China years away from being a major nuclear export player

Before it can sell its reactors to other nations, it must prove it can build them at home.

Chinese-Dragon-Yellow-3-largeMuch has been made of China’s global ambitions to become a major player in the global nuclear export market. Analysts have pointed to deals with Argentina, Romania, and Pakistan. Also, two Chinese nuclear firms are close to signing on for significant equity investments in the UK nuclear new build at Hinkley Point.

A key challenge is lining up customers who can pay for the products. Neither Argentina, nor Romania or Pakistan have the coin to pay for their orders. Even before that China must prove that its reactors are safe and can be operated by customer utilities at a profit. There are plenty of opportunities to do so. China has 24 nuclear power reactors in operation, 25 under construction, and at least five-to-eight more about to start construction this year.

China’s major challenge is that it has not yet built and operated its flagship nuclear reactor design, the 1000 MW Hualong One, at home. And getting one built has to face the multiple competitive pressures for different reactors, foreign and domestic, within China for each new power station. Even the state owned firms compete for each domestic project. A lot of construction of Gen III+ reactors is taking place with reactor designs from other nations. For more details see WNA’s country profile of China’s commercial nuclear program.

No utility in a western nation is going to accept a Chinese reactor until China’s multiple state owned nuclear firms can prove that its components are of predicable quality and that the reactors built with them are safe. It could be a while before there is a track record that proves that point.  Over the next five years many reactors which will be completed either won’t be of Chinese design or won’t be of Chinese design equal to western Gen III+ in terms of safety measures.

Can anyone make up their mind?

The China State Council inked a go-ahead decision on Feb 17 for two new reactors to be built by China General Nuclear Power at the utility’s Hongyanhe plant. The reactors initially were announced to be 1000 MW PWRs which are expected to be based on the Hualong One design.

However, the China Nuclear Energy Association (CNEA) said that the two units, to be named Hongyanhe-5 and Hongyanhe-6, are expected to be of the CAP-1400 Generation III domestic design, which is based on the Westinghouse AP1000 design.

And yet other reports indicate the two units could be ACPR–1000, a design which has yet another configuration for the fuel assemblies. Even if it is a Hualong One, the two units won’t be commissioned until at least 2020 or later depending on what issues emerge in the construction of the first of a kind build.

Four Westinghouse AP1000s, an 1150 MW reactor, are under construction at two locations. China has, through technology transfer agreements, plans to build a 1400 MW version and also eventually offer it for export. A 1700 MW version is on the drawing boards. Westinghouse components are slated for some of China’s domestic build. However, problems with the pumps from a third party US supplier for the reactors under construction has delayed completing the initial four units.

Two Areva 1660 MW EPRs are under construction at Taishan, and two more are planned, but that will probably be it for externally sourced EPRs from the French nuclear giant.

While Areva is exploring technology transfer of its EPR technology to India, to speed up the planned six unit Jaitapur power station on India’s west coast, it has only an agreement in principle with China General Nuclear signed nearly two years ago.

Russia’s Atomstroyexport was the EPC lead for the Tianwan 1&2 power plants. It provided two VVER-1000 reactor with a 1060 MWe capacity. The reactors use Areva’s instrumentation and control (I&C) systems. Tianwan units 3&4 will use the same version of the VVER-1000 reactor with Areva’s I&C systems. These units are expected to be commissioned by the end of 2017.

Getting paying customers is the goal

China’s line-up of new customers is not an A-list.  Argentina, Romania, and Pakistan are China’s first customers in its order books and all come with fat files of issues. China may have to provide a significant portion of the financing and the technical talent to build and operate the reactors. The good news is all are currently operating commercial nuclear reactors, but that may be also the last of it.

Argentina defaulted on bonds held by global banks in July 2014 throwing its ability to tap international equity markets, and convert its currency into dollars, into free fall. Industrial production took a 10% nose dive as the nation’s ability to import materials and parts needed to make things fell driven by devaluation of the Peso against the dollar. Measures of gross domestic product continues to fall relative to prior verified baseline data. The government has been accused of cooking the books in terms of published economic indicators.

Romania, which has two 700 MW Candu 6 reactors, would prefer not to entertain a Chinese design which is being accommodated by a joint team from China and SNC Lavalin, which bought the AECL reactor division when Canada privatized it. Several technical teams have come and gone in terms of proposals for new reactors at Ceranvoda. The reason is Romania could not attract equity investors to take a stake in the project.

Pakistan is not only a country who’s economy is less than optimal, it has another liability. It never signed the nuclear nonproliferation treaty. Normally, this would be a barrier to getting commercial nuclear power technology, and fuel, from members of the Nuclear Suppliers Group (NSG). China, as a signatory nation to the treaty, is defying its requirements which prompted a protest from the US Embassy in Karachi. The US also regards China as the likely supplier to Pakistan for some of its nuclear weapons capabilities.

The whole issue falls into a diplomatic gray area since the US is now poised to export nuclear technology to India, which also has not signed the treaty, and Australia has inked a deal to sell India the uranium it will need for its ambitious plans to build 20 GWe of new reactors. The Chinese may be justified in raising the issue of a pot calling the kettle black.

The announcement of the Pakistan deal with China for two 1000 MW reactors comes only a month or so after US President Obama’s visit to India which gave nuclear technology trade between the two countries a high profile. Whether that visit will be translated into actual reactor deals remains problematic as long as India’s liability law is on the books.

Other issues involving the new Pakistan China deal involve the proximity of the selected site to areas of dense urban populations, earthquake & tsunami risks for the coastal site, and the general instability of Pakistan’s government.

What about safety?

Chinese officials are undoubtedly aware that to export its reactors it must prove they can be operated safely at home. There are perceived and real gaps in China’s nuclear safety regulatory infrastructure. Regulatory independence and oversight, along with enforcement of standards, will collide with China’s sprawling nuclear industry and a history of corruption and counterfeit parts that have shown up in exports to the West.

Concepts about transparency and public input to nuclear energy site and licensing decisions are unlikely to gain much traction in the top down communist state. It’s going to be tough for Chinese EPC firms used to doing business at home to modify their practices in western nations.

China’s experience with its Gen III+ designs must demonstrate success in terms of delivering the newest units on time, within budget. Once commissioned, the Gen III+ units must be shown to be able to operate safely without unplanned outages due to equipment malfunctions or operator errors.

Steve Kidd, an expert on China’s nuclear new build, wrote recently in an online forum;

“I can say that they are acutely aware of the suspicions about their quality standards prevalent in the rest of the world and that they are determined to overcome these. Their huge domestic nuclear program is their first priority. The challenge is to extend the high reactor operating standards achieved at Daya Bay and Qinshan (confirmed by WANO reports and IAEA missions) to a much bigger program on many new sites and fully to establish the latest reactor designs within this.”

He added, “No operator in the Western world is going to build a reactor they feel is inherently unsafe, or where they have doubts about the quality of the key components. “

China’s success with nuclear energy could be important for other nations who are considering this energy source as a way to reduce carbon emissions. Its willingness to proceed with new construction starts, after a nearly three year hiatus due to Fukushima related safety reviews, is a signal that they see the risks as manageable.

If China does overcome some steep challenges and becomes an major export player, it will also become a significant contributor to whatever chance nuclear energy has to play a role in being both a commercial success and a factor in addressing CO2 reductions.

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