Lungmen Nuclear Power Scheme, Taiwan

The Lungmen (Dragon Gate) nuclear project in Taiwan is expected to come online in July 2009 (Unit 1) and July 2010 (Unit 2). Although construction began in 1997, the plant has been delayed by political arguments and construction was temporarily halted in 2000. By October 2005, the project was over 60% complete.

Lungmen is Taipower's fourth and largest single investment in a broad building programme. Pressed by demand and the country's uncomfortable exposure to foreign fossil fuel supply disruption risk, Taipower is determined to proceed. This is despite unprecedented protests against its plans and the total price tag of an estimated $6.5bn. Its opponents, mostly from the site area and opposition parties, are equally determined to stop what they see as an unnecessary investment with very high risks.

Site construction is underway and it seems increasingly unlikely that it will be halted. Taipower was issued a construction permit for Lungmen on March 17 1999 and first concrete was poured in March 29, but the plant is still troubled by local political opposition. In October 2000, the Taiwanese Premier resigned. Nominally this was for health reasons, but commentators at the time suggested that disagreements over the huge Lungmen investment were more to blame. It is also likely that the project will be taken through the courts over disputes on environmental law.

The project involves a 2,700MW plant consisting of two 1,350MW units at Yenliao, on the north eastern tip of Taiwan, near the capital Taipei. The advanced boiling water reactor technology marks a departure from the utility's three existing nuclear plants, which are smaller units completed in the late 1970s and early 1980s. US technology, however, will be a common thread from the first to the fourth plant. The units were planned to come on line in 2004 and 2005.

LUNGMEN CONTRACT ALLOCATION

GE won the reduced scope 1996 tender, which was subcontracted out to Black and Veatch. Other contenders were Combustion Engineering and an alliance between Westinghouse and UK generator Nuclear Electric (now British Energy), which proposed a project based on the UK Sizewell B plant.

Framatome did not bid, repeating its displeasure with the technical standards required by Taipower. SA Belgatom and Ebasco jointly provided engineering and evaluation services for bid evaluation through a $4m contract placed as early as 1992.

POWER PLANT MAKE-UP

GE won the contract to supply the reactors and steam generators in May 1996, with the lowest bid of $1.8bn. It was given final authority to proceed in October 1996, after pressuring the government to reverse the legislature's freezing of funds. A substantial share of the order will be subcontracted to GE's Japanese partners, Toshiba and Hitachi.

The three groups will use experience gained together in the Kashiwazaki-Kariwa ABWR project, on which Lungmen is modelled. Foxboro won the GE sub-contract to provide control and data acquisition systems plus related engineering services.

ABWR SAFETY DESIGN

GE states that the ABWR has been designed to higher levels of safety, including being designed to prevent and mitigate the consequences of a severe accident (eg a core melt). Licensing documents approved by the USNRC indicate that even in the event of a severe accident, there will be no release of radioactive material to the public.

TECHNOLOGY TRANSFER TO TAIWAN

The contract included technology transfer and local procurement requirements valued by Taiwanese sources at $360m, or 20% of the contract value. Taipower will be GE's lead partner in the transactions, which are divided 50/50 between nuclear power and other sectors. As in other heavy capital goods investments such as aerospace deals, Taiwan has been careful to use these 'offsets' to limit the impact on its trade position, and gradually reduce its technical dependence on foreign suppliers.

These conditions may be a small price to pay for the suppliers, who are intent on building solid nuclear equipment businesses in potentially enormous Asian export markets. Winning one of the few orders available, and on terms that were probably less onerous than those required in South Korea or China, was a major coup. It was an especially important milestone for Toshiba and Hitachi, who had otherwise relied almost exclusively on their domestic nuclear market.

GE already had deep roots in Taiwan – its longstanding joint venture with Taipower, United Asia Electric, is Taiwan's only substantial power engineering group. But keeping the relationship active in the face of strong Taiwan challenges from Westinghouse, ABB and Siemens was an important defensive win.

TURBINES AND GENERATORS AND CONSTRUCTION

Mitsubishi Heavy Industries won a separate steam turbine and generator contract in October 1996. It has also agreed an 'offset' contract reportedly worth $233m. Partnering its Japanese rivals and GE was an unusual exercise, but Mitsubishi was just as intent on building nuclear export successes, alone or in concert.

Another GE competitor to receive an albeit small benefit from the project is Daewoo Corporation's construction division, which is providing the expertise to build nuclear power plants to Taiwan's New Asia Construction and Development Corporation. Daewoo is to provide technical consulting services to the Taiwanese construction firm, which also landed a contract to work on the first stage of nuclear power plant construction for a consulting fee of $5m.

TAIWANESE POWER INDUSTRY

The state-run Taiwan Power Company (Taipower) is responsible for production and distribution of electric power in Taiwan. Nearly two-thirds of all power generated is used by industry. Taipower's annual operating revenues are more than $9bn and the company employs around 25,000 people.

A liberalised electricity market is to due to be introduced in March 2008. While it was aiming that 13.5% of all capacity would be from the private sector by 2005, Taipower still has major construction programmes including the 2x1,356MW Lungmen nuclear power scheme on Taiwan's northern coast. Taiwan's present nuclear capacity, comprising six units, is 4,884MW. There is little doubt that, whatever other form of deregulation Taipower has to face, it will certainly retain control of the nuclear facilities as well as thermal and hydropower schemes deemed to have too high a liability for the private sector.