t happened as the project has been mired in land disputes and demands by Indian companies for “localization” of manufacturing components. In April 2015 some progress was made, in terms of agreements to move forward, but construction has not started at the site.
Meanwhile, Rosatom has been moving ahead with plans to build two more VVER reactors at Kudankulam with first concrete expected to be poured this winter. Overall, there are plans for eight 1000 MW units at that site in Tamil Nadu on India’s southern most coastal point of land.
India’s unstable power grid
In July 2012 a series of power outages threw 670 million people into three days of darkness. According to the New York Times, India suffered the largest electrical blackout in history, affecting an area encompassing about 670 million people, or roughly 10% of the world’s population.
Three of the country’s interconnected northern power grids collapsed. Blackouts covered from India’s eastern border with Myanmar to its western border with Pakistan.
India’s primary form of electrical power generation comes from coal, and the country has extensive deposits, mines, and fossil fueled power plants. The country’s economic interests behind this infrastructure do not want the competition from nuclear power plants.
GE’s pullout from India is a major blow to that country’s civilian nuclear energy plans. For now, it faces the prospect of more blackouts, more CO2 emissions, and slower progress shifting its generation capacity from fossil to nuclear.
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