Yesterday, I appeared on Dale Goldhawk’s show on Zoomer Radio discussing Ontario’s electricity situation. A podcast of the show is here. Since that appearance, I have had some requests for more discussion about Ontario’s nuclear future. Here are some very brief notes on a big subject.
The Ontario government’s announcement last week that it was ending its effort to build two new reactors at Darlington has little practical importance because that development process had stalled long ago. It appears that the purpose of the government’s announcement was to distract from the ongoing gas scandal controversy.
Ontario is not alone in backing away from new nuclear reactors. The current low price for natural gas combined with new thinking on reactor safety arising from Fukushima have put new nuclear plans on the shelf across the continent. After decades of talk, all other provinces once considering nuclear expansion have abandoned those plans. Of more than two dozen new reactors proposed in the U.S. over the last decade, almost all have been abandoned and only three are current still in active, advanced development. World uranium prices have steadily declined since the Fukushima accident.
The market has spoken on new nuclear in North America, although some politicians have not kept up to date.
Ontario depends on CANDU reactors for over 50% of its electricity supply today. The Candu design available for new construction now has not advanced to meet current international safety standards. AECL’s project of modernizing the design was not completed at the time AECL’s reactor division was transferred from the federal government to SNC Lavalin.
The last Candus built were in China. When completed in 2003, AECL claimed to have achieved its finest hour. Soon after the completion of those reactors, the Chinese announced that they would not be building more Candus.
The only reactor design currently at an advanced stage of construction in the western world is the Areva/Siemens EPR design. Two units of that design are under construction, one in Finland and one in France. Both projects are drastically behind schedule and over budget. As those projects began to struggle, Siemens downsized its nuclear development efforts.
Several potentially useful small modular reactor designs are under early development.
“Soon after the completion of those reactors, the Chinese announced that they would not be building more Candus”
One imagines that this was due, in no small part, to our refusal to pay for it. We did the first time, to the tune of $2 billion, IIRC. But it was a “development loan”, my bad.
“The only reactor design currently at an advanced stage of construction”
The wording here is unclearâ€¦ do you mean “the only advanced reactor design”? If so, I do need to point out the System 80+ and AP1000 are under construction as well. The AP1000, in particular, is definitely on the same level as the Areva design.
None of this changes the general outlook, however. China’s previously-announced massive buildout suffered major political setbacks after the Sichuan earthquake revealed the shoddy workmanship of rushed construction, and Fukushima then demonstrated that meltdowns are surprisingly easy to arrange. Korea’s program is in disarray after numerous faked safety reports resulted in over 100 charges being laid. The US was all for the renaissance, but the final nail in that coffin is apparent in Duke’s abandonment of the Florida reactors after they passÃ© $11 a watt CAPEX and kept going.
A number of bloggers continue to pretend that everything’s fine, and/or blame the sorry state of the industry on a conspiracy of big banks and hippies (the imagination trembles). As I understand it, AECL’s design team was disbanded even before the SNC sale, yet you still see calls for CANDU sales to be picked back up.
In any event, I think one needs look only to the market to see what’s going on. Last predictions I saw was that this year 35 GWp of PV is going in, followed by 32 GWe of wind, and somewhere on the other of 10 GW of natural gas turbines. In fact, China was installing more wind than nuclear even at the height of their plans. The grid is rapidly shifting to new sources at a rate no one predicted, and certainly not to the sources predicted. Oddly, it looks like the hippies had it right in that respect!
“Several potentially useful small modular reactor designs are under early development”
I am highly sceptical of these designs. Efficiency scales with outlet temperature, and cost with size, so making a small, cool reactor is unlikely to be successful – at first glance. I know there are entirely new concepts involved, but so far no bent metal. Let’s not forget pebble bed designs, the last great white hope of the industry.
Maury: So I guess you are suggesting we abandon nuclear and go “solar” as that is the business you are in! Our electricity bills are not high enough yet? That’s not what most ratepayers think or anyone with the ability to see what both wind and solar have done to our rates in this province! Nukes are not he cause of our bills rising it is the inability of the politicians to see through the haze created by people with an agenda to lift money from everyone else’s wallet. Have a look at this very recent article about solar.
Forbes, July 18,2013
“Solar Energy Storage About To Take Off in Germany and California”
Decreasing FITs wil push the attractivness of PV storage systems as will government incentives.
Note: Comment section
Justin Gerdes, author of this article, comments that PG&Es rate for home PV panels is about $0.04 per kilowatt hour for surplus electricity sent to the grid.
Compare this to what Ontarians get for home PV electricity sent to the grid.
The game name now is energy storage for renewables no matter what the cost will be.
Renewable Energy Storage Summit, Toronto, Oct.7,2013.
Co-Located with CanWEA 2013
Renewable Energy Summit
“Maury: So I guess you are suggesting we abandon nuclear and go â€œsolar ”
*That’s* what you took away from the numbers in my post? That this is something about *me*?
You’re an ex-banker right? Most bankers I’ve known have a strong penchant to let the numbers do the talking, and are big supporters of the free market. In fact, most of your posts on the topic are basically complaints about government intervention. This post is no exception.
Well here’s the numbers, and that’s what the market is doing. So how do *you* explain this?
Why do *you* think PV and wind are the fastest growing energy sources in the world, by far?
Why do *you* think this has been true for the last five years or so?
Why do *you* think no one is putting in new reactors?
Given that this is a worldwide phenomenon, may I suggest that you might be a little too hyper-focussed on your own “problem” and might be missing the forest for the trees? After all, I suspect that the rapid uptake of PV in Japan this year has little to do with Ontario politicians.
“it is the inability of the politicians to see through the haze created by people with an agenda to lift money from everyone elseâ€™s wallet”
Really? A banker is complaining about someone else lifting money from other people’s wallets? The irony is delicious.
“Nukes are not he cause of our bills rising”
As a numbers man, I’m sure you’ve run the numbers on this and presented them? No?
Well fine, I’ll do it.
In the article you linked to, Sharp claims that $550 million were spent on payouts to PV in 2013.
Pickering, which is right out my window, sells its power onto the grid at a reported 8.5 cents/kWh. The reactors have an average capacity factor of about 73%, so that means on a yearly basis we should average 8765 x 0.75 x 3.1 ~= 20 TWh of production.
Over on the ieso website, I can see that the average wholesale price for power has averaged 2.7 cents/kWh this year. That means that every kWh from Pickering costs us 5.8 cents in support. That means Pickering costs us $1.16 billion a year.
This, of course, ignores the other two major reactors, both of which also sell power at rates above the wholesale cost. It also ignores the $21 billion in stranded debt, the majority due to overruns at Darlingon. And of course there’s all the money spent on AECL, to the tune of $350 million a year, going back to the 1950s.
So by all appearances, in relative terms it *is* nuclear that is causing your bill to go up.
But actually it’s not. What’s really causing the bills to go up is what has been repeatedly and clearly reported in the press: retail rates have been artificially suppressed for decades, with electricity rates being well below inflation. That is a formula for disaster. To make matters worse, in order to keep the prices suppressed, basic maintenance on the grid was left incomplete or ignored entirely. This accounts, the last time I saw numbers, for about $20 billion.
BTW, I completely agree with Sharp on the point that PV installs should have had a natural regression pattern in them. But to ignore all the other problems with the electricity system in the province due to this one particular problem? That sounds like scapegoating to me.
Maury, You want some facts. Here they are:
A “free” market does not guarantee prices but that is exactly what the OPA has provided through the FIT program which guaranteed prices of over 70 cents per kWh for rooftop solar to people like IKEA, Loblaws, Canadian Tire. A “free” market is one where there actually is a MARKET where buying and selling take place for a commodity, etc. The HOEP is not a market no matter how anyone spins it!
The only MARKET Ontario has is the trading done with OPG’s unregulated hydro and coal generation (gone at the end of this year) which sold at an average of 3.1 cents per kWh in the 1st Q of the current year. Some market!
Pickering and Darlington are regulated and got 5.7 cents a kWh for the 1st Q of 2013–do some research. Because they are regulated they get the difference between the regulated and market price so get 3 cents a kWh not the 5.8 cents you claim.
Now looking at solar. If solar got an average of 50 cents a kWh the difference becomes 47 cents a kWh or 17 times the “difference” paid for nuclear power.
If the 814 MW of solar up and running in Ontario produced at 15% of capacity (IESO doesn’t tell us the actual production) they would produce approximately 1.1 TWh annually or much less then 1% of total production in 2012. That would have a cost of over $550 million and most of that would wind up in the GA pot and represent about 6/7% of that pot. So that 1% costs ratepayers 6/7% of their total bill.
Now if your research took you to the OEB an their latest rate increase you will see their calculations indicate that on their “price comparison for residential customer” that 6.79 cents of the price of each kWh comes from the GA pot and over 50% of that is from the OPA contracts signed mainly for wind and solar.
By the way when you don’t like a bank or its charges you have the choice to move to another financial institution (competition) but when the government runs a monopoly and dictates the price for something you must have you have no choice!
I think it is important that you really understand the concept of competition!
On the issue of the “residual stranded debt” you should note it was $7.8 billion not what you imply and much of it was caused by political interference. Bill Davis stopped and started the Darlington build three time stretching it out almost 20 years from the time it was approved. Interest alone on the stop/start process exceeded $6 billion and holding onto staff trained added another $1 billion. If planning were left in the hands of the experts instead of politicians we would have power now that wouldn’t be rivalling all of North America for the “most expensive”. We also wouldn’t be contracting for so much wind and solar!
Guess you may have noted another 2,000 jobs will be lost when US Steel closes Hamilton’s operation. No doubt the price of electricity had much to do with the upcoming closure.
Parker, I want to draw your attention once again to the key statement in both of my posts:
“Given that this is a worldwide phenomenon, may I suggest that you might be a little too hyper-focussed on your own â€œproblemâ€ and might be missing the forest for the trees”
How do you respond to this? With another post entirely 100% about Ontario.
Maury, My response was about Ontario because you suggested Pickering was getting 5.8 cents a kWh in support (above the HOEP) and you referenced IESO and Darlington. All of these three are still in Ontario. I was simply helping you crunch the numbers to get at the truth. I also provided some information on the Darlington overrun costs and the stranded debt issue as you had also referenced that in your remarks.
As a taxpayer and ratepayer in Ontario my focus is on the mess of our electricity system. If China and California want to erect wind turbines and plaster solar panel on their roofs let them go ahead because high electricity prices will raise their production costs and we may become competitive again–but only if we start to control our electricity costs. The “Ring of Fire” will never be developed and no jobs will be created as long as our electricity prices are 100% higher than Quebec and Manitoba unless the price of the commodities sitting in the ground jump to ridiculous levels. We are also seeing our auto manufacturing slowly dissipate which I am convinced has to do with both the price of electricity as well as the unions. Buzz wouldn’t come clean on that when I asked but he did concede the Xstrada jobs were lost because of the price of electricity. It is tough to wear two hats at the same time.
Hmm, it seems I missed this post. My apologies.
> you suggested Pickering was getting 5.8 cents a kWh in support
Not me, the OPG did so. Look for “Ontario Energy Board Docket No. EB-2013- 0321,” as found here on the OEB web site:
Pickering was paid 8.5 cents according to OPG’s filing to OEB. As it goes on to note, OPG’s estimate for LCoE from the Darlington plant comes it at an even higher price, about 8.9 cents/kWh according to their estimated cost of the rebuild and an estimated 82% CF.
> China and California want to erect wind turbines and plaster solar panel
> on their roofs let them go ahead because high electricity prices
You’re from the finance world, so you must be familiar with Lazard, right? Well maybe you’ll want to look at their latest LCoE estimates on page two of this presentation:
As you can see, the *unsubsidized* price of wind is now *significantly* less than that from nuclear. The only thing that comes even close is combined cycle base load gas plants.
Which is precisely why wind is the fastest growing power source in the world, followed closely by combined cycle gas plants.
I’m going to ignore your off-topic comments at the end, as I want you to address the numbers as presented. I will continue this policy in the future.
U.S. Chamber of Commerce
‘Sue and Settle’ Threatens Business
Sue and Settle issue involved in the Navajo Generating Station near Page, Arizona which has the potential raise Arizonians electricty costs by 20%.
Businesses that require large amounts of electricity won’t come to areas where the electricity supply is threatened. And they leave areas where the cost of electricity is too high. Continued abuse by U.S. environmental groups is becoming a serious problem in the States. But it is a lucrative practice for environmental groups.
Nuclear and other kinds of conventional power are out because they don’t create an investment craze such as there is in renewables.
For one thing,conventional power dosen’t require all kinds of storgage schemes which use huge amounts of wasted capital.
Reminds one of the early railroad investment craze but at least the public got something useful from railroads.
Maury, better late than never eh?
On your statements about what OPG received for nuclear did you look at the 2nd Quarter 2014 OPG report which had this quote:
â€œThe average sales price for the Regulated â€“ Nuclear Generation segment during the three and six month periods ended June 30, 2014 was 5.5 Â¢/kWh compared to 5.7 Â¢/kWh during the same periods in 2013. The decrease was primarily due to a lower rate rider during 2014 related to the recovery of approved variance and deferral account balances.â€ As a former banker I am more inclined to accept the ACTUAL results in a financial statement rather than from another source.
On the cost competitiveness of wind I would point to this relatively old article from Forbes:
http://www.forbes.com/sites/christopherhelman/2012/12/21/why-its-the-end-of-the-line-for-wind-power/ which is as applicable today as it was when published two years ago. Please note the LUEC fails to capture the additional costs of non-dispatchable (the EIA’s definition) wind generation. On a stand alone basis the LUEC (levilized unit of electricity cost) fails to include all of the costs highlighted in the article and referenced study, and if they were included the price for wind generation is more than double the EIA calculation. I also find it humorous that the EIA claim wind produces at a 35% level of rated capacity rather than the 28/29% it actually does in Ontario and most other jurisdictions thereby suggesting the LUEC for wind is lower than it really is. If you went further and noted that wind produces power 80% of the time its not needed the LUEC would be a lot worse.
As for your reference to Lazard’s let me say that I was an old fashioned international banker not of the â€œinvestment bankerâ€ ilk. Investment bankers generally colour reports because they have underwritten either a stock or bond issue and want to sell it off! That is where they generate their revenue and big fat bonuses! Want to buy some Bre-X or Enron stock?