China Goes Nuclear

The explosive economic growth China has experienced over the last few decades shows no signs of slowing down.

And so inevitably, this unparalleled Chinese success story comes with a sub-plot: one of increasing pressure on energy supplies, as booming industries and newly demanding consumers lust after more and more power.

In fact, so insatiable has the demand become, the only viable way to meet it currently is via highly polluting coal-fired power stations, the continued construction of which is considered preferable to power cuts, which would be sure to test the people’s patience and place prized economic growth at risk. Yet, this reliance on fossil fuels has led to chronic smog across much of the country, which itself serves to undermine the physical well-being of the country’s human capital.

Foundation Capital | Nuclear power plant control room

Nuclear: The New King in Town

Confronted with this conundrum, the authorities have prioritised addressing the issue of pollution, placing nuclear power ahead even of wind and solar as the answer to China’s energy prayers.

Consequently, China is spending $570 billion building new nuclear power stations over the next decade, as it seeks for it to make up 10 per cent of its energy mix by 2030. And, with eight new reactors being built every year until 2030 to meet the country’s climate and clean energy goals, this will make it the fastest expanding nuclear power generator in the world.

Moreover, with China now largely self-sufficient in reactor design, as well as most aspects of the fuel cycle, it is full speed ahead on the construction front, meaning endless work for the earth movers and material handling equipment relied upon to craft these massive facilities. So extensive is the schedule of works, despite there being decades of construction still to come, the Asian powerhouse economy already leads the world in terms of the largest installed nuclear power capacity, with 21 per cent of the global total.

In addition, with some provinces holding back on new approvals for wind and solar projects until the associated transmission infrastructure improves, nuclear power’s star is set to rise further still, for it comes with the assurance that more of the actual energy produced will reach its intended destination.

Foundation Capital | Nuclear power plant cooling towers with China flag

No Expense Spared

With government support and subsidies assured, and safety and security concerns dictating that any new nuclear infrastructure must be exceptionally robust, no expense is being spared in the construction of these facilities. This translates to armies of machines working day and night to meet challenging deadlines across dozens of sites simultaneously both along China’s coastline, as well as inland.

For example, in Jiangsu province, the industrial equipment will be out in force to ensure that the two new reactors to be added to the existing Tianwan facility are completed in time for the start of operations in 2027.

Such mega projects do not come cheap, however, with these two new units alone costing $3.3 billion, while the four new reactors at Xudabao plant in Liaoning province come with a whopping $16 billion price tag!

Foundation Capital | Nuclear power plant control room

Mega Projects, Mega Income

As a low-carbon energy source with capacity for a large base load of electricity, nuclear power is hard to beat. And it needs to be, for even the most conservative estimates have demand for energy in China doubling within 20 years.

As such, the authorities there are looking at having some 200 nuclear power plants in operation by 2050, translating to an unprecedented amount of building work to come.

Understandably, this is very welcome news indeed for those investors who own the machinery used to realise this new national energy vision, since it pushes yet more business their way from those construction companies obliged to rent the industrial equipment they need to secure the contracts they covet.

And, with China absolutely dominating this global rental market estimated to be worth $75.2 billion by 2024, no doubt a lot of investors will be very happy.

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