As the U.S. continues to reveal incentives to spur a nuclear renaissance south of the border, officials in Ontario attempt to extend the life of existing reactors. The two sets of policies reveal how nuclear power is intertwined with economic concerns, green energy policy, and efforts to combat climate change.

US loan guarantees

As reported by BusinessGreen.com, President Obama announced US$8.3 billion in loan guarantees for the construction of two new nuclear reactors in Georgia. This is only one slice of the $18.5 billion loan guarantee pie that Congress has already approved. The Obama administration is seeking approval of an additional $54 billion in loan guarantees, all as part of a strategy to revive the dormant nuclear industry in the U.S.

Environmentalists are angered at the prospect of new nuclear plants, despite the President's promise in his recent State of the Union Address to build "a new generation of safe, clean nuclear power plants."

However, the President's push for nuclear appears to be significantly motivated by environmental concerns. Specifically, the loan guarantees are viewed by many as a way to garner Republican support for the climate change bills that are mired in Congress. As discussed below, nuclear power also fits into the province's climate change strategy, although in a much different way.

Ontario refurbishments and planned closure

Ontario Power Generation ("OPG"), which is owned by the province, made two significant announcements in the past week. First, OPG revealed that it will close the Pickering nuclear station in 10 years, but only after spending $300 million to refurbish the reactors in the interim. Pickering station has a nominal output of 3,100 MW, which accounts for about 8% of Ontario's installed capacity. Second, OPG indicated that it would spend an undisclosed amount on refurbishing the Darlington nuclear station. It is unclear if the refurbishment would spell the end of the proposed procurement of new reactors for Darlington, which the Ontario government suspended last year, citing the suprising cost of private-sector bids from AECL and Areva (pegged north of $20 billion) as the reason for doing so.

Opposition critics were quick to pounce on the McGuinty government, expressing concern about the price tag for keeping the stations running. The Toronto Star quotes New Democrat energy critic Peter Tabuns as saying, "You don't make a multi-billion dollar decision based on a guess. "Either they're withholding numbers from the public or they're making a guess. In either case, that's indefensible."

Environmentalist, on the other hand, praised the decision. Referring to the Pickering announcement, Greenpeace energy specialist Sean-Patrick Stensil said, "For once OPG has told the truth about a project being uneconomic and saved the ratepayers millions if not billions of dollars. The ball is now in the government's court, and they need to give direction as to how Pickering will be replaced, and it can be replaced with green energy."

Premier McGuinty appears to agree that the focus should be green energy. The Star reports that the Premier is asking Ottawa to provide more funding for green energy. This funding should complement the funding being provided for carbon capture and sequestration, said McGuinty. "I'm not going to pass judgment on the merit of the science associated with carbon sequestration. But what I am going to say is if the federal government chooses to support that kind of research, we'd like them to provide comparable levels of financial support for things that we know in fact work."

Implications

In Ontario, the nuclear question is therefore intimately tied to policy considerations regarding green energy and climate change. The McGuinty government characterizes its Green Energy Act in many ways as a climate change initiative, particularly because it will allow the province to eliminate coal fired generation. A diminishing supply of nuclear power could mean a growing demand for renewables. However, nuclear baseload generation will likely continue to be essential to the stability and reliability of supply in the province.

Both nuclear and green energy policy will also have significant economic implications. New nuclear construction and refurbishment as well as Ontario's generous renewable Feed-in Tariff rates will result in higher electricity bills in the province. However, those costs may be outweighed by the economic benefits of creating new jobs in the province. While nuclear projects would certainly employ a number of people, the province's Green Energy Act is intended to create 50,000 green collar jobs.

The challenge for the province will therefore be to balance its nuclear and green energy policies so as to achieve a reliable supply of power that minimizes greenhouse gases and has a net economic benefit for the province.

In so doing, the province should not lose sight of what is happening south of the border. A successful nuclear renaissance in the US could drain Ontario of most of its nuclear expertise. A successful climate change bill would also have significant repercussions for the province, which could be very positive if the province successfully becomes a green and cleantech centre of excellence.