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 December 08, 2014
Nuclear power in China: Promethean perils.

 AFICIONADOS of fission have had to wait nearly two decades for another public flotation of a firm operating nuclear power plants. The last one, that of British Energy, was back in 1996, and that troubled company has since been taken over. Now investors have the chance to get in on the action in the hottest place in the global nuclear business: China.

China General Nuclear Power (CGN), a state-owned enterprise (SOE) that is the country's largest nuclear firm, is planning to float shares on the Hong Kong stock exchange on December 10th. Market rumours suggest it will raise well over $3 billion. Dealogic, a research firm, reckons this is likely to be the biggest listing in Hong Kong as well as the largest utility IPO globally so far this year.

Some see in the flotation a harbinger of a nuclear renaissance. If true, this would bring cheer to a gloomy industry. The shale-gas revolution has undercut the economics of building new nuclear reactors in North America. And since the deadly tsunami and nuclear fiasco at the Fukushima site in Japan nearly four years ago, confidence in this technology has waned in many places. Germany, for example, is getting out of nuclear power.

China put a moratorium on new plants after that accident too, but the boosters have now prevailed over the doubters. The State Council, the country's ruling body, wants a big expansion of nuclear power along the country's coast to triple capacity by 2020 (see map). This plan is not as ambitious as before Fukushima, but Moody's, a credit-ratings agency, nevertheless calls it an "aggressive nuclear expansion". Some analysts look beyond 2020 and predict an even bigger wave of nuclear power plants will be built in inland provinces, giving a boost to this type of energy worldwide.

Such forecasts should be taken with a big pinch of salt. It is true that China is the brightest spot in the global nuclear industry, but that is mostly because prospects in other places are bleak. It is also true that China's need to tackle pollution and desire to curb carbon emissions will give nuclear power a boost, but these factors also favour rival clean-energy technologies. In short, today's nuclear revival may well not live up to investors' lofty expectations.

One factor that could slow growth is cost. In the past Chinese governments were happy to throw endless pots of money at favoured state firms in industries deemed "strategic". Times are changing, however. Economic growth is slowing, and the government must now deal with massive debts left over from previous investment binges. Since the export-oriented and investment-led model of growth is sputtering, officials may soon be keen to boost domestic consumption rather than merely shovel subsidised capital at big investment projects.

And it is not just that China may---and should---be starting to pay attention to the true cost of infrastructure projects. Rapid technological advances are also making low-carbon alternatives to nuclear power appear more attractive. Bloomberg New Energy Finance, an industry publisher, forecasts that onshore wind will be the cheapest way to make electricity in the country by 2030. Though coal will remain China's leading fuel for some time, Bloomberg's analysts think that renewables could produce three times as much power as nuclear in the country by that year.

What is more, as a latecomer, China had the chance to standardise designs of new nuclear plants to gain economies of scale and minimise risk. But rather than build copies of safe and proven designs from Westinghouse of America or Areva of France, it is insisting on "indigenisation". This approach is in line with China's desire to create national champions in key industries, as it has in high-speed rail.

Chinese nuclear designs could in theory be sold globally at some point, but this approach introduces needless variability and complexity. Some in the government pushed for selecting just one "indigenised" design---but turf battles seem to be preventing this too. China National Nuclear Corporation (CNNC), another big nuclear SOE which itself is hoping to do an IPO in Shanghai next year, and CGN are now championing different approaches.

Another drag on growth could be nagging doubts about safety. Philippe Jamet, a French nuclear safety commissioner, told his country's parliament earlier this year that Chinese counterparts were "overwhelmed". Wang Yi of the Chinese Academy of Social Sciences, an expert body, has warned that there are indeed "uncertainties" in the approach to nuclear safety.

Communist leaders would like nothing better than to replace filthy coal with carbon-free nuclear power. Yet they are also keenly aware that a big nuclear accident would prompt an ugly---and, in the age of viral social media, nerve-wrackingly unpredictable---public backlash against the ruling party. So leaders may well scale back aggressive growth plans if they find out that the country is unable to regulate, manage and staff nuclear plants properly.

A word of warning comes from the man who matters most. President Xi Jinping, speaking at a nuclear-security summit in the Netherlands earlier this year, likened the technology to the gift of fire granted by Prometheus to humanity. It can bring great benefits, he said, but without proper safeguards "such a bright future will be overshadowed by dark clouds or even ruined by resulting disasters."