Key project at Darlington nuclear facility hundreds of millions over budget, delayed

(October 16, 2017) A Global News investigation has uncovered a single component of the Darlington nuclear project could cost half a billion dollars, four-times initial estimates. Auditors say project “plagued” by problems.

This story originally appeared on Global News.

A Global News investigation has learned a single component of the Darlington nuclear refurbishment – that is two and a half years behind schedule and currently on pause – could cost Ontarians as much as $500 million, roughly four-times the initial estimate, when finally complete.

Ontario Power Generation – the provincially-owned company managing the project – says it has already terminated one contractor from the job – Black & McDonald – due to “unsatisfactory” work. While the company says a second contractor – the joint-venture between SNC-Lavalin and Aecon – was recently put on notice because of its unacceptable performance on the job.

“The price tag has gone up since the original estimate, it’s [now] at $381 million,” said Jeff Lyash, CEO of Ontario Power Generation and the person responsible for making sure the project comes in on-time and within budget.

Originally budgeted at $110 million, the project could cost Ontarians as much as half a billion dollars when complete.

OPG says these delays and cost overruns are primarily due to design changes in the project – including stricter regulations imposed by the Canadian Nuclear Safety Commission – but Global News has uncovered auditor reports that claim inappropriate oversight and failures in management at OPG are predominantly to blame.

While the current estimate is significantly higher than first planned – and there is no guarantee the project will remain within the current budget – OPG says the additional costs were accounted for when releasing the final public estimate.

“When OPG prepared the overall $12.8 billion [estimate] for Darlington Refurbishment in November 2015, all 500 projects, including the HWSF, were assessed for project risks,” said Neal Kelly, a spokesperson for OPG. “There is also adequate contingency within the overall Refurbishment program to fund the risks related to the final costs of the [storage facility].

Heavy Water Storage Facility

The Heavy Water Storage and Drum Handling Facility was originally proposed in 2006. It was among the first projects started at the massive Darlington refurbishment.

Made-up from a series of large metal tanks, piping and earthquake-proof foundation, the facility will be used to store and filter radioactive water from the province’s nuclear reactors.

The project is important to the refurbishment because without it, OPG says it cannot complete work on multiple reactors at the same time.

According to industry experts – as well as OPG – this is crucial to keeping the refurbishment on-time and within budget.

Lyash acknowledges the project has been difficult – perhaps the most difficult of all the projects worked on so far – but he says it’s no canary in the coalmine.

“This [refurbishment] consists of over 500 projects,” Lyash said. “Some of those have gone extremely well – under budget and ahead of schedule – some of them have been more challenging. But in aggregate, it puts us right where we want to be with the megaproject – on schedule and under budget.”

Ontario’s poor track record with nuclear

Lyash says OPG and SNC-Aecon have taken steps to prevent further delays and cost overruns on the heavy water storage facility. He says the contractor has responded positively to concerns about performance issues and he’s confident the project will be completed in the near future.

This is supported in the May 2014 audit – as well as subsequent audits – that says OPG has taken “aggressive action to correct as many of the major issues as possible.”

But energy critics who’ve spoken with Global News say Ontario has a notorious track-record when it comes to managing large-scale nuclear projects. And that energy customers in the province – who end up footing the bill for these problems – should be worried anytime they hear about such significant cost overruns and delays.

“This is just deja-vu all over again,” said Tom Adams, an energy-policy analyst who believes projects like this serve as a litmus-test for the refurbishment as a whole. “To be simply not learning from history. To repeat these mistakes. That’s really costly for society. It’s just amazing that we can’t do better”

Adams and other critics point to delays and cost overruns on past nuclear projects as justification for these worries.

For example, original construction at Darlington in the 1980s was budgeted at $7.4 billion. Plagued with delays and changes in financing, the project ended up costing Ontarians nearly double – with a final price tag of $14.5 billion.

But Lyash insists OPG has learned from the past. He says the problems facing heavy water storage are unique to this project and are due to it being a “first-of-its-kind” facility. OPG says this was also the first time they used a new contractor precurment model.

“I’ve got to stress,” said Lyash. “This refurbishment is a $12.8 billion megaproject. The underlying pieces – hundreds and hundreds of them – are going to be over budget, under budget, ahead of schedule, past schedule – that’s the way a megaproject is managed.”

But utility megaprojects in Canada do have a tendency of spiraling out of control. This was highlighted in a recent EY report [formerly Ernst & Young] that said, on average, Canadian utility megaprojects run nearly 40 per cent over budget with a delay of one year.

“[The heavy water storage facility] has sort of gone off the rails from what they were originally projecting,” said Brady Yauch, an economist and executive director of the Consumer Policy Institute. “They don’t know what the final price tag is going to be. Maybe they have some updated estimates, but their initial plans and where we’re at now are worlds apart.”

Yauch has been involved in the approvals process for the refurbishment and questioned OPG executives during energy board hearings.

He says that while OPG may have taken steps to ensure the project is eventually completed, he’s still wary of whether other projects at the site will experience similar problems.

“This is the first project to get kicked-off in relation to what is going to be $12.8 billion of expenditures,” Yauch said. “If you were kicking-off a big renovation or a big project and the first step along the way you’re significantly over budget, you’d probably start questioning whether you should be concerned about going forward.”

Lyash says OPG is reviewing the heavy water project and that the results will be shared with regulators and Ontario’s Minister of Energy, Glenn Thibeault.

But Yauch says Ontarians should be concerned – not just by this project, but by the refurbishment as a whole.

“This is just a miniscule component of what is the larger Darlington project,” Yauch said. “if [OPG] can’t handle this one, you have to start wondering: What happens when all the other projects face similar problems?”


This entry was posted in Nuclear Economics, Nuclear Power, Reforming Ontario's Electrical Generation Sector and tagged , , , , , , , , , . Bookmark the permalink.

3 Responses to Key project at Darlington nuclear facility hundreds of millions over budget, delayed

  1. Andrew Roman says:

    If this was a privately owned business would this be happening?



    • consumerpolicyinstitute says:

      If it did, they would be on the hook for the risk of those cost overruns.

    • Pierre says:

      You may remember the massive government bailout of a vast number of private enterprises (actually the whole economic realm) in the 2008-2009 global financial crisis…despite clearly exposing some of the perpetrators, none of them had to face any serious consequences.
      As far as I am concerned, the guillotine is ready.

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