Why Get Rid of a Good Thing?

Old carBy John Stewart
Director, Policy and Research
Canadian Nuclear Association

I once had a beloved old car – a 1984 Volvo – that didn’t look great, and needed regular work, but ran beautifully. I only scrapped it because my girlfriend hated it. That decision, I figure, cost me several thousand dollars over the next two years as I paid for a pricey lease on a new car.

The two most basic ways to get value out of equipment are to make sure you use it, and to keep it a long time.

Cars are getting more expensive and complex, but this doesn’t stop us from buying them. It does lead us to keep them 50% longer than we did a decade ago.

These days, my wife and I share our old car with my brother and his wife. We spread the fixed costs of ownership across two families’ driving needs, cutting the fixed costs per family in half.

Equipment that’s expensive can still be highly economic. Up-front cost isn’t an obstacle if the equipment runs efficiently, gets used a lot, and lasts a long time.

A nuclear reactor is a big piece of equipment, and the business of owning one is like owning a vehicle, only more so.

Nuclear power plants are designed to run extremely well for a long time, and they do it. They typically produce electricity at 80% or more of their designed capacity, and they last – with refits – for fifty or sixty years. That’s a lot of use over a very long time.

How many products do you – or even your employer – own that you know will have five to six decades of life? The result is cheap, reliable power, as this chart from the Ontario Power Authority shows, nuclear refurbishment is the lowest cost option for generation and ranks very close to the cost of energy efficiency:

relative-cost-of-electricity

Quebec recently decided to decommission its only nuclear plant, rather than give it a mid-life refit.

The decision came one week after the election of a new provincial government – before it had even been sworn into office. The government then asked for an economic analysis. In other words, they made their decision – it was written into their election platform – and then asked for backup.

The province’s electrical utility, which had planned to refit the plant, came back with re-worked numbers that raised the refit cost by 126%, and the cost of shutting it down by only 12%. Surprise, surprise:  the new numbers justified the announced decision.

The utility’s new estimate for refit cost was $4.3 billion. But a refit of a similar reactor came in at $2.4 billion in neighbouring New Brunswick. There, Energy Minister Craig Leonard was quoted saying, “If you look at the market today and try to obtain 700 megawatts of baseload emission-free power for $2.4 billion, you’re probably going to be searching for quite a while.” (iPolitics.ca, July 16, 2013, item by K. Bissett).

This story isn’t unusual. We often get rid of good things for poor reasons and many, like Quebec’s, are political.

Greenhouse gas emissions, clean air, long-term fossil fuel pricing and long-term carbon pricing are sometimes overlooked in political decisions. Some jurisdictions are closing good nuclear plants in favour of currently cheap fossil fuels. This is like scrapping our cars because the local taxi service is giving us a month’s worth of free rides. The problem, of course, is what happens at the end of the month. We’re caught without cars, we’re hostages to the taxi business, and we’re paying taxi fares two to four times a day. Our cost of getting around has quintupled! This is why so many countries continue to choose nuclear.

According to the WNA, nearly twice as many reactors will start up as shut down by 2030. India has six new units under construction, Russia has ten and China has twenty-eight. A long list of other countries are as well, including Turkey to Saudi Arabia to Argentina.

Yes, nuclear power generating capacity has a large capital cost and it takes time to build. But as we have seen, high capital cost is compatible with good economics. Good efficient equipment, used well and maintained well throughout its optimal operational life, pays off.

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