Will CANDU Do?

Losing access to the US market was a major blow, but things took a turn for the worse when officials in China, where the two Canadian-financed candus recently went into service, said current plans require simpler US-style reactors to be built in the future. The Chinese decision followed one made by South Korea, which had bought four candus in the 1980s and ’90s before it also decided to go with American reactors. With the doors slammed shut in most of the world’s markets, aecl officials are now fighting to hold on to Ontario, where more than half of the province’s electricity is produced by sixteen aging candus. Their struggle began in earnest in June when, despite skyrocketing uranium prices, the Ontario government announced that it would spend $40 billion over the next twenty years repairing the province’s reactors and building two new ones—but not necessarily candus.

Still, Ontario’s decision must have delighted aecl’s chief operating officer, Ken Petrunik, the country’s top nuclear salesman. After decades selling candus to Romania, Argentina, and China, Petrunik is now working on the Ontario project. Speaking to financial analysts in Toronto in April, he insisted that the candu was the “best-performing nuclear product in the world,” then argued that Ontario and the candu enjoy a special relationship. “aecl is vital to the economy of Ontario,” Petrunik said. “If we build in Ontario and continue to be successful, that will create exports.”

But selling more candus to Ontario, where the province’s experience with the reactors has been financially traumatic, will not be easy. By the time they were completed in 1993, the four reactors built at Darlington, east of Toronto, had jumped in cost from a projected $2.5 billion to $14.4 billion. While some of the cost overruns could be blamed on political interference, the candus were also plagued by severe technical problems largely related to their complex pressure systems, which were wearing out far earlier than expected. It was a widespread problem and of the twenty reactors built in Ontario, eight were shut down after less than twenty-five years in operation. Billions of dollars have been spent refurbishing four of the reactors, which are now back in operation. The remaining four have been out of commission for more than seven years, and two of them (at the Pickering station) will never operate again.

Partly as a result of the reactors’ poor performance record, in 1998 the government dismantled Ontario Hydro, the utility that originally purchased and operated the reactors. Amid bitter opposition, the company parcelled out its $38-billion debt (about half incurred by candus) to consumers. Then, in 2001, the province leased the Bruce nuclear generating station on Lake Huron, Ontario’s largest nuclear facility, to Bruce Power, a consortium of companies led by British Energy. As four of the eight candu reactors at Bruce had been shut down, a move to private ownership was deemed necessary. British Energy sent Duncan Hawthorne, a charismatic Scotsman, to bring the plant back to life.

Hawthorne’s arrival signalled the end of the original compact that gave aecl its historic monopoly in Ontario. For decades, aecl executives had been able to count on privileged access to provincial energy mandarins, many of whom fully subscribed to what William Farlinger, the Ontario Hydro chairman who dismantled the company, scathingly described as the “nuclear cult” surrounding the candu.

By handing over the Bruce reactors to a private operator, the Ontario government set the stage to extend private ownership across the provincial nuclear industry. Under Hawthorne’s leadership, the Bruce operations surged back to life, and Hawthorne now says he’s ready to raise private funds to build new reactors. He is looking hard at French and American alternatives to the candu, and when asked how many of Ontario’s new reactors he can build, Hawthorne replied: “Why shouldn’t we build them all”

Ontario politicians have been advised to force the candu to compete with its international rivals. In 2003, a panel headed by former deputy prime minister John Manley, told the McGuinty government that economic nationalism should not be a factor when it comes to deciding which reactors to build. “Ontario should not be biased towards choosing Canadian-developed technology,” stated the panel in its report, “but should seek out the best available technology worldwide.”

Dwight Duncan, Ontario’s Minister of Energy, appears to be listening. Despite intense lobbying from aecl and its partners, Duncan said the province would pursue the best technology at the best price. He has had informal talks with US heavyweights General Electric and Westinghouse Electric, and with Areva, the French-owned nuclear manufacturer. “It is our preference,” said Duncan, “to use Canadian companies and technology, but our first responsibility is to the people of Ontario.”

To overcome Duncan’s concerns about price overruns, aecl has agreed to guarantee the cost of the construction of new reactors in Ontario. It used the same strategy last year to win a $900-million contract to overhaul New Brunswick’s twenty-three-year-old Point Lepreau reactor, though critics claim that such guarantees are hollow because they simply shift responsibility for cost overruns from provincial to federal taxpayers.

What Hawthorne and Duncan ultimately decide is turning into a $40-billion question for aecl. Their dilemma comes down to whether to support hundreds of Canadian communities and companies by buying homegrown reactors or to go with the technology favoured by the rest of the world. “We don’t want to export the jobs,” said Hawthorne. But in the end, he says, his decision will be based on commercial, not political, considerations.