Chinese go nuclear at home and
abroad By Antony Froggatt and
Joy Tuffield
The Chinese energy sector is
dominated by coal, which provides nearly 70% of
the country's energy compared with a global
average of 27%. Furthermore, with energy demand
rapidly increasing, so is coal production, which
was 3.5 billion tonnes in 2011, more than doubling
its 2002 level.
The International Energy
Agency's current policy scenario predicts that
total coal demand in China will increase by 1,000
million tons of oil equivalent (Mtoe) by 2035, up
from 2,500 Mtoe in 2009. This projected increase
is around double the current total consumption
levels in the United States and would increase
carbon dioxide (CO2) emissions
from approximately 4,751 million tons (Mt) to
1,0000 Mt in 2035, equal to nearly one quarter of
the world's projected total at that time. [1]
China is aware of the resource and
environmental implications of its current energy
policies and is attempting to address these. In
particular, the 12th Five-Year Plan (2011-15)
proposes to reduce the increase in consumption by
improving its energy and carbon intensity by 16%
and 17% respectively by 2015 as well as expanding
the use of non-fossil fuels so that they provide
11.4% of total energy consumption. Meeting these
targets would not fundamentally change the
trajectory of Chinese CO2 emissions in the short
run, but it would require unprecedented investment
and planning in the relevant sectors in the coming
years with long-term implications.
While
the main focus of this article is not renewable
energy, it is important to note the impressive
growth in Chinese renewable energies, in
particular wind and increasingly solar
photovoltaic (PV) systems. In 2001, China had an
installed capacity of wind of just 406 megawatts
but by the end of 2011 it was 64 GW. Five years
ago, nuclear power was producing 14 times as much
electricity as wind, but by 2011 the difference
was less than 30%. [2]
The country's
on-grid wind power capacity is projected to reach
100 gigawatts by 2015 and 200 GWs by 2020,
according to the 12th Five-Year Plan for Wind
Power Industry. Solar PV has also grown
remarkably, both in production capabilities (much
of which is used for export) and more recently in
installed capacity. At the end of 2011, total
installed capacity for solar was 3 GW, up from 300
MW in 2009. A recently revised target from 15 to
21 GW by 2015 projects a rapid acceleration of the
growth rate.
China only started
construction of its first commercial nuclear
reactor in 1985, but its nuclear sector is
developing fast, and it now hosts 40% of the
world's reactors under construction. As of August
2012, China had 16 reactors in operation, which in
2011 provided just 1.85% of the country's
electricity. This compares to a historical maximum
of 2.2%, since despite increases in the production
from nuclear power, electricity demand is growing
faster. Until Fukushima, China had an impressive
recent history of construction starts. However,
during 2011, though three reactors were completed,
construction did not start on any further
reactors.3
Projected nuclear power
development In 2007, the State Council
issued the National Nuclear Power Middle and Long
Term Development Plan 2005-2020, which proposed
that 40GW of nuclear capacity be in operation by
2020 with a further 18GW under construction. A
revision to this plan was under consideration in
2010, when some officials predicted that a more
likely target for 2020 would be 80GW in operation
together with a further 50GW under construction.
In
January 2011, the State Council Research Office
(SCRO), which makes independent policy
recommendations to the State Council, published a
report suggesting that the 2020 target should be
restricted to 70GW of nuclear power in operation,
with another 30GW under construction, so as to
ensure quality control in the supply chain. It
cautioned against the launch of new Gen-II
projects, and emphasized the need for greater
deployment of Gen-III+ projects, notably AP1000s.
Safety concerns over the domestic designs
were highlighted in a 2008 cable from the US
embassy in Beijing, released by WikiLeaks, when it
stated that the Gen-II CPR-1000 design were copies
"of 60s era Westinghouse technology that can be
built cheaply and quickly." [4] Similar concerns
have been expressed by Tang Zede, a member of the
State Nuclear Power Technology Corp, who was
reported to have said that the CPR-1000 could not
meet even the national safety standards issued in
2004, let alone the most up-to-date international
standards. Tang stated that "unless, the
constructed Gen-II reactors are renovated, they
should not be allowed to load fuel and start
operation". [5]
Furthermore, the SCRO
report advised that since goals to increase the
localization of AP1000s have proven difficult,
efforts were needed to break the bottleneck on the
domestic supply chain for AP1000s. In addition,
the SCRO recommended that the National Nuclear
Safety Administration, responsible for
implementing safety regulations, be removed from
the authority of the China Atomic Energy
Authority, whose aim is to promote the nuclear
industry.
Nuclear power development
after Fukushima In the aftermath of March
2011 earthquake and tsunami that destroyed
Fukushima nuclear plant in Japan, on March 14, Xie
Zhenhua, vice chairman of the National Development
and Reform Commission, stated that "[e]valuation
of nuclear safety and the monitoring of plants
will be definitely strengthened." [6] An account
of a mid-March 2011 State Council meeting chaired
by Premier Wen Jiabao states: "We will temporarily
suspend approval of nuclear power projects,
including those in the preliminary stages of
development. ... We must fully grasp the
importance and urgency of nuclear safety, and
development of nuclear power must make safety the
top priority". [7]
As a result, a new
China National Plan for Nuclear Safety with
short-, medium- and long-term actions was ordered
and approval for new plants will remain suspended
until it is approved. [8] The China Guangdong
Nuclear Power Corporation's (CGNPC) chairman, He
Yu, was reported in October 2011 to say that two
plants were to be completed by the end of 2012.
[9]
On June 1, 2012, the State Council
announced it had finished inspecting the country's
existing nuclear plants, and gave preliminary
approval to both a revised 2020 nuclear strategy
and a post-Fukushima safety plan. The revised 2020
nuclear strategy is expected to propose a target
of 60-70GW by 2020. The indications are that the
new safety plan will reduce the role played by
Gen-II reactors in upcoming projects, which in
part explains the proposed decrease in the 2020
target capacity
Prior to Fukushima, the
12th Five-Year Plan projected 43 GW of nuclear
power in operation by the end of 2015. Meeting
this target would have required the completion of
all the reactors under construction at the end of
2010, plus those that were planned to be started
in 2011. However, the suspension of the start of
new construction, the uncertainty over the
strategic direction for future designs, along with
the problems outlined below, make meeting this
2020 target highly unlikely.
Concerns have
been raised about the availability of qualified
staff and about the impact of such rapid
construction on supply chains, leading a research
unit of the State Council to suggest that the rate
of growth be limited. Moreover, public acceptance
of new reactors can no longer be taken for
granted.
Historically, nuclear protests
mainly occurred in Hong Kong opposing the Daya Bay
facility (both before and after the 1997 transfer
of sovereignty). However, post-Fukushima, greater
public concern coupled with reactors being
proposed in up to 16 provinces, makes wider public
engagement likely.
China's importance in
the global nuclear sector is not solely due to
construction numbers; it is also related to the
types of reactors being built. Currently, the
world's major reactor vendors, including AREVA and
Westinghouse, are building their most advanced
designs in China. In the case of Westinghouse, the
AP1000 is the company's flagship Generation III+
design, and China is its most advanced sale.
A key factor in the contract was that it
contained a technology transfer not only for the
reactor but also for back-end services,
particularly waste management. In June 2011,
Westinghouse said it was in talks regarding
building 10 further AP1000 units, and confirmed
that as part of the earlier construction agreement
it would transfer intellectual property rights.
Construction of these four units, two at
Sanmen and two at Haiyang, is underway, although
delays of six to 12 months are reported. For the
first unit at Sanmen, this is said to be due to
design changes post-Fukushima, while for the
remaining three it is said to be due to supply
chain issues relating to the increasing local
content. It is suggested that the domestic content
across the series of the four reactors will
increase from 30% to 70%, with any future reactors
built with purely Chinese parts.
The
estimated construction costs of the AP1000 are
also quoted as rising. In 2009, the estimated cost
was US$1,940/kW, but the latest figures range from
$2,300-2,600/kW. [10] While this is far below the
estimated costs of any other Generation III+
globally, it is higher than the reported costs for
the CRC 1000 at $1,800/kW.11
In November
2007, AREVA announced the signing of an 8 billion
euro (US$11.6 billion) contract with the CGN for
the construction of two European Pressurized Water
Reactors (EPR) in Taishan in Guangdong province
and that it will provide "all the materials and
services required to operate them". [12]
At about the same time, China and France
signed an agreement opening the way to industrial
cooperation at the back end of the nuclear fuel
cycle, committing to undertake feasibility studies
for the construction of an 800 ton-per-year spent
fuel reprocessing plant in Jiayuguan, Gansu
province. Design, construction, and commissioning
were expected to take a decade starting from 2010.
In November 2010, an industrial agreement was
signed that AREVA called "the final step towards a
commercial contract" for the project, though this
view may be too optimistic. [13]
China's export of nuclear
reactors China has also been engaged in,
and is increasing its activity for, the export of
nuclear reactors. In Pakistan, which is outside
the regime of the Non-Proliferation Treaty, China
has supplied equipment for the two reactors at
Chashma, the second of which entered commercial
operation in May 2011. Construction of units 3 and
4 was said to have begun at the end of 2011 with
the engagement of China Zhongyuan Engineering as
the general contractor and China Nuclear Industry
No 5 as the installer, with finance also coming
from China.
In October 2011, CGNPC signed
a contract agreement with Romania's state-owned
Nuclearelectrica to invest in the completion of
units 3 and 4 of the Cernavoda plant in Romania.
In recent months, the Chinese industry
reportedly connected with many other projects
around the world. The April 2012 visit of the
Turkish Prime Minister Recep Tayyip Erdogan to
Beijing was used to discuss China's assistance for
a proposed nuclear power station at Sinop.
Other possible deals include the prospect
of the sale of a plant to South Africa and a
nuclear co-operation agreement in Saudi Arabia. In
July 2012, China National Nuclear Corporation
(CNNC) was in talks with the Argentinean
government regarding the construction of a fourth
unit at the Atucha nuclear power plant. Argentina
awarded CNNC a certificate for the preliminary
examination of ACP1000 technology application.
China's entry into the international
market will increase competition for the existing
reactor exporters. In particular, Chinese
companies may well compete with Russia's nuclear
sector, which has been active in markets such as
Belarus, Turkey and Vietnam.
Cutback in
European nuclear energy plans Several
nuclear development plans have been scuppered
across Europe in recent years, particularly in the
UK. In September 2011, the UK Utility SSE exited
the NuGen nuclear group by selling out to partners
Iberdrola and GDF-Suez. A second withdrawal from
new nuclear projects took place in March 2012,
when RWE and E.ON pulled out of their Horizon
joint venture citing global economic conditions, a
shortage of capital, and the accelerated phase-out
of nuclear power in Germany as reasons for their
exit.
RWE and E.ON were planning
investments of approximately $23 billion to
develop 6GW of nuclear power across two approved
sites - Wylfra and Oldbury - by 2025. The
companies are seeking a buyer for Horizon. At
least two consortiums, both involving state-backed
Chinese enterprises, have shown significant
interest in putting forward a bid.
The
first involves Westinghouse, the Japanese-owned
nuclear reactor manufacturer, in partnership with
State Nuclear Power Technology Corporation of
China. The second is led by AREVA, the French
state-controlled nuclear reactor manufacturer, in
partnership with China Guangdong Nuclear Power
Corporation (CGNPC). In addition, Russian
state-owned Rosatom and, it is believed,
US-Japanese joint venture GE-Hitachi have an
interest in bidding. However, since the AREVA EPR
and Westinghouse AP1000 are the only Gen-III+
designs to have undergone the lengthy process of
getting approval from the UK's Office for Nuclear
Regulation, it is unlikely that the bids put
forward by either consortium could be challenged.
Nevertheless, in contrast to Italy and
Germany, both of which have chosen to exit nuclear
power, the British government remains determined
to proceed. Not only is it supporting the
construction of new nuclear plants, but it
proposes to guarantee a minimum price for the
electricity that is expected to range between two
and three times the current base load price,
without which no utility will build nuclear in the
UK.
As with most energy sectors, what
happens in China regarding nuclear power has
global ramifications. In many quarters there is
significant confidence that ambitious targets for
domestic construction will be met, but this should
be tempered given the remaining strategic
questions over nuclear safety standards,
engineering bottlenecks, increasing environmental
opposition combined with lower electricity demand
projections.
Globally, Chinese companies
are becoming more active and one of the key
nuclear test cases will be in the UK, where
successive governments have been promising a
"nuclear renaissance" for over a decade. With
European utilities pulling out of the bidding
process, gaps have opened up and speculation is
rife that Chinese investors will step in.
However, with high estimated construction
costs, the projects will only proceed with
significant government financial guarantees - aka
subsidies. In these austere times, whether the UK
government is willing to grant adequate financial
inducement is still unclear. However, if they do,
and Chinese companies form part of the consortiums
it will no doubt be a milestone for the Chinese
nuclear sector.
Notes: 1.
IEA, "World Energy Outlook", International Energy
Agency, November 2011. 2. BP, "Statistical
Review of World Energy, BP, June 2012. 3. IAEA,
"PRIS-Data-base", International Atomic Energy
Agency, accessed August 2012. 4. Wikkileaks, Viewing
cable 08Beijing3362, Effective Nuclear Advocacy in
China. 5. "Despite Inspections, Post
Fukushima Impact on Newbuild is Minimal," Nuclear
Intelligence Weekly, January 30, 2012. 6.
Archana Chaudhary, Nuclear
Accident Forces China Policy Review as India Sees
Safety Backlash, 14 March 2011. 7. "China
Suspends Approval for Nuclear Power Plants," The
Guardian 16 March 2011. 8. WNA, Nuclear
Power in China, May 2012. 9. Dynabond, China's
nuclear safety plan might be completed by the end
of this year, 27th October 2011. 10. "Wang
Declares AP1000s Back on Track", Nuclear
Intelligence Weekly, March 23rd 2012. 11.
"AP-1000s Delayed by 6-12 Months SNPTC Says,"
Nuclear Intelligence Weekly, January 17th
2012. 12. AREVA, "China: AREVA and CGNPC Sign
the Biggest Contract Ever in the History of
Nuclear Power and Enter into a Long-term
Commitment. AREVA and CNNC Strengthen Their
Links," press release (Paris: 26 November
2007). 13. World Nuclear Association (WNA), China's
Nuclear Fuel Cycle, updated January
2011.
Antony Froggatt is
currently an independent consultant on
international energy issues and a senior research
fellow at Chatham House (also known as the Royal
Institute for International Affairs). He is also
co-author of The World Nuclear Industry Status
Report 2012: (worldnuclearreport.org). Joy
Tuffield is a recent graduate of Oxford
University. She has worked in oil and gas
corporate finance and has been working in the EER
summer programme at Chatham House.
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