Tuesday, January 12, 2016

Nuclear Ontario: Government approves Darlington refurbishment

“This morning when the sun rose, it brought with it a very good day. A good day for the residents of Clarington, for Pickering, a good day for the residents of Durham. As a matter of fact, a good day for all of Ontario with this announcement”
The quote is from Clarington Mayor Adrian Foster, of the host community for the Darlington nuclear generating station (NGS). 10,500

Ontario Power Generation (OPG) had already laid out many of the cost aspects in its financial reporting, and the big surprise on the day was probably re the other OPG nuclear generating station.

Ontario is moving forward with nuclear refurbishment at Darlington Generating Station, securing 3,500 megawatts of affordable, reliable, and emission free power.
Ontario Power Generation (OPG) is on track to begin refurbishment of the first unit at Darlington in October 2016. To best protect Ontario ratepayers and ensure OPG delivers refurbishment on-time and on-budget, the government has established off-ramps that require OPG to obtain government approval prior to proceeding with each of the remaining unit refurbishments. The budget for the project is $12.8 billion, about $1.2 billion less than originally projected by OPG, and all four units are scheduled for completion by 2026. 
The Province has also approved OPG's plan to pursue continued operation of the Pickering Generating Station beyond 2020 up to 2024
The average cost of power from Darlington nuclear units post-refurbishment is estimated to range between $72/MWh and $81 MWh, or 7 and 8 cents per kilowatt hour.
The Pickering NGS news took me a little by surprise. OPG's news release added detail:
OPG will work with the Ministry of Energy, the Independent Electricity System Operator and the [Ontario Energy Board] to pursue continued operation of the Pickering Station to 2024. All six units would operate until 2022; two units would then shut down and four units would operate to 2024. Extending Pickering’s operation would ensure a reliable, clean source of base load electricity during the Darlington and initial Bruce refurbishments.
The Bruce NGS refurbishment was announced a little over a month ago.
Bruce and Darlington NGS have a combined capacity of ~10,500 megawatts, and complete refurbishments of both locations would allow nuclear to remain the dominant form of generation in the province for another 4 decades.

 Journalist Rob Ferguson provides a better timeline for the four refurbishments in  Ontario Power Generation to spend $12.8 billion refurbishing four Darlington nuclear reactors.
OPG chief executive Jeff Lyash said the Crown utility will take 40 months to fully refurbish the first of four reactors before doing the three others to work out any bugs before the bulk of the work is done.
This all indicates only one, of 10, refurbishment projects is likely to start prior to 2019.

The good news for the nuclear industry in Ontario is it can deliver the majority of electricity in the province for decades to come - if it can deliver on its estimated costs for refurbishments, and most importantly its next refurbishment which we now know will be at Darlington.

It's good news for consumers if the industry does deliver. Power from both sites is not to be expected to be noticeably different after refurbishment than it is today.
It's also not terrible news for consumers if it does not. Both the Bruce and Darlington contracts have "off-ramps."
Chiarelli said there are no kill fees to the dozens of southern Ontario contractors involved in the project if it is cancelled but that some provisions would be subject to arbitration.
He pledged any decision to scrap the project could be made “without any significant costs.” - Rob Ferguson
The pressure is on OPG to deliver on its costing, but the impact goes well beyond OPG, to a broad supply chain that will service all refurbishments of reactors.

There are multiple implications if everything announced goes as planned.
  1. the capacity shortfall the the 2013 Long-Term Energy Plan disguised as "Planned Flexibility" is pushed back 4 years
  2. Ontario's supply surplus remains significant until multiple reactors (3) are being concurrently refurbished (likely 2020)
The surplus may become less of an issue if coal-fired generators in the United States continue to come off line, and, particularly, if reduced drilling activity sees a recovery in natural gas pricing. 

I will mention, as I refuted claims of cheap plentiful power from Quebec being an alternative to Darlington's refurbishment, that Ferguson quotes Energy Minister Bob Chiarelli as stating of the Quebec fantasy, “It’s not doable and it’s not feasible.”

I wrote in April 2015 on the pace of refurbishment negotiations, and at that time I examined the effective full-power hours (EFPH) of Ontario's reactors. The Bruce B reactors have far more hours producing power than Darlington's, but I suspect due to contracting it makes sense to use a Darlington reactor to establish the financial feasibility of refurbishment.

I also read one nuclear critic claiming refurbishments were occurring far earlier than planned during the original build period of the reactors. I was skeptical of this, as the EFPH allowed of the reactors was only recently changed from 210,000 to 245,000+, so I revisited the final annual report from Ontario Hydro before it was disbanded (OPG is one successor). It displayed the change in anticipated refurbishment periods over the final three years .
Three of Darlington's units will be refurbished as planned in 1997, and one prior to that. Bruce units will operate far longer than anticipated in 1997, and a decade beyond the lowered expectations of 1999.

I found it interesting the nuclear generation assets were devalued by shortening the anticipated period to refurbishment between 1997 and 1999 (contributing to a "stranded debt"), but more interesting the operational improvements that have recently seen most of the highest production years from Ontario's nuclear generating assets.
With the refurbishment announcements of the past 6 weeks, I am far more hopeful of a reasonable cost, low emission electricity sector in my province for decades to come - but I'll temper my optimism until the first Darlington refurbishment indicates it is delivering on the promises of an industry.

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