Aspiring to be a global leader in nuclear power generation by mid-century, China is on the verge of investment decisions that could commit the country to fuel its rapidly growing fleet of nuclear power reactors with plutonium. Should China soon take major and possibly irreversible steps to go that route, the domestic, regional, and global impact of its actions will be profound.

Key Chinese nuclear energy organizations aim to build a series of large fast breeder reactors (FBRs) fueled by plutonium that would be supplied by a commercial-scale spent fuel reprocessing complex. If these projects move forward as their advocates intend, China’s nuclear energy ambitions would match those of Japan and major European nuclear energy-generating countries in fueling reactors with both low-enriched uranium and plutonium. The uranium poses few economic, security, and proliferation challenges. The plutonium, however, does.

Four decades ago, Japan and Europe set out on a similar path that eventually failed to demonstrate commercial viability of plutonium fast breeder programs for reasons of cost, technology, proliferation risk, safety challenges, and political acceptance. Thereafter, reprocessing in Japan and Europe was mostly driven by the need for a short-term solution to the lack of storage space for spent fuel from light water reactors (LWRs). Where storage space for spent fuel has not been an issue, including in the United States, commercial nuclear power programs have opted not to reprocess spent fuel and recycle plutonium.

Although China has thus far moved very cautiously in implementing a nuclear fuel cycle strategy, moving too quickly down its forecasted path could have detrimental effects. It’s unwise for China to commit itself to a rapid deployment of plutonium reactors and premature establishment of commercial-scale reprocessing, as that would burden China’s young nuclear power program with additional safety, security, and proliferation challenges and could prove unnecessarily costly to China.

China’s Fast Breeder Vision

China first tested a nuclear weapon in 1964, but it began generating electricity using the atom 30 years later. By that time, advanced nuclear countries had already accumulated four decades of experience with FBRs. By the time China’s first small LWR began operating in 1994, advanced nuclear countries had encountered a raft of problems that arrested the commercial deployment of breeder technology.

Today, the LWR still has a virtual monopoly on commercial nuclear power production and will continue to dominate production for many years, but the pioneers of China’s nuclear power program have mimicked the prior aspirations of advanced countries to quickly set up a fleet of breeders. And these plans remain on the books in China today.

The China Institute for Atomic Energy (CIAE), a research and development affiliate of China’s leading nuclear state-owned enterprise, the China National Nuclear Corporation (CNNC), began operating a small 20-megawatt (MW) test breeder this summer—a quarter-century after the project was first planned. This was built with cooperation from Russia. CIAE now aims to set up a series of progressively bigger FBRs in China with Russian help, beginning with a 600-MW to 900-MW reactor to be finished by 2020 and, just eight years later, a unit as large as 1,500-MW.

Unlike the LWRs that China has been setting up since the 1990s as the basis of its nuclear program, CIAE wants to set up a series of FBRs which would generate more plutonium than they consume. This would theoretically create an unlimited supply of fissile material to fuel China’s future nuclear power program. In light of the cost and safety challenges associated with handling plutonium fuel thus far, however, CIAE’s initial reactor will be fueled with enriched uranium, not plutonium.

Because CIAE intends to launch its breeder series without accumulating many years of valuable operating experience in between each stage, some nuclear scientists, on the basis of their experience in Western breeder programs, fear that the Chinese breeder program is predestined to fail. A senior Chinese nuclear research and development scientist acknowledged that if CIAE’s breeder deployment timetable is not dramatically ambitious, the program will not be funded by government decision makers in Beijing.

In the meantime, CIAE has firmed up its plans for what comes next after the 20-MW test breeder: an 800-MW reactor designed by Russian engineers decades ago but not yet built and operated. Russia has built a few smaller breeders of a similar design, but the largest of these have burned mostly uranium fuel. An agreement for the design of the Chinese project was made with the Russian nuclear vendor Atomstroyexport (ASE) last year, and advocates of this project at CIAE and CNNC are now pressing to begin construction in 2011.

China’s Reprocessing Track

Chinese industry’s grand but yet unrealized breeder blueprint is mirrored by its plans for establishing a commercial-scale plutonium fuel production infrastructure. During the last decade, CNNC erected a pilot-scale reprocessing plant. CNNC now harbors an ambitious vision to provide mixed-oxide (MOX) fuel—containing both uranium and plutonium—for many future reactors, both LWRs and FBRs.

In the mid-1980s—about the same time CIAE began preparing its initial dwarf FBR project—CIAE and CNNC cooperated to engineer a small pilot spent fuel reprocessing plant. Construction finally began in 1997 and the plant, with a throughput of about 50 metric tons (MT) of spent fuel per year—perhaps large enough to reprocess the spent fuel discharged every year from two power reactors—was probably finished in 2004. As in the case of the FBR program, the next phase envisioned for China’s reprocessing program is a big commercial-scale complex.

Since the 1980s, China has set up nearly all of its nuclear power plant sites along its eastern coastline. From the outset, however, CNNC—which has been responsible for both civilian and military fuel cycle activities—intended to locate all spent fuel reprocessing in the remote Gansu Province in northwest China. Chinese officials have provided various rationales for doing this: locating plutonium-handling installations in booming coastal regions would threaten real estate values and water currents in the Yellow Sea and the South China Sea discourage China from disposing low-level reprocessing wastes into the ocean.

Japan and France, however, have built their commercial reprocessing plants on seacoast sites for compelling logistical reasons, including facilitating sea transport of nuclear material to and from the plants. Logistics might also persuade China to do the same. Moreover, a British nuclear fuel firm that consulted the Chinese nuclear industry a decade ago on how to manage its spent fuel warned that transporting large amounts from coastal reactors to Gansu would require an immense investment in China’s underdeveloped railways and roadways.

While the security requirements of moving heavy loads of spent fuel from reactors to a reprocessing plant would not be severe, that would not be the case for shipments of plutonium-laden MOX from Gansu back to far-flung reactors. The big breeders CIAE and CNNC want to build would also likely be set up on the east coast, requiring that large amounts of plutonium be moved 2,000 miles across the country.

Sino-French Cooperation

During the last few years, Beijing has been negotiating agreements with foreign governments and companies to obtain assistance in setting up its future nuclear fuel cycle. It concluded one agreement last month to permit Belgian firms to negotiate a commercial contract with Chinese counterparts to set up a pilot plant in China to make a small amount of MOX fuel.

China may take a far bigger step should it conclude, as anticipated, an agreement with France to allow Areva—the government-owned nuclear flagship vendor in France—and CNNC to sign a future contract worth perhaps more than $20 billion to establish commercial-scale reprocessing and MOX fuel infrastructure in China.

In 2006, Westinghouse Electric Company beat out Areva and ASE in a bidding war set up by China to determine which foreign LWR technology would serve as the template for China’s future nuclear power program. Shortly afterward, Areva made an offer to CNNC intended to recoup and capitalize on its comparative advantage over Westinghouse—which has no plutonium fuel expertise—to help China set up a reprocessing and MOX fuel complex. Officials then described the offer as a replication of Areva’s plants in France, in particular its 800-MT reprocessing plant at La Hague called UP-3.

Some officials predicted that the Sino-French plutonium deal would come to fruition in eighteen months. It has taken longer, however, in part because the proposed project has raised questions that need to be addressed by both sides during the course of ongoing negotiations.

French Concerns

This month, Areva and CNNC signed a memorandum of understanding affirming their resolve to negotiate a commercial contract for setting up reprocessing and MOX fuel facilities in China. Under French law concerning nuclear fuel cycle cooperation with foreign countries, however, no such contract can be signed without a bilateral government-to-government agreement in place that establishes the nonproliferation, technical, and political commitments of both sides. This Sino-French agreement is still under negotiation.

During these talks, the French government has set some conditions for fuel cycle cooperation because it is concerned that Areva’s fuel cycle partner, CNNC, has long been responsible for the production of plutonium for China’s nuclear weapons program.

In the aftermath of revelations nearly a decade ago that uranium enrichment know-how had been widely diverted globally, France and most other members of the 46-country Nuclear Suppliers Group (NSG) want to further restrict the transfer of enrichment and reprocessing technology. New rules may require that any new joint ventures for enriching uranium be organized as “black box” projects to ensure that sensitive technologies are not transferred. Both France and China are currently setting up “black box” enrichment plants on their territories.

But a strict “black box” approach is not seen as a feasible option for the Sino-French reprocessing project. Early considerations that Areva might operate a reprocessing plant it provides to China were dropped, and China now expects to control the plutonium plant and obtain access to the technology it contains.

Because of this—and especially because China is the only country among the five nuclear-weapon states party to the Nuclear Non-Proliferation Treaty (NPT) that has not declared a formal moratorium on the production of fissile material for nuclear weapons—the French government wants to be assured that fuel cycle assistance its industry provides will not contribute to China’s military nuclear capabilities and that a French-supplied reprocessing plant is not producing any plutonium for China’s nuclear weapons program.

CNNC initially approached the French to obtain a reprocessing plant using so-called Purex technology, which results in a pure plutonium output after the spent fuel is chemically treated. France instead wants China to get a plant using a technology Areva calls COEX, which would provide a mixture of plutonium and uranium.

The significance of the difference is subject to debate. French officials say the absence of pure plutonium in the COEX plant supports nonproliferation. Other experts say that a would-be proliferator could strip off the uranium from the mix to obtain pure plutonium. In any event, France will not agree to provide the reprocessing plant to China unless a MOX fuel plant is set up in tandem, to absorb all of the plutonium output from the reprocessing installation.

For years, China has envisaged setting up its large civilian plutonium plant at one of two locations in Gansu Province where CNNC has operated a military plutonium production line and uranium enrichment facilities. Because of its concerns about China’s nuclear weapons program, France will not agree to supply the reprocessing plant if China wants to build it on a site where CNNC or any other Chinese organization is carrying out military nuclear activities.

Some officials believe that additional French restrictions on the transaction should not be necessary, as China already has a military reprocessing plant that it could restart if it wanted to resume plutonium production for weapons. And with well over a ton of plutonium in its inventory from previous military fuel production, China does not currently need to reprocess more irradiated fuel if it wants to make more nuclear warheads.

China’s longer-term nuclear weapons aspirations are not clear. Alone among the five nuclear weapons powers in the NPT—including during the NPT Review Conference this year—it has not formally committed to refrain from producing more nuclear material for military purposes. And some Chinese defense experts have hinted that Beijing might resume military plutonium production, particularly if China and the United States fail to resolve some critical strategic differences.

Therefore, a pending Sino-French agreement might require that the International Atomic Energy Agency (IAEA) verify that nuclear materials processed in an Areva-supplied plant in China not be diverted to China’s military program.

Carrying out this verification may not be an insurmountable challenge, but because of budget constraints the IAEA has a policy of not self-financing any additional safeguards obligations in countries that already have nuclear weapons. Measured against the IAEA’s current resources, safeguarding a large-scale reprocessing plant in China will be costly. For example, the cost of safeguarding a similar French-designed 800 MT/year reprocessing plant in Japan currently accounts for about 10 percent of the IAEA’s total safeguards manpower resources.

It will be up to France and China to decide whether a French-supplied fuel cycle installation should be put under IAEA safeguards. If they decide it should, current practice would argue that China should pay for it. In the same spirit, France will pay for safeguards at a new enrichment plant built in France, and the United States will pay for safeguards at a new enrichment plant being set up in New Mexico, when these facilities begin operating.

The greatest contribution China could make to assure that the French plant does not contribute to China’s military nuclear program would be to declare a formal halt to the production of fissile material for military purposes, joining France and the three other NPT nuclear weapon states. China’s declaration could happen prior to or when the agreement with France on nuclear fuel cycle cooperation—including the supply of reprocessing infrastructure—is concluded.

Chinese Energy Security

Why would China make expensive, challenging, and potentially risky investments in FBRs and plutonium production now? As was the case in Western countries a quarter-century ago, a cadre of dedicated nuclear scientists is convinced that the technology will work and is lobbying hard to get approval of their vision. “Our radiochemists have been waiting for this moment for nearly 40 years,” one CNNC official said.

The reason most often asserted by Chinese officials, however, is that plutonium fuel and breeders are necessary for energy security, since China will be adding more and more reactors without having sufficient uranium resources to fuel them.

How many reactors China will build and how much nuclear electricity China will generate in the future is uncertain. China currently has a dozen reactors on line and is building about two dozen more. Over most of the last four decades, China’s nuclear power development has proceeded timidly. But in the last ten years, Beijing suddenly accelerated development and began devoting more resources to building new reactors.

In the meantime, CNNC made sure that it owned shares in virtually all of China’s nuclear enterprises, ensuring that construction projects would obtain access to cheap capital controlled and apportioned by Beijing. For now, that system is working and easy money is flowing into reactor projects. Chinese officials say that the country may have a nuclear generating capacity of 60 gigawatts (GW) by 2020 and many analysts currently believe that’s a fairly safe bet barring unforeseen complications.

But Chinese predictions about how many reactors the country will build in the future are inflating. Proponents of an expansion into FBRs forecast that by 2050 China will have an installed capacity of 240 GW—more than two times the amount the world’s biggest nuclear power generator, the United States, has today. This implies that China will need to add approximately 200 nuclear reactors. CIAE argues that because China won’t have enough uranium to fuel all of these reactors, it will have to commit to plutonium-fueled breeders soon.

Some Chinese nuclear engineers express little doubt that CNNC and other firms can and will accomplish this feat. But financial and economic experts are far less confident. Beijing’s allocation of zero-cost capital to state-owned enterprises like CNNC could prove unsustainable. Should China make economic policy changes that would alter the allocation of resources, construction of reactors may slow in the coming decades.

There is also reason to question the assumption that China will need plutonium fuel any time during the next few decades. In tandem with the government’s recent decision to ramp up reactor construction, Chinese firms have been tapping sources where uranium is plentiful—Australia, Canada, Kazakhstan, and Niger—both by direct purchases of uranium oxide and making investments in new production. Some Western uranium market analysts have recently calculated that the uranium investments China has already made will suffice to cover Chinese demand for many years.

China so far is prudent

This year, some Chinese and Western media reports have suggested that China’s leadership has already committed itself to CNNC’s strategy of setting up a series of FBRs quickly and fueling them with homemade plutonium. But in reality, Beijing’s top leaders appear to be taking a reasonably cautious approach.

The small reprocessing plant in Gansu was completed about six years ago, but Chinese oversight agencies have not yet permitted it to separate any plutonium—as of last month, just two fuel assemblies have been dissolved in the nitric acid tank at the plant. Full-scale operation is not expected before 2012.

Likewise, CNNC’s plan to build large FBRs is still awaiting formal approval from Beijing. And some senior Chinese officials in the approval chain have urged caution due to the higher level of risk that the Russian BN-800 design poses compared to the LWRs that China is now building, especially given China’s lack of experience in the breeder field. No preliminary safety analysis has been performed and no site has been approved for this project.

Both the BN-800 design and the French reprocessing plant are based on technologies originally developed several decades ago. China is getting involved in coordinated international efforts—including those among France, Japan, Russia, and the United States—to develop new, more advanced reactor and fuel cycle technologies. These may not be commercially applicable for several decades, but when they are, they may be safer, pose less proliferation risk, and more effectively manage nuclear material and waste than what is currently available. Chinese advocates say they are in a hurry to get a big Purex reprocessing plant on line by around 2020, but a premature decision by Beijing to make a commitment might prove more costly to China in the long run.

On a separate track, while China negotiates with foreign partners about possible plutonium fuel projects, China is trying to identify a site for a possible central spent fuel storage complex. A similar approach has also been undertaken by Japan, South Korea, and Taiwan. The intake pool at the pilot reprocessing plant in Gansu, which is used to store spent fuel from a few reactors with limited space, may be expanded to hold 1,300 MT of spent fuel—enough capacity through 2030.

Next Steps for China and Its Partners

For very compelling reasons, China will continue expanding its nuclear power program in the years ahead and must provide sufficient fuel for its growing fleet of reactors.

Given the possibility of future technology options, the availability of uranium resources, the failure of the fast breeder reactors to demonstrate commercial viability elsewhere, and the challenges of managing risks for both regulators and investors, Beijing should prudently weigh whether it wants to set up a commercial plutonium fuel cycle right now. As is the United States, China is under no pressure to find a repository for its spent fuel. It has the time necessary to carefully make a strategic decision about its fuel cycle, in the interest of energy security, cost effectiveness, and sustainability.

France and other foreign partners participating in China’s nuclear fuel cycle development should ensure that their contributions cannot be used for non-peaceful purposes and that their know-how is not transferred to third parties. France so far has set some critical conditions that are meant to alleviate concerns that its aid might help China make nuclear weapons.

But verification that Chinese activities are devoted solely to peaceful uses may be more important than the location where China decides to conduct these activities. As a confidence-building measure and as a condition of its access to foreign fuel cycle technology, China could go far to address concerns by declaring a moratorium on the production of both plutonium and highly enriched uranium for nuclear weapons.