The next time you hear that nuclear energy is 6 or 7 cents per kWh, keep in mind that it isn’t the true cost
Canada has a history with nuclear reactors dating back to 1942 when the National Research Council set up a British-Canadian co-funded laboratory in Montreal to develop a design for a heavy-water nuclear reactor. In 1944 approval was given to construct an experimental reactor in Chalk River Ontario. It operated for 43 years performing research and producing isotopes for medical purposes.
In 1952 the Canadian government formed Atomic Energy of Canada Ltd to develop peaceful uses for nuclear energy. They formed a partnership with the Hydro Electric Power Commission of Ontario and General Electric to build Canada’s first nuclear power plant in 1962. It was called Nuclear Power Demonstration (NPD) and produced 20MW using a process which was later to be termed ‘CANDU’ which is an acronym for Canada Deuterium Uranium.
The first full-scale CANDU reactor went into service at Douglas Point in 1967 on the shore of Lake Huron in Ontario.
Three large scale nuclear sites have been developed in Ontario beginning with Pickering in 1967, Bruce in 1970 and Darlington in 1981.
Ontario’s CANDU nuclear generation now provides the majority of the province’s energy needs and is a critical component of the energy mix.
On the positive side, Nuclear energy has near zero emissions and – when it runs – has a very high capability factor. It represents an incredible technical achievement and has been implemented at generating facilities world wide.
On the negative side it has been very costly due to project delays, reliability problems, a history of cost overruns and leaves a legacy of spent fuel that must be managed for thousands of years. There is also a risk of environmental contamination up to and including a meltdown.
We are fully committed to the CANDU facilities, however it is only fair that it is characterized by true cost and actual performance, without the smoke and mirrors. I have put together a timeline of significant events to capture some of the capital expenditures associated with the 3 major Nuclear stations.
Nuclear Program Capital Investment Examples
| Project | Capitalization Year | Cost (Dollars of the Day) | Cost in 1998 Dollars |
|---|---|---|---|
| Pickering A (1965 - 1973) | 1973 | $716,000,000 | $2,860,859,649 |
| Bruce A (1969 - 1978) | 1978 | $1,800,000,000 | $4,593,277,310 |
| Pickering B (1974 - 1986) | 1986 | $3,846,000,000 | $5,398,622,496 |
| Bruce B (1976 - 1989) | 1989 | $5,994,000,000 | $7,419,203,804 |
| Darlington (1977 - 1993) | 1993 | $14,300,000,000 | $15,290,258,215 |
| Pickering A Retube Units 1 to 4 1983 to 1993 | 1993 | $1,000,000,000 | $1,069,248,826 |
| Pickering A Unit 4 (1999 - 2003) | 2003 | $1,250,000,000 | N/A |
| Bruce A Units 3 & 4 (2001 - 2004) | 2004 | $725,000,000 | N/A |
| Pickering A Unit 1 (1999 - 2005) | 2005 | $995,000,000 | N/A |
| Bruce A Units 1 & 2 (2005 - 2012) | 2012 | $4,800,000,000 | N/A |
| Total of 'Dollars of the Day' Capital Costs | Various | $35,426,000,000 | N/A |
| Total of Ontario Hydro Capital Costs | 1998 | $36,631,470,300 |
At the time Ontario Hydro was split up, the nuclear capital costs as shown in 1998 dollars amount to $36.6 Billion! This information is for illustration only – to prove a point. Some of the costs may have been covered by Federal taxes or Atomic Energy Canada Ltd and there are some tricky accounting procedures to deal with the debt. That’s what I call smoke and mirrors.
In fact, when Ontario Hydro split up, the debt exceeded the value of its assets by over $19 Billion. That amount was determined to be stranded and was moved to the new holding company (OHFC) to manage.
This stranded debt is being paid through our rates and corporate charges. It is arguably from the pre-1998 nuclear program.
The debt should have been paid through revenues from nuclear energy, A simple 30 year payback on the $19.1 Billion at 5% interest would add 4 cents per kWh on a 35 TWh annual energy output from the Darlington and Pickering Nukes. Instead the cost is obscured by debt repayment line items on our bills, payments-in-lieu by OPG, Hydro One and all LDCs.
The facilities looking forward
The costs are going to rise over the foreseeable future because the all of the refurbishment costs will have to be recovered through the generator rates.
The 3 Nuclear sites Pickering, Bruce and Darlington have the following plans.
Pickering is the oldest facility with 6 out of 8 reactors remaining in operation. It is scheduled to close in 2024 and is being maintained in order to provide base generation capacity while the Darlington and Bruce multi-year refurbishment is being managed. It will likely incur additional costs between 300 and 500 million to keep the units operating until 2024.
Bruce is the second oldest facility which is owned by OPG but leased to Bruce Power as a privately owned operator. Bruce Power will undertake a $13 billion 15 year refurbishment starting in 2020. In their proposal to the Ontario Government they are forecasting that the project will increase the cost of electricity from the current 6.57 cents per kWh up to 7.7 cents per kWh once the units are refurbished. I fully expect that inflationary increases will happen throughout the duration of their operation to bump those numbers higher.
Darlington is the newest nuclear facility in the fleet and it produces approximately half the energy output of Bruce. Darlington is in the midst of a 10 year $12.8 billion refurbishment project. If I work the numbers using a mortgage-like calculation over the expected 30 year life extension it suggests an extra 3 cent per kWh revenue requirement to pay for the investment.
Derek
