You’ll recall that last year the Canadian federal government refused to inject more funding into Sustainable Development Technology Canada, an agency that has proven crucial to helping Canadian energy and environmental innovations cross the “Valley of Death.” SDTC has contributed hundreds of millions of dollars to clean technology demonstration projects and leveraged twice as much from the private sector. It has enough money to fund probably one more round of projects, after which it will exist simply to manage its existing portfolio of projects (it also manages and issues grants from a separate biofuels fund). To stop funding new clean technology innovation now would be a huge mistake, and SDTC officials have made this clear to the federal government. We’ll find out at 4:30 pm today, after details of the federal budget go public, if the Harper government will continue to fund the agency’s activities. If it doesn’t, this will be a sad day for cleantech in Canada…. stay tuned.

Nuclear power is facing its worst public relations crisis since Chernobyl, and environmentalists are seizing on the opportunity. For too long Greenpeace and others have had to rely on references to Chernobyl to remind people that nuclear, when things don’t go as planned, can go terribly, catastrophically wrong. But Chernobyl happened 25 years ago. A good percentage of the population wasn’t alive at that time or were too young to remember.

Japan’s Fukushima nuclear accident — still unfolding after a week of continuous coverage on TV, news sites, blogs and in newspapers — is the new reference point, and one that’s showering the world with a never-ending flow of images and commentary that is showing, in dramatic and vivid detail, why nuclear power’s greatness is its achilles heal. Imagine if Chernobyl had happened in the Internet age? Could the nuclear industry ever have recovered from the onslaught of traditional and digital coverage?

Here’s the thing about nuclear: it works well until it doesn’t work well, and while we can always do more to lower the risk of failure and reduce vulnerabilities to natural disasters and outside attacks, those efforts come at a huge cost — and, as the Japanese crisis clearly shows, such costly measures don’t always work. And when they don’t work, are we truly prepared to deal with the consequences?

As I write in my latest Clean Break column, how we deal with a nuclear disaster could be one of the most unplanned things in Canada. This isn’t just about getting tens of thousands of people out of an evacuation zone within a specific period of time. That alone is a logistical nightmare. But more important, what do we do with these people? How long must they be kept from their homes — their lives? Can they ever go back? When a natural gas plant explodes we know people can move back after the dust settles. That’s not the case when you’re dealing with a massive release of radiation that could easily extend from Pickering generating station to downtown Toronto, which is only 30 kilometers away. Could Canada’s economic engine handle a long-term disruption?

Canadian authorities give us assurances of the extremely low odds of a Fukushima-like disaster. Fair enough. What they fail to discuss is what happens if such a disaster were to happen. Their approach is simple: assume, for the most part, it never will. This shouldn’t give anyone living within 30 kilometres of a nuclear plant any comfort. Surprises can and do open our eyes. For example, there has been at least one major earthquake in Japan that occurred in an area not known to be along a geological fault line. “Following a magnitude 7.3 earthquake in 2000 in an area where no geological fault was known, Japan’s NSC ordered a full review of the country’s 1978 seismic guidelines,” according to the World Nuclear Association, which has a section on its website devoted to nuclear power plants and earthquakes. It says that 20 per cent of all nuclear reactors in the world are located in highly active seismic zones. Comforting.

Ontario nuclear operators and regulators routinely highlight that Ontario is so geologically different that we needn’t worry. But a 2003 peer-reviewed study from University of Toronto researchers suggests otherwise. Pickering Nuclear Generating Station “was constructed adjacent to a major population centre in the late 1960s largely in ignorance of local and regional geological conditions and well before the plate tectonic paradigm provided a model for basement evolution,” according to the researchers. “The presence and significance of major bedrock lineaments, such as the Central Metasedimentary Belt Boundary Zone that passes directly under PNGS, together with several other structures that intersect below Pickering, was not then known. Today, such structures are recognised as being defined by persistent earthquake activity.” They continue: “The local community has every right to be concerned about the presence of an aging nuclear reactor in their midst.” In fact, three years earlier earthquakes were the topic of much discussion in this Parliamentary committee report. (Just as frightening is much of China, which wants to build the equivalent of three new nuclear reactors per year over the next decade, is subject to the same seismic activity as Japan and the same hubris as Ontario).

It’s telling that the insurance industry won’t touch nuclear projects unless governments cap their liability. In Canada, the cap is now $650 million on disasters that can cost many billions of dollars to battle, excluding long-term economic impacts. Taxpayers, of course, cover the rest. Without such caps, the industry argues the cost of insurance would simply be too high.

Ultimately, it will be cost that defeats the nuclear power industry. Nuclear is not “too cheap to meter,” as early proponents once boasted. It is surrounded by hidden subsidy. It is rarely built on time and on budget, outside of regimes willing to play fast and loose with safety standards. And it has become tremendously more costly since the 1970s and 1980s, when the last major buildout occurred. After Fukushima, you can bet nuclear costs will go even higher as nuclear regulators, responding to public concerns, tighten the rules and standards even more to calm fears that what is happening in Japan can happen in their own back yard.

This is the conundrum with which the nuclear power industry will forever struggle. The technology can work great and serve our energy needs, but it is inherently dangerous. To make it less dangerous, we have to spend considerable amounts of money putting measures in place to assure safety and reliability, and even then, there are no guarantees. Maybe we can accept the risks, knowing that they are indeed extremely low. But making them low adds a huge amount of cost, and that cost is what is increasingly making nuclear uneconomic against renewable alternatives, which are falling — not rising — in price and are inherently safe.

Quite the pickle in an age that needs more, not fewer, energy options.

My Clean Break column takes a look at some of the new assumptions in Ontario’s latest 20-year electricity plan — assumptions that have changed dramatically since the previous plan was introduced (but never formally approved) three years ago. Electricity demand that we were supposed to reach before 2015 has now been delayed to beyond 2030. Now that’s quite the gap. More than that, the newer forecast takes into account the impact of electric-vehicle charging on the grid and the plethora of power-sucking gadgets populating our homes, while the previous forecast didn’t (at least not as much). Five years ago, Ontario was going to convert its Thunder Bay coal-fired power station to run on natural gas. Gas was cheap back when the decison was made, but the plan was cancelled a couple of years later after gas prices shot up to record highs. We took a $10 to $13 million cancellation penalty for that decision. Now, thanks to a bounty of shale gas, the option isn’t just back on the table, it’s going ahead. More than that, the government is now seriously looking at converting a number of other coal-fired units (at Nanticoke and Lambton) to natural gas.

The point: So much can change in just a few years it’s incredible. This is why the decision to plan for a new nuclear build I take with a grain of salt, as there are many alternative options that exist or will emerge. Importing hydroelectricity from Quebec or Newfoundland & Labrador is but one. I’m quite resigned to refurbishing, where appropriate, much of the nuclear fleet we have (sorry, Greenpeace), but I’m not as keen about building new reactors. Once built, they’re designed to last for 50 years or longer. So much can change in that 50 years that, as a ratepayer, I don’t want to be locked into one technology at the expense of others that may — and likely will — emerge. As I just showed, so much can change in just five years. I don’t want new nuclear crowding out better options.

Andy Frame, a former advisor to Ontario’s Ministry of Energy, wrote yesterday in a commentary that the new plan, while better than the last one, is still severely flawed. But his criticisms are mostly over the top. He says “this policy has resulted in the doubling of rates in Ontario to a level higher than in most U.S. states,” and that this has killed our industrial advantage. Historically there have always been U.S. states and Canadian provinces with lower — in some cases much lower — electricity rates. Have we seen a mass exodus of industry into Quebec, or Manitoba, or Wyoming? No, because electricity rates are one of many factors that are weighed by companies. Ontario is still very much competitive with many of the states that count, including Michigan and Pennsylvania, and we’re far cheaper than New York State, New Jersey and California. The claim that our industries are going to pick up and run is scaremongering, and other quite innovative programs are in place to help these Ontario industries cope with rising prices by becoming more efficient with their energy use, including the Industrial Accelerator Program and the Northern Pulp and Paper Electricity Transition Program. For too long unsustainably low electricity prices have been used to prop up our industry, which does nothing to make them more globally competitive/efficient.

And while it is true — and no surprise — that rates will keep going up over the next 20 years, critics too often look at this in isolation from trends in other states. Most U.S. states have renewable portfolio standards that require a certain amount of renewable energy in their mix. Like Ontario, they need to desperately upgrade infrastructure, and they’re making their grids smarter. Bottom line is that electricity prices will be going up in jurisdictions all across North America. Ontario is not unique here, and it’s unrealistic to keep measuring ourselves by pointing to Quebec, which has low-cost hydroelectric resources that are unique to its geography. Where is our industry going to move? To Europe, where rates are well above what we have here? Not likely. China? Well, if they’re moving to China it’s because of cheap labour and energy subsidies that violate WTO rules. We need to keep the situation in Ontario in perspective.

Andy Frame also writes:

Turning to supply, the decision to shut down coal generation for environmental reasons was made in haste, without considering alternatives or the problems that result from providing replacement power. In Europe, coal gasification has become a major source of supply. Called “cleaner coal,” it results in lower emissions — much less than what blows over Ontario from Ohio Valley coal plants. If coal plants were converted to cleaner coal, existing transformer stations and transmission lines could still be used.

This is a ridiculous comment. Yes, coal gasification exists in Europe, though I’m not sure I would agree it has become a “major” source of supply. But at the same time as Frame says it’s good to leverage our existing coal-plant assets, he talks about a technology — gasification — that can only be applied to new coal plants. New coal plants that use gasification are expensive and are only built if there is a plan to capture the CO2 and store it. Ontario doesn’t have the geography that can do CO2 sequestration economically, and so-called carbon capture and sequestration is hugely expensive and untested at large scale even for the most ideal locations. And yes, there are technologies — i.e. band-aid solutions — for retrofitting coal plants, but these also don’t come cheap, aren’t 100 per cent effective and don’t address the CO2 issue. Frame could be a climate skeptic who doesn’t care much about the CO2 issue, I don’t know, but if so that’s not the position of those who have an ounce of concern for climate change.

The bottom line is that Frame and other critics of the plan seem to think that electricity policy alone is what determines the survival of Ontario industry. It’s an important component, but the price on a bill doesn’t reflect other programs and initiatives in place to help alleviate the economic strain. Sure, looked at in isolation it may seem scary, and it’s easy to criticize something in isolation of other facts, but it’s not constructive to the debate.

The Ontario government’s plan isn’t perfect. I have my own concerns. I think we’re paying too much for large-scale solar, largely because solar prices have dropped dramatically since the FIT was introduced and this isn’t reflected in FIT prices. If I had my way, I would take the opportunity during the 2-year FIT rate review to dramatically cut the FIT price for multi-megawatt solar farms and eventually move to competitive bidding for these large projects. I would keep the rooftop FIT and microFIT but adjust the rates down accordingly, as the Germans are doing. I would also throw large wind projects — 50 MW or larger — back into a competitive bidding situation that, like Quebec, still has some local content requirements.

Beyond that, what else can be done? Everybody is claiming about how expensive the plan is, but what’s the alternative? Green energy is less than half of the projected cost increases, and the rest are a necessary part of modernizing the grid and realizing the potential of conservation and energy efficiency. Even building new coal plants would be more expensive. Keeping our existing coal plants open is not an option, in my view.

On a final note, a carbon tax should be viewed as a complement to this, not as an alternative as the Task Force on Competitiveness, Productivity and Economic Progress suggests in its recent review of the Ontario economy. I’ve got my problems with this report, largely because it fails to consider the many barriers that alternative technologies face to being adopted. The purpose of the FIT was to help level the playing field so newer, smaller developers, farmers, communities, homeowners, schools, etc… can participate in the province’s energy system. Its goal was to promote more distributed generation, diversity of supply, and of course renewable energy technologies that face an uphill battle in an industry dominated by nukes and fossil fuels. Simply throwing a carbon tax out there will help, but it won’t change that much, especially if the tax doesn’t amount to very much. Bottom line is I found their analysis flawed and their research weak.

The other problem, and Frame does this as well, is that it keeps using the average spot price for electricity as the comparison to new green energy generation. A more fair comparison is to the marginal cost of generation, because we know that whatever new form of generation we add to the grid — nuclear, natural gas, renewables — is going to be more expensive (far more) than the spot price.

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.

France’s Areva SA is known mostly as a designer of light-water nuclear reactors, builder of transmission and distribution systems, and a miner of uranium, so the announcement today that it has purchased 100 per cent of concentrated solar power company Ausra Inc. came as a surprise. Ausra, based in Mountain View, Calif., was founded by Canadian inventor Dr David Mills. Mills developed the underlying technology as a student and professor in Australia, but located the company in Silicon Valley as part of a major venture capital infusion from Khosla Ventures and Kleiner Perkins Caufield & Byers. Mills is currently the company’s chief scientific officer.

Areva said today that the acquisition marks its entry into the solar thermal power market, where it intends to be the leader. The market itself is expected to grow 20 per cent annually over the next decade. This is just the latest in a string of acquisitions and deals aimed at broadening Areva’s portfolio of renewable energy products and services. The company has been pushing heavily into biomass power and has been building biomass/biogas plants in the U.S., Brazil, India, Thailand and other countries. It is dabbling in hydrogen production and fuel cell systems, and through its acquisition of Germany’s Multibrid is trying to establish itself as a future leader in offshore wind.

It’s going to take big, deep-pocketed companies like Areva to really push deployment of solar thermal and other promising renewables, so this acquisition of Ausra is a good sign of where the market is heading. Given that the nuclear renaissance simply isn’t materializing as expected, it’s wise for Areva and other big energy conglomerates to hedge their bets.