It’s the mid-2020s and a re-elected President Trump fires a nuclear missile at an island that the Chinese have built in a disputed part of the South China Sea. That fictional scenario is what a futuristic BBC TV series called Years and Years envisaged earlier this year.
The scene was conceived as a wake-up call to real-world threats – particularly in areas where geopolitical instability has increasing sway. In fact, those artificial islands are not entirely fictional – they exist, as does a Chinese plan to construct a series of floating nuclear power plants.
Years and Years was broadcast at the same time as Chernobyl, another highly-rated series, which offered a throwback to an earlier era of superpower conflict. Together, the two shows demonstrated that global anxiety about nuclear power (both civil and military) has never gone away, despite peaking at the height of the Cold War.
Instead, the fears have lain dormant (with the exception of 2011, when the Fukushima accident brought the spotlight back to the civil nuclear industry). Far too dormant is the conclusion of former US Energy Secretary, Ernest J Moniz and former Senator, Sam Nunn, who argued in a recent Foreign Affairs article that the world is still “wilfully blind to the peril”, specifically of the Russian threat.“Not since the 1962 Cuban Missile Crisis, has the risk of a US-Russian conflict involving nuclear weapons been as high as it is today,” they suggest.
However, the current US administration has a more immediate focus on its rivalry with China. And as such, it was almost inevitable that discussion in Washington would turn to responding to some of China’s burgeoning nuclear ambitions.
The key move came in mid-August when the country’s largest nuclear power company China General Nuclear Power Group (CGN) and three of its affiliates were added to the US government’s Entity List.
American firms are prevented from doing business with companies on the list as Washington deems them a national security threat. In particular, the Trump administration believes that Hong Kong-listed CGN has been illegally diverting American civil technology to the Chinese military. But the Chinese media has cried foul, dismissing the action against CGN as little more than a symbolic gesture. Instead, the Global Times said it underlined how Washington wants to thwart China’s progress in high-end technology, although it warned that the move would only “accelerate China’s efforts to seek technological independence”. Guancha.cn said the same, arguing that the “sanctions will have little impact on China and provide no benefit to the US”.
That may hold true domestically, given that China now has its own homegrown reactor technology: Hualong One. However, the US action will almost certainly dent China’s ambitions to export its nuclear know-how to nations that Washington considers its key allies.
One country finds itself in a particular bind. In the UK, CGN holds a 33.5% stake in the £20.3 billion Hinkley Point C power station project being built by France’s Areva. Last October, a US official warned the British government against partnering with CGN. Those calls will grow louder as the UK tries to strike a trade deal with Washington to counterbalance its imminent departure from the EU. One of the first casualties might be the UK’s Bradwell B nuclear project, which has not yet passed all of its approvals. Here, CGN is not only the main contractor, but also planning to deploy Hualong One technology.
India recently flagged that it would be taking its lead from the US. In March, the two countries reaffirmed New Delhi’s intention to build six nuclear projects using Westinghouse technology (following a decade of discussions).
Westinghouse (now owned by a US private equity group after filing for bankruptcy in 2017) also has a presence in China. It partnered with the country’s second largest nuclear power company, China National Nuclear Corporation (CNNC), nearly a decade and a half ago. CNNC used the American company’s AP1000 reactor design as the basis for both China and the world’s first third-generation plants: Sanmen 1 and 2, plus Haiyang 1, which all entered commercial operation last year.
This March, Sanmen 2 was temporarily shut down because of a problem with a coolant pump. A new one had to be shipped from the US, which may help to explain why CNNC wasn’t mentioned on the Entity List, despite US International Security and Non-Proliferation Secretary, Christopher Ashley Ford, previously telling the Financial Times that “the entirety of the Chinese nuclear industry is lashed up with military-civil fusion”.
Demanding an end to American firms doing business with CGN is one thing. Adding CNNC to the list would have been an order of magnitude greater, given the potential safety implications for an existing nuclear plant using AP1 000 tech.
CGN says the American embargo will affect its supply chain, but that the impact is “controllable”. Its first third-generation plants (Taishan 1 and 2) are using French-designed EPR (European Pressure Reactor) technology. About half of the key equipment has been localised and the foreign suppliers are French, Japanese or Czech. The first plants to deploy Hualong One technology are CNNC’s Fuqing 5 and 6 plants, scheduled to become operational later this year.
Over the summer, the Chinese government approved new nuclear plants for the first time in three years. This will push the country further up the global rankings in terms of gigawatt output (GW). In 2018, the US led the world with 98 nuclear units producing 99.4 GW, according to the World Nuclear Association. France came second and China was third with 45 units producing 43 GW.
Because of Fukushima, Japan has fallen down the rankings, producing 36.1 GW. This satisfied just 4% of its energy needs in 2017 compared to 30% back in 2011, although existing plants are coming back online after safety tests.
The key difference in nuclear energy strategy between the US and China is that most of the former’s plants were built 30 years ago and most of the latter’s in the past decade. Chinese newspapers say that this means that the US is falling behind technologically-speaking. But the American media point out that improvements in maintenance technology have extended plant lifecycles to 60 years and potentially 80. Furthermore, the next technological battlelines will be drawn less around building new plants, and more about how to recycle depleted uranium from existing ones.
That would not only preserve global uranium supplies but also reduce the enormous costs of building and running nuclear power stations. For example, CGN’s third-generation Taishan plants are purportedly 100 times safer than its second-generation ones (but also more costly: according to financial analysts this is reflected in the company’s return on assets, a lowly 1% to 2%, ).
As we reported in WiC400, Bill Gates’ reactor design company, TerraPower, is one of the pioneers behind travelling wave reactors (TWR), which use spent fuel and liquid sodium as a cheaper and safer coolant. TerraPower originally signed an agreement with CNNC to build a demo reactor in China, but the deal has fallen foul of Sino-US rivalries.
The US government has woken up to the need to reclaim its technological edge and TerraPower is at the front of the queue for funding from the federal government. The Nuclear Regulatory Commission and Department of Energy are also removing regulatory barriers and putting financing channels in place to help private sector operators get two advanced-nuclear demo projects up-and-running by 2025 and five more by 2035. Industry experts hope new technology will make the sector more cost-efficient, even compared to natural gas.
The other big push in the industry is coming from SMR (small modular reactors), which are cheaper and more flexible to operate (they are small enough to be deployed on ships, as well as remote locations). In China CNNC is at the forefront of development efforts and its Nimble Dragon project on Hainan Island began its impact assessment earlier this year.
This Monday CGN also listed its stock on Shenzhen’s A-share market, raising Rmb15 billion ($2.09 billion). Its stock soared by 75% as of Wednesday’s close – meaning its market capitalisation reached Rmb219.6 billion.
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