AECL has been a niche player and will remain a niche player

There were a couple of interesting updates on the Atomic Energy of Canada Ltd. saga in the Globe and Mail yesterday, one about Ontario Premier Dalton McGuinty urging the federal government to postpone a planned sale of AECL until a deal is struck to sell reactors to Ontario, while the other was about the lack of international interest in AECL’s nuclear business and how, as a result, it will become a niche player in the market selling older, smaller-scale reactor technology and doing refurbishments for the existing AECL fleet.

I put “become” in italics because I’ve always considered AECL a niche player, so the better word is remain. There’s this thinking in some Canadian circles that AECL is being held back from becoming a big player in the international scene, like it’s some washed-up boxer that “coulda been a contender!” But AECL’s chance at international stardom faded some time ago, and the thought that Ontario buying two Advanced Candu Reactors will suddenly make it a contender in the global nuclear marketplace is ridiculous. How can AECL deliver on a new, unfinished design when it can’t even get its old finished designs right? Two Candu refurbishment projects under way in Canada are way over budget and way behind schedule. I remember Bruce Power chief executive Duncan Hawthorne telling the Toronto Star’s Sandro Contenta in 2007 that the refurbishments at Bruce were “a destiny issue for the industry” and that “the failure of this probably means that we wouldn’t want to do it again.” Now that project is two years delayed and $2 billion over budget, as we learned earlier this month. It boggles the mind why the Ontario government would still seriously consider a new reactor purchase based on the poor track record of this technology, which continues to this day, and it’s no surprise the federal government doesn’t want to backstop it given how much of taxpayers’ money it has already put at risk. Nor does Bruce Power, one of only two groups (both Canadian) willing to bid for AECL’s reactor business but unwilling to shoulder risk in such a deal.

Can we stop with this nonsense that AECL is a gem that only needs to be cleaned and buffed to prove its worth? Yes, it has talented, hard-working people working for it, but that doesn’t mean it has the right technology nor does it mean, just because it’s Canadian, that an unsuccessful technology should be perpetually put on public crutches. This is not the Avro Arrow all over again, as some contend. That’s because the Avro program didn’t have a history of overruns, didn’t have the MAPLE reactor fiasco, or the Chalk River fiasco, or the current-day refurbishment fiasco, or the unfinished ACR development project that has proven itself as nothing but a sinkhole for taxpayer dollars. This is a company that has consistently failed to prove its worth in a world that’s quickly blowing past it. If it dies, it dies on its own sword, just as any other company would if it were in the private sector.

This isn’t an anti-nuclear rant. This isn’t even a criticism of Candu’s heavy-water technology, which may be better than more popular light-water technologies but simply failed to get the market excited (read: Beta vs. VHS syndrome). This is just about business, a poorly run business.

18 thoughts on “AECL has been a niche player and will remain a niche player”

  1. Not sure what is happening but it is disheartening to see all of Canada’s big, recognizable high-tech / engineering companies folding one after the other. Nortel, AECL, and RIM will probably be next. Why can’t we grow and sustain decent companies in the technology space?

  2. Nortel’s bad management decisions killed the company, along with some bad luck and a market downtown. AECL is a combination of bad management, over promising and under delivering, and lack of scale in a market now dominated by three major global players. I don’t expect RIM will be next, at least not for a long time.

    Canadian companies, unless they’re resource-based, simply can’t get to that large scale unless they’re government subsidized. Let’s remember Nortel (Bell Northern Research) had a 100-year plus history and plenty of early government support. If a Canadian company is good it tends to be bought before it achieves enough scale to stand alone. RIM is one of a handful of exceptions, the other being Magna International.

  3. Success in the nuclear industry is a political decision. It is not a business that is viable without significant government intervention. From the exemptions to liability, to the governments that support cost overruns, to the lack of a plan to dispose of nuclear waste, government has its hand in making the nuclear industry survive. Ontario got the wake up call it required to move away from nuclear when the unexpectedly high quotations for new plants came in two years ago. Let it die, let’s move on. The nuclear industry wants to survive, that does not mean it should or will.

  4. The math is simple.
    $5 billion invested in 1600MW of capacity that is likely to run at over an 80% capacity factor for 25-30 years.

    What option do you suggest that competes with that in terms of value?

  5. You’re talking about refurbishment, I assume, because $5 billion for that amount of power from new nukes is a dream figure.

    Assuming it runs at 80 per cent capacity — cause we didn’t see that with Pickering A — and assuming it lasts 30 years, it may be a decent deal. The problem is the inability of these guys to stick to schedule and budget, and how that would likely translate to new build. I say, where safe and when economical, get as much from existing nuclear assets as you can, but new build is a different story,.

  6. I only talk about refurbishment for Ontario.
    The infrastructure is already there – although in Bruce’s case, the additional transmission capacity is also behind schedule.
    We deliberately ceased Pickering and Bruce A, at times. We do see around 80% on Gentilly II, Point Lepreau, Bruce B reactors, and well above 80 at Darlington and several builds elsewhere . It’s a rational figure to use.

    The $2 billion over is simply a big number, but not very big in the context of the total output over the expected life of the reactors. Mr. Hawthorne’s statement is still relevant, and the outcome still may very well be positive.

  7. Come on Tyler, this is a bit harsh. Overruns are management issues, to be decided by shareholders and boards of directors. At the end of the day the nuclear plants in this province are providing the lowest-cost power. This is why off-peak rates are the lowest — by far most off-peak power comes out of nuclear plants.

    And not just low-cost power, low cost ZERO-EMISSION baseload power.

    Renewables cannot provide baseload or low-cost power. You talk about survival in the private sector — there’s no way that wind or solar generators could survive without artificial government-supported rates that are way above the market rate.

    I know you will say that we can get trillions of kWh of low-cost zero emission power from other kinds of nuclear reactors, and you are right. But if it’s all the same, then why don’t we buy Canadian? Ontario has been a successful beta site for new reactors — and that success is underlined by the fact that those beta machines are cranking out nearly 80 percent of the province’s power as I write this.

    Harping on a few missed deadlines just misses the point.

  8. Hi Steve,

    I think it’s a stretch to downplay the issue by calling it “harping on a few missed deadlines.” Hydroelectric is the lowest-cost power, particularly if you take into account the many other costs that pro-nuclear folks like to exclude from the discussion, such as ongoing operation and maintenance, future waste management, debt-retirement charges, uncharged water use and consumption costs, and who knows what else that’s hidden from ratepayers and taxpayers. Besides, we’re talking — I’m talking — about *new* nuclear here and how, based on the horrible track record in the past and more recent track record on refurbs, it would be ludricurous to march forward on an untried, untest and unfinished technology like the ACR. Also, as you know, new nuclear — ACR or otherwise — is a hell of a lot more expensive than what we built 10, 20 years ago, so let’s look at the forward realities. By the way, I can guarantee you that if we gave nuclear that same 13.5 cent FIT price that wind gets that the private sector — without getting a cent of government backing or insurance liability caps or publicly subsidized waste management programs — would still stay clear. The problem with the nuclear industry is that all promises about costs have never been accurate because the world changes so dramatically during the time it takes to build the things.

    Also, even if we did what you consider our patriotic duty and bought Canadian it wouldn’t prove anything — it will do nothing to convince the rest of the world to buy new ACRs and AECL will still be stuck selling Candu 6s to the developing world and relying on reburbishments, and would still rely on annual top-ups from the federal government (i.e. taxpayers) to keep the science experiment going.

  9. Tyler, thanks for your reply. The “horrible track record” you refer to produced a fleet of generators that is cranking out more than 10,000 megawatts as I write this. That’s a success, not a failure.

    On the basis of that record, I have no problem going with the ACR. AECL proved — over 7 major construction projects, including Douglas Point, Pickering A and B, Bruce A and B, Darlington, and the CANDU 6 fleet — that it can put first-of-a-kind designs onto the grid.

    The alternative is natural gas; you and I both know that renewables are just a PR cover for gas. Let’s remember that gas is a demonstrably dangerous, volatile, and expensive fossil fuel that is the reason for the skyrocketing greenhouse gas emissions in the oil sands.

    You call the ACR a science experiment, and on one level you’re absolutely right. It is a science experiment that represents exactly the science Canada should be paying for: it is in a field where we are proven world leaders. This is cutting edge technology — and certain to produce scientific and societal payoffs. Public R&D should produce a public ROI. Our current CANDUs do that — as witness their performance right this minute in Ontario — and the next generation one will as well.

  10. Just getting something into the ground isn’t all that matters…. there are a lot of other technologies we can embrace if we measure the success by just putting “first of its kind designs onto the ground”. You can’t ignore what led up to that operation, and you can’t ignore the delays and cost overruns happening today, which is what you seem to be doing. I think you romanticize our modern-day contribution to the nuclear industry too much, and if we are proven world leaders, the sales pipeline certainly doesn’t indicate as much. Calling renewables as “just PR cover for gas” is nonsense.

    It’d be interested to learn how there has been a public ROI based on public R&D. When was the last time AECL sold a reactor? How much money was wasted with the MAPLEs? At Chalk River? Putting a cap on liability?

    I seriously challenge you or anyone else in the industry to estimate how much a nuclear feed-in-tariff would need to be before the private sector decided to take on all the risks and costs?

  11. Public ROI is measured in kilowatt-hours dispatched to the grid. Ontario CANDUs have generated something like two trillion, without a gram of CO2. And that’s trillions of kWh at a low cost — less than 5 cents per kWh. Less than half the rate required to draw the private sector into wind, and one-tenth the rate for solar. Add the Debt Retirement Charge (0.7 cents per kWh) to each of those kWh, and it’s still way cheaper.

    Most of Ontario’s power comes out of them. Ontario is a prosperous, advanced industrial jurisdiction. That’s what I call a good return on investment.

    Bruce Power is private sector, and it isn’t getting anything close to wind’s FIT. Bruce wanted to build new units (Bruce “C” and Nanticoke), because it knows it can sell cheap bulk power and still make a profit. It was the government that said no.

    And Tyler, yes wind/solar ARE a PR cover for gas. It’s plain arithmetic: wind’s capacity factor is 30 percent, and the sun shines only half the day (and will strike silicon panels at the right angle — if there are no clouds — for much less than half the day). We need power 24/7. Something has to cover for wind 70 percent of the time, and under this government that something is gas.

    A casual observer driving north on Hwy 21 from Kincardine will pass first the Bruce Power site then the Enbridge wind farm. Though the wind farm generates less than one-seventieth the electricity of Bruce Power, it is more visible. Enbridge is a gas company. That wind farm is physical PR, and it is being subsidized by Ontario taxpayers. Think of it: poor and middle-class Ontarians are helping Enbridge, a rich gas company, pay for a giant PR effort. All so the rich gas company can sell more gas.

  12. Again, focusing on the past and using numbers that are way out of date. Not considering the realities of new build today, and not factoring in other subsidies, risks, etc…

    Do this mental exercise: replace the entire coal fleet with gas — you’ve halved CO2 emissions. Then with every megawatt-hour of renewables added you burn less gas, a direct reduction in gas and CO2 emissions over time. On most lifecycle analyses of the options, with the exception of those produced by the nuclear industry, wind beats nuclear when you take into account construction and uranium mining emissions…

    You can’t cherry-pick the data Steve and use that to sell nukes, as AECL and others have done for years, but that’s what you’re doing. Fact is, nuke prices are going up; renewables are going down. Those are two trajectories worth taking into account before any jurisdictions ponies up many billions of dollars for a project that will lock them into a certain rate for 50 years.

  13. The nuclear onion has many layers and many players interested in looking at the problem through different lenses. I have no financial connection to the nuclear industry (except what I pay in utilities). I do believe renewable energy has have a very big role to play in our future energy systems, so maybe I am biased – but not by money, but by the logic of the situation. Lets look at the OEFC, their website shows that as at March 31, 2010, total debt and liabilities were $29.9 billion. Data is very hard to find, but I think it is safe to say a very large part of that debt is from the build and repair of the nuclear system in Ontario – so throw some money into the cost per kWh for nuclear on that front. That debt has barely gone down in 10 years, so out little 0.7 cents/kWh is paying for kWh that were made and used years ago and we will be continuing to pay for those archived kWh for many years to come. The fund for nuclear waste disposal is underfunded and the NWMO has to date only come up with the terminology of “adaptive management” for the ultimate disposal of the high level waste fuel. This actually means we don’t know what to do with it and very importantly we therefore do not know what the cost of disposal will be. Actual capacity factors over many years for the Ontario nuclear stations hovered in the range of 50-60% – use SEDAR and look the data up.

    So, the Ontario government with that history as a backdrop gets an estimate of $28 billion for 2400MW of new nuclear capacity and understandably it is concerned. The new plants are unlikely to come in on budget (where’s the history to show that?) so what is a good number to use?

    Meanwhile, strides are being made in CDM and we have just entered a world of falling prices for PV. So does a $30 billion investment for nuclear plants that will not produce power for another 7 to 10 years really make sense? Yes, PV is being installed at unsustainable levels of incentive, but four years ago the OPA forecast the total installed capacity of photovoltaics in Ontario in 2025 would be 25 MW, we now have 10 times that feeding the grid, yes at lower capacity factor, storage is an issue, we all know that. My point is, the world of clean energy is moving very fast, and let’s look very carefully at where clean energy and storage and CDM and time of use, smart grid etc. etc. can take us in 10 years.

    cheers

  14. Tyler, I appreciate you taking the time. There’s no cherrypicking. Cost per kWh is the basis of the whole thing, and the only economic metric that matters. Nuclear outmuscles renewables/gas, so much so that the government has to fix the market in their favour.

    And since we’re explicitly talking about GHG-free power, then wind makes even less sense. You can’t compare wind’s lifecycle GHGs to nuclear, because wind simply cannot provide dispatchable power. You have to pair it with gas, and when you do that nuclear is far cleaner — even if you don’t factor in the considerable lifecycle emissions of conventional gas (never mind LNG or shale). That’s just arithmetic. The real kicker is that nuclear/coal is cleaner than wind/gas, and I can prove it by pointing to historical data.

    As for external costs of nuclear, we’re already paying for the nuclear repository in our rates, just as American ratepayers have already paid for Yucca Mt.

    I don’t know where you get the notion that renewables will fall in cost. The only way that can happen is if the wind starts blowing more and the sun shines more. Renewables will ALWAYS be tied to gas, and the cost of wind/gas will go UP, because gas, the heavy lifter of that team, will become more expensive. It’s cheap today because of the recession. It will go back to normal, i.e., north of $7 per million Btu.

    You assume that renewables will somehow eat into gas generation. They can only do that if the government continues to fix the market and give wind way-above-market prices. That just won’t happen. Rate- and tax-payers will revolt.

  15. Steve Lapp,

    Glad you take up the Debt Retirement Charge. For purposes of simplicity, and to underline my point that nuclear is cheap not expensive, I have attributed the entire amount of the residual stranded debt to the Darlington project, which was completed in 1994. (The Darlington overrun has always been estimated to have cost roughly $7 billion, and since the residual stranded debt was $7.8 billion, it looks reasonable to attribute the whole amount to Darlington. But that is wrong — the residual debt was the amount that OPG and Hydro One couldn’t service when they were spun out of Ontario Hydro.)

    If you don’t like the fact that the DRC hasn’t paid down much of the stranded debt, well the DRC was for the residual part of that. Instead it has been used to cover the costs of the money-losing gas plants whose fuel costs exploded between 2002 and 2008.

    I smile when you compare solar PV with nuclear. That’s like comparing mosquito-level hockey with the NHL, and insisting that mosquito players get paid more than NHL players. If you don’t like the allegedly low capacity factors for nuclear, then why are you promoting solar? Solar CF is so low that it’s not economical to build unless the government pays more than ten times the market rate for the power!

    Let’s be honest. You cannot replace nuclear with solar PV and/or wind. You can only do it with gas — a dangerous, expensive, carbon-intensive fossil fuel. We’re behind in out debt payments because of that same gas, but the spin is that it is all because of nuclear.

  16. Steve (Aplin),

    If you’re going to say the standed debt has been used to cover the costs of money-losing natural gas plants, you should back that up, because until you do it’s speculation.

    Nobody has ever suggested that solar or wind or both completely replace nuclear, and it’s funny that nuclear folks ignore the other clean-energy tools in the mix. This is about a combination of things — solar, wind, biomass, biogas, energy-from-waste, hydroelectric, energy-efficiency/conservation and yes, natural gas, and in the future added storage, not to mentioning imports from Quebec. This isn’t nuclear vs. some other single technology, this is getting away from the arrogant mindset so prevalent in nuclear circles that nuclear must continue to supply 50 per cent of the electricity in our overly centralized power system.

    The future cost of nuclear is not the same as the past cost of nuclear — a point I’ve repeatedly made and which you’ve repeatedly dodged. Buying a *new* fleet of nukes and locking into that technology for half a century means being unable to take full advantage of renewables and their falling costs over time. It makes the system inflexible and vulnerable to larger single points of failure.

    Perhaps we’ve each drank our own flavour of Kool-Aid and there’s no debating this any further, but as much as people talk up how nukes are so great and superior the performance in the marketplace over the last 10 years says othewise.

  17. Hi Tyler,

    You’re right on the money here, and for people who suggest that nuclear generation has been successful in Ontario and should be continued, I can suggest 2 books that are good reading, both by Paul McKay, an award winning journalist who lives here in Ontario:

    Electric Empire – The History of Ontario Hydro (out of print now, unfortunately,but libraries often have it). The misinformation we have been fed and the back room deals for uranium that made the friends of politicians rich are sickening. The cost overruns and largely unreported “incidents” are scarey.

    Atomic Accomplice – The story about how a number of countries now have nuclear weapons due to their purchase of Candu reactors. Many of these have been unstable governments, and even after repeated breaches of their promises not to use Plutonium for weapons, we still sold them more. Words fail me.

    I doubt anyone will still support nuclear generation, particularly from Candus, after these reads.

    And to Steve Aplin: About the fact that only nuclear can provide base load: 1) how did we ever get along without it before? and 2) That’s all it ever could be good for at very best. Would you take a car out on the street no brakes and the gas pedal stuck half way to the floor? Well, that’s how much one of these nukes can be throttled. Our daily power needs are anything but a flat line.

  18. “If you’re going to say the standed debt has been used to cover the costs of money-losing natural gas plants, you should back that up, because until you do it’s speculation.”

    Mr. Hamilton, there is no argument to be made to counter that claim. The ‘global adjustment” figures are at http://www.ieso.ca/imoweb/b100/b100_GA.asp
    I’m sure you know OPG has been supplying about 60% of the total output, and I’m sure you know Bruce Power only receives around 6.5 cents/kWh for their output (CAMECO quarterly reports indicate much less this year). So you could do the math there.
    or …
    You could look at 2009’s annual reports for OPG and CAMECO and figure out what remains averages about 10 cents/kWh
    We paid 4.5 cents/kWh for OPG’s approximately 90TWh last year. You can weight the .7 cent/kWh debt retirement charge entirely to that and still be well under 6.
    Of course OPG subsidizes gas.

    That isn’t speculation.
    It’s math.

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