November 22, 2014
Ontario should nuke reactor rebuilds
If you ran a business and paid attention only to the profits being made by your most successful division, while ignoring the losses in an even bigger division, you wouldn’t stay in business for long.
So it’s a little surprising to see the Canadian Manufacturers and Exporters (CME) trumpeting money losing nuclear power as a good way to keep electricity costs down for businesses in Ontario (“Ontario has a nuclear future” – Robert Hattin column, Nov. 5).
Last year, Ontario Power Generation’s (OPG’s) nuclear division lost $140 million, while its water power division delivered a profit of close to $275 million. This illustrates exactly why we have to look at these sources of power separately, not combine them to create an illusion that nuclear produces low-cost power and is financially sustainable in the long run.
Just around the corner for OPG’s money-losing nuclear division is its proposal to rebuild its aging Darlington nuclear station. According to OPG’s “high-confidence” estimate, this project will cost $12.9 billion. But every nuclear project in Ontario’s history has gone massively over budget – on average by 2.5 times. If history repeats itself, the real cost of the Darlington rebuild will be $32 billion.
And it won’t be the contractors doing the work that eat those cost overruns – it will be you, me and businesses across Ontario. Only 7% of the work planned for Darlington is going to be carried out through fixed price contracts – everything else is pretty much on the consumers’ and taxpayers’ tabs. No wonder former TD Bank CEO Ed Clark warned in his review of government assets that “this is a project which carries enormous risks.”
We’ve seen this movie before. In 2005, the Ontario government signed a contract with Bruce Power for the re-start of the Bruce A Units 1 and 2. Bruce Power said the cost would be $2.75 billion. The actual cost ended up being $4.8 billion. Fortunately for privately owned Bruce Power, the government had agreed to absorb up to $3.4 billion in cost overruns on the project, an extremely generous condition which only applies to nuclear projects. In contrast, the Ontario government has signed more than 21,000 contracts signed for renewable and gas-fired power projects in Ontario. Not one of these renewable or gas-fired electricity producers is allowed to pass their cost overruns on to consumers or taxpayers.
Now the government is deep in secret negotiations with Bruce Power to rebuild more of its aging nuclear reactors. Sadly, the government has refused to promise to send any deal to the Ontario Energy Board for review to see if it makes sense for energy consumers and taxpayers.
If we really want to keep electricity costs down in Ontario, we should be working on a deal to quickly boost imports of low-cost water power from Quebec. Quebec has a growing surplus of low-cost power thanks to stiff competition from natural gas in its prime export market – the northeastern U.S. Quebec Premier Philippe Couillard has indicated his province would welcome a deal with Ontario.
A deal at a price of six cents a kWh would be a windfall for both Quebec and Ontario. Quebec would increase its export revenues by $14 billion over a 20 year contract – money it can use to build schools and hospitals. Ontario would save at least $14 billion compared to the cost of power from a rebuilt Darlington station – money it could invest in badly needed transit. The cost of transmission system improvements needed to maximize Quebec imports would be only $500 million – just 4% of the “best case” cost of re-building Darlington.
The economically savvy course for keeping electricity prices competitive in Ontario and strengthening our economy is to make a deal with our neighbours in Quebec while taking a pass on financially risky experiments in rebuilding aging nuclear reactors.
Jack Gibbons is chair of the Ontario Clean Air Alliance