BUSINESS/ECONOMY

The high cost of CANDU

Ian Austen May 14 1984
BUSINESS/ECONOMY

The high cost of CANDU

Ian Austen May 14 1984

The high cost of CANDU

BUSINESS/ECONOMY

Ian Austen

When the first surge of electricity flowed out of the Douglas Point nuclear reactor 17 years ago, officials at Atomic Energy of Canada Ltd. (AECL) hailed the operation as the model for its CANDU reactor program. But last week those dreams about the $81-million station 200 km northwest of Toronto came to an end. Faced with having to invest even more money in a project that has generated only

losses from the start, AECL shut down the reactor and began the $100-million tásk of closing it permanently.

The shutdown of Douglas Point, which AECL previously estimated would be in operation until 1998, took place during a troubled time for the Crownowned nuclear energy corporation. Waning interest in Canada and a worldwide lull in nuclear power plant construction have severely damaged sales prospects for the multibillion-dollar CANDU program. At the same time, AECL’s widely promoted reactor technology suffered a humiliating setback when its biggest customer—Ontario Hydro—announced that it faces costly repairs and the loss of millions of dollars worth of electricity because a de-

sign fault shut down several of its other reactors. The closing of Douglas Point, combined with the other events, said Ontario’s New Democrat leader, Robert Rae, indicates the need for a review of nuclear power “is coming in loud and clear.”

But any study is likely to find that the economics lessons of Douglas Point are unclear. AECL owns the plant and had paid all of its operating expenses, including the salaries of 264 workers. But Douglas Point’s operator was Ontario

Hydro—the 200-megawatt facility’s sole customer. Ontario Hydro, in turn, paid the federal corporation for power generated at Douglas Point. AECL refuses to divulge how much it spent on the project after it began operating, but it is clear that it never showed a profit. According to AECL annual reports, during the past three fiscal years alone the plant lost $16 million—even though Ontario Hydro, by reimbursing AECL at a rate comparable to its generating costs at a nonnuclear suburban Toronto generating station, was essentially subsidizing what was supposed to be a cheaper source of electricity.

In the short term the Douglas Point closure will have little immediate impact on the plant’s workers. They will

likely be occupied for the rest of the year in shutting down the reactor. Ontario Hydro said that when that process is completed, it will have relocated most of the workers. But Arvo Niitenberg, Hydro’s executive vice-president of operations, admitted last week that some layoffs are possible—a dismal prospect in Ontario’s job-starved Bruce Peninsula.

Ontario Hydro remains one of the biggest promoters of the CANDU reactor, but the units, which generate about one-third of the utility’s capacity, have frequently turned out to be flawed. One of the most costly problems has developed at the massive 4,000-megawatt installation in Pickering, Ont. Currently, two reactors there are shut down for three years while workers remove and replace pressure tubes. The main reason for the $720-million repair and the resulting oneto twoper-cent rate increases in each of the next three years: an improperly designed spring which has allowed highly radioactive fuel bundles to shift out of position. A third unit at the plant will be out of service until June for maintenance tests on its pressure tubes, and last month a fourth unit was closed for about 10 days after one of its transformers leaked oil. The shutdowns do not create a danger of power shortages but they are costly. The leaky transformer will cost Hydro $2 million as it replaces the lost nuclear power with coal-generated electricity. Said Ontario Liberal Leader David Peterson: “What we have seen is the best-laid plans of mice and men go wrong.” Ontario power users are not the only consumers who have paid CANDU’s high costs. Although outside of Ontario only consumers in Quebec and New Brunswick, where two small projects recently went into operation, benefit directly, AECL estimates that Canadians from every province have paid about $3 billion in taxes into the program. Paul O’Neill, AECL corporate executive vice-

president, argues that that amount is offset by approximately $5 billion that consumers save because using nuclear power to generate electricity is cheaper than burning coal, most of which Ontario buys from U.S. mines. But a leading nuclear industry critic with Energy Probe, a private research foundation, Norman Rubin, says Hydro’s claims are exaggerated. Rubin adds that CANDU has enjoyed a national subsidy of about $5.4 billion, an amount he believes offers many Canadians little benefit. Said Rubin: “Pick a taxpayer outside of Ontario and it is not clear what those people are getting for their money. Ontario has really put one over on the federal government.”

Ottawa has tried to persuade other provinces to enter the nuclear generating business with attractive construction subsidies, but it is unlikely that they will accept. Indeed, a 66-page Nuclear Industry Review that the federal energy department released two years ago concluded that there is essentially no market for the CANDU in Canada.

Quebec, which opened its one reactor station,

Gentilly II, last year, has little interest in further projects. It fills its domestic and export needs easily with its water-powered turbines in its mammoth James Bay project. And New Brunswick was only able to rationalize its reactor at Point Lepreau by exporting a third of its capacity to three New England utilities.

AECL’s export market is even more unpredictable. So far, it has sold reactors to Argentina, Romania, South Korea, Pakistan and India. But AECL’s only current sales prospect is a single reactor sale to Turkey. And AECL’s proposal—a joint venture involving a secret technology exchange with South Korea—faces competition from the United States and West Germany. Not only that, but last month Turkey extended its deadline for proposal submissions indefinitely, indicating that no purchase will be made in the near future. Acknowledged AECL spokesman Mac Keillor: “We are not selling reactors like women’s hats. There are not a lot of prospects.”

And AECL also admits that its last sale—a $2-billion, two-reactor project at Cernavoda in Romania—was unsatisfactory. The problem: Romania has insisted on paying for its CANDU with

offsetting trade rather than cash. Said Keillor: “Anyone would agree that it is not the best way to do business, but if it is doing that or not doing business at all, you have to weigh all the factors.” Ottawa’s desire to protect the 35,000 jobs in the nuclear industry was one of the major reasons for accepting the proposal. But Rubin argues that ultimately the transaction may cut—rather than sustain—overall employment. Said Rubin: “By being willing to take trade or offset barter, we are willing to deal away what is surely a larger number of jobs in other Canadian industries.” In the deal with Romania each of the Canadian-based contractors for the proj -ect (AECL farms out most of the manufacturing work on CANDUs to private companies) will make individual agreements with Romania to trade their reactor parts for Romanian merchandise.

The Canadian manufacturers, in turn, will have to sell those goods in Canada. But much of the goods that will enter the Canadian market will likely be labor-intensive, such as farm machinery, shoes and wine, and Canadian producers of competing products already have financial difficulties. Said Rubin: “There is just about no domestic industry in which $1 billion worth of goods carries as little employment as building CANDU reactors. But if we import $1 billion worth of inexpensive I tractors, we can virtual ally wipe out Massey| Ferguson.”

For his part, Rubin is f one of many who argue I that the best thing AECL “ can do to prevent its collapse and the resulting loss of jobs is to get out of the reactor business. In its place, he suggests that the company could put its resources into developing new techniques for decommissioning shut-down reactors, such as Douglas Point, the disposal of radioactive and other toxic wastes as well as upgrading operating reactors in Canada and abroad. Keillor says AECL is “scratching to dig up any kind of business,” but he rejects the suggestion that many new technologies could be developed in the fields that Energy Probe suggests. Instead, he contends that the company’s fortunes will improve after the world economy strengthens. Said Keillor: “The question is, are we going to get enough business to keep a team together until then To answer, you need a crystal ball.”O