Natural Resources Committee on March 24th, 2011

[The Chair, Conservative, Leon Benoit]

Merci, Madame Brunelle.

We go now to Mr. Cullen for up to seven minutes. Go ahead, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you, Chair.

Thank you, gentlemen.

To you, Dr. Cooper, one of the things that we struggle with at committee is being able to find studies around energy production and costs that truly compare apples to apples. I'm wondering if you could recommend to us, either now or through a submission later on, where you have found the best either North American or global studies in an attempt to understand what it costs to produce power from the various sources, in a full-cost accounting, an all-in basis, as opposed to where subsidies get extracted out. And I put that across all energy sources.

Do you point to one group or one information source that seems to do a consistent and reliable job of comparing energy prices?

[Dr. Mark Cooper]

I included the Lazard study—and frankly, Lazard is lower than other people on nuclear, although it's still more expensive—for a number of reasons. One, they include efficiency, and almost nobody else does. Efficiency is an extremely—especially in the U.S.—important resource. It's baseload in the most baseload of all senses, because if consumers are not turning their things on or they're getting the same comfort with less energy, that's baked into their appliances and their buildings.

Secondly, he considers different scenarios. He considers cost of capital, he considers carbon, he considers fuel price scenarios. That kind of analysis is very rare. It's extremely rare to have someone do all of the choices and consider many of them. So that's one.

I will give you an example. The MIT study, which was very important in the early part of the renaissance year, did not include any renewables. So I personally will not use a study that doesn't include all of the choices.

The other place to look that's very interesting is the California Energy Commission. They have big resources. They have a cost-of-generation model. They run it every year. They include about 20 options. They also have a module that lets you do your own if you want, run your own. They include all of the apparent costs for a California citizen, so they include tax breaks and things like that. They might be different in Canada, but there are ways to build models to take that into account.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you for that.

Here's a question I have for Mr. Tremblay. The Ontario government put out a bid in 2007, or an expectation of a bid, for the two new builds. They were expecting somewhere around $7 billion. It worked out to just a little shy of $3,000 per kilowatt. Am I getting the numbers even in the ballpark of the original estimation?

[Pierre Tremblay]

I don't have those numbers, but certainly there were some questions about where the risk was going to be managed in the project.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Right, because the province said something different when it was requesting those new builds, and I don't know what OPG's role is when the province does these requests, but I'm sure you're at least sharing information, you're involved in the bidding process.

[Pierre Tremblay]

What we generally do is provide technical guidance around the best design, if you will, or the adequacy of the design.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

We're getting to this. I know they're going through the environmental assessment.

In 2007 they put out a number.... The expectation from the minister and from the government at the time was somewhere around a little shy of $3,000 per kilowatt. It said in its documents that anything above $3,600 will be considered uneconomical. AECL put in a bid for $26 billion, Areva came in at $23 billion. Perhaps these numbers were wrong, but I'm getting this off the Ontario government's website, so perhaps they're.... Then in 2009 they dropped plans, but the plans have been reinvigorated for the two new builds at Darlington.

Are we speaking of the same thing?

[Pierre Tremblay]

We are certainly speaking about the same thing. We're talking about essentially what our analysis shows is in the long run competitive, based on the expected performance of the plant.

I don't have the numbers; I'm not directly involved with the new build proposal. I think it's important to note that we're not solely a nuclear utility.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

No, I understand.

Dr. Cooper, let me come back to you. Something that's confusing in this renaissance motif that the industry has put together is that there is some talk about 140 new builds globally. That was being referred to before us here even some months ago.

What I don't understand is that if the build estimates around the early 2000s that we're citing in the MIT report and others—and I know you don't like the MIT, but I'm trying to give us some sort of estimate.... We're talking about energy security here, and price security is important. What the industry site says, and I was looking at it earlier, and what the global industry site said is that because of the growth in the world economy, prices got more expensive for commodities and construction supplies and everything else. This is what caused the acceleration of costs.

In your research, you're saying that the alternatives during that same period of time came down, even though some of them also use heavy capital costs to get themselves up and started.

I don't understand why this confluence happened.

[Dr. Mark Cooper]

I frankly don't believe the original numbers. We have a cycle of promotion from vendors and what I call enthusiasts, and they underestimated the costs. The $3,000 number that you give me for 2007 is the kind of number they were using here in the U.S. as well. These days, utilities, who I think are still underestimating the costs, are up to more than $5,000 a kilowatt. Some people, analysts.... Lazard, I think, uses $6,000 to $8,000, and as I say, he's a little bit on the low side. Those numbers just grew a great deal.

If you look at the CERA index of costs, you discover that nuclear costs, both in Europe and the U.S., escalated much more rapidly than others. What looked like a certain relationship in 2007.... By 2011, nuclear has gotten much more expensive.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Let me stop you just for a second.

One thing I don't understand. You say that nuclear suppressed the cost, in a sales pitch or something, to promote the industry. That's fine; industries do that. But one of those promoters—one of those enthusiasts you talk about—would certainly be somebody like John Rowe, who heads up Exelon, the largest nuclear provider of energy in the Unites States. He is coming out and saying that safety isn't their major concern right now, although what has happened in Japan will give them some thought. The main concern they have is costs, in terms of those new builds that are projected in the U.S.

[Dr. Mark Cooper]

He does not see it as economic any more, and I'm glad he has come around to my point of view, frankly. There were analysts who were saying that all along. We'll see what OPG's costs are, won't we?

It is important to recognize what your endowment of alternatives is. There are places in the U.S. where you have lots of wind, lots of solar, tremendous opportunities for efficiency. You need to look at your specific resources.

One of the things we have asked for in the U.S. is to try to get a price guarantee. If people are going to say that it will cost x, then let's have a risk-sharing scheme if you go above that. But the utilities will not give you that kind of guarantee. They will not take the risk of cost overruns, because the history is that you cannot deliver this technology at the projected cost.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Cullen.

We'll go now to Mr. Anderson, for up to seven minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I hope I'm reading these graphs properly. I had some folks who know a lot about this say they couldn't really make sense of them.

Mr. Tremblay, if I were to tell you there were over 10,000 major nuclear incidents in the last 50 years, would you agree with that?

[Pierre Tremblay]

I don't know what you're speaking of. That sounds.... I don't know what you're talking about.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Would you define “major incident”? You have used that term a number of times here. You talk about level four and five, and you talk about an accident every 2,500 hours. I assume that means that of 400 plants operating, every 2,500 hours there's a major incident.

Can you define what those are? What does that term cover?

[Dr. Mark Cooper]

There are ten level-four incidents in the history of the industry. There are five level-five incidents now; Fukushima is now seen as a level five.

What I've calculated is the number of operating hours in each year. I can go back, and we know the number of reactors that were operating. If you look at the period between Chernobyl and Fukushima, you have almost 5,000 operating hours. The point of that graph is not to predict that incidents will happen, but to show that they do happen. When we get a review, as we have heard today from the utility, it is a reaction to a reality.

There have been ten incidents over 60 years. But the industry was building up the number of reactors. One of the interesting things about the period between Chernobyl and Fukushima is that we did not have a lot of new plants coming online. There were very few plants coming online. So the number of incidents is small, but as the number of reactors increases, you need to pay attention to the rate of accidents per operating year.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Excuse me. I have a limited amount of time here. I need a bit more explanation.

I want Mr. Tremblay to react to this, but you're talking about 2,500 to 5,000 hours. There are 400 plants operating. If you take 400 plants times 24 hours, you have more than that in a day.

[Dr. Mark Cooper]

No. Those are operating years.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Yes. I know what you're saying, but Mr. Tremblay—

[Pierre Tremblay]

Let me comment on that. I believe this is in reference to the INES scale, which is essentially drawn up by the IEA to assess and evaluate events in terms of their significance.

If you look at the Canadian industry and its performance, it's exemplary in this manner. As has been pointed out, there have been a number of significant events, but there's a very large culture of reporting in our industry, and there's been very little in the way of significant impact on publics.

Clearly, there have been events; no one would ever say that there aren't events. I would tell you one thing about the nuclear industry; it's that we learn from each other. We recognize that we're hostages of each other, and we learn from each other. What is happening around the lessons learned from Japan is no different from other cases.

By the way, that event in 2003 created a lot of learning for us in the industry. Chernobyl essentially built some of the operator industry groups that you see today.

No one says that incidents don't occur. They're rare. When they impact upon on the public, they're even rarer. The safety performance industry has been solid. Certainly the Canadian industry has been a solid performer.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Your point is that when an incident happens, you're learning from it and are changing the way you're doing things so that it does not reoccur.

[Pierre Tremblay]

Absolutely; we're all over it. And we get assessed to very high standards.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay.

I want to come to renewables in a minute, but first I'd like to ask you, Mr. Tremblay, can you tell us what Japan is doing right now with their other plants? What kinds of analyses and evaluations are they doing during this time with the other plants? Are they running normally?