Beijing’s clear nuclear strategy

AS WE GET CLOSE TO 2020, many commentators say that China’s governmental target – operational nuclear reactors totaling 58GW capacity – will not be reached.

By comparison the target for wind energy was 200GW in 2020. It has already reached over 160GW and could approach the target, provided it grows by 11% per year, its current pace. More surprising, solar energy, which has always lagged behind the others in recent years, saw an extraordinary 70% capacity increase in 2017, easily surpassing the 2020 target.

In early 2017, the National Energy Administration (NEA) in its Energy Work Guidance Opinion forecast the completion of five new nuclear units before the end of the year, including an AP1000 at Sanmen and an EPR at Taishan; but instead, only three reactors were connected to the grid – all classical Generation II types. There was a public recommendation for six to eight new construction authorisations, after the whole of 2016 passed without any authorisations, but the first half of 2018 remained equally quiet and void of any new construction. Nuclear electricity prices are facing strong competition from coal and gas. Caught in a vice between increasing economic pressure and unconditional support to solar and wind, the picture looks gloomy for nuclear power and increasingly bright for renewable energy.

However, these judgments are based on 2016 statistics, when it was realised that previous year energy growth was 0.3% and electricity production growth was only 0.5%. Some observers expected and hoped that China had started to shift from energy-intensive industries to services and would follow worldwide policies to limit coal use. All parties seemed to favour this explanation: Chinese government could show it was coping with its international obligations to reduce CO₂ emissions, and getting closer to a goal set in 2013 by its own State Council to reduce its carbon emissions by 40-45% in 2020 from 2005 levels; promoters of renewable energy were claiming their own contribution to this success and the whole economic world was proud to say that China was no longer the “factory of the world”. However, this ill-founded enthusiasm had to face reality: the electricity consumption was not detached from GDP, except in a purely and unfortunate accidental way. The link between electricity production and GDP is nearly constant despite yearly variation. It evolves, but very slightly and over many years (see graph).

Professor Liu Shi Jin, vice chairman of China Development Research Foundation, said that a shift from high-speed growth to medium-speed growth in China’s economy leading to the ‘new normal’ of 5-6% annual growth was to be expected. However, according to China Electricity Council data, in 2017 the industrial sector primary energy consumption grew again by 12%, i.e. more than residential electricity (+10%).

Overall electricity demand in 2017 was 6.5% higher than in 2016, while GDP growth was 6.9% over the same period, and the total installed capacity grew even more, by 9.75GW – the largest yearly addition of new capacity.

These 2017 figures are not compatible with the constant whisper of oversupply in the Chinese markets and bottlenecks in the grid. Strong efforts are made to limit fossil fuel energies in general, but coal production still rose by 3.3% and gas by 8.2%. Even in the electricity sector, coal generating capacity rose by 3.7%: the country is still building new coal plants. Coal’s share in the power mix is around 65%. However clean energies, which in China include hydro, nuclear, wind and solar power, now represent more than 20% of total primary energy.

The amazing growth in solar capacity is encouraging, particularly as it seems that new installations are shifting from the very sunny West to Central and Eastern parts of China. But obstacles to further significant growth are obvious: the utilisation rate, measured in hours per year, is a low 1209 hours (13.8% capacity factor) and it is not growing. Wind power is progressing better, but is also has a low 21% capacity factor (or 1949 hours per year). In contrast nuclear power saw three quarters of the national fleet significantly increase production, even in the face of context of economic competition and decreasing costs and subsidies. The least productive plant, Hongyanhe, in Northern Liaoning province increased its utilisation rate in 2017 on its four reactors by 22% average, (up to 5273 hours) despite being challenged by low coal prices. The most productive plant, Daya Bay near Hong Kong, increased its production by 8% (to 8868 hours). So there is definitely something wrong in the suggestion that nuclear power is threatened by low coal prices or that plant availability is condemmed to drop to 5000 hours per year, following the 2015 trend, as suggested in The Future of Nuclear Power in China by Mark Hibbs (see also page 22-26).

China’s nuclear progress

Nuclear power in China is developing in a healthy way, regardless of critics and doubts.

In its 25-year history of nuclear electricity, China has experienced several ups and downs and several pauses – between 2003 and 2007, and between 2007 and 2010. Is the rapid development from 2010 and onwards the new norm? In the long term, maybe, and in any case the current “pause” in starting new constructions cannot be seen as a hesitation or a turning back from original plans.

The so-called 2020 target of 58GW in operation is a milestone in a much broader strategy: to follow the International Energy Agency two-degree scenario, China should have 400GW of installed capacity in 2050. Earlier, a probable new target of 150GW in 2035 would represent only 7% of the mix, at a time when the post-Fukushima Japan is planning to have above 20% of nuclear in its mix. China’s per capita electricity consumption has grown again this year, by 5%, but it is still 53% less than in Germany and only half of the 2050 forecast and target. So a two or three year slide in the current phase does not jeopardise the completion of the overall programme. Whenever the 58GW target is obtained – most probably in late 2022 – China will overtake USA as the first nuclear electricity country in the world before 2030.

In late June, after nine years of construction and many unforeseen developments, the two latest designs, the AP1000 and EPR were connected to the grid, 11 hours apart. Two weeks earlier China had signed a new contract with Rosatom including four new reactors to be built in collaboration with the Chinese nuclear industry. New projects can begin and at the end of April M. Zeng Ya Chuan, director of nuclear energy at the National Energy Administration (NEA) confirmed that “conditions are met to build in series Gen III reactors” and “the time has come to develop a new nuclear strategy for the 2035 horizon”.

Little time has been lost, as serious preliminary works have been undertaken at: Huizhou 1&2 and Zhangzhou 1&2 for four ‘Hualong One’ projects; Sanmen 3&4, Haiyang 3&4, Lufeng 1&2 and Xudapu 1&2 for eight AP1000s and at Shidaowan for two CAP1400 projects. All these 14 reactors are waiting for imminent first concrete authorisation. Behind those, preliminary works are also under way at Changjiang, Ningde 5&6 and at six inland sites – Taohuajiang 1&2, Pengze 1&2 and Dafan 1&2 in Hubei province. Construction at inland sites was postponed after Fukushima. They are not vulnerable to tsunamis, but there was concern that after a river flood, any radioactive release would endanger the population downstream. But studies have been performed and there is new confidence that they can be launched right after 2020.

We must acknowledge that there has been at least one negative impact from the delay in new authorisations. 

Engineers and technicians left the industry at a rate as high as 7.45% in Shanghai Electric and 15.7% in Dongfang Electric in 2016. But these figures must also be put into perspective, as the average employee turnover in China is 20%. Even in the very stable and mature automotive industry, it is around 6%. Around 160,000 people work in nuclear construction and the supply chain and this figure will double by 2050, but that challenge can easily be met, considering that average age of employees is under 35 and that all the technologies have been developed in domestic research institutes while the domestic industrial supply chain provides 85% of nuclear equipment.

A lot could be said about the electricity price issue. But the market is not free and open; it is controlled through benchmark prices and quotas. This makes senseless any western evaluation of profitability. Each kWh of renewable origin can be sold at 0.6CNY or 0.7CNY, while nuclear kWh is stuck at 0.43CNY. From 1 June, the solar electricity selling price benchmark has been lowered by 0.05CNY/kWh, meaning indirect subsidies have fallen by 10%. However, as solar manufacturing costs have also decreased significantly, this new move should not have any major impact on the market.

In any case, the two major operators of nuclear plants have played their cards right: in 2017, CGN’s operating income rose 29.3% and its profit rose 15.3%, despite significant growth in 2016 (up 18.2%). CNNP’s operating income also rose by 11.9%, following on from an impressive 32.4% growth in 2016.

Seeing a bright future for Chinese nuclear industry is not an illusion. Difficulties on the way cannot be considered as unsurmountable obstacles. Chinese nuclear industry leaders see role as partners with more mature industries from Russia, France, the USA and others rather than as an autonomous player; but whether they want it or not, their responsibility to ensure the success of nuclear power in the world will now only grow.  

Author information: François Morin, Director, China at the World Nuclear Association 

All data are 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)