Modi’s Clean-Energy Goals Face Funding, Political Hurdles

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Obama, Modi Say Breakthrough Reached on India’s Nuclear Program
President Barack Obama and Indian Prime Minister Narendra Modi said they broke a years-long deadlock Sunday on obstacles that blocked the U.S. from selling nuclear technology to Asia’s third-largest economy. Photographer: Saul Loeb/AFP via Getty Images

India’s Prime Minister Narendra Modi says the world’s third-biggest polluter is ready to take on global warming. Money and politics stand in his way.

Following meetings with U.S. President Barack Obama in New Delhi, Modi said India, a nation with some of the dirtiest air in the world and 400 million people without access to electricity, is prepared to use renewable power to reduce greenhouse gas pollution. The leaders also announced a breakthrough that may herald an expansion of carbon-free civilian nuclear projects.

While the remarks represent a shift in India’s tone on global warming, stumbling blocks remain. Indian legislation allows nuclear suppliers to be sued over accidents, a legacy of the 1984 chemical leak in Bhopal in which more than 10,000 people were killed or injured. Modi’s commitment to renewable power means India must build five times the current total installed solar capacity in the U.S., or about 12 gigawatts a year until 2022.

“It was significant that the Prime Minister said that we don’t feel external pressure on climate change but we feel pressure from inside that climate change is a significant issue for India,” said Navroz Dubash, a senior fellow at the New Delhi-based Centre for Policy Research. “That is important because on the back of that we have to build some serious domestic measures.”

In the past, India has stressed the historical responsibility of industrial nations for worsening climate change, and the government has been ambiguous about whether it will adopt domestic targets for reducing greenhouse gases. Modi’s comments suggest he’s ready to work with Obama on a deal in Paris in December that would for the first time require all nations, rich and poor alike, to restrain emissions.

Global Warming

“When we think about the future generations and what kind of a world we are going to give them, then there is pressure,” Modi said in a news conference with Obama on Sunday. “Global warming is a huge pressure.”

India is the world’s third-biggest polluting nation behind China and the U.S., making Modi’s participation in the United Nations climate deal crucial. In November, Obama reached a landmark agreement with President Xi Jinping designed to bring China into a system limiting emissions.

Previous climate accords, including the 1997 Kyoto protocol, required cuts only from developed nations. Since then, China surpassed the U.S. as the world’s biggest polluter, and India’s emissions increased rapidly.

“The president has an open line with President Xi on climate and now also with Prime Minister Modi,” John Podesta, an adviser to Obama, told reporters in New Delhi. “It’s very important to elevate that to the political level so that barriers can be opened up.”

Open Channel

Obama said he and Modi agreed to keep working on a phase-out of hydrofluorocarbons, a class of refrigerants that have been discovered to be potent greenhouse-gas chemicals in the atmosphere. More importantly, he said the two established a channel for them to talk about climate before the Paris summit and that the U.S. will provide financial support for India’s solar program.

Modi’s commitment to renewable power means 600 solar farms with 20 megawatts of capacity for each of the next eight years. SunEdison Inc. has announced plans to invest $4 billion to build the biggest solar panel factory in India.

“Whether Modi can achieve the target hinges on funding,” Izumi Kaizuka, manager of the research division for RTS Corporation, a Tokyo-based consulting firm for the solar energy industry, said by telephone Monday. “The pace of solar expansion has tended to be delayed even under the previous goal which was much lower.”

It’s a $160 billion funding hurdle, according to Arunabha Ghosh, chief executive officer at the New Delhi-based Council on Energy, Environment & Water. Others agree.

Coal Consumption

“India has a big financing problem because its local interest rates are very expensive,” Xie Jian, president of Chinese solar panel supplier JA Solar Holdings Co., said in a telephone interview. At the same time “overseas financiers find themselves under huge pressure because India’s foreign exchanges rates fluctuate widely.”

Coal use presents another challenge. The International Energy Agency has said India will overtake the U.S. by 2020 as the world’s second-largest coal consumer, making it more difficult to wean India off of the fuel used for almost 60 percent of the country’s electricity. The agreement on civilian nuclear reactors announced Sunday may help.

India is one of the few nations that do not exempt nuclear suppliers from accident liability. Though Obama said the two countries had taken an “important step,” neither leader provided details on how an earlier 2005 U.S. decision to provide India nuclear fuel and reactor components would finally be implemented.

“We think we came to an understanding of the liability” issue, U.S. Ambassador Richard Verma said. The deal “now opens the door for U.S. and other companies to come forward and help India develop its nuclear, non-carbon-based energy production.”

Accident Liability

India plans a $182 billion expansion of its nuclear industry to produce electricity for the almost one-quarter of the country’s 1.2 billion people who routinely go without it. Modi’s administration on Sunday said it will set up a 7.5 billion rupee ($122 million) insurance pool to shield nuclear plant operators and suppliers from liability. The government would add to the pool at a later date “on a tapering basis,” according to the foreign ministry.

U.S. companies such as General Electric Co. and Westinghouse Electric Co. that have stayed away from India must decide whether the arrangement is adequate, Verma said. Westinghouse, the Cranberry Township, Pennsylvania-based nuclear builder owned by Toshiba Corp., must study the offer, said Chief Executive Officer Danny Roderick.

“We need to understand what I’ll call the fine print of the insurance,” Roderick, said in a phone interview from New Delhi. “Let’s look at the total package of all the things that the Indian government is talking about now on how they’re going to address nuclear liability.’

Unresolved Issues

It remains unclear what would happen if unlimited claims come in the wake of a disaster, according to Debasish Mishra, Mumbai-based partner at Deloitte Touche Tohmatsu.

‘‘This is a government-to-government agreement and ultimately the final deals will be signed between companies,” he said. “There’s a feeling that not everything has been resolved.”

As part of the deal, the U.S. dropped its earlier insistence that it be able to track the nuclear material provided to India, a requirement that went beyond standard International Atomic Energy Agency safeguards, according to Indian press reports.

Obama arrived Sunday morning in Delhi for the start of the three-day visit. Modi departed from protocol to greet him at the airport. The two shared a hug at the bottom of Air Force One’s stairs.

Diplomatic Choreography

Obama and first lady Michelle Obama are Modi’s chief guests Monday for the Republic Day parade, the ceremonial centerpiece of the president’s visit. The procession features missiles, tanks and a fly-past by the Indian air force’s Russian fighter jets and U.S.-made transport and surveillance planes.

The day’s diplomatic choreography -- televised live for hours in India -- showcased the two countries’ relationship in a way rarely seen here. Just eight months in office, Modi has been more willing than his predecessors to be seen publicly as close to the U.S.

“He’s treating the U.S. as a very, very significant part of India going up to the next level as an economy and as a power,” said Baijayant Panda, an opposition member of parliament.

(An earlier version of this story corrected Westinghouse’s headquarters in the 19th paragraph.)

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