A Nature comment published last week provides interesting data on nuclear construction costs in China. The authors find that, unlike in the United States and France, where costs have historically ballooned, China has seen nuclear construction costs decline over time (their findings are recreated in figure 1). What has China done right, and what has the West done wrong? Can these differences teach us how to improve nuclear development in the future?
Although critics of nuclear power often focus on safety or waste disposal, the core problem has always been cost. As Peter Van Doren and I outline in our 2022 working paper, nuclear projects in the United States and elsewhere have been plagued by large cost overruns and construction delays. The exact cause of these cost problems remains debated, especially the extent to which they can be blamed on overregulation versus broader challenges in construction and project management.
It is clear, though, that during the early stages of nuclear construction in the 1960s through the 1980s, costs rose in nearly every country that pursued nuclear power. The escalation was especially severe in the United States, but the pattern has been the same across countries with different regulatory regimes and political systems: the more capacity that was built, the higher the cost. This trend led to the decline of nuclear construction in the West during the 1980s and 1990s.
Since then, large-scale nuclear deployment has occurred primarily in Asia, especially in China, Japan, and South Korea. Construction in Japan stalled after the Fukushima accident in 2011 and has slowed in South Korea amid political opposition. But in China, construction has continued at a rapid pace: 58 reactors have been built in the past several decades, with 32 more currently under construction.
Proponents of nuclear power in the United States routinely point to China and South Korea as evidence that cost-effective nuclear construction is possible. If only we could adopt the lessons from their experiences, we too could develop and build affordable reactors. On the surface, the Nature comment appears to support this optimism. But there are strong reasons to be cautious about drawing conclusions from the apparent success of nuclear development in China or South Korea, especially for those who believe in free markets and are skeptical of centralized planning.
First, we can’t be entirely confident in the accuracy of the Chinese cost data. Nuclear project costs are difficult to interpret and compare because of differences in what is counted and how costs are reported. This is especially true in countries like China and South Korea, where projects are managed by state-owned firms and cost data are neither transparent nor independently audited.
The Nature authors are open about the limitations of their data, noting in their supplementary materials:
Collecting nuclear power plant cost data is challenging worldwide, both in terms of availability and reliability. Ideally, such data should be independently audited for accuracy, but audited cost records are rarely publicly available, especially for historical projects.
They explain how they process data from publicly available sources to generate comparable cost metrics. However, because they do not disclose their sources, the data are not reproducible.
Moreover, because the underlying cost information lacks transparency and independent verification, it is impossible to account for other factors, such as subsidies or favorable government financing, that could affect the reliability and applicability of comparisons across Chinese, US, and French reactors. This does not mean their data are not useful, but it does suggest that, as with South Korean cost estimates, it is difficult to draw strong conclusions.
Even assuming the data are roughly accurate, it is not clear whether the lessons they imply are transferable outside of China’s unique context. In a seminar at the Harvard Kennedy School, one of the Nature authors, Shangwei Liu, elaborated on the drivers of China’s cost declines. Importantly, he argues that the decline is not a result of economies of scale (cost savings from building larger reactors) or “learning by doing” (efficiency gains from repeated construction). Instead, it stems from “indigenization”, substituting foreign labor and equipment with less expensive domestic alternatives. As Liu puts it, “when replacing foreign equipment with Chinese equipment, it gets cheaper. When replacing foreign labor with Chinese labor, it gets cheaper.” He adds:
It’s not surprising that Chinese nuclear is cheaper. Everything in China is cheap. Chinese solar is cheap, Chinese wind is cheap, Chinese energy storage is cheap. For China, the real question is, can cheap Chinese nuclear power compete with cheap Chinese renewables and storage?
If this is the real driver of China’s nuclear cost reductions, what exactly can the United States hope to replicate?
One argument that US nuclear boosters may latch onto is the Nature article’s statement that:
China’s regulatory structure and policy environment also play an important part. A consistent, state-backed industrial policy has provided stable electricity tariffs and low-interest financing for state-owned nuclear power companies. Its centralized nuclear governance structure helps to ensure regulatory stability and coordinates reactor standardization across the country.
Given concerns that overregulation and regulatory instability have driven up nuclear costs in the United States, it is convenient to seize on regulatory stability and standardization as the key factors behind China’s success.
However, it is important not to ignore the wider context: nuclear construction in China, like virtually all other cases of reactor construction, is not a product of the free market. It is reliant on some combination of state-ownership, government subsidies, and electricity rate regulation. As one nuclear industry observer noted about China: “They don’t have any secret sauce other than state financing, state-supported supply chain, and a state commitment to build the technology.” Regulatory stability and standardization are byproducts of China’s central planning and are likely deeply intertwined with the broader downsides of centralized control. From a libertarian or free-market perspective, centralization comes with hidden and indirect costs that outweigh the surface savings.
Even if China’s success is real, and not just the result of cheaper materials and labor, it is questionable whether the lessons are desirable or transferable. It is tempting to hold up China as an exemplar of nuclear success, but those who value markets and individual liberty should contend with the possibility that its apparent achievements are inseparable from the authoritarian system that enabled them.
