NUCLEAR ENERGY IN CHINA

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1 NUCLEAR ENERGY IN CHINA 1201 F Street NW Suite 1100 Washington DC Overview January 2015 World s largest market for nuclear power plants, equipment and technology. China has 23 nuclear power plants in operation, 26 plants under construction, and more about to break ground. Generating capacity is planned to rise from 19 gigawatts today to at least 58 gigawatts by 2020 and to approximately 150 gigawatts by Chinese construction will account for a third of new nuclear infrastructure worldwide between 2012 and 2032, when China will become the world s largest generator of nuclear power. Major U.S. economic interests at stake. Major Chinese contracts awarded to U.S. nuclear suppliers have created billions in U.S. exports and tens of thousands of American jobs. In addition to nuclear power plants, U.S. companies are supplying China with equipment and a broad range of services, including engineering and construction, fuelcycle and training. U.S. and Chinese firms have partnered in valuable joint ventures and research and development projects. Benefits to nuclear safety, security and nonproliferation. U.S. engagement with China has brought about significant advances in China s nuclear nonproliferation policies and practices. U.S. equipment and technology exports have enabled China to deploy the safest technologies, including a U.S. advanced reactor design that has been standardized for most of China s planned nuclear power stations. China s adoption of U.S. technology has deepened U.S. relationships with China s nuclear energy sector. Reduction of carbon emissions. Nuclear power is planned to carry the largest share of China s non-emitting generating capacity additions through Ending U.S. nuclear cooperation would disrupt China s nuclear development plans and set back its efforts to limit carbon emissions. If the U.S.-China Section 123 agreement is not renewed before it expires in December 2015, multiple U.S. interests will be harmed. To renew the agreement, the president must submit a signed agreement to Congress, and Congress must allow it to enter into force.

2 History of U.S.-China Nuclear Cooperation The foundation for U.S.-China nuclear cooperation was laid in 1984 when Reagan Administration officials and their Chinese counterparts initialed a bilateral nuclear cooperation agreement (known as a Section 123 agreement after the part of the U.S. Atomic Energy Act that establishes its terms). In July 1985, President Reagan submitted the agreement to Congress. Congress did not block the agreement, but instead passed legislation, Public Law , to prohibit export licenses to China until (1) the President certified effective verification of China s peaceful use of U.S. exports; (2) China provided additional information concerning its nonproliferation policies; and (3) the President submitted a report to Congress on China s nuclear nonproliferation policies. The nuclear cooperation agreement took effect when President Reagan signed the bill in December 1985, but it was not implemented because the law s conditions had not yet been met. Following China s Tiananmen Square crackdown in 1989, Congress passed a sanctions bill (Public Law ) that placed another impediment to implementing the Section 123 agreement. It suspended nuclear cooperation with China until the President certified that China had provided clear assurances that it would not assist any non-nuclear-weapon state in acquiring nuclear explosive devices or the materials to create one. In 1997, almost 13 years after the U.S.-China Section 123 agreement was initialed, the Clinton Administration determined to implement it. After a contentious debate over whether and how to engage with China, the Clinton Administration determined that civil nuclear cooperation fit its strategy to expand U.S.-Chinese cooperation while addressing difficult issues in the bilateral relationship. Recognizing that China was indispensable to global nonproliferation efforts, U.S. officials sought to use the Section 123 agreement to integrate China into the international order, rather than isolate it, and to persuade China that it shared a common interest in curbing nuclear nonproliferation. U.S. officials also viewed the opening of peaceful nuclear trade with China as a way to advance U.S. exports to big emerging markets. In January 1998, President Clinton signed the certifications the 1985 law required and waived the suspension of nuclear cooperation that the 1989 sanctions law required, and the U.S.-China Section 123 nuclear cooperation agreement was finally able to be implemented. It is scheduled to expire on December 30, 2015, its 30-year term having begun in China s Growing Energy Needs The People s Republic of China has a population estimated to be 1.4 billion people, half of whom live in cities. Recent estimates 1 of the populations of China s six largest cities are: Shanghai 20 million Beijing 15 million Guangzhou 11 million Shenzhen 10 million Chongqing 10 million Wuhan 9 million. The third largest economy in the world, China has a gross domestic product of $9 trillion. Its 2013 rate of GDP growth was 7.7 percent. Its unemployment rate is about 4.1 percent. Its labor force, also the largest in the world, is divided roughly equally among agriculture, industry and services. China produces more electricity than any other country, slightly above the U.S. production of 4 trillion kwh. It produces this electricity mainly from coal, followed by oil, hydroelectric dams and natural gas. Nuclear generates about 2 percent of China s electricity. China is expanding its energy supply from nearly every source offshore oil and gas exploration, gas pipelines from Russia, renewables of all types, hydroelectric dams, and a massive increase in nuclear power. NUCLEAR ENERGY IN CHINA 2

3 China s Installed Electricity Capacity by Fuel as of year-end 2012 Nuclear 2% Natural Gas, 3% Hydro, 22% Oil, 2% Renewables, 6% Coal, 66% U.S. Energy Information Administration, International Energy Statistics. Since the Chinese nuclear market opened to U.S. suppliers in 1998, U.S. commercial nuclear companies have made significant commitments to trade and investment with China. U.S. firms have won contracts to export nuclear technology, equipment and services worth billions of dollars, creating tens of thousands of U.S. jobs. Specific examples include: Westinghouse Electric Company. In July 2007, a U.S. consortium led by Westinghouse signed a major contract with Chinese nuclear firms to supply four AP1000 nuclear power plants at an estimated cost of $8 billion. 3 The plants are currently under construction two at the Sanmen site in Zhejiang province and two at the Haiyang site in Shandong province. Under the contract, Westinghouse supplies technology, engineering services, automation as well as certain components and materials. Although nuclear generation currently provides a small share of China s power, it is growing in importance. High coal consumption has caused serious public health problems and made China the world s largest emitter of CO 2. As the Chinese government implements its plan to cap coal use at 65 percent of total primary energy consumption, nuclear power will supply the majority of China s of clean and reliable power. 2 Major U.S. Commercial Interests at Stake The Chinese nuclear energy sector, already well established, is undertaking a massive expansion. Since China s first nuclear power station began operation in 1994, the country has brought 22 more plants online. Twenty-six plants are currently under construction, and more are set to begin construction in the coming months. China s government has plans to increase its nuclear generating capacity to 58 GW by 2020, 150 GW by 2030 and considerably more by In September 2014, Westinghouse said it expected to be involved in orders for eight additional AP1000s. Westinghouse values the contracts, together with machinery and services, in the billions of dollars. 4 Beyond these eight plants, China plans to develop another 12 AP1000 plants at inland sites and another 12 at coastal sites. The company stated that it expected to have 20 AP1000 units under construction in the next five years in China. Much like earlier U.S. supply agreements with South Korea and other countries, the Westinghouse-China contracts include provisions to share technology with Chinese firms. The export of AP1000 plants has benefitted Westinghouse and its thousands of employees, and dozens of its U.S. partners and suppliers. For example: Chicago Bridge & Iron (CB&I). Based near Houston in The Woodlands, Texas, with facilities in 31 states, CB&I is a 125-year-old engineering and construction company with 55,000 employees. It provides design, engineering, construction, fabrication, maintenance NUCLEAR ENERGY IN CHINA 3

4 pressure vessels and other heavy-walled components to the AP1000 projects in China. Sanmen Nuclear Power Station, under construction in Sanmen County, Zhejiang Province. When complete, the two U.S.-designed, Westinghouse AP1000 reactors, each of 1,250 MW capacity, will generate carbon-free electricity for over a million people. Photograph courtesy Westinghouse Electric Co. and environmental services to the AP1000 projects in China. Curtiss-Wright. With manufacturing facilities in Brea, California, and Cheswick, Pennsylvania, Curtiss-Wright s nuclear unit supplies the large reactor coolant pumps used in the Chinese AP1000s. SPX Corporation. Based in Charlotte, North Carolina, with 17,000 employees worldwide, SPX is supplying squib valves to the AP1000 projects in China. A squib valve prevents leakage from pipe connections during normal operations but, in an emergency, it shears open pipe caps to allow water to flow through to depressurize systems or provide coolant to reactor cores and containments. SPX s contract for these components covers up to 12 nuclear plants and is worth $100 million. Holtec International. With facilities in New Jersey, Ohio and Pennsylvania, Holtec International is designing and licensing high-density fuel racks for the AP1000 plants under construction in China. Holtec s supply chain also creates a ripple effect that supports over 1,000 jobs at other U.S. companies. Precision Custom Components (PCC). Based in York, Pennsylvania, PCC is supplying custom, heavy- U.S. commercial nuclear exports to and partnerships with China are not limited to the AP1000 plants. Other U.S. commercial nuclear vendors are supplying other Chinese projects and markets: CB&I. In July 2014, CB&I signed a memorandum of understanding with China National Nuclear Corporation (CNNC) to cooperate in operation and maintenance support services for CNNC's operating nuclear power plants. CNNC currently has nine reactors in operation at two sites, Qinshan and Tianwan, as well as a further 12 units under construction at five other sites. The agreement between CB&I and CNNC also includes cooperation in international nuclear power market development, as well as nuclear power training programs and the exchange of management personnel in the U.S. and China. In October 2013, CB&I announced a joint venture with China Power Investment Corporation (CPI), under which it will provide EPC, commissioning, project management and technical support services for new plants planned by CPI. TerraPower. In December 2013, the U.S. and Chinese governments executed an agreement to permit technical collaboration on TerraPower s innovative fast reactor design, the Traveling Wave Reactor (TWR). Backed by Microsoft founders Bill Gates and Nathan Myhrvold and based in Bellevue, Washington, TerraPower intends to demonstrate a prototype of the design in China. The company plans to keep a substantial amount of the TWR engineering and design program in Bellevue and is establishing a dedicated supply chain based in the United States. If successful, the project will establish U.S. leadership in the market for Generation-IV reactor designs, which has been estimated at up to $5 trillion. 5 The company expects to double its core staff to 200 in the next three years and expand its contract jobs NUCLEAR ENERGY IN CHINA 4

5 from 150 to thousands. Workers in Connecticut, Pennsylvania and New Hampshire are currently engaged in prototyping and fabrication projects. Fluor. In December 2014, Fluor Corporation, an engineering and construction firm based in Texas, signed a memorandum of understanding with China National Nuclear Corporation (CNNC) to cooperate on a broad range of civil nuclear-related opportunities. The MOU envisions projects in the U.K., Germany and China and also covers work in the renewable energy market. Enertech. In 2013, China s National Nuclear Safety Administration certified the design and manufacturing of valves manufactured by the Curtiss-Wright subsidiary Enertech, based in California. This certification qualifies Enertech to supply these valves to civil nuclear power plants currently in operation, under construction, or planned in China. Transco. Chicago-based Transco Products is supplying thermal insulation equipment to Chinese nuclear power plants of multiple designs. Mature Nuclear Energy Sector The Chinese nuclear energy sector is mature and wellintegrated into the international nuclear market. China has incorporated diverse reactor and fuel-cycle technologies from multiple partner countries other than the United States. France and China have active cooperation agreements that include the construction of two AREVA EPR plants at the Taishan site. Russia is heavily involved in the Chinese market. Russia completed two VVER-1000 reactors in China in Russia is currently building two more VVER reactors at the Tianwan facility, which will come online in 2017 and Canada constructed two CANDU units in 2002 and 2003 at the Qinshan site. In July 2012, the Canadian and Chinese governments signed a supplementary First nuclear concrete pour, December 2012, at unit 3 of the Tianwan Nuclear Power Plant. When units 3 and 4 are complete, the Tianwan station will consist of four Russian-designed Rosatom VVER-1000 reactors, each of of 1,060 MW capacity. Photograph courtesy Rosatom. protocol that helps Canadian uranium companies export nuclear fuel to China. A recognized nuclear-weapon state under the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), China has possessed enrichment and reprocessing capabilities for decades. With assistance from Russia and France, China has recently made strides toward its goal of selfsufficiency for the enrichment and reprocessing needs of its growing fleet of nuclear power plants. Russia built two major enrichment plants under agreements concluded in the 1990s and is helping to expand that capacity under a 2008 agreement. France has agreed to develop a large, used-fuel reprocessing plant that will begin operation in Emerging Supplier Nation As China s market has expanded, the country has leveraged its scale to promote its own industrial development including the absorption of technologies and localization of manufacturing. China is slowly but steadily emerging as a designer/vendor of power plants. Chi- NUCLEAR ENERGY IN CHINA 5

6 na has developed an indigenous plant design, the 1,000 -megawatt CPR-1000, which is based on the original French plants built in the country. Although various technologies are under development, the CPR-1000 has been designated, along with the AP1000, as one of China s two standard designs for future construction. The Chinese aim to export the CPR-1000 and eventually an advanced version under development called the ACPR China is also planning a 1,400-megawatt CAP1400, based on the AP1000 technology licensed from Westinghouse. 6 So far, China s exports have been limited. It built a 325- megawatt power plant in Pakistan that began operating in 2000, and completed a second unit in Both plants operate under facility-specific IAEA safeguards. In June 2010, Pakistan signed a contract with China to build two more plants of the same class, and a contract for a CPR-1000 plant was reportedly signed in November China has attempted to market the smaller plant to Belarus and countries in Africa. As China s nuclear energy sector expands, so will its nuclear design and manufacturing capabilities. In time, it will follow in South Korea s footsteps to become an important partner for nuclear vendors worldwide and a major commercial nuclear supplier in its own right. Cooperation Benefits U.S. National Interests Nuclear safety. Following the Fukushima accident in Japan in 2011, China ordered safety inspections on all its operating plants and those under construction. The operating plant inspections were completed by In 2011, the Ministry of Environmental Protection mandated new standards for reporting nuclear accidents and new protocols for the management of radioactive materials. The ministry also submitted new draft safety rules for operating plants to the State Council for approval. In October 2012, the government announced that it would begin approving new nuclear plants that incorporate new features resulting from the new post- Fukushima safety rules. China s post-fukushima review elevated the priority to develop Generation-III plant designs, notably the Westinghouse AP1000, at the expense of China s indigenous, second-generation CPR Reduction of Carbon Emissions. In November 2014, China agreed for the first time with the United States to limit its emissions of greenhouse gases and to reduce its emissions after Without China s planned additions to nuclear generating capacity, achievement of this goal would be impossible. An analysis of China s Energy Development Strategic Plan indicates that nuclear power will account for a majority of China s new, zero-emitting generating capacity. 7 Given China s advanced plans to expand its nuclear infrastructure with U.S. technologies, a cessation or lapse of U.S. nuclear cooperation would likely cause serious disruption to China s nuclear energy development and set back its efforts to reduce its carbon emissions. Nonproliferation. When the U.S.-China Section 123 agreement was negotiated by the Reagan Administration in 1984, China had only recently begun a long evolution toward following international nonproliferation norms. 8 Throughout the 1960s and 1970s, Chinese leaders had openly rejected nonproliferation on principle as discriminatory. As recently as 1980, China was not a party to any major non-proliferation agreement. During this period, China supplied 60 tons of lowenriched uranium (LEU) to South Africa, heavy water and LEU to Argentina, and assistance with uranium enrichment and possibly a nuclear-weapon design to Pakistan. 9 Since the 1980s, U.S. diplomatic engagement has yielded China s steady acceptance of international nuclear security and nonproliferation standards and practices. In 1984, China joined the International Atomic Energy NUCLEAR ENERGY IN CHINA 6

7 Nuclear Power Plants in China Operational Under Construction Planned Agency and agreed to place all of its exports under safeguards. In the same year, it assured the United States that it did not advocate or encourage nuclear proliferation. In 1990, China attended the NPT review conference and made favorable statements about the treaty. Two years later, China formally acceded to the NPT as a nuclear-weapon state. China signed the Comprehensive Nuclear Test Ban Treaty in 1996 and joined the Zangger Committee the next year. China became the first nuclear-weapon state to ratify the IAEA Additional Protocol in In 2004, China joined the Nuclear Suppliers Group, with U.S. government support. China is the first nuclear-weapon state to adopt a no first use policy and an official pledge not to use nuclear weapons against non-nuclear weapon states most recently in the 2010 Defense White Paper. 10 Since 1992, China has improved its export controls, including regulations on nuclear materials and nuclear dual-use exports, and has pledged to halt exports of nuclear technology to un-safeguarded facilities. NUCLEAR ENERGY IN CHINA 7

8 Why the UAE Gold Standard does not make sense for China. Nuclear security and nonproliferation remain among the leading issues for which Washington seeks Beijing s collaboration. As a fellow nuclear-weapon state and permanent member of the United Nations Security Council, China is indispensable to restraining the nuclear ambitions of Iran and North Korea. As the world s largest developer of nuclear power and an emerging nuclear energy supplier, China will be increasingly essential for preventing the proliferation of sensitive nuclear technologies. Renewed U.S. engagement with China in civil nuclear cooperation will continue to strengthen the bilateral relationship and promote China s respect for international nuclear security and nonproliferation norms. As a nuclear-weapon state and a party in good standing to the NPT, China is fundamentally different from the countries that have featured in the debate over whether the United States should condition nuclear trade on its partner s renunciation of technologies to produce nuclear fuel a commitment sometimes called the gold standard. A U.S. policy to withhold programmatic consent for Chinese reprocessing would serve no nonproliferation purpose China is already producing sensitive nuclear materials legally, for strategic and civil purposes. If the United States were to withhold blanket consent from China, it would only undermine longstanding nuclear cooperation and its benefits. The current U.S.-China nuclear cooperation agreement the first Section 123 agreement with a nuclearweapon state pledged the parties to negotiate a mutually acceptable arrangement if China should seek to enrich or reprocess U.S.-obligated materials. The agreement provides that, if the two governments cannot reach a long-term arrangement within six months, then they would negotiate measures for reprocessing and enrichment on an interim basis. Since 1984, when the current agreement was negotiated, China has begun to accumulate U.S.-obligated nuclear materials. China s large-scale deployment of U.S. reactor technology will create a stream of U.S.- obligated used fuel. To implement its closed fuel-cycle policy, China will require a flexible ability to reprocess this material. China is therefore expected to insist, in the renewal agreement, on U.S. programmatic advance consent for reprocessing. Conclusion As China has emerged during the past three decades as one of the world s largest economies and a global strategic power, the United States has sought to overcome deep mutual distrust and avoid debilitating conflict by identifying areas for cooperation and mutual benefit. Although bilateral cooperation in the peaceful uses of nuclear energy has not dispelled mutual suspicions, it has clearly helped to promote important economic and security interests for both countries, and strengthened the bilateral relationship. Nuclear cooperation with China has brought the United States important economic benefits, including billions of dollars in export revenue and the creation of tens of thousands of American jobs. U.S.-China nuclear cooperation has advanced other critical U.S. interests: It has promoted global nuclear safety through China s standardization of an advanced U.S. reactor design and its enlistment of U.S. expertise in developing the plants. The strong U.S. presence in China s nuclear energy market has helped the United States to persuade China to adopt international norms for nuclear security and nonproliferation. U.S. assistance in developing China s nuclear energy program is helping China to mitigate its world-leading carbon emissions and other pollution. United States must not forfeit these important gains. The U.S.-China nuclear cooperation agreement should NUCLEAR ENERGY IN CHINA 8

9 be promptly renewed by the two countries on mutually acceptable terms. Notes 1. The World Factbook, U.S. Central Intelligence Agency, June U.S. Energy Information Administration, International Energy Statistics, China, February Chen Aizhu and Jim Bai, Westinghouse Seals Mega China Deal, Reuters, July 24, China Seen Buying Westinghouse Reactors for $24 Billion Nuclear Energy Projects, Reuters, April 21, Jesse Jenkins and Sara Mansur, Bridging the Clean Energy Valleys of Death, The Breakthrough Institute, November Nuclear Power in China, World Nuclear Association, updated October Arthur Yip, US-China Climate Deal Underscores Need for Substantial Energy Innovation, Breakthough Institute, December China Country Profile, Nuclear Threat Initiative, updated March Jennifer Weeks, Sino-U.S. Nuclear Cooperation at a Crossroads, Arms Control Today, June 7, China Country Profile, Nuclear Threat Initiative, updated March NEI Trade Team Dan Lipman Vice President, Suppliers and International Programs dsl@nei.org Carol Berrigan Senior Director, Supplier Policy and Programs clb@nei.org Ted Jones Director, Supplier Programs thj@nei.org Staci Wheeler Director, Federal Programs saw@nei.org Bob Powers Senior Director, Federal Programs rjp@nei.org NUCLEAR ENERGY IN CHINA 9