Canadian Nuclear Units will be Overhauled at Cost Approaching $20 Billion

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Canada has re-embraced nuclear power as a cost-effective way to meet its global climate change obligations and diversify its fuel mix while preserving or creating thousands of high-paying jobs.

Last month, provincially owned generation company Ontario Power Generation Incorporated (OPG) (Toronto, Ontario) announced it would spend $9.33 billion to refurbish four units at the Darlington Nuclear Power Station, located east of Toronto near the shores of Lake Ontario. One month prior to that, the Ontario government and Bruce Power, the private operator of the Bruce Nuclear Station in Tiverton, Ontario, announced plans to invest about $9.48 billion to refurbish six of Bruce's eight reactors.

"Refurbishing Darlington is an investment in Ontario," Jeff Lyash, OPG's president and chief executive, said last month when announcing the refurbishing project. "It's an investment in clean air, in jobs, innovation and in lower energy prices. OPG has been preparing for refurbishment since 2009, and we're ready to deliver the job safely, on time and on budget."

OPG estimated the $9.33 billion refurbishing of Darlington will generate about $10.9 billion in economic benefits to Ontario. These benefits include creating an average of 8,800 construction jobs at the plant as well as purchasing components from about 60 Ontario companies. OPG also said the project would preserve about 3,000 jobs and provide over 30 years of base load power at a cost lower than other alternatives considered. In addition, the company said the cost of refurbishing Darlington is about $870 million less than it had originally projected.

Work is scheduled to begin later this year on Darlington Unit 2, the first Darlington unit to be refurbished. That unit is licensed through 2020, and the overhaul of that unit is expected to extend its operating life by about 30 years, to about 2050. Refurbishing Unit 2 is expected to cost about $3 billion. Work on refurbishing all four Darlington units is expected to be completed by 2026, OPG projected.

"Proceeding with the refurbishment at Darlington will ensure that nuclear continues to be Ontario's single largest source of power," said Canadian Energy Minister Bob Chiarelli. "The price is right and it is emission-free. I can tell you that the Darlington transaction is extremely cost-effective."

About 50% of Ontario's electricity is generated from nuclear reactors, and Kathleen Wynne, Ontario's premier, reportedly wants to maintain nuclear's share of the province's electricity mix. Her government has cancelled plans to build a grassroot nuclear generating station, reportedly at a cost of at least $15 billion.

Shortly after the January announcement of the Darlington overhaul project, a 50/50 joint venture between SNC-Lavalin Group Incorporated (TSE:SNC) (Montreal, Quebec) and Aecon Group Incorporated (TSE:ARE) (Calgary, Alberta) said it won a $2 billion contract to carry out the execution phase of the Darlington re-tube and feeder replacement project.

Separately, one month before the Darlington announcement, Bruce Power said it would spend about $9.48 billion over 15 years to refurbish six of the eight units at the Bruce Nuclear Station, located in Tiverton, Ontario, near Lake Huron. The Bruce station is the world's largest nuclear complex. Work on that overhaul is scheduled to begin in 2020.

Regarding the Bruce renovation project, Energy Minister Chiarelli said: "The agreement makes 23,000 jobs possible and supports an estimated $4.6 billion in annual, local economic development. These actions will save the electricity system $1.24 billion and provide important relief for electricity consumers."

He emphasized that the plant's operator, Bruce Power, would shoulder the financial risks that the overhaul project could come in over budget. News reports quoted Duncan Hawthorne, Bruce Poweýr's president and chief executive, as confirming Chiarelli's statement: "We are 100 percent accountable (if we come in) over-budget or late--no ambiguity. If it costs us more--$7 billion or $70 billion--Bruce Power will bear the cost of that."

To make up the lost generation during the overhauls at Darlington and Bruce, OPG decided to keep its Pickering Nuclear Generating Station open until 2024. That six-unit, 3,100-MW complex, which is located on the shores of Lake Ontario, had been scheduled to close in 2020.

"Canada is showing that any sustained effort to meet carbon dioxide reduction targets must include nuclear power," said Britt Burt, Industrial Info's vice president of research for the global Power Industry. "In the U.S., unit additions to nuclear power plants have fallen behind schedule and exceeded budget. Hopefully Canada's refurbishment will be a happier story."

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