Canada’s uncertain nuclear future

Backed by decades of research, experience and innovation, Canad's nuclear industry may be well positioned to take advantage of opportunities around the world. However, over the past two decades declining R&D funding has combined with an absence of new domestic nuclear power plant construction to push the sector into stagnation. Political and public support, once a source of strength and pride for the nuclear industry, has waned to such an extent that it is one of the greatest contributors to nuclear energy's decline. Recent decisions by political leaders, including moratoria on uranium mining in Quebec, Nova Scotia and British Columbia, Ontario's hesitancy to build proposed new reactors, and the federal government's privatisation of the reactor business of Atomic Energy Canada Limited (AECL), are seen by many as evidence that government is now looking to redefine its role in the sector.

In the spring of 2013, Canada's Public Policy Forum convened experts from across the nuclear supply chain in workshops in Saskatoon (17 participants) and Toronto (29 participants) to explore a long-term outlook for the industry. In September that year, the Forum convened approximately 60 senior leaders at a summit in Ottawa to build on these findings and explore the strategic options stakeholders might consider to enhance the sector domestically and internationally.

“These conversations suggest that Canada's rich history in nuclear energy offers a significant advantage that could be effective in repositioning our country as a global leader in this area. This would require public support, along with much more collaboration between governments and the private sector. A more creative, innovative, and focused long-term strategic approach could allow the nuclear sector to move beyond its current position on the world stage," writes David Mitchell, president and CEO of the Public Policy Forum.

Challenges

The following serious challenges have significantly impaired the industry's ability to compete in domestic and international markets:

High capital costs. In today's uncertain economic environment, it is difficult to make the political case that public funds should be committed to large, expensive energy projects that may not come online for nearly a decade. Typically, investment costs of nuclear power plants account for around 60% of total project lifecycle costs.

Unclear foreign investment rules. Organisations that constitute a "strategic asset" to Canada may be barred from foreign purchase or takeover. In fact, the phrase "strategic asset" is not discussed in the Canada Investment Act, but its frequent mention by federal and provincial politicians has created confusion in Canada and abroad. As a result, there is uncertainty around whether foreign entities will be able to purchase Canadian nuclear energy companies and assets, or even compete in the Canadian market. In the absence of a transparent investment framework, it is difficult for international organisations to expand or develop operations in Canada that could generate greater economic growth.

A historical CANDU monopoly places the sector in a niche market. The Canada Deuterium Uranium (CANDU) reactor has been the flagship of Canada's nuclear energy sector for almost 50 years. But since the nuclear energy market shifted to light water reactors (LWRs) -- approximately 30 years ago, when France started procuring LWR technology from the US -- heavy water reactors have become a minority technology in the global market.

Acquiring and maintaining social license. Among the greatest challenges facing stakeholders in the nuclear sector is the lack of social license for new nuclear power plants. This concern does not necessarily exist in communities near power plants or uranium mines, but it is a broader perspective within the general population. Concerns around safety, spent fuel storage, and high capital costs have decreased public and political support for large nuclear construction programmes. Fears over nuclear proliferation and plant meltdowns and accidents, like those at Chernobyl, Three Mile Island and Fukushima, are common. In part, this is due to the industry's inability to dispel myths and communicate the overall safety and benefits of nuclear energy to a wide audience.

Few political champions. An important element in any country with a successful nuclear energy programme is leaders who champion the merits of nuclear energy, often at great political risk. Overcoming the concerns of the public is much more difficult without this political support.

Opportunities for Canada's nuclear sector

Canada's history and expertise in nuclear energy give it a sizeable advantage in winning new benefits from the industry. It is already a respected leader in uranium mining, reactor technology, plant manufacturing and operation, R&D, and environmental and safety standards and regulations. These strengths give Canadians an edge to take advantage of opportunities outside our borders.

Since 1996, Canada has built or maintained 22 CANDU reactors for power generation, plus several research reactors. According to a 2010 report by Canadian Manufacturers and Exporters (CME) as many as 10 nuclear power plants will need to be refurbished over the next decade and could generate significant economic benefits (see also Figure 1, from 'Achieving Balance: Ontario's Long-Term Energy Plan', December 2013). Some booming economies like India and China continue to use heavy water reactors in general, and CANDU technologies in particular. This provides Canada with a market in countries that are seeking to expand their energy capacities.

The prospects for the uranium industry look promising. Over the next decade, the Cigar Lake and Midwest uranium mines in northern Saskatchewan are expected to reach full capacity. Exploration in Saskatchewan, Ontario, Labrador, Nova Scotia and Nunavut shows promise for uncovering new deposits. And Canada is quickly gaining access to emerging economies that have high demand for uranium.

Nuclear energy is an important part of Canada's national science, technology and innovation system, involving over 30 universities and six major research centres. Nuclear experts suggested that the quality of Canada's future R&D capacity and infrastructure will help determine whether our country remains a significant nuclear energy player. Since the 1940s, the National Research Universal (NRU) reactor at Chalk River Laboratories has allowed AECL to conduct research on new fuel sources and applications for CANDU reactors, such as developing recycled and recovered uranium fuel (an option that has prompted interest in China; see below).

As a source of nuclear, medical and scientific innovation, Canada's NRU has produced significant economic and social benefits for Canada. However, it is an ageing facility that is in need of either replacement or refurbishment.

A recent fall in natural gas prices has made gas-fired power plants an attractive short-term energy option for Canadian provinces seeking to expand or replace their existing electricity supplies. However, refurbishing nuclear power plants, or building new ones, including small modular reactors (SMRs), may also have long-term benefits.

One advantage that CANDUs have over many other designs is their ability to use different fuel sources, including spent fuel from LWRs. In 2010, China was able to extract uranium from spent fuel recovered from its light water reactors and use it to power its Qinshan Phase III CANDU reactor. This successful experiment demonstrated CANDU's adaptability, which could offer a cost-effective option for host countries to get more energy from imported uranium and reduce stocks of highly-radioactive used fuel at the same time. As participants noted in the Toronto workshop, CANDU's ability to leverage existing uranium supplies provides fast-growing countries, such as China and India, with economic and environmental incentives to procure Canadian reactors and technologies.

Recommendations

Countries seeking to expand their nuclear energy programmes should consider innovative public-private partnerships. By partnering on risk-sharing and funding, public and private sector leaders could better develop new technologies, products and services.

These could make use of funding support such as power purchase agreements, loan guarantees and risk-sharing arrangements. Canadian stakeholders may wish to explore successful case studies from other countries. For example, the UK's electricity market reform may provide some insights into how to secure the necessary investment for a low-carbon energy mix that includes nuclear.
Governments and others working in the nuclear energy industry should also consider opportunities to acquire funding from overseas investors. This will require government leaders to define clear foreign investment rules and a strong private-sector business case for investment.

One approach to address the concerns of the anti-nuclear movement is to work with environmental NGO leaders, to foster trust and a less-polarised dialogue. Such dialogues will be difficult and will take time: workshop participants said this approach was successful in the forestry sector, but it required much time and effort over two decades. To gain social license and broader acceptance, groups outside the sector will need to initiate the discussions. The start of this dialogue can be seen in the US, with recent efforts by some prominent environmental NGO leaders, who had once been opposed to nuclear.

The often passionate public reaction against nuclear power is a significant challenge. Extensive media coverage of the Fukushima Daiichi disaster in Japan, bad memories of Chernobyl and Three Mile Island, and common misunderstandings around radiation mean the public is often reluctant to embrace nuclear power plant construction or to view nuclear as a viable energy source. A key to success in both the UK and France has been including information about nuclear energy in school curriculums. By educating students about nuclear energy, both countries have been successful in helping to dispel myths around safety and security that persist elsewhere. These countries have shown that education could be a useful first step to engaging citizens in a more enlightened discussion on nuclear energy. Given the diverse energy sources in Canada, school boards would be wise to develop science programmes that explore all types of energy and allow students to be exposed to and learn about the positive and negative aspects of all of them.

In 2012, Canada signed nuclear co-operation agreements with India and China, providing miners and exporters in Saskatchewan and, potentially, Quebec and Nunavut, with greater access to the world's two fastest-growing markets. Part of the success of these agreements stems from the highest-level political support they enjoyed. On an official visit to China in February 2012, Prime Minister Stephen Harper and Chinese Premier Wen Jiabao agreed in principle to enhance bilateral nuclear trade, setting up a year of negotiations that eventually led to the Canada-China Nuclear Co-operation Agreement. On a similar trade mission to India in third quarter of 2012, Prime Ministers Harper and Manmohan Singh agreed to open the Indian nuclear market to more Canadian uranium exports through the Canada-India Nuclear Cooperation Agreement. These agreements demonstrate clearly how crucial a strong and senior political will is for creating and realising new opportunities.

The role of the NRU in facilitating nuclear energy research, development and innovation should be enhanced. Elected officials, industry leaders and researchers should weigh the benefits that a national nuclear research laboratory provides for our economy and competitiveness against its cost.

In both the workshop- and executive-level discussions, participants praised Canada's regulatory agency for working with private and academic leaders to make regulation more transparent and understandable. A key success is a dialogue among industry leaders, governments and regulators that ensures a solid understanding of each other's challenges. Recent changes to the federal environmental assessment and regulatory process for new nuclear projects provide a good example of private and public sectors working together to successfully bring about change. Public confidence depends on a strong, credible regulator, and it is incumbent on both the industry and regulators to ensure that safety is observed at the highest levels.

The vision: four future steps

As stakeholders consider whether and how to implement the next steps outlined in the previous section, it will be useful to identify some of the sector's main goals. They should be to:

• Unite organisations and leaders across the value chain in a common purpose
• Give the sector a single voice and therefore more influence in dealing with governments and foreign customers
• Help organisations throughout the sector work together and gain access to new markets
• Demonstrate to foreign investors that Canada has a serious, long-term business plan for the sector.

Workshop participants were asked for a vision for Canada's nuclear energy sector. The purpose was to identify the characteristics of a future scenario, encourage leaders to think about how the sector could change over the next 20 years, and see what steps they should take to help bring this evolution about. The ideas from the workshops led to two vision statements, one domestic and the other global.

In the domestic vision proposed, nuclear energy will play an essential role in meeting domestic energy needs, helping to drive economic growth, job creation and innovation. For Canada's nuclear energy sector to be thriving in two decades, more nuclear capacity will be required to meet domestic energy needs. Specifically, more nuclear power plants will be needed in large markets, such as Ontario and Quebec, and SMRs and very small modular reactors (vSMRs) will be required to provide energy to remote communities in northern Saskatchewan and, potentially, to help provide power to access Alberta's oil sands.

In the international vision, Canada's nuclear energy sector will be a strong international competitor, providing innovative technologies, fuels and services to emerging and existing markets. Participants suggested that a stronger domestic presence could make Canada's nuclear energy sector more competitive internationally. For example, Canada could be exporting more CANDU mixed oxide fuel (MOX) reactors to the UK; establishing a presence within the US market; dramatically increasing the reactors, fuel and services sold to China and other emerging economies; and continuing to promote CANDU.

Key roles and responsibilities

The private sector could play a leadership role in Canada's nuclear energy sector. Business leaders could help the country's governments, financial institutions and the public understand the sector's potential by building a solid business case for continued growth and expansion. The private sector cannot wait for government to act first. In the absence of this type of sector initiative, it is unlikely that governments and others will be able to fully appreciate the potential economic benefits that Canadian industry leaders could bring to the sector.

Within the energy sector, there is a common perception that expanding exports will depend on whether Canada is able to demonstrate to the world that it champions its own technology and services at home like its main international competitors - France, Russia, South Korea and the US. According to some workshop participants, a country's willingness to buy from its own industries demonstrates confidence and is often a prerequisite for other nations looking to make purchases.

Over the next decade, there are a number of opportunities for Canada to bolster its industry by making greater investments in nuclear energy. Recent refurbishments at the Darlington and Bruce power plants have been successful and relatively cost-effective, showing that the Canadian nuclear energy sector can manage complex projects.

This article is based on Canada's Nuclear Energy Sector: Where to from here? published by Canada's Public Policy Forum.