Evidence of meeting #50 for Natural Resources in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was plant.
A recording is available from Parliament.
Conservative
The Chair Conservative Leon Benoit
None. I'm really glad you asked. If you hadn't asked, Mr. Allen, I would have let you go forever, pretty much.
We are out of time for the first panel. I want to thank you both very much for your information. It's extremely helpful.
From the Canadian Nuclear Association, Denise Carpenter, president and chief executive officer, thank you.
And Duncan Hawthorne, president and chief executive officer from Bruce Power, thank you.
We will suspend for a couple of minutes as we change panels.
Conservative
The Chair Conservative Leon Benoit
We will reconvene this committee meeting with the second panel. We have two witnesses.
Appearing via video conference from Des Moines, Iowa, as an individual is Dr. Mark Cooper, senior research fellow for economic analysis from the Institute for Energy and the Environment, Vermont Law School. Welcome. Thank you very much for appearing before our committee today.
From Ontario Power Generation Incorporated we have Pierre Tremblay, senior vice-president, nuclear programs and training. We will take the presentations in the order the witnesses appear on the agenda.
We'll start with Dr. Mark Cooper for up to seven minutes. Go ahead, please, sir.
Dr. Mark Cooper Senior Research Fellow for Economic Analysis, Institute for Energy and the Environment, Vermont Law School, As an Individual
Thank you, Mr. Chairman and members of the committee.
I appreciate the opportunity to testify today, and I will share some research I've been working on about the cost of building nuclear reactors. Plus, I've done some analysis looking at the impact of safety, an issue the last panel suggested needs to be considered at this moment.
The high cost and large capital expenditures associated with the construction of nuclear reactors make the technology more expensive and risky than available alternatives. Because reactor projects are extremely complex and involve environmental safety concerns of very toxic and volatile fuel, they are prone to cost overruns. The cost is driven by the difficulty of dealing with the fuel.
Their huge size and long lead times make them vulnerable to changes in marketplace dynamics, or public policy for that matter, which may eliminate or alter their economics. Because of these characteristics, certain utilities in the U.S. cannot raise funds in capital markets to build them.
Reacting to this marketplace reality, nuclear utilities in the U.S. have sought to sidestep the judgment of financial markets to secure massive subsidies that shift the risk of nuclear construction away from utility stockholders onto taxpayers, in the form of loan guarantees, and onto ratepayers, in the form of advanced cost recovery. Equipment vendors are probably kicking in some subsidy too in an effort to get a bandwagon going.
In the U.S. the industry had some success getting loan guarantees and advanced cost recovery, but the reality of the economics of nuclear reactors has set in. Almost every one of the projects that was talked about or asked for licences has been delayed, suspended, abandoned, or cancelled altogether.
What we've had here in the U.S. is a classic bubble with a promotional frenzy in the early part of the 2000s followed by a speculative surge and then the failure of the industry to live up to its promises about costs, something it has always had difficulty doing. Finally, the bubble burst with low-cost natural gas, declining demand growth, stable alternatives, and subsequent cancellations.
The long lead times of these reactors and high costs make them a uniquely bad investment to make in a period of great uncertainty. The simple fact of the matter is that what you want in uncertain times are investments that are flexible, let you make changes, don't sink costs, the antithesis of building large central station facilities. I have laid this out in exhibits attached to my testimony.
As bad as nuclear economics were in the recent past, I believe the incident at Fukushima will make them more difficult.
As you heard in the last panel, after an incident all the people with responsibility for various aspects of nuclear reactors have to step back and re-examine. Policy-makers would be irresponsible not to look at how safety standards are set and how the process is used to re-evaluate the cost-benefit of various alternatives. To consider gathering more information and slowing down is a good policy.
Safety regulators would be irresponsible not to re-examine safety, perhaps looking for more safety measures, which may lead to long lead times or the retrofit of existing plants. Of course financial analysts will have to look at the risk of these projects, whether they are more difficult to complete and whether they're less attractive than alternative options, whether they are less popular with policy-makers who will give them less support. As a result, the cost of capital will increase.
Cost escalation flows from the conduct of these complex plants. I looked at the U.S. before Three Mile Island, I looked at the U.S. after Three Mile Island, I compared that to the French before and after, and what we know is that nuclear construction had a cost escalation problem before Three Mile Island, it had a cost-escalation after, and the problem got a little worse after, because safety was an increased concern.
Some utilities will argue it is unnecessary, especially when subsequent events or incidents don't occur. But one can also argue that the lack of events is a function of taking proper account of safety.
I looked in my testimony at the occurrence of such events, not to predict when a future event will occur but to make it clear that these are possibilities. They do happen; they need to factor into our thinking; and inevitably they will have an impact on costs.
In the U.S., there was never any reason for the government to put taxpayers or ratepayers at risk when this nuclear bubble started to inflate. Instead, they should have listened to the judgment of the capital markets and let the technology be. If in the future it comes around, I'm a consumer advocate: I would be glad to support it if its costs would support it, leading me to conclude that it was the least-cost option to pursue. But the simple fact of the matter is that the economics of new nuclear reactors, certainly in the U.S., were bad before Fukushima and will be worse after.
Thank you for the opportunity.
Conservative
The Chair Conservative Leon Benoit
Thank you very much, Doctor, for your presentation.
We go now to our second witness, Pierre Tremblay, from Ontario Power Generation Inc. Go ahead, please, with your presentation for up to seven minutes.
Pierre Tremblay Senior Vice-President, Nuclear Programs and Training, Ontario Power Generation Inc.
Good afternoon.
Thank you, Chair, and honourable members of the House of Commons Standing Committee on Natural Resources. I appreciate the opportunity to appear before you today as part of the committee’s work in studying Canada’s energy security and the contribution that nuclear makes to safe, reliable, and low-emission baseload electricity generation.
First, let me begin by stating the obvious: that our thoughts and prayers are with the people of Japan during this extraordinary period in their history.
A bit about OPG: it is Ontario’s largest electricity generator and owned by the people of Ontario. From our 65 hydroelectric stations, three nuclear plants, and six fossil stations, we have in-service electricity generation of around 19,000 megawatt electrical. OPG nuclear generation represents approximately 30% of our generation portfolio.
Safety is central to everything we do. OPG has had many years of operation with no significant nuclear safety events. In fact, in over 40 years of nuclear operations, there have been no injuries to any member of the public as a result of those operations.
Along with our own nuclear plants, we lease to Bruce, as was mentioned earlier, two plants, which they operate. Finally, OPG operates the nuclear waste management facility that services OPG and Bruce Power.
OPG produces 60% of Ontario’s electricity. With the Ontario government’s directive to stop burning coal as a fuel by the end of 2014, OPG will predominantly be generating low-emitting electricity from its hydro and nuclear plants. In fact, in 2010, 90% of our electricity was virtually free of greenhouse gas generation.
Nuclear power enables renewable power generation from wind and solar, which are so dependent on variable weather conditions. Again, based on provincial direction to end the use of coal in our fossil plants, OPG is actively investigating the possibility of biomass and natural gas in combination to be a potential replacement fuel for our fossil fleet.
We have approximately 11,000 employees, and our company generates $6 billion in gross revenues, which supports many communities directly and indirectly across Ontario. Moreover, for the people of Ontario, the real owners of the assets, the commercial success of OPG contributes to the well-being of all Ontarians through the investments we make into those assets and taxes and other payments we make to the province. Our net income stays in the province.
OPG's three nuclear multi-unit CANDU plants are located at Pickering and Darlington, Ontario. We have been operating nuclear power plants since 1971. In 2007, OPG was awarded the prestigious Institute of Nuclear Power Operations performance improvement award for our facilities.
Our reactors are licensed to operate by the Canadian Nuclear Safety Commission. We recognize that our licence to operate relies not only on our strong safety record but also on the earned trust from the communities in which we operate. We work very closely with our host communities at Pickering and Darlington, where we enjoy strong local support. This has translated to strong host community support for OPG's plan regarding a new nuclear build and for refurbishment to the Darlington facility. Our community partnerships include regular updates on nuclear operations as well as on safety and health issues.
In 2008, OPG was selected to operate two new nuclear units at the Darlington site. This has the potential to generate 3,500 jobs during construction as well as 1,400 jobs during the operation of those two plants. On September 21, 2006, we began the federal approval process when we submitted an application for approval to prepare the site for the new nuclear project to the commission.
The Darlington new nuclear project joint review panel hearing process on the environmental assessment began on March 21 and is scheduled to end on April 28 of this year. These EA hearings will be followed by hearings to license a chosen technology and hearings to construct and operate the plant.
OPG's nuclear operations are a key component of Ontario's long-term electricity plan. Nuclear provides the low-emitting baseload electricity that enables emerging renewable generators such as wind and solar to have the opportunity to develop their technologies and participate in the province’s electricity plan.
Part of the equation of energy security for OPG is our nuclear safety. We take great pride in the safety of our workers and communities across the board. Generation using nuclear power plays a fundamental role in the low-emitting electricity for the province. Industry and residents depend on this safe, reliable, and cost-effective electricity generation.
Our CANDU reactors take advantage of natural resources and technologies that are readily available in Canada, which further enhances security of the electricity supply, independent of external influences. Nuclear will continue to provide a safe and secure supply of energy for Ontario well into the future.
Now, Duncan Hawthorne spoke at some length about the occurrences in Japan, and I will not revisit that. I'm certainly open to answering any questions you may have.
For my part, I would simply say that we recognize the unfolding events in Japan. CNSC has requested that nuclear operators undertake a further review of the actions that we have, and OPG—in conjunction, in fact, with Bruce Power and the rest of the Canadian industry and operators—is fully cooperating with the CNSC in this review.
Canadian nuclear power plants are among the most robust designs in the world and have multiple redundant safety systems designed to prevent damage in the event of an earthquake and other disasters. These systems ensure that reactors are placed in a safe condition in the event of an earthquake or a loss-of-power incident. Seismic qualified systems function to ensure that the reactors are shut down, the fuel is suitably cooled, and any radiation release is contained.
Ontario is not a region where serious earthquakes are common. Despite this, the reactors have been built to resist earthquakes stronger than those that seismic studies say are likely to occur in Ontario. They are designed for a one-in-1,000-year earthquake and are robust for a one-in-10,000 earthquake. Ontario nuclear facility equipment and structures are built to CSA nuclear seismic standards. In addition, the topography of Ontario makes a tsunami a highly unlikely event. I would add, however, that consideration of other events, such as severe weather, is part of the design considerations for the power plants.
Ontario’s CANDU reactors have considerable redundancy in backup power supplies. Across the fleet there is a mix of standby generators, emergency power generators, auxiliary power generators, and so forth. Over the years, OPG has invested in upgrades in the systems as well as in fire protection and fire suppression systems, as part of our commitment to ongoing safety improvements.
This concludes my presentation. I'd like to thank you for the opportunity to appear before the committee. I'd reiterate that OPG is a key player in the Canadian electrical generation industry and nuclear generation business. OPG and the Province of Ontario are committed to safe, reliable, and secure nuclear generation now and in the future.
I guess I would also like to extend our invitation to the committee to visit our facilities, where we can show you first-hand the safety systems and the backup supplies, where you could talk to some of our front-line employees. These are people who come to work at the plant everyday, who live and raise families in our community.
I'd be pleased to answer any questions.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Tremblay, for your presentation.
We'll go now to questions and comments. We start with Mr. Tonks, for up to seven minutes.
Go ahead, please.
Liberal
Alan Tonks Liberal York South—Weston, ON
Thank you, Mr. Chair.
My first question is to Mr. Tremblay. With respect to the timetable that has been established by CNSC on risk assessment, what is the target date for a report on matters related to safety?
Senior Vice-President, Nuclear Programs and Training, Ontario Power Generation Inc.
Mr. Hawthorne talked a little about what has been asked for, which is essentially a field walkdown, and a confirmation that the defences that are designed and built and available are in place and robust. Independent reviews are going on by the site officers themselves, who are walking the facilities as well.
We're expecting the response by April 1, and essentially there are a series of timetables for various reviews and so forth.
The industry isn't simply waiting. We don't need the regulator--and I'm sure they would agree with this--to tell us we need to pay attention and look at things, so we've been moving forward.
Liberal
Alan Tonks Liberal York South—Weston, ON
Mr. Hawthorne mentioned a substantial dislocation of power in 1973 with the blackout. And the implications in Japan with respect to that example were the lack of ability to pump coolant into the reactors and cool the rods.
Would a factor in the safety review be to look at a power dislocation that would create the same situation, not as a result of earthquake or whatever, but just as a matter of system overload? Would you say that a 72-hour risk factor was adequate, or would you be looking to substantially increase that, say to 11 or 12 days or perhaps 20 days?
Senior Vice-President, Nuclear Programs and Training, Ontario Power Generation Inc.
As I recall, the specific event was on August 1, 2003, I believe. That was the blackout in the northeastern U.S.
Liberal
Alan Tonks Liberal York South—Weston, ON
That's right. I was around in 1973, but that wasn't the blackout, was it?
Senior Vice-President, Nuclear Programs and Training, Ontario Power Generation Inc.
As we are a learning organization, that event led all of us to examine and assess our defences at that time. One of the modifications in design that occurred at Pickering, where there were some issues around re-establishing class IV power to the grid to the Pickering plant, was the construction of an auxiliary power system. All the facilities now have secondary and tertiary electrical backups that can power the large pumps that essentially circulate cooling fluid. So very much so, that's part of the discussion we're having with the regulator and part of the review.
Liberal
Alan Tonks Liberal York South—Weston, ON
You've heard Mr. Cooper's analysis with respect to the cost-effectiveness of nuclear. I notice that based on provincial government direction, OPG has been investigating biomass, natural gas, and other potential parts of the energy production inventory. In that strategic plan, to what extent do you factor in the kind of cost-effectiveness and return along the lines that Professor Cooper has mentioned?
Senior Vice-President, Nuclear Programs and Training, Ontario Power Generation Inc.
I would agree that the economics certainly is a large factor in terms of the long-term viability of any project.
Certainly biomass is in itself fundamentally a risky project. We need a source, we need storage considerations, and there are many elements to beginning a biomass project on a commercial basis.
Based on the guidance we get from our shareholders, our objective is to develop all those means and mechanisms to produce electricity. I would say that our interest is maintaining a diversity of electrical supply for the security of that supply to the province of Ontario. So we are regulated. I would also add not the fossil fleet, but certainly the nuclear and the hydroelectric, so we have to account for our costs. And that certainly does make us focus on that.
Liberal
Conservative
Liberal
Alan Tonks Liberal York South—Weston, ON
All right.
Professor Cooper, with respect to what has been described as a nuclear renaissance, have you evaluated the cost-effectiveness of other technologies? Granted that in this review of nuclear, with the events in Japan there has been a public awakening that may not be described as a renaissance. Do you make recommendations with respect to what technologies would be more cost-effective, would be safer, and would be a better national strategy than embarking further down the nuclear path?
Senior Research Fellow for Economic Analysis, Institute for Energy and the Environment, Vermont Law School, As an Individual
In the document I gave you and the documents at the Vermont Law School website, there are really two key elements that turned the nuclear renaissance into a bubble. There never was a renaissance; we don't even have one picture on the wall. They really never did produce a renaissance.
Two critical factors undid the industry. One, they talked about a very low set of construction costs at the beginning. They could not deliver them by any stretch of the imagination. So it very quickly became clear that the actual projected cost of delivering them, before they started pouring concrete, which is when overruns occur, was at least three times as much as they originally talked about in the early 2000s. So the bubble came undone very quickly.
When people began to look at alternatives, while the projected cost of nuclear was increasing, the costs of the alternatives were not. Of course in the U.S. the cost of natural gas has plummeted and it looks to be very plentiful and very cheap, and the CEO of Exelon, the largest U.S. nuclear utility, has basically said nuclear can't compete. He's given big speeches and he's shown his numbers.
So it was the combination of those rising projected costs and stable alternatives. Then if you throw in the recession, which dramatically reduced demand and growth in the U.S., you really do have a perfect storm that burst the bubble long before the renaissance got going.
Frankly, you've heard the list of alternatives, although one that was not mentioned is efficiency. In my analysis that I presented to the committee I include a Wall Street analyst, because they always include efficiency; they're the only ones who do. So you've got four or five good alternatives: efficiency, wind, solar, biomass, and natural gas. Individual states and individual provinces should look at those, but they really, in my opinion, need to apply a very rigorous economic analysis.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Tonks.
We'll go now to the Bloc Québécois. Madame Brunelle, you have up to seven minutes. Go ahead.
Bloc
Paule Brunelle Bloc Trois-Rivières, QC
Thank you, Mr. Chair.
Good afternoon, Professor Cooper. It is a pleasure to speak to you.
Much has been made—as you mention—of a nuclear renaissance. It seems to me that, since we have been talking about it, things have never gone so poorly. In Canada, we are in the process of reassessing it all. In fact, from your comments, we realize that the costs of constructing and refurbishing nuclear plants are enormous, not to mention the timelines. We have what went on at Point Lepreau as an example.
I live in Quebec. The refurbishing of the Gentilly nuclear plant has raised many questions. If you are familiar with that plant, perhaps you could tell me more about it. It has always seemed to me that nuclear energy was not really clean energy. In order to sell us on the idea of nuclear energy, we were told that it was clean energy because there were few CO2 emissions, but they forgot to talk to us about the disposal of nuclear waste.
I have two questions. If you are familiar with Gentilly, what do you think of the refurbishment of that plant? Because of the nuclear bubble that you are telling us about, have we not fallen behind in developing truly clean energy?
Senior Research Fellow for Economic Analysis, Institute for Energy and the Environment, Vermont Law School, As an Individual
Well, I'm not familiar with the refurbishment of that specific plant, although I have participated in proceedings in the U.S. in which refurbishment is an issue, and it suffers a little bit from the same problems. When you first do it, it looks inexpensive, but then when you actually get into it, it gets more and more expensive. So it really requires very careful consideration.
It's my understanding that there was a project talked about in Canada that also got very expensive. It gets into the many billions of dollars. So we need independent analysis of the costs.
Long lifetimes are going to be a serious concern with the older plants. I've looked at Vermont Yankee, which is not far away, and it has raised many concerns.
With respect to the bubble, one of the things I found in my research is that when utilities become committed to nuclear, it tends to consume their attention and resources and crowds out the alternatives, and that is a real problem.
With respect to “clean”, I think we got to be lazy with that adjective, in the sense that it's a low-carbon resource, but it is not a clean resource. The fuel is very volatile and very toxic. We've had a reminder of that. We had gotten a little bit...lazy is the best word in thinking about it.
And frankly, the volatility and toxicity of the fuel is what drives the costs. All this engineering around that reaction is a function of the fact that it is very difficult to control—and we try very hard—and if the controls fail, the consequences are very great.
Of course, the waste product has the same characteristics. It's very volatile and toxic.
So we have forgotten that all of this engineering, which we're proud of, is driven by the inherent nature of the fuel. It's important to remember that, when we think about things such as wind, which does not have those problems.
Bloc
Paule Brunelle Bloc Trois-Rivières, QC
Thank you.
Good afternoon, Mr. Tremblay. You may have to defend a toxic and volatile fuel. What do you think of what Professor Cooper has just told us?
Senior Vice-President, Nuclear Programs and Training, Ontario Power Generation Inc.
I'd have two specific things to say. Certainly there are hazards. No one would say that any technology is free of hazard, and we take great care with the fuel, which even after the reactor is shut down continues to generate heat and has fission products that we need to protect ourselves from.
There are a couple of points I would make. One is that the history, the performance of the nuclear industry, particularly over the last ten years but perhaps fifteen, has been remarkably improved in terms of safety, in terms of performance. In fact, in the U.S. the utilities have increased the effective generation and contribution of nuclear power by the equivalent of about 20 new facilities without any capital investment, simply through improvements and minor investments in the plant.
The refurbishments, the new builds—these projects clearly are long-term in nature; they take ten years from conception to construction. Certainly I would be in total agreement that there are risks associated with them that need to be managed.
The key for us, speaking about Ontario Power Generation, is preparation and planning. When we do a good job in planning and we take the right time to define the scope of the work, the projects are successful.
We have many examples. We manage an outage portfolio, which is about $1.5 billion over a five-year time period, and we bring these projects in on time and on budget. There are clearly some exceptions to that; there are challenges. These facilities, though, generate power for a long time. The new builds have the potential to generate power for in excess of 60 years. That's a lot of reliable full-power operation to essentially anchor the grid to allow for other forms of electricity.
I would never say that there are no risks associated with nuclear power. The question is what the benefit is, whether we can manage it, and essentially whether we are prepared to harness the benefit from it. It's as simple as that.
Bloc
Paule Brunelle Bloc Trois-Rivières, QC
Mr. Tremblay, the Ontario Government is planning or was planning to buy two new reactors for the Darlington plant. What is the status of that? Do you still intend to proceed with those purchases?
Senior Vice-President, Nuclear Programs and Training, Ontario Power Generation Inc.
The environmental assessment has been submitted to the commission. The environmental assessment looks at a large array of potential impacts—economic, technical, environmental—and essentially the public consultation period began on March 21, and we are proceeding with that.
The commission is overseeing this, and basically it is our intention to continue going forward. It is a long process, a process that subsequent to the conclusion on the environmental assessment, and the environmental impact statement that we've made, will result in a decision to be made as to whether to proceed to the next step. That would lead to a technology selection and a licence application for construction. Then there would be more dialogue and discussion about the design, and an opportunity to talk about any new lessons or new issues that need to occur.
So yes, it is our intention to keep moving forward.