In a series of announcements during December and January, the government of Ontario has revealed not just hefty new contracts to buy nuclear energy but a new risk management approach intended to ensure the purchases remain prudent into the future. Together these announcements constitute a significant resolution of the province’s strategy for planning and development of nuclear power.
On December 3, an agreement to refurbish six of the Bruce reactors was announced, and on January 11, the government announced approval of plans to refurbish OPG’s Darlington reactors and to extend the life of the Pickering reactors until 2024.
Affecting nearly 13,000 MW in total, and costing up to $25 billion, the decisions represent the largest energy policy decision yet by the Wynne government (6300 MW at Bruce, 3500 MW at Darlington, and 3100 MW at Pickering).
The Bruce contract transfers the risk of cost overruns or delays to Bruce Power. As an enhanced form of risk management, in each of the refurbishments, the government has negotiated “off-ramps” that are intended to allow uncompleted nuclear projects to be dropped, if they are no longer attractive.
Premier Kathleen Wynne said the government intends to retain the province’s nuclear generation in general, but, “The off-ramps are very responsible. It’s a really prudent approach because, if conditions change, if there are different circumstances, then we have that opportunity to make a change.”
Energy Minster Bob Chiarelli made it clear that changes could be made for economic or policy reasons: “We have … options open should we not continue with refurbishment, or alternatively should we want to go in a different direction. … If there are cheaper, more efficient ways of generation of electricity because of innovation or changes in the sector, we would have the discretion to move off in that particular case.”
With the Darlington refurbishments for example, OPG will have to provide performance reports on refurbishment progress, and the government will have to sign an approval for each individual reactor before refurbishment will be authorized in each case.
The Darlington refurbishment, affecting four reactors, is expected to cost $12.8 billion when completed over the course of the next 10 years. OPG will receive up to 8.1 cents per kilowatt-hour.
OPG President Jeffrey Lyash vowed, “OPG, with our support team, will get the job done on budget, it will get the job done safely and it will get the job done on time.”
Taken together these decisions represent a significant commitment to nuclear energy for the province, and represent major steps forward in terms of clarifying government energy policy and the Long Term Energy Plan.
APPrO Executive Director Jake Brooks recommends that analysts be careful not to underestimate the significance of these developments: “This is historic. Off-ramps aside, I can’t recall any government in Canada making $25 billion worth of commitments to one program in a six week period.”
See the related stories: “Darlington units to be refurbished, Pickering to continue operations,” and “SNC Lavalin, AECON to retube Darlington” also in this issue, and “Bruce Power, Ontario reach agreement to secure long term output from the Bruce site,” December 2015.
Ontario’s 7 principles for nuclear refurbishment
In the Long Term Energy Plan, the Ontario government set out 7 principles to guide the negotiations for nuclear refurbishment. The IESO website notes that negotiations were required to adhere to the principles as follows:
1. Minimize commercial risk on the part of ratepayers and government;
2. Mitigate reliability risks by developing contingency plans that include alternative supply options if contract and other objectives are at risk of non-fulfillment;
3. Entrench appropriate and realistic off-ramps and scoping;
4. Hold private sector operator accountable to the nuclear refurbishment schedule and price;
5. Require OPG to hold its contactor accountable to the nuclear refurbishment schedule and price;
6. Make site, project management regulatory requirements and supply chain considerations and costs and risk containment the primary factors in developing the implementation plan; and
7. Take smaller initial steps to ensure there is opportunity to incorporate lessons learned from refurbishment including collaboration by operators.
See also the following related stories:
Darlington units to be refurbished, Pickering to continue operations
SNC Lavalin, AECON to retube Darlington