A low carbon tax in Ontario would make worst-case nuclear overrun look cheap

A $15-per-ton tax on carbon dioxide (CO2) emissions from Ontario power plants would add 0.8 cents to the cost of natural gas-fired power generation. Natural gas is generally regarded as the “cleanest” fossil fuel; that is because it emits roughly 550 grams of CO2 for every kilowatt-hour it generates, whereas coal—the “dirtyest” power generation fuel—emits between 900 and over 1,00 grams. Here is the arithmetic for gas-fired generation when CO2 emissions are taxed at $15 per ton:

Carbon tax per ton of CO2 emitted: $15
CO2 emitted by natural gas-fired power generation, in grams per kWh: 550
Grams per metric ton: 1,000,000
Tons of CO2 per kWh emitted by natural gas-fired plants: 0.00055
$15 x 0.00055 tons per kWh = $0.0083 per kWh
To convert to cents, multiply $0.0083 by 100 = 0.83 ¢ per kWh

Those who follow the Ontario electricity debate know that the infamous Debt Retirement Charge on your electricity bill is 0.7 ¢ per kWh. That is regularly ascribed to the cost of building the Darlington nuclear generating station, a project that began in 1979 and finished in 1994. Darlington ended up costing $14 billion, twice the original estimate.

Those who ascribe the entire DRC to Darlington do so with a fair amount of outrage. To them, that 0.7 ¢ per kWh represents an increase to the cost of electricity that is simply unacceptable.

It is ironic that most of those who ascribe the DRC entirely to Darlington and feel the 0.7 ¢ per kWh is unacceptable are perfectly fine with the Feed-In Tariff (FIT) program, which forces Ontario rate payers to pay wind farms 13.5 cents per kWh for wind-powered electricity. It must be pointed out that rate-payers only have to pay 5.5 cents per kWh for Darlington’s electricity.

It is doubly ironic that most of those who complain about the exorbitant 0.7-cent DRC almost all advocate the replacement of Ontario’s nuclear fleet with natural gas-fired plants. As I have shown above, gas-fired power would cost an extra 0.8 cents per kWh if there were a modest $15-per-ton tax on CO2 emissions.

In other words, these people oppose the 0.7 cent DRC, but support a 0.8 cent increase for their favourite power source.

If there were a $15 per ton carbon tax, the most we could ever expect from a major nuclear cost overrun would be an extra 0.7 cent per kWh increase. That is LESS than what we would pay for gas-fired power.

And if the carbon tax were made truly meaningful, say $30 per ton? Then gas-fired power would cost an extra 1.6 cents per kWh. Nuclear would stay at, at most, 0.7 cents. It does not emit any CO2.

0 0 vote
Article Rating
Subscribe
Notify of
5 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
seth
8 years ago

Of course the Darlington overruns had very little to do with cost of building the reactors. It was project schedule waffling stupid financing decisions by moronic politicians,

Post Darlington the 7 Candu’s built world wide came in at 2B/Gw, or 1 cent a kwh with public power financing.

Unfortunately, the Gen II Candu tech is very dated and Ontario needs to work out a deal with Toshiba to become a AP-1000 factory module production centre with the new Darlington contract and the replacement rather than refurb of the old Candu’s.

8 years ago

“Post Darlington the 7 Candu’s built world wide came in at 2B/Gw, or 1 cent a kwh with public power financing”

That’s an odd mixture of units and conditions. Using basic inflation adjustments, they all come out around $3.50/W. For instance:

Cordoba was $420 million in 1973, and required a $130 million write-down in 1978. Applying the Bank of Canada inflation rates to those numbers gives you $1,860 and $415, for a total of $2,275 for a single 600 MWe plant. That’s about $3.8/W

Cernavoda-1 can use the 1991 number of $2.2 billion for the first 700 MWe, or about $3.2 inflation adjusted for about $4.60/W. Cernavoda-2 added another $1.2 billion ($750 CAD, $250 USD) in 2000 (this is a bit confusing, I see two sets of numbers for this), so another $1.5 billion. That brings it down to $3.25/W.

Wolsong-1 was $576.5 million in 1975, or $2,300 today, at around $3.85/W. Wolsong-2 was $1.2 billion in 1990, or about $1.8 billion today, for a 680 MWe plant at about $2.67/W combined. I can’t find pricing on 3 & 4.

Finally there’s Qinshan 1&2: $4 billion in 1996, $5.4 today, for 2x 725’s or about $3.75/W.

So the price seems pretty steady when you inflation-adjust, at around $3.50 a watt. Let’s also not forget that cost-of-capital and decommissioning (etc) roughly doubles this, which explains the $8.25/W price for Darlington-2. This is in-line with Moody’s latest numbers of ~$7/W.

8 years ago

“In other words, these people oppose the 0.7 cent DRC, but support a 0.8 cent increase for their favourite power source.”

Ahh yes, “these people” – why might “these people” support such a thing? Well, maybe they didn’t forget to consider the base cost of the power?

That’s because the base cost is 3.9 cents/kWh (latest numbers from NA, as quoted in the Vancouver Sun) for NG instead of 5.5 for U (the number you quote here on the blog).

Here, let me do the math for you:

3.9 + 0.8 = 4.7
5.5 + 0.7 = 6.2

4.7 < 6.2

"Then gas-fired power would cost an extra 1.6 cents per kWh"

3.9 + 1.6 = 5.5
5.5 + 0.7 = 6.2

5.5 < 6.2

Steve Aplin
8 years ago

But the base cost of NG-fired power in Ontario has very little to do with the current low cost of gas across the continent. In Ontario, gas-fired power is fetching something in the neighborhood of 10 cents per kWh. Check out this post, from Cold Air: http://morecoldair.blogspot.com/2012/01/sober-look-at-ontarios-2011-electricity.html

Throw in the cost of “renewables” by which I mean wind and solar, and the cost of that pair—renewables and gas—heads north of ten cents.

And, to repeat, we haven’t even begun to factor in the cost of CO2.

Meanwhile, we’re fretting over 0.7 cents per kWh.

8 years ago
Reply to  Steve Aplin

Your article sets up this point of comparison:

“those who complain… advocate the replacement of Ontario’s nuclear fleet with natural gas-fired plants”

Ontario’s nuclear fleet provides base load power.

Therefore, replacing them with NG would require a number of NG plants operating as base load.

So in response, I posted the current price of base load power from NG turbines. That’s apples-to-apples.

You don’t like my figure, fine. So you quote another one. However, as the very article you quote notes:

“except in Ontario where low capacity factors at private gas generators demand contracts at much higher levels. Those capacity factors are low because the gas plants are there to supplement the grid only during the daily peaks”

So you’re comparing baseload nuclear to peaker NG. That’s apples-to-oranges.