Nuclear Boom in China Sees Reactor Builders Risk Their Know-how for Cash
The ballroom of the Grand Hyatt on Beijing’s East Chang An Avenue was packed. The occasion: the first-ever China International Nuclear Symposium, a gathering of China’s top nuclear players and the world’s nuclear power companies, including Westinghouse, Areva SA, and Hitachi-GE.
What brought the Chinese to the Hyatt on Nov. 24 and 25 was a hunger for the latest technology, Bloomberg Businessweek reports in its Dec. 6 issue. What brought the foreigners was money: According to Michael Kruse, consultant on nuclear systems for Arthur D. Little, the Chinese are ready to spend $511 billion to build up to 245 reactors.
“The market is being driven by the construction of new reactors, and it is no secret that most of those are right here in China,” says Fletcher T. Newton, an executive vice-president of Uranium One, a mining company.
The global nuclear industry is willing to take big risks to get a piece of China’s nuclear budget. The danger is that in landing those fat contracts -- and sharing technology with Chinese partners -- the industry will help build a formidable rival. Even though they lack the most advanced technology, the Chinese are rapidly becoming self-sufficient in reactor design and construction, according to the World Nuclear Association.
The industry has the backing of the deep-pocketed Chinese state, an ambitious plan to train an army of nuclear engineers, and the leverage that comes from being the biggest market around.
“They are going to use a bunch of different [suppliers] with the goal of being a developer themselves,” says Jeffrey Holzschuh, a Morgan Stanley vice-chairman.
Westinghouse, for example, says it has handed over more than 75,000 technical documents to its Chinese customers as part of its agreement to license reactor technology.
“We look at this as a long-term opportunity and partnership,” says Jack Allen, Westinghouse Asia’s president. “But there are no guarantees.”
Just 13 nuclear plants operate in China today, and until recently the Chinese were building only one or two reactors a decade. Now they are building 25 facilities, accounting for close to half the reactors under construction worldwide.
“This shows the rapid momentum of China’s nuclear power development,” says Zhang Shanming, president of China Guangdong Nuclear Power Group, the country’s No. 2 builder and operator of reactors.
China’s energy planners say they aim to have 40 reactors by 2020 and, by 2030, enough additional reactors to generate more power than all 104 reactors in the U.S., the leader in nuclear energy. Westinghouse, Areva, and other foreign companies will profit by licensing their reactor technology, consulting on safety and other issues, supplying components, and helping with construction.
“Money is not an issue, which is different from the rest of the world. The Chinese have the capacity to deliver and they are deadly serious about achieving it,” says Steve Kidd, director of strategy and research at the London-based World Nuclear Association, the industry trade group.
President Hu Jintao wants non-fossil fuels to produce 15 percent of China’s energy by 2020. Although the Chinese have spent plenty on wind turbines and solar panels, only a buildup of nuclear power can make that target reachable.
“Developing clean, low-carbon energy is an international priority,” says Zhao Chengkun, vice-president of the China Nuclear Energy Association. “Nuclear is recognized as the only energy source that can be used on a mass scale to achieve this.”
Foreign companies are already getting contracts. On Nov. 23, Cameco Corp., the miner, agreed to supply 29 million pounds of uranium to Guangdong Nuclear through 2025. Thomas Mundy, president and chief executive officer of Exelon Nuclear Partners, whose parent company runs 17 nuclear reactors in the U.S., says he hopes to reach an agreement by mid-2011 to help the Chinese manage their reactors.
Westinghouse designs are being used for four reactors now under construction. Areva has sold two latest-generation reactors now under construction, as well as nuclear fuel. Areva Chief Executive Officer Anne Lauvergeon told the French Senate on Nov. 24 that she expected another deal on two more.
According to Lauvergeon and Allen, China is building reactors faster and at a lower cost than the rest of the world. State ownership of the industry guarantees capital and relatively quick approvals of new plants. Low-cost labor and experience in major infrastructure projects, whether power plants or subway systems, also help.
As a result, building a Western-designed reactor in China costs about $4 billion, 40 percent less than one in Normandy, and can be completed in 46 months, versus 71 months in France, according to Areva.
Locking in Supply
One challenge for the Chinese is locking in a supply of components, including reactor vessels (which protect the nuclear fission core), steam generators, and nozzles produced in large- size forges. Just a few companies make these parts, says Westinghouse’s Allen.
“You end up in a queue for these long-lead specialized materials,” he says. “That is a constraint on how fast you can build.”
How long will it take for the Chinese to become tough competitors? Guangdong Nuclear says it would like to be selling its reactors abroad by 2013 (to date, China has supplied commercial reactor technology only to Pakistan). The Chinese ability to complete large civil engineering projects is already “very worrying” for Europe’s companies, Lauvergeon told the French Senate on Nov. 24. Yet Areva, like every other Western company, still wants those China deals.