Is Areva out of Ontario? And can AECL and Westinghouse dance?

It costs $3 million to have a nuclear reactor design reviewed by the Canadian Nuclear Safety Commission. Compared with other nuclear expenditures that’s not a huge amount of money. So when Areva, the French nuclear giant, decided to halt its CNSC design review, you have to wonder if Areve just saw the writing on the wall and decided to cede the Ontario nuclear reactor competition to AECL, the federal crown corporation and maker of the CANDU reactor.

You also have to wonder if Areva has run into serious problems regarding regulators’ views of the computer-based instrumentation and control (I&C) systems that  govern the operation and safety of its EPR, the 1600 megawatt pressurized light water reactor it is offering to Ontario. The trade press has buzzed since last summer with stories on concerns on the part of Finnish, U.K., and U.S. regulators that the EPR’s safety and non-safety I&C are not sufficiently independent of each other. If these concerns persist, Areva might be required to rework the architecture of these I&C systems. This is not a small change.

This would seriously set back Areva’s ambitious drive to be the firm that starts the nuclear renaissance. It would also thereby hurt the image of the world-wide “nuclear industry,” by giving more fodder to those who think the slightest delay on any nuclear project is proof that the entire industry is non-viable.

But Areva’s problems are not necessarily a bad thing from the point of view of Areva’s competitors, and especially AECL. The longer Areva’s projects are delayed, the more time AECL has to catch up to the French company in the all important drive to the two-year-in-service mark (see article). This benchmark is considered critical to demonstrate to nervous power utilities that the “evolutionary” next-generation reactor designs are problem-free and worth investing in.

But of course for AECL to reach that mark, it needs a customer who will actually build its own evolutionary offering, the ACR-1000. Right now, its most likely customer is Ontario Power Generation, the government-owned Ontario utility. And OPG can’t decide to buy any reactor because its provincial government bosses won’t let it. And they won’t let it because they don’t like AECL’s, or anyone else’s, price.

In the case of AECL, Ontario wants the company’s owner, the Canadian federal government, to guarantee a firm price in the event of a construction delay that drives up the cost. All three vendors were required to include such costs in their bids, and since it’s difficult to predict the extent and nature of a future delay, AECL accommodated this requirement by simply jacking up its final price. Ontario has demanded that that price go down, which means the federal government must come up with some guarantee of a backstop.

The presence of the other two vendors, Areva and Westinghouse, gave Ontario some leverage in this bargaining game. If the feds couldn’t or wouldn’t play ball, Ontario could always threaten to do the unthinkable: buy from a non-Canadian vendor.

Well, it appears that one of those non-Canadians, Areva, has lost its bottle in Ontario. Again, was that because Areva just decided to not waste any more money chasing a preferred-vendor contract or because it sees an unfavourable worldwide regulatory consensus? Ontario had better hope it’s not the former, because Westinghouse will likely soon follow suit. In that case, goodbye leverage.

But if it’s the latter reason, i.e., regulatory problems particular to the EPR, then there’s no reason for Westinghouse to bow out.

So the dance continues. Meanwhile, the Canadian employment situation continues to look bleak (see article). A major nuclear build project in Ontario could alleviate that.

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