Wednesday, April 22, 2015

Why the China 123 Agreement is Good for America

Dan Lipman
Dan Lipman
Dan Lipman is NEI’s Vice President for Suppliers and International Programs. Before joining NEI in 2012, he spent 31 years at Westinghouse Electric Corp.

In 1985, China had only recently begun its transformation into an economic powerhouse, and had just begun construction of its first nuclear power plant. It was also the year that the United States and China agreed to cooperate in commercial nuclear energy technology.

Thirty years later, China has overtaken the United States as the world’s largest economy and it is the world’s largest market for nuclear power plants, equipment and technology. Consider: 23 reactors are now in operation, another 26 are under construction, and even more are preparing to break ground. Consider further: China’s nuclear generating capacity, which is about 19 gigawatts today, is expected to increase three-fold to 58 gigawatts by 2020 and to some 150 gigawatts by 2030. In short, for any company that is a global player in nuclear energy technology and equipment, China is the most important market in the world.

Major Chinese contracts awarded to U.S. suppliers have created billions in U.S. exports and tens of thousands of American jobs here at home. American companies supply not only reactors, but also equipment and a broad range of services, including engineering, construction, fuel cycle and training services. On top of all this, the progress China makes in building the U.S. nuclear plants in China directly benefits the plants of the same design that are currently under construction in the United States. Moreover, American companies are forming valuable joint ventures and business relationships in China to serve growing markets in third countries.

All this will be abruptly halted, irrevocably so, if Congress blocks renewal of the U.S.-China nuclear cooperation agreement from coming into force. These bilateral agreements between the United States and its nuclear cooperation partners are also known as “Section 123 agreements” after the part of the 1954 Atomic Energy Act that sets the terms for sharing U.S. peaceful nuclear energy technology, equipment and materials. Without such an agreement, negotiated by the State Department, signed by the President and reviewed by Congress, none of this can occur.
AP-1000 construction at Sanmen

In recent years, certain nuclear trade agreements have attracted controversy. We have seen debates over whether to add new conditions for U.S. nuclear energy cooperation, such as a proposed requirement that partners foreswear technologies for enriching uranium or reprocessing used reactor fuel. China, a recognized nuclear weapons state, has used enrichment and reprocessing technologies for decades, so such concerns do not apply. If for some reason Congress were to oppose the renewal of the U.S-China Section 123 agreement that would be remarkably short-sighted. While China stands to gain safe, carbon-free electricity through partnerships with U.S. industry, the United States stands not only to promote its economic interests through exports and domestic job creation, but also to advance other national interests.

U.S. engagement with China has fostered significant advances in China’s nuclear nonproliferation policies and practices. The use of U.S. equipment and technology allows China to deploy top-flight technologies, including an advanced reactor design that has been standardized for most of China’s planned nuclear facilities. In addition, management systems employed by U.S. nuclear companies regarding operational excellence and safety culture are the envy of the world. Having China implementing these techniques is imperative. U.S.-China nuclear energy cooperation is deep and mutually beneficial on many levels, all of them consistent with and supportive of American priorities.

U.S.-China nuclear cooperation also plays a critical role in addressing China’s pollution and carbon emissions -- a regrettable byproduct of China’s economic rise. There is growing unrest in China over air quality, especially in Beijing, where residents are literally choking on the smoke generated by its electricity generators fueled by coal and other fossil fuels. Expanding the use of nuclear energy is essential if China is to fulfill its ambitious transition to a lower-carbon energy portfolio. Given China’s standardization of a U.S. reactor design, the loss of U.S. cooperation would seriously disrupt China’s plans to reduce its carbon emissions by 2030.

The current Section 123 agreement is scheduled to expire at the end of this year. China will continue to expand nuclear energy with or without the U.S., but at considerable potential cost to this country. We cannot know precisely how the Congress will proceed with their upcoming review of the renewal of the China 123 agreement. But there are many, many reasons to renew it, including critical U.S. national interests.

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