January 13, 2025 • 47 mins
In the US right now, there is a lot of talk about a so-called "nuclear revival," though it remains to be seen whether that translates into action. Meanwhile, China has built 37 nuclear reactors in the last decade, with even more in the works. So what does it take to build nuclear at scale? On this episode of the Odd Lots podcast, Bloomberg's Joe Weisenthal and Tracy Alloway speak to David Fishman, a China-based energy analyst at The Lantau Group. He explains all the elements of the country's nuclear success, from financing to manufacturing to its domestic power markets.
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Speaker 1 (00:00):
Hi, it's suckh Bloomberg's Odd Lots podcast recently did a
great episode about the rise of nuclear power in China
is the only country deploying nuclear at a large scale
right now, and I thought you would enjoy listening to it.
So here's the extra episode. We'll be back with a
new episode of Zero on Thursday.
Speaker 2 (00:23):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 3 (00:39):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 4 (00:43):
I'm Joe Wisenthal and I'm Tracy all the way.
Speaker 3 (00:46):
Tracy, you know, we've been talking a lot about the
US energy system for obvious reasons, at least when it
comes to electricity. I don't know about you. I kind
of feel like the more we talk about it, the
less I understanding.
Speaker 4 (00:56):
Yes, yes, absolutely, I think there are a couple problems. So, like,
even beyond the actual different technologies for generating power, there's
the patchwork of like how different grids work in different states.
There's the different regulations, the different like interoperability and all
of that. And then even if we look like beyond
(01:18):
the US, it gets I guess even more different.
Speaker 3 (01:21):
Yes, well, I sort of wonder maybe we can learn
something about the US by a little compared and contrast. Right,
So if we look at the US and we still
don't totally get how it works, maybe, I don't know,
just to thought, maybe we'll learn something about the US
by looking at some different system and then we have
something to compare it to. It might be a waigh
(01:41):
in by looking at the outside world.
Speaker 4 (01:43):
I'm a big fan of doing this, by the way,
just to identify like different choke points in a particular
domestic process. If you think that the US can't do
something for whatever unidentifiable reason or I don't know, cultural
like holdback, but if you look at a different country
and they're doing it at scale, very very quickly, then
(02:04):
I think you can learn a lot about yourself.
Speaker 3 (02:07):
Well, that's exactly right. And so one of the things
again that comes up from time to time here in
our conversations is nuclear and this is just one example
of a source of power that may or may not
be important in our future. But according to and I'm
looking at a story from the Economist, over the past decade,
China has added thirty seven nuclear reactors according to the
(02:28):
International Atomic Energy Agency. I don't know, maybe we've added
like two. I forget how many there are at that
Georgia plant. A couple more, maybe restarted. But you know,
we talk all the time about nuclear and how hard
it is and how hard the financing is and the
labor force and the learning laws, and we forgot to
you know, we forgot how to build them for various reasons.
(02:49):
But that's not and it's so expensive. There's all these
cost overruns every time. But apparently that is not the
case everywhere, and that there are other parts of the world,
particularly China, where they just keep building at scale, and
maybe we could learn a little bit of how they
do that and how they finance it and how they
avoid forgetting how to build them.
Speaker 4 (03:07):
I think this is so interesting, this particular approach that
compare and contrast, and it is absolutely true. I think
the US has the most nuclear reactors out there, like
almost one hundred or something like that, but it took
us decades and decades to build them, and as you
rightly point out, we haven't built many new ones that recently. Meanwhile,
China is adding more and more, and they make it
(03:29):
look easy. I mean, I guess they are just like
giant things to boil water, but you know, China really
makes it look easy. So what can we learn from China.
Speaker 3 (03:36):
We really do have the perfect guests. By the way,
we've had this guest on in the past. We talked
to him about something completely different. Yes.
Speaker 4 (03:44):
This was during the depths of the COVID crisis, Yes,
and we were talking to this person. He was based
out in Shanghai and we were talking basically about how
they were getting food into apartment buildings and staying alive
during that time.
Speaker 3 (03:57):
Yeah, so that was an interesting sort of logis story
and it's own right. If you're under complete lockdown and
a Shanghai apartment building, how do you actually get food?
And anyway, I'm thrilled because now we're recording this December seventeenth,
twenty twenty four, we are talking to him in completely
different times.
Speaker 4 (04:14):
He's been freed from lockdown.
Speaker 3 (04:16):
He is now here in studio with us. So we
are going to be speaking with David Fishman, senior manager
at the Lantau Group. He's based in China typically where
he mostly focuses on the Chinese energy system. So literally
the perfect guest and a repeat guest. So David, thank
you for coming on. Ad lads, welcome to New York City,
Welcome back.
Speaker 5 (04:36):
Thank you for having me.
Speaker 3 (04:37):
What do you do the only other time we talked
to you, the only thing we knew about you is
that you were figuring out how to get food into
your apartment. What do you do now when that's no
longer the pressing issue?
Speaker 5 (04:48):
Yeah? Sure. So I work at a company called the
Lantau Group. We are an economic consultancy. We're doing power
and gas consulting across apac and so I'm focused on China.
I'm in the China. We're doing the business of electricity.
So for me, that means either somebody who wants to
build an electricity generation asset, wants to sell one, wants
(05:10):
to sell a portfolio of assets, wants to invest in one,
maybe through a fund or as some other type of
investment product. And then on the what we'd call our downstream,
who uses the electricity right, your major multinationals, your factories,
anybody who uses electricity as an input to produce things.
So we're working in the business of electricity, trying to
make buying and selling electricity more economic for everybody involved.
Speaker 4 (05:34):
Well, I'm just going to dive into the nuclear aspect
of this. Then, you know, Joe gave us some contours
around how much China is currently building. When did China
decide that it was interested in nuclear and what was
the sort of like thought process the strategy about how
nuclear would fit into everything else, including the coal power
that China is famous for using.
Speaker 5 (05:56):
Yeah, I mean the history of the Chinese civil nuclear
power industry goes back to stems back to the eighties.
So looking at you know, the mid to late eighties
is when China was signing agreements to bring in its
first nuclear reactor technology. At the time, it was there
are two different paths that were pursuing. They signed an
agreement with Framatome, a French company, to bring over one reactor,
(06:19):
and they developed a domestic reactor with at the time
the Soviet Union to have a domestic technology tree as well.
So in the eighties, China was actually experiencing some pretty
rapid economic growth, especially in the late eighties, and looking
to expand its power supply rapidly and at the time
it was quite tight, and so nuclear was seen as
(06:39):
a potential way to expand the power supply and get
into a power generation for what was at the time
something very new for China.
Speaker 3 (06:47):
What did you so I mentioned literally from just reading
the first paragraph of a paywalled economist story that number
of about thirty seven new nuclears. I saw that one too,
just like I just google how many new clear reactors
are big built in China? Scrolled down where I find
something in the Google search. This is how the research
is done, folks. Well, why don't you, in your words,
give us a sense of the size and scale of
(07:10):
Chinese civil nuclear generation and where it's going, and then
sort of like the role it generally plays in.
Speaker 5 (07:18):
The overall portfolio there, yeah, surescribe it. Yeah, sure so.
So nuclear in China has the interesting status of being
both relatively large and still somehow small. Large in the
sense that it's one of the largest operating fleets in
the world. Right, You've got you know, fifty almost sixty
reactors operating, We're talking about nearly sixty gigawatts of generation capacity.
(07:39):
But then in the context of China's entire generation fleet, right,
they've got well over a thousand gigawatts of coal and
then many more thousands of gigawatts of wind and solar.
So it's both large in the context of the world,
but also small. And that's the case for a lot
of things in China. The thing that can be large
in China canoso And what's.
Speaker 3 (07:57):
The ambition for you know, looking out you know, in
a five year plan. I don't know how whether they
do that for energy? Two? Where is nuclear potentially? How
much could nuclear be a thing? What's the size and
scale of the ambition?
Speaker 5 (08:09):
Yeah, sure so long term? I mean it depends on
how your energy planners and your economic planners and vision
the long term makeup of the grid. What type of
power are we using in twenty fifty Is it going
to be a little bit or a medium amount or
a lot of nuclear? So it's scenarios, right, and China
has scenarios too, for a high end a low end.
So the recent scenarios that I've seen, Originally it was
(08:33):
saying no less than three hundred gigawatts two hundred and
fifty three hundred gigawats, so two hundred and fifty or
three hundred reactors, right, two hundred and fifty units. So
the United States has just about one hundred right now.
So if they got to that scenario, it would be
about two and a half times what the US has
right now.
Speaker 4 (08:50):
So what's the process by which a new nuclear reactor
gets built in China, and how much does it differ
from what goes on in the US.
Speaker 5 (08:59):
Sure, well, the steps of the process are actually very similar.
These are international best practices for how you build these
types of infrastructure. So you have to choose a site.
You're going through a siting process and environmental impact report.
Maybe you've got to make sure the local sea life
is not going to be affected by warm water being discharged,
there's no endangered species nearby, all those different aspects. So
(09:22):
you choose your site. That takes a few years. You
have consultation period, there's a period for the public to
maybe express their dissatisfaction. This happens in China too. And
when the site is finally selected, then you start pre construction.
You can level the site, you can connect communications utilities,
you can do all your pre groundwork, and then we're
waiting for a really key milestone called FCD. That's first
(09:45):
concrete need and that's when the first barrel of safety
related concrete is poured at the site. And so that
would be the beginning of your construction of your containment building.
And so from FCD to your full construction period, you
do construction, you do installation, you have commissioning. Maybe you
encounter some issues during commissioning, you do trouble shooting right,
(10:06):
and eventually you fully connect. You connect it, you load
your fuel, you have your first criticality the first time
that you know, fission starts in the reactor. Then you
connect it to the grid and then you get up
to one hundred percent power and you got a nuclear
power plant. If you do it quick, we'll you're looking
at ten to twelve years. If you do it not
so quick, you're looking at a lot more than that.
Speaker 3 (10:25):
So it takes a long time in China too, So
you know, we look at you as construction build. I
was like, oh can't we It's a log process anywhere
you look. I want to ask about the financing. So
if there's a new who's paying for this? And also
how are they selling this energy? Because one thing I
get the impression of is that setting aside the cost
of building a new nuclear reactor, which is an expensive,
(10:48):
time consuming process. The electricity market structure also seems to
matter a lot because you need a certain amount of
guaranteed off take, You need a certain amount of price
stability if the price robs to zero for a long time,
because there's it's very sunny and windy in that area,
and suddenly you're that's screwing with the economics of it.
(11:09):
And so market structure and financing are both important. Talk
to us about how that works in China versus two.
Speaker 5 (11:15):
Right. Sure, So the builders, right, the companies that are
constructing and eventually owning the assets are all state owned enterprises. Okay,
So you've got these great big sos. Their job is
to own and operate nuclear power plants. And so when
they go out to secure financing, of course they're securing
financing from state owned banks as well. They're going to
be getting very preferential loan treatment, right, very low percentage
(11:36):
rates maybe two percent, one and a half percent, things
like that. For a huge infrastructure like that, we're talking billions.
Speaker 3 (11:41):
Of cultural rate, not the spread.
Speaker 5 (11:44):
Okay, keep going, so very very low rates because again
they have a mandate to build. This is state banks,
state infrastructure, and state builders. They need to build these things.
And then when they're going out to sell power right now,
they're given a guaranteed on grid rate. So the grid
company and the power regulators say, when you complete your
(12:04):
plant and you start selling power, we will make sure
you receive this much for every kilo lot hour of
power that you send into the grid. Long term, they
want to marketize it. They want to have that exposed
to the vagaries of the markets the same way that
you would see maybe in the United States or Western Europe,
and that will be an adjustment for China's nuclear industry.
Historically they have only operated on this kind of fixed
(12:26):
feed and rate.
Speaker 4 (12:27):
So, I mean, that's a pretty big comparative advantage if
you're getting subsidized financing from a state owned enterprise or
something like that. Plus at the moment you have that
guaranteed off take, even though they might want to move
to a market based system before. It also strikes me
that there are a few other potential comparative advantages, like
lots of ready labor, lots of manufacturing capacity presumably that's
(12:52):
able to make the stuff you need for these things.
Walk us through all the different advantages that China has
in this process.
Speaker 5 (13:00):
Yeah, sure, so if you maybe you've seen before or not,
if you look at one of those like stacked bar charts,
that it compares all the cost components of you know,
building one of these things in China versus Europe versus
the United States. It's not like you'd point to any
single component of the stacked bar and say, ah, that's it.
That's the key. That's why they're so cheap. Every single
component is cheaper. Right, You've got your cost of capital
(13:21):
is lower, You've got your construction timeline is so tightly managed.
Speaker 4 (13:25):
Right, and so you're saving on interest costsactly.
Speaker 5 (13:28):
And the sooner you can connect to the grid and
start selling power, that's when you start making your money back. Right.
So every day that you go over your construction schedule
as a hunt, we say in the US about a
million dollars of missed power sales and then also about
a million dollars of interest payments. So here you got
this two million dollars spread every day over your construction
schedule that was originally planned. Like that's just mind boggling.
(13:50):
Then we look at the production capacity, right, China's incredible
industrial production capacity. We're talking about these heavy forged components.
Maybe only a couple of companies in the whole world
can make things like the reactor pressure vessel, the steam generators,
the pressure risers, the primary piping, the reactor cool and pump,
all these things. And there's like three companies in the
(14:11):
world that can make these, and now at this point,
several of them are in China. And when they need
to prototype, when they need to iterate, when they need
to troubleshoot something, it's all in one industrial cluster. It's
all a company and its subsidiaries or its sister partner companies, right,
and so they can quickly trouble through things really quickly.
So that's going to be your industrial production component very strong.
(14:31):
You've got you know, people work longer hours, they'll work
through weekends, they'll work through holidays. China is really really
competent at building very large construction, very large infrastructure.
Speaker 3 (14:43):
Right.
Speaker 5 (14:43):
It could be a dam, or a bridge, or a
highway or a high speed railway, or a nuclear reactor.
When it comes to the construction know how of being
able to do it on time and like an oiled machine,
they're winning there too. And then we talk about the
actual way they're building the nuclear power plant. Something really
interesting here. This was actually pioneered by Westinghouse out of
(15:04):
the United States, something called modularized construction, where on site
or off site, you're prefabricating large portions of the reactor,
portions of the containment building, and so you can work
on individual components at the same time, bring it to site,
and then you get the largest crane in the world
that lifts this massive, massive, pre assembled component into place.
(15:26):
When you're able to work like that, you can cut
down the construction schedule even more Interestingly, Westinghouse pioneered that
that they haven't been really successful in implementing it in
their recent builds. China, on the other hand, learned from
Westinghouse and has been very successful with this modulized construction approach.
Speaker 3 (15:43):
Can you talk more about that, because it's very intuitive, right,
the idea that the more you can build at the
factory and the less you have to build on site
makes it easy and a lot of the so far,
it seems like mostly hype about small modular reactors in
the US is sort of on this idea, like why
don't start a project from scratch? Why is it apparently hard?
(16:04):
Even though in theory that seems very obvious, because I
don't know if there actually are any modular reactors in
the US despite the sort of intuitive appeal.
Speaker 5 (16:13):
So I think I gotta clarify here, there's modularized construction
and there's small modular reactors. Okay, so SMRs are small
modular reactors. They refer to a situation where the entire
reactor is encased in a single unit.
Speaker 3 (16:26):
Oh okay, got it. Yeah, but it's still this idea
that the lot of the fabrication process happens not at
the site itself. Again, something that feels highly intuitive and
apparently easier so than time.
Speaker 5 (16:37):
Well so my understanding from the Westinghouse design approach when
they used this for the first time in designing the
AP one thousand technology that we're built here in Vocal
in the United States, is one of the major barriers. Well,
there's terveral. There's always going to be regulatory barriers, right,
it's a new way of doing things. Anytime it's a
new way of doing things, the regulator is going to
want you to jump through a million hoops to try
(16:59):
to clarify and justify that what you're doing is defensible
and safe. So you've got that one, of course, But
then the actual logistics of lifting these massive, massive, we're
talking thousands of tons of prefabed components. They actually had
to design and then especially contract the world's largest heavy
lift crane. Westinghouse did just to be able to lift
(17:22):
the first one. They worked with an American company to
design to custom design this giant fixed base ring crane
that requires other cranes to build it. Then you have
this giant giant crane that's in place and it swings around.
It usually works for two different units to build two
reactors at the same site. Interestingly, they weren't able to
use this giant giant crane in China because of a
(17:43):
design miscommunication. The first AP one thousands that Westinghouse tried
to build in China, they didn't leave space on the
site to put the giant crane, so in the end
they had to use a very very large roller crane instead,
which just about did the job, but it forced them
to change the way they built it. China has learned
from that though, So the newest you know, QUA long
(18:04):
one reactors that China builds, they use a giant ring crane.
I believe they use a zoom lion to the Chinese
brand has designed one of these, built one of these
massive ultra heavy lift cranes as well, and so now
that's you know, they're reaping those benefits.
Speaker 4 (18:33):
I have a slightly random question, which is building nuclear
reactors how customized. Do the components that go into these
actually have to be like how much does the design
actually vary site to site?
Speaker 5 (18:46):
Well, if they are the same series of reactors, right,
you could say the AP one thousand, right, that's a
base unit. Now the ones that are built in vocal
and the ones that were being built at Summer in
South Carolina before that was canceled, those are probably a
little bit different, right, but you know, largely part of
the same series. The ones that were built in China
were built on that same platform, but they would have
(19:07):
been modified a little bit for the Chinese context. They
called them Chinese AP one thousand CAP one thousands, But
you could say they're substantially the same reactor with with
small modifications. When we start talking about different series, though,
if we say like the French design versus the US
design versus what's being sold now in Korea or something
like that, you'll see more similarities to their predecessors that
(19:31):
they came up through different generations of technology. So like Korea,
you'd see similarities to the old g Hatachi reactors because
that's where they got their technology originally. Then you'd see
to say a modern EP one thousand, these are different
tech trees from different competitors.
Speaker 3 (19:47):
So if I'm a guy on Twitter listening to this,
and I am a guy on Twitter, except I'm talking
in this, but I'm just a guy on Twitter, and
I'm hearing you talk about Okay, they get preferential lending
from the state owned bank. The company me is state owned.
Probably the crane company is state owned. There's probably a
few other state owned businesses. And I think, yeah, okay,
(20:08):
you know, they're really good at building reactors fast, but
there must be some sort of accumulated debts and inefficiencies
that come with all of these all of these entities
that have something other than a profit motive. And you know,
probably you know, I don't know that my intuition or
my response to you, or my my dunk on you
(20:28):
is that there's going to be all these accumulated losses
that ripple through the systems on account of the fact
that it's SOOE working with see after SOE, do we
have any sense of how economic these projects actually are?
Because if these were private companies, you say, oh, they're
either making money, or if these were sort of strictly
for profit listed companies, you say, well, they're making money.
(20:51):
They're not making money whatever, How do we think about
the actual economics of whether this is good investment? Because
it's cool. Yeah, you know, China building dozens of reactors.
How do we know these are good economic investments?
Speaker 5 (21:04):
Well, unless I can crack open you know, China National
Nuclear Corporations books like, I can't tell you for sure
if these are good investments.
Speaker 3 (21:10):
Right.
Speaker 5 (21:11):
But when they build them at that pace, when you
look at it from the outside and you say, all
the conditions are in place to have surely built this
according to the budget you set for yourself. Right, you
declared that you would build it with a certain budget
and a certain time. Ye talk about the budget, right,
So you're looking at you know, your construction period of
five years, your pre construction, and your commissioning. You add
another five years or so. Right. But then once they
(21:34):
build it, they're saying, you know, we can build a
single gigawatt unit reactor for five billion dollars four and
a half billion, five billion. You look at numbers out
of the US and they're saying, we're going to build
what vocal cost was two units for twenty eight billion
dollars or something like that. You do a little bit
of Napkin math, and you say that reactor can't possibly
make back how much money it costs to build and
(21:54):
it's operating lifetime or maybe it will just about get
there after forty years. And that's assuming that the plant
operates in the spot markets really really well and sells
power so efficiently and never gets curtailed and never has
issues like that. Meanwhile, your Napkin math in China is saying, well,
they're going to sell power at this rate for the
next forty, maybe sixty years, maybe they'll do double life extension,
(22:15):
maybe eighty years. And you know, so many killo odd
hours of power times so much per kill a lot hour. Yeah,
it looks like these things should be reasonably profitable. And
keep in mind the profit motive of Chinese soees is different, right,
They're expected to try to be profitable so they have
cash flow to do things and you know, be functional.
But if they have to take a hit, sometimes they will.
(22:38):
They can be the lubricant in the system that causes
the inefficiencies to be okay, because you've got you know,
a major SOE that was okay, losing half a billion
dollars last year. They'll make it back later. It's okay.
The system didn't fall apart. They were the lubricant.
Speaker 4 (22:52):
So one way we could potentially judge the success of
Chinese nuclear reactors is you could look at whether or
not they are significant changing the energy mix. And there
was a story out this week saying that China's domestic
coal production had reached an all time high, and granted
that's production that's not necessarily coal use, but I don't know,
(23:14):
it doesn't seem like there's been a big impact just yet.
Speaker 1 (23:17):
Why is that?
Speaker 5 (23:19):
And yeah, and that's right. I saw that yesterday too.
I'm bummed about that because I'm on record saying back
in December twenty twenty three that I thought twenty twenty
four would be the peak year, and I thought structurally
we were in place to be able to peak coal
consumption in twenty twenty four, and I think we're going
to end up up one one point five percent year
(23:39):
on year something like that, which for China is a
huge amount of coal because it consumes so much coal.
But it's really close, which of course means if we're
up year on year and last year was the highest
year ever, then this year is the highest test year ever.
And so what are we looking at, though, We're looking
at a power sector that is still growing consumption every
year by seven percent year on year, six or seven
percent year on year, compared to the US, where a
(24:01):
good year is maybe like one percent or half a
percent year on year, and you talk about data center
demand growth is going to maybe rise that and everybody's
freaking out, how are we going to meet this new
consumption need? China has been growing like that seven percent
eight percent in the past. It was even higher for
decades now. So it to be able to peak coal consumption,
(24:21):
we have to get to a single year where all
of the incremental consumption growth is met by incremental generation
from clean assets, right from wind and water and solar
and nuclear. If we can't manage to do that in
one year where all the incremental growth is covered by
new incremental clean generation, thermal generation has to go up.
And so that's still where we're at. We're real close.
(24:42):
If it only grew by one point five percent this year,
that means that seven percent of China's entire consumption mix
was almost totally covered by growth year on year of
wind and water and solar and nuclear, but it wasn't
quite there, and so that's where we stand at twenty
twenty four. I'm going to be made a liar of
that statement at the end of last year where I
thought coal consumption would peak this.
Speaker 3 (25:02):
Year since you mentioned it. Data centers is obviously a
huge part of the story of the return of load
growth in the US. I mean, there's obviously just the
general modernization and country getting wealthier. But tell us about
the data center's story in China as you see it
and it's impact on the grid.
Speaker 5 (25:17):
Yeah, it's it's of course going to be another growth driver.
The major difference here is that when China says, oh,
we've got data centers coming in, so instead of six
point five percent growth, it's going to be seven point
five percent growth. Right, It's just what's a percentage point
among friends, right, Whereas the United States going from half
a percentage point to one point five or two percent
is very different from how we've had to grow in
(25:38):
the past. So China's i think, approaching this with much
more sanguinity, maybe that they're just saying, yeah, it's going
to be a driver of growth. Let's put them in
some of our parts of the country that have low
load and great renewable resources. We're going to put them
Inner Mongolia is what we're going to put them. We're
going to put growth demand centers in Inner Mongolia. They
don't need to be close to the Chinese.
Speaker 3 (26:01):
Is Inner Mongolia.
Speaker 5 (26:02):
Yeah, it's it's sparsely populated, it's got a lot of
great energy resources. The wind blows and the sunshines all
day long, and there's no load out there. So it
wouldn't have made so much sense maybe to cite you know,
your heavy energy intensive industrial manufacturing so far from the
demand center, so far from the coasts where you could
get it to logistics. Oh, they put some stuff out there,
but it wasn't so intuitive to put energy intensive industry
(26:25):
out there. But data centers, Oh that's great, right. They
don't need to be close to markets per se. You
just need to get be them close to the affordable energy.
So it's looking like inn Moongolia or places like that
will be a great match for China's data center growth.
Speaker 4 (26:39):
So one of the things that's been happening in the
US speaking of data centers is a lot of the
big tech companies have been signing off take agreements with
energy producers and they've been pushing them towards more renewable energy.
So they say, we want clean energy to power these things,
and you make it for us and we'll take it.
Do you see a similar dynamic taking place in China
(27:00):
or do people not care as much about the ultimate
cleanliness of their energy for data centers.
Speaker 5 (27:07):
Yeah, that's a major driver of how the power sector
offers power. Right, your customers demand a certain type of power,
you should be able to meet their needs. Right now,
in China, you'd split, or in anywhere anywhere in the world,
not just in China, you'd split green power consumption on
the end user end into voluntary and mandatory. So mandatory
(27:28):
says the government says you have to consume a certain
amount of electricity that is green. We call it a
renewable portfolio standard or an RPS. Right, there's rps and
US states, not all of them, but some of them,
And there's RPS in China. So from that perspective, you
could say the government mandates that you consume a certain
amount of renewable energy to meet the quota. Now. Right now,
that applies to utilities in China, but it doesn't yet
(27:50):
apply to end users. Your aluminum smelter doesn't have that
man yet, but that's the next stage of RPS that's
being added right now. Data centers I think need to
be it's quite high. I think it's eighty percent renewable.
To build a new data center in China, you're going
to need to have aluminum and steel and all these
heavy energy intensive industries need to consume renewable. So that's
(28:10):
your mandatory consumption. That's OURPS driven and then you've got
your voluntary consumption. So voluntary consumption, you know, corporate social
responsibility initiatives ESG right companies say we want to go green.
We want to put it in our CSR report that
we consumed x amount of renewables last year. We did
this on a voluntary basis. We joined ARE one hundred,
we joined the Science Based Targets initiative, and we want
(28:33):
to claim that we are green. Yeah, that's your consumer
tech brands, that's your luxury fashion and increasing. A lot
of European brands are very aggressive on their renewable energy consumption,
including in China. So if you're producing in China and
selling to the world, you want to be able to
say our production in China was also green. So that's
voluntary consumption of green power. But you demand your power
(28:56):
retail or to provide you with green electricity and they'll
give you a quote for green electrics.
Speaker 3 (29:16):
We started on the nuclear side, we talked coal, but
then we're all, you know, there's all these charts that
are you know, great about all this solar being installed?
Is the economics of that roughly the same in the
sense that it's probably an sooe getting money from an
so E bank, And talk to us about who's funding
(29:36):
that and where does it make sense? Like why in
some places is solar going to be solar wind part
of the answer versus say nuclear.
Speaker 5 (29:44):
Right, So when it comes to wind and solar, these
are being built differently from nuclear, right, They're not nearly
as capital intensive. Also, they can be smaller, they can
be more distributed. And so when you look at Chinese
wind and solar, of course you still see sooees playing
a big role, but there are as well ipp independent
power producers or just non soees right, as well as
foreign players. So you as a you know, a foreign
(30:06):
investor who you know, like black Rock, can come into
China and build a power plant if they want to,
a wind or a solar farm, no problem. And so
anyone can participate in that space if they do their
financial analysis and they see the way to attractive project economics.
So for if Chinese builders they borrow from Chinese banks,
as will Chinese independent borrowers, then international players they might
(30:28):
borrow from international banks, they might try to borrow from
Chinese banks. They can do that as well. They will
get you know, market competitive rates. This is a different
kind of building compared to nuclear where it's instead of
it's like a national strategic priority to build a rooftop
sole or facility. Now that's much more of a commercial
market operation. However, there are some projects in China that
(30:49):
are national strategic priority. We talk about those huge desert bases,
you know, hundreds of megawats gigawatts, hundreds of gigawats in
the middle of the Gobi desert, coal plants, plus a
wind far and plus a solar firem plus a huge
battery array, all financed by a giant Chinese built by
a Chinese soe. That's the kind of stuff that that
kind of looks more like a nuclear power plant in
(31:09):
the way that they finance and process that. But you know,
rooftop solar facility in Eastern China. Now that's very much
just a commercial play. If it makes money, if it
makes sense, they'll build it.
Speaker 4 (31:19):
So when we talk about China's energy landscape or its
energy mix, I mean a lot of what we're talking about,
we're pulling in numbers from the Chinese government, right, like
domestic production numbers, domestic usage numbers. And whenever you do that,
there's always a certain element of uncertainty or a question
mark over them. And there are some people who even
(31:41):
if you were to say that China's coal production was
finally falling, which it isn't, as you know, people wouldn't
necessarily believe it. They'd be like, oh, well, China wants
you to think that. So I guess my question is
like how much should we believe some of these stats?
Speaker 5 (31:57):
Yeah, and this is going to be always very subject
about how much you want to believe or how much
you think is worthwhile believing. My take that I usually
go to is like, look at the top levels. You've
got your National Bureau of Statistics, You've got these you know,
national level entities who's their job mandate is to report
statistics as faithfully and as honestly as they can. All right, fine,
(32:18):
you know what, that's their job mandate. I have no
latitude to say I think they're doing their job dishonestly
or something like that. But I do believe there are
many kind of perverse incentives throughout the structure of the
reporting economy in China that would create opportunity for misreporting information.
When you tie you know, the county governor's promotion or
(32:39):
lack thereof, to his ability to grow GDP in that
province or in that county, you're creating the incentive for
him to cook the data. When you're creating economic recovery,
and you announced to and this happened. This is a
real story. When you announce to a certain city in
twenty twenty two that you're going to be evaluating how
quickly they've recovered from COVID conditions by seeing how quickly
(33:02):
their factories get back up to regular production. And you
know that they're measuring that by seeing how much electricity
they consume. Well, all of a sudden, you have.
Speaker 4 (33:10):
And everyone starts plugging stuff in.
Speaker 5 (33:12):
Right, So if you can say that people are trying
to do their jobs honestly, and then you also have
people that have been given perpose incentives to misreport did.
I think that's where a lot of the uncertainty.
Speaker 3 (33:23):
I mean, this is the core problem of central plan.
I mean, this is it in a nutshell. And obviously
the most egregious examples of this were, you know, during
the Great Leap Forward and all of the ways that
either they you know, the steel production that was melting
down literally anything of steel and destroying the economy. In
(33:44):
twenty twenty four, what are some of the techniques used
to avoid sort of egregious juking of the stats so that, yeah,
someone's promotion who is tied to electricity consumption can't be
sort of egregiously abused like that.
Speaker 5 (33:57):
Yeah, well, I mean famously or perhaps infamous. So I
think it ended up it came out of like a
WikiLeaks something that the former premier Leka Chang said he
didn't look at GDP data.
Speaker 3 (34:08):
From certain produces and that's the terminal.
Speaker 5 (34:11):
Yeah, the le Kasyang index, And he said, I prefer
to look at I think it was a rail cargo
and electricity consumption, and there were the third item too, right,
he said that these items, you know, the people in
charge of reporting them, there's you know, my assumption is
that his logic was there's less incentives to misreport these,
so that these are the ones I want to look at,
and you can maybe come up with your own version
(34:32):
of the modern day Li Ku Chang index. I think
electricity consumption is still fine, but maybe there's some other
numbers that you say, look, this is all very centralized reporting.
The reason I like electricity because it's all state grid, right,
those numbers almost all come from state grid, and State
grid is just a single unified entity. You're not gathering
data points from many different companies. Maybe other stuff like
(34:53):
we talk about cargo right again China Railways. Yeah, you
have one centralized company that would be able to report
that information. So if you want to modern you know,
fashion your modern Lika Chanan decks, maybe try those types
of indsease.
Speaker 3 (35:06):
So one other element obviously of the Chinese energy demand.
We've talked a lot about the grid obviously and the
power of the grid. Then there is the whole world
of automobiles, which up until very recently was totally separate
part of the energy system, but now it's around the world,
but in particular China, and we talk about Chinese evs
(35:27):
all the time being plugged into the grid. How much
do we see the electrification of the Chinese automobile fleet, Like, A,
how electrified is it right now? And b is it
moving the dial on oil consumption? Because this is a
pretty big question in the West, right like at some
point will EV's become big enough where meaningfully starts to
reduce our oil demand? And even in countries like Norway,
(35:50):
I think like it's still barely moving the dial despite
mass of electrification. What are we seeing in China right
now on that front?
Speaker 5 (35:57):
Yeah, I mean in the major cities you say, Shenjen, Shanghai, Beijing,
places like this, the EV penetration rate is noticeably high,
and you'll see that they're easily identifiable. They have green
license plates instead of the regular blue license flight, so
you can just kind of look at them on the street.
It's very expensive to get a license plate in Shanghai.
Just the license plate itself is expensive. But EV's for
(36:18):
a long time were free, like the license plate was free,
so that was a great perk for them to pursue those.
And yeah, there I think it was. New vehicle sales
in Shanghai, for example, was fifty percent electric vehicles in
the last reporting session, and it's really noticeable when you
stand on a street corner in Shanghai, and I guess
it's noticeable by the lack of the noise.
Speaker 3 (36:41):
I heard that everyone goes to Shanghai and says it's
really quiet. That's you know.
Speaker 5 (36:44):
Look, I'm back in New York right now for the
first time in a year, and I stand on a
street corner. It's so loud, and I hadn't really noted
the lack of the noise because I'm just used to
it now, and it's it's I hear the roar of
petroleum based engines all around me.
Speaker 3 (36:58):
Yeah.
Speaker 5 (36:58):
So eve's in the large cities. Penetration rates noticeably high.
In the smaller cities still fairly high. When you go
out to the more rural areas, it's going to drop off.
Of course, there's more skepticism about the completeness of the
charging network, just maybe some more uncertainty about the technology itself.
You'll hear people in the countrysides and all batteries are dangerous.
(37:19):
I heard that I saw a video once of an
evy on fire. Things like that. Similar you know comments
in the United States too. But the long term, the
EV penetration rate will will only continue to rise.
Speaker 3 (37:32):
It's national oil consumption, I believe.
Speaker 5 (37:35):
So I think I saw. Now I'm not an oil specialist,
but I think I've seen and I've read recently that
that Chinese oil imports should have peeped right, that they
should have be ready to draw down if you know,
if I'm lying here, may God smite me down. But
I think that that was the case, and that we
see a structural decline in petroleum because of the adoption
(37:56):
of evs.
Speaker 4 (37:57):
So, speaking of EV's, there is a lot of Chinese
made clean tech that is here in the US, including
solar panels as well. And this has been one of
the frictions of the past few years, which is, you know,
the US says it wants cleaner energy, and Chinese solar
panels and evs are probably the cheapest forms of that
(38:17):
technology around, and yet there's a lot of I guess,
reluctance to import tons of those into the US, and
certainly with Trump coming in, it seems like tariffs are
on their way. How do you see all of that
shaking out into the new year.
Speaker 3 (38:33):
Yeah.
Speaker 5 (38:33):
Look, in the United States, you're gonna decarbonize or you're
gonna buy green tech. At exactly the rate that is economic. Yeah,
and so if you have access to very affordable green tech,
you'll do it at a faster rate. If you have
access to more expensive green tech, you'll do it more slowly.
And so I have to assume that if those teriffs
(38:56):
go in place, unless alternative producers are able to offer
similar quality goods at similar prices, then you're going to
slow down your green transition. That's maybe a simple but
obvious kind of answer there. On the Chinese side, of course,
there will be some pain for exporters, anyone exposed to
the United States market. Some solar panels, maybe some evs,
(39:17):
some batteries I think are pretty significant if those are targeted. Yeah,
you'd expect to see some pain on the Chinese side there.
It's already an extremely extremely competitive environment in China. Most
of these producers are in very thin profit margins, hanging
on by a threat. It's good for consumers, it's not
good for if you're holding those stocks. So this would
only just be another bit of pain for them, denial
(39:40):
of a potential revenue channel.
Speaker 3 (39:42):
Since you mentioned EV charging stations, we have this sort
of weird patchwork here, and there's a lot of I'm
a little ambiguity about the US government under Biden has
earmarked a lot of money to build EV charging stations.
It's a little unclear how much actually got built publicly.
There seems to be a view that it hasn't been
particularly successful on the public side. What is the structure
(40:06):
of the buildout for charging stations in China? Is it
publicly owned? Is it what's the deal?
Speaker 5 (40:11):
It's all of the above, I guess. So you've got
you know, China State Grid or China Southern Grid. The
grid companies they build charging infrastructure. Some of the EV
makers themselves build their own charging infrastructure, maybe like like
a Tesla supercharger, right. Some of them also build their
own battery swap stations. I think Neo is quite famous
for having battery swap stations. You can go pretty much
(40:31):
any highway rest stop in China and you can find
a Neo battery swap station.
Speaker 3 (40:36):
So then there's no time you just swap it in
and out.
Speaker 5 (40:38):
Yeah, I'm there's a line to wait for the battery
swap station if another Neo pulls ahead of you. But
besides that, I mean, I think the major thrust, at
least the ones that I've seen recently in the Southern
Grid region have been by the grid company itself, right, So,
China Southern Grid. I remember reading last year they said, ah,
you know, we're planning to build one hundred thousand chargers
(40:58):
this year, where you know, three min we're seventeen thousand
chargers in so far. We're on track to finish our
goal by the end of the year. And you do
see it when you go to regions that have been
targeted for those buildouts. Right. You can go to fairly
rural areas in say Gwandong Province down in the south,
and you'll find EV chargers installed there by China Southern
(41:19):
Grid and a village where I don't think there are
necessarily any evs, but hey, they got the infrastructure there
because they said we're going to build one hundred k,
and so they built a hundred K.
Speaker 3 (41:27):
David Fisherman so great to chat with you again, especially
in person, and I'm so good you have other things
to worry about besides figuring out how to get food
in your apartment. Really appreciate you coming back on ovloins.
Speaker 5 (41:39):
Thanks a lot for having you guys.
Speaker 3 (41:53):
That was really helpful. Tracy, I learned all the things
more or less that I wanted to know about how
they're built so much nuclear.
Speaker 4 (41:59):
Yeah, what's that reaction? Well, it does. It leaves me
wondering how like replicable it is in other countries, right,
because obviously in places like the US, we don't really
have subsidized finance on the scale that China does. We
don't have a lot of cheap and skilled labor at
the same time, and we don't have some of the
(42:22):
let's put it this way, like regulatory hastiness maybe in
approving these sites and these things. I don't know, like,
how replicable do you think it is?
Speaker 3 (42:32):
No, this is the exact question, because you know there's
some subsidy the loan Program's office exists, but we don't not,
say the same gigantic state owned banks. Yeah, and then
even if you solve the financing problem, and even if
you solve the market off take problem, which is going
to be very different, right because we have market grids
(42:54):
in a lot of parts of the country, and so
it's hard to sort of make that forty year commitment
that you will get this price. Then there's all the
logistics like oh, you needed this gigantic crane that's the
biggest crane in the history of.
Speaker 4 (43:07):
Now you need a big crane to make the big
crane you.
Speaker 3 (43:09):
Need to make. So this gets to I mean, this
is a point that jigger Shaw makes all the time,
but this idea that we're never gonna really do this economically,
and David just mentioned the sort of daunting economics of Vogel.
We're never gonna do this economically unless we do it
over and over and over and over again. And it
feels like the components of what it would actually take
(43:30):
to do it over and over and over again is
this massive centralized commitment to doing lots of different parts.
And you know, it sounds like the regulatory side or
the permitting thing that seems about the same. And the
fact that the public can complain about endangered fish and
all that that's sort of similar. So people complain about
(43:50):
annoying local nimbi's. That doesn't really sound that much different.
It sounds like everything else that's different.
Speaker 4 (43:55):
I suspect the nimbiism is slightly different too. But point
to taken, and I do wonder, like, how do you
even go about beginning to redevelop that nuclear muscle memory
in the States. It seems really really hard, Like, Okay,
we can reactivate some nuclear reactors like we're planning to,
but starting like new ones from scratch. It just seems
(44:17):
like there's such a limited pool of people who are
capable of doing that and then putting in place, as
you rightly pointed out, all the off take agreements and
the network and everything needed to kind of make those
things financially viable. It seems hard.
Speaker 3 (44:31):
By the way, I'm glad you asked that question about
coal consumption that because that was really helpful, because it's
one thing to say, well, another record year for coal consumption,
but I guess the waight I think about it, at
least in the short term, we don't know.
Speaker 4 (44:45):
When it's not coal consumption, it's production.
Speaker 3 (44:47):
Just to be cold production. Yeah, but it's really going
to be about like if coal is in fact as
a part of the you know, if it's only growing
one percent, but electricity demand is growing six to seven percent,
that is a good sign, right, even if it's not
bending the curve down yet.
Speaker 4 (45:05):
Mm hm. Anyway, it's funny I will always associate Beijing
with lots and lots of burning coal in the winter.
Speaker 3 (45:13):
By the way, I had heard that about how apparently
the big cities now are really quiet, which is pretty cool.
And once self driving cars are everywhere, there will be
no honking either, And so we can look forward to
a future. Maybe one day we're very peaceful, peaceful, quiet
big cities.
Speaker 4 (45:30):
All right, something to hope for. Shall we leave it there?
Speaker 3 (45:33):
Let's leave it there.
Speaker 4 (45:34):
This has been another episode of the Outhoughts podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 3 (45:40):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow our guest David Fishman, he's at Pretentious What. Follow
our producers Carmen Rodriguez at Carman armand dash Ol Bennett
at Dashbot and Kilbrooks at Kilbrooks. Thank you to our
producer Moses Adam. From our Oddlots content. Go to Bloomberg
dot com slash oud lots, where we have transcripts, a
blog and a newsletter and you can chat about all
(46:02):
of these topics, including energy and China, where we have
two separate rooms in our discord Discord dot gg slash.
Speaker 4 (46:09):
Out lots and if you enjoy all thoughts, if you
like it, when we talk about nuclear power plants in China.
Then please leave us a positive review on your favorite
podcast platform. And remember, if you are a Bloomberg subscriber,
you can listen to all of our episodes absolutely ad free.
All you need to do is connect your Bloomberg account
with Apple Podcasts. In order to do that, just find
(46:29):
the Bloomberg channel on Apple Podcasts and follow the instructions there.
Thanks for listening.
Speaker 5 (47:00):
Eight
Hi, it's suckh Bloomberg's Odd Lots podcast recently did a
great episode about the rise of nuclear power in China
is the only country deploying nuclear at a large scale
right now, and I thought you would enjoy listening to it.
So here's the extra episode. We'll be back with a
new episode of Zero on Thursday.
Speaker 2 (00:23):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 3 (00:39):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 4 (00:43):
I'm Joe Wisenthal and I'm Tracy all the way.
Speaker 3 (00:46):
Tracy, you know, we've been talking a lot about the
US energy system for obvious reasons, at least when it
comes to electricity. I don't know about you. I kind
of feel like the more we talk about it, the
less I understanding.
Speaker 4 (00:56):
Yes, yes, absolutely, I think there are a couple problems. So, like,
even beyond the actual different technologies for generating power, there's
the patchwork of like how different grids work in different states.
There's the different regulations, the different like interoperability and all
of that. And then even if we look like beyond
(01:18):
the US, it gets I guess even more different.
Speaker 3 (01:21):
Yes, well, I sort of wonder maybe we can learn
something about the US by a little compared and contrast. Right,
So if we look at the US and we still
don't totally get how it works, maybe, I don't know,
just to thought, maybe we'll learn something about the US
by looking at some different system and then we have
something to compare it to. It might be a waigh
(01:41):
in by looking at the outside world.
Speaker 4 (01:43):
I'm a big fan of doing this, by the way,
just to identify like different choke points in a particular
domestic process. If you think that the US can't do
something for whatever unidentifiable reason or I don't know, cultural
like holdback, but if you look at a different country
and they're doing it at scale, very very quickly, then
(02:04):
I think you can learn a lot about yourself.
Speaker 3 (02:07):
Well, that's exactly right. And so one of the things
again that comes up from time to time here in
our conversations is nuclear and this is just one example
of a source of power that may or may not
be important in our future. But according to and I'm
looking at a story from the Economist, over the past decade,
China has added thirty seven nuclear reactors according to the
(02:28):
International Atomic Energy Agency. I don't know, maybe we've added
like two. I forget how many there are at that
Georgia plant. A couple more, maybe restarted. But you know,
we talk all the time about nuclear and how hard
it is and how hard the financing is and the
labor force and the learning laws, and we forgot to
you know, we forgot how to build them for various reasons.
(02:49):
But that's not and it's so expensive. There's all these
cost overruns every time. But apparently that is not the
case everywhere, and that there are other parts of the world,
particularly China, where they just keep building at scale, and
maybe we could learn a little bit of how they
do that and how they finance it and how they
avoid forgetting how to build them.
Speaker 4 (03:07):
I think this is so interesting, this particular approach that
compare and contrast, and it is absolutely true. I think
the US has the most nuclear reactors out there, like
almost one hundred or something like that, but it took
us decades and decades to build them, and as you
rightly point out, we haven't built many new ones that recently. Meanwhile,
China is adding more and more, and they make it
(03:29):
look easy. I mean, I guess they are just like
giant things to boil water, but you know, China really
makes it look easy. So what can we learn from China.
Speaker 3 (03:36):
We really do have the perfect guests. By the way,
we've had this guest on in the past. We talked
to him about something completely different. Yes.
Speaker 4 (03:44):
This was during the depths of the COVID crisis, Yes,
and we were talking to this person. He was based
out in Shanghai and we were talking basically about how
they were getting food into apartment buildings and staying alive
during that time.
Speaker 3 (03:57):
Yeah, so that was an interesting sort of logis story
and it's own right. If you're under complete lockdown and
a Shanghai apartment building, how do you actually get food?
And anyway, I'm thrilled because now we're recording this December seventeenth,
twenty twenty four, we are talking to him in completely
different times.
Speaker 4 (04:14):
He's been freed from lockdown.
Speaker 3 (04:16):
He is now here in studio with us. So we
are going to be speaking with David Fishman, senior manager
at the Lantau Group. He's based in China typically where
he mostly focuses on the Chinese energy system. So literally
the perfect guest and a repeat guest. So David, thank
you for coming on. Ad lads, welcome to New York City,
Welcome back.
Speaker 5 (04:36):
Thank you for having me.
Speaker 3 (04:37):
What do you do the only other time we talked
to you, the only thing we knew about you is
that you were figuring out how to get food into
your apartment. What do you do now when that's no
longer the pressing issue?
Speaker 5 (04:48):
Yeah? Sure. So I work at a company called the
Lantau Group. We are an economic consultancy. We're doing power
and gas consulting across apac and so I'm focused on China.
I'm in the China. We're doing the business of electricity.
So for me, that means either somebody who wants to
build an electricity generation asset, wants to sell one, wants
(05:10):
to sell a portfolio of assets, wants to invest in one,
maybe through a fund or as some other type of
investment product. And then on the what we'd call our downstream,
who uses the electricity right, your major multinationals, your factories,
anybody who uses electricity as an input to produce things.
So we're working in the business of electricity, trying to
make buying and selling electricity more economic for everybody involved.
Speaker 4 (05:34):
Well, I'm just going to dive into the nuclear aspect
of this. Then, you know, Joe gave us some contours
around how much China is currently building. When did China
decide that it was interested in nuclear and what was
the sort of like thought process the strategy about how
nuclear would fit into everything else, including the coal power
that China is famous for using.
Speaker 5 (05:56):
Yeah, I mean the history of the Chinese civil nuclear
power industry goes back to stems back to the eighties.
So looking at you know, the mid to late eighties
is when China was signing agreements to bring in its
first nuclear reactor technology. At the time, it was there
are two different paths that were pursuing. They signed an
agreement with Framatome, a French company, to bring over one reactor,
(06:19):
and they developed a domestic reactor with at the time
the Soviet Union to have a domestic technology tree as well.
So in the eighties, China was actually experiencing some pretty
rapid economic growth, especially in the late eighties, and looking
to expand its power supply rapidly and at the time
it was quite tight, and so nuclear was seen as
(06:39):
a potential way to expand the power supply and get
into a power generation for what was at the time
something very new for China.
Speaker 3 (06:47):
What did you so I mentioned literally from just reading
the first paragraph of a paywalled economist story that number
of about thirty seven new nuclears. I saw that one too,
just like I just google how many new clear reactors
are big built in China? Scrolled down where I find
something in the Google search. This is how the research
is done, folks. Well, why don't you, in your words,
give us a sense of the size and scale of
(07:10):
Chinese civil nuclear generation and where it's going, and then
sort of like the role it generally plays in.
Speaker 5 (07:18):
The overall portfolio there, yeah, surescribe it. Yeah, sure so.
So nuclear in China has the interesting status of being
both relatively large and still somehow small. Large in the
sense that it's one of the largest operating fleets in
the world. Right, You've got you know, fifty almost sixty
reactors operating, We're talking about nearly sixty gigawatts of generation capacity.
(07:39):
But then in the context of China's entire generation fleet, right,
they've got well over a thousand gigawatts of coal and
then many more thousands of gigawatts of wind and solar.
So it's both large in the context of the world,
but also small. And that's the case for a lot
of things in China. The thing that can be large
in China canoso And what's.
Speaker 3 (07:57):
The ambition for you know, looking out you know, in
a five year plan. I don't know how whether they
do that for energy? Two? Where is nuclear potentially? How
much could nuclear be a thing? What's the size and
scale of the ambition?
Speaker 5 (08:09):
Yeah, sure so long term? I mean it depends on
how your energy planners and your economic planners and vision
the long term makeup of the grid. What type of
power are we using in twenty fifty Is it going
to be a little bit or a medium amount or
a lot of nuclear? So it's scenarios, right, and China
has scenarios too, for a high end a low end.
So the recent scenarios that I've seen, Originally it was
(08:33):
saying no less than three hundred gigawatts two hundred and
fifty three hundred gigawats, so two hundred and fifty or
three hundred reactors, right, two hundred and fifty units. So
the United States has just about one hundred right now.
So if they got to that scenario, it would be
about two and a half times what the US has
right now.
Speaker 4 (08:50):
So what's the process by which a new nuclear reactor
gets built in China, and how much does it differ
from what goes on in the US.
Speaker 5 (08:59):
Sure, well, the steps of the process are actually very similar.
These are international best practices for how you build these
types of infrastructure. So you have to choose a site.
You're going through a siting process and environmental impact report.
Maybe you've got to make sure the local sea life
is not going to be affected by warm water being discharged,
there's no endangered species nearby, all those different aspects. So
(09:22):
you choose your site. That takes a few years. You
have consultation period, there's a period for the public to
maybe express their dissatisfaction. This happens in China too. And
when the site is finally selected, then you start pre construction.
You can level the site, you can connect communications utilities,
you can do all your pre groundwork, and then we're
waiting for a really key milestone called FCD. That's first
(09:45):
concrete need and that's when the first barrel of safety
related concrete is poured at the site. And so that
would be the beginning of your construction of your containment building.
And so from FCD to your full construction period, you
do construction, you do installation, you have commissioning. Maybe you
encounter some issues during commissioning, you do trouble shooting right,
(10:06):
and eventually you fully connect. You connect it, you load
your fuel, you have your first criticality the first time
that you know, fission starts in the reactor. Then you
connect it to the grid and then you get up
to one hundred percent power and you got a nuclear
power plant. If you do it quick, we'll you're looking
at ten to twelve years. If you do it not
so quick, you're looking at a lot more than that.
Speaker 3 (10:25):
So it takes a long time in China too, So
you know, we look at you as construction build. I
was like, oh can't we It's a log process anywhere
you look. I want to ask about the financing. So
if there's a new who's paying for this? And also
how are they selling this energy? Because one thing I
get the impression of is that setting aside the cost
of building a new nuclear reactor, which is an expensive,
(10:48):
time consuming process. The electricity market structure also seems to
matter a lot because you need a certain amount of
guaranteed off take, You need a certain amount of price
stability if the price robs to zero for a long time,
because there's it's very sunny and windy in that area,
and suddenly you're that's screwing with the economics of it.
(11:09):
And so market structure and financing are both important. Talk
to us about how that works in China versus two.
Speaker 5 (11:15):
Right. Sure, So the builders, right, the companies that are
constructing and eventually owning the assets are all state owned enterprises. Okay,
So you've got these great big sos. Their job is
to own and operate nuclear power plants. And so when
they go out to secure financing, of course they're securing
financing from state owned banks as well. They're going to
be getting very preferential loan treatment, right, very low percentage
(11:36):
rates maybe two percent, one and a half percent, things
like that. For a huge infrastructure like that, we're talking billions.
Speaker 3 (11:41):
Of cultural rate, not the spread.
Speaker 5 (11:44):
Okay, keep going, so very very low rates because again
they have a mandate to build. This is state banks,
state infrastructure, and state builders. They need to build these things.
And then when they're going out to sell power right now,
they're given a guaranteed on grid rate. So the grid
company and the power regulators say, when you complete your
(12:04):
plant and you start selling power, we will make sure
you receive this much for every kilo lot hour of
power that you send into the grid. Long term, they
want to marketize it. They want to have that exposed
to the vagaries of the markets the same way that
you would see maybe in the United States or Western Europe,
and that will be an adjustment for China's nuclear industry.
Historically they have only operated on this kind of fixed
(12:26):
feed and rate.
Speaker 4 (12:27):
So, I mean, that's a pretty big comparative advantage if
you're getting subsidized financing from a state owned enterprise or
something like that. Plus at the moment you have that
guaranteed off take, even though they might want to move
to a market based system before. It also strikes me
that there are a few other potential comparative advantages, like
lots of ready labor, lots of manufacturing capacity presumably that's
(12:52):
able to make the stuff you need for these things.
Walk us through all the different advantages that China has
in this process.
Speaker 5 (13:00):
Yeah, sure, so if you maybe you've seen before or not,
if you look at one of those like stacked bar charts,
that it compares all the cost components of you know,
building one of these things in China versus Europe versus
the United States. It's not like you'd point to any
single component of the stacked bar and say, ah, that's it.
That's the key. That's why they're so cheap. Every single
component is cheaper. Right, You've got your cost of capital
(13:21):
is lower, You've got your construction timeline is so tightly managed.
Speaker 4 (13:25):
Right, and so you're saving on interest costsactly.
Speaker 5 (13:28):
And the sooner you can connect to the grid and
start selling power, that's when you start making your money back. Right.
So every day that you go over your construction schedule
as a hunt, we say in the US about a
million dollars of missed power sales and then also about
a million dollars of interest payments. So here you got
this two million dollars spread every day over your construction
schedule that was originally planned. Like that's just mind boggling.
(13:50):
Then we look at the production capacity, right, China's incredible
industrial production capacity. We're talking about these heavy forged components.
Maybe only a couple of companies in the whole world
can make things like the reactor pressure vessel, the steam generators,
the pressure risers, the primary piping, the reactor cool and pump,
all these things. And there's like three companies in the
(14:11):
world that can make these, and now at this point,
several of them are in China. And when they need
to prototype, when they need to iterate, when they need
to troubleshoot something, it's all in one industrial cluster. It's
all a company and its subsidiaries or its sister partner companies, right,
and so they can quickly trouble through things really quickly.
So that's going to be your industrial production component very strong.
(14:31):
You've got you know, people work longer hours, they'll work
through weekends, they'll work through holidays. China is really really
competent at building very large construction, very large infrastructure.
Speaker 3 (14:43):
Right.
Speaker 5 (14:43):
It could be a dam, or a bridge, or a
highway or a high speed railway, or a nuclear reactor.
When it comes to the construction know how of being
able to do it on time and like an oiled machine,
they're winning there too. And then we talk about the
actual way they're building the nuclear power plant. Something really
interesting here. This was actually pioneered by Westinghouse out of
(15:04):
the United States, something called modularized construction, where on site
or off site, you're prefabricating large portions of the reactor,
portions of the containment building, and so you can work
on individual components at the same time, bring it to site,
and then you get the largest crane in the world
that lifts this massive, massive, pre assembled component into place.
(15:26):
When you're able to work like that, you can cut
down the construction schedule even more Interestingly, Westinghouse pioneered that
that they haven't been really successful in implementing it in
their recent builds. China, on the other hand, learned from
Westinghouse and has been very successful with this modulized construction approach.
Speaker 3 (15:43):
Can you talk more about that, because it's very intuitive, right,
the idea that the more you can build at the
factory and the less you have to build on site
makes it easy and a lot of the so far,
it seems like mostly hype about small modular reactors in
the US is sort of on this idea, like why
don't start a project from scratch? Why is it apparently hard?
(16:04):
Even though in theory that seems very obvious, because I
don't know if there actually are any modular reactors in
the US despite the sort of intuitive appeal.
Speaker 5 (16:13):
So I think I gotta clarify here, there's modularized construction
and there's small modular reactors. Okay, so SMRs are small
modular reactors. They refer to a situation where the entire
reactor is encased in a single unit.
Speaker 3 (16:26):
Oh okay, got it. Yeah, but it's still this idea
that the lot of the fabrication process happens not at
the site itself. Again, something that feels highly intuitive and
apparently easier so than time.
Speaker 5 (16:37):
Well so my understanding from the Westinghouse design approach when
they used this for the first time in designing the
AP one thousand technology that we're built here in Vocal
in the United States, is one of the major barriers. Well,
there's terveral. There's always going to be regulatory barriers, right,
it's a new way of doing things. Anytime it's a
new way of doing things, the regulator is going to
want you to jump through a million hoops to try
(16:59):
to clarify and justify that what you're doing is defensible
and safe. So you've got that one, of course, But
then the actual logistics of lifting these massive, massive, we're
talking thousands of tons of prefabed components. They actually had
to design and then especially contract the world's largest heavy
lift crane. Westinghouse did just to be able to lift
(17:22):
the first one. They worked with an American company to
design to custom design this giant fixed base ring crane
that requires other cranes to build it. Then you have
this giant giant crane that's in place and it swings around.
It usually works for two different units to build two
reactors at the same site. Interestingly, they weren't able to
use this giant giant crane in China because of a
(17:43):
design miscommunication. The first AP one thousands that Westinghouse tried
to build in China, they didn't leave space on the
site to put the giant crane, so in the end
they had to use a very very large roller crane instead,
which just about did the job, but it forced them
to change the way they built it. China has learned
from that though, So the newest you know, QUA long
(18:04):
one reactors that China builds, they use a giant ring crane.
I believe they use a zoom lion to the Chinese
brand has designed one of these, built one of these
massive ultra heavy lift cranes as well, and so now
that's you know, they're reaping those benefits.
Speaker 4 (18:33):
I have a slightly random question, which is building nuclear
reactors how customized. Do the components that go into these
actually have to be like how much does the design
actually vary site to site?
Speaker 5 (18:46):
Well, if they are the same series of reactors, right,
you could say the AP one thousand, right, that's a
base unit. Now the ones that are built in vocal
and the ones that were being built at Summer in
South Carolina before that was canceled, those are probably a
little bit different, right, but you know, largely part of
the same series. The ones that were built in China
were built on that same platform, but they would have
(19:07):
been modified a little bit for the Chinese context. They
called them Chinese AP one thousand CAP one thousands, But
you could say they're substantially the same reactor with with
small modifications. When we start talking about different series, though,
if we say like the French design versus the US
design versus what's being sold now in Korea or something
like that, you'll see more similarities to their predecessors that
(19:31):
they came up through different generations of technology. So like Korea,
you'd see similarities to the old g Hatachi reactors because
that's where they got their technology originally. Then you'd see
to say a modern EP one thousand, these are different
tech trees from different competitors.
Speaker 3 (19:47):
So if I'm a guy on Twitter listening to this,
and I am a guy on Twitter, except I'm talking
in this, but I'm just a guy on Twitter, and
I'm hearing you talk about Okay, they get preferential lending
from the state owned bank. The company me is state owned.
Probably the crane company is state owned. There's probably a
few other state owned businesses. And I think, yeah, okay,
(20:08):
you know, they're really good at building reactors fast, but
there must be some sort of accumulated debts and inefficiencies
that come with all of these all of these entities
that have something other than a profit motive. And you know,
probably you know, I don't know that my intuition or
my response to you, or my my dunk on you
(20:28):
is that there's going to be all these accumulated losses
that ripple through the systems on account of the fact
that it's SOOE working with see after SOE, do we
have any sense of how economic these projects actually are?
Because if these were private companies, you say, oh, they're
either making money, or if these were sort of strictly
for profit listed companies, you say, well, they're making money.
(20:51):
They're not making money whatever, How do we think about
the actual economics of whether this is good investment? Because
it's cool. Yeah, you know, China building dozens of reactors.
How do we know these are good economic investments?
Speaker 5 (21:04):
Well, unless I can crack open you know, China National
Nuclear Corporations books like, I can't tell you for sure
if these are good investments.
Speaker 3 (21:10):
Right.
Speaker 5 (21:11):
But when they build them at that pace, when you
look at it from the outside and you say, all
the conditions are in place to have surely built this
according to the budget you set for yourself. Right, you
declared that you would build it with a certain budget
and a certain time. Ye talk about the budget, right,
So you're looking at you know, your construction period of
five years, your pre construction, and your commissioning. You add
another five years or so. Right. But then once they
(21:34):
build it, they're saying, you know, we can build a
single gigawatt unit reactor for five billion dollars four and
a half billion, five billion. You look at numbers out
of the US and they're saying, we're going to build
what vocal cost was two units for twenty eight billion
dollars or something like that. You do a little bit
of Napkin math, and you say that reactor can't possibly
make back how much money it costs to build and
(21:54):
it's operating lifetime or maybe it will just about get
there after forty years. And that's assuming that the plant
operates in the spot markets really really well and sells
power so efficiently and never gets curtailed and never has
issues like that. Meanwhile, your Napkin math in China is saying, well,
they're going to sell power at this rate for the
next forty, maybe sixty years, maybe they'll do double life extension,
(22:15):
maybe eighty years. And you know, so many killo odd
hours of power times so much per kill a lot hour. Yeah,
it looks like these things should be reasonably profitable. And
keep in mind the profit motive of Chinese soees is different, right,
They're expected to try to be profitable so they have
cash flow to do things and you know, be functional.
But if they have to take a hit, sometimes they will.
(22:38):
They can be the lubricant in the system that causes
the inefficiencies to be okay, because you've got you know,
a major SOE that was okay, losing half a billion
dollars last year. They'll make it back later. It's okay.
The system didn't fall apart. They were the lubricant.
Speaker 4 (22:52):
So one way we could potentially judge the success of
Chinese nuclear reactors is you could look at whether or
not they are significant changing the energy mix. And there
was a story out this week saying that China's domestic
coal production had reached an all time high, and granted
that's production that's not necessarily coal use, but I don't know,
(23:14):
it doesn't seem like there's been a big impact just yet.
Speaker 1 (23:17):
Why is that?
Speaker 5 (23:19):
And yeah, and that's right. I saw that yesterday too.
I'm bummed about that because I'm on record saying back
in December twenty twenty three that I thought twenty twenty
four would be the peak year, and I thought structurally
we were in place to be able to peak coal
consumption in twenty twenty four, and I think we're going
to end up up one one point five percent year
(23:39):
on year something like that, which for China is a
huge amount of coal because it consumes so much coal.
But it's really close, which of course means if we're
up year on year and last year was the highest
year ever, then this year is the highest test year ever.
And so what are we looking at, though, We're looking
at a power sector that is still growing consumption every
year by seven percent year on year, six or seven
percent year on year, compared to the US, where a
(24:01):
good year is maybe like one percent or half a
percent year on year, and you talk about data center
demand growth is going to maybe rise that and everybody's
freaking out, how are we going to meet this new
consumption need? China has been growing like that seven percent
eight percent in the past. It was even higher for
decades now. So it to be able to peak coal consumption,
(24:21):
we have to get to a single year where all
of the incremental consumption growth is met by incremental generation
from clean assets, right from wind and water and solar
and nuclear. If we can't manage to do that in
one year where all the incremental growth is covered by
new incremental clean generation, thermal generation has to go up.
And so that's still where we're at. We're real close.
(24:42):
If it only grew by one point five percent this year,
that means that seven percent of China's entire consumption mix
was almost totally covered by growth year on year of
wind and water and solar and nuclear, but it wasn't
quite there, and so that's where we stand at twenty
twenty four. I'm going to be made a liar of
that statement at the end of last year where I
thought coal consumption would peak this.
Speaker 3 (25:02):
Year since you mentioned it. Data centers is obviously a
huge part of the story of the return of load
growth in the US. I mean, there's obviously just the
general modernization and country getting wealthier. But tell us about
the data center's story in China as you see it
and it's impact on the grid.
Speaker 5 (25:17):
Yeah, it's it's of course going to be another growth driver.
The major difference here is that when China says, oh,
we've got data centers coming in, so instead of six
point five percent growth, it's going to be seven point
five percent growth. Right, It's just what's a percentage point
among friends, right, Whereas the United States going from half
a percentage point to one point five or two percent
is very different from how we've had to grow in
(25:38):
the past. So China's i think, approaching this with much
more sanguinity, maybe that they're just saying, yeah, it's going
to be a driver of growth. Let's put them in
some of our parts of the country that have low
load and great renewable resources. We're going to put them
Inner Mongolia is what we're going to put them. We're
going to put growth demand centers in Inner Mongolia. They
don't need to be close to the Chinese.
Speaker 3 (26:01):
Is Inner Mongolia.
Speaker 5 (26:02):
Yeah, it's it's sparsely populated, it's got a lot of
great energy resources. The wind blows and the sunshines all
day long, and there's no load out there. So it
wouldn't have made so much sense maybe to cite you know,
your heavy energy intensive industrial manufacturing so far from the
demand center, so far from the coasts where you could
get it to logistics. Oh, they put some stuff out there,
but it wasn't so intuitive to put energy intensive industry
(26:25):
out there. But data centers, Oh that's great, right. They
don't need to be close to markets per se. You
just need to get be them close to the affordable energy.
So it's looking like inn Moongolia or places like that
will be a great match for China's data center growth.
Speaker 4 (26:39):
So one of the things that's been happening in the
US speaking of data centers is a lot of the
big tech companies have been signing off take agreements with
energy producers and they've been pushing them towards more renewable energy.
So they say, we want clean energy to power these things,
and you make it for us and we'll take it.
Do you see a similar dynamic taking place in China
(27:00):
or do people not care as much about the ultimate
cleanliness of their energy for data centers.
Speaker 5 (27:07):
Yeah, that's a major driver of how the power sector
offers power. Right, your customers demand a certain type of power,
you should be able to meet their needs. Right now,
in China, you'd split, or in anywhere anywhere in the world,
not just in China, you'd split green power consumption on
the end user end into voluntary and mandatory. So mandatory
(27:28):
says the government says you have to consume a certain
amount of electricity that is green. We call it a
renewable portfolio standard or an RPS. Right, there's rps and
US states, not all of them, but some of them,
And there's RPS in China. So from that perspective, you
could say the government mandates that you consume a certain
amount of renewable energy to meet the quota. Now. Right now,
that applies to utilities in China, but it doesn't yet
(27:50):
apply to end users. Your aluminum smelter doesn't have that
man yet, but that's the next stage of RPS that's
being added right now. Data centers I think need to
be it's quite high. I think it's eighty percent renewable.
To build a new data center in China, you're going
to need to have aluminum and steel and all these
heavy energy intensive industries need to consume renewable. So that's
(28:10):
your mandatory consumption. That's OURPS driven and then you've got
your voluntary consumption. So voluntary consumption, you know, corporate social
responsibility initiatives ESG right companies say we want to go green.
We want to put it in our CSR report that
we consumed x amount of renewables last year. We did
this on a voluntary basis. We joined ARE one hundred,
we joined the Science Based Targets initiative, and we want
(28:33):
to claim that we are green. Yeah, that's your consumer
tech brands, that's your luxury fashion and increasing. A lot
of European brands are very aggressive on their renewable energy consumption,
including in China. So if you're producing in China and
selling to the world, you want to be able to
say our production in China was also green. So that's
voluntary consumption of green power. But you demand your power
(28:56):
retail or to provide you with green electricity and they'll
give you a quote for green electrics.
Speaker 3 (29:16):
We started on the nuclear side, we talked coal, but
then we're all, you know, there's all these charts that
are you know, great about all this solar being installed?
Is the economics of that roughly the same in the
sense that it's probably an sooe getting money from an
so E bank, And talk to us about who's funding
(29:36):
that and where does it make sense? Like why in
some places is solar going to be solar wind part
of the answer versus say nuclear.
Speaker 5 (29:44):
Right, So when it comes to wind and solar, these
are being built differently from nuclear, right, They're not nearly
as capital intensive. Also, they can be smaller, they can
be more distributed. And so when you look at Chinese
wind and solar, of course you still see sooees playing
a big role, but there are as well ipp independent
power producers or just non soees right, as well as
foreign players. So you as a you know, a foreign
(30:06):
investor who you know, like black Rock, can come into
China and build a power plant if they want to,
a wind or a solar farm, no problem. And so
anyone can participate in that space if they do their
financial analysis and they see the way to attractive project economics.
So for if Chinese builders they borrow from Chinese banks,
as will Chinese independent borrowers, then international players they might
(30:28):
borrow from international banks, they might try to borrow from
Chinese banks. They can do that as well. They will
get you know, market competitive rates. This is a different
kind of building compared to nuclear where it's instead of
it's like a national strategic priority to build a rooftop
sole or facility. Now that's much more of a commercial
market operation. However, there are some projects in China that
(30:49):
are national strategic priority. We talk about those huge desert bases,
you know, hundreds of megawats gigawatts, hundreds of gigawats in
the middle of the Gobi desert, coal plants, plus a
wind far and plus a solar firem plus a huge
battery array, all financed by a giant Chinese built by
a Chinese soe. That's the kind of stuff that that
kind of looks more like a nuclear power plant in
(31:09):
the way that they finance and process that. But you know,
rooftop solar facility in Eastern China. Now that's very much
just a commercial play. If it makes money, if it
makes sense, they'll build it.
Speaker 4 (31:19):
So when we talk about China's energy landscape or its
energy mix, I mean a lot of what we're talking about,
we're pulling in numbers from the Chinese government, right, like
domestic production numbers, domestic usage numbers. And whenever you do that,
there's always a certain element of uncertainty or a question
mark over them. And there are some people who even
(31:41):
if you were to say that China's coal production was
finally falling, which it isn't, as you know, people wouldn't
necessarily believe it. They'd be like, oh, well, China wants
you to think that. So I guess my question is
like how much should we believe some of these stats?
Speaker 5 (31:57):
Yeah, and this is going to be always very subject
about how much you want to believe or how much
you think is worthwhile believing. My take that I usually
go to is like, look at the top levels. You've
got your National Bureau of Statistics, You've got these you know,
national level entities who's their job mandate is to report
statistics as faithfully and as honestly as they can. All right, fine,
(32:18):
you know what, that's their job mandate. I have no
latitude to say I think they're doing their job dishonestly
or something like that. But I do believe there are
many kind of perverse incentives throughout the structure of the
reporting economy in China that would create opportunity for misreporting information.
When you tie you know, the county governor's promotion or
(32:39):
lack thereof, to his ability to grow GDP in that
province or in that county, you're creating the incentive for
him to cook the data. When you're creating economic recovery,
and you announced to and this happened. This is a
real story. When you announce to a certain city in
twenty twenty two that you're going to be evaluating how
quickly they've recovered from COVID conditions by seeing how quickly
(33:02):
their factories get back up to regular production. And you
know that they're measuring that by seeing how much electricity
they consume. Well, all of a sudden, you have.
Speaker 4 (33:10):
And everyone starts plugging stuff in.
Speaker 5 (33:12):
Right, So if you can say that people are trying
to do their jobs honestly, and then you also have
people that have been given perpose incentives to misreport did.
I think that's where a lot of the uncertainty.
Speaker 3 (33:23):
I mean, this is the core problem of central plan.
I mean, this is it in a nutshell. And obviously
the most egregious examples of this were, you know, during
the Great Leap Forward and all of the ways that
either they you know, the steel production that was melting
down literally anything of steel and destroying the economy. In
(33:44):
twenty twenty four, what are some of the techniques used
to avoid sort of egregious juking of the stats so that, yeah,
someone's promotion who is tied to electricity consumption can't be
sort of egregiously abused like that.
Speaker 5 (33:57):
Yeah, well, I mean famously or perhaps infamous. So I
think it ended up it came out of like a
WikiLeaks something that the former premier Leka Chang said he
didn't look at GDP data.
Speaker 3 (34:08):
From certain produces and that's the terminal.
Speaker 5 (34:11):
Yeah, the le Kasyang index, And he said, I prefer
to look at I think it was a rail cargo
and electricity consumption, and there were the third item too, right,
he said that these items, you know, the people in
charge of reporting them, there's you know, my assumption is
that his logic was there's less incentives to misreport these,
so that these are the ones I want to look at,
and you can maybe come up with your own version
(34:32):
of the modern day Li Ku Chang index. I think
electricity consumption is still fine, but maybe there's some other
numbers that you say, look, this is all very centralized reporting.
The reason I like electricity because it's all state grid, right,
those numbers almost all come from state grid, and State
grid is just a single unified entity. You're not gathering
data points from many different companies. Maybe other stuff like
(34:53):
we talk about cargo right again China Railways. Yeah, you
have one centralized company that would be able to report
that information. So if you want to modern you know,
fashion your modern Lika Chanan decks, maybe try those types
of indsease.
Speaker 3 (35:06):
So one other element obviously of the Chinese energy demand.
We've talked a lot about the grid obviously and the
power of the grid. Then there is the whole world
of automobiles, which up until very recently was totally separate
part of the energy system, but now it's around the world,
but in particular China, and we talk about Chinese evs
(35:27):
all the time being plugged into the grid. How much
do we see the electrification of the Chinese automobile fleet, Like, A,
how electrified is it right now? And b is it
moving the dial on oil consumption? Because this is a
pretty big question in the West, right like at some
point will EV's become big enough where meaningfully starts to
reduce our oil demand? And even in countries like Norway,
(35:50):
I think like it's still barely moving the dial despite
mass of electrification. What are we seeing in China right
now on that front?
Speaker 5 (35:57):
Yeah, I mean in the major cities you say, Shenjen, Shanghai, Beijing,
places like this, the EV penetration rate is noticeably high,
and you'll see that they're easily identifiable. They have green
license plates instead of the regular blue license flight, so
you can just kind of look at them on the street.
It's very expensive to get a license plate in Shanghai.
Just the license plate itself is expensive. But EV's for
(36:18):
a long time were free, like the license plate was free,
so that was a great perk for them to pursue those.
And yeah, there I think it was. New vehicle sales
in Shanghai, for example, was fifty percent electric vehicles in
the last reporting session, and it's really noticeable when you
stand on a street corner in Shanghai, and I guess
it's noticeable by the lack of the noise.
Speaker 3 (36:41):
I heard that everyone goes to Shanghai and says it's
really quiet. That's you know.
Speaker 5 (36:44):
Look, I'm back in New York right now for the
first time in a year, and I stand on a
street corner. It's so loud, and I hadn't really noted
the lack of the noise because I'm just used to
it now, and it's it's I hear the roar of
petroleum based engines all around me.
Speaker 3 (36:58):
Yeah.
Speaker 5 (36:58):
So eve's in the large cities. Penetration rates noticeably high.
In the smaller cities still fairly high. When you go
out to the more rural areas, it's going to drop off.
Of course, there's more skepticism about the completeness of the
charging network, just maybe some more uncertainty about the technology itself.
You'll hear people in the countrysides and all batteries are dangerous.
(37:19):
I heard that I saw a video once of an
evy on fire. Things like that. Similar you know comments
in the United States too. But the long term, the
EV penetration rate will will only continue to rise.
Speaker 3 (37:32):
It's national oil consumption, I believe.
Speaker 5 (37:35):
So I think I saw. Now I'm not an oil specialist,
but I think I've seen and I've read recently that
that Chinese oil imports should have peeped right, that they
should have be ready to draw down if you know,
if I'm lying here, may God smite me down. But
I think that that was the case, and that we
see a structural decline in petroleum because of the adoption
(37:56):
of evs.
Speaker 4 (37:57):
So, speaking of EV's, there is a lot of Chinese
made clean tech that is here in the US, including
solar panels as well. And this has been one of
the frictions of the past few years, which is, you know,
the US says it wants cleaner energy, and Chinese solar
panels and evs are probably the cheapest forms of that
(38:17):
technology around, and yet there's a lot of I guess,
reluctance to import tons of those into the US, and
certainly with Trump coming in, it seems like tariffs are
on their way. How do you see all of that
shaking out into the new year.
Speaker 3 (38:33):
Yeah.
Speaker 5 (38:33):
Look, in the United States, you're gonna decarbonize or you're
gonna buy green tech. At exactly the rate that is economic. Yeah,
and so if you have access to very affordable green tech,
you'll do it at a faster rate. If you have
access to more expensive green tech, you'll do it more slowly.
And so I have to assume that if those teriffs
(38:56):
go in place, unless alternative producers are able to offer
similar quality goods at similar prices, then you're going to
slow down your green transition. That's maybe a simple but
obvious kind of answer there. On the Chinese side, of course,
there will be some pain for exporters, anyone exposed to
the United States market. Some solar panels, maybe some evs,
(39:17):
some batteries I think are pretty significant if those are targeted. Yeah,
you'd expect to see some pain on the Chinese side there.
It's already an extremely extremely competitive environment in China. Most
of these producers are in very thin profit margins, hanging
on by a threat. It's good for consumers, it's not
good for if you're holding those stocks. So this would
only just be another bit of pain for them, denial
(39:40):
of a potential revenue channel.
Speaker 3 (39:42):
Since you mentioned EV charging stations, we have this sort
of weird patchwork here, and there's a lot of I'm
a little ambiguity about the US government under Biden has
earmarked a lot of money to build EV charging stations.
It's a little unclear how much actually got built publicly.
There seems to be a view that it hasn't been
particularly successful on the public side. What is the structure
(40:06):
of the buildout for charging stations in China? Is it
publicly owned? Is it what's the deal?
Speaker 5 (40:11):
It's all of the above, I guess. So you've got
you know, China State Grid or China Southern Grid. The
grid companies they build charging infrastructure. Some of the EV
makers themselves build their own charging infrastructure, maybe like like
a Tesla supercharger, right. Some of them also build their
own battery swap stations. I think Neo is quite famous
for having battery swap stations. You can go pretty much
(40:31):
any highway rest stop in China and you can find
a Neo battery swap station.
Speaker 3 (40:36):
So then there's no time you just swap it in
and out.
Speaker 5 (40:38):
Yeah, I'm there's a line to wait for the battery
swap station if another Neo pulls ahead of you. But
besides that, I mean, I think the major thrust, at
least the ones that I've seen recently in the Southern
Grid region have been by the grid company itself, right, So,
China Southern Grid. I remember reading last year they said, ah,
you know, we're planning to build one hundred thousand chargers
(40:58):
this year, where you know, three min we're seventeen thousand
chargers in so far. We're on track to finish our
goal by the end of the year. And you do
see it when you go to regions that have been
targeted for those buildouts. Right. You can go to fairly
rural areas in say Gwandong Province down in the south,
and you'll find EV chargers installed there by China Southern
(41:19):
Grid and a village where I don't think there are
necessarily any evs, but hey, they got the infrastructure there
because they said we're going to build one hundred k,
and so they built a hundred K.
Speaker 3 (41:27):
David Fisherman so great to chat with you again, especially
in person, and I'm so good you have other things
to worry about besides figuring out how to get food
in your apartment. Really appreciate you coming back on ovloins.
Speaker 5 (41:39):
Thanks a lot for having you guys.
Speaker 3 (41:53):
That was really helpful. Tracy, I learned all the things
more or less that I wanted to know about how
they're built so much nuclear.
Speaker 4 (41:59):
Yeah, what's that reaction? Well, it does. It leaves me
wondering how like replicable it is in other countries, right,
because obviously in places like the US, we don't really
have subsidized finance on the scale that China does. We
don't have a lot of cheap and skilled labor at
the same time, and we don't have some of the
(42:22):
let's put it this way, like regulatory hastiness maybe in
approving these sites and these things. I don't know, like,
how replicable do you think it is?
Speaker 3 (42:32):
No, this is the exact question, because you know there's
some subsidy the loan Program's office exists, but we don't not,
say the same gigantic state owned banks. Yeah, and then
even if you solve the financing problem, and even if
you solve the market off take problem, which is going
to be very different, right because we have market grids
(42:54):
in a lot of parts of the country, and so
it's hard to sort of make that forty year commitment
that you will get this price. Then there's all the
logistics like oh, you needed this gigantic crane that's the
biggest crane in the history of.
Speaker 4 (43:07):
Now you need a big crane to make the big
crane you.
Speaker 3 (43:09):
Need to make. So this gets to I mean, this
is a point that jigger Shaw makes all the time,
but this idea that we're never gonna really do this economically,
and David just mentioned the sort of daunting economics of Vogel.
We're never gonna do this economically unless we do it
over and over and over and over again. And it
feels like the components of what it would actually take
(43:30):
to do it over and over and over again is
this massive centralized commitment to doing lots of different parts.
And you know, it sounds like the regulatory side or
the permitting thing that seems about the same. And the
fact that the public can complain about endangered fish and
all that that's sort of similar. So people complain about
(43:50):
annoying local nimbi's. That doesn't really sound that much different.
It sounds like everything else that's different.
Speaker 4 (43:55):
I suspect the nimbiism is slightly different too. But point
to taken, and I do wonder, like, how do you
even go about beginning to redevelop that nuclear muscle memory
in the States. It seems really really hard, Like, Okay,
we can reactivate some nuclear reactors like we're planning to,
but starting like new ones from scratch. It just seems
(44:17):
like there's such a limited pool of people who are
capable of doing that and then putting in place, as
you rightly pointed out, all the off take agreements and
the network and everything needed to kind of make those
things financially viable. It seems hard.
Speaker 3 (44:31):
By the way, I'm glad you asked that question about
coal consumption that because that was really helpful, because it's
one thing to say, well, another record year for coal consumption,
but I guess the waight I think about it, at
least in the short term, we don't know.
Speaker 4 (44:45):
When it's not coal consumption, it's production.
Speaker 3 (44:47):
Just to be cold production. Yeah, but it's really going
to be about like if coal is in fact as
a part of the you know, if it's only growing
one percent, but electricity demand is growing six to seven percent,
that is a good sign, right, even if it's not
bending the curve down yet.
Speaker 4 (45:05):
Mm hm. Anyway, it's funny I will always associate Beijing
with lots and lots of burning coal in the winter.
Speaker 3 (45:13):
By the way, I had heard that about how apparently
the big cities now are really quiet, which is pretty cool.
And once self driving cars are everywhere, there will be
no honking either, And so we can look forward to
a future. Maybe one day we're very peaceful, peaceful, quiet
big cities.
Speaker 4 (45:30):
All right, something to hope for. Shall we leave it there?
Speaker 3 (45:33):
Let's leave it there.
Speaker 4 (45:34):
This has been another episode of the Outhoughts podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 3 (45:40):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow our guest David Fishman, he's at Pretentious What. Follow
our producers Carmen Rodriguez at Carman armand dash Ol Bennett
at Dashbot and Kilbrooks at Kilbrooks. Thank you to our
producer Moses Adam. From our Oddlots content. Go to Bloomberg
dot com slash oud lots, where we have transcripts, a
blog and a newsletter and you can chat about all
(46:02):
of these topics, including energy and China, where we have
two separate rooms in our discord Discord dot gg slash.
Speaker 4 (46:09):
Out lots and if you enjoy all thoughts, if you
like it, when we talk about nuclear power plants in China.
Then please leave us a positive review on your favorite
podcast platform. And remember, if you are a Bloomberg subscriber,
you can listen to all of our episodes absolutely ad free.
All you need to do is connect your Bloomberg account
with Apple Podcasts. In order to do that, just find
(46:29):
the Bloomberg channel on Apple Podcasts and follow the instructions there.
Thanks for listening.
Speaker 5 (47:00):
Eight
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