Beyond the propoganda of the nuclear industry, I haven’t seen a single credible study that calculates the cost of (new) nuclear to ratepayers below 13 cents per kilowatt-hour. Indeed, there are many reports that suggest nuke power is above 20 cents per kilowatt-hour, particularly when you choose to not hide the hidden costs and subsidies. This makes wind power, landfill gas systems, waterpower and even some large biogas systems competitive with nuclear on a kilowatt-hour basis. And, of course, under the FIT we’re not held hostage to delays or cost overruns like we have been in the past with nuclear. You pay for what you get under the FIT. No risk, no large single points of failure, no risk of meltdown, no worries about handling future radioactive waste, and very high price transparency.

Now, Hudak would have Ontario voters believe that the rate we pay today is what we should expect to pay for future generation. I don’t believe this is a naive belief on Hudak’s part; I believe it’s to intentionally mislead. Fact is, there isn’t a single form of clean (or dirty) generation that can be built new today that isn’t more expensive than the 6 or 7 cents per kilowatt-hour that Hudak (and most media, for that matter) recklessly bandies about. Now, could we get wind generation cheaper through a competitive process? Yeah, we could maybe carve a couple of cents off the FIT rate. But the FIT was intentionally designed to lower barriers to market access — to open up the market beyond the big, deep-pocketed corporate giants who can afford the upfront millions required to respond to a request for proposals (RFP) and, after participating in such a process, can afford to walk away empty handed. The province created the FIT to encourage community participation, and to stimulate the kind of growth that would attract manufacturing and jobs — and it has, despite a few spineless moments and missteps from the Liberal government.

 Now, on to solar. Hudak and his legion of backers, including National Post columnist Parker Gallant (who has somehow managed to turn his column into an official soap box for the Ontario PCs — hell, he even hands over fresh quotes for Hudak’s press releases now), always point to solar prices when talking about the FIT. After all, it’s easier to anger voters by saying generally that we’re paying 80.2 cents per kilowatt-hour under the FIT and that this is 10 times more than the wholesale market rate for electricity. Wow — 10 times more! Crazy. But the comparison shouldn’t be to the wholesale market rate, and the rate itself is far from representative of the FIT program pricing. That scary 80.2 cents, which will soon be lowered, is for less than 1 per cent of FIT contracts when measured on a megawatt-hour contribution basis. Also, that money doesn’t go to big corporate conglomerates intent on vacuuming money out of Ontario. It goes to farmers and homeowners who are taking risks to become participants in the electricity system. The thousands of people taking part are literally changing the energy landscape in Ontario and they’re creating local jobs. You can see it just driving around this province. Put into perspective, the premium being paid to them is more than worth what the province is getting back. Hudak, however, would prefer to demonize them to score votes.

Now, let’s talk about the elephant in the room — big solar. Big, multimegawatt solar projects are getting 44.3 cents per kilowatt-hour. But unlike the small solar rooftop systems, these larger systems will collectively have an impact on electricty rates over the coming years. At the same time, we have to acknowledge that it is because of these large systems that a lot of manufacturing has shifted to Ontario. Still, it’s a lot of solar and a lot to pay, and this is in my view the Achilles heal of Ontario’s FIT program. If there are going to be changes to the program, the most dramatic changes have to come here, but it has to be done in a way that balances the need to nurture an emerging industry and the interests of ratepayers. The answer, in my view, is to embrace a competitive bidding process for these large-scale projects and set caps (targets?) on the amount of big solar we want in Ontario by 2015, 2020 and 2025.

But Hudak isn’t thinking or talking that way. He wants to throw the baby out with the bath water, and in doing so kill investor confidence in the Ontario market, kill green jobs and build new nuclear plants that we’ll have to start paying for 10 years before the first kilowatt-hour is generated. His approach is reckless at a time when Ontario needs surgical, not blunt force, solutions. He’s being destructive at a time when Ontarians want our politicians to be constructive.

On a final note, let’s keep in mind that we don’t have to choose nuclear over renewables or vice versa. While building new nuclear plants may be an unwise decision economically, there is plenty of job creation to come from reburishing or extending the life of Ontario’s existing nuclear fleet — even if we retire a couple of plants, such as Pickering. Indeed, OPG and Bruce Power have expressed concerns about doing these refurbishments and building new because of the limited labour pool and the logistical nightmare of taking so much on in such a tight window. So, the message here is you can continue to aggressively build green energy and capture the associated jobs while keeping folks in our nuclear industry gainfully employed for the next 10 years, simply following through on an existing refurbishment schedule. Talk of building new nukes is a distraction — there will be opportunities in both sectors, and plenty of jobs to go around. We don’t have to choose one over the other.

There’s a lot of rethinking going on in the utility sector these days. Utilities once intent on building new nuclear plants are now scrapping those plans and focusing instead of refurbishing existing  reactors. Last week Canadian nuclear operator Bruce Power announced it was withdrawing two new-build site licensing applications from the Canadian Nuclear Safety Commission. The company said it would concentrate resources instead on refurbishing several reactors at its site northwest of Toronto. Then Russia’s state nuclear company said it would cut back its new-build program by half. Exelon, the biggest nuclear owner and operator in the United States, has said it would halt all new-build efforts for at least three years (and possibly as much as 20) and instead move toward uprating the capacity of its existing 17 reactor units.

The common theme is simple: the economic downturn has reduced electricity demand and with it the need for new reactors. Utilities are also realizing that refurbishing/uprating units is cheaper than build anew. Exelon has said that uprating existing plants costs half as much as building new and carries far less risk. Investors, apparently, don’t like the risk involved with spending billions and billions of dollars on a 1o-year project when electricity demand is dropping, not climbing. As Murray Elston, a vice-president at Bruce Power told me, “We were not prepared for the decrease in electricity demand. I think it’s been a surprise to almost everyone.” And while you can argue that the downturn is a blip and that long term the power will be needed, it comes down to who’s paying the money. “We have to be prudent with our investors’ money and it makes us really refocus ourselves so we can be the best with the site we have.” Bruce Power has already been hit by the downturn because power coming from its existing fleet is often surplus and must be given away to balance the grid. This has affected the company’s cash flow and in some cases has forced it to temporarily shut down reactors to cope with the excess power supply.

China is forging ahead with its new nuke strategy, so the renaissance is taking off somewhere around the world — but not North America. Not yet, anyway. The hope is that renewables and conservation will have a chance to take root and show a meaningful contribution before electricity demand starts to pick up again. Maybe then, even in the face of an improving economy, we’ll realize that we can get by without building new nukes. Or maybe not. At least we’ve got two or three years to show what’s possible.

Of course, these costs don’t include operating costs, long-term waste management and plant decommissioning costs, or costs for the massive volumes of water that are needed every day for cooling of the reactors. There are other costs as well, but somehow they never seem to be calculated in discussions about the economics of nuclear.

Eskom cited the fact that electricity demand is down because of the economic downturn so it didn’t make sense to rush into such an expensive infrastructure project. It’s not alone — power demand is falling across North America as well, including Ontario. In fact, the Ontario Power Authority has agreed to re-do its long-term load forecast for the province in light of recent consumption declines. It will be interesting to see what the agency concludes, and how the government will react if the forecast has been revised materially downward and the bids coming in to build a new 2,000 MW nuclear plant are much higher than expected.

Will Ontario make the same decision as South Africa? Somehow I doubt it, but certainly if the load trend falls and the nuclear cost trend rises, the government here will have some explaining to do if it hopes to sell the nuke plan to the general public.

My guess, if such a scenario does occur, is that the government will suddenly be all ga-ga over electric cars and the need to build nuclear plants to handle the sudden rise in grid load as more cars plug in.

In the Ontario context, the power planning agency has dramatically underestimated the cost of building new nukes, and while one could still argue that even at the higher price it’s still worth pursuing, that case needs to be made before we head down a path that at some point becomes irreversible.

Another point, which I didn’t mention in the column, has to do with loan guarantees. The U.S. Department of Energy, for example, has received 19 applications from 17 electric-power companies asking for loan guarantees totalling $122 billion (U.S.), which would backstop construction of 14 new nuclear plants (21 new reactors).

In this market, other forms of emission-free power generation should be given equal treatment. Why should the nuke builders get such massive loan guarantees while a wind, solar or geothermal developer trying to raise debt capital in a difficult market doesn’t?