Power at Affordable Cost
Bringing Fiscal Reality to the Nuclear Renaissance
Adam Beck and Power at Cost
The early economic strength of Ontario (and in many ways Canada) was powered by the public waterways of the province. Quite literally, industry was built upon the province’s ability to tap its hydro electric resource potential to generate very competitively priced electricity for industry. The added benefit that we love today - one that was not a consideration a the time - is the fact that hydro power did not cause carbon emissions like other sources of power. Quebec was eventually able to follow the same path with its even more abundant hydro resources, but Ontario was really the trailblazer. In the early decades of the last century, hydroelectric power allowed the businesses in central Canada - aided by the tariffs imposed by the federal government - to compete against powerful US states on the strength of our reliable and very low cost electricity.
Sir Adam Beck was the driving force of this effort in Ontario. He not only championed the construction of hydro dams, but wanted the public electrification of the province to extend to electric streetcars and lower costs for households. His ethos was based on public ownership and public benefit of hydro development through the avoidance of profit seeking behaviour. ‘Power at cost’ was Beck’s rallying cry, and it allowed for the tremendous growth and influence of the Hydro-Electric Power Commission of Ontario (renamed Ontario Hydro in 1974, but I will use Ontario Hydro from here on) in the economic affairs of the province. The Ontario economy boomed from the tapping and sharing of these public resources and Beck became one of the most influential men of his age.
Sir Adam Beck has a statue on the grand University Avenue boulevard in Toronto. To show how influential he was, it should be noted that none of the provinces Premiers (or Prime Ministers as they were once called) are so honoured. The tribute on the statue states that Beck was commemorated because his “labours have ensured that the citizens of his native province under co-operative municipal ownership shall enjoy the benefits of low-cost electrical energy derived from water-power resources to serve the industrial and domestic needs of the Province of Ontario”. Public development, self-reliance and profit-free operation of electicity generation in Ontario was the cornerstone to the industrial development of the province. These elements were also central to all public policy decisions related to electricity and Beck’s desire for municipal involvement as well (Beck served as the Mayor of London and its MLA).
Beck died in 1925 and the statue was erected in 1934, but within a few decades his ethos of reliable ‘power at cost’ was already starting to become unsustainable for Ontario. The mighty hydroelectric dams built under the vision of Beck - including the one in Niagara that now bears his name - are all listed on the plinth of the monument, but by the 1950s Ontario had run out of rivers to tap. Demand for electricity was also increasing rapidly, so Ontario Hydro was forced to begin planning for other ways of generating the power needed for an economy that had become critical to the economic strength of Canada. All of these plans meant departing from the public resource/public cost approach that had been championed by Beck.
The easist course of action was for Ontario to use coal burning plants to meet demand like most of the other Canadian provinces. The first public coal power station in Ontario (the Hearn Generating Station) became operational in 1951 and used coal from the United States shipped on the Great Lakes to generate power. This was the start of the tipping point for self sufficiency and price certainty. While Ontario Hydro was still very much a public utility, the ability to have cheap and reliable electricity generation from the public resources that all Ontarians shared was no longer possible. Increasingly, Ontario would become reliant on coal supply from the United States and the fluctuating prices that came with it. Over time, the province would also begin to appreciate the environmental cost that came with it as well.
By the 1960s, Ontario had four coal-burning power plants operating or under construction to meet electricity demand (later a fifth would be added in Atikokan), but it was already looking at the possibility that atomic (nuclear) energy could be the path to returning to the low-cost, self-reliant approach to the generation of electricity that was more in line with the spirit of Beck. The province - through Ontario Hydro - had already entered into early experimental partnerships with federal nuclear agency AECL in the 1950s to help develop the industry based out of their Chalk River labratories in Deep River, Ontario. This led to the completion of the Nuclear Power Demonstration (NPD) reactor in 1962, which proved it was feasiable to use the AECL heavy water reactor design for the generation of electricity at a commerical level.
All of that pioneering work by AECL and Ontario Hydro in the 1960s led to the creation of the CANDU (CANada Deuterium Uranium) reactor. A technology born in Ontario with the province being both a partner and a major customer of the technology. Ontario Hydro began an ambitious nuclear build out with plants constructed and multiple reactors in the Bruce Penisula, Pickering and Darlington. This was very much in the Adam Beck tradition, but the industry peaked at the end of the 1980s. Darlington was the last CANDU reactor built in Canada, which means there has not been a new reactor built in Canada for over thirty years.
Power at What Cost?
Ontario is once again preparing to add new electricity generation capacity to its grid and emission-free generation is even more critical than in the past. These climate change pressures means there is no longer any serious debate about whether nuclear energy will play a central role in this generation build out. In the last decade, critics have become converts in what is being called the ‘nuclear renaissance’ by many policy advocates (myself included). However, before we begin to break ground on the next generation of nuclear power plants, Canadian policymakers must be honest with themselves and answer two crucial questions:
How do we prevent the large delays and cost overruns experienced in the past?
Who bears the risk for cost overruns?
Last fall, the Independent Electricity System Operator (IESO) reminded us about the challenge we face in terms of energy security. The IESO projected that electricity demand in Ontario will rise by 75% in the coming decades. This projection only models future demand based on our knowledge of the economy today, but as AI, data centres and quantum computing evolve alongside the overall electrification of our economy (transit, vehicles, etc.) the real demand for electricity may even be higher.
The challenge Ontario faces is to have an energy security plan that effectively doubles the amount of emissions-free electricity generation we have on the grid today without raising carbon emissions. To meet this challenge, the province has indicated that it will add more large-scale nuclear generation capacity alongside the trial of some new Small Modular Reactors (SMRs) as well. Conservation measures and curbing demand are also important parts of planning for the future, but the electrification of the economy and transition into AI means that Ontario and all provinces will face significant energy challenges in the future.
Nuclear 1.0
Canada has a trailblazing history as a trailblazer and innovator in the development of atomic (now nuclear) energy. We were the second country to achieve controlled nuclear fission. We were also the first country to commit to developing the technology only for peaceful uses.
Canada developed one of the most effective and safe ways to harness nuclear energy through CANDU technology, and we became self-sufficient on the mining of uranium as the fuel for the CANDU technology. The world has also benefited from our leadership on isotope production for medical uses and a nuclear supply chain in Canada that is amongst the best in the world. All that said, our own history with nuclear energy development is also littered with cautionary tales of construction delays and cost overruns that almost killed the industry in the 1990s. These are the lessons we must learn from on the eve of Nuclear Energy 2.0.
I became a major advocate for nuclear energy in and out of public office because of my personal experiences. I grew up in Bowmanville during the construction of the Darlington Nuclear Generating Station and many of my friend’s parents and some of my own family worked for Ontario Hydro (later Ontario Power Generation). Decades later, I learned more about the technology as a lawyer doing work work on electricity regulation and as an independent director on the board of our local distribution utility named Veridian (now Elexicon). It was with Veridian that I first began to meet union leaders from the Power Workers Union and the Society of United Professionals, who would later help shape my evolving views on unions and their important role in public policy development.
In fact, my first memory of ‘politics’ was as a grade five student interviewing the local Member of Provincal Parliament, Sam Cureatz, on the Darlington Generating Station that was being built back in the early 1980s. As a Member of Parliament, I spoke about this childhood experience, when I launched a local initiative to brand the Durham Region as Canada’s Clean Energy Capital. A few years later, as the Conservative leader, I was proud that our caucus began the advocacy for federal support for the development of SMRs and helped nudge the Liberal government to change their own positioning towards nuclear energy being critical for Canada’s energy security and environmental future.
I recite all of these these personal experiences to say that I remain a huge fan of nuclear energy and the Canadian industry, but I also want to ensure that we get the policy decisions right for our energy future. I can say with sincerity and a degree of authority that the effectiveness and economic benefits of the nuclear energy sector in Canada are undeniable, but so too is the less than stellar history of the sector when it comes to construction delays and crippling budget overruns. Going back to that childhood interview with the MPP, the Darlington nuclear plant was billed as a $4.5 billion project for Ontario Hydro that was scheduled to be completed by 1985. By the time Darlington was actually completed, the cost had ballooned to a staggering $14 billion and it was not fully completed until 1993.
The stranded debt of the construction of the Darlington generating station and decades of cost challenges with the nuclear fleet in Ontario led to the breakup of Ontario Hydro and the restructuring of the electricity sector. A few years after the completion of the Darlington station, the refurbishments of various existing nuclear reactors in Pickering and Bruce also came in at a cost that was three times over the cost estimate. These massive cost overruns led to the creation of a new Debt Retirement Charge that began to appear on the electricity bill of Ontarians in 2002. This 0.70 cents/kWh charge was paid by residential and commerical ratepayers for the next sixteen years collecting over $13 Billion in charges over that time. The ‘power at cost’ philosophy from the origins of Ontario Hydro was now just a dream from a long-gone era.
The impact of delays on the electricity grid are just as challenging for the government or regulators to deal with as cost overrruns. Delays in the creation or refurbishment of generation sources impact the reliability and certainty of the electricity grid. Delays in the refurbishment of several Ontario reactors in the 1990s and early 2000s meant there was often insufficient electricity generation within the province to meet provincial demand. This forced Ontario to import more electricity from the United States through that time to the point that Ontario was increasingly reliant on the American electricity grid. It was in this period that Ontario strayed the furthest from the Beck legacy and when energy security became quite perilous. This came to a head in the great blackout of 2003 that impacted Ontario and several of the border states. While the initial source of the blackout was in the United states, Ontario’s increased reliance on electricity imports from New York was a source of scourn on both sides of the border. [Nota Bene: this history is one reason why we should not be threatening to cut off supply in the current tariff war with the US. You never know what the future holds for energy security. Germany also understands this well too when their decision to phase out nuclear ran headfirst into the Russian invasion of Ukraine and their reliance on Russian gas].
Other provinces did not fare much better than Ontario. Generating stations in Quebec and New Brunswick faced construction delays and cost overruns, leading Quebec to eventually abandon nuclear and limit their emissions-free electricity generation to hydro only (which is causing challenges today). In New Brunswick, the massive cost pressures associated with refurbishing the Point Lepreau nuclear generating station led to rate pressures and even a Hail Mary pass in 2009/10 to sell New Brunswick Power to Hydro Quebec. The deal was abandoned due to public opposition to the sale, but all of these examples demonstrate the enormous challenges provinces face when saddled with massive cost overruns in their nuclear programs.
It was during these chaotic years of restructuring, debt charges and reliability problems in the Ontario electricity market that the province and and many energy advocates across Canada began to rethink the role of nuclear energy. AECL had also sold off its isotope business in this period and was having serious financial challenges in its reactor business. This ultimately led the Harper government to decide to sell the AECL reactor division to the private sector. Without going too far into all of the details surrounding the AECL sale, it is safe to say that by the late 2000s the nuclear industry in Canada was fading away and teetering on the edge of irrelevancy.
The United States had a similar history with respect to cost overruns and delays in their nuclear sector. The rekindling of interest in new nuclear led the Biden administration to launch a working group in 2024 to tackle the issue of nuclear cost overruns and construction delays. This working group brings together project developers, engineers, utilities, investors, and labour leaders to identify ways to advance project delivery and reduce cost overrun risk. This approach will likely continue with President Trump despite his upending of most of the Biden agenda. While the Trump administration has withdrawn from the Paris climate accord (again) and declared an energy emergency that requiress the US to “drill baby, drill”, Trump has also expressed support for nuclear energy as part of the US energy mix. He also appointed Chris Wright as the Energy Secretary. Wright has been a prominent advocate for nuclear energy as an oil and gas executive involved in a bi-partisan initiative to support nuclear energy development in 2023. The renaissance remains on track in the US and they seem determined to learn from the past.
Nuclear 2.0
There are challenges in front of Canada with respect to energy security, the energy transition and the nuclear renaissance, but we must remember that we are well positioned to rise and meet these challenges. Canada has had great success with its CANDU fleet of reactors over many decades. They have a stellar safety record and a solid performance track record when compared to other technologies and facilities. Nuclear energy has also been critical for Canadian action on the reduction of carbon emissions. Ontario was able to eliminate the burning of coal for electricity generation because of an electricity mix that has nuclear energy accounting for more than half of our generation. The removal of coal from the Ontario grid still ranks as the largest greenhouse gas emission reduction achievement in Canadian history, so we should recognize that this would not be possible were it not for the fleet of nuclear reactors in the province. In recent years, we have also seen nuclear refurbishments for Bruce and Darlington reactors come in on time and on budget. This shows great promise for the future what is possible for the sector when it learns from the past.
With all of this in mind, I believe we should also take a similar approach to what is happening with the nuclear energy working group in the United States. We must have an all of industry approach to project development, construction risk and ownership. Canadian provinces and the federal government need to ask the tough questions to industry to ensure that taxpayers are not saddled with long delays and permanently high bills filled with debt repayment charges. In this exercise we should be technology agnostic and open to all operating models. The goal should be to maximize our ability to generate emission-free electricity without massive financial risks to our economy.
We also need to be more self-reliant in the mold of Adam Beck. This means we need the sovereign capacity to enrich uranium here in Canada. We are one of the great uranium producers and Cameco is a world leader, but we dont have the ability to upgrade this resource and sell it into all customers in the nuclear supply chain. We should rectify this. We have not had to build this capacity in the past because CANDU uses natural uranium and because we could always rely on our neighbour when needed. The conduct of the Trump administration and the state of geopolitics shows that we cannot rely on anyone else for capacity that we control ourselves.
We must also redefine the role of the private sector in our nuclear sector. Federal and provincial governments will always have a critical role in the nuclear discussion because they are central to planning the electricity generation needs for our economy and responsible for regulating the safety of operations and waste management, but the private sector has a much stronger record on cost discipline and project execution. The restructuring of Ontario Hydro gives us an example to follow. In 2001, the Ontario Power Generation (OPG) nuclear assets at the Bruce Generating Station were transferred to a private sector operator known as Bruce Power. The shareholders of Bruce Power include a Canadian pension fund, two operator unions and TC Energy (formerly TransCanada Energy). Bruce Power has safely operated and refurbished reactors at their site since that time and they operate the largest nuclear power complex in the world. They have also helped Ontario turn the corner on massive cost overruns for refurbishments and have helped improve the performance of the entire Ontario fleet in their two decades of operating these assets.
Bruce Power has worked closely with OPG, the employee unions and local utilities in the province to maintain the reliability of the Ontario grid and ensure that operators across the fleet of reactors in Ontario can learn from one another. Lessons learned from the Bruce refurbishment helpd the refurbishment at Darlington. Workers go back and forth amongst the various sites in Ontario and ensure that safety and performance standards reflect the pursuit of excellence. The modern Ontario nuclear sector demonstrates that a high level of training, accountability measures and milestone-based financing can deliver safe and effective performance for the nuclear energy industry without runaway costs and troublesome delays. The Ontario experience along with examples from other international energy projects should be part of the Canadian working group discussions to get Nuclear 2.0 right.
Before we start writing the next chapter of nuclear energy in Canada, let’s be sure we take away all the lessons from our past. Federal and provincial governments must be willing to advance projects in a way that minimizes cost overrun risks, while maximizing safety and productivity. To do this, I believe the private sector must play a role in both the construction and operation of the next generation of nuclear plants in Ontario. The ghost of Adam Beck may be surprised by the need for private participation in the Ontario electricity grid, but the days of relying only upon the mighty rivers of Ontario passed by over 70 years ago. We should remember that Beck also viewed affordable electricity to power a strong and growing Ontario economy was also a part of his public good model. This is why I believe that we need a healthy public-private nuclear plan for our energy security.
I like your historical analysis. Were some of the costs overruns cause by different Ontario governments deciding not to build or not to complete certain nuclear plants and then the next government deciding to go ahead, meanwhile interest costs were accumulating? If so it was not just that government projects are less efficient than the private sector but also party politics?
Great historical and current info on the generation of energy in Canada. Wonderful read.