This blog was originally published in Professor Mark Winfield's blog.

Last week’s announcement by the federal government of its sale of the reactor division of Atomic Energy of Canada (AECL) to SNC Lavalin for a mere $15 million comes as no surprise to those who have been following the nuclear industry in Canada over the past few years. The Harper government has been clear about its desire to offload the AECL financial “sinkhole” (in the words of the Prime Minister’s former Press Secretary) for some time. With more than a decade since AECL’s last sale of a new reactor, the failure of the $800 million MAPLE isotope reactor project, the controversy over the shutdown and safety of the NRU reactor at Chalk River, delays and cost overruns on power reactor refurbishment projects in Ontario and New Brunswick, and a perpetual need for annual bail-outs running into the hundreds of millions, the federal government has decided to cut its losses.

AECL, which has absorbed more than $20 billion in federal taxpayers’ money over the sixty years of its existence, has never come close to being a commercially viable entity. As if to drive home this point the federal government is providing an additional $75 million subsidy (five times the purchase price) with the sale for reactor development. Federal taxpayers will remain liable for the cost overruns on the company’s existing reactor refurbishment projects and the long-term clean up costs, estimated to run into the billions, at AECL’s facilities.

Most observers are of the view that SNC has no interest in new reactor sales, given the scale of the capital investments and cost risks involved, as well as AECL’s past record of cost overruns and delays. Rather, it is thought that SNC’s primary interest is the maintenance and refurbishment of existing CANDU reactors.
The strongest response to the sale – aside from the surprisingly loud objections from the nominally anti-nuclear federal NDP – is predictably from Ontario, whose Long-Term Electricity Plan includes as many as four new CANDUs at the Darlington nuclear power station east of Toronto. The province, reeling from the reported $26 billion “sticker shock” of AECL’s ‘all in’ cost bid for just two new CANDUs, had been demanding that the federal government ‘share’ some of this cost. Any cost-sharing options with the federal government, which probably anticipated questions from its western Canadian base about why federal taxpayers from Alberta and BC should pay for nuclear reactors for Ontario, are now off the table.

The case for new reactors in Ontario was already shaky, given the decline in electricity demand over the past five years and the strong response of renewable energy developers to the province’s Green Energy Act. In the context of the Fukishima disaster the federal environmental assessment hearings on a Darlington new build project that wrapped up last month took on a distinct air of unreality. Jurisdictions around the world are now reassessing the role of nuclear in their long-term energy strategies.

The case for Ontario to do the same is now stronger than ever. The renewable energy supply and services industry in Ontario that is emerging in response to the Green Energy Act has already made up for the 800 jobs that are likely to be lost in the immediate aftermath of the AECL sale many times over.

Rather than continuing to make an increasingly hopeless case to the federal government for support for its nuclear-based plans, the Government of Ontario should be seeking federal investments for the creation of a truly national electricity grid. Such an undertaking is far more likely to win backing from other provinces and would enable Ontario to connect its enormous, but intermittent, wind energy potential with those provinces that have large-scale hydroelectric storage capacity. Similar arrangements are being employed among countries in Northern Europe to facilitate the large scale integration of intermittent renewable energy sources into their electricity grids. Water is stored up behind hydro dams when wind-based supply is strong, and released to produce electricity when there is less wind. In Canada, such arrangements could provide the foundations of a sustainable national electricity system.

The AECL sale compels Ontario to revisit is long-term electricity plans, and to embark on a serious and open review of the full range of alternatives in the future design of its electricity system. Province needs to face this reality and respond accordingly.

This blog was originally published on Professor Mark Winfield's blog.

June 17, 2011

Ontario Power Authority
IPSP Consultation
120 Adelaide St. W., Ste 1600
Toronto, Ontario M5H 1T1

Re: Submission on Planning and Consultation Document.

To whom it may concern,

I am writing to you to provide my comments on the IPSP Planning and Consultation Document

I general I note that the OPA is largely proposing to follow the same approach to the development of the 2011 IPSP as it followed with the original 2007 Plan. Such approach seems likely to reproduce many of the problems that emerged with the original IPSP, particularly with respect to the consideration of environmental sustainability in the development of the plan, as documented in the attached paper authored by myself and colleagues at York University and the University of Waterloo, and published in the international journal Energy Policy August 2010. The OPA’s approach is particularly surprising in light of the developments from 2006 onwards with respect to electricity demand in Ontario, the outcome of the province’s new build nuclear procurement process, continuing serious questions about the capacity of either of the proponents in the 2009 procurement process to file viable new bids in the forseeable future, the Fukishima nuclear disaster, continuing delays and cost-overruns involving current nuclear refurbishment projects in Ontario, the response to the Green Energy and Green Economy Act and changes in the North American natural gas supply and market. Indeed, these developments indicate that fundamental assumptions that underlay the 2007 IPSP were flawed, and that a different approach to electricity system planning in Ontario was required.

I am particularly concerned regarding the reliablity of the demand forecasts to be incorporated into the second IPSP. My understanding is that the medium demand forecast on which the plan is to be based reflects peak demand and annual consumption net of successful conservation efforts as per the province’s conservation targets as expressed in the February 2011 Supply Mix Directive. However, in reviewing recent and historical patterns of electricity demand in Ontario, the projections would seem more reasonable estimates of potential demand before the impact of conservation is taken into account. Many of the points on this matter raised by the Pembina Institute in its 2006 submission on the IPSP demand forecast seem to me to remain relevant today. I therefore attach that document, for which I was the primary author, to this submission (http://pubs.pembina.org/reports/Com_OPA_IPSP_DP2_Load.pdf)

A plan based on these forecasts, if net of conservation, would suggest that either:

1) The plan will result in a massive overbuild of supply if the province’s conservation efforts are successful; or
2) The plan is assuming that the conservation will in fact, largely be unsuccessful and that a realistic demand scenario will have to be meet through supply-side options.

The demand forecast on which the 2011 IPSP is to be based should be reviewed in light of these considerations and a more realistic forecast employed as the basis for the plan.

Yours sincerely,

Mark S. Winfield, Ph.D.
Assistant Professor
Coordinator Joint MES/JD Program
Chair, Sustainable Energy Initiative
Faculty of Environmental Studies
York University
4700 Keele St.
Toronto, Ontario
M3J 1P3
Tel: 416-736-2100 ext. 21078
Fax: 416-736-5679