China is Nuclear Power Landscape Sees “Tripartite Division”

On May 29, the official websites of China Power Investment Corporation (CPI) and State Nuclear Power Technology Corporation (SNPTC) successively released a notice titled “Appointment of Key Leading Personnel of State Power Investment Corporation (SPIC)”. The notice stated that with the approval of the State Council, CPI and SNPTC had restructured to establish SPIC. Wang Binghua was appointed Chairman and Secretary of the Party Leadership Group of SPIC, while Meng Zhenping was appointed General Manager. The birth of SPIC has been widely interpreted by public opinion as solidifying the “tripartite division” pattern of China’s nuclear power industry and giving rise to a new energy giant with assets of 700 billion yuan. While this has a significant impact on China’s energy sector landscape, the significance of SPIC’s establishment goes far beyond that.

For China’s current energy enterprises, implementing the “Four Revolutions, One Cooperation” proposed in the energy revolution is a mission entrusted by history. The establishment and development of SPIC will gradually explore an enterprise form that can better practice the energy revolution, and set an example for the transformation of energy enterprises.

Driving the energy revolution with technology as the lifeblood both SNPTC and CPI are companies known for technological innovation. In the eight years since its establishment, SNPTC has fully absorbed and digested international advanced third-generation nuclear power technology and its equipment manufacturing system, and on this basis, developed the CAP series technologies with independent intellectual property rights and cultivated an independent equipment manufacturing system. CPI has taken a leading position in the development of clean energy in the industry, with good practical experience and corporate awareness of cutting-edge technologies in the energy field, and has pioneered a variety of influential comprehensive utilization methods for renewable energy, such as the water-solar complementary mode. The strong technological innovation genes of SPIC, established on the basis of the two, are evident.

The establishment of SPIC will effectively combine SNPTC’s globally leading technological advantages in the third-generation nuclear power field with CPI’s nuclear power industry layout (CPI is the only enterprise with nuclear power owner qualification besides China National Nuclear Corporation (CNNC) and China General Nuclear Power Group (CGN), and has rich reserves of nuclear power plant site resources). This will further promote the development of China’s advanced third-generation nuclear power technology and its technological influence in the global nuclear power field. More importantly, SPIC will likely inherit SNPTC’s tradition of giving technology a decisive role beyond the nuclear power sector. SPIC is currently involved in numerous fields, including coal-fired power, gas-fired power, hydropower, nuclear power, photovoltaic power, and wind power, in which it is an important domestic participant, as well as key industries such as coal, aluminum, ports, railways, and environmental protection. From the perspective of global industrial development trends, the development space of these industries will gradually be determined by technology, which is significantly different from the enterprise development model dominated by external conditions such as resources in the past few decades. The birth of SPIC will effectively practice the development path of energy enterprises guided by endogenous scientific and technological forces, and continuously promote the energy revolution.

Recently, China released Made in China 2025, which puts forward new requirements for China’s energy enterprises. Enterprises will no longer focus solely on project development, operation and maintenance, but will carry out multi-field cooperation to jointly promote the development of China’s manufacturing industry and contribute to the realization of China’s Industry 4.0.

In this regard, SNPTC has mature experience. In the process of introducing and digesting third-generation nuclear power technology, it has always been involved in overcoming the difficulties of the world’s most cutting-edge manufacturing technologies, and has driven the upgrading of China’s equipment manufacturing enterprises. For example, although the problem of the shielded main pump, which plagued the progress of China’s AP1000 demonstration project, caused many troubles, objectively speaking, if the equipment manufacturing of a new technology is not challenging, the improvement of the overall manufacturing level brought by this new technology will be limited. From this perspective, China and the United States jointly overcame the R&D difficulties of the AP1000 shielded main pump, which objectively enabled China to reach the global leading level in this field. When answering a question from a reporter of China Electric Power News, Wang Binghua stated that the development process of third-generation nuclear power has brought a leap-forward improvement to China’s equipment manufacturing level, especially in the hot working field of the materials industry, where the technological improvement is significant.

At present, China’s third-generation nuclear power equipment system has been initially established, and the qualified supplier system has been expanding year by year, from the initial few to more than 100 now, reflecting the improvement of China’s overall equipment technical capabilities. Industry insiders said that the restructured SPIC may replicate this equipment upgrading model to all its business sectors. If the effect is obvious and recognized by the industry, its experience can be widely promoted. This will have a far-reaching impact on the promotion of China’s energy technological revolution and Made in China 2025.

SPIC will leverage its advantages in the new power system reform as an important part of the energy system revolution, the power system reform is one of the main threads of China’s energy sector development for a long time in the future. It will have a significant impact on grid enterprises, power generation enterprises and power sales enterprises. This power system reform takes “regulating the middle, liberalizing the two ends” and restoring the commodity attribute of electricity as the general direction, which will have a major impact on the business model of power generation enterprises. Especially for nuclear power, coal-fired power, wind power and photovoltaic power, with the gradual liberalization of the power sales side, competition among them will intensify. Due to their respective characteristics, different types of power sources will be affected in different ways in the face of market competition. For example, photovoltaic and wind power need coal-fired and gas-fired power for peak regulation. Nuclear power, with its large unit capacity and slow load change, needs a variety of power sources to provide auxiliary services for customers. After marketization, these auxiliary costs will gradually become important expenditures. At the same time, the ability to effectively establish such an auxiliary mechanism also depends on the specific power source and power consumption situation in the region.

If an enterprise has a single type of power source in a region, its room for maneuver in the regional power market will be limited, the cost of cross-enterprise auxiliary services will increase, and such services will be unstable. For coal-fired power, its utilization rate is already low in many regions, and whether it can obtain more auxiliary service opportunities to increase its utilization rate will also be a question.

Zhang Weiqing, Vice Chairman of CGN, said that SPIC has advantages in addressing the above issues because it owns all mainstream types of power sources. To address climate change, nuclear power and renewable energy will play an increasingly important role in China’s future energy landscape, especially in the eastern coastal areas, where the proportion of clean energy will further increase. At that time, the demand for nuclear power to participate in peak regulation or for other power sources to provide auxiliary services for nuclear power and renewable energy will grow. SPIC’s multi-power source layout in various regions across the country will play a key role. If it can balance the output of various power sources through its internal coordination mechanism and establish power sales companies in each region to directly connect with the power generation side, it will effectively utilize resources and reduce emissions. It is understood that SPIC is currently the only power generation enterprise with the hardware foundation to carry out such practices. If the above practices can be implemented and achieve positive results, they will provide a reference for the development of other power generation enterprises.

Core competitiveness in foreign cooperation will be enhanced the birth of SPIC marks the birth of China’s largest clean energy group. Before the restructuring, CPI was already the enterprise with the highest proportion of clean power sources in China. After the merger with SNPTC, the proportion of clean energy in the new group will further increase, and with the gradual construction and operation of the CAP1400 demonstration project and other subsequent projects, it will become an energy enterprise dominated by clean energy, which is exactly the goal expected by the energy supply and consumption revolution.

It can be predicted that SPIC’s high proportion of clean energy will give birth to numerous cutting-edge clean energy technologies. Under the global trend of clean development in the energy market, SPIC’s core competitiveness in foreign cooperation will be enhanced. At the same time, with the current international cooperation model oriented by technology, capital and enterprise strategy, SPIC, with advanced technology and strong capital, will become a popular participant in international cooperation.

Based on current conditions alone, the merged SPIC will also significantly accelerate its pace of “going global”. Before the merger, CPI had a foundation for carrying out energy business in many countries and regions around the world, while SNPTC was also promoting the “going global” of nuclear power and had made good progress. After the merger, first, its capital capacity has been greatly improved. Wang Binghua told the media in March this year that the total assets of SPIC will exceed 700 billion yuan, and the nuclear power assets will be integrated and listed after the merger. Second, its engineering capabilities have been enhanced. CPI has complete whole-industry-chain engineering service capabilities, while SNPTC owns domestic and international leading power engineering design institutes covering conventional power, nuclear power, power transmission and distribution, and new energy. Third, its international relations and market familiarity have been deepened. Taking Turkey as an example, CPI has already built and operated thermal power plants in Turkey and has a good reputation in the country’s energy circle. Turkey is also a key potential market for SNPTC’s AP/CAP technologies, and exclusive negotiations are underway. It can be predicted that the merged SPIC’s reputation and influence in the Turkish market will be enhanced, which is conducive to further cooperation.