Gauging the Wind behind Nuclear Power Industry
Thursday, 16 April 2009 11:04
Gauging the Wind behind Nuclear Power Industry
Based on China’s Latest 2009 “Twin Sessions”
The annual “Twin Sessions” –the National People’s Congress Session and the Chinese People’s Political Consultative Conference Session– have long been known to provide insights into the Chinese government’s policy orientations. Around those sessions, representatives from different sectors will debate various issues and express their opinions through public media. Meanwhile, the discussions held during the sessions can have a significant impact on industry developments. Given this, taking note of what policymakers and industry leaders said during the latest “Twin Sessions” should prove useful to people working in the nuclear power generation industry.
Two Fundamental Issues Under Discussion
For the latter, the key area of concern involves any changes to China’s nuclear power development plan. In this respect, the “Twin Sessions” held in 2009 saw two major issues in particular come to the forefront.
The first key issue under discussion was whether the nuclear industry development plan needed to be expanded. The State Energy Bureau supports such an expansion. In early March, Mr. Zhang Guobao, director of the State Energy Bureau, clearly stated during an interview with Xinhua Net that the original plan should be expanded since China now had the capability to build more power plants. At that time, Mr. Zhang declined to provide clear target numbers on account of some controversy in this regard and the need to balance different views. During this year’s “Twin Sessions”, Mr. Zhang Guobao went on to propose that the development of nuclear power generation in China be accelerated to adjust the country’s energy structure. According to a State Energy Bureau official, the draft plan aims to boost the weight of nuclear energy in China to 5% of total installed capacity and 8% of overall power generated by 2020 –which implies at least 75GW in installed capacity and 30GW in capacity under construction by that year. This is a prodigious figure, and some wonder whether the expansion proposal is realistic given China’s constraints in terms of available human resources, equipment and waste treatment capabilities. Such potential issues are a source of concern for some industrial leaders. Mr. Wang Yuqing, a former director of NNSA, for instance, has stated that he was worried about the risks associated with moving too fast in nuclear power development, and proposes the government focus on strengthening nuclear safety supervision.
Another major issue under debate was whether the AP1000, which belongs to the third generation technology, should be retained by China as the main reactor type to be adopted over coming years. Dissatisfaction with the AP1000 has been building up for a while, but recently broke out after the publication of a long article by Professor Lu Feng from Peking University that not only criticized China’s lack of independent innovation in developing nuclear power equipment, but also called US supplier Westinghouse “shameless” for failing to ensure the AP1000 kept its promise of a low investment rate –the investment per KW capacity having at least doubled from US$1,000 to US$1,500 initially quoted. Some Chinese experts, in particular CNNC engineers, have also raised questions about whether the AP1000 was a mature model. They believe that the AP1000 may need further testing, and that it may not be appropriate to construct large-scale AP1000 plants before a demonstration plant is completed –thus suggesting that build-out of second-plus generation nuclear power plants ,including CNP600 and CPR1000, be permitted for now. To support their allegations, the Chinese experts have referred to Westinghouse wanting to consign NPIC to conduct some tests on the AP1000 in early 2007 –a move that has convinced them that the AP1000 had not been tried and tested enough before being exported to China. Opposing these claims is SNTPC, which wants to reproduce the AP1000 model fast in order to decrease its unit cost. Mr. Wang Binghua, president of SNTPC, has been strongly insisting that the technical advantages and safety of the AP1000 are unquestionable. Meanwhile, he is also appealing to the Chinese government for preferential tax treatment to be granted to the first AP1000 nuclear power plant, and for help funding the equipment manufacturers, all of which would seem to demonstrate that the cost of the AP1000 may indeed be exceeding expectations. Mr. Wang’s appeal for state support, however, appears to have failed so far. In this debate, both parties will need to gain high-level support to get anywhere. The State Energy Bureau, for instance, supports SNPTC, since importing the AP1000 was the bureau’s decision –as demonstrated by Mr. Zhang Guobao, when he emphasized the safety advantage of the AP1000 in reply to a reporter saying the general public did not understand why China was wasting so much money on importing the AP1000 when it had itself mastered second-plus generation technology. That being said, one has to admit that it may be too hard to construct about sixty AP1000 nuclear power generating unit in the next 10 years to meet the target of 75GW installed nuclear power capacity for 2020, considering that technology maturity is still in question and qualified equipments providers are far from enough, especially key equipments, such as main pumps. Thus, the second plus generation technology still has enough space to develop itself.
Industry Lobbying for State Support
The “Twin Sessions” also provide the different Chinese power generation groups with an opportunity to lobby the authorities and appeal for state support –with active delegates including representatives from both traditional power companies and local governments.
Mr. Zhai Ruoyu, the CEO of Datang Power Group, for instance, has been pushing forward a proposal for China’s four major power groups apart from CPIC to be allowed to become controlling shareholders of nuclear power plants. In support of this request, Mr. Zhai highlighted Datang’s solid funding capability, power project management experience and active moves to train qualified nuclear industry personnel. Huaneng Power Group has adopted a similar stance.
In 2009, China’s five power generation giants (Huaneng, Datang, Huadian, Guodian and CPIC) all experienced significant operating losses due to high coal prices –making nuclear power generation all the more attractive to them given the low cost of nuclear fuel. So far, of these five players, only CPIC is authorized to be the controlling shareholder of a nuclear power plant. Highly valued, the license to control a nuclear power plant is difficult to obtain –not only are adequate qualifications and capabilities required, but the most important factor remains the authorities’ development plan for the industry and how they decide to balance interests between the different groups involved. Based on our interview with Mr. Zhang Heyin, a senior engineer from Datang’s nuclear power department, we know that Datang hopes to gain official approval soon, but has not been provided with an explicit timetable by the State Council. Huaneng is also pursuing actively pursuing a license and making bold moves to push forward the process –for instance, Huaneng has already been struck an agreement with CNNC to take a 51% share in the Hainan Changjiang II nuclear power plant, although it will still need the NNSA’s and State Energy Bureau’s approval before the project can go ahead.
The enthusiasm shown by the four large Chinese power producers to launch nuclear power generating activities should provide significant opportunities for foreign nuclear power technology and equipment providers. China suffers from a shortage of domestic talent and expertise –with Datang, Huaneng and Guodian all saying that they will be requiring training to construct and operate nuclear power plants. This shortage is all the more pressing that those Chinese corporations that have some resources to provide technology and high-level training would rather avoid sharing these with their competitors. It appears that the industry will have no choice but to turn to foreign technology and equipment suppliers for support.
Lobbying by Local Governments
The development of the nuclear power industry has also become very important to promote the economic development of different Chinese provinces. Local government officials have therefore been actively appealing for support from both the central government and nuclear power giants during their stay in Beijing. Particularly active figures included officials from Hunan and Guangxi provinces. Mrs. Huang Lanxiang, major of the city of Yueyang, Hunan Province, approached the NNSA, State Energy Bureau and CPIC in order to lobby the authorities and investors to accelerate progress on the Xiaomoshan nuclear power plant project in Yueyang City (Hunan province) and include it in the State’s mid- and long-term nuclear power development plan. Another Hunan province city, Yiyang, has an inland nuclear power plant in preparation, Taohuangjiang nuclear power plant, being developed by CNNC. The project is currently being delayed by uncertainty over the technology to be used in inland nuclear power plants. Yiyang’s CPC Municipal Committee Secretary, Mr. Ma Yong, has been suggesting that the State Council allow second plus generation technology be used at Taohuangjiang, in order to accelerate construction of the plant and meet the significant demand for electricity in Hunan province. A similar proposal was made by Mrs. Wei Fengpin, Vice Head of Pingnan County, Guangxi province, where a nuclear power plant is in preparation.
Other suggestions made during the “Twin Sessions” put pressure on the State Energy Bureau to use AP1000 technology (third generation) for inland nuclear power plants. In this regard, it would appear that local governments and investors are losing patience –they do not know when the AP1000 may be applied to inland plants, while now it cannot be built into coastal plants even. CGNPC and CNNC are working hard to develop second generation power plants to meet inland requirements. To our knowledge, the cooling tower is one of the key issues that they need to resolve.
Conclusion
Based on the “Twin Sessions” discussions, most people within the nuclear power industry are anticipating strong growth in activity. An expanded nuclear power development plan should provide more business opportunities to both local and foreign companies within the sector. Certain segments may also be happy to see the plan award a greater role to second generation technology.
The influence of power producers and local governments, moreover, should not be ignored. It would be in foreign companies’best interests to seriously consider cooperating with some of the larger Chinese power companies, and to continue paying close attention to the direction of inland power plant development policy.
