Argentina Reports $10B Nuclear Deal with China

  • China National Nuclear Corp (CNNC) is reported to be willing to finance $8.5 billion of the reported $10 billion cost for one 1000 MW PWR Type Hualong One.  The total cost of the deal most likely involves not only the reactor, but also financing for fuel services, and various “Belt & Road” infrastructure projects unrelated to the power station project.
  • The project originally also involved a 700 MW CANDU type PHWR but there is no mention of it in the latest news reports about the deal. Reuters confirmed in April the deal is for just a single Hualong One reactor.
  • CNNC will be paying much higher labor rates for construction than at home, and the supply chain would stretch halfway around the globe. CNNC will have to import a lot of its own people to support the project competing for them against demands at home for the same engineering and skilled trades talent needed by other Chinese state owned nuclear firms.

Special to Neutron Bytes by Diálogo Chino with reporting from Buenos Aires
by Fermín Koop, Lili Pike. Additional reporting from Cleveland by Neutron Bytes and from London by World Nuclear News.

In the midst of economic and political uncertainty, Argentina has doubled down on a major Chinese nuclear power deal. The new plant in Buenos Aires province will help meet Argentina’s energy needs with the support of Chinese technology and financial support.

With China looking to ramp up its nuclear power exports and countries seeking low-carbon electricity, the project in Argentina could represent the first concrete success of China’s efforts to export its nuclear technology to a South American country. However, concerns over nuclear power’s cost, and localization issues for construction, remain as barriers to starting work on the project.

See prior reporting on this blogArgentina Shifts its Focus to Nuclear May 2015.

Striking a Deal After Long Negotiations

Four years after formally agreeing to its construction, Argentina is moving forward with the Atucha III plant that could become operational and enter revenue service around 2024 at the earliest.

In April, Argentine president Mauricio Macri’s administration signed a letter of intent with China’s National Energy Administration. The contract, which is expected to be signed in the coming weeks, will include a US$10 billion loan from the Industrial and Commercial Bank of China (ICBC), which will cover 85% of the project’s costs. The contract will almost certainly include long term fuel contracts for of new fuel from CNNC and return of the spent fuel to China.

The deal would impose on Argentina a requirement to put up $1.2 billion for a 1000 MW plant.  At this price the project probably includes upgrades to Argentina’s electrical grid and other non-nuclear infrastructure improvements. Given the amount of the loan program. it may include other elements of China’s Belt & Road infrastructure program even if they are not promoted that way by the two countries. The reactor itself would probably come in for not more than half of the total value of the financial package at a rough order of magnitude estimate of $5000/Kw or $5 billion.

CNNC would be paying much higher labor rates for construction than at home, the supply chain would stretch halfway around the globe, and CNNC would have to import a lot of their own people to support the project competing for them against demands at home for the same engineering talent.

A Reuters report from April of this year confirmed that the deal between China and Argentina was for a Hualong One. Reuters reported that sources previously told the wire service that the protracted negotiations over the Argentina project were partly due to due concerns over what proportion of components would be sourced from domestic suppliers.

CNNC has been demanding in return for favorable financial terms that Chinese companies be given priority for all aspects of the project including design, construction, and the fuel cycle.

The original deal with China would have added Argentina’s fourth (Atucha III) and fifth (Atucha IV) nuclear plants, adding 1,700MW to the grid. It was to have been composed of a 700 MW PHWR CANDU reactor and a 1000 MW PWR Hualong One. Given the limits of Argentina’s finances, the deal was reduced to just the single 1000 MW unit.

By agreeing to acquire the PWR type reactor from CNNC, Argentina gives up the ability to leverage its experience with CANDU type PHWRs with a new power station. It also gives up the right to provide its own fuel for the new power station. Argentina does provide its own fuel for its PHWR reactors.

argentinanukes

By acquiring a Hualong One, Argentina has committed itself to buying fuel for the reactor from CNNC for the next 60 years.  CNNC recently announced that it had established the capability to produce fuel for the reactor in commercial quantities. A PHWR, which uses natural uranium, which Argentina has in abundance, would not have generated these costs.

These terms have not set well with Argentina’s nuclear regulatory agency nor the government for both cost and safety reasons.  Key among them are doubts about being a first of a kind test case for an export deal for the Hualong One.  They claim that  experience building and completing one isn’t available.

Chinese officials who are part of the trade delegation negotiating the deal with Argentina likely cited the facts that construction of CNNC’s GEN III ACP1000 reactor is well underway at the Fuqing nuclear power plant in Fujian province.

World Nuclear News reported in January that all the main equipment has now been installed at the first of two demonstration Hualong One units under construction at the Fuqing site in China’s Fujian province. Installation of the steam generators has begun at the second unit.

Construction of two Hualong One (HPR1000) units is also under way at China General Nuclear’s Fangchenggang plant in the Guangxi Autonomous Region. Those units are also expected to start up in 2019 and 2020.

Two HPR1000 units are under construction at Pakistan’s Karachi nuclear power plant. Construction began on Karachi unit 2 in 2015 and unit 3 in 2016; the units are planned to enter commercial operation in 2021 and 2022. The HPR1000 has also been proposed for construction at Bradwell in the UK, where it is undergoing Generic Design Assessment.

Hualong One Cooling Systems Schemata

Active and passive cooling systems of HPR1000 (aka Hualong One) nuclear reactor. Red line; active systems; Green line; passive systems; IRWST – in-containment refueling water storage tank. Source: Science Direct http://bit.ly/2EzKjus Author: Ji Xing, Daiyong Song, Yuxiang Wu

CNNC did offer some concessions on the localization issue. Li Xiaoming, assistant general manager of CNNC, is reported to have said last week regarding the Argentina deal that the localization rate for the new Hualong One in Argentina would be 40 percent but he did not specify which nuclear or non-nuclear parts of the project would be local.

History of the Deal

The Atucha III project is part of an agreement signed in 2015 by former president Cristina Fernández de Kirchner, which approved two nuclear plants: one using the PHWR Canadian technology in Argentina’s existing plants, and one using Chinese technology.

President Macri eventually approved construction, but Argentina’s economic crisis led to pursuing just one plant to reduce the size of the loan.

“Argentina is going through an economic crisis and money is tight. Investing in nuclear requires a long-term commitment, but China can offer subsidized capital to its foreign customers,” said Mark Hibbs, senior fellow at Carnegie’s Nuclear Policy Program.

Macri and Chinese president Xi Jinping also signed a joint five-year action plan (2019-2023) at last year’s G20 Summit in Buenos Aires, but Xi did not secure Argentina’s formal endorsement of China’s Belt and Road infrastructure initiative. The nuclear project was also expected to get the green light at that time, but negotiations remained stalled over how much work would go to Argentina’s industry and workforce.

The current government has now justified the project as a way of reducing the country’s energy deficit and fostering closer ties with China.

State-owned China National Nuclear Corporation was originally slated to build the plant with Argentina’s state-owned Nucleoelectrica. The former’s presence at the letter signing last month signals that it will remain involved and that the localization issue may have been settled.

A separate offering by Russia’s Rosatom for a 1000 MW VVER has not materialized in any substantive way since it was first announced four years ago. Reuters reported in December 2018 that Rosatom attempted to move the deal forward towards a contract, but instead the outcome was a high level MOU without concrete commitments to build a reactor. Argentina may have used the high level hand waving with Rosatom to put pressure on CNNC to come to the table with more favorable financial and localization terms.

Backlash from Green Groups Favoring Renewable Energy

The nuclear deal with China attracted criticism from a group of former energy secretaries, who claimed in a November 2018 press release that it would be cheaper to develop solar and wind projects.

“Any future energy projects have to be part of a national and long-term energy plan, which now doesn’t exist. All new projects should be economically competitive and should be in line with the country’s mitigation commitments,” said Jorge Lapeña, a former energy secretary.

Environmental organizations that favor wind and solar proliferation agree.

“We don’t consider nuclear as renewable energy, it has many risks regarding the functioning of the reactors and waste. It’s not suitable for Argentina,” said Andrés Nápoli, head of Fundación Ambiente y Recursos Naturales (FARN).

“A new nuclear plant would require risk and impact studies and we haven’t seen any.”

Positioning the Deal by China

The Argentina deal is one of the first success stories for Chinese nuclear overseas. Since 2000, Russia has dominated overseas nuclear power, supplying 45% of total capacity. China is the fifth largest exporter, supplying just 9%. So far, the only Chinese reactors constructed overseas are in Pakistan.

Beyond the Argentina and Pakistan deals, it is unclear whether China’s nuclear power reactors will find other markets. An effort to sell several Hualong One reactors to the UK depends, in part, on the design completing the UK generic design review which is ongoing.

In 2014, China’s Hualong One reactor passed the International Atomic Energy Agency’s safety review and is now undergoing assessments in Europe.

Is there a Future for Small Modular Reactors in Argentina?

CAREM (Spanish: Central Argentina de Elementos Modulares) is an Argentine nuclear reactor designed by CNEA (National Atomic Energy Commission). A 25 MWe, pressurized water reactor version of CAREM is currently being built near Atucha I Nuclear Power Plant as the first prototype.

The-CAREM-25-reactor-schematic-view-of-the-flow-circulation-and-basic-data

CAREM SMR elements. Source: Christian Marcel; A small innovative modular nuclear reactor: the carem-25 reactor, Research Gate, May 2013 http://bit.ly/2wmuwL2

A second one of 100-200 MWe is planned to be installed in Formosa Province. The first prototype was planned to receive its first fuel load in 2017. The date for deployment of the second larger unit would be set thereafter.

A presentation to the IAEA in October 2017 Calzetta Larrieu Osvaldo of the National Atomic Energy Commission of Argentina (CNEA)  indicated ongoing progress, but not a completion date.  (English PDF file)

Nuclear Engineering Intentional reported in May 2018 that as CAREM is positioned as a first of a kind project which the government in 2009 licensed it as a prototype and not as a conventional commercial power reactor. Initially, it was planned for start-up in 2017, but this has now been put back to 2020.

As of January 2019 there is no report of fuel loading for the reactor. In June 2016 World Nuclear News reported Brazil’s INB contracted with Argentina to provide four tonnes of enriched uranium oxide for the CAREM25 reactor. It is to be shipped in three batches with enrichment levels of 1.9%, 2.6% and 3.1% U-235.

CAREM is being positioned in a commercial version to be used to supply energy for areas with small populations/small electricity demands. Another possible use is to power seawater desalination plants to supply water and energy to coastal sites.

Like other SMRs, the plan is to build multiple units at the same location to scale up generation of electricity to follow economic development.  There are plans for 100 MW and 300 MW designs. CNEA has its eye on export markets for the various SMR designs.

How Nuclear Energy Fits in Argentina’s Energy Mix

Argentina has three nuclear reactors generating about 10% of its electricity. Its first commercial nuclear power reactor began operating in 1974.   According to WNN, the profile of installed units includes three PWHR Candu type reactors the oldest of which was built in 1974 (Atucha 1). Atucha 2, a 700 MW PHWR, entered revenue service in 2014, and a third unit Embalse, a 600 MW Candu 6, was completed in 1983. The majority of the country’s electrical power generation comes from a combination of natural gas and coal (68%) and hydro (28%).

reactors argentina

Nuclear Energy in Argentina. Table courtesy World Nuclear News

According the US Energy Information Administration, natural gas, which is used widely in the electricity, industrial, and residential sectors, represented just over half of of total primary energy consumption. Oil is the primary fuel used in the transportation sector and represented 33% of total primary energy consumption. Argentina produces almost all of its domestic fuels for the transportation sector.

Despite the commitments to new nuclear plants, Argentina is continuing to exploit its coal deposits with construction of a 240 MW mine mouth power plant near one of the major mining sites.

Update May 29, 2019

Update: The $10 billion loan now appears to have two main parts to it. The first part for approximately $7.5 billion is for a single 1000 MW nuclear power plant, a Chinese Hualong One, regional grid upgrades, and long-term fuel services from China. The second part is an unrestricted loan of approximately $2.5 billion for general purpose infrastructure. The reactor project is said to have a start date of 2021.

Source: NBN Media

 

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