How will Australian uranium affect India’s energy mix?

India has ambitious plans to expand nuclear power.

Earlier this week, the Australian Prime Minister Julia Gillard indicated she wants to reverse the ban on selling uranium to India. India’s government has welcomed the idea. Australia has close to 40% of low cost uranium and is the world’s third largest exporter, with most of its exports going to the US, Japan and South Korea.

While the announcement has caused much controversy in the Australian media (mostly because India is not a signatory to the Nuclear Non-Proliferation Treaty (NPT)), less attention has been devoted to the potential impact of Australia’s uranium sales on India’s energy security.

India’s energy demand has nearly doubled in the past decade. India is now the world’s fourth-largest energy consumer. According to data from BP, the average annual demand growth since 2004 has stood at 7.5%, with record growth of 9.2% in 2010.

In terms of energy mix, India relies heavily on coal (over 50%), oil (30%) and natural gas (over 10%). Although India is home to 20 nuclear reactors in six power plants, nuclear power supplies only 1% of India’s energy needs, and less than 3% of electricity.

India has ambitious plans to expand its nuclear power capacity. Five additional power stations (with nine reactors) are under construction. Once online, these reactors would more than double India’s nuclear power capacity.

In the longer term, India plans to spend $175 billion by 2030 on expanding nuclear generation. The goal is to achieve an eight-fold increase by 2022 to 10% of the electricity supply and a 70-fold increase by 2052 to 26%.

Indian public opinion is against nuclear, so what will happen to Australia’s uranium? Greenpeace

This would bring nuclear’s share in India’s electricity supply on par with the mix in Japan and South Korea, and would reduce the share of coal in the country’s electricity supply.

At the same time, India’s domestic uranium reserves are small and the country is dependent on uranium imports to fuel its growing nuclear power industry. While the discovery of large deposits in Andhra Pradesh in early 2011 is promising, it will take some time to start production from these deposits.

Although India is not a signatory to the NPT, waivers from the Nuclear Suppliers Group in 2008 have lead to bilateral deals on civilian nuclear energy cooperation with numerous nuclear powers, including the US, UK, France and Canada. In addition, India has uranium supply agreements with Russia, Kazakhstan, Namibia, Mongolia and Argentina.

But while the international obstacles to India’s nuclear energy expansion have been removed, domestic resistance is intensifying, especially in the aftermath of the Fukushima disaster.

India’s government reviewed its nuclear power plants after the Fukushima disaster, and declared them safe. But in the world’s most populous democracy, it has become very difficult for any political party to sell the idea of nuclear power to the Indian people. For example, in recent weeks, work at Kudankulam Nuclear Power Plant has been halted by protests by local villagers, backed by the newly elected Tamil Nadu state government.

India’s domestic coal reserves are limited and renewable energy sources are not mature enough to supply the kind of energy requirement that India would need. In fact, nuclear power is the most viable option to satisfy India’s growing energy needs from a low-emissions point of view.

In this context, Australia’s potential uranium sales to India would go some way towards reducing the share of fossil fuels in India’s energy mix. However, whether these sales materialise seems to be beyond Australia’s control.