July 24, 2015
Oh ye of too much faith
Chamber buying into nuclear rebuilds
The Ontario Chamber of Commerce has created a big splash with a claim that rising electricity costs could put the lights out in one in 20 Ontario businesses within the next five years.
It’s a dramatic claim, but one that is difficult to assess given that it is based simply on concerns expressed by the chamber’s members and the fact that the system for determining electricity prices for businesses and industries in Ontario seems to be only slightly less complicated than calculating the trajectory of a probe to Pluto.
The chamber certainly raises some good points, including the need to offer small and medium-sized businesses the same financial incentives that large businesses receive to reduce their demands on hot summer days when our air-conditioners are running full out.
But the chamber’s preferred solution seems to be keeping residential customers plugged into paying the nuclear debt retirement charge rather than fixing the system for the long term.
Fortunately, there is a better, less painful solution that serves all customers. Right now, the Ontario government is poised to approve the rebuilding of 10 aging nuclear reactors at the Darlington and Bruce nuclear stations at a cost of up to $80 billion. The chamber hugely underestimates the cost of this undertaking (pegging it at $20 billion) and expresses an odd degree of faith in the government’s ability to bring these projects in on time and on budget. The truth, of course, is that no nuclear project in the history of this province has ever been finished at anything close to on budget or on time. In fact, on average, the actual costs of our nuclear projects have been 2.5 times greater than forecast.
Even under optimistic official estimates, the cost of power from these rebuilt reactors will be much greater than the cost of water power from Quebec. Right now, Quebec is earning around three cents a kilowatt hour (kWh) for the bulk of the power it exports. That’s because Quebec’s power exports are being hampered by two factors: a transmission system that limits its ability to export power to the U.S. during high-price peak demand periods and tough competition from natural gas power plants. Quebec needs new markets for its growing surplus of low-cost water power (and, no, it does not need to build new dams to supply Ontario contrary to the Chamber’s assertion).
In 2010, Quebec signed a long-term deal with Vermont to export power at a cost of just less than six cents a kWh. That’s at least 30 per cent less than what Ontario Power Generation estimates juice from rebuilt Darlington reactors will cost. By cancelling the Darlington Re-Build Project and importing water power from Quebec, we can reduce our electricity costs by $14 to $52 billion over the next 20 years.
The cost to upgrade transmission connections to take full advantage of the power Quebec has available today — power that is more than adequate to replace what we currently get from Darlington — would be paid back in one year from the cost savings. Quebec has sufficient surplus power to supply Ontario for 99 per cent of the hours of the year. This fact is missing from the chamber’s analysis, which seems to rely strictly on the usual red herrings raised by the pro-nuclear crowd in Ontario looking to protect a juicy fiefdom that certainly is not benefitting small and medium-sized businesses.
Another head scratching element of the chamber’s report is its call for greater transparency in electricity pricing and decision making. Of course, prices paid for renewable energy sources such as wind and solar are completely transparent under the Feed-in Tariff program and if projects go over budget, it is the developer who is on the hook. But the chamber prefers nuclear, where contracts remain secret, true prices are almost impossible to determine, and where cost overruns have routinely been shifted from utilities to ratepayers (in part through the nuclear debt retirement charge that the chamber wants residential consumers to continue to pay.)
We can only ask: Why is the Chamber of Commerce, of all organizations, so keen to believe the government’s weak assurances that “this time it will be different” when it comes to nuclear rebuild projects?
If the chamber is really looking for a way to keep electricity costs for its members under control (at least for those members without a direct stake in the business of rebuilding nuclear reactors), the worst possible answer is to make another risky bet on nuclear. The real answer is to ensure strong incentives for small and medium-sized businesses to upgrade their energy efficiency, including benefitting from time-of-use pricing, and for Ontario to strike a mutually beneficial deal with Quebec that saves Ontario businesses money while creating new revenues that Quebec can invest in infrastructure. That’s a win-win for consumers and business in both provinces.
Jack Gibbons is chair of the Ontario Clean Air Alliance.