Xi Jinping, at a May 2014 Asia-Pacific Economic Cooperation (APEC) summit, described a secular decline in the rate of China’s GDP growth as a “new normal” condition. Since then, the term “new normal” has become shorthand in China for the challenges that the economy will face in coming years, perhaps for decades. Leaders in Beijing use Xi’s words to lower the expectations of Chinese who have taken for granted dizzying rates of wealth and welfare gains recorded since modernization was launched in the 1980s. 

At the outset of that era, China built its first modest nuclear power reactor, and went on to replicate the light-water reactor technology deployed since the 1960s by China’s foreign partners. As a result, in 2020 China may have over fifty nuclear power plants in operation and perhaps by 2030 over one hundred units, enough to overtake the United States as the world’s leading nuclear power-generating country. But China’s “new normal” now stands in the way of its plans for continued uninterrupted nuclear power development, including a transition from light-water technology to fast reactors and a closed nuclear fuel cycle. 

Fukushima’s Shadow

Three years before Xi’s APEC address, China’s leaders were stunned by the failure of the region’s most technologically advanced country to prevent three power reactors at Fukushima-Daiichi from melting down inside of 72 hours. Beijing immediately grasped that because China aimed to build a fleet of power reactors far greater than Japan’s, it needed to know whether a similar severe accident could happen in China. If such a disaster did occur, China’s leaders knew, the Chinese population would blame the Communist Party and the state and not, as in Japan, managers at an unpopular electric power utility company.

The Chinese government promptly announced that henceforth only new-design nuclear power plants would be built in China. But the most important consequence of recent developments including at Fukushima is that China will likely build just half the number of power reactors that many experts at the onset of the 2010s had foreseen.

Since 2011 the government has slowed down the approval process for new nuclear power plant construction. Notably, seven years later Beijing has still not approved longstanding plans to build power reactors at inland sites in China, raising the possibility that a political red line may be drawn, preventing the spread of big nuclear power plants west of China’s coastline where all 56 units operating and under construction have been sited. When plans for nuclear expansion into China’s hinterland were first drafted in 2006, industry counted on these projects to account for as much as three-quarters of future nuclear power investment in China.

Components of China’s Nuclear New Normal

In coming years, the challenges of the “new normal” may well reinforce the likelihood that in the future China’s nuclear expansion will be less than officials until 2011 had anticipated. Elements of a “nuclear new normal” include these: 
Lower Growth: After decades of GDP expansion at or near 10% per year, China is slowing down. That means China’s electricity demand growth will also be reduced from about 9% per year to something less. Xi Jinping is not alone in talking about shifting China’s growth model from production of capital-intensive goods to consumer spending. If that happens in earnest the impact on nuclear investment may be profound.

Demographics: China’s population has no safety net and is aging. It is also becoming more urbanized. The first trend may inhibit growth in domestic consumption; the second may increase demand for electricity. A better-informed and wealthier population may expect greater performance legitimacy from central government nuclear regulators and energy planners.
Debt: Since the 1990s China’s economy has quietly assumed a debt load heading toward 300% of GDP. Debt levels of nuclear SOEs are at or exceed the ceiling set by the State-Owned Assets and Administration Commission (SASAC), their government shareholder. This could damage the competitiveness of these firms at a time when the leadership’s main concern about SOEs has shifted from overcapacity to profitability; for now Xi seems prepared to address this concern by merging firms—a strategy that in the past has led to protectionism.   
Bureaucratic Policy Conflicts: The richer and more connected China has become, the less easy it is for Beijing to rule from the top down. When the government ordered the nuclear power industry to inflate, it embarked on a collision course with other interests, including China’s massive coal sector, but also officials determined to reform China’s electricity supply system.
Technology Challenges: China has impressively succeeded by quickly replicating existing nuclear power technologies deployed and demonstrated by others for half a century and over many thousands of cumulative operating years worldwide. Beginning in the 2020s China 
aims to develop and deploy more advanced technologies that will require China to take international leadership, assume greater risk, control costs, innovate, and make difficult transitions from R&D to commercial application.
Risk Assessment: Fukushima ignited debate over how committed to nuclear power China should be. Ultimately the Communist Party and the State Council of Ministers will provide guidance, but the growth of corporatism at SOEs may encourage risk-aversion, and company management may resist rulers’ directives in defense of other interests. While Xi is assuming for himself, the Party and the state greater authority—and greater risk—personnel in industry and government may paradoxically become increasingly unwilling to make needed decisions and take the initiative if they fear that their careers will be set back or that they might thereafter be charged with corruption. 

Debate in China about the “nuclear new normal” has prompted denial and wishful thinking but it may also favor innovation. Veterans in the Chinese nuclear sector hope that the “new normal” recedes as a troubling instigator of change. Elsewhere in the world, the nuclear industry has performed best under extremely stable and controlled conditions for investment, profitability, regulation, and technology that no longer obtain in many countries. China may prove to be no exception. On the other side of the ledger, actors who favor market forces and forced renewables deployment view the “new normal” as an opportunity, a harbinger of lower demand for the base load power that nuclear power provides. The evolution of China’s electricity system may also encourage a partial shift in China’s nuclear power technology development from large light-water reactors deployed so far, to smaller and more versatile models more appropriate for future distributed generation and hybrid systems, including in China’s vast hinterland where big nuclear plant projects have not so far been approved.

It would be a mistake to assume that the next two decades for China’s nuclear power program will represent a straight-line continuation of the last two decades. To be sure, even if power demand growth falls to half the level of China’s boom years, in two to three decades China’s demand for electricity will double. Executives at nuclear SOEs therefore express confidence that China will keep adding light-water reactors at a steady clip. But if the “new normal” deepens, if the coal sector pushes back, and if power sector reforms continue, without continued and additional state intervention nuclear energy may be priced out of the market especially if its costs increase. 

How Much Nuclear Energy?

In 2005, premier Wen Jiabao, reacting to expectations in the global industry that a “nuclear renaissance” was on the horizon, and to real-time electricity shortages caused by logistical problems in China’s coal sector, dramatically accelerated nuclear power plant construction. By the end of the 2000s, quasi-official estimates were commonplace that by 2050 China’s population of nuclear power plants would reach 400 or even more. This was not idle speculation. China burns more coal to make electricity than any country by far. Environmentalists told the government that that many reactors would be needed to cut China’s coal consumption by half.

Today, if there is something like an informal and unofficial consensus among Chinese experts about how many nuclear power plants China will have three decades from now, rough estimates are likely to be far lower, between 100 and 300. Can China have 200 power reactors on the grid by 2050? Measured by investment capacity, the answer is probably yes, but only if the government is firmly resolved to do it, if SOEs including construction firms and equipment makers remain focused, and if China turns out enough skilled people to do the work responsibly and reliably. Chinese industry says it can make enough equipment for between 8 to 10 reactors per year, and its foreign partner firms estimate that China’s industrial capacity is probably still higher. 

China’s Nuclear Generating Capacity in 2050

So there may be a way, but there must also be a will. And that’s where the “new normal” factors in and where deep questions arise. 

If China overcomes “new normal” challenges, by 2050 it might have over 200 power reactors spread out over the country; Beijing may have negotiated opaque compromises with local authorities, ratepayers and taxpayers to arrange for side payments and subsidies needed to pay for R&D, nuclear power price supports, and setting up installations to close the nuclear fuel cycle. China may be routinely exporting nuclear power plants and replacing its oldest light-water reactors with fast reactors and other advanced designs.  

Alternatively, if  “new normal” conditions bedevil nuclear decision makers, by 2050 China may be preparing instead to gradually retire a fleet of 100 power reactors and replace much of their capacity with other technologies. Industry may have failed to control nuclear costs, and firms may resist pressure from the state to invest in technologies bearing greater risk. Middle-class Chinese might not support expansion of nuclear power after about 2030 when China’s air is clean. Protectionism may inhibit nuclear power plant exports. 

What in fact transpires in the near to medium term may be something in between. In 2005 China added missions for a dramatically enlarged nuclear power program that will ensure it will continue at least into the 2020s: de-toxifying the air breathed in China’s megacities, creating intellectual property including for exports, and generating a great quantity of carbon-free electricity. On balance there is a reasonable likelihood that China by 2050 will have 150 power reactors on line, maybe more. It will depend upon what technologies are available to China’s power system and to a great extent on how China copes with the “new normal.”  

China’s nuclear industry might not thrive into mid-century unless the state continues to provide it incentives and benefits that are now coming under pressure from market forces and their advocates in Chinese government agencies. Unlike in the West where decisions about nuclear investments are mostly left to commerce and industry, China’s government makes these decisions, and they are driven by strategic rationales. Strategists in Beijing may ultimately prevail and protect China’s nuclear investments, but they won’t likely have a blank check. 

These remarks were given as a keynote presentation to the conference Nuclear Energy at a Crossroads: Chinas Expansion in Global Perspective, held at the Katz Graduate School of Business at the University of Pittsburgh on March 16, 2018.