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China’s electricity consumption is rising. In the summer especially, heatwaves and air conditioning usage are driving record-breaking levels of electricity production.
It is the global leader in solar and wind power installations. But China’s consumption of coal continues to increase too. Coal generated a record 5,760 terawatt hours of electricity last year. Increasingly, filling that gap with cleaner nuclear energy is seen as the answer.
This week the Chinese government approved a record 11 nuclear reactors across five sites, according to state-run media. The total investment is reported to be at least $31bn.
Shares of CGN Power Co, the listed unit of state-owned China General Nuclear Power Corp, are up 55 per cent this year. It is the biggest beneficiary of the latest push, receiving approvals for six reactors. Shares of peer China National Nuclear Corp, which has received approval for three reactors, are up 30 per cent in the past six months. State Power Investment Corp, one of the largest local electricity generation companies, said it had received approval for two units.
Coal still accounted for nearly 60 per cent of the country’s electricity supply last year, according to industrial association China Electricity Council. The country’s existing nuclear power capacity, from 56 reactors, accounted for about 5 per cent of total electricity demand.
Although it has encountered fewer problems with nuclear buildouts than many European countries, there are still hurdles.
On the plus side, China has become mostly self-sufficient in the design and construction of nuclear reactors. The challenge lies in other parts of the supply chain, especially in fuel processing and radioactive waste management where it still needs to build out infrastructure. A shortage of specialists is another pressing issue, with the country estimated to need up to 6,000 industry professionals each year in the next decade — triple the current number available.
But the biggest hurdle may be public opposition. Following the Fukushima nuclear disaster in Japan in 2011, there have been large protests over plans to build new nuclear power plants, uranium-processing facilities, nuclear waste processing plants and even plants that manufacture reactor components in China. In some cases, the civil protests were enough to suspend construction.
Fears over seismic risk and potential reactor damage are not unfounded: large earthquakes have occurred before, a magnitude 7.9 earthquake for example which hit southwestern Sichuan province in 2008 left nearly 90,000 dead or missing.
The rise in the shares of local nuclear plant operators reflects expectations for more approvals in the coming years. But investors should pay closer attention to the risks that still need to be addressed.