Identifier
Created
Classification
Origin
09CHENGDU196
2009-09-18 02:06:00
CONFIDENTIAL
Consulate Chengdu
Cable title:  

SW CHINA OFFICIALS SIGN MOU FOR MODULAR NUCLEAR REACTOR

Tags:  ENRG ETRD EINV PGOV KNNP CH 
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SUBJECT: SW CHINA OFFICIALS SIGN MOU FOR MODULAR NUCLEAR REACTOR

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CLASSIFIED BY: David E. Brown, Consul General, U.S. Consulate
General Chengdu.
REASON: 1.4 (d)
C O N F I D E N T I A L SECTION 01 OF 02 CHENGDU 000196

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SUBJECT: SW CHINA OFFICIALS SIGN MOU FOR MODULAR NUCLEAR REACTOR

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CLASSIFIED BY: David E. Brown, Consul General, U.S. Consulate
General Chengdu.
REASON: 1.4 (d)

1. (C) Summary: Chinese officials from the Future Nuclear Energy
Technology Application Institute (FNETA) recently signed a
memorandum of understanding (MOU) with U.S.-based NuScale Power
to work toward an agreement to build modular light water nuclear
reactors (LWR) in China. Chengdu officials pushed aggressively
for the MOU, rolling out the red carpet for NuScale officials,
paying for their travel to China, and arranging a meeting with
Chengdu's Deputy Party Secretary. Chinese officials told
NuScale executives that they favored the company's design over
other advanced reactor designs like the pebble bed reactor. End
Summary.



China's Push For Deal Catches U.S. Firm By Surprise

-------------- --------------




2. (C) Chinese officials from the China Guangdong Nuclear Power
Holding Corporation (GNPC) contacted NuScale officials in
mid-August to express interest in forming a partnership to build
nuclear plants in China using NuScale's modular design. GNPC,
together with FNETA, paid for NuScale executives to travel to
Chengdu and Beijing to discuss the possible cooperation in
nuclear power development. The Chinese officials told CEO Paul
Lorenzini and Chief Technologist Jose Reyes that they were
interested in licensing NuScale's design for direct heating,
non-power applications in China. While FNETA is a Chengdu-based
company, the reactors would be built throughout China if a final
agreement were reached. FNETA suggested if an agreement were
reached, they might have exclusive sales and distribution rights
in China, and NuScale would receive royalties.




3. (C) NuScale officials told CG on September 8 that they did
not know what to expect when they arrived in China, but had been
warmly welcomed by a number of officials including, Chengdu's
Deputy Party Secretary Tang Chuanping. Lorenzini said that the
Chinese side was pushing hard to sign an MOU with NuScale before

the executives returned to the United States. Chinese nuclear
officials said that they would like to use the NuScale design
rather than a pebble bed reactor, suggesting to Lorenzini that
Chinese nuclear officials had gone through a selection process
and the pebble bed design had lost. Lorenzini and Reyes had not
come prepared to sign an MOU, and both questioned Consul General
(CG) about how to continue to discuss a joint venture without
committing to too much too early in the process. (Note: After
meeting with CG, NuScale officials signed an MOU with FNETA on 8
September to work over the next year to see if an appropriate
joint venture agreement can be worked out to the benefit of all
parties. End Note.)



Lingering Concerned About Intellectual Property Rights

-------------- --------------




4. (C) NuScale officials expressed concern to CG about how their
intellectual property (IP) would be protected in a joint venture
agreement with a Chinese company. Lorenzini worried that other
companies in China might acquire his company's designs and
compete against NuScale in the Chinese market. At the same
time, he thought that a company, or group of companies, wanting
to steal or reverse engineer NuScale's IP could probably do that
based on publicly available information. Lorenzini expressed
confidence, however, that Chinese companies would not be able to
acquire the Reactor Excursion Leak Analysis Program (RELAP)
safety codes. He had made clear to his Chinese hosts that the
safety codes would not be part of the technology transferred in
any potential joint venture.



Overview Of NuScale's Reactor

--------------




5. (SBU) NuScale, founded in 2007, has developed a 45 megawatt
(MW) LWR that Lorenzini claims is safer than many other nuclear
power plants, can be built almost entirely offsite, and can be
scaled to produce as much as 540 MW. Unlike other reactor
designs that rely on cooling pumps to circulate water through
the plant to control the temperature, the NuScale design relies

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on natural circulation from a convection process. Lorenzini
said this makes their design safer by eliminating a possible
failure point in the cooling system. The modular reactor could
be built at existing factories in the U.S. or potentially at
factories in China if a final agreement is reached. The reactor
vessel measures about 65 feet long and 15 feet in diameter, and
once built, can be transported via barge, truck, or rail to the
power plant for installation. This greatly speeds the process
of construction and helps keep down cost, according to
Lorenzini.




6. (SBU) The advantage of NuScale's design over some other
advanced reactor designs, says Lorenzini, is that it is
commercially viable now. He says that the reactor could be used
in both commercial power applications and in direct heating.
Furthermore, the reactor design should have the ability to
withstand large seismic events. The company is currently funded
by venture capital, but expects to receive funding from the
Department of Energy, beginning in 2011.




7. (SBU) COMMENT: The Chinese government is moving forward with
plans to deploy nuclear reactors inland (currently all of
China's reactors are on the coast). Although Chinese officials
have stated they are interested in using NuScale technology for
industrial applications and not large-scale power generation,
potential risks associated with the development of China's
indigenous pebble-bed reactor technology may prompt Chinese
utilities to look at other reactor options that can used in
China's earthquake-active interior, such as the NuScale
technology. END COMMENT.
BROWN