Antony Froggatt, a senior research fellow at Chatham House, works on international energy security and climate issues. An expert on nuclear power policies in Europe, Froggatt talks about his interest in energy security, the energy situation in India and the civil liability for nuclear damage bill tabled in the Monsoon Session of Parliament.
Excerpts from an interview:

Q: India is piloting a bill in Parliament on the civil liability for nuclear damage. What are the essential ingredients of a bill like that?
A: If I were drafting a bill, the first and foremost thing would be ensure that there is a mechanism that enables adequate compensation in event of an accident and that somewhere should be the primary objective of that legislation. Therefore, it is clear that the extent to which the economic impact of a large-scale nuclear accident is probably beyond the financial means of a single entity.
In an ideal bill, you would be looking at identifying different tiers of accountability. If you take example of either Germany or the US, firstly the primary responsibility is with the operator. Then you have a system whereby all of the nuclear operators within the country have a financial responsibility and then you have the state as the third tier. I imagine you would have some similar type of system in India which basically just increases the financial resources available in event of an accident.

Q: A nuclear accident is not limited to geographical boundaries, so should the civil liability for nuclear damage bill need to cover that aspect too?
A: You can look at it in two ways: People argue that if you join the Paris or Vienna conventions, it includes a thing called no-fault liability, which makes it easier for compensation to be sought in event of an accident. It aids different parties from other countries to get money.
The other way is taking the example of Austria, which has a definite policy of not signing the conventions because it sees that they would restrict its ability to get money. It does not recognise the channelling and does not recognise the ceilings, so it believes it enables its citizens potentially to sue a company in another country.
As the conventions have a no-fault liability, in theory, it should enable citizens in another country to get financial compensation. However, on the other hand, it then is capping the total amount of money available and that brings with it the dilemma: Are they more likely to pay their own citizens or give compensation for those from another country. I think, that’s the danger.

Q: How does cap on the total amount of compensation in event of a nuclear accident work? We have seen British oil giant BP pay compensation way beyond the cap agreed in event of an oil spill. Would a similar scenario be applicable to a nuclear accident which might happen in India?
A: It is very interesting, and I don’t know what the widespread ramifications of the BP issue will be. It is very clear that political pressure was exerted on BP and BP said it will come out with the money. I don’t know whether or not legally BP could have held out and said, “No, no, no. This is what law says and our maximum liability is $75 million. All of you people who wish to have money, we are sorry, but our responsibility is only this much.” I just think politically it was impossible for them to do so and the value of their shares and all the rest of it make this a worthwhile trade-off.
In fact, it remains to be seen whether in the other parts of the world where such incidents occur, political and media pressure on the company can force them to increase the liability amount beyond the cap agreed on initially.
Taking the example of the Bhopal gas tragedy, there you have a situation where it took many decades and compensation was not perceived to be adequate. In some ways, BP and Bhopal are the two extremes of the liability issue and who knows what will happen in the future.

Q: Does the bill also need to consider the possibility of the future changes in the company, for example if it gets taken over by some other firm or goes into liquidation?
A: There is this no-fault liability that says the operator is responsible. I think the problem in case of a large nuclear accident would be where damages could be $1 billion, how many utilities in Europe or India would be able to pay that and what would happen if they become bankrupt? A lot of value of a company is in its share price, if the value of the share price drops significantly then its ability to pay is obviously significantly reduced. Identifying operators as the first port of call in the liability bill, I think is the good thing.

Q: China is also a keen player in the nuclear-generated energy. How does its liability regime compare with that of India?
A: China has a civil liability bill, but the payment levels are very low. I think it is interesting to see which companies are going to invest and under what conditions. We know that China is not party to the Vienna Convention, they do have a domestic legislation and yet we know that France has already built a nuclear power plant in China and Westinghouse is now proposing to. It’s clear they are willing to go without the same conditions they are requiring from India. I don’t know the Chinese domestic legislation enough to know what specific language is in there that gives the company confidence that it would not result in a financial impact for them, in case of an accident.

Q: What is the difference between the nuclear technologies available for power generation in the market? Would the level of technology used have an impact on the civil liability for nuclear damage bill?
A: This is a very interesting debate over reactor designs. The first generation reactors were originally the plutonium production reactors, the civil industry came out of these. They were the Magnox reactors in the UK and the RBMKs in Russia and these were designed to produce as much plutonium as possible. The Generation II’s are largely the pressurised water reactors that we see across the world. We then move into Generation III which are advanced pressurised water reactors of which there a few and then we have so-called Generation III+ reactors which are AP1000 and EPR, the European pressurised water reactors being built in Finland and France and a similar design reactor is being built in the US.
The Western vendors are pushing very hard for their Generation III+ reactors to be built. What we saw interestingly in the UAE case, was that it went on to choose South Koreans to build their reactor, a Generation III reactor. Obviously the French and others were quite disappointed. It has been argued that the safety standards or the safety requirements within the later Generation III+ reactors had an implication on price and therefore the UAE went for a slightly cheaper design.
It is very clear that the desire by the French, in particular, was to build a demonstration new generation reactor in Finland and France and this would then used as an example to get more export orders for the reactor. But if countries are turning around and saying it’s very nice, but we want something cheaper then where does it leave the French nuclear designers? It is a technology choice issue. It is something to be aware of and the other thing to look at is the whole package that comes with a reactor. If you look at the situation in China for example, Westinghouse got the deal over the French not solely because of the reactor design but over what adds-on came with it.

Q: Impacts and costs of a nuclear mishap are massive and long term. So does a cap on financial and time aspect as proposed in the Indian bill make sense?
A: The liability issue is two-fold from a company’s perspective — the first one is to potentially restrict how much it will have to pay in the event of an accident. But in many ways, that maybe to some degree academic because as in the BP situation there can be huge pressure to pay up in any case, plus the company may well be bankrupt as an operating entity, as it may have lost its assets, assuming they were destroyed, reputation is destroyed and effectively it may be finished in any case. The other side is the impact on the current operations of the company. Capping the compensation liability is important from the financial perspective as the implication of going for unlimited private insurance makes nuclear power uneconomic.
From an operating point of view, having financial cap adds to certainty of the operation. The financial cap is not driven by what could the maximum damage be but by what is feasible and achievable from an insurance perspective. However, when with the move towards pooling system, like in Germany and the US, the amount available for compensation is significantly higher. That would seem to be a logical way forward. This way has been recommended for European Union too.

Q: There is no global regime on nuclear civil liability. How does being party to Vienna or Paris conventions affect a country’s bid for compensation?
A: It hasn’t really been tested as in case of Chernobyl, which occurred in the Soviet Union in 1986, as the country was not a party to the Vienna convention. It is to the advantage of the signatory countries as it makes things clearer and the countries may not seek to overturn it, it may be individual companies and attempt to seek compensation regardless of the treaty.

Q: You are an energy expert, can you recommend the right technology to use for electricity generation?
A: A lot of work has been done on this and there are studies supporting whichever method you like and each method has some drawback or the other like solar PV is labelled the most dangerous due to use of chemicals, coal stations emit more radiation.
The important way to choose the best way to generate electricity is to look at different criteria. The best way is not to produce electricity. Conservation of energy is absolutely essential and I would argue that if you look forward 20 years, the forecasts that say we will have business as usual shows that we can’t meet global electricity demand.
From an environmental perspective, there needs to be an assessment of the immediate and long-term impacts and finally what kind of raw materials are available. Final issue is of resource availability. We need to wean ourselves off the fossil fuels and I would argue the same for nuclear as even uranium, which is the raw material for nuclear energy, is fast depleting. Comparing the production versus resource availability, for oil it’s about 40 years, for gas about 70 years and for uranium it’s about 75 years, if used at the current levels. Uranium is not a renewable resource.