Keen to clean up hazardous air pollution, the Chinese government is embracing nuclear power and seeks to shift from coal to gas generation – although fuel costs still make operators favour coal. As for new nuclear, China has an additional 20 reactors under construction, which, if completed, will add more than 22 GW to its existing capacity of 27 GW.
At China's current construction rate, one reactor comes online every five months. According to both China's State Power Investment Corporation (SPI) and the World Nuclear Association's assessment of China's 13th Five-Year Plan, unveiled in March 2016, the Chinese Energy Fund Committee is set to approve six to eight new nuclear reactors each year through 2020.
This represents an additional 34 to 45 GW, boosting China's nuclear capacity to nearly 90 GW by 2025. Analysts at the US Energy Information Administration (EIA) expect that by 2032, China will surpass the United States as the country with the most electricity output from nuclear power.
Shift to cleaner fuels to meet environmental goals
Carbon-free nuclear power helps China reduce carbon emissions – a pressing task, not least as the government in Beijing recently signed up to the Paris Climate Change Agreement. President Xi signed the accord just before the G20 summit in Hangzhou, vowing to “unwaveringly pursue sustainable development”.
Tapping domestic shale gas reserves is another way for China to shift to less carbon-intensive fuels for power generation. Chinese state-run companies have heavily investment in joint ventures in U.S. shale plays—China's financial involvement represents 20% of total foreign investment in the sector. This investment provided China with valuable expertise that can be applied to its own domestic production, helping to lower well development costs.
Sinopec and PetroChina have spearheaded shale gas development in China, with most efforts focused on the Longmaxi formation in the Sichuan Basin, which is estimated to hold technically recoverable volumes of 287 Tcf. To incentivise fracking, the Chinese government in 2012 launched a four-year, $1.80/mmBtu subsidies program for any Chinese company reaching commercial production of shale gas. These subsidies were recently extended to 2020, but at a lower rate.