Ontario backs away from plans to buy new nuclear reactors

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Ontario's government will shelve plans for a major new investment in nuclear power, according to industry and government sources.

Kathleen Wynne's Liberals have decided against spending upwards of $10-billion to buy two new nuclear reactors as had been planned when Dalton McGuinty was premier, and will commit only to refurbishing existing ones, the sources told The Globe and Mail.

The decision appears to be the latest blow to the nuclear industry, which is already facing a decline in international demand, safety concerns after 2011's earthquake-induced meltdown at Japan's Fukushima plant, and the emergence of comparatively cheap natural gas. As the most nuclear-reliant province in Canada and the only one with plans to acquire new reactors, Ontario had been held up as a source of hope for prospective builders, including Candu Energy Inc., the once-mighty division of Atomic Energy of Canada Limited that is now a subsidiary of SNC-Lavalin.

As a result of the change in plans, nuclear power – which accounted for 56 per cent of Ontario's total energy supply in 2012 – could end up with a somewhat smaller share of the supply mix. At the same time, the decision reflects stagnant demand due largely to the struggles of the province's manufacturing sector.

Ruling out a nuclear procurement in the foreseeable future, rather than just putting one off as Mr. McGuinty did when a potential deal fell through four years ago, also appears aimed at serving Ms. Wynne's political goals.

Under fire for soaring hydro prices, particularly since an Auditor-General's report showed that the bungled cancellation of a pair of gas-fired power plants could cost more than $1-billion, the Liberals want to be able to show future cost containment when they release a new long-term energy plan in the next couple of months.

Nuclear power is also known to be a sticking point among some of the left-of-centre voters Ms. Wynne is hoping to woo away from the New Democrats, particularly in cities. While it is expected to remain the biggest contributor to the province's power grid, providing between 40 and 50 per cent of all supply, scrapping the procurement could be interpreted as a sign that Ms. Wynne is sympathetic to their views. And while industry insiders say the option to rely less on nuclear generation is primarily because of increased reliance on natural gas, the Liberals are expected to play up conservation as a reason the reactors will not be needed.

Although it is a significant about-face from the Liberals' nuclear policy to date – including a commitment to new reactors in their long-term energy plan released in 2010 – the decision is a culmination of the procurement's somewhat tortured history.

In 2009, Atomic Energy of Canada Limited appeared poised to get the job to build two new reactors at the Darlington nuclear station. But the province balked at a price reported to be as high as $26-billion, and a period of uncertainty followed around AECL's future as Ottawa tried to unload its Candu division.

As recently as this summer, after Ms. Wynne replaced Mr. McGuinty, the crown corporation Ontario Power Generation was still receiving bids for a building contract that The Globe and Mail reported would be worth more than $10-billion. One bid came from Candu, another from the U.S. company Westinghouse Electric. But by that point, Energy Minister Bob Chiarelli was expressing skepticism about the need for new reactors.

Energy-sector sources, including those favourable to nuclear power, conceded on Wednesday that the province can likely afford to drop the investment. The key, they said, will be committing sufficient resources to refurbish current reactors, all of which are at least two decades old.

Provincial officials said the preferred mix of nuclear, gas, wind, and other forms of power generation is still being hammered out.

"Ontario is currently reviewing our long-term energy plan," a spokesperson for Mr. Chiarelli said via e-mail. "This update will include our plan for Ontario's supply mix over the next 20 years. The updated plan will be released later this year."