The nuclear capacity of the People's Republic of China (PRC) is growing rapidly. For the longest time China was regarded as a younger brother by Russia.The Chinese have historically liked talking about the necessity of learning from others, but the fact is that this situation is rapidly changing. One can easily distinguish between the Chinese approach towards nuclear power of 10 years ago, when the country was eager to obtain any technology on any conditions, and today's approach characterised as Napoleonic in its size and scope. Starting with a domestic reactor technology of the CNP-300 (Chinese nuclear power unit), the country's strategic objective is to create a CAP-2100 (a reactor type with 2100MW power capacity) on the basis of American advanced technologies within the next 10 years. The nuclear rise of the Chinese atomic dragon is obvious. The point for discussion lays in the ability of the other nuclear players around the world to wisely assess China's capabilities in the nuclear domain. The topic on the export intentions of the PRC is a subject of greatest interest in Russia. What technology will be used by the Chinese in bidding for foreign contracts.
In developing its nuclear industry, China's strategic objective was to make its first nuclear power plant themselves. This target was successfully achieved. The Qinshan-1 plant is built with Chinese technology and is the first power unit equipped with the CNP-300. This reactor originated from ex-submarine power reactor technology with increased power capacity. Through military-nuclear applications, China was able to take its first nuclear step. The Chinese decided to develop their own technologies with the main goal of creating a 1,000MW nuclear power unit, which would form the basis not only for a domestic Chinese nuclear market, but also provide the ability to export this technology. A second option was to import and acquire foreign nuclear technologies in order to accumulate experience and knowledge, and on this basis, grow its nuclear industry.In fact, the Chinese pursued both approaches simultaneously. But the path to developing the CNP-1000 met with a dead end. The Chinese claimed their power 300MW reactors were independently constructed by themselves with an 80 percent domestic technological input, whereas their 600MW technology was available with 70 percent Chinese input. Concurrently, their success with 1,000MW technology remained null and void.
Preference was then given to their second option, which counted on importing technologies from the world's top nuclear producers. These producers are AREVA (France), Westinghouse-Toshiba (US-Japan), and Atomstroyexport (Russia).So what has been the contribution of these companies and countries to the rise of nuclear power in China.
France became the PRC's first partner in the nuclear sphere. The former has assisted China in constructing its so-called CPR-1000 power reactor. For a long time, this technology was seen as the basic reactor technology for the domestic Chinese market. Due to Chinese involvement, the price for constructing Chinese nuclear plants was significantly decreased.But there were two serious downsides to this concept. First, since AREVA supplied some of its key technological components, the intellectual property rights to this technology remains French. There are absolutely no restrictions for the spread of this technology inside China, but re-exporting French technology and know-how is different.Every contract on supplying CPR-1000 reactors abroad requires in-principle approval from AREVA.
Such approval is highly unlikely to be granted. For this reason, CPR-1000 reactors are planned for only China's domestic market. The second crucial problem for the prospects of this reactor is Fukushima. CPR technology belongs to the second generation of power reactors, which implies that some characteristics do not meet optimal safety requirements. After the Japanese earthquake, nuclear safety was widely questioned, and all requirements for nuclear safety have been increasing. Therefore, one of the decisions adopted by the State Council of the PRC has been to revise the requirements for reactor technologies for future sites and concentrate on expanding China's nuclear industry with more advanced third-generation power reactors. The prospects for the future expansion of CPR-1000 reactors are quickly fading.
French involvement in the rise of Chinese nuclear expansion is multifaceted. AREVA is developing some advanced technologies for its first EPR-1600 reactor presently under construction in Finland.However, considering that the Finnish EPR-1600 project has encountered some problems, China may turn out to become the first operator of the EPR-1600 reactor.
In 2005, the PRC issued a call for tender for the development of several reactors in the Mainland. In real terms, this tender was designed to open competition for the whole of the Chinese market. AREVA, Westinghouse and Atomstroyexport put forward their bids. The key Chinese requirement on the transfer of imported nuclear technology was met only by the Americans. Despite its tender defeat, the French still managed to find a way to buildapartnership with the Chinese. AREVA has since retracted its restrictions on the technology transfer issue and, as a result, a US$8 billion contract for China's Taishan site has been signed and a joint venture created with a 55 percent split between the China Guangdong Nuclear Power Group (CGNPG), with AREVA retaining a 45 percent ownership stake. Further details of the contract remain unknown.
Apart from technological cooperation, France has significantly contributed to the Chinese nuclear industry in another sphere. The PRC is aiming at developing and supplying technologies for all phases of the nuclear fuel cycle. The industry is targeted for complete autonomy and independence in all aspects of this cycle. France has been invited to construct a fuel fabrication plant in Yinbin town and it is providing fuel assembly for all pressurised water reactors in China.
US-Japan
American presence in the Chinese nuclear market was limited for a long time, but over the last five years the situation has changed dramatically.The 2005 tender competition showcased the highest level of American nuclear technologies. As mentioned, the tender bid proposed by Westinghouse had no restrictions on the question of technological transfer, and this turned out to be crucial. The US proposed a new reactor the AP-1000. Currently, there are two sites in China--in Sanmen and Haiyang--where these reactors are being constructed. Many more sites are expected for development in the future. On this point the Fukushima nuclear crisis brought lots of positive momentum for the roll-out of the AP-1000 reactors in the Chinese market. The reactor is third-generation technology, and its characteristics make it the most advanced reactor technology available anywhere at present. Yet this reactor technology is not without its own problems.
Most important is the price issue.The cost of the American reactor is way above the Chinese CPR, CNP and even the Russian VVER technologies, which may present hurdles for further AP-1000 technology export to countries that are embarking on nuclear power in order to cut budgetary expenses.In China, this problem may be solved through Chinese involvement and the introduction of Chinese technologies in order to reduce the overall cost of the reactor.Another hurdle is safety, which seems less than optimal. The main point here is the absence of a so-called "melting fuel trap". This is a trap located under the active zone of a reactor and serves as a last barrier for preventing contamination in the event of an accident. This question was widely debated in the UAE where South Korea's KEPCO enterprise is offering its own version of the US AP-1000, with similar design characteristics.
Another risk the Chinese are facing is the lack of operating experience. The AP-1000 is an absolutely new technology and China is the first importer of this reactor in the world. The first reactor, the Sanmen nuclear power plant (NPP),will be built three years sooner than in the US. This absolute trust by the Chinese in US reactor technology has surprised many experts. Recently, Westinghouse admitted that the reactor's main circulation pumps were not working as expected. The technology would need additional testing and a delay on delivery is inevitable. Though Westinghouse claims the situation is under control, it is the first sign of trouble that this new technology is bound to face.
So, what are the Chinese plans concerning AP-1000?
Involvement of the Russian Federation in China's nuclear market is restricted by its principal position on technology transfer. The first mutual Russia-China nuclear project was the Tianwan nuclear power plant, with Russia'sAtomstroyexport as a general contractor. The Chinese managed to take advantage of the poor state of the Russian nuclear industry during the 1990s, when the PRC invited Russia to build a new plant near Lianyungang city. For Russia, the terms of the contract were less than optimal.The price was very low. China received credit for the project, and payment was to be made not in money but in exchange for Chinese goods. In the end, the entire project was unprofitable. Yet for the industry it was salvation.
It took Atomstroyexport around 15 years to complete the two power units with PWR reactors (VVER-1000) type. In matter of fact, Chinese interest in this Russian slow neutron technology was never very strong. Russia's position on the transfer of technology further created many problems.In fact, the only reason the Tianwan-1 contract was signed was due to the uranium enrichment technology that was attached to the package agreement.Looking to sign a new contract on Tianwan-2, the Russians played a similar hand in order to persuade the Chinese to compromise and stimulate their interest in fast neutron reactors, which were introduced into this contract.
As for uranium enrichment technologies, China is deeply interested in gas centrifugal enrichment. Russia is the world's leader in this technology. Russian facilities are already equipped with 8th-generation centrifuges, whereas China's are 6th-generation technologies.Altogether, Russia has already constructed four stages of a uranium enrichment plant in China and, according to development plans, more will be required.The contribution of the Russian Federation to another aspect of the Chinese nuclear industry is very serious.
Fast neutrons
Russia occupies the world's leading position in fast neutron technology. The only commercial fast neutron reactor is currently operating in the Russian Federation at the Beloyarskaya nuclear power plant, and the first mutual fast neutron project in China was CEFR.This was a Chinese experimental fast neutron reactor, in which Russian specialists assisted Chinese engineers during the construction. However, the PRC's strategy goes way beyond simply introducing the technology. China's nuclear development is planned in conformity with the three steps suggested by former Chinese leader Jiang Zemin. First, slow neutron energy is supposed to become the basis for China's nuclear energy sector; second, fast neutron technology should be introduced and take the lead role; finally, thermonuclear reactors are expected.
According to the plan, the fast neutron energy sector will be developed only after 2050. But in order to be ready for a major shift to fast neutron reactors the first steps are being taken now. So Russia has been invited to construct two power units with BN-800 reactor types (In Russian, BN or Bustrye Neitroni are fast neutrons). A technical contract was to be signed in November 2010, but the Chinese insisted on signing the contract and working on the project without any intergovernmental agreement, which is seen by Russia as a way to obtain Russian advanced technologies. When the project will enter the next stage still remains uncertain.
Growing a new rival
Russian specialists must take into account the possibility of future competition with China in the global nuclear market. Russia makes efforts at securing some of its top nuclear achievements. At the same time, some experts suggest that competing for the niche in the Chinese market at the cost of selling some unique technologies in not reasonable. Yet, Russia sticks to its policy of preventing further transfer of its technologies, and clearly, some profitable contracts have been lost in order to keep these secrets. For instance, Russian Atomstroyexport (ASE) is currently involved in the Belorussian project on constructing a new nuclear power plant. At the same time the Chinese Guangdong Nuclear Power Corporation (CGNPC) has developed great interest in this project and moreover stimulated Belorussian interest by offering very beneficial contractual terms.
A joint venture between ASE and CGNPC was suggested. The Russian party considered the offer unacceptable, as working on a technical project hand-in-hand with Chinese could result in leaking some of Russian know-how to the PRC. In order to guard all its technological secrets ASE claimed that Russia is ready to withdraw from the construction in case the Belorussian side insists on Chinese involvement. Now, it looks like this "clash of interests" problem may be resolved through strictly dividing up the areas of responsibility.China is likely to be in charge of constructing all the infrastructure elements, whereas the nuclear core is to be a Russian project.
At the same time, there is another option for Russia and China to become involved in joint projects. The way forward for this was paved by the inclusion of a few clauses about working together in third countries, which were added to the protocol of the 15th meeting of the Sino-Russian Sub-committee on nuclear issues in September 2011.
As for the American attitude to the possibility of growing China as a new rival, its position is flexible. Westinghouse sees the Chinese rise of nuclear power as a possibility for trading new reactor technologies.
Since the US AP-1000 reactor, currently under construction in China, is the first of its kind and is to be built three years before the US one, Westinghouse finds it positive that operational experience for this technology is obtained by the Chinese test-driving this. Another interesting point for cooperation is that Westinghouse may secure a presence in the Chinese market through technological and scientific support for constructing additional AP-1000 reactors. It appears that China's rise as a nuclear exporter is not feared by the US, nor is its technological progress a threat to America's technological nuclear capacity.
Possible nuclear markets
In developing foreign export markets, China will face a number of hurdles. As mentioned the country is still unable to create its own 1,000MW power unit. The Chinese are able to work with only small-capacity reactors like the CNP-300 and CNP-600. Of course, there is some interest in these types of reactors in Africa for example.However, demand remains limited and the Chinese are looking forward to becoming a much stronger player.Clearly, they are aiming to supply technologies in all stages of the nuclear fuel cycle as one strategy, although this will be tough.
By the time China is ready to enter the global nuclear technology market, it will find the market already divided between the old, established players and it will have to make great efforts to build a niche for itself. There are actually two ways to crack this nut. First, it may use its financial strength in providing extremely beneficial financing for an importing country. This was the path South Korea's KEPCO took in the UAE. In order to persuade the Emirates, KEPCO came up with very generous financial terms for its nuclear offer. The second option for entering the market is through political channels. This is pretty much the case for Russia's Atomstroyexport. Currently, all nuclear projects led by the corporation are obtained on the basis of friendly relations with a country, while the technological level of equipment is considered almost optional.The Chinese like to develop their cooperation through so-called "guanxi" (personal relations), so some of the African regions, countries from ASEAN, and neighbouring Pakistan may build nuclear partnerships without any tender competitions. China will most likely try every option available in order to conquer these markets. At first, it can be expected that Chinese corporations will be ready to construct anything and anywhere.
Pakistan
As a nuclear exporter, China has already begun in neighbouring Pakistan. For years, Pakistan has been regarded as an instrument to deter Indian growth. Pakistan found some support in China for developing its nuclear weapons capability, and then turned to cooperation in peaceful atoms as well. Currently, the PRC manages the Chashma nuclear power project, which has already been equipped with two CNP-300 reactors. The second unit was launched in July 2011. It is expected that altogether there will be five units supplied to the plant by the Chinese. Pakistan is a test case for China to gain experience in supplying nuclear technologies. The Pakistani market opened for world nuclear imports in 2008, but in the case of the Sino-Pakistani nuclear dialogue, this will not be subject to uncomfortable restrictions for Pakistan by China. As a result, this market will most likely be monopolised by China in the future.
ASEAN
For China, it has always been easier to do business with ASEAN nations than with others. Similarities in climate, culture, traditions and sometimes even language make it easier for China to seek and find a compromise. Two main Asian rivals of China--Japan and South Korea--have the same comparative advantage as the Chinese. In the region there are several countries which seek to expand into nuclear energy. These include Vietnam, Thailand and Indonesia. With others the nuclear question is at different stages of discussion. But because of Fukushima, they will delay development. Laos, Brunei, Cambodia are unlikely to introduce any nuclear technology for a while. Malaysia, Singapore, Burma and the Philippines are seriously considering the nuclear option. The most attention is drawn to Vietnam. The country has proclaimed its course on diversifying into nuclear along the so-called Chinese way. The first stage of the power production will be constructed by the Russian Federation; the second is likely to be Japanese. Altogether, there are eight units planned for now, and there is serious competition between France, the US, South Korea, and China for future contracts.The recent focus is on the Fangchenggang nuclear plant, which is being constructed near the Sino-Vietnamese border. It looks like at least one power unit will definitely originate from China.
Iran
Sino-Iranian nuclear cooperation is top secret. Nuclear partnership between these two countries is built on a long history of oil diplomacy. There are often some questionable facts about the illegal supply of centrifuges to Iran or cooperation on nuclear enrichment, but both sides claim these allegations to be untrue.On the other hand, if sanctions imposed on Iran are lifted or at least softened, the dialogue between the parties will develop. Currently, the Russian Federation is considering the possible extension of Busher for the second unit, and within this framework the question of a probable presence of other nuclear players is widely discussed. Should the Iranian market open up, China will be among the competitors in this sphere.
Africa
Africa is often called a Chinese colony. China invests huge sums of money into the region and supports many local governments. Chinese interest is mostly driven by the oil resources that some African countries possess. Through oil diplomacy China has already settled deep and prospective partnerships with some of these countries. On this basis the nuclear dialogue is supported as well. The first project was a South African nuclear power plant. Before the recent economic crisis, the Republic of South Africa planned to introduce several plants into its energy sector, and US and French technologies were under consideration. In spite of some serious budget cutbacks, the country still plans on developing its nuclear sector, but on a sound economic basis. China is a possible partner in these developments and is ready to meet all of South Africa's demands, but suffers from its comparatively smaller reactor technology. Another possibility for cooperation is on high temperature gas-cooled reactors (HTGC). HTGC is considered the most advanced reactor type in the world with a gas cooling system instead of water, making it less dangerous and thereby enhancing plant safety by decreasing the possibility of contamination.China is planning to build a 200MW demonstration unit, and for some time has had a mutual working group with South African specialists who are interested in this technology.But again, due to limited funding,the African republic has suspended realisation of this project.
In addition to South Africa, another project has recently appeared in Nigeria. Nigeria has declared its intentions to build a new nuclear power plant, and it sees the Russian Federation as its partner. However, some other companies may find their own way into this market as well. The political, economic and overall stability situation of the country make the Nigerian market risky. In spite of the fact that Nigeria is almost the only country in Africa that has some available financing for such a project, it may still face financial difficulties. Another issue is plant safety with risks posed by gangs, local warlords and pirates causing havoc for the government. Such risks pose problems for countries like the US and France. For China, these difficulties are optional, as are human rights violations which China considers as domestic issues of countries it trades with.As far as cost is concerned there is no doubt that the cheapest price will come from the PRC. Therefore, in Russia, possible Chinese involvement in the Nigerian market is a very topical issue.
In attempting to answer the question broached in the title of this article "Is China a competitor on the nuclear market" There is no simple answer. At present, Westinghouse, AREVA, Rosatom, TVEL, Tenex are the big serious players in the nuclear technologies market. They are hugely experienced, they provide the highest standards, and are true brand names. We are incapable of saying the same about the Chinese. Their companies still have a long way to go. Currently, we are witnessing many clashes of interest between the Chinese Atomic Energy Agency and other nuclear exporting countries and corporations. China is developing rapidly and will soon catch up with the world's top nuclear exporting powers. The situation will get tougher within 10 years as China gains operational experience with its new technologies. Market will see new nuclear offers coming forward from this nation. China is not satisfied to stand still; the rest of the world should take note.
Article republished with permission from the Institute for the Analysis of Global Security (IAGS). Author Artem V. Goncharuk is a Research Fellow from theAtomstroyexport, Department of Constructing Nuclear Power Plants in China, National Research Nuclear University, "MEPhI", in the Russian Federation.
BY: Artem V Goncharuk