State Nuclear Power leads acquisition of US 3G technology The establishment of State Nuclear Power Technology Corp last week heralds a new phase in the development of the mainland's nuclear power industry, although it remains uncertain whether existing proven technology or new know-how will dominate what will be the world's largest nuclear power construction programme. China has set a goal to raise its nuclear power generation capacity more than fourfold to 40 gigawatts - or about the entire power generation capacity of Taiwan - from 9.1 GW, as it faces increasing pressure at home and abroad to tackle worsening pollution from soaring coal-burning generation. It took more than two years for Beijing to weigh the merits of competing technologies before it picked a foreign partner to introduce the so-called third-generation (3G) nuclear technology to the mainland, which intends to localise it. Plants based on 3G technology are supposed to be cheaper and faster to build than 2G generation and 2.5G facilities - although it is expected that Finland will be deploying the world's first commercial 3G plant only in 2009. State Nuclear Power was set up as the acquirer of technology from US-based nuclear technology firm Westinghouse under a technology transfer agreement. In December last year, Beijing awarded Westinghouse Electric, now part of Japan's Toshiba, a contract worth at least US$6 billion to supply four 1GW reactors - two to Sanmen, Zhejiang province, and two to Haiyang, Shandong province. They will be based on Westinghouse's AP1000 technology. This came after intense competition for the 3G tender from France's state-owned Areva and Russia's AtomStroyExport. Industry sources said AP1000's lower construction cost and greater technology transfer agreed by Westinghouse were the main reasons it was chosen. But Beijing has not let long-time mainland nuclear power technology supplier Areva go empty-handed. It unexpectedly added two more reactors to the tender list and has preliminarily agreed to let Areva supply two 1.6GW reactors to a planned plant in Yangjiang, Guangdong, subject to further negotiations on the commercial terms. Since the late 1980s, China has developed capabilities to design, build and operate nuclear plants with some overseas component sourcing. The nation's first nuclear reactor, a 300 megawatt powerhouse, came on stream in 1994, nine years after construction started. To shorten the construction period and improve reliability, China imported its first complete reactor from France for the Daya Bay nuclear plant in Shenzhen. The plant supplies 70 per cent of its output to Hong Kong. This was part of Beijing's long adopted two-pronged strategy in developing its nuclear industry - 'co-operating with international partners with China playing the major role'. While co-operating with Canada on the Qinshan plant's phase three development and with Russia on another plant in Tianwan, Jiangsu province, China has designed, built and procured equipment on its own with some foreign help on a plant in Lingao, Guangdong, and phase two of Qinshan. China has made it clear it wanted complete control of the entire supply chain to cut costs, create jobs and boost its industry prowess as part of the process to realise the mega-expansion programme. But to reap maximum economies of scale, it will likely choose to expand its bunch of reactors by picking one technology and standardising it, analysts said. 'China is at a stage quite similar to [South] Korea 10 years ago,' said World Nuclear Association director of strategy and research Steve Kidd at the sidelines of the Global Economic Forum last week. While it is experimenting with different technologies, 'in five to 10 years, China will still have to come down to one particular style due to economies of scale, operating and experience-sharing advantage'. Although it is too early to tell which technology would be chosen, some industry executives bet that a 2.5G technology will be mass-produced. 'I think until 2020, most of the nuclear plants to be built in China will be 2.5G, but it will also be digesting foreign technology and developing its own 3G technology,' said French nuclear energy giant EDF China chief executive Didier Cordero. Mr Cordero said EDF was also building a 3G plant using Areva's EPR technology despite France having no need for more capacity before 2020. Even when the 40 GW target is achieved in 2020, it will account for only 4 per cent of China's power generation, up from 1.9 per cent last year, but still far behind the world average of 16 per cent. Meanwhile, the establishment of State Nuclear Power Technology has solidified the unique position of China Power Investment Corp in the nuclear segment. It is the only one of the five national state-owned power producer groups spun off from former behemoth State Power Corp to own operating nuclear plants, after receiving all the nuclear assets in the 2002 industry restructuring. With a registered capital of four billion yuan, State Nuclear Power is 60 per cent-owned by State-owned Assets Supervision and Administration Commission, with the remainder equally shared by China National Nuclear Corp, China Guangdong Nuclear Power Holding, China Power Investment Corp and China National Technical Import and Export. The new company is headed by Wang Binghu, ex-chairman of China Power Investment, who was previously a vice-president of CNNC. The inclusion of China Power Investment as a shareholder - with an equal share alongside dominant players CNNC and China Guangdong Nuclear - raised its standing as a key player in the tightly controlled nuclear market.