Quintus Fabius Maximus, the Roman dictator whose ex post facto victory over the original Hannibal has for centuries inspired both admiration and contempt, would applaud the strategies of the major players in the Ontario nuclear reactor competition. The major players are the governments of Ontario and Canada. The decision strategy of each is pure Fabius: delay. The feds’ favourite dilatory device is the expert report, wherein an objective outsider is tapped to provide advice on what to do with AECL, the federally-owned maker of the famous CANDU reactor.

So far the feds have seemed to prefer their advice come from bankers: first the National Bank, which turned in its report a year ago; now Rothschild & Sons, which handed in its version just last week.

What has changed since the government commissioned the report? Not much. The same basic factors drive estimates of AECL’s value: the availability of credit, the real prospects of reactor sales, and the development of the international power reactor industry in the medium to long term.

None of these has changed. Credit is still tight, and that applies as much to nuclear construction as anything else. Investors are still wary of plunking down billions on a project that might die during a regulatory review. However, we shouldn’t attribute this reticence to hard-headed analysis. This is the same crowd that as recently as this time last year was lunging at credit default swaps like Homer Simpson lunges at chocolate. Unlike credit default swaps, nuclear build projects require commitment and discipline; they’re not quick or easy money.

Reactor sales in the near term remain dependent on the price of natural gas, a fuel which is viewed, fairly or unfairly, as the only viable low-carbon competitor for nuclear when it comes to new generators. Gas has been cheap since the beginning of 2009. Cheap gas is the prime reason Ontario is running with Fabius’s playbook and getting away with it. Still, the prospect of a CANDU sale is extremely high: AECL has been touted as Ontario’s preferred vendor. It is purely a matter of political will. Do the feds want AECL to win or not?

As for developments in the power reactor industry, the two “benchmark” nuclear build projects—Olkiluoto and Sanmen—are not far-enough advanced to assure observers that the nuclear renaissance is for real.

In other words, the Rothschild report is not likely to provide information any more or less useful than last year’s National Bank report on exactly the same subject. The only thing that has changed is that AECL’s Ontario competitors, Areva and Westinghouse, will reach the critical two-years-in-operation mark well ahead of AECL (see article).

To be fair to the bankers, the real issue from the feds’ point of view is Canada’s nuclear future. Though it does involve billions of dollars, the issue transcends money. It brings us smack dab into the rarefied world of global security and non-proliferation policy. Some believe Canada does not belong in this game. But we’ve been playing the game, and playing it well, since the Manhattan Project.

Those who think Canada should get out of the nuclear reactor business need to consider this history. Back in the 1950s, when the CANDU was in development, Canada faced formidable competition in the power reactor business. The main country pushing power reactors was the U.S., under Eisenhower’s Atoms for Peace program.

While it sounded high-minded, there was a hardball commercial component to Atoms for Peace. It was based on light-water reactor technology, which requires enriched uranium fuel. Back then the U.S. possessed the only uranium enrichment capacity. If another country bought a light water reactor (LWR) to generate electricity, and was prevented from acquiring enrichment equipment, then the U.S. could control the spread of weapons technology based on enriched uranium while ensuring that American companies profited from the sale of both LWRs and their enriched uranium fuel.

This marriage of security and commercial interests was fine if you were selling American technology. But the CANDU, which uses natural (non-enriched) uranium and heavy water, didn’t fit in that marriage. Rather, the CANDU would appeal to those countries that were uncomfortable with being beholden to the U.S. for fuel, or who just liked the reactor’s ability to refuel without having to shut down.

The upshot was that by choosing the heavy-water-natural-uranium route, Canada was competing head-to-head with the greatest superpower on earth for business in that same superpower’s sphere of influence. And this was during the darkest days of the Cold War.

And how did that superpower respond to the competitive threat posed by the CANDU? The U.S.’s imagined monopoly on uranium enrichment capacity meant that the main proliferation concern in those days was the other nuclear explosive, plutonium, which forms inside reactors when uranium-238 (the main constituent of both natural and low-enriched uranium) is bombarded with neutrons. Because the CANDU runs on heavy, not light, water, and because the U.S. itself had manufactured two-thirds of its stockpile of weapons-grade plutonium inside the heavy-water reactors at the Hanford facility, somehow the CANDU became conflated with the plutonium threat.

The on-load refueling machine, another feature that made the CANDU so attractive to power utilities that were required to deliver uninterrupted electricity to their customers, was thereby used by the CANDU’s detractors to feed the alarmist plutonium fantasy. The longer plutonium sits in an operating reactor, the less attractive it becomes for use in a weapon. According to the anti-CANDU crowd, the CANDU’s on-load refueling machine gives would-be proliferators the ability to remove “optimized” plutonium at any time. (A proliferator could do actually the same with an LWR—and get much more plutonium from a single load of fuel than from an under-irradiated CANDU fuel element—but this scenario has always been downplayed as unlikely. Nobody has ever adequately explained why premature removal of fuel poses a greater danger in the case of a CANDU than an LWR.)

Never mind that the CANDU’s automatic refueling machine only works at the commercial duty cycle, thereby making it impossible to use the reactor in this way. And never mind that the Hanford reactors themselves required shut-down refueling, as does North Korea’s Yongbyon reactor, which is the object of much international concern these days.

Above all, never mind that of the four biggest nuclear proliferation threats in recent years, three—Iraq, Libya, and of course Iran—are associated not with plutonium, but enriched uranium. So much for the proliferation resistance of the LWR fuel cycle.

All of this exposes the whole natural uranium, on-load refueling issue as the red herring that it is. But regardless: the natural uranium reactor with on-load refueling became, in the minds of LWR salesmen and anti-proliferation advocates, a proliferation threat.

In spite of this facile and negative PR, AECL managed to sell between 30 and 40 CANDUs, both in Canada and around the world.

Has the international competitive landscape changed much since the 1950s? There are a few more competitors now than there were then: France and Russia have entered the commercial nuclear game in a big way. The U.S. reactor vendors with whom AECL competed in the 1960s and 1970s have morphed into major international consortia. But we competed successfully then, in arguably more difficult circumstances, and there’s no reason we couldn’t do so today.

It really boils down to how you view competition. Are you afraid of it, or do you welcome it? Next year Canada’s Olympic hockey team will go up against the best in the rest of the world: Russia, Sweden, Finland, the U.S. Wow, those are strong hockey countries. Should we play these countries, or should we just quit since we’ll never win anyway?

Silly as that sounds, that is precisely what the anti-CANDU crowd is urging. The world is tilting toward LWRs, the CANDU is a proliferation-prone “niche” product… so let’s just get out of the game. Well, here’s hoping the federal government isn’t listening. Here’s hoping that the feds’ Fabian strategy is just part of their bargaining game with Ontario (see article), and that an Ontario decision comes down soon.