Op-Ed: An Impending Chinese Tsunami

The following op-ed is written by Mr. Scott Campbell, President of The Howard Baker Forum and organizer of the U.S.-Japan Roundtable.

As we turn the page on Fukushima, members of the United States-Japan Roundtable are increasingly concerned about the emerging structure of the global market.

In a post-Nuclear Security Summit article, Forbes contributor James Conca reported on a Chinese campaign that will transform global nuclear power markets and much more:

“China plans to spend over a trillion dollars to become the world’s largest producer of nuclear power. They will build 40 new reactors by 2020, another hundred by 2030, and over 200 additional reactors by 2050. The new Five-Year Plan puts China on track to meet this ambitious schedule.”

These numbers are staggering.

In a single paragraph, Conca outlines an entirely different kind of tsunami, poised to once again shake the global nuclear energy industry to its core.

Mr. Scott Campbell (R) with Ms. Takako Onitsuka, METI (C) and Mr. Toshiyuki Abe, ITOCHU (L) at a recent meeting of the U.S.-Japan Roundtable.

Mr. Scott Campbell (R) with Ms. Takako Onitsuka, METI (C) and Mr. Toshiyuki Abe, ITOCHU (L) at a recent meeting of the U.S.-Japan Roundtable.

Should China realize these figures, it would represent an historic transfer of industrial influence, marking the biggest realignment of natural resource power since the rise of OPEC in the 1970s. Others who have been in the energy industry since those days will remember the profound impact the shift in oil wealth and power had on the world economy, and that it took nearly 50 years to see a correction.

China’s emergence as a nuclear energy giant is not cause for total alarm. As a rising economic power, the country has as much a right to seek opportunity as any other, and such pursuits will not be without benefits for the many. Massive Chinese nuclear expansion will see the opening of a substantial reactor market, after years of stagnation and abandonment. Every additional nuclear reactor constitutes increased carbon-free electricity generation capacity. In the wake of COP21, a dramatic ramp up in zero-emission power generation will aid not only China, but the world in mitigating climate change threats.

There are, however, areas of concern. As China aggressively pursues nuclear expansion within its own borders, its market will likely soon close to foreign competition. Privately-owned reactor vendors in the United States and Japan, and the state-owned companies of Russia, France, and Korea will all be boxed out. As China constructs an enormous reactor fleet, it will also apply its technology, acquire technical know-how, and advance often-irresistible financial credit to capture developing markets.

China’s coming domination of emerging nuclear markets poses a serious threat not only to the non-proliferation regime that the United States and Japan have long maintained, but also to the sovereignty of developing nations. China’s build-own-operate (BOO) method of securing nuclear reactor sales will allow it to monopolize developing countries’ energy infrastructure, an insidious method of political leverage and power projection.

What are we to do?

The answer is found neither in conflict nor isolation. Rather, the United States and Japan should spearhead a coordinated commercial nuclear strategy that encourages open markets and competition in China’s new build. China will only benefit from free and open competition. As China expands into emerging market, it will be essential to persuade China to “play by the rules,” to engage in the global marketplace as a powerful-yet-equitable actor.

Beyond this effort at engagement, however, the United States and Japan must establish a greater joint commitment to advanced research and innovation, particularly in Gen 4 reactors and small modular reactors (SMRs). In this capacity, American and Japanese markets will remain dynamic and competitive, potentially leapfrogging the light water reactors (LWRs) that China has historically reverse-engineered and will continue to sell and operate internationally.

The United States-Japan nuclear alliance has never been more important. Nuclear cooperation between our two countries will remain vital as the global nuclear energy industry faces the coming onslaught of the Chinese tsunami—we cannot allow it to sweep the existing market structure into oblivion.