In Depth: China’s Booming Nuclear Sector Lobbies for Green Vouchers to Ensure Profits

China is aggressively reinstating its nuclear power program after a decade-long lull following the 2011 Fukushima disaster, which caused global hesitancy on nuclear energy. Following the disaster, China drastically reduced new reactor approvals with sporadic permissions in 2012 and 2015, and a complete freeze from 2016 to 2018 [para. 1][para. 2][para. 3]. However, the need to transition away from carbon-heavy energy sources in order to meet environmental targets prompted the Chinese government to fast-track nuclear projects. Recently in August 2024, the State Council approved the construction of 11 new nuclear reactors across five stations in coastal provinces like Jiangsu, Shandong, Guangdong, Zhejiang, and Guangxi, with an estimated total cost exceeding 200 billion yuan ($28 billion) [para. 4][para. 5].

Despite these expansions, China's nuclear sector faces challenges due to incoming power distribution reforms aimed at marketizing electricity, a significant shift from the fixed pricing structure that has historically benefited the sector. These reforms gained traction following the power shortages in 2021 and are expected to be well enacted by the time the new reactors come online [para. 6][para. 7]. China currently operates 56 nuclear reactors with a capacity of 58.08 gigawatts (GW), ranking second globally after the U.S. with 94 reactors. Despite this, nuclear power only accounts for about 5% of China's electricity, significantly lower compared to its share in the global and EU electricity mix [para. 8][para. 9]. China’s plans, as per the 14th Five-Year Plan, are to elevate this capacity to 70 GW by 2025, but current projections by the Global Energy Monitor suggest China might lag slightly behind, reaching around 63 GW by 2025, and 71 GW by 2026, surpassing France's 66 GW [para. 10][para. 11].

Integrating more nuclear power into a newly competitive and market-driven electricity framework presents another layer of complexity. The national electricity trading volume rose by 7.9% year-on-year in 2023, with over 60% of electricity now traded on the market [para. 14]. Specific regions like Guangdong, Jiangsu, Shandong, Guangxi, and Fujian have already initiated nuclear power contracts [para. 15]. For instance, in 2023, China General Nuclear Power Corp. (CGN) sold 57.3% of its produced energy on the market, up from 33.5% in 2020 [para. 17].

Nuclear power companies, long accustomed to price stability, face challenges in adapting to the fluctuating market rates. Since 2013, the on-grid price for new nuclear plants has been around 0.43 yuan per kWh, modifiable based on local thermal power costs [para. 24]. Entering this competitive market means navigating cost structures that differ from cheaper sources like coal, and the operational limits of adjusting power outputs to match demand can incur additional costs. For instance, ancillary services for nuclear units in Shandong can reach tens of millions of yuan monthly [para. 27].

Moreover, high safety and construction costs further complicate the financial landscape of nuclear power. Generation IV reactors, while safer, currently cost around 0.6 yuan/kWh, more than double that of third-generation units at 0.25 yuan/kWh [para. 29]. The price stability of nuclear power is crucial, especially if coal prices remain above 800 yuan per ton, allowing nuclear power companies to sustain profitability [para. 31].

Politically, there is a push to integrate nuclear energy into the green certificates system, incentivizing its use. Including nuclear power in this system would align with China's broader environmental goals, such as those set for the non-ferrous metals sector, where 30% of aluminum production will be powered by renewable energy by 2030 [para. 35][para. 36]. Nuclear power's stable and low-carbon output is vital for specific users like electrolytic aluminum factories, giving them longer-term supply agreements at steady prices. Guangxi, a significant aluminum producer, is set to further nuclear power and aluminum sector synergies [para. 39].