NEI Executive Viewpoint US Commercial Service/Nicobar: China reactor designs likely to be indigenous

Business Intelligence for the nuclear industry

Executive Viewpoint

US Commercial Service/Nicobar: China reactor designs likely to be indigenous

21 April 2011
Nowhere today is the global Nuclear Renaissance stronger than in China. Over the past five years, China has developed the world’s most ambitious nuclear new-build program. With over 20 new reactors currently under construction, But future technology is likely to be domestically developed in conjunction with established technology.

By Nicobar Group and the US Commercial Service
Future reactor designs in China will be dominated by the indigenous CPR-1000 and the Westinghouse AP1000, the world’s first of which are currently under construction in China.
China’s nuclear new build is subject to government-imposed local content quotas, which influence Chinese customers’ procurement decisions. Consequently, a strategic localization plan is crucial to US companies’ success in the Chinese market.
It is recommended that potential entrants to the market engage experienced in-country service providers in determining how to best position themselves in compliance with local content rules.
Major Players
Regulatory
The China Atomic Energy Authority (CAEA) is the ultimate government organ responsible for the use of civilian nuclear energy in China, in charge of industry regulation and planning, review of feasibility studies, and international cooperation. Its subsidiary, the National Nuclear Safety Administration (NNSA) is responsible for licensing and permits. National macroeconomic energy policy is shared between the National Energy Administration (NEA), and National Development & Reform Commission (NDRC).
Ownership
While most of China’s power industry (coal, hydro, wind) is dominated by China’s “Big 5” power generation companies, the nuclear power sector has historically been and continues to be largely controlled by two separate nuclear-specific owner-operators: China National Nuclear Corp. (CNNC) and China Guangdong Nuclear Power Group (CGNPC).
Both are Chinese state-owned enterprises (SOEs). The industry is gradually liberalizing in terms of ownership: One of the “Big 5” players, China Power Investment Corp. (CPI), after taking minority stakes in several early nuclear plants, has now been authorized as China’s third NPP majority owner-operator, along with CNNC and CGNPC.
The other four of the “Big 5” generators are all now actively taking minority stakes in China’s under-construction power plants, though it is uncertain when majority ownership rights will be expanded. Despite gradual liberalization in the ownership of nuclear plants, all fuel cycle activities remain controlled by the two SOE giants: CNNC and CGNPC.
Through its subsidiaries, CNNC controls all conversion, enrichment, fuel fabrication, reprocessing, storage, and disposal activities. Foreign participation in China’s nuclear fuel cycle is handled by CNNC’s Dept. of Nuclear Fuels and Dept. of International Cooperation.
New Build & Procurement
China Nuclear Engineering & Construction Group (CNEC) holds a monopoly on NPP construction, with 5 daughter nuclear construction companies it deploys on a per project basis for civil construction and installation work.
These daughter companies are in turn responsible for the procurement of construction materials and services from domestic and international suppliers. The majority of NPP equipment and components procurement, whether local or foreign, are made by one of three EPCs contractors: CNPEC, CNPE or SNPEC, dependant on plant type and owner.
The design and fabrication of nuclear pressure-bearing equipment requires a Chinese nuclear safety-related equipment license, which is issued by the Chinese the National Nuclear Safety Administration (NNSA) and known as HAF.
An HAF 601 license is required of companies in China providing safety-related equipment, whether Chinese SOEs, Chinese private companies, Sino-Foreign Joint Ventures (JVs), or Wholly Foreign-Owned Enterprises (WFOEs). An HAF 604 license is required for the importation of foreign safety-related nuclear equipment. Both licenses involve an application process of about a year with the NNSA.
Entering the Chinese Market
The combination of the Chinese nuclear industry’s rapid growth with its relative lack of maturity will mean that there will be many shortages in both capacity and expertise, and there are very large opportunities for US companies to fill those gaps.
The best way to serve the Chinese market is through the establishment a China operation in some form. Chinese NPPs under construction are under pressure to meet government defined local content quotas in their procurement decisions.
The interpretation of these requirements varies, and the benefits of being considered “local” in the eyes of the Chinese customer are myriad. Realizing a local presence is a key sales and marketing tool for companies doing business in-country.
Chinese customers prefer purchasing local product and services because of the lower costs and shorter lead times they bring with them. In addition, companies with a local presence of some form (whether manufacturing facilities, service centers, or representative offices, etc.) will be able to provide easier in-country communications (a very valuable asset to customers for resolving issues that arise over the course of contract execution) and are given preference in bids accordingly.
Manufacturing at least some part of one’s product in-country is also attractive to Chinese customers because it allows them more visibility into fabrication and saves significant time and travel costs on any required or desired in-process inspections.
Chinese Commercial Nuclear Reactors
For an interactive version of this map, visit www.nicobargroup.com/)
This report was produced by Nicobar Group in collaboration with the U.S. Commercial Service in Beijing, China. The Nicobar Group specializes in establishing and managing operations in China for US nuclear companies. nuclear@nicobargroup.com

The United States Commercial Service is the trade promotion arm of the International Trade Administration within the United States Department of Commerce: http://www.buyusa.gov/china/en/energy.html
Other sources:
Chinese Atomic Energy Authority (CAEA): http://www.caea.gov.cn/
National Nuclear Safety Administration (NNSA): http://nnsa.mep.gov.cn/
China National Nuclear Corp. (CNNC): http://www.cnnc.com.cn/
China Guangdong Nuclear Power Group (CGNPC): http://www.cgnpc.com.cn/
China Power Investment Corp. (CPI): http://eng.cpicorp.com.cn/
State Nuclear Power Technology Corp. (SNPTC): http://www.snptc.com.cn/
China Nuclear Engineering & Construction Group (CNEC): http://www.cnecc.com/