Nuclear Ontario: fed-prov negotiation needs to continue

A report in the Globe and Mail says that the Ontario premier asked the Canadian prime minister, in a letter sent in June, to hold off privatizing Atomic Energy Canada Limited (AECL) until Ontario buys new AECL reactors. Odd that we find this out only 5 months later—and 17 months after Ontario halted the process to buy the same reactors—but better late than never. Ontario’s plea shows that the structure of the AECL issue is exactly the same as it was when Ontario put the process onto the back burner in mid-2009: who pays what if the reactor construction project gets delayed.

The new machines will go into the Darlington site, after all. The original Darlington nuclear project ended up costing twice its original estimate. The station today cranks out 2,500–3,200 megawatts of cheap, clean power—morning, noon, and night—and we should remember that “cheap” includes the infamous Debt Retirement Charge, which essentially is each rate-payer’s contribution to paying down the debt that Ontario Hydro, the provincial utility, incurred when it built Darlington.

Let me be clear: Darlington today produces cheap baseload power, without dumping so much as a gram of carbon dioxide into the atmosphere. Don’t take my word for it; see the IESO generator output tables, which are published every hour at http://reports.ieso.ca/public/GenOutputCapability/.

 In spite of this, today’s Ontario politicians have been conditioned by years of hare-brained anti nuclear hyperbole and mediocre business analysis into thinking that a schedule delay on a nuclear project is the worst thing that can happen. Actually, the worst thing that can happen is that we don’t have power. Which means we need to build new stations, and those stations should be nuclear.

Both Ontario and the feds agree with this. Moreover, they agree on what kind of new reactors should go into Darlington: they should be the Advanced CANDU Reactor (ACR). The feds wanted that, and they got it.

 So what’s the holdup? Ontario’s insistence that somebody else cover the cost of a schedule delay may seem, to the feds, like an abdication of responsibility. The reason the original Darlington project cost double the original estimate was because Ontario couldn’t decide, after construction began, whether it really needed the power: demand forecasts proved wrong in the short term. So Ontario put the project on hold but didn’t cancel it. Which meant an entire workforce was paid, with borrowed money during a time of historically high interest rates, to wait for the government to make up its mind. According to Jeremy Whitlock of AECL, 40 percent of the total cost was due to interest charges.

As it turned out, Ontario did need the power. So all the fretting and delaying could and should have been avoided.

I think it’s safe to say that if we build 3,000 MW of new nuclear capacity at Darlington, we’ll need its output when it’s available.

From the federal point of view, it is absolutely right that Ontario should bear the cost of schedule delays that originate from Ontario decisions, like they did with the original Darlington project.

So why can’t Ontario ease up on that requirement? Take a disciplined approach, and just decide to complete the project once it is started? If Ontario committed to doing that, the feds might be amenable to providing some other kind of support, such as loan guarantees, that would help attract private capital to the project. That would ensure the sale of the first ACR units, and prove to potential international buyers, like China and India, that there is a market for these machines.

Given that the feds have put serious money into ACR development, this would ensure a payoff for that investment. They want to sell AECL, after all, and why not get the very best price they can?

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Joffan
10 years ago

Useful history. Asking to be sheltered from your contractor’s bad decisions is reasonable – asking to be shletered from your own bad decisions is not.

donb
10 years ago

Steve Aplin wrote:
I think it’s safe to say that if we build 3,000 MW of new nuclear capacity at Darlington, we’ll need its output when it’s available.

Even if the power is not needed in Ontario, there are plenty of opportunities to ship the power south across the boarder. There are lots of people in the USA, especially in areas close to Ontario, who seem to think that even if they shut down local nuclear power plants, that the replacement power will somehow appear magically.

10 years ago

Joffan, exactly. The Government of Ontario essentially demanded that AECL, Areva, and Westinghouse estimate the cost of schedule delays that might well have their origin in GO decisions. Only AECL had any idea what that meant, and since the federal government rightly refused to play along AECL based its estimate on the worst-ever case, which was the original Darlington.

Reminds me of the NHL player lockout. The owners essentially told the players they need a salary cap, because if some player asks for the moon there’s probably some owner dumb enough to give it to him. The salary cap was to protect the owners from themselves.

Donb, I agree. We should also remember that the surplus baseload situations have occurred in 2009 and 2010 because of low demand due to (1) cool summer in 2009 and (2) the recession. That’s a temporary situation.

9 years ago

Why is the idea that the regulatory body needs an overhaul not being discussed. Also the idea that various departments cooperate for the common good rather than pure rule enforcement and passing the buck.