Energy Probe

Matthew McClearn
Canadian Business
December 7, 2003

For Jerry Hopwood, the Wigan Coalfield served as a sobering lesson about the cost of man’s need for energy. During his youth, in the 50s and 60s, in Manchester, England, Hopwood witnessed its ravages first-hand. “I grew up around coal mines and coal dust, and people dying of silicosis and mine accidents,” he says. “That coalfield was just coming to the end of its life, and people realized that this was a very difficult way to make energy.” After graduating from university with a master’s in applied physics from Oxford, he decided he wanted to be part of the solution.

Three decades later, Hopwood, a man who speaks thoughtfully and confidently on energy issues, is a director of business development at Atomic Energy of Canada Ltd. In that capacity, he is an ambassador for the Crown corporation’s next generation of Candu (short for “Canada deuterium uranium”) nuclear reactor, the ACR-700 (ACR stands for Advanced Candu Reactor). As AECL’s engineers draw up designs and schematics for the ACR, however, Canada’s nuclear industry has reached a crossroads of sorts. Older Candu reactors in Canada seem to bear witness to a similarly stark message: nuclear is a difficult ? and expensive ? way to make energy.

Canada’s 22 Candu reactors (most are in Ontario, but some are in New Brunswick and Quebec) provide 13% of the nation’s electricity. Several are dormant; none will be operating beyond 2020 without expensive refits or reactor replacements. All of which raises the question: will Canada go with new nuclear or no nuclear? “I believe we are going to have to face that question sooner rather than later,” Dave Goulding, president and CEO of Ontario’s Independent Electricity Marker Operator, said during a speech earlier this year.

The same question has come up in energy circles around the world, and several nations have already given their answers. Governments in Belgium, Sweden and Germany have initiated plans to phase out nuclear power in coming decades. China, South Africa and Japan are leaning the other way, with new nuclear plants now under construction. Canada, which invested heavily in maintaining its nuclear infrastructure in recent years, must come up with a clear, coherent policy. Regrettably, our leaders seem some distance from finding one.

One need look no further than the Pickering Nuclear Generating Station A’s four reactors to grasp the troubled history of nuclear power in Canada. Located on the shores of Lake Ontario east of Toronto, all four units at Pickering A shut down in 1997 over concerns about management, process and equipment. “The failure of Pickering A couldn’t have happened at a worse time,” wrote journalist Gordon Laird in his recent book, Power: Journeys Across An Energy Nation. He notes that coal-fired generators have taken up the slack, creating a surge in greenhouse gas emissions. “After a golden era of nuclear megaprojects ? resulting in a thirty-billion-dollar public debt ? atomic power faltered right when smog and greenhouse gas issues became critical.”

If that wasn’t bad enough, electrical utility Ontario Power Generation’s $800-million restart plan proved an inglorious boondoggle. It was to see all four reactors restarted between June 2000 and June 2002. The first, Unit 4, finally re-entered service on Oct. 4 ? only to shut down in November due to equipment problems. (OPG claimed it would return to service shortly.) The other three units remain dormant, and should they be restarted, too, the invoice could top $4 billion. It’s not the first such disaster: Pickering A’s reactors were shut down in 1983 after a loss-of-coolant accident. Repairs cost more than $1 billion and took a decade to complete.

Pickering A is not an anomaly. South of the Bruce Peninsula, which juts out into Lake Huron, Bruce A Unit 4 has been testing in preparation for its return to service. When fully operational, it is expected to generate 750 megawatts, enough to power a city of 300,000 people. Unit 3 is expected to come back online soon after. Those restarts have been a long time coming: Unit 2 was shut down in October 1995, followed by the other reactors in March 1998. Bruce Power, a consortium that leased the eight reactors from Ontario Power Generation in 2001, announced the same year its plans to restart Units 3 and 4 by summer 2003, at a cost of $340 million. That would have helped Ontario through the electricity-sucking hot months ? had Bruce Power not missed its target. Unit 4 restarted in October, while Unit 3 is expected to be back on the grid in the coming months.

During the industry’s ? and AECL’s ? genesis in the 1950s, proponents envisioned nuclear power as an energy source “too cheap to meter.” That promise, and many others, vaporized faster than water inside a reactor. In the wake of shattered budgets and deadlines missed by spectacular margins, the industry’s future is uncertain. The last reactor built in Canada was Ontario’s Darlington station, completed in 1993. Of the more than 150 nuclear reactors built across North America ? including Darlington ? all were ordered before 1974. The dearth of orders at home has forced AECL to look abroad; during the past decade, it built reactors in Romania, South Korea and China.

If Canada’s nuclear industry has a future, you’ll find it at AECL’s facility at Sheridan Park in Mississauga, Ont. Here, a development staff of 300 are busy working on the ACR-700. Still very much in the design and licensing phase, it’s one of a third generation of reactors conceived by the industry’s global leaders, such as General Electric, Westinghouse and France’s Framatome ANP. It’s a global race to reduce the risks and costs associated with nuclear power generation, to make it more competitive with other technologies.

The ACR is the next evolutionary step for Candu technology. It’s more compact than the current flagship, the Candu 6, and requires less heavy water ? an expensive commodity used as a coolant and a moderator inside traditional Candus. The ACR uses enriched uranium, so fuel bundles last roughly three years, as opposed to one year in a Candu 6. The result, AECL says, will be shorter construction times and less waste. And, more importantly, lower cost: after construction of the first ACR, subsequent units should cost 40% less than the $1.5-billion Candu 6.

AECL plans to be ready to build its first unit by early 2006. And while it remains enthusiastic about foreign markets ? particularly China ? it also hopes to build ACRs in North America. A few years ago, such talk would have seemed far-fetched. But sitting in an office at Sheridan Park in October, Hopwood and Ian Dovey, AECL media relations manager, are decidedly optimistic. Hopwood sees nuclear playing an increasing role in Canada’s energy future. Dovey’s message, repeated often during an interview, is that nuclear is the “workhorse” of Ontario’s electrical grid ? a role he wants retained.

Neither Dovey nor Hopwood will speculate on the chances of seeing new nuclear plants built in North America. “That’s a political decision,” Dovey interjects. And yet, AECL is spending millions to license and market the ACR in both Canada and the United States. The federal government pledged $46 million toward that effort in September, in addition to the $51.5 million already committed to the project. Clearly, AECL at least hopes political winds will sway in its favour. Pressed on the issue, Hopwood says that the tone of the energy debate has changed. “Nuclear” was a word politicians were reluctant to use a few years ago, he offers. “Events like the Aug. 14 blackout stimulate a lively debate,” Hopwood says. “All of a sudden, the nuclear option is being spoken about, recognized and debated. We’re back on the agenda.”

The Great Blackout of 2003 may have spurred Canadians to think more about energy, but nuclear’s renewed appeal has more to do with Canada’s commitments under the Kyoto Protocol. Canada has agreed to lower greenhouse gas emissions to 6% below 1990 levels between 2008 and 2012, a target many see as unattainably aggressive. “Our trend line on CO2 emissions has been going up, and there are not a lot of easy ways to turn it around,” says Hopwood. “One of the best ways to contribute to that is nuclear.” After all, nuclear power plants emit no carbon dioxide. With the power sector contributing hugely to the nation’s total emissions, that’s a considerable benefit.

Nuclear also has attractive implications for energy security. North America’s increasing reliance on imported hydrocarbons ? oil and gas ? is becoming an acute problem. North Americans can mine, fabricate and enrich uranium on their own soil, and then use it to generate their own electricity. Unfortunately, a move to nuclear would do little to alter the continent’s reliance on oil ? after all, very little petroleum is used to generate electricity.

There’s one final ? and very potent ? argument in favour of building more reactors: the country has invested a mind-boggling amount in the industry over the past 50 years. The industry now employs more than 30,000 people and is said by some to contribute billions annually to the Canadian economy. That point was hit home recently by the Canadian Nuclear Association, the industry’s non-profit promotional arm. It commissioned a report by the Canadian Energy Research Institute (CERI) to study the industry’s economic impact. The report offered an enticing carrot: if Canada builds two 720-megawatt reactors, it claimed, $2.6 billion would be injected into the economy. The National Energy Board, for one, can foresee new nuclear facilities in Canada. In a recent study, the ENB envisioned a scenario in which “new nuclear facilities, based on the Advanced Candu reactor, are located on the sites of existing nuclear facilities as advancements in technology for safety and waste disposal provide for wider public acceptance.” Under that scenario, nuclear could expand to 11% of fuel share by 2025 from 7% in 2000. “The ACR,” the report concluded, “could be among the most economic options for new generation in Canada.”

Tom Adams, the vocal executive director of Toronto-based Energy Probe, speaks about capitalism and markets with something approaching reverence. Among the many criticisms of nuclear, his are among the more incisive: Adams believes the market has rejected it as a viable alternative. He’s confident Canada will, too. “Nuclear has no future in Canada,” he says. “The existing record will stop them.”

Adams points to the Pickering A units not only as valuable lessons on nuclear economics, but also as indications of what to expect down the road. Alongside Pickering A, for example, sit the newer Pickering B reactors. Unit 5’s pressure tubes are at the end of their service life and are “close to the malfunction point,” he says. He estimates it could cost $850 million to retube the reactor. Reactors in New Brunswick and Quebec face similar situations, he says, adding that most reactors in Canada encounter serious troubles early in their teenage years. “The only rational way to manage this industry is in wind-down mode,” he says. “We made terrible mistakes getting into this thing, and we ought to manage as graceful as possible an exit.” That means operating existing plants for as long as feasible, until they become too costly or unsafe; when they require expensive refits, pull the plug.

That nuclear persists at all on the agenda is a tribute to the industry’s public relations efforts, Adams alleges. “These people have never generated a return on investment, but they’ve been able to secure massive amounts of state aid,” he says. “They are the No. 1 panhandlers in industrial history.” How much the industry has received is anyone’s guess. The Sierra Club of Canada, an opponent of nuclear, claims the industry has received subsidies totalling $17.5 billion (in 2001 dollars) from the feds during the past 50 years. (A 2002 estimate from AECL put that figure at just $6 billion.)

The bottom line, critics argue, is that nuclear is an energy source almost too expensive to meter. Some think-tanks agree. In a recent review of clean power alternatives, the Conference Board of Canada notes that the long approval and construction process for nuclear facilities makes them unattractive to investors. The Pew Center on Global Climate Change based in Arlington, Va., examined advanced nuclear technology alongside other clean energy alternatives and concluded it would be a “relatively expensive” method of reducing greenhouse gas emissions. “If decisions were purely economic,” wrote Laird in Power, “nuclear power would likely be phased out.”

On the other hand, energy-policy decisions are not purely economic. They never have been.

The market may well have rejected nuclear. But have governments?

On behalf of the nuclear industry, the Canadian Energy Research Institute released a study earlier this year on nuclear’s potential in Alberta’s oil sands. CERI posited that steam provided by a modified ACR facility for bitumen production would be economically competitive with steam from a gas-fired plant. Alberta premier Ralph Klein was decidedly cold to the idea. “I have some concerns about nuclear power,” he said last January. “When I think of nukes, I think of Three Mile Island and Chernobyl.” Other provinces also have reservations, though they’re probably thinking more about Pickering. Hydro Quebec’s plans to increase Quebec’s generation capacity, for example, focus mostly on hydroelectricity. In any case, few Canadian utilities plan to build major generation capacity soon.

The real question mark is Ontario. Debates in its legislature have clearly identified the electricity supply challenges facing the province today are expected to worsen as existing facilities age. The new Liberal energy minister, Dwight Duncan, is awaiting two reports to guide future decisions. One if from the Electricity Conservation and Supply Task Force, which will suggest ways to attract new generation. The other is expected soon from the Pickering A review panel, which will advise on whether to continue efforts to restart that facility’s three remaining dormant units. The government has already committed to shutting down dirty coal plants, and is working on a feasibility study to develop the Beck hydroelectric station at Niagara Falls. “New nuclear projects have not been ruled out,” said spokesperson Angie Robson. Premier Dalton McGuinty has already spoken out in favour of nuclear. “We’ve had a nuclear industry in Ontario for about 50 years and it has been, by and large, a very successful and solid record,” he has said. “Nuclear generation is an integral part of a responsible, progressive plan to generate electricity in the 21st century.” As for exactly what that role should be, Ontarians have yet to hear.

Policy within the federal government, which has jurisdiction over nuclear energy, is similarly uncertain. The current regime is decidedly pro-nuclear. During a trade mission in late October, Prime Minister Jean Chr?tien participated in opening ceremonies at two new Candu reactors in eastern China. He has aggressively marketed AECL’s technology for more than 20 years. And his energy minister, Herb Dhaliwal, expressed enthusiasm for the ACR when he committed $46 million toward its marketing and U.S. licensing in September. The support, however, clearly has limits. The feds recently backed away from participating in an international experiment into nuclear fusion, reportedly for fears of cost overruns.

Chr?tien’s successor, Paul Martin, has not been averse to the nuclear industry. As finance minister, he presented a budget in 1996 that continued subsidies to AECL, albeit at the reduced rate of $132 million a year. The continued funding reflects in part “a desire to maintain the Canadian Candu nuclear reactor as an energy option for the country,” according to Natural Resources Canada. Canadians have no reason to believe Martin’s thinking has changed. Neither he nor his communications staff responded to repeated inquiries about his position on nuclear power.

The lack of clarity on policy makes it at least conceivable that ACRs will be built in Canada. To critics, that would mean ignoring the lessons providing by existing reactors. In Ottawa last March, New Brunswick Power president Stewart MacPherson told the Canadian Nuclear Association that the utility’s Point Lepreau nuclear facility ha a “less than stellar” record, and that the industry must improve performance if it ever wishes to gain public acceptance. The ACR may be AECL’s last opportunity to do so. If it, too, delivers less than promised, a fate similar to that of the Wigan Coalfield, which now lies abandoned, cannot be far off.

Lawrence Solomon
National Post
December 6, 2003

For four decades, in three provinces, under Liberal, Conservative and NDP governments alike, nuclear power has brought Canadians nothing but grief.

In New Brunswick, nuclear power has all but bankrupted NB Power. The utility now has negative net worth and an insecure supply of power, all because its big gamble in building its one nuclear plant – which accounts for 30% of that small province’s production when operating – didn’t pay off.

In Quebec, nuclear power was less of a disaster, but only because the province recognized its error and pulled the plug early on. One of the two plants built in Quebec was mothballed as soon as it was built; the other produces expensive power. Hydro Quebec remains solvent only because of the huge hydro-electric reserves to which it has access.

In Ontario, nuclear power effectively bankrupted Crown-owned Ontario Hydro in 1997, leading to its breakup and reorganization. Of the 21 nuclear plants built in Ontario, only 14 are operating today. The province’s vast supplies of hydro-electric power from Niagara Falls and other water plants, though they produce inexpensive power, cannot counteract the huge costs the power system must bear from its nuclear system. Even the nuclear plants that do work are financial albatrosses. Darlington, Hydro’s last nuclear plant, came in at $14.4-billion, almost three times its initial estimate and 10 years late. It produces the most expensive power in Canada, raising rates for all and encouraging industries to locate elsewhere. This week’s news, that refurbishing the Pickering reactors is now estimated at $4-billion, or more than five times its initial estimate, is true to form.

Federal taxpayers have likewise been hit: Atomic Energy of Canada Limited, a federal Crown corporation, has bled red ink from the get-go and needs annual transfusions in federal support – the tab to date: more than $20-billion.

Neither are Canadians alone in being disappointed by nuclear power. In the late 1980s, the United Kingdom decided to shut down much of its nuclear fleet, and cancel its nuclear expansion program, when the privatization of its power sector revealed that the country’s Crown-owned utility had been providing parliament with wildly fraudulent financial accounts. The balance of the U.K.’s nuclear fleet, privatized as British Energy in the 1990s, went bankrupt earlier this year, despite generous subsidies designed to keep it afloat.

The story is little different in Germany, Sweden, the United States and every other Western nation, with the possible exception of Finland. Elsewhere, nuclear power remains popular only in nations such as China, Iran, India, Pakistan and North Korea – countries with nuclear weapons programs.

Nuclear power can only survive in a monopoly system, where governments can force society to subsidize its operations. When countries turn to competitive markets to meet their power needs – as has happened in the U.K., New Zealand, and parts of Australia, Canada and the United States – no private sector player has ever built a nuclear power plant.

The U.K. was the first country to turn to competition, at the same time that it privatized its non-nuclear plants in 1989. Almost immediately, the private companies that now had access to the marketplace went on a building spree – the largest the country had ever seen. They soon flooded the U.K. with a vast new supply of inexpensive and clean power, most of it from the modern, high-efficiency natural gas generating plants that the private sector always preferred, but also from some wind power and renewable energy. Rates dropped for residential and small business consumers first, then for big business. The U.K.’s power prices are now a remarkable 30% lower than they were prior to privatization.

In the United States, competition came more slowly, and state by state. Some states, like California, badly botched their attempt at opening up their market, and paid dearly as a result. But most states deregulated sensibly, leading to a flood of inexpensive power in the United States, too. In some U.S. states, power companies have the ability to generate almost twice as much power as they will need on the coldest and hottest days of the year. Since 1999 alone, deregulation has increased the U.S. power supply by 24%, creating an immense surplus. Ontario now depends on this surplus from the United States to get by, and New Brunswick may soon, too.

Ontario, Quebec and New Brunswick are now all reassessing their power systems, wondering whether to pour more good money after bad in an attempt to refurbish their ailing nuclear reactors. If they do, they can count on more of the same – cost overruns, followed by high-priced power if the plants work and no power if the plants don’t.

If they decide to stop their nuclear bailouts, they have a ready alternative in open markets. Small power producers – once they become confident that governments won’t change the rules of the game on them after they had invested millions – will soon flood Canadian power markets with inexpensive and clean power. Power shortages will give way to power surpluses. After four decades of careening from one crisis to another, politicians can move on to other fields.

Lawrence Solomon is executive director of Urban Renaissance Institute and Consumer Policy Institutes, divisions of Energy Probe Research Foundation. E-mail: LawrenceSolomon@nextcity.com.