China Planning to Become No. 1 Producer and Operator of Nuclear Plants BUSINESS ASIA By Bloomberg
By Dune Lawrence and Alan Katz
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 new reactors by 2020, at a cost totaling 450 billion yuan, or $61 billion. It could add as many as 300 in time, according to 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 the $3 billion to $5 billion nuclear plants at home and abroad. 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, 67, Westinghouse’s former chief technology officer, who two decades ago helped spearhead the company’s efforts 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 fastest-growing major economy. At the same time, as China is poised to pass the United States as the world’s biggest producer of gases that contribute to global warming, it’s under pressure to curb emissions. A new round of UN-sponsored talks on climate change opens next week on the Indonesian island of Bali.
The Chinese nuclear program took another step forward on Monday when Anne Lauvergeon, chief executive officer of Paris-based Areva, signed an euro 8 billion, or $12 billion, contract to sell two new European pressurized water reactors and a long-term supply of uranium to China Guangdong Nuclear Power Group. President Nicolas Sarkozy of France and the Chinese president, Hu Jintao, stood at the table.
In July, U.S.-based 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 will be able to 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 such as 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’s the third-biggest buyer of foreign oil behind the United States and Japan.
China’s 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, according to the Washington-based bank. Those deaths and related diseases cost 157 billion yuan in 2003, or 1.2 percent of gross domestic product.
The recent reactor orders are part of China’s plan to regain some energy independence. The country’s nuclear power program was just getting started in 1986 when the Chernobyl disaster happened in Ukraine, forcing the industry to grind to a halt in much of the Western world. That made the Asian nation a prime market for reactor makers.
In 1988, Westinghouse’s Bruschi 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, the Pittsburgh resident took 60 business trips to China, eating fried scorpions and honing his chopstick skills 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, Japan’s Toshiba 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 the locals’ know-how and desire to meet strict safety standards.
“China will be very disciplined about safety,” said Andrew Brandler, chief executive of CLP Holdings, Hong Kong’s largest utility and a partner in operating China’s first atomic reactors, 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 nuclear 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.
“Given the numerous stories of deaths and injuries in China’s coal mining industry, there is the perception that all industries in China are operated in the same manner,” said Andrew Kadak, a nuclear engineering professor at the Massachusetts Institute of Technology in Cambridge. “That’s not the case. The safety performance of the Chinese reactors has been quite good.”
Kadak is part of a U.S. team that advises Daya Bay plant managers on operations, spending two weeks a year on site.
Safety concerns about Chinese goods have gripped consumers worldwide this year with a wave of “Made in China” recalls, including RC2′s Thomas & Friends trains and 21 million Mattel toys.
Last week, Baltimore-based Raymond Geddes recalled 84,200 children’s pencil pouches for excessive levels of lead on their zipper pulls.
For the nuclear energy industry, the bigger challenge for now is managing the technology transfer in a way that benefits the international suppliers, too.
“What we don’t want to do in general is say, ‘Here’s the technology and I’ll go home and you deal with it,’ ” said Paul Felten, senior vice president of sales, development and marketing for the Areva NP reactor unit. “We want to stay involved in the process, but we transferred technology in the past and we won’t refuse to do so in the future.”
The question is whether that know-how in the hands of Chinese companies will help or harm international companies.
Originally published by Bloomberg News.
(c) 2007 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.