Who has the leg up in the Ontario nuclear reactor competition? It is reasonable to say the three competitors—Atomic Energy Canada Limited (AECL), Areva, and Westinghouse—are all capable of building reactors that will generate electricity safely, reliably, and relatively cheaply, over their designed lifetimes. But it’s the details that make this interesting. Take lifetime cost of power, which is the first of the three major decision criteria in Phase 2 of the RFP. All three competing reactors require enriched fuel. But fuel for the AECL model requires a lower level of enrichment than fuel for the two others.
Given that it is expensive to enrich uranium, does this give AECL a cost advantage over the Areva and Westinghouse models? Areva and Westinghouse will point out that any such advantage could be canceled out by the AECL reactor’s requirement for expensive heavy water, whereas the Areva and Westinghouse reactors would use inexpensive ordinary water. AECL will counter that its new model uses less heavy water than earlier models.
To judge vendors on this aspect of the first criterion, bid evaluators will have to consider the cost of uranium, uranium enrichment, and heavy water over the next 60 or so years.
The third criterion, level of investment in Ontario, is pretty much AECL’s to lose. While the other vendors will provide domestic content assurances, the big parts of their supply chains likely won’t involve Canada, let alone Ontario. AECL can credibly quantify the jobs involved in its supply chain.
It is the second criterion, “ability to meet Ontario’s timetable to bring new supply on line in 2018,” that is the most challenging.
This is where the spectre of construction delay comes into the picture. Delay, together with the huge cost of borrowing money during the 1980s, is what caused the Darlington project cost to escalate into the stratosphere.
The Ontario government will therefore want an assurance that when the winning vendor says the project will cost $x billion, the final price tag will be reasonably close to $x billion, and preferably less. That is more likely to happen if the vendor has staying power. And that kind of staying power comes when you have government money behind you.
So how much government support do the three vendors get? Areva and Westinghouse enjoy huge support from their home governments. Areva is majority-owned by the government of France, and is a source of national pride. The French government loves nuclear power. France will backstop Areva’s Olkiluoto project in Finland (which is already behind schedule and over budget).
Westinghouse has access to U.S. government financial incentives, through the Energy Policy Act (EPAct) of 2005. The EPAct provides a range of incentives intended to jump-start the American nuclear renaissance. These include construction delay insurance, loan guarantees, and power production tax credits. The loan guarantees were included in order to bring private-sector investors into the action. A nuclear build project takes years, and private-sector investors generally look for quicker returns. The longer a project takes, the more nervous the original investors get. Loan guarantees address that nervousness.
Interestingly, Areva may also obtain access to U.S. government support. Unistar Nuclear’s prospective Calvert Cliffs unit 3 project in Maryland will likely involve an application for EPAct loan guarantees to build an Areva power reactor. Unistar’s consortium members also include EDF, another company owned by the government of France.
What about AECL? It got $300 million in the federal budget this year, but that was to complete design work on its new power reactor (the one it is offering to Ontario). The federal government offers much moral support, and has told any media person who will listen that it wants AECL to win the Ontario competition. It is doubtful that this matches the support Areva and Westinghouse get.
In addition to moral support, could incentives, perhaps similar to those in the U.S. EPAct, level the playing field in Ontario? Electricity generation is the low-hanging fruit on the climate change action tree. The two major government-forming federal political parties generally agree that nuclear energy must be part of Canada’s climate change strategy. Everybody agrees the private sector should be involved in new nuclear projects, and everybody agrees that non-emitting electricity is worth supporting.
So could a package of Canadian government incentives, similar to those in the U.S. EPAct, sufficiently and legitimately counter-balance the support AECL’s Ontario competitors enjoy from their own governments?
And just as important, would such a package be salable politically? I think yes on both counts.