Nuclear Power in China : Solar and Wind are Winning
Look to China to see the future of decarbonized power and wheeled transport
World’s first onshore Small Modular Reactor at Changjiang Nuclear Power Plant in South China. Source CNNC
I’m a keen observer (and investor) in the dramatic changes in technology as the world begins to decarbonize its energy and wheeled transport systems. There is a climate emergency and an urgent need to stop burning fossil fuels. This leads to interesting opportunities for investors looking to the future. A good summary as to what happens in such transitions is outlined in the paper “Peaking : A Brief History of Select Energy Transitions” from the Rocky Mountain Institute. The real possibilities to exit fossil fuels in energy and transport involve recent maturation of two core technologies : solar PV and wind power, along with associated means to store power and manage intermittency. This includes EV batteries, grid-scale batteries and HVDC (High Voltage Direct Current) cables to provide interconnectivity over thousands of kilometers.
Nuclear power has its advocates and it seemed likely to become a core part of a global decarbonized power system until the Fukushima disaster in 2011. Since then nuclear power has struggled, not only because safety regimes needed to be revised, but also because the cost structure and time taken to execute on projects were major hindrances. I think it is always good to look at where the action is at when assessing new or resurgent technologies. In the case of nuclear power this means China, because there have been big plans for nuclear in China, although these plans were paused after the Fukushima disaster. Here I give my take on Chinese nuclear power developments and more generally China’s plans to decarbonize energy and wheeled transport. I’m unconvinced that nuclear power is going to have a significant role in a decarbonized world. This has relevance to choice of technology which is going to succeed.
Nuclear power versus renewables in China
For me the big issue, that is becoming clear concerning China’s push to decarbonize its economy, is that solar PV and wind are outperforming nuclear developments on both cost and speed to deliver the technology. This contrasts with projections pre-Fukushima, when nuclear power was predicted to become comparable with solar PV and wind power in a decarbonized world.
Prior to 2008 Chinese Government plans for nuclear power involved 70-80 GWe by 2020, 200 GWe by 2030 and 400-500 GWe by 2050. Today these projections are considerably pulled back and even smaller targets are not being met. For example a target of 58 GWe of installed nuclear capacity by 2020 may not yet have been achieved.
On the other hand projections for solar PV and wind power have been dramatically revised upwards and planned targets are being exceeded. At the end of 2022 China had installed 365 GW of wind power capacity and 392 GW of solar PV; the consensus is that a 1200 GW target by 2030 for combined solar PV and wind will be exceeded in 2025! In fact China might achieve 1000 GW of solar PV power alone by the end of 2026. Recently the US and China committed to treble renewables between 2020 and 2030. This means that China will need to have installed between 2800 and 3000 GW of solar PV and wind power by 2030. The expert consensus believes that China can do this.
My take on this is that nuclear is proving to be uncompetitive with solar PV and wind in China based on three key criteria : i) time to implement a nuclear versus solar PV or wind project; ii) cost to deliver nuclear versus renewable energy; iii) need for lots of water for cooling nuclear facilities, versus no water need for power generation from solar PV or wind. (China is a very dry country).
China’s nuclear story
The World Nuclear Association has a blow-by-blow description of the huge ambition of the Chinese nuclear program that has explored technology partnerships with global partners (especially French, Canadian, US and Russian groups) to accelerate its programs. The Fukushima accident in 2011 had a significant impact on the Chinese nuclear programs (as it did for the rest of the world).
At the COP28 climate meeting France, the US and UK were important countries (of 22 countries) which committed to trebling nuclear power capacity by 2050. China did not join this group.
As far as I can gather China’s nuclear program seems still based on large Gen III nuclear reactors. If SMR (Small Modular Reactor) technology was proven and cost effective, I would expect that China would be adopting this technology at scale. It isn’t, although it has a small Gen III (or IV?) program under construction (no indication of cost). China has spent a lot moving forward on various technologies from global partners in parallel. It seems like there is a lot of repetition and also that China’s recent isolation by the rest of the world might be having an impact on China’s nuclear programs. My guess is that China might start to consolidate its varied nuclear programs with its own versions of technology that it has acquired. It is complicated at the moment and may be slowing things down. However, I suspect the real issue is the massive cost reductions and speed to complete solar and wind programs.
The bottom line is that nuclear power no longer sits at the level of China’s solar PV and wind power programs. This view is clearly demonstrated by examining new power capacity built in China in 2022 (see below). In 2022 solar and wind produced ~10x the actual new power generation (not capacity) that new nuclear additions did. Adequacy of the water supply and fear of river contamination has proved to be a significant consideration in the slowing of plans for inland nuclear plants in China.
Data source: Energy Institute - Statistical Review of World Energy (2023) – Learn more about this data
The data from the Energy Institute provides really helpful insights into what is happening in the energy sector. I’ve just presented the latest data (2022). Annual changes can be confusing and readers are encouraged to review the Table for the period 1966 through 2022. However the 2022 figures make clear that in China, wind and solar power production is increasing ~10 fold faster than nuclear power, based on actual power produced.
The other clear conclusion is that China far exceeds US increases in renewables and it also reflects that the US remains committed to expanding fossil fuel production (largely gas) notwithstanding that the US is decreasing its coal power consumption.
China and SMR technology
The above indicates that China has largely focused on Gen III large nuclear reactor designs, although there have been discussions about smaller reactors, including floating nuclear plants in cooperation with Russian groups.
Russia and China are the only countries with actual progress on implementing SMR projects. Russia’s invasion of Ukraine has implications for its nuclear development because international partnerships are not in good shape and the Russian economy is stretched by a war.
China has a new generation ACP100 Gen III or IV? SMR reactor (Linglong One) that will be commissioned soon. It is a 125 MWe pressurised water reactor designed and developed by CNNC (China National Nuclear Corporation). Construction was planned to start in 2017 but it did not commence until 2021 and the core module was installed in August 2023. It is claimed to be the world’s first Gen III SMR to pass a safety review by the International Atomic Energy Agency.
China has not met its planned nuclear expansion nor have its nuclear programs kept pace with solar PV and wind developments. This is a big deal because it not only gives insight into the scale of China’s exit from fossil fuels, but it also indicates the technologies that are driving the transition.
I am not a financial advisor but I am interested in disruption and opportunity that come with revolutionary changes in energy and transport. My comments reflect how I approach investment in this space, but I leave it for you and your financial advisor to decide if my commentary is helpful for your investment decisions.
Thanks for indicating another issue that China has to contend with in its nuclear programs. It reinforces that solar PV and wind power, which seem less subject to foreign dependence, are the major focus of China's energy transition.
I wanted to bring to your attention the issue of China's uranium supply and its concerns regarding power independency and import constraints in light of geopolitical conditions. In my class, my professor mentioned that Chinese scientists have been making significant efforts to extract uranium from oceans; however, it is currently not commercially feasible.