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Ontario goes nuclear

Unwilling to rely on fossil fuels to provide 25 GW of new electricity generating capacity over the next 15 years, the Ontario government is making nuclear power a centrepiece of its energy-supply future and establishing a lightning rod for critics, writes WJ Simpson

THE Canadian government has unveiled a controversial C$4.25bn ($3.61bn) programme to refurbish four idled nuclear reactors, installed in the 1970s and closed since 1998, at Ontario's Bruce Power plant. The undertaking will take six years and will give the province 1.55 gigawatts (GW) of new power-generating capacity. The investment follows C$1bn it spent over the past year refurbishing a unit at the Pickering plant – although this did not represent an incremental capacity gain.

But the Bruce refurbishment will make only a slight dent in the projected power needs of Canada's industrial heartland and a province that represents almost 40% of the nation's population. Premier Dalton McGuinty says Ontario needs to refurbish, rebuild or replace 25 GW of generating capacity by 2020. The province's capacity amounts to 30 GW, of which about 22 GW is available on any given day. On a high-demand day, Ontario requires 25 GW, while on moderate days this falls to 16-18 GW.

As a result, McGuinty has asked the Ontario Power Authority (OPA), which is controlled by his own office, to develop a 20-year plan to meet the projected demand and obviate costly electricity imports from elsewhere in Canada and the US during times of peak consumption. OPA is responsible for ensuring an adequate, long-term supply of electricity in the province.

"We will go ahead with economical, safe, new nuclear generating capacity if that is recommended by OPA," McGuinty says. "It is time to make decisions that have been avoided." However, Howard Hampton, leader of the opposition New Democratic Party, accuses McGuinty of single-mindedly clinging to "unsafe, unreliable and expensive" nuclear power when "energy efficiency is our best bet".

In 1997, Ontario Power Generation (OPG) took seven of its 19 reactors off line because they were not up to standard and, in 2003, three of the agency's top executives were sacked for botching the restoration of a Pickering unit, which came in years late and millions of dollars over budget.

Just last summer, OPG, whose primary business is to generate and sell electricity in Ontario, scrapped plans to restart two other mothballed Pickering reactors, arguing it did not make economic sense to spend C$2bn on the project.

Despite those stumbles, McGuinty wants to avoid "climate-altering carbon emissions" from the consumption of oil, gas and coal. His government has already pledged to close its coal-fired plants by 2007, taking 6.5 GW out of commission – a process that included a C$0.5bn write-off last year.

A spotty record

McGuinty's conversion to nuclear power follows a specially commissioned Ontario government report that argued that well run nuclear plants would be essential to meet the province's energy needs. Panel member John Manley, a former Canadian finance minister, says Ontario is running out of options, regardless of what he concedes is a "spotty" record when it comes to running nuclear plants, which have been plagued with cost overruns, expensive shutdowns and mismanagement.

The panel's report says Ontario needs "a framework and the tools to get to work on its core business – providing reliable, competitively priced electricity generation" by replacing ageing nuclear plants with new technology and by entering into leases with the private sector for financing.

It is not alone in Canada in returning to nuclear power. The New Brunswick government decided in June to spend C$1.4bn overhauling its outdated Point Lepreau plant, choosing Atomic Energy of Canada (AECL), the federal government agency that produces Candu reactors, as general contractor. That contract includes a fixed price and substantial penalties if AECL fails to meet a September 2009 completion date.

Backtracking on an earlier plan to build a coal-fired plant, New Brunswick's premier, Bernard Lord, says closing the 22-year-old Point Lepreau facility at a cost of C$0.5bn and building new coal-fired plants would not make financial sense.

The direction being taken by Ontario and New Brunswick reinforces the view of Phil Prince, president of the Canadian Energy Research Institute, that fossil and renewable fuels will not be able to meet the demand for electricity in Canada, leading to a nuclear "renaissance". But he points out that strong public opposition to nuclear power poses a stumbling block.

Other critics say hefty up-front costs, long-term risks, the difficulty of obtaining insurance and a complex regulatory approval process will deter the private sector from investing without subsidies and guarantees. And the hidden costs, which often take years to surface, have been felt by the Canadian government, whose bill for decommissioning existing AECL plants has ballooned to C$6.8bn from C$3.1bn.

The dangers that Ontario is entering a financial quagmire by embarking on fresh nuclear agreements are reflected in the books of Electricity Financial Corporation, whose inherited debts from the former state-owned Ontario Hydro include C$23.8bn of unfunded nuclear decommissioning and nuclear-waste management liabilities.

Under its deal to refurbish Bruce's reactors, Ontario has entered a 31-year contract for electricity supply with a consortium that includes TransCanada, the investment wing of the Ontario Municipal Employees Retirement System and two electricity unions. The partnership will be paid a fixed rate of C$57.37 per megawatt hour (MWh), or C$63/MWh including fuel costs, for power it supplies when two of the reactors are restarted. When market prices fall below that level, OPA will make up the shortfall.

Opportunities for growth

Cameco opted out of the consortium after declaring a C$63m loss on refurbishing two other Bruce reactors and now plans to sell its stake for C$200m. The world's largest uranium producer says those decisions "do not change our vision to be a dominant company in the nuclear energy business", although Cameco claims the best opportunities for growth on the power-generation side are in the US.

Tom Adams, executive director of Energy Probe, a Canadian energy think-tank, predicts Ontario is setting up taxpayers and consumers for "financial meltdown". He argues that no Candu refurbishment has ever been completed on budget and the "obsolete" Bruce reactor design only compounds that challenge without making any fundamental changes to the basic safety features.

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