Letter to the Financial Accountability Office

August 10, 2017

August 10, 2017

Financial Accountability Office of Ontario
2 Bloor Street West, Suite 900
Toronto, ON M4W 3E2

Dear Sirs:

Nuclear power is a very important part of electricity generation in Ontario, comprising 60% of current supply.  Nuclear power is also one of the less expensive types of generation in Ontario with a current average cost of around $65 per MWh.  Despite claims by some, our analysis shows that nuclear power has not been a large contributor to the significant increase in electricity costs in Ontario.

Over the past year the Government of Ontario has renewed its commitment to nuclear power with a combined commitment of almost $26 billion to refurbish both the Bruce and Darlington nuclear power plants.  As a result, these two plants will continue to provide base load power until the mid-century.  Nuclear power is expected to remain an important part of the next Long Term Energy Plan which is expected to be released shortly.

Nevertheless, there are some significant questions that still need to be adequately answered with regards to nuclear power.  Three of these that Niagara-on-the-Lake Hydro considers important are:

  1. What are the implications of cost over-runs?  Nuclear projects have a history, both in Ontario and around the world, of costing substantially more than initially estimated.  As noted below, this was one of the reasons cited for halting some of the projects in the US.  The IESO Ontario Planning Outlook of September 2016 was limited in its cost analysis and did not appear to include any scenario analysis for higher nuclear generation costs.  A substantial rise in nuclear generation costs would have a significant impact on expected future costs of electricity in Ontario.  The FAO could analyze the implications of cost over-runs for the Ontario electricity consumers.
  2. Are the decommissioning reserves sufficient?  A large cost of nuclear power is decommissioning the plants after they have reached the end of their useful lives.  This includes the ongoing storage of the spent nuclear fuel until a permanent solution to managing these can be found.  One of the worries of those that object to nuclear power is the cost to decommission the plants and store the spent fuel far exceeding the reserves set aside during the life of the plant with the taxpayer or ratepayer being left to pay the balance.  Worldwide we are starting to develop the experience and expertise in shutting down nuclear plants across North America and Europe.  The FAO could analyze these, somewhat still limited, experiences to help assess if current reserves at Ontario Power Generation are sufficient.
  3. Is nuclear power the right investment at this point in time?  Several nuclear plants have closed or stopped construction in the United States.  The low cost of gas is a significant factor in these decisions but so is the rising costs of nuclear construction and the lowering costs of distributed generation.  The cost of solar power continues to fall rapidly and the cost of energy storage looks to be embarking on the same trend.  Generators in the southern US are promoting solar and short-term storage combinations at rates substantially lower than the proposed cost of future nuclear power.  We recognize that we are not comparing the same degrees of generation reliability but that will change over time and we run the risk of a huge investment in a thirty year fuel source that could be more expensive than readily available alternatives.  We recognize that this is not a question the FAO can answer but it is a question that should be debated.

The commitments being made to nuclear power in the future will have an enormous impact on the future cost of electricity.  It is important that we understand these impacts should the cost be significantly higher, either through project costs or decommissioning costs, than currently anticipated.  An analysis of these potential rate impacts would be a positive contribution to the electricity debate in Ontario.

Niagara-on-the-Lake Hydro asks that some consideration be given to performing this analysis.

Yours truly,

Tim Curtis

c.c Minister of Energy Glenn Thibeault
Todd Smith, PC Energy Critic
Peter Tabuns, NDP Energy Critic
Mike Schreiner, Leader Green Party