<DOC>
[109 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:31088.wais]
S. Hrg. 109-692
U.S./INDIA ENERGY COOPERATION
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
to
EXAMINE UNITED STATES AND INDIA ENERGY COOPERATION IN THE CONTEXT OF
GLOBAL ENERGY DEMAND, THE EMERGING ENERGY NEEDS OF INDIA, AND THE ROLE
NUCLEAR POWER CAN PLAY IN MEETING THOSE NEEDS
__________
JULY 18, 2006
Printed for the use of the
Committee on Energy and Natural Resources
______
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska RON WYDEN, Oregon
RICHARD BURR, North Carolina TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri DIANNE FEINSTEIN, California
CONRAD BURNS, Montana MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia KEN SALAZAR, Colorado
GORDON SMITH, Oregon ROBERT MENENDEZ, New Jersey
JIM BUNNING, Kentucky
Bruce M. Evans, Staff Director
Judith K. Pensabene, Chief Counsel
Robert M. Simon, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Henry Abeyta, Fellow
Jonathan Epstein, Legislative Fellow
C O N T E N T S
----------
STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 2
Bunning, Hon. Jim, U.S. Senator from Kentucky.................... 3
Domenici, Hon. Pete V., U.S. Senator from New Mexico............. 1
Gadbaw, R. Michael, Vice President and Senior Counsel, General
Electric Company............................................... 38
Poneman, Daniel B., Principal, The Scowcroft Group............... 34
Pumphrey, David, Deputy Assistant Secretary for International
Energy Cooperation, Department of Energy....................... 3
Simons, Paul, Deputy Assistant Secretary for Economic and
Business Affairs, Department of State.......................... 11
Thomas, Hon. Craig, U.S. Senator from Wyoming.................... 2
Victor, Dr. David G., Director, Program of Energy and Sustainable
Development, Stanford University............................... 27
APPENDIX
Responses to additional questions................................ 49
U.S./INDIA ENERGY COOPERATION
----------
TUESDAY, JUNE 18, 2006
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10:10 a.m., in
room SD-366, Dirksen Senate Office Building, Hon. Pete V.
Domenici, chairman, presiding.
OPENING STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM
NEW MEXICO
The Chairman. Hello, everybody. The purpose of today's
hearing is to examine recent developments in U.S./India Energy
Cooperation. After committing to a framework exactly one year
ago, President Bush and India's Prime Minister announced an
agreement in March this year on civil nuclear cooperation
between our countries. This is an historical agreement that I
believe will lead to a strategic relationship between our great
democracies. I'm pleased with the recent action taken by my
good friend, Senator Lugar, of the Foreign Relations Committee
to pass the U.S./India Civil Nuclear Agreement, withstanding
bipartisan, strong bipartisan support. I encourage the Senate
and Senator Frist to bring this measure to the Senate floor
prior to departure of the August recess.
In hearings that led up to the approval of the Foreign
Relations Committee nonproliferation issues, issues related to
sharing nuclear technology played a promising role. A related
measure focused on U.S./India energy security. Cooperation did
not receive the same level of media attention but it raises a
very serious issue that we all became keenly aware of after the
hurricanes hit our gulf coast last year and that is that human
and economic toll that can result from a tight, inter-dependent
world energy market reliant on energy sources that are subject
to disruption. Energy security is not only a concern for the
United States but for the developing countries like India, that
has a population to surpass China in the next 50 years, an
economy rapidly expanding with a growth rate of over 7 percent
in 2005, resulting in increased energy consumption which is
expected to double in the next 25 years. Our witnesses today
will speak to the role of technological cooperation and
industry partnerships to aid in developing options to meet
future global energy demands while assuring diversified,
proliferation-resistant energy sources.
My good friend Senator Bingaman and I have engaged in
serious discussions on another topic of global importance, that
is of climate change and I have said that I do not know where
we will end up but I do believe that a large number of our
citizens are concerned about climate change. I think that
Congress needs to explore ways to reduce our contribution to
those gases. Our cooperation with India also encourages the
development and the developing world to do their part by
adopting sustainable energy sources that reduce greenhouse
gases and their emissions. It is no secret to anyone in
Washington that I am a serious proponent of expanding nuclear
power generation along with many members of the Senate who sit
here today. The global community is rapidly examining nuclear
power as a means of providing sustainable energy. India has
announced plans to significantly expand its civil nuclear
program with nine reactors currently under construction. I am
hopeful that cooperation with India will lead to significant
opportunities for U.S. industry in nuclear powers resurgence as
India and other countries develop plans for expanded nuclear
power in the next decade. I strongly support an evolving
strategic U.S. relationship with India. India is home to one
billion people, the largest democracy and a worthy partner that
we can work with in our pursuit of global security. I look
forward to the testimony today and hope that the Senators who
are here are also looking forward to what we are going to hear
today.
We are going to have two panels testifying before us. On
one panel we have Mr. David Pumphrey, Deputy Assistant
Secretary for International Energy Cooperation at the
Department of Energy and Mr. Paul Simmons, Deputy Assistant
Secretary for Economic and Business Affairs at the Department
of State. I will stop with that and ask if Senator Bingaman
will have any comments and then either of you two Senators.
Thank you for coming today. It is a very interesting panel.
STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR
FROM NEW MEXICO
Senator Bingaman. Thank you very much, Mr. Chairman, for
having the hearing. It is an extremely important hearing and
set of issues. I'm interested in hearing from the witnesses, of
course, about the energy cooperation aspects of this but also
about the implications of what is proposed for our
nonproliferation efforts in the world. I hope to have some
questions when we get to that part of the hearing. Thank you.
The Chairman. Thank you.
Senator Thomas.
STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR
FROM WYOMING
Senator Thomas. Thank you, Mr. Chairman. I think it is an
interesting issue as well. Nuclear power has great promise, of
course, and I think we are looking at the growth and change in
the world, change in the economies, India being one of those
that is going to make a change in the world and so this is an
opportunity. I think we need to work with them to talk about it
in terms of air quality and the environment. However, that
responsibility with nuclear power doesn't end just with the
environment. We have to be concerned about nuclear
proliferation and so on. So I think it is important we work in
this area and help to develop the economy, our relationships as
well as the safety, over time. So thank you. I look forward to
your comments.
STATEMENT OF HON. JIM BUNNING, U.S. SENATOR
FROM KENTUCKY
Senator Bunning. Thank you, Mr. Chairman. This hearing
represents an important step in recognizing that energy prices
are governed by a global marketplace. The price my constituents
pay for gasoline at the pump in Kentucky and the price
Americans pay for natural gas to heat their home is directly
related to energy demands in countries like India. The growing
demand for energy in India will stretch limited international
resources and push energy prices even higher. To meet worldwide
energy challenges, it is important that America and India
cooperate.
America is the worldwide leader in mining, processing,
burning and gasifying coal. It is the most abundant domestic
energy resource that we have. Similarly, India relies on coal
to fuel more than half of its energy needs. With its
electricity growth forecast to increase by 8-10 percent
annually, India has the potential to be an important new
marketplace for our America coal and electricity companies. In
partnership with India, we can apply the newest clean coal
technologies and mining techniques. India will benefit from our
experiences and American companies will take advantage of a new
market. Cooperation is not only about helping India or
developing a new market for American goods, it is a way for us
to take control of our own energy prices. Every time an
American company shares a new technique or asset or a new
project, we can increase the efficiency of India's energy
production and usage. Added efficiencies will curb demand and
decrease pressures on international energy prices. As we help
India develop a vibrant, efficient and environmentally friendly
energy marketplace, we must ensure that American companies who
share their technologies are protected. They need a level
playing field with India's companies in terms of regulations,
market participation and intellectual property rights. The
partnership of America and India is an opportunity for both
nations to realize significant benefits. Thank you, Mr.
Chairman.
The Chairman. Thank you, Senator. I note the arrival of
Senator Craig. We were just finishing a few observations by
each Senator before we proceeded. Do you have any?
Senator Craig. No, Mr. Chairman.
The Chairman. Very good. All right. Witnesses, let us
proceed. Mr. Pumphrey, if you would start.
STATEMENT OF DAVID PUMPHREY, DEPUTY ASSISTANT SECRETARY FOR
INTERNATIONAL ENERGY COOPERATION, OFFICE OF POLICY AND
INTERNATIONAL AFFAIRS, DEPARTMENT OF ENERGY
Mr. Pumphrey. Thank you, Mr. Chairman, members of the
Committee. I am pleased to appear before you this morning to
discuss India's expanding role in global energy markets and the
important energy cooperation taking place between our two
countries. India has been mentioned already, a Nation of over a
billion people with an economy growing at nearly 8 percent per
year has a large and rapidly increasing appetite for energy.
Providing clean, reliable and affordable energy to sustain this
high level of economic growth is a critical challenge for the
Indian government. Between 1980 and 2004, energy demand
increased by over 270 percent and based on our latest EIA
assessments, we expect demand to double again by the year 2030.
Concerns about assuring adequate energy supplies prompted
President Bush and Prime Minister Singh to focus on energy
security cooperation as a key aspect of a transformed Indo-U.S.
strategic relationship. This focus on energy security was
reflected in the launch of the new U.S./India energy dialogue
on May 31 of last year, chaired by Secretary Bodman and Deputy
Chairman of India's Planning Commission, Dr. Montek Singh
Ahluwalia. The goal of the dialogue is to identify concrete
actions the two countries can take to help India address its
energy challenge through increased trade and investment and
cleaner domestic energy production, energy efficiency, clean
energy technologies and diversified imports of energy.
This dialogue has established five Working Groups, each co-
chaired by the Department of Energy and an appropriate
government of India counterpart and we also have a number of
other U.S. Government agencies involved in the activities. So I
will briefly highlight some of the key activities and
accomplishments so far and of course, there is more detail in
the formal testimony.
Coal, as was mentioned, currently provides about half of
India's energy and is expected to remain the dominant fuel in
the future. The dialogue is focused on a number of activities
to improve the mining, transport and utilization of coal.
Perhaps the most significant development has been India's
decision to become a partner in the Government Steering
Committee of the FutureGen alliance. India is contributing $10
million to this demonstration powerplant, which will capture
and sequester carbon dioxide.
India has recently discovered significant reserves, new
reserves of natural gas but lacks an adequate infrastructure to
move this gas to major national markets. In addition, India has
a large potential for coal-bed methane. We have brought
together the private sector and government officials to review
the potential for natural gas development and to assist the
government of India in shaping the regulatory environment
necessary to attract the investment in these natural gas
resources.
Looking towards the longer term, we are also working with
India on the first efforts to drill for gas hydrates offshore.
We hope this research will accelerate efforts and develop this
resource of considerable untapped potential. Energy efficiency
and renewable energy resources, we believe, will also make an
important contribution in shaping future demand for energy in
India. We have undertaken a number of activities to support
energy efficiency practices and stimulate investment in
renewable energy. This work builds on significant programs
undertaken by the U.S. Agency for International Development.
Clearly, nuclear energy will be an important part of India's
energy future as well. While we have had only limited exchanges
under the dialogue, meaningful collaboration in this area will
be contingent on the modification of our own legal framework.
In looking longer term again, at our urging, the ITER
partners have invited India to participate as a full member in
this project to advance fusion energy research. Private sector
investment in all parts of the energy supply chain is critical
to achieving any of India's energy goals. We and the government
of India have made it a priority to include the participation
of U.S. and Indian business community in aspects of all of the
Working Groups. We have launched several events designed to
bring U.S. industry in contact with Indian counterparts,
including a CEO Roundtable in Houston put together by the U.S./
India Business Council with the Minister of Petroleum and Gas
to discuss investment in India's oil and gas sector. Finally,
we have also been working with India to help develop its
emergency response capability and its own strategic stockpiles.
Over the past few years, we have hosted study tours to visit
the U.S. SPR sites, invited Indian officials to international
conferences in the United States and invited Indian
representatives to visit with the International Energy Agency
to better understand how the IEA members plan for and respond
to severe supply disruptions.
Mr. Chairman and members of the committee, let me conclude
by emphasizing that the economic growth that India is
experiencing today will lift many people out of poverty. It is
in our mutual interest to help India meet its energy needs and
become a more efficient user of energy in order to sustain this
growth. We are convinced that bilateral, multi-lateral energy
cooperation maximizes everyone's energy security. Thank you
again, Mr. Chairman, for the opportunity to address the
committee and I'll be happy to take any questions that you or
the members have.
[The prepared statement of Mr. Pumphrey follows:]
Prepared Statement of David Pumphrey, Deputy Assistant Secretary for
International Energy Cooperation, Office of Policy and International
Affairs, Department of Energy
Mr. Chairman and Members of the Committee, I am pleased to appear
before you this morning--the one-year anniversary of the Joint
Statement concluded by President Bush and Prime Minister Singh--to
discuss India's expanding role in the global energy market and the
important energy cooperation taking place between the U.S. and India.
President Bush placed energy security high on his agenda from the
beginning of his first term and that commitment has only increased. The
President's policy recognizes the global nature of the energy markets,
and that a nation's energy security does not end at its national
boundaries. Our overarching energy security objective is to promote
adequate and reliable supplies of affordable energy, as well as the
clean and efficient use of energy resources. As the world's largest
producer and consumer of energy resources, the U.S. must play a leading
role in addressing the world's energy challenges and ensuring a secure
energy future. The world's demand for energy is growing rapidly and the
demand growth will be increasingly concentrated in the developing
world.
We are working internationally to create expanded energy
partnerships with major consuming and producing countries. These
partnerships are designed to improve energy security globally through
domestic energy resource development, increasing the use of clean
fuels, improved legal and regulatory regimes, increasing private
investment, diversifying resources to include alternative and renewable
energy sources, and helping the developing countries and growing
economies to be more efficient producers and consumers of energy.
INDIA'S ENERGY OUTLOOK
India--a nation of over a billion people with an economy growing at
approximately 8 percent per year--has a massive and rapidly growing
appetite for energy. Rapid population growth, expanding industrial
production, economic development, urbanization, and increased motor
vehicle ownership are all driving this energy demand. Between 1980 and
2004, energy demand increased by over 270 percent. In 1980, total
primary energy demand was only 4.16 quadrillion BTUs but by 2004 demand
had risen to over 15 quadrillion BTUs of commercial energy, thus making
it the fifth largest consumer of energy in the world behind only the
United States, China, Russia, and Japan. This growth will continue at a
rapid pace with total energy demand projected to be 25.7 quadrillion
BTUs by 2020 and 32.5 quadrillion BTUs by 2030.
India is the world's third largest coal producer behind China and
the U.S. Coal consumption was 478 million short tons (mst) in 2004,
growing to 775 million mst by 2020. India's coal has twice the ash
content of U.S. coal, resulting in serious environmental and health
consequences for its population. Currently, about 53 percent of India's
total energy (and 70 percent of India's electric power generation) is
derived from coal.
Of the remaining sources:
<bullet> nearly 33 percent is derived from oil;
<bullet> 8 percent from natural gas;
<bullet> 5 percent from hydro-electric power;
<bullet> less than one percent from renewable (solar and wind)
sources; and,
<bullet> the remaining 1 percent comes from nuclear energy.
India's current civilian nuclear program has an installed capacity
of 3,850 megawatts electric (MWe), but, according to the Government of
India, it is expected to reach 20,000 MWe by 2020.
India's demand for oil and natural gas is substantial, and will
only increase as its economy grows and industrializes. Indian
consumption of natural gas has risen faster than any other fossil fuel
in recent years, from 63 trillion cubic feet per year (Tcf) in 1995 to
1.09 Tcf in 2004. Its use is projected to reach 1.5 Tcf by 2010 and 2.2
Tcf by 2020. Oil accounts for 33 percent of India's total energy
consumption. India's average oil production level was 828,000 barrels
per day in 2005. Future oil consumption is expected to grow from 2.6
million barrels per day (mmbd) in 2005 to 3.7 mmbd in 2020 and 4.5 mmbd
in 2030. In 2005, India imported (net) approximately 1.7 mmbd of oil.
Based on conservative estimates, these imports will continue to grow as
consumption needs will rapidly outpace growth in production capacity.
Looking ahead, in 2020 India's production capacity will be 1.4 mmbd,
leaving an estimated import demand of 2.3 mmbd. Likewise, by 2030
import demand will continue grow to 2.9 mmbd as production will only
increase slightly between 2020 and 2030 (1.4 to 1.6 mmbd.)
U.S. POLICY RESPONSES
The U.S. began engaging India on energy more than a decade ago. We
realized the enormous growth potential in its economy and recognized
the implications for our energy security and for the global
environment. My colleague from the Department of State can elaborate on
the Civil Nuclear Cooperation Initiative; I would like to discuss more
fully the broad range of energy-related activities we have undertaken
with India. Today, the Department of Energy leads a wide variety of
joint activities with India designed to increase its energy security
while building a lasting partnership and friendship between our two
nations. These partnerships include participation from several
agencies, the Department of State, the Department of Commerce, the
Agency for International Development, the Trade and Development Agency,
and the Environmental Protection Agency.
Our efforts in 1994 focused on improving the efficiency of India's
coal-fired power plants, promoting the use of clean fuels such as
natural gas, wind and solar energy, helping establish public-private
partnerships in industrial energy efficiency, and improving the
investment climate for U.S. energy firms.
President Bush and Prime Minister Vajpayee bolstered our energy
cooperation in November 2001, issuing a Joint Statement establishing
energy as one of five pillars of the Indo-U.S. Economic Dialogue, with
the other pillars being trade, investment, commerce and the
environment. This enabled the implementation of the President's
National Energy Policy Plan's recommendation that the Department of
Energy work with India's Ministry of Petroleum and Natural Gas to
enhance domestic oil and gas supply.
U.S.-INDIA ENERGY COOPERATION
Growing concerns about energy security prompted the U.S. and India
to launch a new energy dialogue in 2005 that reflects the transformed
strategic relationship between the world's two largest democracies. The
United States and India recognize their mutual interests are best
served by working together in a collaborative fashion to ensure
stability in global energy markets. Adequate and reliable supplies of
clean energy at reasonable cost are essential to fuel India's rapidly
growing economy. Both the U.S. and India are increasingly reliant upon
global oil and natural gas markets to satisfy their energy needs. Both
nations depend heavily upon domestic supplies of coal for electric
power generation and seek to increase their utilization of natural gas,
renewable energy and nuclear power, as well as pursue energy efficient
practices to ensure a balanced and sustainable energy economy that
helps preserve a clean environment.
In addition to our bilateral work, the United States and India
joined with Australia, China, Japan, and South Korea to launch the
Asia-Pacific Partnership on Clean Development and Climate in January.
This results-oriented, pro-growth initiative will help Partner
countries to focus on steps that will create new investment
opportunities, build local capacity, and remove barriers to the
introduction of clean, more efficient technologies. This partnership,
pursued in close collaboration with the private sector, will help each
member meet the challenges of improving energy security, reducing
pollution, and addressing the long-term challenge of climate change. We
look forward to India's active participation in this critical
initiative.
U.S.-INDIA ENERGY DIALOGUE
President Bush has called for a transformed Indo-U.S. relationship
premised upon a new strategic partnership under which energy security
and energy cooperation are key factors. This relationship was reflected
in the launch of the new U.S.-India Energy Dialogue on May 31, 2005
chaired by Secretary Bodman and Deputy Chairman of India's Planning
Commission Montek Singh Ahluwalia. It established five Working Groups
along with a Steering Committee to provide oversight and direction. The
goal of the Dialogue is to identify concrete actions that the two
countries can take to help India address its energy challenges. The
underlying strategy is to address these challenges through increased
trade and investment in cleaner domestic energy production, energy
efficiency and diversified imports of energy. Building upon the broad
range of existing cooperation, this effort will help mobilize secure,
clean, reliable, and affordable sources of energy.
The five Working Groups are: Oil and Gas, Coal, Power and Energy
Efficiency, New Technologies and Renewable Energy, and Civil Nuclear.
These Working Groups have launched activities designed to increase the
development of domestic resources, promote the deployment of clean
energy technologies and fuels, support reforms in the power sector,
enhance India's awareness of steps it needs to take to attract foreign
investment in the energy sector, and bolster India's energy security.
The Department of Energy co-chairs each of these Working Groups with
the appropriate Government of India counterparts and we convene experts
from a variety of U.S. Government agencies to participate in the
projects.
DEVELOPING INDIA'S DOMESTIC ENERGY RESOURCES
The Department of Energy, in partnership with several other U.S.
Government agencies, has been working with the Government of India on
several projects that will increase the use of India's domestic
resources.
More Efficient Utilization of Coal Resources
The Department of Energy is undertaking a number of steps to
support the most efficient development of coal resources. In April
2006, India became a partner in the FutureGen international partnership
which will work to create a zero-emissions coal-fired power plant that
will produce hydrogen and sequester carbon dioxide underground,
enabling greater use of coal in an environmentally sustainable way.
Successfully demonstrating and adopting this technology will allow
India to reduce the intensity of future greenhouse gas emissions from
the burning of their abundant coal resources. India became the first
country to join the United States on the FutureGen Government Steering
Committee and plans to participate in the FutureGen Industry Alliance.
The Government of India will contribute a total of $10 million to the
project to join the government steering committee, $2.2 million of
which has already been contributed.
The Coal Working Group has recently identified several high
priority projects that will be pursued by our two countries over the
next 2 years, including pursuing investment opportunities and
information exchanges in the areas of coal mining and processing, coal
mine safety, coal mine methane, and in situ coal gasification. The U.S.
Trade and Development Agency has provided a $360,000 for a feasibility
study grant for the Neyveli coal mine expansion project. Technical
exchanges and visits are underway between the U.S. and India to examine
the potential for pilot projects in India in the areas of underground
coal gasification and coal beneficiation/coal washeries.
Finally, a Memorandum of Understanding, or MOU, between the U.S.
Minerals Management Service and India's Oil Industry Safety Directorate
is expected to be signed in July 2006 in Washington, D.C. The MOU will
deal primarily with operational safety, inspection issues and accident
investigations of offshore oil and gas operations related to both
drilling and production.
In the area of coal-based power generation, a proposed strategic
partnership has been established between India's National Thermal Power
Corporation and the U.S. Department of Energy's National Energy
Technology Laboratory to collaborate on advanced research and
development of clean and efficient power generation. A workshop is
planned in India for September 2006 to discuss the results of a study
on the feasibility of Integrated Gas Combined Cycle power plants in
India.
Promoting Natural Gas Development
The promotion and development of clean coal technologies and carbon
sequestration efforts associated with power generation remain a focus
of current U.S. initiatives with India.
The Department of Energy has been working with India to help them
develop their domestic natural gas resources that can offer near-term
alternatives. India has discovered a significant reserve of natural gas
off its east coast but lacks an adequate infrastructure to move this
gas to major national markets. We recently held a joint conference on
natural gas that included representatives from government and the
private sector to review the potential for natural gas development and
to assist the Government of India in shaping the regulatory environment
necessary to attract the investment needed to move this gas to market.
Another important area for future domestic natural gas production
is from coal bed methane (CBM). India is believed to have significant
resources of CBM that could make important contributions to meeting
future energy needs. This is an opportunity for the U.S. private
sector, which has extensive experience in the area of CBM development,
to engage in this key energy source. The Ministry of Coal and Ministry
of Petroleum and Natural Gas with the U.S. Trade and Development Agency
(USTDA) and the U.S. Environmental Protection Agency are working
together to establish a CBM Clearinghouse Information Center, an
initiative under the Methane to Markets Partnership. This Center would
promote the development of CBM projects and CBM resources by collecting
data, conducting training, facilitating technology transfer, and
providing consulting services. USTDA plans to support a kickoff event
such as a workshop or conference showcasing U.S. technologies, and the
Environmental Protection Agency plans to provide financial assistance,
technical training, and other support to the organization. In addition
USTDA is providing a $506,000 grant to Reliance Industries Limited to
partially fund the cost of technical assistance to develop CBM
resources at Reliance's Sohagpur field.
The U.S. Department of Energy is also working with India on ongoing
research and development of the first hydrate drilling offshore India;
this research is expected to accelerate efforts to develop methane
production from hydrates in both countries, potentially providing a
significant increase in the quantity of domestic natural gas available
to the Indian market. The ocean research ship Joides Resolution is
currently drilling and coring hydrate-bearing sediments offshore India.
DOE has provided specialized equipment and research scientists to
detect and evaluate gas hydrates in cores. DOE and the Directorate
General for Hydrocarbons are in discussions to develop an MOU to
exchange information and analyses, conduct joint studies and projects,
and exchange scientific and technical personnel in order to increase
understanding of the geologic occurrence and the potential for methane
production from natural gas hydrates in both India and the United
States.
ACCELERATING ENERGY SECTOR REGULATORY REFORM
In order to meet India's growing demand for energy, significant new
investment is needed and the necessary legal and regulatory framework
must be in place to attract the needed capital. Recently, the two
governments conducted a workshop on natural gas regulation held at the
Ministry of Petroleum and Natural Gas. India has recently enacted a
Petroleum and Natural Gas Regulatory Board Act which seeks to promote
competition, open access and greater transparency in gas pipeline
transportation. The meeting addressed a number of regulatory issues and
processes that India will have to address to develop a regulatory
scheme that will be attractive to potential investors. The meeting was
attended by various U.S. Government officials (from the U.S. Department
of Energy, U.S. Department of Commerce, U.S. Trade and Development
Agency, and U.S. Embassy in India); and a senior official of New York
State's regulatory body for natural gas who is an expert on both U.S.
federal and state regulation. The Indian representatives at this
meeting included the Ministry of Petroleum and Natural Gas, and its
Petroleum Planning Analysis Cell, as well as the Gas Authority of India
(GAIL). The effort to establish an appropriate regulatory regime is
also being supported by a USTDA grant to the Government of India for a
limited feasibility study of a national pipeline grid and to explore
the possibility of providing further technical assistance in the area
of gas sector regulation.
DATA COLLECTION AND INFORMATION EXCHANGE
A key element of a fully functioning energy market is the
availability of timely and accurate information. To help support
India's efforts to develop much better data and information, the U.S.
Energy Information Administration and India's Ministry of Petroleum and
Natural Gas have initiated activities to help develop Indian data
systems. The initial work has focused on techniques for collecting
hydrocarbon data in India and the United States and methods to improve
data collection in India.
IMPROVING ENERGY EFFICIENCY
One of the most important areas of cooperation between the U.S.
Government and the Government of India is improving energy efficiency.
Energy efficiency investments could make a major contribution to
shaping the future demand for energy in India. Much of the recent
cooperation between DOE and India has focused on facilitating the
development and deployment of energy efficient technologies and
practices, including those directed at the industrial, residential, and
transportation sector. Building on much of the work of the U.S. Agency
for International Development mission in India, the Power and Energy
Efficiency working group has engaged in several projects designed to
decrease energy demand and improve power generation infrastructure in
India.
A U.S.-India Energy Efficiency Technology Cooperation Conference,
jointly organized by DOE and India's Ministry of Power, was held on May
2nd and 3rd, 2006 in New Delhi with technical support from USAID and
sponsorship by several Indian and U.S. industry groups. The focus of
the conference was on industrial and building energy efficiency. Among
the key recommendations that came from the event was the establishment
of five regional centers of excellence in energy efficiency in India as
well as a collaborative program of assistance in developing macro-
economic energy efficiency indicators. Following the conference, USAID
in technical partnership with the State Government of Karnataka and the
Ministry of Power, announced the establishment of a center of
excellence for efficient lighting technologies and products, to be
called the ``Lights Museum and Energy Centre'' in Bangalore.
Cooperation is also continuing on energy efficient buildings and on the
development of building codes, and a U.S. team conducted training in
India in May 2006.
Major strides have been made towards rural electrification as well.
USAID recently launched a public-private partnership with the General
Electric Company to increase access to clean and affordable energy
services in rural communities in India. The partnership will span a
two-year period and provide up to four communities in India with access
to clean energy. The Distribution Reform Upgrades and Management
program under USAID has also completed detailed project reports on four
model projects on efficient power distribution in the states of
Karnataka, Maharashtra, Gujarat and Delhi.
INCREASE USE OF ALTERNATIVE AND RENEWABLE ENERGY RESOURCES
U.S.-India energy cooperation has also focused on the fostering of
reliable sources of fuels, including development, deployment, and
commercialization of technologies for sustainable, renewable fuels.
This work includes creating public-private sector partnerships, as well
as the promotion of investment, trade, and technology cooperation in
the development of renewable resources such as solar, wind, hydro, and
biomass. The Minister of Non-Conventional Energy Sources recently met
with experts at DOE's National Renewable Energy Lab to discuss
potential areas of collaboration in hydrogen and biofuels research.
CIVIL NUCLEAR ENERGY COOPERATION
Nuclear energy will also be an important part of India's energy
future. To that end, the Department of Energy held a joint technical
workshop earlier this year in Mumbai to advance dialogue and
cooperation on technical issues associated with civilian nuclear energy
use. Initial preparations are underway for a second workshop to take
place this fall in the United States. However, any meaningful
collaboration in this area is contingent on modification of our legal
framework as proposed under the U.S.-India Civil Nuclear Cooperation
Initiative.
Looking longer term, the U.S. and its ITER partners, the European
Union, Russia, Japan, Republic of Korea and China, have invited India
to participate as a full partner in the international research project
which aims to demonstrate the feasibility of fusion power. U.S. support
was instrumental in ensuring this final agreement. The partnership
represents the first tangible and concrete step towards greater
cooperation between the U.S. and India in the area of civil nuclear
energy.
IMPROVED BUSINESS CLIMATE AND MOBILIZE PRIVATE INVESTMENT
Private sector investment in all parts of the energy supply chain
is critical to fostering energy security. We have made it a priority to
include the participation of U.S. business in aspects of all of the
working groups under the U.S.-India Energy Dialogue, which we have
encouraged on the Indian side as well, and we have consistently made an
effort to encourage the Government of India to take the necessary steps
to improve the investment climate and attract U.S. companies.
This past March, the Department of Energy, with the Department of
Commerce and USTDA, organized a CEO-roundtable event for the Ministry
of Petroleum and Natural Gas in Houston. This event was held in
conjunction with the roadshow for the sixth round of New Exploration
Licensing Program and third Coal Bed Methane bid round. The meeting was
designed to be a forum for U.S. companies to discuss their potential
investment and voice any concerns they may have about the oil and gas
sector in India.
In addition, the Department of Energy and the U.S.-India Business
Council jointly organized a meeting in January of this year with the
purpose of soliciting industry views on key commercial issues and
building private sector participation in the Energy Dialogue and to
promote increased U.S. trade and investment in India's energy sector.
The Coal Working group is also establishing a Coal Business Council
consisting of representatives from business, industry, academia and
other non-governmental organizations to serve as a resource to the
Working Group.
DEVELOPING CRISIS RESPONSE MECHANISMS
The Department of Energy has been working closely with India for
some time to help develop its emergency response capability and its
strategic stocks. India is developing a 5 million ton (approximately
36.5 million barrels) strategic crude oil reserve, with several
locations near Mangalore on the east coast being considered. The
Department of Energy has hosted study tours for Indian officials to
visit U.S. Strategic Petroleum Reserve sites and speak with U.S.
experts in these areas. Indian officials have also participated in
international oil stockpile conferences we have held in the U.S. We
have also invited Indian representatives to visit with the
International Energy Agency (IEA) to better understand how the IEA
members plan for and respond to a severe supply disruption.
As such, the Department of Energy has been actively improving
relations with senior Indian officials in energy policy-making. In
order to ensure a coordinated response in an emergency or crisis
situation, we must continue to develop close relations at the highest
levels of government. In recent months we have had several high level
meetings and exchanges between senior Department of Energy and Indian
government officials.
CONCLUSION
Mr. Chairman and members of the Committee let me conclude by
emphasizing that the economic growth that India is experiencing today
will lift many people out of poverty and it is in our mutual interest
to see that growth continue. Therefore, it is in our mutual interest to
help India meet its energy needs and become a more efficient user of
energy, both that which is available domestically and that which it
imports.
The U.S. is leading by example and making needed investments in
technologies that will fundamentally transform how we produce and
consume energy in the future. We have embarked on an ambitious agenda
through the President's Advanced Energy Initiative. We can share these
bold ideas and our experiences with India. We are convinced that
bilateral and multilateral energy cooperation maximizes everyone's
energy security. Thank you, Mr. Chairman, for the opportunity to
address the Committee on this important subject and I am happy to take
any questions you or the Members may have.
The Chairman. Thank you very much. We will have some
questions.
Mr. Simons.
STATEMENT OF PAUL SIMONS, DEPUTY ASSISTANT SECRETARY FOR
ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE
Mr. Simons. Thank you, Mr. Chairman. From the perspective
of the State Department, we very much appreciate the interest
of this committee in the U.S./India energy relationship. Let me
ask that my full statement be entered for the record and I'd
just like to focus on three brief points in my opening
statement.
The Chairman. It will be made a part of the record and we
thank you for doing that. Please proceed.
Mr. Simons. Thank you. Let me focus on three very brief
points this morning in my opening statement. First, Mr.
Chairman, as you pointed out, we have an evolving strategic
relationship with India and as the Secretary stated in her
speech on July 10, 2006, we do consider strengthening and
expanding and deepening this U.S./India relationship to be one
of the President's signature foreign policy achievements. India
is the world's largest democracy. It is a natural partner for
the United States. Its society is open and free and transparent
and stable and multi-ethnic and multi-religious. India's
democracy is characterized by individual freedom by Rule of Law
and by civilian control of the military, all aspects that we
very much support and want to reinforce. India will soon become
the world's most populous Nation as well as one of the five
largest economies of the world and of course, as a rising
global power, India can be a pillar of stability in a rapidly
changing Asia and a strategic partner for the United States as
we meet many of the broad challenges of the 21st century. We
have invested the necessary capital to build a global
partnership with India. This partnership is founded on
strategic success and strategic interests, common democratic
ideals and this partnership will advance the cause of peace and
freedom and the opportunity in the new century. So we
definitely agree, Mr. Chairman, with your support for this
evolving strategic partnership with India.
The second point is that from our perspective and again, as
Secretary Rice noted last week, a key to unlocking the full
promise of this partnership is the very Civil Nuclear
Cooperation Initiative that President Bush and Prime Minister
Singh put forth last July. By addressing India's unique
situation creatively and responsibly, we believe that our civil
and nuclear initiative will elevate our partnership to this new
strategic position that we all seek. The Secretary noted that
this is the first benefit of the Civil Nuclear Agreement. She
also noted four other improvements.
First, the initiative, as several of the Senators have
pointed out, will enhance energy security. Second, it will
benefit the environment. Third, it will create opportunities
for American jobs and finally, it will add to stability and
security of the world and in fact, be a net gain for the cause
of nonproliferation worldwide.
The third point I'd like to stress is the role of nuclear
energy in acting as a critical element in building a portfolio
of technologies that will bring the world onto a more
sustainable energy path. This concept of a portfolio of
technologies was laid out in a recent report issued by the IEA,
the International Energy Agency. For the first time, they
conducted a survey out to the year 2050, to try to take a look
at what a sustainable, global energy future would look like.
And their conclusions are very similar to the conclusions that
have been arrived at by the Bush administration and which
basically frame our overall approach to global energy security,
which is that we need work simultaneously in a number of key
areas, technology-related areas, to assure this sustainable
future and nuclear energy is clearly one of those. It is an
important component. Other areas are clean coal, including the
incorporation of carbon capture and steward's technology. A
third area is increased use of biofuels for road transport and
a fourth area is a strong focus on energy efficiency. I point
this out because, as Mr. Pumphrey pointed out, we have an
energy partnership now with India and I think it is important
to note that we are focusing on all four of these areas in our
energy partnership and they are very much consistent with the
analysis of the IEA and the administration's analysis, in terms
of what is necessary to lead towards a sustainable energy
future.
Thank you, Mr. Chairman and I look forward to your
questions.
[The prepared statement of Mr. Simons follows:]
Prepared Statement of Paul Simons, Deputy Assistant Secretary for
Economic and Business Affairs, Department of State
Mr. Chairman, distinguished Committee members, I am pleased to be
here today, with Department of Energy Deputy Assistant Secretary David
Pumphrey to discuss Indian energy issues. As the world's largest
democracy and an important emerging energy consumer, India surely
warrants the extra attention.
U.S.-INDIA PARTNERSHIP
During the visit of President Bush to New Delhi last March, he
proclaimed that ``India in the 21st century is a natural partner of the
United States.'' It is this natural partnership that has led to our
ongoing U.S. India Economic dialogue since 2000 and led to the
launching of the U.S.-India Energy dialogue prior to the Prime
Minister's visit in July 2005.
The U.S.-India economic relationship has become stronger. We are
working with India on a full agenda of economic issues through our
Embassy in New Delhi, the many cabinet-level visits to the sub-
continent, and the four policy forums of the Economic Dialogue--the
Trade Policy Forum, the Financial and Economic Forum, the Environment
Dialogue, and the Commercial Dialogue--as well as two cross-cutting
forums focused on biotechnology and information technology. We also
established a CEO Forum last year composed of 10 chief executives from
each country. Their input will help the United States and India make
progress on key issues that will enhance economic growth and job
creation and promote bilateral trade and investment by harnessing the
energy and expertise of private sector leaders.
India is increasingly becoming a major U.S. trading partner. From
just $16 billion in two-way trade in 1998, U.S.-India trade has grown
to $26 billion in 2005. U.S. exports (of goods), now at approximately
$8 billion, grew almost 30 percent last year and we expect continued
strong growth. In the past year, we have taken steps that are opening
many new opportunities for both India and the U.S. We negotiated a
comprehensive open skies agreement that has brought momentum to the
aviation sector. Since then Boeing has sold almost $15 billion in new
aircraft to India and two U.S. airlines have opened non-stop routes to
India. Airport privatization is underway and the air transport market
has grown by close to 40 percent in the past year.
ECONOMIC CHALLENGES
There are a number of mutually beneficial strategic reforms that
could contribute significantly to India's progress and encourage
American business to invest in India's future. Private enterprise and
free markets are key to long-term progress. Effective public-private
cooperation will address economic growth and development challenges far
more effectively than micro-management by governments. Business
activity and people-to-people engagement will be critical to the
transformation of U.S.-India relations. Nevertheless, governments play
an important role in setting the ground rules for much business
activity. Prime Minister Singh has put economic reform at the top of
India's agenda. We recognize that these reforms must be politically
viable to survive. There are a number of mutually beneficial strategic
reforms that could contribute significantly to India's progress and
encourage American business to invest in India's future.
The most prominent challenge is world-class infrastructure, which
India must provide as a platform for higher sustained growth to enable
India to achieve its vision of becoming a world power. Infrastructure
is now a national priority, but bringing together federal/state
authorities and public/private players is just beginning, and remains a
tall order. Infrastructure challenges are complicated by the fact that
India's federal/state fiscal deficits severely restrict necessary
finances for development. India must invigorate private sources to
finance long-term project development. This means that the regulatory
environment and attitudes towards private investment in infrastructure
at the federal and state level must change. Opening up sectors of the
economy where private investment is now restricted, such as retailing,
real estate, food processing, small-scale industry, and
telecommunications will improve rural connectivity and help generate
the growth and revenue streams necessary to provide positive returns to
infrastructure investment.
Investors need greater confidence to undertake infrastructure
investments, especially in the power sector, where our U.S.-India
Energy Dialogue promotes increased trade and investment, including in
civilian nuclear power. Transparent market structures and commercial
practices help to open markets. They enable foreign investors to better
understand and negotiate on a level playing field. These are essential
for realizing the energy security objectives of India as well as other
countries in the South Asian region. Market structures will be critical
for nations as they seek to increase access to global energy markets
and strive to meet the needs of their growing economies.
U.S.-INDIA CIVIL NUCLEAR COOPERATION INITIATIVE
One of the most important aspects of our strategic partnership with
India is, of course, the U.S.-India Civil Nuclear Cooperation
Initiative. As Secretary Rice said during her Senate hearing, this
initiative is an historic strategic achievement that will advance
energy security, further environmental protection, foster economic and
technological development in both of our countries, bolster
international security, and strengthen the global nonproliferation
regime.
The significance of this initiative should not be underestimated.
India has pledged, for the first time, to submit its entire civil
nuclear program to international inspection and to take on significant
new nonproliferation commitments in exchange for full civil nuclear
cooperation with the international community. With this initiative, the
world expects India to be a full partner in nonproliferation, and India
expects the world to help it meet its growing energy needs. We will
continue to work with India on a range of nonproliferation issues as it
implements its Joint Statement commitments and our strategic
partnership further unfolds.
Implementing this Initiative is a top priority for both the United
States and India. We continue to engage our Indian counterparts on a
daily basis as we both move forward. In doing so, we look to Congress
as a full partner in this endeavor. We are thankful for the support of
the Senate Foreign Relations Committee and the House International
Relations Committee in favorably reporting legislation on this
initiative by overwhelming bipartisan margins. Your support for this is
crucial and we look forward to continuing to work closely with you to
ensure that we grasp this important opportunity by passing the enabling
legislation by the full bodies of both houses.
ENERGY CHALLENGES
Another top priority for India is found in ensuring energy security
to maintain its strong economic growth. India's growing appetite for
energy has been fueled by urbanization, economic development,
population growth, expanding industrial production, and increased motor
vehicle ownership. Between 1980 and 2001, demand increased by 208
percent. By contrast, China, often thought of as the next big energy
consumer, saw a 130 percent increase over the same period according to
the U.S. EIA (Energy Information Administration). India ranked fifth in
the world in total energy consumption in 2004, only behind the United
States, China, Russia, and Japan. India's energy needs are expected to
double by 2025.
India has experienced very strong growth in energy demand, growth
that threatens to outstrip supply and lead to energy shortages around
the country. This is a serious challenge for the country, but we need
to keep in mind that this is the result of strong economic growth,
which is good news. We should also understand that India is not the
only country facing this challenge. For oil importing countries, the
rise in the cost of oil and refined products has added to trade
deficits and in some cases, created balance of payments problems. Many
developing countries, whether in Asia, Africa or Latin America, are
also facing challenges meeting growing electricity demands, resulting
in brownouts and blackouts.
ENERGY OPTIONS AVAILABLE
While these are enormous challenges, I believe that India has more
options than many other countries in meeting them. In order to meet
these challenges, it needs to pursue a policy of energy security
through diversification of supply and resources.
India relies on the following principal sources of energy:
Coal is the dominant energy source in India. Currently, over 50
percent of India's total energy, and 70 percent of India's electric
power generation, is derived from coal. India is the world's third
largest coal producer (after China and the United States), so domestic
supplies satisfy most of the country's coal demand. One major drawback
is that Indian coal is extremely energy inefficient. It produces about
twice as much ash and particulate matter as American coal. Coal
consumption is projected in the International Energy Outlook 2005 to
increase to 544 million short tons (Mmst) in 2010, up from 431 million
short tons (Mmst) in 2003.
Oil demand in India grew by over 6% annually during the past
decade, more than three times the world average, while at the same time
oil production rose barely at all. This has led to a widening of the
demand-supply gap and in an increased dependency on imports. The EIA
says that future oil consumption in India is expected to grow rapidly
from 2.2 million barrels per day in 2003 to 2.8 million barrels per day
in 2010. At current rates of economic growth this figure is likely to
rise to over 5 million barrels per day by the year 2030 according to
the IEA (International Energy Agency). Unless India obtains or develops
alternative sources of energy, in 15 years it will have to import close
to 90 percent of its petroleum needs. India is trying to limit its
dependence on oil imports by expanding domestic oil exploration and
production and by diversifying to other energy sources where possible.
Much will depend on India's ability to locate and use existing domestic
oil reserves.
Natural gas is an increasingly important fuel as India strives to
meet growing energy needs by diversifying its fuel supply, with the
recent focus on development of gas-fired electric power plants in
coastal areas. India's domestic natural gas is unlikely to keep up with
demand, and the country will have to import much of its natural gas,
either via pipeline or as liquefied natural gas (LNG). Potential for
gas use in India's growing economy is large and has so far mainly been
constrained by insufficient supplies. India became a gas importer in
February 2004 with the arrival of the first LNG tanker at the Dahej
terminal. India needs to almost triple its existing pipeline capacity
over the next five years to accommodate LNG imports and growing
domestic consumption. Construction of a ``National Gas Grid'' is one of
the major national priorities and plans for the construction of over
7,000 km of pipelines for a cost of about $4.5 billion by 2008 have
been announced. India also currently lacks a coherent natural gas
policy and regulatory framework. The price of natural gas also remains
regulated, reducing incentives for energy companies in the Indian
market.
Electricity: India's installed power generating capacity on 31
January 2005 was 115,545 MW reflecting a 44 percent increase in
capacity in the decade between 1993 and 2002. India currently relies on
coal for nearly 70% of its electricity generation and forecasts
indicate that coal will remain the backbone of the country's power
sector for many decades. To meet its mounting power demands, the Indian
government plans to double its capacity to produce electricity within
the next eight years. The government of India has set an ambitious
target of adding 100,000 MW of new capacity by 2012.
Nuclear energy currently only comprises approximately two percent
of India's total power generation. In comparison, the United States,
receives over 20 percent of its power from nuclear energy, Japan
derives 30 percent, and France roughly 78 percent. India's operating
civil nuclear power plants currently have approximately 3,310 megawatts
of installed capacity. If given the opportunity under the U.S.-India
civilian nuclear initiative, India plans to invest quickly in
additional civil nuclear reactors so that, by 2030, its capacity to
produce electricity from clean nuclear technology would reach 40,000
megawatts--a twelve-fold increase, according to India's Atomic Energy
Commission. Under this plan and further long-term objectives, the
Indian government has indicated that approximately 20 percent of
India's total power production would eventually be met by nuclear
technology, thus significantly decreasing the growth in its reliance on
fossil fuels.
India's power generation resources are unevenly distributed and far
away from major load centers. Two-thirds of India's population lacks
access to electricity, and those who are connected to the power grid
have to live with frequent power disruptions. State Electricity Boards
(SEBs) are responsible for the production and distribution of
electricity in all but 3 of India's 28 states. Old equipment,
subsidized electricity rates, and bloated payrolls mean that reform of
the Indian power sector is necessary to maximize economic growth.
Renewable Energy: India has a modest renewable-energy program, and
the plans for its expansion are ambitious. According to the
government's Policy Statement on Renewable Energy, India hopes to
obtain as much as 10 percent of its new power capacity from renewable
sources--wind, biomass, hydroelectric, and solar--by 2012. If the
country even hopes to approximate this goal, however, it will require
both external funding and technological expertise. US companies, which
have considerable expertise in the development of alternative and
renewable energy sources, could play a vital role in energizing the
Indian market.
EXTERNAL ENERGY POLICY
India has increased its energy diplomacy with states in the South
Asia region as well as states in Central Asia, Russia, the Middle East,
Latin America and Africa. The Indian state-owned Oil and Natural Gas
Company (ONGC) has invested $3.5 billion in overseas exploration since
2000. It has invested in gas fields in Vietnam, as well as energy
projects in Algeria, Kazakhstan, Indonesia, Venezuela, Libya and Syria.
Indian private sector firms have pursued projects in the Middle East
and in Africa.
Gas Pipelines involving Iran, Turkmenistan, Burma and Bangladesh
have also been considered in recent years. Each of these proposals has
serious geopolitical problems and the outlook for pipeline supplies
will depend on resolving key regional geopolitical rivalries and
constraints. The Iran-Pakistan-India pipeline has been in discussion
since the early 1990's. A meeting earlier this year reached no
consensus on gas price and project framework. The U.S. government
continues to make clear our concerns about the pipeline, based on long-
standing U.S. policy and law. We encourage India to look to non-Iranian
sources for their gas supplies. The proposed Burma-Bangladesh-India has
also seen little progress due to opposition in Bangladesh. Instead, a
longer and more costly route directly from Burma through India's
northeast is being considered. In 2006, India agreed to join the
Turkmenistan-Afghanistan-Pakistan (TAP) pipeline project.
U.S.-INDIA ENERGY COOPERATION ON INDIAN ENERGY CHALLENGES
Diversifying India's energy sector will help to alleviate the
competition among India, the United States, and other rapidly expanding
economies for scarce carbon-based energy resources, thereby lessening
pressure on global energy prices. At the same time, increased energy
efficiency can have significant environmental gains. An India that can
meet its energy needs efficiently and rationally ultimately strengthens
global and U.S. energy security.
Our cooperation with India in its energy sector goes back to the
1960's through a variety of initiatives. More recently, we have
continued this cooperation through the U.S.-India Energy Dialogue. The
U.S. and India are cooperating on energy initiatives through five
working groups: The Civil Nuclear Working Group, the Coal Working
Group, the Power and Energy Efficiency Working Group, the Oil and Gas
Working Group, and the New Technology and Renewable Energy Working
Group. These DOE-led groups have been actively meeting since the
formation of the U.S.-India Energy Dialogue in May 2005, and plan a
full range of activities in the near term.
National Gas Grid: These groups are allowing us to work with India
on key areas of concern in the energy sector. A key example is our
support of a national gas grid. Through the support of the USTDA (U.S.
Trade and Development Agency), the Indian Ministry of Petroleum and
Natural Gas, is exploring the feasibility of a national gas grid for
reaching all major energy consuming areas in India. Expanded access to,
and utilization of, natural gas is expected to facilitate economic
growth and maintain sufficient energy supplies to avoid potential
shortages as India's energy demand grows. This represents an example of
the U.S.-Indian private and public sector cooperative efforts underway
as a part of the U.S.-India Energy Dialogue.
Power Sector: There are many other challenges that both our
countries face in the energy sector. As the IEA noted in a report
several years ago, reform of India's electricity supply sector is
important in order to maintain its level of economic growth. The
demand-supply gap will grow unless more market mechanisms are
introduced while taking into account goals of electricity access,
environmental protection and economic growth. State Electricity Boards
are heavily dependent on government subsidies, which have reached the
point where their impact on state and national fiscal operations could
threaten India's overarching development objectives. Power utilities
lose almost $7 billion per year, and this figure is growing at 15 to 20
percent each year.
The U.S. government has worked closely with the Indian government
to promote best practices in the power sector, expand electrification
to rural areas, and to enhance billing and tariff collection systems
through USAID's new Distribution Reform, Upgrades, and Management (or
``DRUM'') activity. In April of this year, USAID launched a public
private partnership with General Electric Company in association with
Winrock International India to bring energy to rural areas in India
that currently lack access to electricity by establishing several pilot
projects. Such partnerships with the private sector help to introduce
new technologies and management expertise and provide access to
financing.
Electricity Imports: In addition to reforming the power sector,
another option is exporting electricity from Central Asia to South
Asia. The World Bank has done some work in this area, and the U.S.
hosted a conference in Istanbul in June to bring together officials
from the region to look at this. Transporting power across borders
offers a number of advantages that simply cannot be achieved otherwise:
In addition to providing supplies to South Asia, it can provide new
markets for countries like Tajikistan and Kyrgyzstan. The U.S. believes
that regional cooperation and integration are key elements of long-term
energy security in this region. We support regional integration because
we are confident that it will benefit the economy and security of all
South Asian countries. It will create stronger partners and bring
member countries closer together. Through USAID's South Asia Regional
Initiative for Energy (SARI/Energy), we have focused on regional
approaches to meet South Asia's energy security needs through increased
trade, investment and access to clean energy. Energy linkages between
South Asia and Central Asia can strengthen the energy security of both
regions.
Clean Coal: India's dependence on its domestically-produced coal
raises many other environmental concerns. Power plants are also the
main source of Indian emissions of carbon dioxide, the most important
greenhouse gas. These high emissions, along with emissions from other
sources, have made all four of India's largest cities--New Delhi,
Mumbai, Chennai and Kolkata--among the most polluted in the world
leading to serious health consequences for inhabitants. The Coal
Working Group has been meeting since July 2005 with several key goals:
increased collaboration on clean fossil energy technologies; creating
an attractive investment climate for domestic and foreign investment in
the energy sector; and developing an efficient and environmentally
sound energy infrastructure.
India's agreement to take part in the FutureGen Project is
important since the project will create the technology to produce a
near-zero emissions coal-fired power plant that will produce hydrogen
and sequester carbon dioxide underground, enabling greater use of coal
in an environmentally sustainable way when the technology is eventually
used in other coal-fired power plants. We strongly support the IEA's
Clean Coal Center and their work with India. In May 2006, the IEA and
the World Coal Institute co-hosted a workshop, ``Coal for Sustainable
Energy: Clean Development and Climate Change'' in New Delhi, India. To
the extent that India expands its use of cleaner energy technology, the
result will be reduced air pollution locally, regionally, and globally.
We have also encouraged by the IEA's efforts to work with India on
developing a strategic petroleum reserve.
During Indian Prime Minister Singh's visit last year, President
Bush stated that ``the United States and India have built a
relationship of great potential as we face this century's challenges.''
Among those challenges is that of ensuring energy security. The U.S.
and India are working together to address this crucial challenge.
Thank you for the opportunity to testify today.
The Chairman. Thank you very much.
Senator Bingaman, would you like to proceed first?
Senator Bingaman. Thank you very much, Mr. Chairman and let
me focus on the set of issues that I think are probably the
most controversial in connection with this Indian/American
proposal, and do so by reference to an article that was in the
Washington Post in March of this year, where it said--it was
quoting our former colleague, Senator Sam Nunn, as saying, ``If
I were still in Congress, I would be skeptical and looking at
conditions that could be attached,'' in connection with this
agreement. It says he was briefed by the State Department, said
that he is concerned that it could lead to the spread of
weapons-grade nuclear material, unleash a regional arms race
with China and Pakistan, and make it more difficult for the
United States to win support for sanctions against nuclear
renegades, such as Iran and North Korea. Then it says that Nunn
is a board member of General Electric. It also states in this
article, the Bush administration originally sought a plan that
would have allowed India to continue producing material for 6-
10 weapons each year but the new plan would allow India enough
fissile material for as many as 50 weapons a year. Then it goes
on to quote Senator Nunn as saying, ``The current agreement
certainly does not curb in any way the proliferation of
weapons-grade nuclear materials.'' I'd ask Mr. Simons, as the
spokesman for the State Department, what your response is to
Senator Nunn's concerns.
Mr. Simons. Thank you, Senator, for that question. I think
the important point here and it has been pointed out by
Secretary Rice as well as a number of other administration
officials in their various testimonies, is that our initiative
essentially brings India into the tent. It makes India a
partner for the first time in more than 30 years, in global
nonproliferation. So this is the point the administration has
been stressing in support of this initiative: basically, it
gives us an opportunity to work with the Indians to bring them
in as a player, as a contributor to future solutions as opposed
to as an outlier and India really has been an outlier for the
past 30 years. I think that the chairman made a good point in
his. I believe he wrote a response back to the Wall Street
Journal addressing some of these points and we would endorse
some of the same arguments that the chairman made in his
article back, which is that we do focus now on transparency for
the first time. We have a window into India's nuclear problem
for the first time, into its program. And we do think that by
creating this type of partnership, we are more likely to see
successful results more broadly in terms of our global
nonproliferation policy.
Senator Bingaman. Let me ask about one other aspect of
Senator Nunn's criticism. He says that among the conditions he
would attach to the legislation is the requirement that it
could not take effect until the President certifies that India
pledges not to produce nuclear material such as plutonium and
highly enriched uranium for weapons. The current agreement,
certainly does not curb in any way the proliferation of
weapons-grade nuclear material,'' Nunn says. And then he goes
on to say, ``India was a lot better negotiator than we were,''
Nunn asserted, while the administration has said it has no
intention of aiding India's nuclear weapons program, ``the
reality could be the opposite,'' he said. ``The administration
has a high burden to explain this.'' How do you explain the
conclusion that Senator Nunn has, that this agreement will, in
fact, aid India's nuclear weapons program and allow them to
produce substantially more weapons than they otherwise would be
able to?
Mr. Simons. Senator, I think part of this question I'll
need to consult with my nonproliferation colleagues and give
you a more detailed answer for the record but as a general
point, I think it is important to stress that by separating its
civilian and its military nuclear components and by providing
access, full access by the IEA, to its civilian components, we
really do bring India into the tent. We engage them as a
partner and we've already started to see some benefits from
that in terms of India working with us and working with the
IAEA more closely with respect to the Iranian nuclear question.
I think it would be useful to question whether that type of
cooperation would have been possible in the absence of the
U.S./India Nuclear Agreement.
Senator Bingaman. My time has expired, Mr. Chairman. Thank
you.
The Chairman. Thank you for the questions, Senator
Bingaman. I might add that I did write an in-depth letter in
response. It is not here. I can give it to you for your perusal
but it even goes one step further, having a recall that I wrote
that letter. Since then, the United States has put on the table
a fissile material cut-off treaty to curb the production of
fissile material and it is interesting that a member of that
team, working on that is India, which I'm not sure we would
have had working for that goal, had India not been party to
this agreement with us, what we have. I'd like to ask, to move
ahead on some other issues. On April 4, the Climate Conference
sponsored by the Energy and Natural Resources Committee,
panelists noted that action by major developing countries like
China and India is critical to address climate change. What
role will energy cooperation agreements play in providing
options to expand greenhouse gas emission-free energy, Mr.
Pumphrey?
Mr. Pumphrey. Thank you, Mr. Chairman. The activities that
we have undertaken in the energy dialogue are very much focused
on moving towards cleaner technologies, energy efficiency and
renewable energy. We believe that all of these efforts will
support having India move to a less greenhouse gas intensive
framework and a less greenhouse intensive future. Currently,
they are very dependent on coal and coal that is burned in
older powerplants, so we are working with them on newer coal-
burning technologies as well as looking at the introduction of
natural gas in areas that it can then take the place of coal,
as well as moving ahead on renewables. I should mention that
India is also an active member of the Asian/Pacific
Partnership, which is a new, multi-lateral group that is
looking at innovative ways to move new technologies into the
marketplace to help address our concerns about greenhouse gas
emissions.
The Chairman. I have a number of questions but I'm going to
hold here now, because there are a number of Senators. So let
me proceed and see what we can do with working our way through
them getting questions out.
Senators Bunning, Thomas, Craig and Salazar.
Senator Bunning. Thank you, Mr. Chairman. Either can answer
this. It is for both of you. What is, with the strong alliance
and strong reliance on foreign oil, what measures has India
pursued to diversity its energy policy, what initiatives are
being taken in India within its own five energy bureaus, to
ensure a comprehensive energy policy is implemented? Either or.
Mr. Pumphrey. Senator, I'll be glad to start and then----
The Chairman. But please, we have a devil of a time hearing
you.
Mr. Pumphrey. I'm sorry. Okay. Let me get up closer then.
India has been making efforts in many areas to reduce this
dependence on oil. One of the most significant has been the
introduction of compressed natural gas into its vehicle fleet
in New Delhi. They have one of the highest penetration rates
for gas--and this is directly backing out gasoline and diesel
fuel. They are also looking at ways, as I mentioned in my
opening statement, to bring even greater volumes of natural gas
in the marketplace and make those available. We have begun
discussions with them on the possibility of increased use of
biofuels for the transport sector, so there are a number of
areas in which they are beginning to operate. The other area
that I mentioned that we think is very important is that
recognizing their reliance on imported oil, they are taking
steps to increase their stockpiles, to start stockpiling oil in
case of emergencies, to guard against the disruptions that may
take place. So they are looking at it from both ends in terms
of diversifying away from the role of oil as well as guarding
against their vulnerability to----
Senator Bunning. Is it a comprehensive plan? In other
words, are they looking to taking coal and making liquid fuels
out of it and other synthetic-type energy products?
Mr. Pumphrey. There have been discussions on looking at
ways to incorporate coal liquefaction technologies. But I think
you raise a very important point that within India,
traditionally there have been the five different groups that
have had responsibilities in the energy sector. Our
understanding is that the Planning Commission is working very
hard to try to bring together those elements to come up with a
comprehensive crosscutting energy policy.
Senator Bunning. In other words, they do not have one
presently?
Mr. Pumphrey. They have come up with an initial plan but
again, it is a problem that I think we've wrestled with
ourselves in terms of coming up with a comprehensive plan.
Senator Bunning. In your testimonies, both of you said that
the government of India is shaping the regulatory environment
necessary to attract international investments. What
specifically is being done by the Indian Congress and Prime
Minister at this time?
Mr. Pumphrey. In one particular area, they are looking at
coming up with a framework for investment in a natural gas
pipeline infrastructure. They have recently passed a new
pipeline act that allows for the creation of a regulatory body
to develop the Rules for Investment so that they can bring in
foreign investment in that sector. So that is one of the very
real time areas that we are having conversations with them
about and lending our experience.
Senator Bunning. Let me ask the last question I will on
this round. Could you describe the benefits of India's
participation in the FutureGen alliance?
The Chairman. Well, that's a good one.
Mr. Pumphrey. We see the FutureGen alliance as a very
important step forward in demonstrating technologies for
utilizing coal. We believe that their presence not only in
helping to fund the activities through their participation in
the Steering Committee but also bringing some of their
expertise to the table, will bring an important dimension of a
major coal-burning country to the table in the design and
understanding of the operation of this and hopefully the
transfer of these approaches to carbon sequestration back to
their own economy.
Senator Bunning. In other words, you think that their
scientists are online and up to speed in this technology?
Mr. Pumphrey. I would actually prefer to consult with my
experts in fossil energy on that in more detail but----
Senator Bunning. Would you give us a written response then?
Mr. Pumphrey. I would certainly be glad to.
[The information follows:]
India's scientific and technology communities are very
interested in the FutureGen technology and science associated
with sequestration. They also recognize the potential of this
technology for their country in terms of using their coal
resources to meet their growing energy needs while mitigating
the impacts on climate change. However, in general, their
scientists and engineers do not have extensive experience with
the primary technology upon which FutureGen is based, namely,
advanced coal gasification to produce power and hydrogen. By
its involvement in FutureGen, India can gain the engineering
and technical experience on FutureGen technology that they can
extrapolate and apply to their own needs. Participation by
India and other countries is important to gaining an
understanding and acceptance of the FutureGen ``near-zero
atmospheric emission'' coal concept, and in so doing, make this
technology broadly available to address environmental and
climate change issues associated with the use of coal, a
strategic and globally diverse energy resource.
Senator Bunning. Thank you very much. Thank you, Mr.
Chairman.
The Chairman. Thank you, Senator. Senator, I think your
questions are right on, exactly what we need to know about. It
doesn't do us any good to just keep hearing about these great
potential relationships. It is what is actually going to happen
to exchange with the United States so that we can both improve.
We from them, them from us. That's the whole purpose. We ought
to hear more about that from the next panel, I hope. Thank you
for your questions. Let's see, the next one we have is Senator
Thomas. It is your turn, please.
Senator Thomas. Thank you, Sir. I think it is very
important that we are working with India in terms of the
economic growth and the relationship there. Why is nuclear
power--or is it--the highest priority in terms of energy for
India? Either of you.
Mr. Simons. We think nuclear power is going to be one very
important component of India's energy future. All the other
major Asian-emerging countries have large nuclear programs,
which are growing. They have all decided--China, Korea, Japan--
that nuclear must be an important component of their energy
futures but those other countries are much farther ahead than
India in terms of making nuclear a big part of their energy
equation. Japan has about 30 percent of its electricity in
nuclear, Korea about 35 percent. Now of course, these countries
are more advanced, also, economically. But India's isolation
also--and its inability to cooperate on civilian nuclear
issues, has also held back and retarded the growth of nuclear
in India. So when the Indian government puts forward a forecast
and says that in 20 years, they'd like to get up to about 20
percent of their total electricity production in nuclear, I
think that demonstrates that nuclear is going to be a very
important component----
Senator Thomas. Let me interrupt.
Mr. Simons. It's not the only answer.
Senator Thomas. You said they haven't made much progress in
terms of nuclear negotiations. They haven't signed a nuclear
treaty, a nonproliferation treaty.
Mr. Simons. Essentially they have been cut off from
civilian nuclear cooperation from a lot of countries because
they've been outside of the mainstream. So, I bring them into
the mainstream----
Senator Thomas. But they still are not interested in doing
that now? I mean, isn't that what the nuclear nonproliferation
is about, so that you can go ahead with energy development
without being concerned about the defense aspect of it?
Mr. Simons. That's right, but India, of course, chose a
different path 30 years ago and so they isolated themselves
from what would perhaps have been a more rapid development of
their civilian nuclear side. Now, with this agreement with the
United States, assuming that it goes through, we will have the
opportunity, to some extent, to jumpstart that nuclear
cooperation and to make sure that nuclear plays a similar,
important part in India's energy future, as it does in say, the
energy future of the United States, France, Japan, and the
other Asian countries that have decided that they need to have
a large nuclear program.
Senator Thomas. Yes, I understand that. I guess sometimes I
wonder why we would have a different arrangement on
nonproliferation with them than we do with anyone else. There
is nothing wrong with suggesting that if you can go into the
nuclear, that you ought to understand that it is for energy and
not for other purposes. What is India's level of consumption of
energy, in terms of other countries and so on, Mr. Pumphrey?
Mr. Pumphrey. The most recent review that we have done
through the Energy Information Administration, they rank about
fifth in the world in terms of energy consumption. Last year, I
believe they were sixth, so they are moving sort of upwards
relative to other major countries. They have passed Germany in
this past year, in terms of their energy consumption.
Senator Thomas. You mentioned that they are working on
FutureGen and other coals and that they have a fairly high
supply of coal, is that right?
Mr. Pumphrey. That's correct. They have very large supplies
of coal.
Senator Thomas. But they are working at ways of conversion
of coal as well?
Mr. Pumphrey. Into other fuels in terms of--yes.
Senator Thomas. Gas?
Mr. Pumphrey. Yes, or liquids, right.
Senator Thomas. Diesel or whatever?
Mr. Pumphrey. There is great interest in doing that.
Perhaps there has been interest expressed in technologies such
as in-situ gasification of coal as well.
Senator Thomas. Okay. Are we working with them then, on
cooperating with other energy development as well as nuclear?
Or are we just focusing on nuclear?
Mr. Pumphrey. We have approached the dialogue in a very
broad basis. We feel that as Mr. Simons had mentioned, that you
need a portfolio approach to how you solve your long term
energy problems. Diversity is a key for energy security
solutions. So while the public debate has been on nuclear,
we've pushed very hard in areas of coal development, gas
development.
Senator Thomas. Why is there public debate on nuclear?
Mr. Pumphrey. The issues concerning the new arrangements
under the agreement.
Senator Thomas. Yes, I understand. That is part of the
problem. Thank you.
The Chairman. Thank you, Senator.
Senator Craig.
Senator Craig. Thank you very much, Mr. Chairman. I think
bringing India into the fold is extremely important. The
Senator from Montana questioned appropriately why they are now
just coming, because they did choose a different path early on
and then I believe during the Clinton years, as a result of the
explosion of some nuclear devices, we put them out on a shelf
and really kept them there for a time. This initiative in
bringing them onboard is extremely important in the long-term.
I think all of us are concerned about the growth of nuclear
communities and what it means and how waste or the by-products
are controlled and managed. Mr. Simons, do you see a risk that
the U.S./India civil nuclear cooperation deal could lead to a
nuclear arms race in South Asia?
Mr. Simons. We support this deal because we do believe it
will actually help to counter global proliferation. We believe
it will have a positive, a net positive impact in terms of our
global nonproliferation strategy. So the answer is no.
Senator Craig. Could the absence of it result in that?
Mr. Simons. Well, once again, we do see this as a very,
very important opportunity to establish a different type of
strategic relationship with India, one that will help bring
India into the fold.
Senator Craig. Mr. Chairman, I'm certainly no Indian expert
but I did have the privilege of going there a spring ago on a
different issue. It was just prior to our Secretary of State
being there. Efforts were well underway toward bringing us to
where we are today and I think for any of us who failed to
recognize what India is and what India could be and our
relationships with them miss a great opportunity, not only for
ourselves but for the rest of the world as it relates to their
potential. Obviously, they are technological abilities, our
involvement with them in high-tech, what they hope to
accomplish for their own nation, many of us have been concerned
about moving ahead in climate change without bringing India and
China along and why we rejected Kyoto because of that, in part
not in total and why they rejected it, obviously, was that they
needed to grow and they needed to feed their people and succeed
and I think this relationship is extremely important from what
I understand of it.
My last question, Mr. Pumphrey. A strategic partnership has
been proposed between DOE's National Energy Technological
Laboratory and India's National Funnel Power Corporation as
well as discussions about potential collaboration between DOE's
National Renewable Energy Laboratory and India's Minister of
Non-conventional Energy Sources and with the India Oil
Corporation. I believe collaborative efforts between these
laboratories are extremely important. How broad do you see this
for our total laboratory complex and I'll let my bias show and
for our lead nuclear lab in Idaho?
[Laughter.]
Mr. Pumphrey. Thank you, Senator. There has been long-
standing cooperation between those two laboratories leading up
to the time of this new and enhanced dialogue. The NETL has
been working with NTPC on coal combustion issues. We are now
looking at and discussing the possibility of developing what
you described as a new strategic relationship. Those
discussions are ongoing so I don't really have the knowledge to
be able to tell you exactly how those will be defined and where
they will be but certainly, I'd be glad to get back to you.
With the National Renewable Energy Laboratory, again they've
been working closely with NMES in some areas and they are just
initiating new discussions of areas of collaboration. In terms
of looking at the rest of the laboratory complex, we are still
evaluating the types of science cooperation that we can have in
place. There is a new science and technology agreement in
place, which the lack of that agreement used to be a hurdle to
these collaborative efforts and so, our Office of Science is
beginning the effort to look at areas for future collaboration.
Senator Craig. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator. I hope your
relationship between your lab and them grows and flourishes and
multiplies, Senator.
Senator Craig. Mr. Chairman, the great hurdle we have and I
think we've accomplished in part through EPAct but we've got to
work with DOE, and their ability to outreach and bring in and
incorporate within their formal agreements and their financial
arrangements, outside interests. Because the work we do today
at our laboratories, while it is national, it is international
in scope but we've held it awfully close to chest for so long,
thinking the Federal Government could finance it all. Now we
have a great opportunity to both private and publicly finance
some of these new technologies but we've got to figure out how
we design those relationships and we are well behind in that
design instead of ahead of it. That's my concern.
The Chairman. Well, whatever questions I had of the two of
you, I'm going to submit them in writing. We'll yield now to
the two on this side who came late but they want to ask
questions. But I just want to say that what I'm least impressed
with about today is the lack of a significant discussion about
the interplay between American companies and American
institutions and American research and India with reference to
diversification of their energy sources and I just would talk
particularly about nuclear. We're clearly, when you look at
what they've got, it is a very, very ancient and old-fashioned
approach to nuclear power, saying that with no sense of
pejorative-ness attached, if you just look at it. It is
obviously--it's not going to stay there. It's obvious it is not
going to stay there and it would seem to me that you all and
America and maybe us, have to get a little bit more anxious
about making sure we enter this play, this foray, to get some
development of technology and the development of business
relationships.
India is going to go and prosper and as you look at the
make-up, I'm hopeful that their projections are way off because
their projections for nuclear in the future are way too small
because they are predicated upon an India that starts with a
nuclear that is behind schedule. If you start with that as your
baseline and keep off of it, 25 years from now, you're still--
unless somebody there has built with a lot of hope and said,
``let's change what we're doing,'' and I think that's our role
as Americans and maybe even this committee. Maybe we should do
what Senator Lugar did and maybe we should explore the idea of
doing something specifically as a Nation on the exchange of
technology and business in the fields of energy with them
unless that is happening and I think I will ask--if Senator
Bingaman wants to join me, I'll ask him to ask Secretary Bodman
what he thinks about what I'm just saying and is there
something that he thinks we ought to be doing that maybe we're
not doing. With that, I'm going to now yield to Senator Salazar
and Senator Dorgan, in that order.
Senator Salazar.
Senator Salazar. Thank you very much, Mr. Chairman and
thank you Senator Bingaman, for holding this hearing. Two quick
questions. The first is on coal gasification. When I look at
what is happening in the United States, China and India and the
amount of coal that we have in those three countries and what
we're doing to burn coal for our energy needs, can you, Mr.
Pumphrey, comment on what it is that India is doing relative to
exploring technologies on coal gasification? We've described in
this committee that coal for us is like oil is to Saudi Arabia.
What is it that India is doing on that front?
The Chairman. Very good.
Mr. Pumphrey. Senator, I think at this point I should
really get back to you on that question. I need to go back and
consult with the specialists we have rather than giving you
information that I'm not sure of myself. But I'd be certainly
glad to provide that for you.
[The information follows:]
COAL GASIFICATION
There are several integrated gasification combined cycle (IGCC)
activities planned or being discussed with India including:
(1) The U.S. Agency for International Development (USAID) has
contracted with Nexant (San Francisco, CA), under its Greenhouse Gas
Pollution Prevention (GEP) Project to conduct a $2-million feasibility
study on IGCC power generation technology. India is interested in this
clean coal technology to increase generation efficiency, protect the
environment, and reduce CO<INF>2</INF> emissions. The Department of
Energy's National Energy Technology Laboratory is providing technical
assistance to USAID in managing the project.
This study is being carried out in three phases. In Phase A, IGCC
technologies were surveyed and compared with conventional and advanced
pulverized coal (i.e., subcritical and supercritical PC), circulating
fluidized bed combustion (CFBC), and pressurized fluidized bed
combustion (PFBC) technologies to confirm the economics, efficiency
advantages, environmental benefits, and other salient features of IGCC
technology under Indian conditions, particularly in using high-ash
Indian coals. In Phase B, the three most promising gasifiers were
selected for pilot plant coal testing. Based on the tests results, a
further screening analysis of the three gasifiers was conducted. A
system optimization was also conducted to select the best process
configuration to provide the basis for a detailed design and cost
estimate of a 100-MWe IGCC demonstration plant in Phase C. Project
financing sources and a roadmap to commercialize the IGCC technology in
India will also be explored in Phase C. Nexant plans to complete the
Phase C study in September 2006. An IGCC workshop is being planned in
New Delhi on September 19, 2006, with the National Thermal Power
Corporation (NTPC), the Ministry of Power, and other interested
organizations to disseminate the study results and to discuss
implementation of the planned 100-MW demonstration plant.
(2) India has joined the FutureGen international partnership to
create a near-zero atmospheric emissions coal-fired power plant that
will produce hydrogen and sequester carbon dioxide below ground.
(3) Under the Asia Pacific Partnership (APP), we are discussing the
possibility of workshops and site visits on IGCC with India (and China)
under both the Power Generation & Transmission and the Cleaner Fossil
Energy Task Forces. The first proposed event is during meetings on zero
emissions coal technologies, (such as IGCC and carbon capture &
storage), during Japan's Clean Coal Days in early September. This would
be the first official activity under the Cleaner Fossil Energy Task
Force. India will be invited to participate.
(4) Underground Coal Gasification (UCG) has several important
economic and environmental benefits relevant to India's energy goals.
This area of energy exploitation would require solutions to numerous
technical issues. At least two technical issues first have to be
resolved: research is needed to ensure that proper site selection
provides both the desired conditions for suitable UCG processes and
that usable groundwater resources are not adversely impacted. Several
activities to discuss exploitation of UCG are planned under the U.S.-
India Energy Dialogue Coal Working Group and the APP Coal Mining Task
Force, including plans for a UCG Workshop in India during November that
will examine these technical issues. The U.S. and India will co-sponsor
this workshop with the other APP countries invited to participate.
Senator Salazar. I think it would be important because I
think as we looked at both India and China, we are making steps
here in the broad portfolio of energy development that this
committee has been pushing and certainly coal gasification is
part of that. It would be very interesting to see what it is
that India is doing, so I would ask you to do that. May I ask
you the same question with respect to biofuels? You are part of
the International Energy Cooperation. Many of us on this
committee have been pushing very hard for a whole new chapter
of renewables, based on biofuels across America. Can you
comment, Mr. Pumphrey or Mr. Simons, on what you know is
happening in biofuels in India?
Mr. Pumphrey. On the question of biofuels, we are just
beginning to engage in that discussion with the Indians about
their research. We know that the Indian Oil Corporation has
research activities that are underway and we have scheduled
this week a meeting of our oil and gas Working Group, one of
the five Working Groups, which has a more in-depth discussion
of biofuels as one of the topics and to look at collaboration
on biofuels for the future. So again, on the specifics, I would
have to respond to you later, perhaps after we've gotten a
better understanding. But we see it as a very important area to
work collaboratively with India on how to move biofuels into
the marketplace.
[The following was received for the record:]
BIOFUELS
The Government of India (GOI) is expected to announce a
comprehensive policy for use of 20 percent bio-diesel for the entire
country by early next year. The Planning Commission has already
submitted its report to the Ministry of Rural Development, which will
now work on presenting the proposal before the cabinet. According to a
GOI official, ``the use of bio-diesel will result in a savings of $4.6
billion annually on imports of crude oil. The GOI is planning to
produce 13 million tons of alternative fuel every year. This will
require 11 million hectares of land and create 11 million jobs.''
During a July 2006 visit to DOE's National Renewable Energy Laboratory
(NREL), a delegation from India discussed several potential areas of
cooperation in bioenergy. The Indian Oil Corporation (IOC) is seeking
collaboration on the following proposed topics:
<bullet> Biorefinery studies to ethanol and biodiesel
<bullet> Life cycle assessments of biofuels
<bullet> Biochemical processing of petroleum for nitrogen, sulfur and
metal removal as well as biocracking, and bio de-waxing.
In addition, various DOE and NREL officials visited the IOC
Research Center outside New Delhi in the first half of 2006 at which
biodiesel was discussed. The Ministry of Petroleum and Natural Gas
(MOPNG) has a policy to purchase Biodiesel, which is based on an Indian
adaptation of the ASTM D6751 standard for 100% biodiesel to be used as
a blending agent up to 20% in high speed diesel (HSD). There is an
additional standard for B-5 HSD. Other research activities have been on
the properties of ethanol blends in Indian light duty vehicles.
The IOC's R&D Center has planned programs to examine the value
chain of biodiesel from plantation, production, and utilization to
environmental assessment. It has been using a laboratory scale plant of
100 kg/day capacity for trans-esterification, with design of larger
capacity plants in the offing. These large scale plants are useful for
centralized production of biodiesel. Production of biodiesel in smaller
plants (e.g., 5 to 20 kg/day) may also be started at decentralized
level in villages.
A bio-diesel blend from IOC is being used in buses in Mumbai as
well as in Rewari, and in Haryana, on a trial basis. Twenty buses are
being run on 5% biodiesel--diesel blends and their smoke, fuel
efficiency and drivability is being compared with another set of twenty
reference buses. Encouraged by these results, the Haryana Roadways has
requested IOC to extend trials on all the 180 buses of Gurgaon depot.
The IOC has also entered into a MOU with Indian Railways to study the
complete value chain of biodiesel. In line with that, the IOC has
planted about fifty thousand saplings of Jatropha on 62 hectares of
railway land at Surendranagar in Gujarat. This project is the only one
of its kind in India, where every aspect of Jatropha Biodiesel would be
studied.
Senator Salazar. Mr. Simons, do you have anything to add to
either one of those two questions?
Mr. Simons. I have nothing to add, Senator.
Senator Salazar. I would just say this, Mr. Chairman. I
think that given the global competitiveness that we're dealing
with, with both China and with India, the billion people in
India, the billion-three in China, that having a good
understanding of what is happening in those two countries
relative to energy development would something that would be
very useful for all us. So I would hope that is information
that can be developed, both by DOE and the International
Working Group that you're on, Mr. Pumphrey as well you, Mr.
Simons. Thank you very much, Mr. Chairman.
The Chairman. Thank you.
Senator Dorgan.
Senator Dorgan. Mr. Chairman, I came late and have to leave
early because of other obligations so I will not take the
committee's time. I do want to say----
The Chairman. You're welcome.
Senator Dorgan. No, I do just want to say that while I
think our relationship with India is very, very important, I
have great misgivings about anything that I believe will
undermine the issues of nonproliferation, stopping the spread
of nuclear weapons is, I believe, one of the most important
things that is ahead of us and I think a good many people have
raised significant questions about this agreement relative to
our ability to stop the spread of nuclear weapons. So I thank
you for holding this hearing, Mr. Chairman. I regret I can't be
here for all of it.
The Chairman. Thank you. With that, gentlemen, you have
heard that we are interested in things you don't know enough
about, to put it mildly and that's no aspersions, that's just
the truth. So if you can dig some of it up and respond so
Senator Salazar will get it, even if you didn't appear, if the
person didn't appear, you can get it from your Department and
submit it so we'll know. I think that will be helpful. With
that, we thank you for giving us your morning and you will get
home in time for lunch. Thank you very much.
The next panel consists of three different people. They
might shed a light on some of the subjects, Senator Salazar,
that you raised and others. One of them is Dr. David Victor,
director of the program of energy and sustainable development,
Stanford University and the other is Mr. Michael Gadbaw, vice
president of international law and policy, General Electric
Company, Washington, D.C. and the other is Mr. Daniel Poneman,
Principal with the Scowcroft Group, Washington, D.C. So we're
going to start as I started. It doesn't make any difference
which way we go but we're going to start with Dr. David Victor.
Would you please make sure that you talk right into the mic so
we can hear you, sir? And talk loud, if you don't mind.
STATEMENT OF DR. DAVID G. VICTOR, DIRECTOR, PROGRAM OF ENERGY
AND SUSTAINABLE DEVELOPMENT, STANFORD UNIVERSITY
Dr. Victor. Thank you very much, Mr. Chairman and thank you
for the opportunity to testify in front of your committee. With
your permission, I'd like to put my full written testimony.
The Chairman. It's in.
Dr. Victor. I will just concentrate on three points. I
think the first and most important point for us to have in mind
when we look at this arrangement is the context for this deal,
which is that in the energy business, there aren't any easy
choices. All of the options for supplying energy have trade-
offs, pluses and minuses. Furthermore, we're talking about an
arrangement by through which we are trying to affect choices
that are made in other countries. Over those choices, we have
very, very limited leverage. So it is in this context where we
have pluses and minuses for all major energy sources, where we
have limited leverage over the choices of other countries, that
I think we should look at this nuclear arrangement. In that
light, I think this is an extraordinary opportunity. I'd like
to say a little bit about India's interests in this and then a
little bit about the United States' interests.
Concerning India's interests, the single most important
thing here is the demand for electricity and India is rising
exponentially. I don't think anybody knows how rapidly it will
rise in the coming two decades but India's enormous success
with its economic reforms, along with its considerable success
in reforming its electric power market means the demand for
electricity is rising at least as rapidly as the Indian economy
is rising and there is some evidence that demand for power is
rising even faster than the economy. Right now, as several of
the panelists will remark, coal is king in the Indian electric
power system and actually I think the position of coal in the
power system in India is getting much stronger. That's because
almost all of the other options for power supply are much less
attractive economically than coal. In particular, natural gas--
there is enormous promise for natural gas but natural gas
prices have been rising sharply in India. Several people have
commented on the new natural gas finds but they are in the
distant future and the situation today is that the real price
of natural gas in India, as in the United States, has risen to
something like three times the level it was previously.
The other thing that has happened in the Indian power
sector is there have been large reforms in the coal sector and
those reforms have encouraged private business and they in
particular have encouraged private business to invest
disproportionately in coal. This sets up India's interests on
power sector reform and on this deal, which is that India would
like to remain dependent on coal and that's an extremely
important part of India's power system but they are very
concerned about excessive reliance on coal. They are investing
in advanced coal, as we've heard from the previous panel and
they are also looking very carefully at the non-coal options.
This deal, in particular, makes the nuclear part of the non-
coal options much more attractive. I think it is fair to say
that it would be impossible for India to expand significantly
its nuclear power sector without some kind of cooperative
arrangement such as the one we are talking about today.
The third point I would like to make, very briefly, is the
implications of all this for the United States. In my written
testimony, I've done some simple calculations on the
implications for global warming. Put very simply, this deal
makes it possible to save something on the order of 100 million
tons of carbon dioxide per year by the year 2020, possibly much
more, possibly less but that's the scale of the problem. To put
that number into perspective, that is almost as large as the
entire European Union's efforts to implement the Kyoto
Protocol. The reason the number is so large is because the
Indian power sector is growing exponentially and because it is
dominated by coal. So we're talking about replacing the most
carbon intensive fuel with the least carbon intensive.
The Chairman. You say this deal. Which deal?
Dr. Victor. This is the partnership between the United
States and India and in particular, the aspects of the
partnership that relate to nuclear fuel and a nuclear
technology.
The last point I would like to make about this is that I
think we should look at this arrangement not only in terms of
the potential carbon savings for this particular arrangement
but also because if this is successful, this creates a new
model for engaging with developing countries because our
efforts under the Kyoto Protocol to engage the developing
countries in controlling their emissions of greenhouse gases
have been largely a failure, because those countries
understandably will not accept caps on their emissions. This
arrangement shows a different way of doing things, which is to
identify areas that are already in these countries' interests,
in this case, cleaner power, rebalancing away from coal and
also in our interests. The savings here are on the order of 100
million tons per year. The savings from similar kinds of deals
in the clean coal part of India weren't gas in China or nuclear
in China, could offer similar savings and be dramatically more
effective than what we have seen to date. Thank you, Mr.
Chairman.
[The prepared statement of Dr. Victor follows:]
Prepared Statement of David G. Victor, Director, Program on Energy and
Sustainable Development, Stanford University
INTRODUCTION
The debate over the India nuclear deal has been too one-
dimensional. Nearly all commentary has focused on whether this proposal
would undermine efforts to contain the proliferation of nuclear
weapons. Dissent along these lines has been based on a series of
largely overblown claims. And the singular focus on proliferation has
allowed the debate to lose sight of other ways that this deal is in the
interests of the United States and India alike.
Chief among those other reasons is environmental. The fuller use of
commercial nuclear power, if done to exacting standards of safety and
protection against proliferation, can play an important role as part of
a larger strategy to slow the growth in emissions of the gases that
cause global warming. That's because nuclear power emits essentially no
carbon dioxide (CO<INF>2</INF>), the most prevalent of these so-called
``greenhouse gases.'' While this benefit is hardly the chief reason for
initiating this deal, with time it will become one of the main benefits
from the arrangement. The nuclear deal probably will lead India to emit
substantially less CO<INF>2</INF> than it would if the country were not
able to build such a large commercial nuclear fleet. The annual
reductions by the year 2020 alone will be on the scale of all of the
European Union's efforts to meet its Kyoto Protocol commitments. In
addition, if this arrangement is successful it will offer a model
framework for a more effective way to engage developing countries in
the global effort to manage the problem of climate change. No
arrangement to manage climate change can be adequately successful
without these countries' participation; to date the existing schemes
for encouraging these countries to make an effort have failed; a better
approach is urgently needed.
ECONOMIC GROWTH, ELECTRIC POWER AND THE OPTIONS FOR SUPPLY
Evaluating the environmental benefits of this deal requires, first,
understanding the basic factors that affect investment in the Indian
electric power market. From the 1970s through much of the 1990s India's
economy was famous for its low rate of growth; with low growth came low
demand for electricity. A series of economic reforms, initially
introduced in the wake of a financial crisis in 1991 but strengthened
over the many years since, has changed that situation dramatically.
India's economy enjoyed an average annual growth rate of around 7% from
1994-2004. Most analysts expect growth to be sustained at 8% over the
next few years if not longer. India's population is young; and an
important fraction is well-educated and increasingly engaged with the
world economy. To be sure, the Indian economy has many deep flaws.
India has made no progress in solving the development problem in the
rural areas where most Indians live, and India's democracy is notorious
for its political gridlock. All that said, there is palpable evidence
that India's economic reforms have finally taken hold.
Higher growth has led directly to higher demand for electricity.
While the exact future needs for power remain uncertain, there is
considerable evidence that electric demand will grow at roughly the
same rate as the economy. Some factors will tend to dampen the growth
in demand for power. For example, economic growth is expected to cause
a shift in the Indian economy away from energy-intensive manufacturing
and also engender investments that make the economy more efficient in
its use of energy. But other factors will cause demand for electricity
to accelerate. Among them is an improvement in power quality that is
likely to accompany the extensive efforts to reform India's electric
power system that have been under way for 15 years. While reformers
have found it difficult to make progress, these reforms are beginning
to take effect in some parts of the country. Those effects are evident
not only in the improved performance of some of the country's power
utilities, but also in the rising role for privately owned (and
generally more reliable) power plants. In industry, for example,
reliable power is essential; many companies are taking matters into
their own hands and building their own plants. And where electricity is
more reliable, Indians will consume more of it.
There are many projections for total demand for electricity. In
Figure 1,* I show the International Energy Agency's projections, which
envision a doubling of power demand from the present to 2020. Barring
an economic catastrophe, I would be surprised if demand for electric
power were dramatically lower than these projections. And it is
possible that demand could be higher if India discovered, as China has
in recent years, that demand for electricity rises even faster than
economic output. For now, let's use these projections to illustrate the
stakes.
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* Figures 1-3 have been retained in committee files.
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At present, the total size of India's electric power system is 124
GW. Of that, coal comprises 55%, hydroelectric 26%, natural gas 10%,
renewables 5%, and nuclear makes up only 3% of total installed
capacity. Looking to the future, India has five main options for
providing the bulk of its electric needs:
Hydroelectric. Official Indian plans call for much greater use of
hydro, but in practice, India has found this option increasingly
difficult to deploy due to local opposition to dams. This pattern is
evident in all large democracies and there is no evidence that it will
become significantly easier to site domestic hydro facilities in the
future. While there are possibilities of hydro imports from Bhutan and
Nepal, such international projects are invariably fraught with
political uncertainty. Overall, hydro will probably play a declining
role in the future Indian system; projections that claim otherwise are
probably wishful thinking and unlikely to be realized.
Renewables. India makes extensive use of biomass digesters in rural
areas and wind and solar energy in a few states. Given India's
aggressive and expanding renewable energy program, particularly in wind
power, the projection shown in Figure 1 (about 6 GW of installed
renewable electricity generation capacity by 2020) is certainly too
low. However, even assuming India were to continue its aggressive push
on renewable energy, renewables are not likely to represent more than
10% of installed capacity by 2020. More importantly, renewable power
generators, notably wind turbines, are intermittent. They are available
less frequently than conventional power plants, contributing to the
unlikelihood that renewables will supply more than 5% of India's total
electricity by 2020 even given optimistic assumptions.
Natural gas. Until recently, most analyses of the Indian power
sector envisioned that gas would play a much larger role in the future.
Gas is attractive because it is the cleanest of the fossil fuels and
because the capital cost of gas plants is much lower than for all the
other main rivals such as nuclear, coal, and hydro. Thus, gas plants
have been especially attractive to private investors who are wary of
sinking large amounts of capital into projects where regulatory rules
are in flux. Indeed, nearly all foreign-owned private power plants in
India are fired with gas. (In other developing countries, most
privately-owned power plants are gas fired). However, the price of gas
has risen sharply in the last four years. For two decades gas prices
were regulated at approximately $3/mmbtu and supplies were controlled
by the state transmission and marketing monopoly. Over the last decade
a private gas market has emerged, with prices much higher than those in
the historic government-managed market. India has built three terminals
to import LNG as a supplement to its own domestic gas supplies, and has
plans to build several others. The workings of that gas market are the
best indicator of the real price of gas in India. The most recent large
transaction, in which India purchased a spot cargo of LNG from
Algeria's Sonatrach, put delivered prices at above $10/mmbtu. Our group
at Stanford is heavily involved in analyzing this gas market, and we
expect delivered gas prices will remain high--perhaps not as high as
$10, but probably in the range of $7-$8/mmbtu.\1\
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\1\ Jackson, Mike (2006). ``India: challenges to growth,'' in
Fundamentals of the World Gas Industry, 2006. Petroleum Economist.
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Nuclear. Until now, nuclear power has been controlled by the
central government, mainly for non-energy purposes (namely weapons),
and has not been exposed to commercial accountability. In addition,
India's domestic uranium reserves are quite meager--the Atomic Energy
Commission estimates that domestic resources could support only 10 GW
of installed nuclear capacity.\2\ Thus, not surprisingly, nuclear
energy has played only a small role in the power sector. Whether and
how that could change is at stake in this deal.
---------------------------------------------------------------------------
\2\ Presentation by Kakodkar, Anil: Chairman, Atomic Energy
Commission (2005). ``Energy in India for the Coming Decades.''
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The India nuclear deal would provide for ``full'' civil nuclear
cooperation between the U.S. and India. By enabling India to import
modern nuclear energy technology, as well as uranium, a properly
regulated deal would in effect alleviate the historical restrictions
placed on civilian Indian nuclear power.
Coal. In the past and in the foreseeable future coal is expected to
provide most of India's electricity. In fact, coal has not met its full
market potential in the last decade because coal supplies are
unreliable (partly because the railroad network is badly in need of
investment) and of notoriously low quality. Both those impediments to
coal sector growth are being alleviated. India has begun to encourage
private investment into coal mines and pithead power plants that will
send the coal ``by wire'' to the national electric grid rather than via
railcars. In addition, the country has adopted favorable rules to
encourage investment in the inter-state power grid, enabling the grid
to move much larger quantities of electricity.\3\ At the same time,
changes in import tariffs are making it easier to import high quality
coal from other countries; those imports, in turn, are inducing India's
domestic coal industry to perform better. These reforms are set to have
a huge impact on growth in coal-fired capacity. India is soliciting
bids for five new 4 GW coal-fired power projects (known as the ``ultra
mega power projects'')--two of which will produce electricity at coal
pitheads in the interior of the country and three coastal plants that
will import foreign coal supplies.
---------------------------------------------------------------------------
\3\ In fact, India's power regulations indirectly encourage
projects that transmit power long distances across state lines because
such inter-state investments are governed by federal regulators and can
be managed more reliably than projects that are exposed to the whims of
state regulators.
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In this context, the question for the India's energy future centers
on the rivals to coal. Where alternative fuels can be successful, the
share left to coal will decline. All the rivals have problems. For
hydro and renewables those problems are severe, and the United States,
in any case, has no ability to influence them. For gas the severity of
the problems created by high gas prices are not yet known. On the one
hand, high prices have discouraged (but not stopped) investment in
plants that use gas. Indeed, some investors who would have built gas-
fired power plants are now looking closely at coal. On the other hand,
barely a month passes without the announcement of new gas discoveries
in India (in particular the large resources discovered off the
country's east cost). These new gas supplies may eventually help to
lower the price of gas, which in turn will allow for a much larger gas-
fired generation capacity.
For nuclear, the future is really wide open. So long as India's
nuclear industry remains isolated, it is hard to see that India will
build more than the occasional reactor as the cost basis for nuclear
equipment will be too high and fuel needed for such reactors will not
be available. Some critics have claimed that allowing exports of fuel
for use in Indian commercial reactors will free up domestic fuel
supplies for use in the nuclear weapons program. The more likely
outcome is that India simply will not expand its commercial reactor
fleet so that the military program can obtain the fuel it needs.
It is hard to predict with certainty how the costs of the different
options will unfold. In Table 1, I focus on the main contenders:
nuclear, coal, and natural gas. I show estimates for nuclear power
drawn from a study by a group at MIT evaluating nuclear power in
developed countries (``high'' and ``medium cost'' estimates) and also
from a study that focuses on nuclear power options in the Indian
context (``low cost'') but used a notably low capital cost estimate.
The coal numbers provide an approximation for costs of a new pulverized
coal plant--technology widely available in India--for a plant that
meets U.S. environmental standards, as well as a conventional plant in
India. The estimates for gas are based on the Indian experience and
levelized costs are shown at different prices--from the low price for
public gas (which is essentially unavailable for new power plants) to
various feasible private gas prices.
Table 1.--CARBON IMPLICATIONS OF INDIA NUCLEAR DEAL
------------------------------------------------------------------------
Generation options US cents/kWh
------------------------------------------------------------------------
Nuclear--Light Water Reactor
High Cost \1\........................................ 6.7
Medium Cost \1\...................................... 4.2
Low Cost \2\......................................... 3.8
Pulverized Coal
U.S. Context \1\ *................................... 4.2
Indian Context \3\ *................................. 3.9
Natural Gas
Public Supplier ($2.86/mmbtu) \3\.................... 4.6
Private Supplier ($5/mmbtu) \3\...................... 6.9
Private Supplier ($8/mmbtu) \3\...................... 10.1
------------------------------------------------------------------------
\1\ Massachusetts Institute of Technology (2003). The Future of Nuclear
Power: An Interdisciplinary MIT Study.
\2\ Bharadwaj, Anshu, Rahul Tongia, and V.S. Arunachalam (2006).
``Whither Nuclear Power?'' Economic and Political Weekly 41(12): 1203-
1212.
\3\ Adapted from Shukla, P.R., et al. (2004). Electricity Reforms in
India: Firm Choices and Emerging Generation Markets
* Both coal calculations based on assumed delivered cost of US$1.20/
mmbtu.
Three things are clear from Table 1. First, at the high gas prices
typical of today's market, gas-fired electricity is extremely
expensive. Second, while there are many uncertainties--especially for
nuclear power--the cost of coal and nuclear are comparable. Third, the
costs noted in Table 1 may exaggerate the cost advantage of coal
because coal-fired electricity has larger environmental consequences.
(The ``U.S. Context'' number is for a plant capable of meeting current
U.S. environmental standards; the ``Indian Context'' number includes
some particulate control but only monitoring of other pollutants). If
these are taken into account, nuclear power would be even more
competitive with coal.
CO<INF>2</INF> AND GLOBAL CLIMATE CHANGE
While there remains some divergence in opinion in the United States
about the causes of global changes in climate and the severity of the
global climate problem, the risk of unacceptable changes in climate
will undoubtedly rise with increasing atmospheric concentrations of
CO<INF>2</INF> and other greenhouse gases. It is impossible to predict
the outcomes from climate change with complete certainty. (Indeed, the
most worrisome possible changes are the least certain, such as possible
catastrophic rise in sea level, a change in ocean currents, or the
destruction of vast ecosystems like the Amazonian rainforest). Looking
at the totality of the evidence, however, it is hard to escape the
conclusion that a prudent and risk-averse policy strategy toward the
threat of global climate change must include a substantial effort to
control emissions. And because those emissions emanate globally, such a
strategy must be pursued globally.
The CO<INF>2</INF> savings implications of replacing coal with a
range of installed nuclear capacities are provided in Figure 2 above.
Because there is considerable uncertainty as to the exact amount of new
nuclear capacity likely to arise from the deal, Figure 2 shows a line
rather than any particular point. India's track record of installing
power plants, combined with the difficulties that are likely to arise
in a shift to a truly commercial nuclear power program, suggest to me
that new nuclear capacity could be in the range of 10-20GW by 2020. The
State Department has proposed that 20GW of new nuclear capacity could
be built by 2020--this represents a middle-of-the-road estimate
provided by Secretary of State Condoleezza Rice in her April 5th
remarks to the Senate Foreign Relations Committee. Under this scenario,
by displacing 20GW of capacity that would otherwise be coal-fired, the
new nuclear capacity would save 145 million tonnes of CO<INF>2</INF>
per year.\4\ Indian Prime Minister Manmohan Singh has recently
suggested that the India nuclear deal could have even larger
implications, arguing that it might lead India to install up to 40GW of
new nuclear capacity by 2015.
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\4\ Jackson, Mike, et al. (2006). ``Greenhouse Gas Implications in
Large Infrastructure Investments in Developing Countries: Examples from
China and India'' (working paper, Program on Energy and Sustainable
Development, Stanford University).
---------------------------------------------------------------------------
In Figure 3, I put the CO<INF>2</INF> savings from a 20 GW buildout
of nuclear power into perspective by comparing it with other relevant
emission estimates. The annual savings from the Indian deal could be
nearly as large as the entire commitment of the 25 EU nations to
reducing emissions under the Kyoto Protocol. This single arrangement in
India would exceed the total carbon savings from the 100 largest
developing country projects under the Kyoto Protocol's Clean
Development Mechanism (CDM). At present, the CDM is the only mechanism
for engaging developing countries in the effort to control greenhouse
gas emissions.
BEYOND INDIA: ENGAGING DEVELOPING COUNTRIES
Until now, developing countries have adamantly refused to limit
their emissions of greenhouse gases. These countries are wary that the
possible high costs of climate change mitigation will jeopardize their
development goals. The result of that opposition is the CDM--a system
that compensates developing countries for the full extra cost of any
policies to control emissions. The CDM was a good idea in principle,
but in practice it is not working well. The scheme has become mired in
red tape as countries and investors try to establish their baseline
levels of emissions and the reduction in emissions from each project.
(The difference between the baseline and the reduced level is the key
to the CDM concept--that difference becomes a credit that can be used
to offset emission obligations elsewhere in the world, such as in
Europe's emission trading system). The problems have encouraged gaming
and they have caused CDM investors to focus on activities that are easy
to quantify and which are marginal in nature. Indeed, energy projects
account for just 17% of the CDM pipeline. Almost none of the energy
projects are of the type that will lead to fundamental changes in
countries' energy systems.\5\
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\5\ Wara, Michael (Forthcoming, 2006). Measuring the Clean
Development Mechanism's Performance and Potential.
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If the India nuclear deal is successful, it will frame a new
approach to engaging developing countries in a climate strategy. This
approach would focus on finding game-changing policies that align with
reluctant countries' interests.\6\ Rather than involving hundreds of
small and marginal projects, this style of engagement would focus on
just a handful of large pivotal actions involving just a few critical
countries. This concept is incidentally at the core of the Asia-Pacific
Partnership on Clean Development and Climate, whose six members,
including India and the U.S., account for half the world's greenhouse
gas emissions. That Partnership has promise, but it remains young.
Success with this nuclear deal could offer a credible example of
practical actions that the Partnership could encourage.
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\6\ See T.C. Heller and P.R. Shukla (2003). ``Development and
Climate: Engaging Developing Countries'' in: J.E. Aldy et al., Beyond
Kyoto: Advancing the International Effort Against Climate Change. Pew
Center on Global Climate Change.
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PROLIFERATION, INDIAN POLITICS AND THE FUEL CYCLE
My brief in this testimony is to focus on the possible
environmental benefits of the India nuclear deal. I close, though, with
a brief word on proliferation.\7\
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\7\ I am mindful that many others have written much more
extensively on these subjects. Notably, Levi, Michael A., and Charles
D. Ferguson (2006). ``U.S.-India Nuclear Cooperation: A Strategy for
Moving Forward,'' Council on Foreign Relations, CSR No. 16. and
Squassoni, Sharon (2006). ``U.S. Nuclear Cooperation With India: Issues
for Congress,'' CRS Report for Congress. Congressional Research
Service.
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My sense is that the claims about proliferation risks stemming from
this deal have been overblown for three reasons. One is that many
observers are reluctant to treat India differently from other states
that have acquired nuclear weapons. Yet that argument is not
sustainable. India--in contrast with Pakistan, among others--has not
been the locus for proliferation of weapons technologies to other
states and possibly terrorists. Nor has India taken the kind of
aggressive stance with its nuclear weapons program that has been
evident in Iran or North Korea.
A second reason for these hyperbolic claims about proliferation is
critics have imagined the world as they would like it--a world before
India's nuclear test and when the NPT was intact and functioning--
rather than the world as it really is. Both these reasons have been
covered extensively and I will say no more on them.
The third reason is that critics have imagined that the U.S.
somehow got hoodwinked by India--for example, the list of facilities
that are exempt from external scrutiny is longer than most U.S.
analysts would like. This is a valid concern, but I think it misses the
point because it imagines the India nuclear deal as a construct
entirely of U.S. interests when, in fact, it is the product of a
nascent cooperation between two democracies that must pay attention to
how the deal plays locally. It is striking how much hostility the deal
has engendered in the Indian press, as Indian nationalists portray this
as an erosion of India's sovereign prerogative to sustain a nuclear
weapons program. In such settings I think it is imperative that we give
extensive deference to those who were able to negotiate a deal that
(probably) has navigated these contours of Indian domestic politics
while also delivering what is most essential for the U.S. to gain from
the arrangement.
The world is in the early stages of recrafting the fuel cycle.
Among the proposals is the Administration's Global Nuclear Energy
Partnership (GNEP). The IAEA has a proposal. A tailored proposal is
emerging as the logical solution to the troubles with Iran's nuclear
program--with off-site fuel production and storage. Similarly, success
with the India nuclear deal can establish a practical framework for a
new fuel cycle for India. Many in the anti-proliferation community have
been uneasy about this shift in fuel cycles, but such a shift strikes
me as inevitable. And a practical demonstration with a responsible
country could go a long way to making these visions a practical reality
with adequate protections against proliferation.
The Chairman. Thank you very much.
Mr. Poneman.
STATEMENT OF DANIEL B. PONEMAN, PRINCIPAL, THE SCOWCROFT GROUP
Mr. Poneman. Thank you, Mr. Chairman. It is an honor to
appear before the committee and I also would just submit my
written testimony for the record and summarize here.
The Chairman. It's done.
Mr. Poneman. I would also note that I am speaking in my
personal capacity and not as a member of any institution or
organization. I would also like to just focus on three basic
points. No. 1, I do believe that U.S. interests are best served
by a wide-ranging, deep and broad cooperation with India in
energy. I cannot improve upon the comments of our
administration colleagues on the panel before or Dr. Victor. I
think it is clear that across the full range of diverse energy
sources, be it biomass synthetic fuels, clean coal or
whatever--we need to and Mr. Chairman, you noted it in your
remarks--we need to deepen and strengthen that cooperation and
indeed, this forms only a part of a much broader degree of
strategic engagement the United States, I think, must have with
India, given that we are the world's two most populous
democracies, we have coherent interests across a broad array of
international security interests and we are clearly much the
better for being able to work very cooperatively with India.
My second point. Nuclear power can play an indispensable
role in meeting the growing need for the large amounts of
electricity that the world needs without aggravating greenhouse
gas emissions. Once again, Dr. Victor, I think, provided some
very stunning statistics in this degree but I would note that I
have been working in these issues for 30 years, over 30 years,
starting as an intern in the Senate, after the first Indian
nuclear test in 1974, and it is remarkable to witness, as we
have in the last few years, how public perceptions of nuclear
have evolved in a remarkable direction. We're not there yet but
we are now seeing large increases in deployed nuclear power
being considered in India, in China, in Russia, indeed in this
country. It is critical, it seems to me, that as part of any
coherent strategy, to minimize greenhouse gas emissions, that
we pursue with all vigor, all sources of energy, certainly
including nuclear.
This brings me to my third point. We must, it seems to me,
pursue that nuclear option in a way that minimizes the threats
of nuclear weapons proliferation. Just consider. If you look at
the MIT study of a few years back, merely to maintain the
current share of deployed nuclear power as a source of
electricity, at about 17 percent of global supplies, could
imply, at the growth rates that we've already heard of energy
consumptions, the deployment of something like 1,000 nuclear
powerplants by mid-century. If you associate with that
expansion of nuclear power, a similar expansion of nuclear fuel
facilities, of enrichment capabilities and reprocessing
capabilities, and if you consider the nuclear weapons threats
to those facilities entail, in terms of providing possible
access to weapons-grade uranium and weapons-grade plutonium, we
face a critical national security threat. That is why I have
supported President Bush's proposals in February 2004, to
minimize the spread of enrichment and reprocessing facilities,
that is why I believe that the Global Nuclear Energy
Partnership the President promoted earlier this year and its
reliable fuel assurance, are critical contributors to that
nonproliferation effort.
In that respect, I would like to note that I think that it
may well be that India, once it is engaged in nuclear
cooperation with the United States, based on the agreement for
cooperation and the safeguard agreements, which we are all now
anticipating will go through, India may be in a position to
make a single contribution to the reduction of nuclear
proliferation risks. I would note that in the July 18 Joint
Statement between President Bush and Prime Minister Singh,
Prime Minister Singh committed to refrain and I quote, ``from
transfer of enrichment and reprocessing technologies to stats
that do not have them and to supporting international efforts
to limit their spread.'' Now, there have been a number of
proposals from President Bush, from President Putin, from the
International Atomic Energy Agency, Mr. El Baradei, the
Director General there, on how one might do that. But I would
like to suggest, for the consideration of the committee, one
possibility that may be worthy of consideration. It is expected
as it has been noted here today, that India will purchase a
number of nuclear reactors from foreign suppliers. I would
certainly hope that these would include U.S. reactors, all of
which require enriched uranium fuel as do many of the foreign
suppliers of reactors as well. India could, for example, offer
to lease nuclear fuel from the suppliers of the nuclear
reactors and other existing nuclear fuel suppliers. Suppliers
would then retain title to that material and that material
would never fall by legal title, into the hands of the user of
the fuel. The spent fuel extracted from the reactor could
either be stored in India or exported for storage in another
country. Either way, the material would remain safeguarded and
India would claim no right to extract or access the plutonium
contained in the spent fuel. The IAEA could guarantee a back-up
fuel supply to reassure the Indian government against the risk
of an arbitrary cut-off of leased fuel. I emphasize this is a
voluntary concept.
By voluntarily refraining from enriched uranium or
reprocessing plutonium for its civilian program, India would
show international leadership, it would kick-start
international efforts to provide fuel assurances in exchange
for country pledges to refrain from enrichment and reprocessing
and by offering an economical, reliable nuclear fuel solution
to countries like Iran and Brazil, nuclear fuel leasing would
reduce any justification for engaging in fuel cycle activities
that would support nuclear weapons development. Nuclear fuel
leasing would imbed the emerging U.S./Indian cooperation and
civil nuclear energy into the warp and woof of global
nonproliferation efforts. Moreover, it would not erode the NPT
bargain, since India would show greater restraint than the
treaty requires by voluntarily refraining from enrichment and
reprocessing, neither of which are expressly prohibited by the
treaty. Obviously, this is no panacea but I do believe it is an
idea worthy of consideration and I would note that all of our
best aspirations for a large-scale rapid deployment of new
nuclear power will be jeopardized, critically perhaps, if we
don't find some way, as the power expands, to limit the access
to the critical enrichment and reprocessing technologies that
bring with them the nuclear weapons threat that we have been
fighting so hard and so long to avoid. Thank you, Mr. Chairman
and members of the Committee.
[The prepared statement of Mr. Poneman follows:]
Prepared Statement of Daniel B. Poneman, Principal, The Scowcroft Group
Mr. Chairman, it is an honor to appear before the Committee on
Energy and Natural Resources to discuss the prospects for energy
cooperation between the United States and India, with particular focus
on the role nuclear power can play in meeting those needs.
I will focus my remarks on three aspects of this issue: the U.S.-
Indian energy relationship, the role of nuclear power in our energy
future, and the need to ensure that our nuclear future minimizes the
threat of the spread of nuclear weapons. Now that the Senate has acted
on the U.S.-Indian civil nuclear cooperation initiative, and the
Executive Branch has taken up the issue for negotiations with the
Government of India and consultations in the Nuclear Suppliers Group, I
do not propose to address that subject. Instead, I will base my
comments on the assumption of a U.S.-Indian agreement for cooperation
in the peaceful uses of nuclear energy, and of all requisite safeguards
and approvals having been obtained from the International Atomic Energy
Agency and the Nuclear Suppliers Group.
I would like to offer three perspectives for the Committee's
consideration. First, U.S. interests would be best served by a wide-
ranging, robust relationship promoting energy cooperation in all
aspects. There is broad and deep consensus in our country in favor of
strengthening relations between India and the United States. As the
world's most populous democracies, we have much in common: our
dedication to promote democracy and freedom, our commitment to promote
human rights and fight terror, our efforts to increase trade and
investment between our two nations, our cooperation to improve public
health and to provide energy for our people while protecting our
environment. We can do much together to promote the security of each of
our nations and that of the international community.
In the energy arena, the initiatives announced by President Bush
and Prime Minister Singh this past March represent an important step in
building the U.S.-Indian energy relationship. These include India's
participation in the FutureGen international partnership to create a
zero-emissions coal-fired power plant, its membership in the
International Thermonuclear Experimental Reactor (ITER), and its work
with the United States and other Asian nations in the Asia-Pacific
Partnership on Clean Development and Climate. It would be in our
national interest to see these efforts prosper, and to strengthen
cooperation across the full range of fossil and renewable energy
technologies not only at the government-to-government level but also at
the business-to-business level. Expanding bilateral commercial
relations between our two countries will help strengthen the political
ties that bind us, thereby facilitating effective cooperation in
tackling difficult political and security issues.
Second, nuclear power can play an indispensable role in meeting the
growing need for large amounts of electricity without aggravating
greenhouse gas emissions. I have been working on nuclear energy issues
for over thirty years. The years since then have witnessed many trials
and tribulations for nuclear power. In addition to the concern that
nuclear energy programs might be misused to,help develop nuclear
weapons, the Three Mile Island and Chernobyl accidents reduced public
confidence in the safety of nuclear power. Further, the chronic
unresolved question of how ultimately to dispose of nuclear wastes in
this and many other nations has also dogged efforts to rebuild public
confidence in nuclear power.
But attitudes toward nuclear power are changing. In part, the
increased public support for nuclear power has reflected the intensive
efforts of the nuclear industry to address the issues of public
concern, including through the development of new and improved nuclear
reactor designs of greater safety and efficiency. In addition, the
citizens of the world are increasingly and properly concerned about the
growing impact of global warming, rooted in the inexorable increase of
global energy demand and the alarming growth of greenhouse gas
emissions should the world rely excessively on fossil fuels to meet
that demand.
But it is not enough to chronicle changes in public attitude. Given
the rate of projected increases in energy consumption over the coming
decades, according to the 2003 MIT Study on the Future of Nuclear
Power, the world will need to exercise all of its options--increased
efficiency in electricity generation and use, expanded use of renewable
energy sources, capture and sequestration of carbon dioxide emissions
from fossil-fueled plants, and increased use of nuclear power--in order
to make a significant impact on global warming. The MIT Study further
concluded that, for nuclear power simply to maintain its current share
of about 17 percent of total installed electricity generating capacity,
it will need to grow from about 366 reactors today to 1000 or more
reactors of 1000MWe capacity. India--with its size, its population, its
growth rates, and its existing commitment to nuclear power--is likely
to comprise a key component in the global nuclear energy scene for the
rest of this century.
Third, the promise of nuclear power can only be fully realized fwe
take aggressive measures to combat the spread of nuclear weapons. It
may be, as I have just suggested, that the world is on the verge of a
major expansion in the fleet of nuclear reactors providing electricity
in India and, indeed, around the world. But this future will only be
realized if nuclear power is successful in addressing all relevant
concerns: cost, safety, waste management, and proliferation risks. For
the balance of my remarks, I will focus on managing the proliferation
risks.
Even as we envisage the possibility of a major expansion of nuclear
power around the world, we are also confronting serious challenges in
combating the spread of nuclear weapons, most notably in Iran and North
Korea. While nuclear reactors themselves are not the central problem in
promoting weapons proliferation, a massive expansion of nuclear power
could be accompanied by a commensurate expansion of fuel cycle
facilities capable of enriching uranium to use as nuclear power fuel
and of processing spent fuel to separate out the plutonium from uranium
and fission products. Those fuel cycle technologies can also be used to
produce nuclear weapon-grade uranium and plutonium, and therefore do
pose a significant proliferation risk. If the product of any fuel cycle
plants are, in fact, diverted from peaceful to explosive purposes, it
could not only lead to nuclear weapons possession by terrorists or
other adversaries, but also abruptly destroy the public confidence
critical to the survival of nuclear as a viable energy source.
It is therefore critical, as we seek to promote the expansion of
nuclear power, that we pay equal attention to preventing the
proliferation of nuclear weapon capabilities. That is why President
Bush was correct, in my view, in proposing in February 2004 that we
take steps to minimize the spread of enrichment and reprocessing
facilities, and why his proposal earlier this year under the Global
Nuclear Energy Partnership to provide for a reliable fuel assurance
also should be pursued with vigor.
And in this respect, it may well be that India, once it is engaged
in civil nuclear cooperation with the United States, may be in a
position to make a signal contribution to the reduction of nuclear
proliferation risks. In the July 18, 2005, Joint Statement by President
Bush and Prime Minister Singh, the Prime Minister committed to refrain
``from transfer of enrichment and reprocessing technologies to states
that do not have them and [to] supporting international efforts to
limit their spread.'' There have been a number of suggestions and
proposals regarding how the international community might effectively
limit the spread of enrichment and reprocessing technologies. Proposals
in this arena have come from people in and out of government, from
leaders including President Bush and President Putin, as well as from
the Director General of the International Atomic Energy Agency, Mohamed
ElBaradei.
How could India support these efforts, as pledged in the July 18
joint statement? It is expected that India will decide to purchase a
number of nuclear reactors from foreign suppliers. I would certainly
hope that these would include U.S. reactors, all of which require
enriched uranium fuel. India could offer to lease nuclear fuel from
abroad. Suppliers would lease enriched uranium fuel to Indian reactors,
but title to the material would never pass. The spent fuel extracted
from the reactor could either be stored in India or exported for
storage in another country. Either way the material would remain
safeguarded, and India would claim no right to extract or access the
plutonium contained in the spent fuel. The IAEA could guarantee a back-
up fuel supply to reassure the Indian Government against the risk of an
arbitrary cut-off of leased fuel.
By voluntarily refraining from enriching uranium or reprocessing
plutonium for its civilian program, India would show international
leadership. It would kick-start international efforts to provide fuel
assurances in exchange for country pledges to refrain from enrichment
and reprocessing. By offering an economical, reliable nuclear fuel
solution to countries like Iran and Brazil, nuclear fuel leasing would
reduce any justification for engaging in fuel-cycle activities that
would support nuclear weapons development.
Nuclear fuel leasing would embed the emerging U.S.-Indian
cooperation in civil nuclear energy into the warp and woof of global
nonproliferation efforts. Moreover, it would not erode the NPT bargain,
since India would show greater restraint than the treaty requires by
voluntarily refraining from enrichment and reprocessing, neither or
which are expressly prohibited by the treaty.
Nuclear fuel leasing is no panacea. It would not purport to prevent
all clandestine efforts to divert civilian nuclear programs to
explosive purposes, or to block dedicated bomb builders who are
pursuing purely military programs. It would, however, help reduce the
risk that the global growth of atomic energy will lead to nuclear
catastrophe. And for that India would justly earn the world's lasting
gratitude.
I would be happy to respond to any questions the Committee may
have.
The Chairman. Thank you very much.
Mr. Gadbaw.
STATEMENT OF R. MICHAEL GADBAW, VICE PRESIDENT AND SENIOR
COUNSEL, GENERAL ELECTRIC COMPANY
Mr. Gadbaw. Mr. Chairman and members of the committee,
thank you for the opportunity to provide a perspective on the
role of commercial nuclear energy in the U.S./India strategic
cooperation. I'd like to ask that my full testimony be put in
the record and I will summarize.
The Chairman. It will be made part of the record.
Mr. Gadbaw. The growing partnership between the United
States and India has profound implications for a wide range of
issues that play into America's enduring national interests.
Among them, Asian stability, global nonproliferation, Indian
economic development and the renaissance of the nuclear
industry.
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, nonproliferation and economic
development.
GE has had a unique vantage point from which to observe the
evolution of this relationship and I have personally had
occasion to travel extensively in India, most recently in March
after the agreement was signed, when I had a chance to talk to
the Department of Atomic Energy and other private sector and
government officials about this agreement. We believe in the
vision that President Bush and Prime Minister Manmohan Singh
articulated in their Joint Statement in March 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.
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 an
increasing demand for U.S. products and technology, in
aviation, power generation, rail, healthcare, and advanced
materials benefiting the workers and suppliers. The opening of
the civilian nuclear relationship will deepen the support for
American jobs. For every order we receive for a 1\1/2\ gigawatt
powerplant, we anticipate U.S. exports in the neighborhood of
$1 billion, which would equate to supporting around 10,000 U.S.
jobs.
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 policy into
distinct compartments, separating security from economics,
public policy from private commerce. Government officials and
the private sector must work together to fully integrate the
commercial and national security dimensions of government
policies.
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 for example, America's
interests in revitalizing the nonproliferation 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 Indian's nuclear program
while tightening the relationships between the U.S. and Indian
energy sectors.
India's economy is growing dramatically with the potential
to lift hundreds of millions out of poverty. To sustain its
current growth trajectory, India will have to increase its
energy consumption by around 4 percent annually.
Although coal, oil and natural gas dominate India's current
energy mix, India's future will increasingly rely on nuclear
energy. This is partly due to resource constraints. 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 an ambitious target for its nuclear
expansion. It hopes to achieve a nuclear capacity of around
10,000 megawatts by 2011, 2012 and it has recently announced a
doubling of its need by 2020, to 40,000 megawatts.
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.
U.S. companies can help the United States 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. 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, the 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 a successful partnership in India.
U.S. nuclear suppliers can thrive in the Indian market but
government policies must enable them to act rapidly and
effectively. This means that U.S. policy-makers must be
sensitive to the link between security and economics. It is not
enough to focus only on formal nonproliferation agreements
between India and the United States, i.e., IAEA or NSG, the
nuclear suppliers group. The U.S. Government must think broadly
about a range of policies that counts for the needs of
commerce.
One pressing example is nuclear compensation and liability.
The International Atomic Energy Agency's convention on
supplementary compensation for nuclear damage 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 your committee will work promptly on any
necessary implementing legislation. This initiative is vital if
U.S. companies are to engage in foreign nuclear markets.
The U.S./Indian strategic alliance 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 give substance to the deal's domestic
aspiration, the renaissance of America's civilian nuclear
industry. Thank you.
[The prepared statement of Mr. Gadbaw follows:]
Prepared Statement of R. Michael Gadbaw, Vice President and Senior
Counsel, General Electric Company
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 took 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\
---------------------------------------------------------------------------
\1\ Report on Growth of Nuclear Energy in India, Department of
Atomic Energy, 2004.
\2\ Sumit Ganguty, Testimony before the Committee on Foreign
Relations, U.S. Senate, ``Energy Trends in China and India:
Implications for the United States,'' July 26, 2005.
---------------------------------------------------------------------------
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 coat 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 coat, 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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\6\ NPCIL, 2006. Originally, the 2020 target was 20,000 MWe; the
Indian government recently doubled it.
\7\ Department of Atomic Energy, 2004.
---------------------------------------------------------------------------
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.
The Chairman. Thank you very much.
Senator Bingaman.
Senator Bingaman. Thank you all for being here. Let me ask,
first of all, Mr. Poneman, ask you about your suggestion. I
think it is a constructive suggestion that perhaps India could
be persuaded to lease the nuclear fuel that they need in new
reactors from abroad. But is there anything in the works or
anything that has occurred that would lead us to believe they
might be willing to do that? I'm just not aware of it. I mean,
I like the idea but it just strikes me that now that they have
negotiated the agreement that they negotiated with us, there is
no incentive for them to do anything like that. It is the kind
of thing that might have been part of a negotiation but it was
not.
Mr. Poneman. Thank you very much for the question, Senator.
I think this is on. I'd make, I guess, a couple of comments. I
think I would certainly, as a tactical negotiating matter, I
cannot get to the point that you just made in the sense that if
one were to make this as part of a deal, one's leverage would
have been greater earlier. There is no question about that.
That having been said, the watch word that we have always heard
from the Indian government is something that is asked of them
cannot go beyond the July 18 Joint Statement from last year
between the Prime Minister and the President. And when I first
mentioned this concept to an Indian colleague, my attention was
invited to that line in the Joint Statement, which I quoted in
my prepared statement, which said that India agrees not to
export these enrichment or reprocessing facilities and to
support international efforts to prevent their spread. So I
think if you couch it in terms of the July 18th Joint
Statement--A--and B, make sure that it is framed as an
opportunity and an option, which having gotten through the
gates of the safeguards agreement and the 123 Agreement and the
rest, that they could voluntarily do, I think there is a
chance. I think that it is better to light one candle than
curse the darkness. I'm not under any illusions that it is
something that would be rapidly and warmly embraced today by
the Indians. But I think under those other circumstances it
might be possible.
Senator Bingaman. Are you under the impression that this is
something that our own administration would advance to the
Indians as an initiative they might consider?
Mr. Poneman. Well, having served on the National Security
Council for 6 years, I am cautious about speaking for a
government I'm no longer a member of. I have discussed this
idea with members in the administration. I have found, I think,
generally positive reactions to the idea, whether they would
choose to put it forward in a negotiation with the Indians, I
would not presume on their behalf.
Senator Bingaman. Mr. Gadbaw, let me ask you. In your
statement, you make the general statement here, toward the
beginning of your testimony, General Electric 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, and then you have
a variety of things it is going to promote, one of which is
nonproliferation. How do you see that? How do you reach the
conclusion that this agreement will promote nonproliferation?
Mr. Gadbaw. Senator, that really comes from a judgment
looking at this relationship over quite a number of years. I,
in my role in General Electric, got involved with India, really
in the early nineties and I have seen that country--at that
time, coming to the United States and came to GE and
representatives asking why is India not even on the radar here
in the United States. A lot of things have happened over the
last 15 years that have brought our two countries much closer
together. As we as a company look out over the next 10 years,
we see India as a country that will be the kind of allay that
the United States wants. So it is really about our alignment of
interests in the broadest sense of the term. I think this
agreement is one step in that longer process. I don't think it
freezes in time our mutual interests. So I think in a broad
sense, it brings those interests together around
nonproliferation and brings India into cooperation with us,
particularly in this civilian nuclear area. In that particular
area, in the scope of this agreement, I think American
companies being part of that market, bringing their approach to
compliance with the export control laws, both in the United
States and with India, working with our suppliers to create an
understanding of how to implement and enforce those rules, will
actually set a standard that will enhance the ability to
control the proliferation of this technology and advance our
mutual interests. So I see both in a macro sense and in a micro
sense, this alignment of interests working towards what I think
are both countries' interests in controlling the proliferation
of nuclear weapons. India has had a great track record in that
regard, despite the fact that it is in a neighborhood that is a
very difficult one.
Senator Bingaman. My time is up, Mr. Chairman. Thank you.
The Chairman. Well, Senator Bingaman, you got right to the
point. One of the most important things we discuss here today
is obviously this issue. Question. How do you test the waters?
How do you see it will move? It would seem to me and I would
just put this to one of you, perhaps Mr. Poneman first. It
would seem to be that if I were them, I wouldn't be very
interested unless it was a broader-scoped agreement that
involved a number of countries, not just India. I mean, India
would say, what are you doing talking about us as if we are in
some way most apt to be violative of this process. We are
cleaner than most. We would be more apt to be okay without any
of this agreement. We probably are not going to be
proliferators, which I think is a fair statement. They could
make that not offend me, based on their performance. So answer
with me whether this should be a broader-based agreement and
how does that happen and is it happening?
Mr. Poneman. Senator, I could not agree more. I am looking
at this as a global issue.
The Chairman. Okay.
Mr. Poneman. I am thinking of this in terms, for example,
of President Bush's initiative in February 2004, to minimize
those states around the world that are engaged in the
commercial enrichment of uranium and reprocessing of plutonium
from spent fuel. My suggestion is that--and of course, we now
have the G8 having considered this and President Putin having
his initiative. I think what is very, very important is to
drain the notion of singling out a Nation as part of this
equation. If it is to work, it must be voluntary, it must be
consensual. Very few countries will simply knuckle under and
say, I'm going to do this because you want me to do this. But
when you think of aircraft, when you think of automobiles, when
you think of a number of commodities, there is a very rich vein
and history about leading. I think there is a very attractive
proposition, an attractive may I say commercial proposition to
be put to a number of nations that says, hey look, rather than
mining the uranium, milling, converting, enriching, fabricating
the fuel, going through all those headaches and being saddled
with a bunch of spent fuel you don't know what to do with, why
don't you lease it from this company? We'll give you a good
price. We'll give you a 10-year guarantee. Discounts could be
applied. You could have assurances of supply and backstopping
arrangements from the IAEA. My suggestion is to really echo a
couple of points, one from you, Mr. Chairman, that if we are to
make this a meaningful relationship, it can't be just the
rhetoric, it's got to be practical and I think this is
practical and then to echo my colleague, Mr. Gadbaw, when he
talks about getting commercial interests to align with our
national security interests. If we can get this whole
discussion in that context and at the same time, talk about it,
yes, more broadly, I think India could play a leadership role
in having something like this become an effective mechanism.
The Chairman. Who is taking the lead in this idea of
leasing?
Mr. Poneman. Well, there have been a number of governments
that have discussed it. I think you will recall that when Prime
Minister Howard was visiting President Bush just a few weeks
ago, there was some discussion in the run-up to that visit in
Australia about nuclear fuel leasing. I have, with a number of
my colleagues, many of whom are well known to this committee,
published an article that proposed an idea like this. It is an
idea that, I think, is certainly waiting to receive more public
support but I'm just trying to see if it might engender some
support.
The Chairman. Hasn't Russia thought about it, too?
Mr. Poneman. Absolutely and we had a very, I think,
constructive visit a few weeks ago from Mr. Karnataka, the head
of Atom Prom as it has now been renamed and I think that
their--now that we have discussions that have begun between the
United States and Russia about the possibility of peaceful
nuclear cooperation. I think this is a very ripe subject for
discussion in that channel, Sir.
The Chairman. Mr. Gadbaw, as a member of GE, you've spoken
here about great potential for commerce in exchange for ideas
that would cause growth in India and in other countries that
are partners with India and you're assuming in that regard that
we would be their friends and would make, would have some
potential for working with them. Could you talk a little bit on
the record with this committee about how you see that
atmosphere at this point?
Mr. Gadbaw. I think the atmosphere is quite positive for
working commercially with India and it has really developed,
evolved over again, the last 15 years, as our interests have
converged. I see in India growth across a whole range,
particularly in the infrastructure area. We've seen their
airlines go out and lease and purchase U.S. planes. We've seen
more of our generation equipment sold there, whether it is work
being done in the coal gasification area and the natural gas
area, in the rural electricification area. We are seeing work
with the railways, the Indian railways, to improve their
efficiency, whether it is with new equipment or in signaling
devices and in the healthcare business. We have a very active
healthcare business in India. This is true across the entire
Indian subcontinent. That is, in every part of India, this
dynamism that has been unleashed by these economic reforms is
demonstrating itself.
So we have a chance now to step up as India is asking us
for help in its most critical area of need that is in bridging
this energy gap that they have. I think unfortunately,
neglected over the years. Nuclear will be a piece of that and
this agreement will ensure that everything we do in the
civilian nuclear sector will be subject to the strike controls
of the IAEA but it will also, I think, create an understanding
between the two countries about how we need to work together in
these commercial areas and it says to India that we, the United
States, want to work with them to serve their needs and in
return, we want to talk to them about how we can work together
to address some of these pressing global issues.
The Chairman. Might I just close by asking any or all of
you to just comment with some closing remarks with reference to
how you see us as a committee--you know what our jurisdiction
is to pass laws that would put the United States in the
position of stating a policy toward another country or create a
policy that would be an enhancement, enhancing of a certain
kind of activity. Do you see anything we ought to be doing in
light of the new openness and of the fact of us proceeding so
far so fast with India? Should we be doing something that we
are not doing? Let's start on your end with you, Mr. Gadbaw.
Mr. Gadbaw. Well, as I mentioned in my testimony, I hope
that the committee will look carefully at the Convention on
Supplementary Compensation.
The Chairman. Yes.
Mr. Gadbaw. Which is not just relevant to India but
actually is relevant to every country where we are trying to
sell nuclear equipment, including places like Canada, where
U.S. companies have had to forego sales because of the absence
of a international regime. That will require possibly
implementing legislation and we would hope that the committee
would look at that. Thank you.
The Chairman. Okay, we will take a look at that. One or two
things from you, Sir?
Mr. Poneman. Mr. Chairman, first I would echo my
colleague's support of prompt Senate action on the
supplementary funding convention because I believe not just in
this instance but for the whole industry. The second point I
would make is that I think with the full range of energies that
you have heard discussed today and really, the opening of a new
chapter in the U.S./Indian relationship, that perhaps there may
be some channels that you could pursue as a committee and as
individual members in terms of reaching out to our Indian
colleagues so that they fully and deeply appreciate the
opportunities that this relationship presents. I would
certainly hope that the United States' industry is able to
quickly take advantage of this critical new opening and I think
that with your stature and leadership, you can make a signal
contribution there. Thank you.
The Chairman. Thank you.
Dr. Victor.
Dr. Victor. My impression is that the country is in urgent
need of a strategy to deal with the global warming problem and
I know this committee has spent much time on that issue and all
that I would urge is that it lay down a marker that this
particular arrangement with India can be part of an overseas
element of the nation's global warming strategy. I would also
urge that we have some discussions, not only about this in the
context of India, which has happened somewhat accidentally
because of the larger discussions about the U.S./India
relationship on nuclear power, but also very similar kinds of
arrangements could exist for China, where emissions of carbon
dioxide are growing even more rapidly.
The Chairman. Senator Bingaman, did you have anything to
wrap up? Thank you very much, gentlemen. It has been a pleasure
having you and you've really contributed here today. We
appreciate it.
[Whereupon, at 11:40 a.m., the hearing was adjourned.]
APPENDIX
Responses to Additional Questions
----------
Responses of David Pumphrey to Questions From Senator Domenici
ENERGY EFFICIENCY
Question 1a. The DOE has initiated an ``energy dialogue'' with
India through working groups that address energy efficiency, civil
nuclear power, coal, and renewables among other topics. In your
testimony, you highlight the importance of improved energy efficiency.
How will improved energy efficiency shape the future demand for
energy in India?
Answer. How India pursues the energy efficiency options it has in
each of its consuming sectors will determine the pace of growth in
future energy demand. It has been estimated by the Renewable Energy &
Energy Efficiency Partnership (an international NGO, funded by a number
of governments including: Australia, Austria, Canada, Ireland, Italy,
Spain, the Netherlands, the United Kingdom, the United States and the
European Commission) that the Indian economy could reduce its energy
consumption by as much as 23% from current levels. The industrial
sector accounts for about 48% of India's commercial energy consumption,
but energy savings of up to 30% have been estimated through
retrofitting in this sector. In the power sector, which is plagued by
high transmission and distribution losses, nearly 25,000 MW equivalent
of capacity creation could be achieved through improved efficiency. In
the commercial sector, the use of heat pumps, load management systems &
control, refrigeration systems/freezers, high-efficiency boilers,
building control, insulation, window coating & films, power factor
correction systems and combined heat & power plants could help achieve
energy savings. A number of steps could also be taken to reduce energy
demand in the transportation sector.
INDUSTRY INFRASTRUCTURE
Question 1b. How will India achieve the necessary investments to
fund industry infrastructure?
Answer. India will need to improve its investment climate if it is
to attract the private foreign capital it needs to build the
infrastructure its energy sector requires. This will require action by
the national and state governments to address various investor concerns
such as sanctity of contracts, tariff reform, transparency and a level
playing field. Recently we have seen progress on key investor issues
and believe over time India will begin to attract much of the
infrastructure investment it requires.
Responses of David Pumphrey to Questions From Senator Bingaman
STAFFING
Question 1. Does the Department of Energy directly fund any staff
positions at the U.S. Embassy in India to monitor energy and science
issues?
Answer. No, the Department of Energy does not currently fund any
staff positions at the U.S. Embassy in India.
RENEWABLE ENERGY MOU
Question 2. What is the status of the agreement between the
National Renewable Energy Laboratory or the DOE and India's Ministry of
non-conventional resource in for renewable energy, particularly solar?
Answer. The National Renewable Energy Laboratory (NREL) had two
Memoranda of Agreement with India's Solar Energy Center, which later
became part of the Ministry of Nonconventional Energy Sources (MNES).
The latest one expired in March, 2005, and there is not currently an
MOU in place. The Minister of Non-Conventional Energy Sources (MNES)
recently met with experts at the National Renewable Energy Lab to
discuss potential areas of collaboration. These areas include solar
thermal power generation, low wind speed technology research &
development, renewable energy resource assessment and the use of
resource data in relevant analysis tools. DOE's EERE and Office of
Policy and International Affairs are working with MNES officials
currently under the U.S.-India energy dialogue.
SCIENTIFIC EXCHANGE
Question 3. Has the Department considered exchanges of scientific
personnel between our national laboratories and the equivalent Indian
scientific laboratories funded through the Council of Scientific and
Industrial Research or the Ministry of Atomic Energy?
Answer. To our knowledge there has been no scientific exchange
between DOE laboratories and the Counsel of Scientific and Industrial
Research (CSIR) or the Ministry of Atomic Energy. However, the new
Science Counselor at the U.S. Embassy in New Delhi has recently made a
proposal to Dr. Mashelkar, the Director of the CSIR, to open a dialogue
between the DOE national labs and the CSIR labs. One of the outcomes
could be an exchange of scientific personnel.
SCIENTIFIC COLLABORATION
Question 4. My understanding is that the Department of State has
finalized the master S&T agreement between the U.S. and India,
particularly with respect to intellectual property, has the DOE taken
action(s) to implement scientific collaboration now that this umbrella
agreement is in place?
Answer. The Office of Science of the U.S. Department of Energy
(DOE) is interested in starting a dialogue with appropriate
counterparts in India as a follow-on to several initiatives that have
begun relative to increasing scientific collaboration between our two
countries. The U.S. side has interest in high energy physics, nuclear
physics and fusion energy sciences while India's interests include
collaboration in biotechnology, nanotechnology, climate research, and
other areas. Collaboration already exists in high energy physics and
nuclear physics on a lab-to-lab basis.
NANOSCIENCE/NANOTECHNOLOGY
Question 5. In my visit to the Indian Institute of Technology,
their Cal. Tech., I was briefed by their international projects office
who were actively collaborating with countries such as France to
develop joint advances in the areas of nanoscience and biomass to
methane conversion. They indicated no such collaboration existed with
the U.S. much less the DOE. Now that the master S&T agreement is in
place would the DOE please reach out to this world class institution?
Answer. Nanosciences/nanotechnology will be a strategic focus area
in the new S&T agreement. As part of the Indo-U.S. S&T Forum
(established in 2000), there have been several meetings and workshops
on nanosciences/nanotechnology. A nanotechnology conclave was hosted in
collaboration with Confederation of Indian Industry (CII) in February
of 2006. There has also been an ongoing collaboration between the
Jawaharlal Nehru Center in Bangalore and UC Santa Barbara. The DOE will
continue to collaborate on these technologies under the auspices of the
S&T agreement.
FORECASTING
Question 6. What are we doing to help India better forecast its
future energy demands? (The ministries in India are organized by fuel
and basically no one is charged with doing an aggregate forecast.)
Answer. India understands the significance of the forecasting
information as it goes directly into government planning. The closest
counterpart to DOE's Energy Information Administration (ETA) is India's
Petroleum, Planning, and Analysis Cell (PPAC). An Energy Information
Exchange MOU was signed in February 2006 between the EIA and PPAC at
the Ministry of Petroleum and Natural Gas. The agreement seeks to
improve Indian energy analysis and forecasting. The parties jointly
determined at their first meeting in June 2006 that the first step is
to improve the quality of Indian energy data. Unlike the companies
operating in the U.S., companies operating in India are not required
through legislation to report energy data to the government, causing
some difficulty. This challenge to national data collection will grow
as private sector participation in Indian grows. Therefore, the next
step for the Energy Information Exchange MOU will involve a technical
workshop about improving the quality of Indian energy data. The timing
and location for this workshop will be determined over the coming
months. After data quality issues have been addressed, EIA and PPAC
intend to focus more specifically on forecasting issues. Continuing an
exchange of ideas in the areas of data forecasting and statistical
accuracy is an essential part of the ongoing U.S.-India Energy
Dialogue.
IEA
Question 7. How are we helping India to participate in the IEA?
Answer. DOE has been actively encouraging India to participate in
IEA activities. India's formal participation in IEA activities dates
back to April 1998 when an agreement was signed to establish
cooperation. India designated its Ministry of Power to be the nodal
agency for this cooperation which has since included a series of energy
policy data workshops: the January 2004 IEA-India Workshop on Indian
Emergency Oil Stocks; Indian participation in the October 2004 IEA
Emergency Response Exercise for IEA non-member countries; the October
2004 workshop on Energy Efficiency Standards and Labeling; a range of
informal contacts and ad hoc Indian participation at IEA events; and
participation in the IEA Committee on Non-Member countries. We want to
continue to develop a closer relationship between the IEA and India by
expanding the engagement to all areas of the Agency's work.
______
Responses of David Victor to Questions From Senator Domenici
Question 1. In your testimony, you analyze the potential climate
implications and conclude that impact on greenhouse gases will ``become
one of the main benefits from the arrangement.'' You state that
``annual savings from the Indian deal could be nearly as large as the
entire commitment of the 25 EU nations to reducing emissions under the
Kyoto Protocol.'' You also discuss the potential for a framework
emerging from the Asia-Pacific Partnership that would apply to U.S.
engagement with developing countries on climate strategy. What steps
should the U.S. take to encourage such engagement with India and
developing countries?
Answer. The United States must show tangible progress from this
alternative framework--such as from the Asia Pacific Partnership (APP)
that is presently taking shape. However, the framework will work only
if it truly demonstrates a path that is complementary to what has
emerged within the Kyoto Protocol. The major developing countries are
seeing substantial resources flow into Kyoto projects under a scheme
known as the Clean Development Mechanism (CDM). Nearly 1,000 projects
are in the CDM pipeline right now. Many of those projects are of
dubious quality, but the CDM is nonetheless a real entity that is
producing real investment. So far, the APP is not. The developing
countries will be wary of any scheme to reduce carbon emissions that
delivers many meetings but no action. The APP is a good idea, as I
outlined in my testimony, but the fact that there has been trouble even
getting the money needed for meetings has been interpreted as a warning
signal that the very governments whose participation is essential are
not committed to the process.
Moreover, the framework I propose--whether through the APP or some
alternative institution--would work by engaging the industrial
ministries, power companies, gas companies, and other institutions that
are actually responsible for building and operating the energy
infrastructure. Unlike Kyoto and many other diplomatic institutions,
this framework would not focus solely on the diplomatic and
environmental regulatory apparatus, but also on the factors that drive
performance in the energy industry. The businesses and institutions
that actually build energy infrastructure rarely focus on international
diplomatic activities. They will be wary of wasting their time if the
effort does not yield practical outcomes.
I am deeply concerned that the United States is on the edge of
destroying its credibility within the APP due to the lack of tangible
progress. The funding fiasco earlier this summer resonated around the
world. At the very least, the United States should demonstrate its
commitment to the process of the APP by reliably meeting its basic
funding obligations without signaling disarray to the outside world.
As for particular projects, I strongly suggest that the United
States focus on a few large efforts that demonstrate clear progress
rather than a multitude of peripheral activities of limited impact. The
U.S.-India nuclear framework could be one such large project.\1\
Advanced coal combustion technology represents another opportunity for
the United States to engage China or India through cooperative
development and testing of technology--to date, the technology has
advanced further in China and the prospects are better there than in
India. In my testimony, I also highlight the potential for the United
States to lend its support to gas pipeline projects to deliver supplies
to China and India, which could offset increased installation of coal-
fired generating capacity in these rapidly growing countries.\2\
---------------------------------------------------------------------------
\1\ David G. Victor, ``Nuclear Power for India is Good for us
All,'' International Herald Tribune (oped, March 17th 2006).
\2\ See generally, Jackson et al., ``Greenhouse Gas Implications in
Large Scale Infrastructure Investments: Examples from China and
India,'' PESD Working paper, Stanford University (http://
iisdb.stanford.edu/pubs/21061/
China_and_India_Infrastructure_Deals.pdf).
---------------------------------------------------------------------------
Responses of David Victor to Questions From Senator Bingaman
Question 1. Your paper explains that the carbon reduction benefit
from nuclear power is based on 20,000 MW or about 20 additional 1000 MW
reactors being built by 2020 with enough carbon savings as the entire
commitment of 25 EU nations under the Kyoto protocol--what do you
estimate the total cost of such a project and do you think 20 reactors
could be built in India in the next 14 years?
Answer. The costs are unknown with precision but they are probably
in the range of $26-40 billion current dollars. The low figures, which
are implausible but not impossible, reflect the lowest credible numbers
that have emerged from analysts of the Indian power sector ($1300/kW
capacity; see citations in my testimony). The high number reflects the
most likely cost (approximately $2000/kw) for the current new
generation of light water reactors, although those numbers are likely
to decline with experience.
It is feasible, but difficult, to build 20 reactors in 14 years.
The effort would begin with perhaps a few orders for foreign reactors
as well as a few Indian projects; in parallel, diligent efforts would
be needed by the Indians to streamline licensing procedures (akin to
the new build/operate licensing scheme devised in the United States),
and new units realistically might come online by about 2015 with a
couple new reactors per year thereafter. In that framework, it will be
hard to reach 20 but an aggressive program could deliver that number.
Much higher numbers have been suggested, but I doubt those are
feasible. India's interest in very large coal-fired power projects also
makes it less likely that they will build fewer reactors unless nuclear
proves to be highly competitive.
Question 2. As compared to their coal reserves, does India have
sufficient stocks of uranium to operate 20 reactors or would they have
to import it?
Answer. They will need to import fuel, and the United States should
welcome that fact because import dependence will allow the U.S.,
working with other countries and with the IAEA, to frame a new
multilateral fuel cycle. The ideas surrounding such a fuel cycle--in
which supplies of fuel and fuel services would be controlled by a
limited consortium of countries--have been discussed for some time but
practical steps to implementation have been few. Potential fuel
importers are wary; a successful scheme must allay their fears, and
there is no better place to start than with a country that must import
and which is prone to work toward a new fuel cycle in a diligent
manner.
Some analysts have claimed that imports of fissile material for
India's commercial nuclear reactor program will allow India to divert
domestic supplies into weapons production. I do not agree and think
that argument is based on a false comparison. If India can't create a
viable commercial reactor program (which includes imports of fuel) then
it won't build many new commercial reactors (if any). The ore and
fissile material it has will be devoted to weapons and there won't be a
competition between military and commercial nuclear power. Outsiders
won't have much influence on the trajectory of the military program.
What is at stake here is just the commercial enterprise, and the fuel,
more or less, is not fungible between the two.
Question 3. What would be the incentive for India to build
Integrated Gasification Combined Cycle plants based on their coal
reserves as compared to importing uranium fuel?
Answer. Right now there are few incentives for commercial power
companies in India--including the state-controlled NTPC (which is the
largest operator of coal plants in the country)--to pursue IGCC. There
are some discussions about IGCC in India and some small cooperative
programs (notably with the U.S.). But IGCC can't compete with
supercritical technologies for coal. Supercritical technologies are
proven and they boost fuel efficiency by a large margin; IGCC is still
seen as risky and distant, especially when utilized in the context of
India's low grade coals. (There are some IGCC technologies that work
with low grade coals, and there have been some tests using Indian coal;
but small scale tests are quite different from operational commercial
plants in the Indian context.)
Implicit in the question is the thought that India will favor coal
because it is available domestically and, by the same logic, it will be
wary of nuclear reactors because they will require fuel imports. I
don't think that is the right way to analyze the Indian policy choices
today. If the U.S. and other countries are successful in creating a
viable multilateral fuel cycle, then fears about fuel insecurity will
abate. Moreover, India is already adopting policies to become dependent
upon imported coal--especially in western India where coal-fired power
plants are located far from India's coal fields (which are
predominantly in the northeast of the country) and it is relatively
easy to import coal by ship from reliable and low-cost suppliers such
as South Africa and Australia. In short, both the coal and nuclear
futures imply dependence on imported fuel and the Indian government has
equally good prospects in making both fuel supplies equally secure. For
coal, that security will come from the world market where coal is
increasingly a fungible commodity. For nuclear, that security would
come from a viable multilateral fuel cycle.
______
Response of R. Michael Gadbaw to Question From Senator Domenici
Question 1. In the area of nuclear technologies, what opportunities
exist for U.S. industry versus countries such as Russia and France that
appear poised to exploit Nuclear Suppliers Group provisions allowing
cooperation with India?
Answer. India originally planned to build eight new reactors.
Reportedly, the Indian cabinet has already approved six for
construction: four by the Russians and two by the French. Moreover, the
French may well be positioned to obtain the remaining two contracts as
well.
Nevertheless, India recently announced another string of reactor
projects beyond the original eight, and we understand that U.S. and
Canadian suppliers would be invited to compete for them. The Indian
government understands the importance of American companies being able
to compete fairly for opportunities in India. As S.K. Jain, chairman
and managing director of the state-run Nuclear Power Corporation of
India, Ltd. (NPCIL), noted in June 2006, India is interested in having
a significant American supplier presence, and is considering American
technologies like the Advanced Boiling Water Reactor (ABWR).\1\
---------------------------------------------------------------------------
\1\ T.S. Subramanian, ``Working to a Plan,'' Frontline, 23:11, June
3-16, 2006.
---------------------------------------------------------------------------
As soon as permitted under U.S. law and regulations, General
Electric is committed to playing a major role in India's construction
of new civilian nuclear power plants. GE's state of the art boiling
water reactor (BWR) designs offer significant cost and safety
advantages, and India has a wealth of positive experience with GE's
earlier generation BWR reactor at Tarapur. This experience and the
quality of GE's technology open the opportunity for the United States
to supply a significant portion of the 40,000 MW of nuclear power India
would like to build by 2020.
Nevertheless, the French and Russian governments and their
associated nuclear companies are clearly working hard to capture large
shares of the Indian nuclear market. The most important requirement for
U.S. commercial participation in that market will be to ensure that all
governmentally related barriers are addressed in a coordinated and
timely manner. The United States might consider a formal approach to
the governments of France, Japan, and Russia to ensure that no
government jumps the gun by allowing its companies to exchange
prohibited technology with India. At the same time, the United States
government should work with the U.S. industry to identify all actions
that must be taken to allow U.S. exports of civilian nuclear technology
to India, and should develop a plan for coordinating the efforts of the
U.S. and Indian governments to allow U.S. suppliers to obtain necessary
licenses at the earliest possible time.
Most immediately, the United States should ratify the Convention on
Supplementary Compensation for Nuclear Damage (of which it is a
signatory and prime mover) and pass any necessary implementing
legislation. U.S. leadership will put us in the strongest position to
ensure that India and other countries that currently lack nuclear
liability and compensation regimes will join the Convention. As
signatories, they would be required to adopt appropriate liability and
compensation legislation, and participate with the United States in
this multilateral regime. The treaty creates an insurance system to
protect nuclear suppliers from unlimited liability, while also ensuring
compensation for those injured in the very unlikely event of a nuclear
incident. The liability issue is critical for U.S. suppliers, which do
not enjoy the protection provided by state ownership. This is in sharp
contrast to French and Russian suppliers, which--underwritten by their
governments--are proceeding to do business in China and India despite
the absence of nuclear liability regimes there. Without effective
protection against liability, however, U.S. nuclear companies will not
be able to engage those foreign markets.
Responses of R. Michael Gadbaw to Questions From Senator Bingaman
Question 1. GE has a very long history in India, not just nuclear,
but everything from consumer goods to advanced R&D conducted at your
Jack Welch center in Bangalore. Given your experience at the Tarapur
reactors with the know-how for reactor design transferred to the
Indians, how will GE protect a similar technology transfer for their
advanced boiling water reactors especially under the Indian Atomic
Energy Act's disclosure and inspection provisions?
Answer. It is unclear how much India is focusing on technology
transfer. After 1974, India was cut off from foreign technology
support, and was forced to move forward on its own, developing its
pressurized heavy water reactor (PHWR) technology indigenously. It is
proud of that technology, and considers it internationally
competitive--more advanced, in India's view, than the current Canadian
technology. Rather, India's interest in foreign participation appears
to relate more to capacity requirements: India would like to develop a
40,000 MW capacity by 2020, but NPCIL, the national nuclear company,
can only complete 12,000 MW of that goal; foreign involvement would
help realize the remainder, and the Indians are unlikely to apply
regulatory requirements that frustrate that objective.
Nevertheless, maintaining safeguards on technology transfer remains
an important consideration, and the U.S.-India deal allows for ample
protections in this regard. Under this historic deal, India's civilian
nuclear program will be more transparent than ever before, and put
under IAEA safeguards, which will provide greater protection against
illegal transfer and use of foreign technologies. India has a record of
respecting such safeguards, as was the case with the Tarapur 1 and 2
plants supplied in the 1960s.
The 123, IAEA, and NSG agreements required under the U.S.-India
deal are designed to ensure that the participation of U.S. companies in
the Indian nuclear market will not lead to unauthorized use of American
technologies. In the private sphere, moreover, the contracts we
establish with the Indian government and other relevant entities will
prohibit misuse and provide for compliance with the USG-GOI agreement.
India has demonstrated that it will honor such commitments.
GE is fully committed to compliance with U.S. trade control rules,
including those administered by the Departments of Energy and Commerce
and the Nuclear Regulatory Commission. Working with its businesses,
employees, partners, and customers in India, GE will ensure that
technology transfers to India accord with all applicable laws and
regulations. In addition, we take measures to protect our valuable
trade secrets and company proprietary information regardless of export
control requirements. We require suppliers, partners, and contractors
that have access to company proprietary information to protect such
information.
Question 2. One of the unknowns is the licensing of a large 1,000
MW reactor by the Indian Atomic Energy Regulatory Board--Indian
reactors typically are smaller in power, 200-500 MW, than the large
reactors developed by GE which are 1,000 MW or more. Do you expect any
licensing issues with your reactors?
Answer. We do not expect any licensing problems with respect to the
capacity of our reactors. GE will offer to supply reactors such as the
ABWR, which has already been licensed in the United States, Japan, and
Taiwan, and the ESBWR, which is in the process of being licensed in the
United States. GE is confident that these advanced designs will meet
Indian regulatory requirements or can be modified if necessary to do
so. Reportedly, India's Atomic Energy Regulatory Board has already
begun to work with the U.S. Nuclear Regulatory Commission in order to
facilitate potential licensing of these designs in India.
We note also that Russia is already in the process of constructing
two pressurized water reactors of 1,000 MW each at Koodankulam, Tamil
Nadu. NPCIL has made explicit its willingness to authorize at least ten
reactors of 1,000 MW each. Influential Indian companies expect to build
nuclear plants with even greater capacity. Vedanta Resources plans to
build a 2,400 MW reactor, Reliance Energy a 2,000 MW reactor; Tata
Energy may enter the arena as well. All are seeking international
partners. Altogether, this signals that the Indian government accepts
and supports a major advance in the capability of India's nuclear
plants, and welcomes foreign participation in that process.
______
[Responses to the following questions were not received at
the time the hearing went to press:]
Questions for Daniel Poneman From Senator Bingaman
Question 1. Many have said that aiding India's civilian nuclear
program, even under IAEA safeguards, will only free up fuel to make
plutonium for their unsafe guarded weapons program--do you find that
statement to be true?
Question 2. Unlike the U.S., India integrated their civilian R&D
program with their military nuclear program, how hard will it be to
separate civilian facilities not only physically local to a military
one but the people as well?
Question 3. Do you think the Indians will be receptive to U.S.
embassy led end-use inspections of nuclear equipment exported to their
facilities to ensure they are not re-exported elsewhere?
Question 4. Your proposal of fuel leasing goes back to the
Eisenhower Atoms for Peace program--but the central flaw of the program
is it denies India any indigenous capability for self sufficiency in
nuclear fuel production--they are reliant on other nations. India has a
long tradition of non-alignment--do you think they will be receptive to
such a tying arrangement?
______
Question for Paul Simons From Senator Domenici
Question 1. Without nuclear power, how will India meet its energy-
mix needs?
Questions for Paul Simons From Senator Bingaman
Question 1. The 1978 Nuclear Nonproliferation Act amended the
Atomic Energy Act to provide enhanced safeguard measures and sanctions
for non-nuclear weapons states that violate criteria with respect to
proliferation or militarizing nuclear energy. In each case the
President has the ability to exempt a non-nuclear weapon state that
violates the conditions set forth in the Act, by submitting to Congress
a waiver and having the Congress enact a resolution accepting the
waiver as it pertains to a cooperation agreement or enacting a
resolution of disapproval as it pertains to an exempted export. This
process actually works--the Congress failed to reject to exports of
fuel to the Indian Tarapur reactors in 1979 and 1980. Why do we need to
enact new legislation to exempt India from law which has worked in the
past?
Question 2. The Global Nuclear Energy Partnership involves
reprocessing spent nuclear fuel and fast breeder reactors, it is my
understanding that India's Fast Breeder Reactor and some reprocessing
facilities will stay on the military facilities list--do you recommend
extending the program to India?
Question 3. Do you have a nuclear cooperation agreement in place
with India? If not why are we enacting legislation when we have not
seen such an agreement?
Question 4. The principal avenue by which we collaborated with
India in R&D was through loan repayment funds deposited in India
accounts under the ``P.L. 480'' program. My understanding is those
funds are now long gone. Would it be advantageous to set up a fund
similar to the Israel--U.S. Bi-national Industrial Research and
Development Fund where revenue from supported projects is used to repay
the R&D grant?