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Nuclear Industry Hopes to Capitalize on Surge in
China
Aug 18 - USA TODAY Within weeks, the Chinese government is expected to announce an $8billion nuclear-reactor order that is just the beginning of a commercial bonanza the beleaguered nuclear industry has long craved. The frontrunners for the initial contract, widely expected to lead to lucrative follow-on orders, are Westinghouse, a British-owned company whose nuclear operations are based in Monroeville, Pa., and Areva of France. The Russian firm AtomStroyExport is regarded a distant third. In the United States, industry executives hope the Chinese reactor surge will help spawn a nuclear renaissance here at home. Nuclear power provides 20% of U.S. electricity, up from 11% at the time of the 1979 Three Mile Island accident in Pennsylvania. But amid persistent concerns over cost, safety and radioactive waste disposal, no new reactors have been ordered in 27 years. "Currently, Asia is the only game in town," says Daniel Lipman, Westinghouse senior vice president for nuclear power plants. "... A success in China clearly translates to the U.S. ... Our customers are watching closely." Earlier this month, President Bush signed energy legislation that encourages new reactor development with tax credits, federal risk insurance and loan guarantees. Yet even as the industry contemplates a potential windfall at home and abroad, some critics say trading state-of-the-art nuclear technology to the Chinese could end up costing the U.S. financially and fueling the spread of nuclear weapons. "You don't build new nuclear power plants for a country that's building up its military and threatening to use nuclear weapons against the United States," says Rep. Dana Rohrabacher, R-Calif., referring to a Chinese general's recent statement that China would employ nuclear weapons against the U.S. in any conflict over Taiwan. In China, nuclear power is regarded as a key component of the government's efforts to dramatically boost electricity production. With an economy growing at breakneck speed, major cities already suffer periodic power outages. And electric consumption is expected to reach 4.5 trillion kilowatt-hours in 2020 vs. 1.9 trillion kWh today. (The U.S. consumed 3.6 trillion kWh in 2003.) In response, state-owned utilities are building dams, erecting windmills and embracing nuclear power. The goal is to almost double by 2020 nuclear power's share of total electric output from today's 2.3% to 4%. Selling point: Lack of emissions Today, China burns coal for nearly 80% of its electricity, fouling its urban air and leaving a brown film on surfaces both outside and in. So for Beijing, nuclear energy's lack of emissions is a key selling point. Reactors are especially attractive in the fast-growing coastal belt, which is far removed from the northeast's coal supplies. (The four reactors in the initial contract are to be built in Sanmen in Zhejiang province and Yangjiang in Guangdong province.) Citing global warming, advocates say the U.S. will benefit if the Chinese clean up their air by turning to nuclear energy. But in recent House and Senate debates, lawmakers assailed proposed government financing of the Chinese reactor purchase. Members of both parties complained about Beijing's role in the proliferation of nuclear weapons technology to countries such as Pakistan as well as the danger of creating a new commercial competitor in the global nuclear market. "We are in essence, through an American taxpayers' loan, subsidizing the Chinese to take more of our technology," complained Sen. Tom Coburn, R-Okla. On June28, the House voted 313-114 to bar the Export-Import Bank, the government's export financing arm, from proceeding with a potential $5billion combination of loans and loan guarantees to support the Westinghouse bid. The mammoth package is almost three times the size of the Ex-Im Bank's largest previous deal. The Senate, where the reaction against China trade has been more muted, rejected a similar amendment offered by Coburn, leaving the issue to be resolved next month in a House-Senate conference committee. Controversial financing terms As part of its initial request for bids, China demanded financing terms. The Ex-Im Bank's preliminary commitment to extend credit was aimed at matching similar government guarantees offered by Westinghouse's French and Russian rivals, said bank spokesman Phil Cogan. "It enables Westinghouse's bid to be competed on the basis of products and services rather than financing," he said. The financing, which remains subject to final approval by the bank's board, would cost taxpayers nothing unless China defaulted. Any money lent would earn interest at a rate reflecting the bank's assessment of the risk. Loan guarantees, in which the Ex-Im Bank assumes part of the risk of a separate loan made by a commercial lender, would earn the bank -- and thus taxpayers -- fees, Cogan says. House opposition to the financing was led by Vermont Rep. Bernie Sanders, the chamber's only independent, who in an interview called the China reactor guarantees "basically insane." Sanders has long objected to Ex-Im Bank programs as corporate welfare, usually without much support from colleagues. But reflecting mounting unease about trade with China, Sanders' campaign attracted 173 Democrats and 139 Republican votes, including those of the chairmen of the Armed Services and International Relations committees. "It's patently absurd for the U.S. to provide a loan to the British government," Sanders said, referring to Westinghouse's status as a subsidiary of the government-owned British National Fuels. Westinghouse says the Chinese deal involves 5,130 U.S. jobs, three-quarters of them new. The positions would be split between engineering and manufacturing in 12 to 15 states, according to spokesman Vaughn Gilbert. National security worries also inflame critics of the reactor plan. Until 1998, the U.S. government prohibited American firms from selling nuclear-reactor technology to China. Once President Clinton, however, formally certified that China was no longer helping other countries acquire nuclear weapons, Westinghouse was freed to pursue a potentially lucrative market. Sanders, however, insists the Westinghouse deal still risks nuclear proliferation because the Chinese government customer -- China National Nuclear Corp. -- has been linked to past transfers of military technology to Pakistan and Iran. As recently as last December, the U.S. imposed sanctions on other Chinese companies found to be selling prohibited weapons-related material to Iran. Westinghouse says those fears are overblown. After years of prodding by the U.S., China has improved its performance in controlling the export of nuclear technology, most recently by joining last year the 44-nation Nuclear Suppliers Group. That body coordinates export controls among member nations in order to prevent civilian nuclear know-how from being used in illicit weapons programs. The potential danger with any reactor is that its spent fuel could be reprocessed into plutonium and used in a nuclear weapon. However, the Westinghouse design, the AP1000, is designed to be operated without refueling for up to two years -- a lengthy burn that leaves the plutonium in poor condition for weapons use, according to Carol Kessler, director of the Center for Global Security at the Pacific Northwest National Laboratory. "The AP1000 technology is not particularly proliferation-sensitive," she said. Advanced nuclear technology Even with Westinghouse possibly on the verge of a major Chinese contract, some congressional skeptics are having second thoughts about the wisdom of selling China the most advanced U.S. reactor technology. Unlike existing reactors, and those that suffered the industry's worst accidents at Three Mile Island and Chernobyl, the Westinghouse AP1000 features advanced "passive" safety features. In the event of an accident, reactor operators wouldn't need to take any immediate action. Instead, the reactor is designed to safely shut down on its own. Westinghouse bills the pressurized water reactor as simpler and easier to construct than existing models, saying it uses 87% less cable and 50% fewer safety valves. But as they've demonstrated in other industries from airplanes to automobiles, the Chinese aren't content to merely buy advanced technology. They want to learn how to design it, make it and then sell it in competition with the original source. So in choosing between Westinghouse and Areva, a key factor will be the amount and speed of technology transfer. "It is our intention to try to transfer all our technology to the receiving country as quickly as possible," says Liu Xingang, Westinghouse's chief representative in Beijing. "The intent is to help China's nuclear industry achieve self-reliance." That doesn't mean Western countries will one day be completely shut out of China sales. Lipman says he expects China's development to mirror that of nearby South Korea, where Westinghouse has sold reactors since the 1970s. The newest South Korean reactors are 90% locally made. Yet in August 2002, Westinghouse received a $350 million contract to provide components and engineering services for four new reactors. "That still leaves a lot of room for Westinghouse to participate," he says. Officially, China has said it will choose the supplier of its newest reactors by year's end. But in June, Fu Manchang, secretary-general of the China Nuclear Society, told the state-run China Daily newspaper that a verdict could be announced in October. Another sign that an announcement could be near: Chinese President Hu Jintao is expected to travel to the USA to meet President Bush in the next several weeks, and the Chinese have a tradition of packaging big-dollar commercial deals with official state visits. |