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Of the three firms vying for the Darlington contract, only state-owned Atomic Energy of Canada Ltd.'s bid met the specifications for the project, Ontario's government said. However, Energy Minister George Smitherman said AECL's price tag was "billions" above what the province was willing to pay. The sum remains undisclosed, but estimates place the minimum price for the twin reactor plant at $15 billion.
What were the bid criteria? Prime Minister Stephen Harper told AECL that its bid must provide a commercial rate of return and a price that recovers all costs. The ever present expectation cost overruns-- a chronic problem in AECL's history-- looms over Harper's order, and accounting for such explosive project costs no doubt led to the high figure presented to Ontario.
The specter of budget busts future figures strong in the province's picture as well. According to Smitherman, the inclusion a liability framework for cost overruns in AECL's bid was the factor that gave it an edge over bids from Westinghouse and AREVA. Here the picture starts to get fuzzy. The record of cost overruns for Ontario nuclear projects is no secret, and its hard to believe that AREVA and Westinghouse did not provide guidelines for such an occasion in their offers.
For those of us watching from the sidelines, it evidence points to the unspoken term that seems to hover over the whole deal: that AECL get the contract. Facing a lack of industry interest in AECL's new ACR-1000 reactor model, Darlington stands as a possible redemption for the company, able to set a precedent for future Canadian and international plants, and protect the 30,000 jobs tied into AECL's business. Without Darlington, the ACR-1000 stands little chance of getting off the ground, and the company would most likely be relegated to the role of global repairman for the 48 operating plants using CANDU technology.
After the most recent malfunction at AECL's Chalk River research reactor in mid-May led to the reactor's shutdown and a shortfall in medical isotopes, a line seemed to have been crossed. Quickly, the lingering option of privatizing AECL switched onto a fast-track toward reality. Now Harper is splitting the company's commercial and research arms, seeking a minority or majority partner for the commercial CANDU business, and casting its net for private companies to take over Canada's medical isotope business.
Uncertainty about AECL's future, particularly how private ownership would effect a cost overrun framework, contributes equally to Ontario's decision to suspend Darlington. However, Premier Dalton McGuinty still seems hopeful to negotiate a price that will allow the project to go forward. "There is going to be a continuing dialogue with the feds," McGuinty said. "We want to know whether they are going to backstop AECL, that they believe it has a promising future for all Canadians. If they do, then we want to be part of that. The way we see it right now is, the ball is in their court."
Our guess is that McGuinty is still banking on the appeal of Darlington as a buoy for the sinking AECL, and is holding off the project in hope of a better deal once the company reorganizes.
Discussion of alternative plans to meet Ontario's growing power demand has been sparse.
Fuel Cycle Week covers the global commercial nuclear industry, offering fresh analysis and commentary on the uranium, conversion, enrichment and reactor markets.
FCW and its blog are published by International Nuclear Associates Inc., a Washington-D.C. based consulting company. Link to original post
