China's two major power companies will work together to build a nuclear project in eastern Shandong province using indigenous improved third generation technology, in a move to enhance the technology level in the industry.

The demonstration project, located in the city of Weihai in Shandong, will have one 1,400-mW reactor in the first phase. It will use CAP1400 technology, which is based on the AP1000 technology developed by the US-based firm Westinghouse.

State Nuclear Power Technology Corp (SNPTC) and China Huaneng Group yesterday inaugurated a joint venture to build and operate the project.

SNPTC and Huaneng hold stakes of 55 and 45 percent in the joint venture that has a registered capital of 300 million yuan.

Construction of the project is expected to start in April 2013. It is scheduled to start operations by December 2017.

After the CAP1400 project, work on another CAP1700 project, which uses similar technology but with larger capacity of 1,700 mW, will begin, according to SNPTC.

Both projects still need the final approval of the government, according to the company.

"Construction of such demonstration projects will bring technology upgrades to China's nuclear power industry, which is vital to the future of the sector," said Tang Zide, an expert with SNPTC.

Reactors using the indigenous technology can have larger capacity than those with AP1000 technology, said Tang. What's more, several components of the reactor have been improved with domestic technology.

China is now putting much focus on the use of advanced technology in the country's nuclear power industry. The country decided to use the AP1000 technology to build four reactors. Two of these are in Sanmen in Zhejiang province and the others are in Haiyang, Shandong province.

The four reactors are also the first in the world to use the third generation technology. So far, construction of three has already started, two in Sanmen and one in Haiyang.

Nuclear power now accounts for less than 2 percent of China's total power capacity, but it will witness accelerated development in the next few years.

"Compared with coal-fired power or hydro power plants, nuclear power plants are much more environmentally-friendly. The industry is promising both in China and overseas," said Fu Manchang, an analyst with SNPTC.

An increasing number of domestic power companies have entered the nuclear power sector to take advantage of the rapid growth of the industry in China. For instance, Huaneng is building another nuclear project near the location of the CAP1400 project.

The company is set to start construction of another nuclear power station in Hainan province soon, company executives said yesterday.