Despite its history and established public reputation as a state-sponsored activity, the nuclear industry is an open business, with opportunities for new market entrants in the 20 or so countries with definitive programmes for nuclear power construction. Even emerging industrial economies like China and India have been remarkably open to international procurement, although governments have been keen to maximize locally-manufactured content (see my October 2012 comment). This has encouraged the beginnings of the formation of an internationally-diverse supply chain and many joint ventures.
The majority of nuclear power plants (NPPs) in the world are light water reactors (LWRs), that is, PWRs and BWRs. For many utilities the choice lies between these two technologies; there is accordingly considerable competition between the technology vendors. Apart from the LWRs, Candu Energy and the Nuclear Power Corporation of India (NPCI) offer PHWRs. According to the OECD Nuclear Energy Agency’s 2008 report Market Competition in the Nuclear Industry, the degree of concentration in the market for new NPPs shows it to be a competitive marketplace with a diverse range of suppliers. It concluded: “despite the consolidation which has taken place, there appears to be no shortage of competition to supply NPPs”. A report in 2005 for the UK government by IBM Business Consulting Services concluded similarly that “a strong global market for most systems and sub-systems” exists with “sufficient capacity” to support an expansion of nuclear power. However, “the global capacity for a small number of key items appears to be limited” in the case of forgings for reactor pressure vessels, primary circuit pressure vessels and steam generators.
The European Commission initiated an anti-trust inquiry in 2010 into an agreement between AREVA and Siemens limiting competition for some years after the break-up of their joint venture, which was judged to be too restrictive in scope and duration. The Commission nevertheless accepted a voluntary scaling back of the non-compete obligation from the companies to limit the condition’s application to the nuclear island, fuel assemblies and nuclear services, with the implication that sufficient competition exists in the European market for these nuclear technologies.
Thus the nuclear market is not a ‘vendors’ market’; however neither is it a ‘buyers’ market’. The main technical barriers to trade are the licensing requirements imposed by the nuclear regulatory bodies for the protection of health and safety and to safeguard materials and know-how from proliferators. Although a number of technology vendors have obtained regulatory approval for their reactor models across several jurisdictions, no vendor is able to offer its technology everywhere.
That said, among the major technology vendors only CNNC in China and NPCIL in India have not so far entered the international market, although two Chinese CNP-300 reactors are being built in Pakistan under an intergovernmental programme, with two earlier units already in operation. Current capacity exists within China to manufacture five AP1000 units a year, according to the China First Heavy Industries Company, and although there are apparently hurdles to achieving consistently high quality in forging, around 50 percent of components are already sourced locally. So it is possible that, in conjunction with Westinghouse, Chinese-supplied AP1000s might be offered to the world market later this decade. The Shanghai Nuclear Engineering Research and Design Institute (SNERDI) and Westinghouse are collaborating on another advanced reactor design, the CAP1400, whose intellectual property will be fully Chinese. AREVA announced plans in February 2012 to cooperate with its longstanding partners the China Guangdong Nuclear Power Group and EDF on developing a 1,000 MWe reactor based on the ATMEA model the company has designed with Mitsubishi. The new model is aimed at the international market. An advanced CPR-1000 is also intended to be available from 2013, which may be suitable for export. Yet bringing a new design to market can be a lengthy process. Work on the South Korean APR1400 was begun in 1992, construction of the first plant was begun in 2007 and the first overseas sale made in 2009, a period of 17 years. The first demonstration CAP1400 is due to be started in 2013, six years after design work began, and the earliest that a fully-Chinese advanced nuclear reactor will be marketed overseas is likely to be towards the end of the current decade.
Indian reactor design has concentrated on developing the PHWR, which has not had the same international success as the LWRs offered by most of the other established vendors. India is developing a relatively small 300 MWe Advanced Heavy Water Reactor (AHWR) that will use thorium fuel, as part of its strategy to ensure greater security of supply through use of indigenously-sourced resources. Thorium (Th-232) is not used in the nuclear cycle outside of India and thus the AHWR is unlikely to attract much interest in the international market. Thanks to its so-called ‘frugal engineering’ India has the potential to rival China and Southeast Asian countries as an exporter of industrial components. But the country faces serious binding constraints on growth, the most serious of which are the inadequacy of its infrastructure and ineffective public institutions. Established suppliers, like Larsen and Toubro and the Electronics Corporation of India have (despite some of these hurdles) demonstrated their capability in export markets, while India’s consulting engineers have established a leading global reputation.
So the availability of nuclear technology is much less constrained than has been the case historically. National barriers to entry have come down in several advanced industrial countries, though there remain significant regulatory and technical constraints applying to the nuclear island itself. The Fundamental Safety Principles issued by the International Atomic Energy Agency (IAEA) provide the framework for safety regulation with the principles incorporated into national licensing procedures. Different regulatory regimes have nevertheless evolved across the world and inevitably there are inconsistencies in the way safety and security is approached between countries and even within countries. Such variations may introduce additional compliance costs for global supply chains which can then hamper the development of an open international trading system. Governments, working through IAEA structures and other intergovernmental organizations, such as the Nuclear Suppliers Group, and partnerships at the global and regional level, could do more to bring about a consistent regulatory regime that would further open the nuclear reactor and equipment supply market.
The nuclear industry essentially operates under a special international regulatory regime primarily to ensure a high level of safety, but also to safeguard the technology against misuse and provide compensation for victims of accidents with trans-boundary effects. It is by no means the only industry to be subject to stringent oversight in the public interest; for example, the production of food and drugs is also controlled rigorously, as are weaponry, railways and air travel. The control system that applies to nuclear power developed from the application of quality assurance techniques pioneered in the USA, and which were developed further, particularly in Japan, to establish a worldwide framework based on common principles. It requires the nuclear supply chain to deliver exceptional performance beyond that found in most other industries.
A streamlined regime of export control and other trade-related regulations for the industry would clearly help. If governments move towards a principles-based regulatory regime, which permits global suppliers to offer their technologies widely, then they will need to work together to share knowledge and good practice. It would also be desirable to institute a more collaborative relationship with industry that is based upon assurance of compliance by well-managed and responsible companies. A comprehensive framework for supplier certification in the nuclear industry, which covers the full compliance with safety, security measures and safeguard materials and technology, needs to be put in place. The quality assurance (QA) programmes that apply to components important to safety require the manufacturer to detect, analyze and correct defects. All data relating to the manufacture and initial testing of safety-related components and systems are also kept for the duration of the plant’s life. The process of safeguarding technology and dual-use equipment calls for end-user screening and due diligence along the length of the supply chain. These are key elements in business excellence models. Suppliers to the nuclear industry are expected to be as good as the best and the industry has to demonstrate that it is applying the highest standards to its business activities.
Ultimately, it would make sense to move towards a less prescriptive regulatory regime. Under a more collaborative and international regime, technology vendors would have greater responsibility for their designs and once a design was approved by the national regulatory body, all other regulatory bodies would be bound to accept it also. Such a system would involve the negotiation of an international convention to coordinate and regulate (through the IAEA) the use of civil nuclear technology. The IAEA guidance would evolve into becoming the benchmark standards for safety, security and environmental protection which all signatories to the convention must apply in granting design and construction licenses to a vendor or an operator. The burden on vendors of complying with numerous nationally prescriptive regulatory regimes would be reduced, while the vendors’ responsibilities for assuring their designs provided health and environmental protection that reduced risks to as low as reasonably achievable over a plant’s whole life would be greater.
In essence, governments would recognize certain companies as responsible organizations with adequate internal and contractual controls to assure full-scope protection in safely and securely safeguarding and managing nuclear technology, operations and materials. Such recognition would be respected by other IAEA member states, with the IAEA continuing to provide assurance that governments were regulating the industry soundly. Technology vendors would also undertake due diligence on their supply chain to provide assurance that their security systems complied with their obligations of ensuring that designs and activities did not contribute to weapons proliferation.
There would also be a public benefit in moving towards a more collaborative regulatory regime. An enhanced role for vendors in a harmonized international licensing setup will streamline the examination, development and introduction of design improvements across the whole fleet, and offer safety and security advantages. National regulatory bodies would remain fully responsible for the licensing of the operator, adaptation of the design to accommodate site-specific features and the quality of the construction. A regulatory body in the country where the technology vendor’s design is registered could act as the lead regulator to assess and accept the design. The design review team could include experts from other regulators, thus adding to its capability. After the lead regulator’s approval of the design, other regulatory bodies could take over the licensing process in their own countries through a validation procedure. Collaboration should therefore bring cost and safety advantages and will enhance regulatory capability and consistency.
Steve Kidd is acting director-general of the World Nuclear Association, where he has worked since 1995, (when it was still the Uranium Institute). Any views expressed are not necessarily those of the World Nuclear Association and/or its members.
This article was first published in the December 2012 issue of Nuclear Engineering International