Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 10:00 AM

Mr. Michael Gadbaw

Vice President for International Law and Policy, General Electric Company

Testimony

 

 

R. Michael Gadbaw

Vice President and Senior Counsel

General Electric Company

 

Committee on Energy and Natural Resources

U.S. Senate

 

July 18, 2006

 

 

“Civilian Nuclear Energy and U.S.-India Strategic Cooperation”

 

 

 

Mr. Chairman and Members of the Committee, thank you for the opportunity today to provide a perspective on the role of commercial nuclear energy in U.S.-India strategic cooperation.  The burgeoning partnership between the United States and India has profound implications for a wide range of issues—Asian stability, global non-proliferation, Indian economic development, and the renaissance of the nuclear industry—that play into America’s enduring national interests.

 

GE supports the implementation of this historic agreement, because we believe the strategic partnership that it will advance will serve the interests of both our countries in promoting global peace, security, non-proliferation, and economic development.

 

          GE has had a unique vantage point from which to observe the evolution of this relationship. We believe in the vision that President Bush and Prime Minister Manmohan Singh articulated in their joint statement of March 1, 2006, regarding the role the United States and India must play together in addressing the challenges facing the world in this century.  We have seen how the economic reforms launched by Manmohan Singh as Finance Minister in 1991 have committed India to a course of development through open markets, global trade, and investment.  Ratified and affirmed through a series of democratic elections and successive governments, these policies have created political, economic, and commercial linkages and understandings between our two countries on ways to increase our mutual security and address the threats we face from intolerance, terrorism, and the spread of weapons of mass destruction.

 

          Together with many U.S. and Indian companies, GE has participated directly in the benefits of this evolving economic and political relationship.  As economic reforms have stimulated unprecedented Indian economic growth, we have seen the increasing demand for U.S. products and technology in aviation, power generation, rail, healthcare, and advanced materials benefiting our workers and suppliers.  The opening of the civilian nuclear relationship will deepen this support for American jobs.  For every order we receive for a 1.5 GW power plant, we anticipate U.S. exports in the neighborhood of $1 billion, which would equate to supporting about 10,000 U.S. jobs.

 

 

The Commercial Role in Strategic Energy Cooperation

 

As you evaluate the policies needed to ensure the success of this agreement, I encourage you to look at how these policies work together.  No longer can we divide nuclear policy into distinct compartments, separating security from economics, public policy from private commerce.  Consequently, government officials and the private sector must work together to fully integrate the commercial and national security dimensions of government policies.

 

Secretary of State Condoleezza Rice recognized in her July 10, 2006, speech that

 

there is a new spirit of partnership between India and the United States and that spirit of partnership arises, first and foremost, from our people, from deep ties and shared aspirations that bind our democratic societies. …The relations between our people point a way forward for cooperation between our governments.

 

The U.S.-India relationship will be cemented through social and especially economic exchange.  Government policy should be designed to encourage and expand those channels of private activity—nowhere more than the nuclear energy sector, where international security, national economic development, and commercial innovation come together.

 

Leading U.S. companies like General Electric will play a crucial role in translating the strategic vision of U.S.-Indian energy cooperation into a reality.  Take America’s interest in revitalizing the non-proliferation regime to include a responsible nuclear India.  As they do business in India, U.S. companies will bring global standards of compliance and processes to safeguard the international legal regime controlling nuclear technologies.  Moreover, nuclear cooperation will require intense and ongoing interaction among governments, local energy providers, and U.S. nuclear suppliers, which will help to increase the transparency of India’s nuclear program while tightening the relationships between the U.S. and Indian energy sectors.

 

 

India’s Energy Needs

 

India’s economy is growing dramatically, with the potential to lift hundreds of millions out of poverty.  But India needs a huge expansion of power generation to fuel its demand for energy.  India currently produces over 139 GWe of electricity, some 2 percent of which is nuclear (2.7 GWe).[1]  To sustain its current growth trajectory, India will have to increase its energy consumption by around 4 percent annually.[2] 

 

Although coal, oil, and natural gas dominate India’s current energy mix (constituting roughly 52, 34, and 7 percent of India’s energy consumption, respectively),[3] India’s future will increasingly rely on nuclear energy.  This is partly due to resource constraints.  A study by the Nuclear Power Corporation of India Limited, which is owned by the Indian government, analyzes the power generation potential of India’s resource base.  Whereas India’s 38 billion tons of coal could produce 7,614 GWe-years of electricity, and its 12 billion tons of oil and natural gas could produce 5,833 GWe-years, it has enough thorium (225,000 tons) to produce more than 155,502 GWe-years.[4]  Moreover, importing uranium to augment its indigenous supply of 61,000 tons costs less per unit of electricity generated than importing coal, oil, or gas.[5]  Nuclear energy also becomes important due to India’s strategy for economic growth.  Nuclear power has long-term advantages for India’s development: India has large reserves of coal, but its high ash-content poses significant environmental problems; nuclear energy is a cleaner resource.  Further, unlike imported gas, oil, and LNG, nuclear power would improve India’s energy security and lessen its geopolitical anxiety over foreign energy sources. 

 

The Indian government has set ambitious targets for India’s nuclear expansion.  It hopes to achieve a nuclear capacity of about 10,000 MWe by 2011–12 and 40,000 MWe by 2020.[6]  By 2052, according to India’s Department of Atomic Energy, India hopes to have a nuclear capacity of 275 GWe, with nuclear technologies providing 20 percent of India’s overall fuel mix (up from 2 percent today).  Coal, by contrast, will go from constituting more than half of India’s installed electrical capacity to about 46 percent by 2052, oil and gas from 24 percent to 15 percent.[7]

 

Given India’s desire to expand its nuclear capacity so quickly and significantly, U.S. nuclear suppliers have an excellent opportunity to participate in India’s energy development.  And expanding the energy supply will also require broader improvements in India’s infrastructure, creating even more opportunities for American companies.

 

 

Opportunities for U.S. Nuclear Suppliers

 

U.S. companies can help the United States to become an integral partner in India’s economic development.  As the last U.S.-owned nuclear technology company, GE is committed to do its part.  GE’s ABWR (Advanced Boiling Water Reactor) is the most modern and advanced design ever built, with installations in Japan and Taiwan.  ABWR has already received NRC certification.  Looking to the future, GE’s ESBWR (Economic Simplified Boiling Water Reactor) is cheaper and safer than existing reactor technologies. 

 

France and Russia started early in cultivating political channels into India’s nuclear market.  But American companies have the capability to take a leading position as India seeks new reactors.  GE not only has great technology, but also a history of successful partnerships in India.  The Indians know this from their experience with the Tarapur BWR site, built by GE, which is the lowest-cost source of energy in India according to officials of the Indian Department of Atomic Energy.

 

Furthermore, India recognizes the political importance of America’s decision to draw closer to it.  America has enabled India to enter the nuclear fold.  The Indian government understands the inconsistency, then, of excluding competitive American companies from participating in India’s new commercial opportunities.

 

 

U.S. Government Policies—Understanding the Security-Commerce Link

 

U.S. nuclear suppliers can thrive in the Indian market, but government policies must enable them to act rapidly and effectively.  And the U.S. government must make clear its expectation that U.S. companies will succeed in India as they have succeeded elsewhere.  Government engagement and advocacy are essential.

 

Again, this means that U.S. policymakers must be sensitive to the link between security and economics.  Commerce between America and India creates the linkages, the transparency, and the safeguards that advance our national security—but commerce requires a conducive policy environment.  Although crucial, it is not enough to focus only on formal non-proliferation agreements between India and the United States, IAEA, or NSG.  The U.S. government must think broadly about a range of policies that accounts for the needs of commerce.

 

One pressing example is nuclear liability: The International Atomic Energy Agency’s Convention on Supplementary Compensation for Nuclear Damage (CSC) establishes an updated, global system for compensation in the event of a nuclear incident outside the United States.  We are pleased that Senate consent to ratify was approved in May by the Senate Foreign Relations Committee and is ready for action by the full Senate.  We hope that the Senate Energy and Natural Resources Committee will work promptly on any necessary implementing legislation.  This initiative is vital if U.S. companies are to engage foreign nuclear markets.  Without a system ensuring compensation and nuclear liability protection, U.S. companies will find the risks of doing business prohibitive.  Moreover, key states—like Japan, South Korea, Canada, Ukraine, China, and not least India—are waiting for America to take the lead in joining the CSC, which the United States promoted and was the first country to sign in 1997.  They could be persuaded to join if America does so first.  The CSC would then reflect a global standard for nuclear liability that could be used to structure legal arrangements with others as well.  If America fails to take the lead, however, the CSC will lose momentum and the opportunity could be lost to establish a global standard for compensation and dealing with legal liabilities in this important area.

 

 

Conclusion

 

The U.S.-Indian rapprochement, driven by nuclear-energy cooperation, opens an array of opportunities for U.S. companies.  General Electric is ready to support this endeavor.  We are confident that, with appropriate government policy and advocacy support, U.S. companies can take a leading role in developing India’s energy capabilities.  In the end, American commerce underpins the national security goals that animate the U.S.-India deal, and gives substance to the deal’s domestic aspiration: the renaissance of America’s civilian nuclear industry.

 

Thank you for your time and attention.



[1] Report on Growth of Nuclear Energy in India, Department of Atomic Energy, 2004.

[2] Sumit Ganguly, Testimony before the Committee on Foreign Relations, U.S. Senate, “Energy Trends in China and India: Implications for the United States,” July 26, 2005.

[3] “India,” Country Analysis Briefs, U.S. Energy Information Administration, http://www.eia.doe.gov/emeu/cabs/India/Full.html (as of December 2005).

[4] “India’s Vision: Nuclear Energy,” Nuclear Power Corporation of India, Ltd. (NPCIL), presentation by S. Vedmoorthy to the India Energy Symposium, March 2, 2006.

[5] “A Strategy for Growth of Electrical Energy in India,” Department of Atomic Energy, http://www.dae.gov.in/publ/doc10/index.htm (as of July 17, 2006).  Other sources estimate India’s uranium supply to be as high as 78,000 tons.  See Ashley J. Tellis, Atoms for War? U.S.-Indian civilian Nuclear Cooperation and India’s Nuclear Arsenal, Carnegie Endowment for International Peace, June 2006, http://www.carnegieendowment.org/files/atomsforwarrevised1.pdf.

[6] NPCIL, 2006.  Originally, the 2020 target was 20,000 MWe; the Indian government recently doubled it.

[7] Department of Atomic Energy, 2004.