Global Insight Perspective | |
Significance | Westinghouse has won the contract to build four 1,000-MW pressurised water reactors after fierce competition among would-be international suppliers for a deal worth between US$5 billion and US$8 billion. |
Implications | The promise of increased transfers of third-generation nuclear technology has apparently carried the day for the Toshiba subsidiary. The news is a blow to French nuclear giant Areva, given its late push to secure the contracts. |
Outlook | The new reactors will be installed in Yangjiang, Guangdong province and at Sanmen in the Zhejiang province. The contract will create 5,000 new jobs in the United States, and while there is the promise of more international contracts of this sort to come, China will hope domestic companies are able to contribute the bulk of the over 30,000MW of installed nuclear capacity it hopes to add to the grid by 2020. |
And the Winner is…
Westinghouse Electrical Company has been awarded the most lucrative international nuclear contract in history by China's state authorities (see "Related Articles"). The final agreement came on Saturday (16 December), with U.S. Energy Secretary Sam Bodman releasing a statement from the country's embassy in China. In a deal set to be worth around US$5-8 billion, it is the U.S.-based group, recently acquired by Japan's Toshiba Corp., that will now begin the construction of four new 1,000-MW pressurised water reactors. These are to be based in China's south and easterly coastal regions. Two reactors are slated for the Yangjiang power plant in Guangdong province, while the two others will be installed in Sanmen, Zhejiang province.
At a time when concerns over the carbon intensity of the power sector have led many public authorities to reconsider the merits of nuclear power, China has represented perhaps the greatest opportunity for would-be international suppliers. It was announced earlier this year that the country plans to have 40,000MW of nuclear power installed by 2020. While state authorities have high hopes that more and more domestic capacity will be able to support the massive operational task represented in that target, given that the country has a mere 9,600MW of nuclear power online at present, new international investment opportunities have long been apparent. This has led to a courtship the likes of which the international nuclear power business has never known. The French nuclear group Areva and Russia's Atomstroiexport have been amongst those vying with Westinghouse for a piece of this pie.
China has played its hand very well in reaching the accord it has today. Despite the late push by French authorities, once the favourites to tie up the deal, it is clear that the wider benefits on offer tipped the balance in favour of the U.S.-based group. Firstly, there is the importance of closer collaboration between the United States and China, something from which both sides stand to gain. Technical merit has been singled out as the grounds for the decision, and this could well be the case. There are suggestions in the press today that Westinghouse has promised far greater technology transfer to China than the French group. Areva had made a global offer, which would see them assume responsibility for all aspects of the fuel cycle. However, that is not what China wants. While the 4,000MW of installed capacity will make a major difference to China's power grid, there is the promise of greater domestic capacity-building in the deal with Westinghouse. Chinese operators will have to assume important positions in the supply chain, and that is critical to the atomic future China has in mind.
Outlook and Implications
Areva can be seen to have misjudged the importance of domestic capacity-building with its all-or-nothing offer. The stakes in this act are indeed high; on top of the investment, some 5,000 new jobs will now be created in the United States. The French group may have other opportunities, and there remains the promise of other major international nuclear contracts in China in the future. Indeed, it has been suggested by the Les Échos newspaper in France today that China might buy two European nuclear pressurised reactors (EPRs) from France in the near future. Such a move certainly would be a timely olive branch. Toshiba's acquisition of Westinghouse was based on a move into China's nuclear power sector, and in the way events have played out, the massive investment made by the Japanese conglomerate looks to be paying off handsomely.
Chinese nuclear reactors—there are currently nine in operation and two more Russian-made reactors are set to go online in early 2007—rely on second-generation technology. However, with the massive growth in the number of reactors sought through 2020 (and it has been estimated that 32 1,000-MW generators would be required to hit the state target) the increased yields and improved safety features of third-generation reactors are going to be more and more important. China has just bought four of these from Westinghouse, and that is the same technology that the EPRs hold. Although the noises that Chinese authorities are making imply that international purchases will not be the first option and that there will be greater emphasis on nurturing the domestic nuclear business in the future, it looks as though more international third-generation reactor deals will follow before China moves its own domestic-reactor manufacturing up a generation after 2015.
Related Articles
China: 26 October 2006: French Renew Lobbying for Nuclear Contracts as China Downgrades Renewables Target
United States: 5 October 2006: Toshiba Agrees to Purchase 77% Stake in Westinghouse
World: 25 January 2006: Toshiba's Move for Westinghouse Bears Expectations of Chinese Nuclear Demand
China: 16 December 2005: Areva Reportedly Close to Securing US$8-bil. Nuclear Power Deal with China
China: 20 May 2005: China Set to Award Four Nuclear Power Plant Construction Contracts Within Five Months