THE SUMMER OF 2009 marked a tumultuous stage in the evolution of electricity policy in Ontario, and the future path of the province’s electricity system remains uncertain.
By the end of May, the provincial government’s strategy appeared to have reached a pinnacle of contradiction. On one hand, Queen’s Park had adopted the Green Energy and Green Economy Act, designed to encourage the rapid deployment of renewable energy sources (when economical under the legislation’s feed-in-tariff mechan-ism). On the other hand, it continued to pursue the procurement of “new build” nuclear-generating facilities as the centre-piece of its overall electricity strategy.
Problems due to these conflicting paths had already become apparent. Competition for access to the electricity grid from nuclear projects had constrained new wind-energy initiatives. Moreover, a system incorporating a large number of widely distributed generation sources (e.g., renewables) requires a different configuration of the electricity grid from one organized around a small number of large, centralized generating facilities (e.g., nuclear). In addition, nuclear facilities lack the operational flexibility required by an electricity system powered largely by intermittent energy sources, such as wind.
Nuclear energy is also characterized by lock-in effects. Given the 10-to-15-year planning and construction time frames, and projected 60-year lifetimes of new nuclear facilities, their construction would commit a large portion of the province’s future energy market to nuclear. Little room would be left for existing or future options that are less costly, have fewer impacts and lower risk.
If anticipated electricity demand failed to materialize, skeptics expected the provincial government to drop its push for conservation and renewables so that room could be made for the irreversible nuclear juggernaut. In that scenario, the Green Energy and Green Economy Act’s intended beneficiaries would become victims of their own flexibility, an outcome made more likely by the recent decline in electricity demand resulting from the combined effects of the economic downturn and emerging conservation efforts.
That was certainly Ontario’s experience in the early 1990s, when electricity demand fell dramatically as a result of a major recession. Ontario Hydro abandoned ambitious conservation and renewable energy initiatives, electing instead to operate its nuclear facilities in order to pay down the debts incurred through their construction.
On June 29, the story took another twist. Ontario’s Minister of Energy and Infrastructure, George Smitherman, suspended the province’s new build nuclear-procurement process because of the high cost estimates proposed in the competing bids. To the province’s credit, it required bidders to internalize cost overruns rather than externalize them through the electricity rate base or direct government subsidy. In effect, the bids had to reflect the real costs of building new nuclear facilities. The result, confirming the predictions of bond-rating agencies and non-governmental critics, was cost estimates more than three times those used by the Ontario Power Authority for its planning purposes. Indeed, at between $23-billion and $26-billion, the projected cost of the first two reactors roughly equaled the power authority’s cost estimates for replacing or refurbishing the bulk of the province’s 20-reactor fleet. The results of this exercise in real price “discovery” should give pause to those who embrace nuclear energy as a cost-effective response to climate change.
Ontario’s path forward seems more uncertain than ever. The provincial government has provided no direction to the power authority since the suspension of the nuclear procurement process. It remains unclear whether Smitherman’s decision is a statement of confidence in the success of the Green Energy and Green Economy Act or an attempt to persuade the federal government to subsidize Atomic Energy of Canada’s (AECL) bid to build new CANDU reactors in Ontario.
If the latter, the provincial government may have made a colossal miscalculation. Unlike Jean Chretien’s Liberals, who aggressively promoted CANDU sales, Stephen Harper’s Conservatives seem to have no enthusiasm for subsidizing AECL. In June, the Prime Minister’s chief spokesperson described the company as a “dysfunctional, $30-billion sinkhole.” Frustrated by the failure of AECL’s MAPLE isotope reactor project and repeated shutdowns of the aging NRU Isotope reactor at Chalk River, the federal government had already signaled its desire to sell AECL’s reactor business. With its roots in Western Canada, the Conservative government seems inclined to focus its major future energy investments in carbon capture and storage. This technology, it hopes, will provide a means of survival for the West’s oil and gas industry in a carbon-constrained world.
Ontario appears to be left with two choices. It could proceed with a nuclear program, asking its ratepayers and taxpayers to bear the costs and risks of a path that at best will leave the province with an electricity system as fragile and inflexible as ever. Alternatively, it could attempt to make the vision underlying the Green Energy and Green Economy Act a reality.
The global economic downturn and emerging efficiency efforts have reduced electricity demand in Ontario. Together with the completion of new gas-fired generating facilities, these factors have attenuated the “crisis” in electricity supply-, giving Queen’s Park a chance to let the Green Energy and Green Economy Act demonstrate its potential to provide the foundation for a sustainable electricity system. The government may find that there is no need to accept the risks and costs associated with a commitment to new build nuclear. The choice now rests with Ontario Premier McGuinty. He will define his government’s legacy and the sustainability of Ontario’s economy and society.
Amory Lovins, co-founder and chief scientist for the US-based Rocky Mountain Institute (http://www.rmi.org), argues against reviving the “nuclear juggernaut” in the US. The oft-cited energy guru says that private investors will not finance another costly nuclear venture, and for good economic reasons. Look to the Pembina Institute for homegrown research on the subject. Its recent report, The Perfect Storm in Favour of Green Power (http://www.ontario.pembina.org/pub/1841), states that there has never been a better time not to go nuclear.