Anchor untied: Ontario nuclear RFP leak makes dull summer interesting

Information leaked to the Toronto Star on July 14 provides fuel for interesting speculation on what we could call the political economy of the Ontario nuclear reactor competition. Two sources, one reported to be directly involved with one of the bids, are the basis for the Star’s claim that AECL’s bid was $26 billion and Areva’s $23.6 billion. Areva says on its North American blog that the report is “misleading,” and an Areva executive added in a subsequent conference call that it is also “incorrect.” Given that on the basis of the two figures Areva actually looks better—bigger units, lower cost—one might wonder if the company’s rebuttals, both offered without numerical substantiation, are more a show of compliance with the gag order the Ontario government put on all participants in the competition than disagreement with the reported figure.

Presumably Areva’s rebuttals refer only to the dollar figure the Star attached to the Areva bid; how could the French company have known the AECL number prior to the story. This gives more fuel for further spectulation: maybe the Star industry source is with one of the other bidders and the figures represent speculation on one or both of the other two bids. Or maybe the source is from the bid evaluation team, which includes the two Ontario nuclear generating companies. We could keep on guessing until the fall.

The bottom line is that the competition is still ongoing. This in itself is interesting. If only AECL complied with the requirement that the cost of its bid include potential cost overruns, what about the other two de facto non-compliant vendors? According to Nucleonics Week, Infrastructure Ontario said all vendors would be invited to “stay in play,” and Westinghouse has indicated it’s still in. Areva during the conference call said it’s also staying in the competition.

As I have pointed out all along, this must be viewed through the prism of the federal-Ontario negotiation over the terms on which Ontario will buy Canadian. Ontario has made clear it wants to do so. Until recently, the feds indicated they wanted AECL to win in Ontario. So what’s standing in the way of a deal?

It could be bailout fatigue (the feds recently committed billions to the auto industry), coupled with federal irritation over the most recent shut-down of the NRU, AECL’s research reactor at Chalk River. NRU is over fifty years old, and like every other fifty-year-old machine its age manifests in shut-downs that are ever more frequent and lengthy. Its double-duty as the world’s premier source of medical isotopes is what has put it into the media spotlight: the latest shut-down jeopardizes the world isotope supply, and the—uninformed—spin in Canada is that this is due more to AECL’s alleged ineptitude than to the egregiously disfunctional state of the international isotope industry.

It is not fair to blame this on AECL, since it has been officially acknowledged that the company has been under-funded for years. And, as I have pointed out, AECL’s flagship CANDU power reactors—which in Ontario are currently cranking out over 9,800 megawatts of carbon-free electricity—are world class. If anything, AECL should be commended for maintaining this excellence in spite of decades of federal neglect.

The current federal government has been by far the most pro-nuclear in recent memory, and Ontario was probably betting that that support meant they could do business on the AECL bid. But federal patience may have run out. With the coffers empty because of the auto and forest industry bailouts and massive infrastructure commitments, the figures reported in the July 14 Star piece could well have fallen on deaf ears.

The province might have realized that, which is why Areva and Westinghous are still in the running. If there’s any accuracy to the reported figures, both the light water vendors submitted bids lower than AECL’s. On the other hand, neither put a dollar figure on cost overruns.

The good news is, the reported figures don’t appear to have generated much, if any, public outrage. Only the usual anti-nuclear suspects have weighed in, and nobody gives that crowd much credibility when it comes to their statements on the cost of energy. So on it goes. But the negotiation now appears open to all three vendors.