Forecasting China’s nuclear industry growth in 2016

Forecasting China’s nuclear industry growth in 2016

Despite appearing poised to miss key nuclear industry goals throughout the majority of 2015, a late-December push from Beijing towards significant expansion suggests that China’s nuclear industry is positioned for notable gains in 2016.

Analysts have increasingly recognized nuclear energy as promising in the face of an increasing demand for alternatives to fossil fuels. Yet it is struggling to fulfill even a fraction of its potential in most capable nations.

One state that has defied that trend for well over a decade is China — a country that appeared set, in spite of this favorable inclination, to fall short of its own ambitious 2015 nuclear growth targets as late as last November. Nonetheless, and in appropriate fashion for a government that fastidiously plans its economy, policymakers in Beijing approved a series of last-minute atomic energy projects that have not only fulfilled China’s 2015 goals, but also propelled it into 2016 with the momentum for even greater nuclear industry growth.

With the December announcement, China’s State Council pushed forward plans for four new nuclear reactors and brought the total of atomic energy plants newly announced in 2015 to eight. This construction rate falls neatly into place for China’s goal of boasting a nuclear capacity of 58 GWe by 2020 and 150 GWe by 2030; the country currently has 30 nuclear power units in operation for a capacity of 28.31 GWe, with an additional 20 units under construction prior to the announcement. Overall, China completed construction on six reactors in 2015.

In addition, these domestic gains take on greater weight when considered alongside China’s budding nuclear diplomacy abroad, a domain in which it secured reactor construction deals with the United Kingdom, Argentina, and Romania.

Rounding out the year of achievement, three of China’s biggest state-owned nuclear firms — China National Nuclear Corporation (CNNC), China General Nuclear Power Group (CGN), and State Nuclear Power Technology Corporation (SNPTC) — developed and launched two next-generation nuclear reactor models in 2015, the Hualong One and the CAP1400. These new models both aspire to become international standards for nuclear power, and their launch represents rising global recognition for China’s nuclear prowess.

With these developments in mind, China’s nuclear industry has entered 2016 in position for even greater margins of growth and investment opportunity.

Solid growth domestically

Overall, China can be expected to either match or surpass its 2015 figures for both newly planned and newly completed nuclear reactors at home.

Observing its ambitious 2020 and 2030 goals, and recognizing the notably positive momentum that China’s nuclear industry has culminated coming out of 2015, China can be expected to approve at minimum another eight domestic nuclear reactors in 2016. Judging by the recent wave of nuclear project approvals and the capacities of China’s new reactor designs, the new approvals can be expected to net Beijing approximately 1000 MWe each.

At the same time, the current status of China’s ongoing nuclear construction projects suggests that Beijing’s state-owned atomic energy outfits will complete construction on seven reactors total and bring over 7500 MWe online for the Chinese nuclear grid.

Finalizing the reality of China’s upward-trending nuclear industry is the fact that, in consideration of the over 20 planned reactors not already underway, and in light of of existing plans for starting construction, China’s top nuclear corporations can be expected to begin building a minimum of 11 reactors.

These domestic projections ultimately position the Chinese nuclear industry in firm standing for growth across 2016, with investors in related companies like CNNC facing a favorable outlook. Investments in the global uranium market can also be expected to trend upwards in 2016, having outlived a series of disappointing annual returns to finally be revived in large part by China’s accelerated nuclear endeavours.

Strong prospects abroad

While investors can expect the Chinese nuclear industry to oversee impressive growth domestically, Beijing’s emerging strategy for exporting its nuclear technologies presents an equally powerful driver of development. Now equipped with two reactor designs at the forefront of nuclear power technology, and being widely recognized as the fastest constructor of reactors in the world, China’s major nuclear power companies can also be expected to benefit from the securement of bilateral contracts.

This year, China has so far confirmed lucrative contracts with both Saudi Arabia and Iran for the construction of nuclear power plants; construction is also expected to begin on the reactors contracted in 2015 for Argentina. China can be expected to heavily promote its ability to construct and service nuclear energy to similar countries in both the Middle East and South America, as well as emerging nuclear domains in Africa and South East Asia.

In particular, China is currently one of several nuclear exporters including Russia, South Korea, and France, in competition for the sizable construction of eight nuclear reactors in South Africa. Presently, the South African government has not given any indication as to which country is favored to secure the deal.

The opportunity represents the ideal chance for Beijing to demonstrate its status now as a leader in nuclear energy technologies, and it can be expected that China will exert a significant amount of diplomatic energy in its bid. Overall, the affordability of China’s newly developed nuclear technologies, its unmatched reactor construction speed, and the overall momentum of the Chinese nuclear industry make the odds of a successful bid likely.

To be certain, China’s push towards nuclear expansion will garner competition for bilateral nuclear construction contracts outside of South Africa, and in particular with Moscow, which itself is aggressively pursuing a global nuclear export regime. Yet, no country is currently demonstrating the same level of commitment to nuclear power seen from Beijing.

It is this commitment that will empower the field of Chinese atomic power to innovate and expand across the upcoming year and beyond. The bottom line for China’s nuclear energy industry in 2016 is that significant growth can be anticipated — an opportunity for investors that will be fueled by favorable outlooks in both the domestic and international realms.

About Author

Ian Armstrong

Ian Armstrong is Commissioning Editor and Senior Analyst at GRI. He also serves as the Geostrategy and Diplomacy Fellow at Young Professionals in Foreign Policy. Previously, Ian assisted in research at Temple University, the University of Pennsylvania, Scottish Parliament, and Hudson Institute's Center for Political-Military Analysis, where he has focused on non-proliferation and international energy. Ian's analysis has been featured at prominent outlets such as Huffington Post, Business Insider, Foreign Policy Association, CBS News, and RealClearEnergy.