Canada's nuclear industry is looking to persuade Ontario that it's not dead yet.
Ontario Energy Minister Bob Chiarelli will launch in the coming weeks a revised long-term energy plan that will spell out how the current government expects to feed the province's appetite for electricity over the next two decades.
The new road map comes as the nuclear sector – which will supply more than half the province's electricity this year – battles to maintain its share of that market by proposing long-term, multi-billion-dollar projects in order to refurbish existing plants and sell the province new reactors.
But the industry is confronting a myriad of challenges: including assumptions about weak demand growth as a result of to economic shifts and greater efficiency and conservation; the low price of natural gas that is fuelling a boom in gas-fired power in the United States; the Liberal government's aggressive commitment to build new wind and solar capacity, and even the possibility of buying electricity from Quebec.
Taken together, those factors could add up to a sharply diminished role for nuclear in Ontario, even as the country's domestic reactor company, SNC-Lavalin Inc.'s Candu Energy Inc., struggles to make sales abroad. But nuclear advocates are insisting there is vitality in an industry that many have written off, that it remains a competitive source of power that does not emit greenhouse gases.
Given the long lead times needed for both refurbishments and new reactor construction, decisions made now will determine whether Ontario maintains a competitively priced electricity system over the next several decades. They will also shape the future of an industry whose supply chain includes 170 companies that employ 30,000 people in Canada.
Mr. Chiarelli has already said the current government will not proceed with the purchase of new reactors, given weak outlook for electricity demand growth. SNC's Candu Energy and U.S.-based Westinghouse Electric Co. LLC have submitted bids for building two reactors at Darlington, but the minister now says that power won't be needed.
But the Liberals govern with a minority and will soon face an election. Conservative leader Tim Hudak said last week that he believes the province will need new reactors to replace old ones that will be taken out of service after 2020.
The Liberal government continues to pursue projects to refurbish existing reactors at Ontario Power Generation's Darlington plant, and the provincially owned utility has already issued nearly $1-billion in contracts to support the Darlington project. Privately owned Bruce Power is also looking to refurbish units at its Lake Huron site.
Some critics question whether even the refurbishments are needed, let alone the new reactors. Nuclear power suffers from that fact that its high, upfront capital costs must be amortized over 30 years in the case of refurbishments, and 50 to 60 years in the case of new reactors. Given the rapid technology transformation, a long-term bet on nuclear is fraught with the risk of the province being saddled with an expensive white elephant, York University's Mark Winfield said.
But industry advocates insist that nuclear remains the best option for providing base load power – the bulk of electricity supply that is required regardless of the peaks and valleys of hourly and seasonal demand.
OPG is proposing that it receive 8.6 cents a kilowatt/hour for power from its refurbished Darlington units, up from the 5.6 cents it currently gets, while Bruce would likely be in the same ballpark, Heather Kleb, vice-president of the Canadian Nuclear Association, said last week.
"That is a small price to pay for 30 years of energy security and price stability," Ms. Kleb said. "And it is still competitive with the other energy sources.
Ontario is currently moving towards a much greater reliance on wind power, backed up by natural gas generation when the wind turbines aren't producing as much as expected.
But nuclear proponents argue wind generation is intermittent, and far more expensive than nuclear when you factor in the price of backup gas generation. Natural gas-fired power is cheaper to build, but operating costs will soar if gas prices rise. And while gas-fired power plants emit less carbon dioxide than coal, it is still a significant source of greenhouse gases.
Nuclear proponents received a recent boost from Morningstar Inc., a Chicago-based investment research firm. In a report by its utility analysts, Morningstar concluded that existing nuclear plants remain the cheapest source of power in the United States. Utility analyst Travis Miller said new nuclear plants would be competitive with gas-fired ones over the long term, given an assumption that gas prices will eventually return to an historical price range.