IEEJ: June 2013 All Right Reserved
Special Bulletin
A Japanese Perspective on the International Energy Landscape (132)

May 23, 2013

Japan Resuming Talks with India on Nuclear Cooperation PactKen Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn May 20, Chief Cabinet Secretary Yoshihide Suga told a press conference that thegovernment was considering resuming Japan’s negotiations with India on a bilateral nuclear
cooperation agreement, which have been suspended since November 2010. The negotiations started
in June 2010. Three official meetings for the negotiations took place before the talks were suspended
due to the March 2011 disaster at the Fukushima Daiichi Nuclear Power Plant. When Indian Prime
Minister Manmohan Singh visits Japan from May 29, he is expected to agree with his Japanesecounterpart Shinzo Abe to resume the negotiations.
When transferring materials, equipment and technologies for nuclear power generation to aforeign country and implementing relevant bilateral cooperation, Japan must give considerations totheir possible use for military purposes and the nuclear nonproliferation problem and conclude a pactwith that country on the cooperation partner’s obligation to use these materials, equipment andtechnologies only for peaceful purposes and restrict their transfer to third countries. This pact is anuclear cooperation agreement. Japan has concluded such agreements with 11 countries, including
the United States, Britain, France, China and South Korea, and with one international organization.
While the Japanese government started nuclear cooperation pact talks with India, many Japanesepeople called for exercising prudence in promoting such talks with India that has not acceded to theNuclear Nonproliferation Treaty. Given India’s nuclear power generation situation as explained
below and the fact that the United States and Russia have concluded nuclear cooperation agreementswith India as an exception to the NPT regime, however, the Japanese government might have chosen
to resume the nuclear cooperation pact talks with India.
What is the situation of India? In short, expectations on nuclear power generation are
growing in India as it tries to meet expanding electricity demand and diversify its electricity
portfolio. Our IEEJ Asia/World Energy Outlook 2012 projects that Indian electricity demand will
increase from 711 terawatt hours (TWh) in 2010 to 3,075 TWh in 2035 in the baseline reference
scenario, with annual growth averaging 6.0%. The average growth of 6% is the highest among Asiandeveloping countries, far exceeding 3.2% for China during the same period. Meanwhile, India'spower generation mix (on an electricity generation basis) in 2010 indicates that coal accounted for
69% of total electricity generation, hydro for 12% and natural gas for 12%. India's dependence on
coal is remarkably heavy. As India tries to promote stable electricity supply and environmental
conservation while meeting the substantial growth in electricity demand and diversifying its
electricity portfolio to reduce its dependence on coal, expectations are growing on nuclear powergeneration.
India, which had used its domestic technologies for nuclear power development, has
shifted to introducing advanced foreign technologies in response to the growing expectations on1

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nuclear energy. In such situation, major countries with advanced nuclear technologies are racing toenter the Indian nuclear power generation market. The above IEEJ outlook predicts that India's
nuclear power generation capacity will expand from 4 gigawatts (GW) in 2010 to 38 GW in 2035 in
the reference scenario or to 72 GW in the advanced technology scenario where new technology
introduction will be accelerated. Following the Fukushima nuclear disaster, nuclear power plant
operators around the world have been required to further enhance the safety of nuclear plants basedon lessons learned from the disaster. This is the same case with India. In this sense, India's nuclear
power generation expansion could be somewhat slower than expected earlier. But India is likely tomove ahead with a very robust nuclear power generation program. As a matter of course, however,we see some challenges including India's nuclear liability law under which producers/providers of
nuclear power plants and other relevant equipment as well as plant operators will be held liable fornuclear plant accidents.
Some other emerging countries in the same electricity and energy situation as India also
indicate robust nuclear power plant construction programs. They include Saudi Arabia, the UnitedArab Emirates and other Middle Eastern countries, as well as Turkey and Central and East Europeancountries, attracting attention from nuclear industry stakeholders throughout the world. In Japanamong advanced nuclear industry countries, relevant companies are about to aggressively explore
business opportunities in these countries planning to newly introduce nuclear power generation. In
an effort to back up these companies, the government has been working to conclude nuclear
cooperation agreements with other countries. Through Prime Minister Abe's recent overseas tour,
Japan signed nuclear cooperation agreements with Turkey and the UAE. Japan and Saudi Arabia areconsidering negotiating their nuclear pact. As noted at the outset of this report, moves have emerged
to resume nuclear pact negotiations with India.
What are the purposes for Japan and its industry sector to participate in nuclear power
generation programs in India and countries planning to newly introduce nuclear generation? The first
purpose is to contribute to ensuring the three “S”s -- Safety, Security and Safeguards. As Japan has
experienced the Fukushima nuclear disaster, it has a duty to take advantage of lessons learned fromthe disaster for contributing to improving safety technology for the world. Japan can utilize its pastefforts and achievements in the areas of Security and Safeguards as well as lessons from the disasterto play a great role in promoting nuclear power generation and ensuring the three “S”s in thecountries planning to introduce nuclear generation. This point meets the needs of the countries
introducing nuclear energy. These countries might have placed great expectations on Japan’scontribution to the enhancement of three “S”s.
Nuclear power generation programs in these countries are also an important business or
economic factor for Japan. The IEEJ estimates the world’s nuclear power plant construction market
at 90-160 trillion yen for the period up to 2035. The market size is estimated at 34-72 trillion yen for
India, the ASEAN members, Middle Eastern countries, Turkey and other countries where Japanesecompanies could take part in nuclear power generation projects, excluding China, South Korea,
Russia and other countries where their domestic companies’ superiority makes it difficult forJapanese firms to participate in such projects. Even if a Japanese company wins a foreign nuclear
power plant order, it may not necessarily receive all of the order value. Local companies may
undertake civil engineering and some other operations. Nevertheless, the Japanese company may
receive nearly 70% of the order value, covering key components such as nuclear reactors andturbines. A nuclear power plant order may also exert spillover effects on the entire Japanese2

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economy through relevant equipment production. In this sense, large-scale nuclear power generation
programs in the countries planning to newly introduce nuclear energy can be expected to provide
key business chances and economic effects.
As a matter of fact, Japan faces a mountain of domestic nuclear problems including
whether and how offline nuclear reactors should be restarted, how nuclear energy should bepositioned and what the best energy mix is. We may have to take note of the fact that aggressive
efforts to undertake overseas nuclear power programs, even in the presence of such domestic
problems, have come under fire or been called into question. Therefore, the government and otherstakeholders must faithfully tackle domestic nuclear energy problems mainly by resolving
Fukushima disaster challenges including radioactive decontamination, decommissioning of nuclear
reactors and evacuees’ return to their hometowns, by implementing measures to enhance nuclear
safety based on lessons from the disaster, and by developing/restoring the culture of safety. The
government may have to address these domestic nuclear problems while giving all people careful
explanations on the contribution to the three “S”s, economic effects and other purposes of Japan’s
participation in nuclear power generation programs in countries planning to newly introduce nuclear
energy.

Contact: report@tky.ieej.or.jp
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