The Energy Collective Group

This group brings together the best thinkers on energy and climate. Join us for smart, insightful posts and conversations about where the energy industry is and where it is going.

9,754 Subscribers

Post

China is Still on Track to Become the World's Leading Nuclear Power

Is there a slowdown in the Chinese nuclear sector, as some observers have argued, ending nuclear power’s “last hope for growth”? No, says François Morin, Director China of the World Nuclear Association. Nuclear has experienced a temporary setback but is still set for strong growth the coming years.

Much speculation is made about nuclear power in China from the observation that no new construction authorizations have been delivered in 2016 and 2017. This is sometimes characterized as a “slowdown” in line with the rest of the world, giving reason to nuclear pessimists to announce the inexorable decline of nuclear power in the world. They say nuclear power has simply become too expensive, even for the state-owned enterprises in a country like China. But do the most recent facts corroborate such theory?

The National Energy Administration (NEA) issued a report on October 31 with detailed figures showing that electricity consumption, after a fall in 2015 (growth of just 0.5%) has fully recovered in 2016 and shown further growth in the first 9 months of 2017. Growth is now at 6.4%, equal to GDP growth itself.

Variable renewable energy sources have their shortcomings in any system requiring a large proportion of constant supply.  But they also have direct environmental impact, playing a role in desertification growth in western China and consuming a big share of rare earth resources in Inner Mongolia

The main reason is that not only residential demand in the least developed regions has increased substantially (7.5%), but also energy-intensive industries such as chemical industries, mineral products, smelters and others saw energy use rise last year, up to an average 4%1.

Some observers had expected and hoped that “shifts from energy-intensive industries to services and worldwide policies to limit coal use intensify”2 had kicked in in China,  all the  more since at the end of 2016, China had itself an annual growth target for energy consumption of 2.5% on average during 2016-20203.

But recent news has highlighted that the reality is that the deep structures of national economy are not easily moved4 

Electricity growth versus GDP

Coal consumption has grown, its contribution to electricity is around 67%. Coal efficiency has also increased, up to 315gCO2/kWh, but this is only 21g less than seven years ago. With a total of 963GW capacity installed by the end of September 2017, China still has more coal power than any country in the world. When oil and gas are added, thermal sources of electricity still represents some 74% of the mix, and their growth at 6.3% exactly follows national electricity growth!

Can renewables take the lead?

The impressive growth of wind energy over the last few years -and now solar too – has not affected the rather stable share of thermal. Production of electricity from wind has grown again substantially this year (25.7% over the first nine months) to overtake nuclear at 212.8 GWh against 183.4GWh. Wind now accounts for 4.5% of the mix.

But all this at a high cost: installed capacity increased by more than 25% in 2015 and again as much in 2016; however, in spite of efforts to increase it by 11% this year, the utilization rate stays at a depressing level of 5 hours/day utilization. The investment rate starts adapting to this reality and dropped by 14% this year. Solar, even with a 70% rise this year, remains behind, while hydro looks flat at stable 17% of the mix. At 330GW capacity hydro has reached nearly 70% of the whole country potential determined by geography and geology, and probably will never overpass 400GWe due to environmental concerns: in Sichuan people even believe that high density of water reservoirs has impacted the seismic potential of the area.

Variable renewable energy sources have their shortcomings in any system requiring a large proportion of constant supply.  But they also have direct environmental impact, playing a role in desertification growth in western China and consuming a big share of rare earth resources in Inner Mongolia (World Bank5). In fast growing China huge wind farms and solar energy plans already present challenges in terms of land needed and efficiency. The more farms are added the more the rejection or curtailment rate will grow, due to the increased sensitivity of the grid to production variations. This is why the gap between installed capacity (9% of total) and actual kWh (4.5% of total) is only rising.

Based on current trends China is on track to overtake France in 2023 and USA in 2028, but, even more impressively, it should double this last figure again by 2040, representing then three times France’s capacity

At the same time overall electricity demand is growing and will continue to grow, as per capita electricity consumption is, in 2017, at 4435 kWh, still less than South Africa and 23% below UK. The 2030 target of 20% fossil-free energy remains accessible, provided that the electricity share in primary energy grows (more electric cars, robots, trains etc.) and that the share of clean sources in electricity production will also grow from 26% today to nearly 35-40%.

To achieve this kind of growth in clean power, nuclear power is the most reliable means. Nuclear electricity generation has grown by 29% in the first nine months of 2017, following a 25% increase in 2016. In this period the utilization rate or load factor increased 3% to 5379 hours (roughly 20 hours/day). That is to say, nuclear plants have produced more and better.

Yes, the original 12th 5 year-plan target of 58GWe operational in 2020 won’t be reached, but honestly, due to construction time, this is a fact known since end 2014 by all serious analysts. The pause in construction which followed the Fukushima Daiichi nuclear accident means that this 58GW target should instead be obtained in 2022.

While perhaps unfortunate this delay can hardly be construed as a policy change. Further, the wish to achieve 150GWe in 2030 has been repeatedly expressed by major decision makers in the industry. For example, He Yu, chairman of CGN, has said: “At least 10 new reactors need to be launched each year in order to achieve the national goal of reducing greenhouse gases”6.

There has in fact never been an official state target for 2030, but it can be safely assumed that approximately 115 GWe should be operating by that time, then making China the world’s leading nuclear country. And at that time like now, China will also still be the first nuclear country in terms of reactors under construction!

Based on current trends China is on track to overtake France in 2023 and USA in 2028, but, even more impressively, it should double this last figure again by 2040, representing then three times France’s capacity. The current suspension of new authorizations is not a retraction of this program or a confirmation of “oversupply”. It’s a reasonable management of competition between products reaching maturity at the same time.

These robust companies have the means to ensure reliable research in all areas and to develop a variety of designs

AP1000 construction as well as EPR had to go through various obstacles (post-Fukushima accident reviews) and technical delays (primary pump/vessels anomalies), which gave the Hualong and CAP1400 designs the opportunity to catch up; these delays are now over with connection to the grid for both AP1000 and EPR expected within months. Once this is done authorization process can resume, either giving priority to AP1000 as per original plan of the 2006 national bid, or by promoting further the Hualong and CAP1400.

The overall picture is not blurry at all and can be accurately enough predicted: there will be 16 to 18 AP1000’s, 2 EPR’s (hopefully 4 for CGN), 2 more VVER’s and the rest (25~30GWe) shared by Hualong and CAP1400.

 To what extent is electricity price an obstacle to development?

All Chinese nuclear plants offer competitive electricity prices. The actual selling price for nuclear electricity has been set at 0.43Yuans/kWh; it might rise soon, up to 0.45CNY/kWh. As a comparison the wind price is at 0.51, 0.54, and 0.61CNY/kWh depending on the regions (0.85 for offshore!) and solar is between 0.65 and 0.85CNY/kWh.

In China quantities are determined by regulated quotas not by prices. These quotas are fixed in each province taking into account various factors including recent carbon related policies, local supply balancing, local industry activity etc.

It is true that coal prices, except in two provinces this year, Guangdong and Hunan, are below the nuclear reference price. How could it be different in a country where building a coal power plant costs US$460/kW? This is 4 to 6 times lower than other technologies. And yet still, the nuclear selling price is not that far off.

As a corollary to the supposed intrinsic defects of a regulated market, it is often highlighted that the size and structure of large state-owned enterprises (SOEs) add additional harmful inertia to an insufficiently fluid market. However, to cope with this problem, the state-owned Assets Supervision and Administration Commission (SASAC) has been actively restructuring SOEs in a bid to improve efficiency, with the number of central SOEs falling in 2017 to 98, down sharply from 196 in 20037.

This is partly done by merging companies, creating even bigger entities and enhancing monopolies. But the major nuclear companies have avoided this kind of merger; they remain healthy competitors that earn profits! In 2016 CNNC’s profit rose 32.4% versus 2015, its highest level ever. All indicators exceeded SASACs assessment targets.

CGN’s global revenue grew by 12% in 2015 up to 50.6BCNY (and profit rose by 18.2% to11.2BCNY) and reached 65.4BCNY in 2016 (again +29%). These figures do not support the gloomy picture drawn by skeptics. Somehow these SOEs, designated as a problem by itself, might be the solution to a complex problem of energy structure evolution in a low-carbon economy.

These robust companies have the means to ensure reliable research in all areas and to develop a variety of designs which cannot be described as an “uncertainty in type of reactor in the future”. Yes, the Chinese fleet is made up of a mix of Canadian, French, Russian, US and Chinese reactors or technologies. As the famous French political writer Benjamin Constant once noted “Variety is what constitutes organization; uniformity is mere mechanism”.

The CO2 emissions goal as well as industry requirements and electricity demand growth only make the realization of the nuclear program more urgent

Would the learning effect be the strongest characteristic of the nuclear industry, then all efforts should be made to unify the fleet. But specific factors limit the learning rate in the construction of nuclear plants. The diversity of Chinese designs is supported by the breadth of research institutes and supply chain factories. An intense localization process has been undertaken leading to 85% Chinese local content today against 30% in 2008. The Chinese have the capacity to build up to 40 units per year.  Each big equipment manufacturing company, such as Shanghai Electric, Dongfang Electric, Harbin Electric, 1st and 2nd Heavy Industry, can supply 5 sets of key components per year.

Public acceptance is a complex issue that cannot be described through polls results, all the more since such polls have not been carried out in China. The Chinese people are now more susceptible to foreign attitudes, skepticism and anti-nuclear campaigns than they previously were. However the obvious cleanliness and positive safety records of nuclear are the basis for the general support of nuclear.

In conclusion one can see the current pause in new build authorizations as a normal trend following developments in the national economy and adjustment to the expected phases of industrial development. The “slowdown” is a theory built up on opportunistic data, in particular the tiny growth of GDP and energy in 2015. However, the CO2 emissions goal as well as industry requirements and electricity demand growth only make the realization of the nuclear program more urgent. A shift of few years does not undermine the decision, the construction and supply chain capabilities or the building up of technological competences.

Performance records of nuclear plants are very good. And we have not even mentioned that new projects for small modular reactors (SMRs) are being launched, a travelling wave reactor joint project is on track, a high temperature reactor is close to final installation, export projects are accumulating. Nuclear power is not a ‘last resort’ but has a strong future in China.

By  

All data from China Electric Council (http://www.cec.org.cn), National Energy Administration (http://www.nea.gov.cn), National Bureau of Statistics (http://data.stats.gov.cn),

1http://www.cec.org.cn/guihuayutongji/gongxufenxi/dianliyunxingjiankuang/2017-10-20/174187.html

2 ref. International Energy Outlook 2016 IEA

3 https://www.platts.com/latest-news/natural-gas/singapore/china-to-cut-annual-energy-consumption-growth-27745783

https://www.nytimes.com/interactive/2017/11/13/climate/co2-emissions-rising-again.html?smid=tw-share

:http://blogs.platts.com/2017/05/02/china-coal-fired-power-generation-surprises-naysayers/

 “Some energy market analysts have been quick to write off China’s growth potential as a market for thermal coal exports, advancing the argument that the Asian country is diversifying away from fossil fuels and into other energy sources such as solar and wind”

5http://documents.worldbank.org/curated/en/207371500386458722/pdf/117581-WP-P159838-PUBLIC-ClimateSmartMiningJuly.pdf

6Interview of He Yu, CGN chairman, March 6, 2017. http://www.cgnpc.com.cn/n471046/n471126/n471156/c1314955/content.html

7http://www.chinadaily.com.cn/business/2017-08/29/content_31273321.htm

Original Post

Content Discussion

Walter Runte's picture
Walter Runte on December 7, 2017

This should come as no surprise. Multi-GW nuclear generating complexes are the quintessential energy source for large centrally planned economies where the government has a direct role in all phases of the fuel cycle, plant design, and regulation. Government scale financial resources are necessary to provide these services as well as risk mitigation in the event of problems. China is ideally suited to these conditions. I would, however be very skeptical of the official economics as published: China is rather opaque when it comes to providing details on costs and the extent to which they are subsidized.

Darius Bentvels's picture
Darius Bentvels on December 7, 2017

So after wind, solar alone will also pass nuclear. Considering these figures. probably already in 2020.

Considering the high price of nuclear power ~$68/MWh which will increase a few percent/year, the small difference with the prices of wind (~$85/MWh) and solar (~$113/MWh) and the fast price decrease of solar (~8%/a) and wind (~3%/a),
solar and wind power will become cheaper than nuclear in ~2022.

Which will accelerate the investments in wind and solar even more,
partly at the cost of new nuclear.
So major nuclear expansion during next decade will be unlikely.

Levis Kochin's picture
Levis Kochin on December 7, 2017

If coal fired power has more external costs than nuclear power. It is rational for a country to pay less for coal power. The small excess of nuclear power prices to coal power prices is much less than any reasonable estimate of the local external effects of coal fired power.

Levis Kochin's picture
Levis Kochin on December 7, 2017

A problem with building nuclear and solar power plants today is that there are good prospects that future plant costs will be less than current plant costs. If costs are falling at 8% per year than the hurdle rate for capital expenditures should be 8% higher than if capital costs were constant.
For solar power the decline in capital costs is an ongoing reality. For nuclear power real costs of construction in the past have certainly not fallen. But there is hope. Terrestrial Power -a Canadian startup- is promising that it will be able to construct molten salt reactors at a cost per KW much lower than current designs. This hope is supported by the fact that its design is essentially immune from the failure modes of water cooled reactors. The reactor operates unpressurized. The Terrestrial; Power reactor needs no pressure vessel. The inherent safety of the Terrestrial Power reactor leads to much lower fixed operation costs. Terrestrial Power has recently received preliminary design approval from the Canadian regulators.
Terrestrial Energy projects that its factory built reactors will have capital costs less than half those of current nuclear power plants and be available in quantity in 10 years. Anyone who believes their contentions must add 7% per year to the hurdle rate for conventional nuclear power plant designs.

Darius Bentvels's picture
Darius Bentvels on December 8, 2017

Paperwork isn’t a prediction of the real costs. With new designed nuclear the costs double… Though, even without costs escalation Terrestrial can conquer only some small niches due to its high costs.

At its site Terrestrial claims to produce for $50MWh. That’s no longer competitive and will be even less competitive in ~2030 ~ 2050 as then wind and solar will produce nearly everywhere for below $20/MWh.
As its marginal costs are higher than those of sun and wind, Terrestrial plants are forced by low market prices to adapt production. So it’s CF will become ~50% which implies that it;s high fixed costs have to earned back with less produced MWh…
So in normal competitive markets Terrestrial plants will make significant losses in 2030 (probably earlier) and thereafter.

Few question marks:
Each 7 years a new reactor vessel with pumps and the first heat exchanger (necessary because of the fast wear of the nickel steel), doesn’t seem cheap…
The pile of radio-active material this creates won’t be cheap too.

It’s unclear how fast adaptation of power levels are possible with the designed two heat exchangers behind each other and the low power density of the reactor (in order to accomplish that the graphite moderator last 7years). It suggests less flexibility c.q. load following capacities than PWR/LWR’s.

James Hopf's picture
James Hopf on December 8, 2017

If nuclear is only somewhat more expensive than (dirty) coal, it should be a no brainer. If even a small price on CO2 emissions were applied, nuclear would be used instead of coal, and coal would be phased out over time. And that doesn’t even include the horrendous public health impacts from coal’s other pollutants. Again, if those costs were accounted for at all, coal would be much more expensive than nuclear. A more interesting comparison would be gas vs. nuclear, but the article did not give gas power costs.

As for renewables, once again, if their raw per kW-hr costs are actually higher than nuclear, it’s a no brainer. Intermittent electricity is worth less. Stated another way, if the grid and fossil backup costs were included, the price difference between renewables and nuclear would be much higher. My understanding is that Chinese renewables are already suffering (curtailment, etc..) from lack of grid infrastructure. Adding the necessary grid infrastructure would significantly increase the overall cost.

https://www.reuters.com/article/us-china-renewables/china-steps-up-efforts-to-tackle-curtailment-of-renewable-energy-idUSKCN0SE0NG20151020

While this article discusses economic comparisons (and competition?) one can’t ignore the extent to which these decisions are made politically. Examples include large subsidies and mandates for renewable generation, and China’s restrictions against building nuclear plants in inland areas. (What is the basis of that? Inland areas don’t have tsunami risks.) They also had a large “pause” in nuclear approvals following Fukushima. Restrictions and actions like these, as opposed to economics, may be behind the recent lull in nuclear authorizations.

Nathan Wilson's picture
Nathan Wilson on December 8, 2017

“The current suspension of new authorizations … Once this is done authorization process can resume, either giving priority to AP1000 as per original plan of the 2006 national bid, or by promoting further the Hualong and CAP1400. … there will be 16 to 18 AP1000’s …”

I don’t see any reason for China to buy additional AP1000s. Buying a few of each of the world’s leaking reactor type (AP1000, EPR, VVER) allow Chinese reactor builder to learn the industry best practices, and insure that their own designs are world class. Mission accomplished. In fact, as part of the AP1000 purchase contract, they bought intellectual property rights to develop follow-on derivative designs, provided that such designs are 1400 MW or greater (to avoid direct competition); this lead to the CAP1400.

By building only Chinese reactors from here on out, they strengthen their position as reactor exporters (e.g. Pakistan has ordered 2 and is planning a third, the UK may be next).

If Westinghouse wants to keep selling AP1000s, they should license the technology to India, which does not have their own LWR designs, and might be willing to buy a few for the right deal.

Nathan Wilson's picture
Nathan Wilson on December 8, 2017

Of course Benvels is personally eager to see other technology surpass nuclear; but the important milestone will be when Chinese sustainable energy surpasses coal. In 2016, their newly installed wind and solar capacity (23 GW and 34 GW resp) combined were about 4x too small to keep up with the typical 5%/year increase in demand (which equates to 34 GW_avg of new demand each year).

China now has more experience with wind and solar than any other countries, and still they prefer to build coal fired plants.

Perhaps the problem is that variable renewables need backup from fossil fuel power plants, but in coal-dominated grids like China’s, their output costs more than the value of the fuel that is saved. In a rich country like Germany, this lost value can be passed on to consumers as higher prices, but such tactics are not appreciated in developing countries.

In contrast, nuclear plants displace fossil fuel fired plants on a one-for-one basis (i.e. they have full capacity value), so there’s no hidden cost when they are deployed.

Once the Chinese-designed Hualong One and CAP1400 reactors are in full production (i.e. the next few years), we’ll certainly see higher build rates, and we may see the end of new Chinese coal-fired plants.

Darius Bentvels's picture
Darius Bentvels on December 11, 2017

That typical 5%/a increase no longer exist for generation by coal.
Electricity production in China (TWh)
From coal Total coal%
2004 1,713 2,200 78%
2007 2,656 3,279 81%
2008 2,733 3,457 79%
2009 2,913 3,696 79%
2010 3,273 4,208 78%
2011 3,724 4,715 79%
2012 3,850 4,937 78%
2013 4,200 5,398 78%
2014 4,354 5,583 78%
2015 4,115 5,666 73%
2016 3,906 5,920 66% (preliminary)
So:
– the share of coal was 81% in 2007 and reduced thereafter toward ~66%.
– absolute production by coal maxed in 2014 and reduced thereafter…

Wind and solar are increasing ever faster, with continued price decreases due to increased mass production. Diminishing the future of nuclear.
So Chinese nuclear will probably never surpass the production of US nuclear.
Because nuclear is gradually more out competed by wind & solar and China has enough hydro to compensate its intermittency.

Darius Bentvels's picture
Darius Bentvels on December 11, 2017

If all external costs for coal are included in the price of coal, than same should occur for nuclear. So then nuclear should pay the insurance premium for:
– possible major accidents which may create a damage of up to $1trillion (depending on local circumstances; consider Indian Point and NYC evacuation); and
– the future costs of nuclear waste for the first 300 years or so.

Considering that ~1% of nuclear power reactors ended its life in a major disaster, such insurance premium would be 2 – 10cnt/KWh (lower for more safe reactors situated in areas far from population centers or with winds blowing always directly to the sea).
It’s questionable whether the health damage costs of modern coal plants are more than that. For both the effect will be that they are situated farther away from population centers.

Note that assigning all external costs also to the generator, will benefit solar and wind greatly as they have hardly any such costs.
It will speed up the paradigm change towards generation by wind & solar greatly!