China gears up to become world's biggest operator of nuclear plants
By Dune Lawrence and Alan Katz
Bloomberg News
Friday, November 30, 2007
BEIJING: China, its safety reputation tattered by lead paint in toys, cancer-causing chemicals in seafood and antifreeze ingredients in toothpaste, is gearing up to become the world's biggest producer and operator of nuclear plants, and a nuclear exporter.
The country plans to build about 30 reactors by 2020, at a cost totaling 450 billion yuan, or $61 billion. It could add as many as 300 eventually, said an official from Atomic Energy of Canada.
Deals signed this year with Westinghouse Electric and Areva will put the Chinese in position to copy the latest technology. Its biggest threat may be as a competitor in selling nuclear plants at home and abroad costing $3 billion to $5 billion. The Chinese atomic industry may follow the copy-and-compete blueprint laid out by local makers of cars, drugs and coal-fired power plants.
"The driving force is self-reliance," said Howard Bruschi, Westinghouse's former chief technology officer, who helped spearhead the company's efforts two decades ago to get a foothold in China. "I don't kid myself that they want to make their own designs and develop them and export them."
The country of 1.3 billion people needs clean sources of electricity to fuel the world's fastest-growing major economy. At the same time, as China is poised to pass the United States as the biggest producer of gases that contribute to global warming, it is under pressure to curb emissions. A round of United Nations negotiations on climate change opens next week in Bali, Indonesia.
The Chinese program took another step forward Monday when Anne Lauvergeon, chief executive officer of Areva in Paris, signed an €8 billion, or $12 billion, contract to sell two European pressurized water reactors and a long-term supply of uranium to China Guangdong Nuclear Power Group. President Nicolas Sarkozy of France and President Hu Jintao stood at the table.
In July, Westinghouse clinched a $5.3 billion deal with China's State Nuclear Power Technology and partners to build four of its new AP1000 reactors. The contract was the company's first for a nuclear reactor since 1987 and its first in China.
Officials of both Western companies said they agreed to transfer technology to local suppliers, meaning China can become a discount competitor. Chinese officials themselves cite Western criteria - safety and cost - for deciding whether Westinghouse's model will become a blueprint for future plants.
"In principle, the absorbed, redeveloped AP1000 technology from Westinghouse will be the dominant technology for China's future nuclear industry development," said Yu Zhuoping, a State Nuclear Power Technology adviser. "But we need to wait and see the real costs, safety, reliability and operational performances of these four reactors before making further conclusions."
That position contrasts with China's safety record in other industries. In nuclear power, international manufacturers are using China as a proving ground to demonstrate to potential U.S. customers that new reactors are safer than older designs. What's more, Chinese suppliers may help make nuclear power competitive with cheaper energy sources like coal and natural gas by bringing down the price of components.
"In the Western world, we talk about nuclear renaissance, but in China it's not a renaissance," said Gavin Liu, Westinghouse China's chief representative. "They're working on the nuclear project on a day-to-day basis, accelerating the whole development process. It's important to build the first AP1000, no matter where we build it, and China's market demand puts it into the best position."
Driving China's nuclear push is the skyrocketing energy demand of its power-hungry heavy industries. This year China became a net importer of coal for the first time. It is the third-biggest buyer of foreign oil behind the United States and Japan.
The Chinese economy will expand by 11.3 percent this year, the fastest pace in 13 years, the World Bank forecasts. Air pollution causes more than 400,000 premature deaths annually in China, the bank says. Those deaths and related diseases cost 157 billion yuan in 2003, or 1.2 percent of gross domestic product.
The reactor orders were part of China's plan to regain some energy independence. The nuclear power program here was just getting started in 1986 when the Chernobyl reactor in Ukraine melted down, bringing the industry to a halt in much of the Western world. That made the Asian nation a prime market for reactor makers.
In 1988, Bruschi of Westinghouse held his first meeting in Beijing, where he sketched out a new atomic plant design, a forerunner to the AP1000. A December wind flapped through a hole where a window should have been, kicking up dust from a coal pile outside. About 40 Chinese engineers huddled in quilted coats, taking notes and encouraging Bruschi to gulp tea for warmth.
Over the next 12 years, he made 60 trips to China, eating fried scorpions and honing his chopstick skills by picking up peanuts. "Time runs at a different speed in the Far East," said Bruschi, now a consultant to Westinghouse.
The efforts paid off with the July contract, which put Westinghouse back on the industry map.
Last year, as the company moved closer to a preliminary deal, Toshiba of Japan bought Westinghouse from British Nuclear Fuels for $5.4 billion, 68 times the cash price in 1999 when CBS sold the unit. Shaw Group of Baton Rouge, Louisiana, and other partners have since taken stakes.
Company officials and industry experts who have worked in China say they are impressed by people's know-how and desire to meet strict safety standards.
"China will be very disciplined about safety," said Andrew Brandler, chief executive of CLP Holdings, the largest Hong Kong utility and a partner in operating the first atomic reactors in China, at Daya Bay. "Their focus is very clearly on safety. They recognize that one incident anywhere will set the industry back decades."
The country already has 11 commercial reactors in operation. Most were built in partnerships with Areva's predecessor, Framatome; the Canadian AECL; and ZAO Atomstroyexport of Russia. There are also three domestically designed reactors.
"Last year, in just one year, China added almost 100 gigawatts of new coal plants, so you can believe that in 45 years China needs and can build 300 gigawatts of nuclear power," said Yang Ruan, chief representative and director of technical programs in China for AECL.
Accidents killed 4,746 coal miners last year in China, according to the official Xinhua press agency. That was more than 100 times the U.S. total.
Alan Katz reported from Paris.
