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China leads demand in a complex nuclear industry

Over half of world's nuclear plants under construction are in Asia

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Workers, bottom, stand in front of a nuclear reactor as part of the Taishan Nuclear Power Plant seen under construction in Taishan, Guangdong province on Oct. 17, 2013.   © Reuters

TOKYO One major driving force behind the expansion of Toshiba's nuclear power plant business is the growing demand for electricity in Asia.

According to the World Nuclear Association, 99 of 447 nuclear power plants operating in the world are in the United States. Three countries -- the U.S., France and Japan -- account for more than 50% of all nuclear power plants in operation on an output basis. But the projected output of plants under construction tells a very different story. China alone accounts for nearly 40% of the total and Asia as a whole makes up over 60%.

Enthusiasm for nuclear power has waned significantly in U.S., Europe, Japan and other developed countries. Major accidents such as Three Mile Island, Chernobyl and Fukushima have made it a difficult sell to a concerned public. Japan has suspended operations at almost all of its running nuclear plants, and work at those scheduled for construction is also on hold. Germany is in the process of phasing out nuclear power. Safety regulations have been toughened across the developed world, putting a greater burden on plant makers and power companies.

In contrast, nuclear power is booming in Asia on the back of the region's economic growth, with China leading the way. The country is home to six of the eight nuclear power plants built between 2015 and 2016.

New plants are being built to meet the shortfall in electricity supply.

China is one of the few growth markets that did not slow down after the 2011 earthquake and tsunami in Japan, and local plant constructors are developing greater technological strength.

Similarly, India has continued to pursue more nuclear power. One in three people in rural India currently have no electricity supply. The government of Prime Minister Narendra Modi plans to increase the country's nuclear power output capacity to 63 gigawatts by 2032 -- 10 times what it is now. In November 2016, India and Japan signed a nuclear cooperation agreement during Modi's visit to Tokyo.

Nuclear power companies in the U.S., Europe and Japan are competing to secure more orders in these growth markets by forming alliances. Since U.S. company Westinghouse Electric became a subsidiary of Toshiba in 2006, General Electric has formed a partnership with Hitachi and France's Areva has teamed up with Mitsubishi Heavy Industries. The strategy is to join forces and increase the chances of selling plants to growing Asian economies needing cheap energy.

Meanwhile, China and South Korea, previously buyers of nuclear power plants, are gaining technological expertise and increasing their presence as sellers in the global market. China General Nuclear Power has been investing in nuclear power in the U.K. by partnering with French utility Electricite de France, or EDF. It also plans to build a new reactor at Bradwell in southeast England -- its first such attempt in a developed country.

Last October, Korea Electric Power Corp., or Kepco, secured the rights to operate four plants it is building in the United Arab Emirates for 60 years. The contract is worth a staggering 54 trillion won ($47.1 billion). The 2009 agreement was the first overseas nuclear plant construction deal won by a group of South Korean companies spearheaded by Kepco. The plants are scheduled to go onstream between 2017 and 2020.

Toshiba and Westinghouse -- jointly the top player in the industry, having built a total of 112 plants to date -- are placing greater emphasis on the huge demand from the Chinese market. "There are numerous hidden risks in China, although not all have surfaced yet," said one person involved in the nuclear power plant business. His opinion is shared by many in the industry.

Nuclear power is the cheapest method of generating electricity. But building new plants has become increasingly difficult in recent years. Some countries that had given the green light to new plants have now gone back on their decisions. Many places have seen greater public opposition to their construction, and safety regulations have become more stringent.

Developments like these have heightened the risks companies face in taking orders for new plants. Additionally, an accident causing widespread damage can easily bankrupt plant makers and power companies. "It has become clear that single makers can no longer manage the wide range of risks involved in nuclear power generation," says Tae Tamura, a researcher at Mizuho Bank. "The entire industry requires more government policy support."

The Toshiba issue has shed light on how the risks are now too much to bear for one company alone. Yet, from an energy-security standpoint, nuclear energy cannot be abandoned altogether.

While the general trend in Asia is to expand nuclear power generation, some countries are putting a stop to plant construction. Taiwan's President Tsai Ing-wen, who took office in May 2016, aims to decommission all the island's nuclear plants by 2025. Vietnam has decided to call off the construction of a number of new plants which were slated to begin operation as early as 2028 with the support of Japan and Russia.

Much like in the West, the increased financial burden and growing public concern over the safety of nuclear energy appears to have prompted the change. Furthermore, extensive pollution caused by a large steel plant being built in Vietnam by a Taiwanese company last April heightened local environmental awareness.

Concern and discontent spread much more quickly in the age of social media. Even in a country where information is tightly controlled, it is difficult to completely ignore public opinion. The question now is how the roles in an increasingly complex nuclear power landscape should be divided among governments, power companies and plant makers.

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