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India: The case for nuclear

WITH ALL the brouhaha caused by the country's negotiations with Iran for gas supplies, the details of India's energy supply gap have been overlooked – namely, how nuclear energy could be a significant contributor. GDP is predicted to grow at 8-10% a year. To sustain such growth, analysts agree that India needs to acquire some 65 gigawatts (GW) of additional energy (adding to its existing capacity of 116 GW) within the next 5-10 years.

Politics has not been the only obstacle to importing gas. The price seems to be a more prohibitive factor affecting any significant moves to acquire gas imports. Although import prices are somewhere between $3.7-4.5/m Btu at present, Qatar, soon to be the world's largest liquefied natural gas exporter, with 77bn cm/y by 2009, has suggested selling gas for closer to $10/m Btu in the future.

India and China, however, have set a maximum price of around $3.6/m Btu. Vishvjeet Kanwarpal, chief executive of Asia Consulting Group, says the explanation for this lies in the way different countries use gas. "Developed markets have gas spread over all sorts of industrial markets. But in China and India, gas is locked into the power market and is a direct competitor to coal."

The effect of this is that the higher the price of gas, the lower the demand because it is the power sector that is driving demand in these transitional economies. If the price of gas is $3/m Btu, demand is 170 units, according to RP Sharma, president of the gas division at India's privately owned Reliance Industries. But a price increase of $0.5/m Btu would cause demand to fall to 140 units. And at $4/m Btu, demand falls to 100 units.

However, Kanwarpal says that any number of sources and combinations, not just gas, could fill the country's energy gap. Coal, for one, is the dominant energy source, and is likely to contribute 30 GW, or almost half, of the additional demand. The country's own gas production could add a further 14 GW. This leaves a third of expected demand, about 20 GW, to be supplied. According to Kanwarpal, nuclear energy is a strong contender.

Until now, nuclear power in the country has been limited. India's present reliance on nuclear energy accounts for just over 3 GW of its capacity, only 2% of total energy consumption, and equivalent to its use of wind power. Since 1969, co-operation with Russian and indigenous activities, has led to the construction of small 200 megawatt (MW) reactors. A 540 MW unit became commercial only last year.

However, there are plans for 1 GW units to be on stream in 2008. Kudankulam 1 and 2, in Tamil Nadu, and Tarapur 3 and 4, in Maharashtra, will double the country's nuclear capacity to 7 GW. This suggests the country is moving towards new developments, so the US offer of sharing civilian nuclear technology with India could be timely. Indeed, with the help of the US, capacity could increase by some 10 GW, says Kanwarpal, filling most of the country's remaining energy supply gap.

Nevertheless, gas imports could one day be feasible. Because of the wide gap between sellers and buyers expectations, Sharma claims that in the absence of a liquid marketplace to sell gas at a higher price, suppliers could find themselves lowering their asking price to match the price that the vast consuming countries – India and China – are prepared to pay.

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