Dismantling Ontario's CANDU reactors, and disposing of their waste, will cost
$18-billion -- and that's if we're lucky
Normand de la Chevrotiere
As published in the National Post -- Tuesday, April 15, 2003
According to recent press reports of official estimates released last week, taxpayers and ratepayers
will need to pay $18-billion -- one-third of it this year -- in order to dismantle Ontario's nuclear power
reactors and safely dispose of the province's radioactive waste. By 2007, say Ontario Power
Generation, a provincially owned nuclear generating company, and Canadian Nuclear Safety
Commission, a federal regulator, $8-billion would need to be set aside and by 2010, $10-billion.
Even this whopping $18-billion bill ---roughly $6,000 per Ontario household -- could be in reality a
whopping underestimate, as federal nuclear regulators acknowledge. As put by Yves Giroux, a
part-time commissioner and civil engineer from Quebec's Université Laval, "Why should we have any
faith in these estimates now?"
Mr. Giroux and others have good reason to be suspicious, because costs associated with nuclear
wastes, which must be managed over unusually long periods of time, can be easily manipulated.
Take the forecasted interest rate used to determine the present value cost. Because some
expenditures will occur up to a century from now, a very small change in the inte rest rate can hugely
affect the present value (essentially, the amount of money that must be put aside and invested today
in order for sufficient funds to be available to pay for future activities and costs when they happen).
As the nearby chart shows, the higher the assumed interest rate, and the longer the expense is
deferred, the lower the cost appears. For the nuclear industry, waste disposal costs will sum to many
billions of dollars. It serves the industry's financial benefit to defer permanent nuclear waste disposal
activities as far into the future as possible, and to assume higher interest rates. A misstep in either
assumption would understate the true present value cost of nuclear waste disposal.
Ontario Power Generation (OPG) already has about 1.5 million used fuel bundles, translating to some
38,000 tons of high-level nuclear waste, to dispose of. Managing them involves the need for elaborate
robotic equipment --one freshly removed "CANDU" used fuel bundle, about the size of a fireplace log,
is so toxic that a person standing within a metre of it would be dead within an hour. Since this waste
must be shielded from humans for thousands of years, disposing of it is an expensive and complicated
proposition. And on the surface, when judged against international standards, OPG's estimates for
disposing of its nuclear waste are wanting.
Yucca Mountain in Nevada is the controversial proposed site for the long-term disposal of the United
States' high-level nuclear waste. The U.S. Department of Energy (Office of Civilian Radioactive Waste
Management) currently estimates the "undiscounted" cost of Yucca at $72-billion (in Canadian dollars).
["Undiscounted" cost estimates reflect the total amount to be spent, in current dollars, over the
lifetime of the waste disposal project. In other words, if you could collapse all work and phases of the
project into the current year, it would represent the cost of completing this work based on 2003
U.S. officials are reluctant to give a "present value" cost estimate, presumably because it might lead to
criticism of the adequacy of the amount set aside to date for this purpose. As of the end of September
2002, the value of these funds is just over $20-billion. These funds are invested only in U.S. Treasury
securities, considered the safest investments in the world. And over $10-billion has already been
spent to date just studying waste issues. Arguably, a conservative present value waste cost estimate
would be the sum of these two numbers, or about $30-billion.
In the U.K., the "undiscounted" waste cost estimate from the Department of Trade and Industry is
$110-billion. The "present value" estimate is $53-billion.
In Canada, Ontario Power Generation (OPG) has produced the lion's share of nuclear waste,
comparable to the tonnage in the entire United States (CANDU reactors generally produce larger
amounts of radioactive waste than U.S. reactor systems). Yet, OPG's present value waste cost
estimate, according to its latest financial statements, is $7.7-billion.
Making the situation worse, past monies collected from electricity consumers for nuclear waste
disposal was spent by the former Ontario Hydro to retire a portion of its massive debt. To date, OPG
has only put aside $1.6-billion in an attempt to pay catch-up in its funding shortfall. To achieve higher
interest and investment returns, in turn lowering the present value cost, more investment risk will
have to be taken. But as with pension funds, the money for radioactive waste management has to be
there when needed, which requires a more conservative investment approach.
As well, OPG doesn't plan to start dismantling its nuclear stations until at least 30 years after they
close. While this practice would lower radiation levels, it also conveniently defers these expenses far
into the future, again lowering the present value cost of the clean-up.
OPG's conceivably low-ball estimates for nuclear waste disposal are difficult to justify, even more so
when combined with the funding shortfall. OPG's ability to fully fund nuclear waste disposal going
forward is also compromised by additional government requirements that threaten to reduce its future
cash flow. OPG must finance the costs of the recently announced provincial electricity price caps, as
well as rebates to customers; it must make payments to reduce the stranded debt; and it must shrink
in size to no more than a 35% Ontario electricity market share within 10 years.
To add to doubts that the financing of nuclear wastes will be actuarially sound, the federal
government, under new law, has just created a three-year panel to recommend how to permanently
dispose of nuclear waste. The panel's directors, though, consist solely of members of the very nuclear
industry that created the funding shortfall in the first place.
How objective can industry and OPG be given its dubious financing capability for nuclear waste? Will
the panel recommend the waste be kept where it is (mostly on the shorelines of Lakes Huron and
Ontario), saving industry billions of dollars but potentially exposing 36 million people in the Great
Lakes basin to undue risk from accidents or terrorist acts? Or will it recommend transporting the
wastes to another location -- the Yucca Mountain solution --with its added headaches of increased
cost and travel route hazards, not to mention finding a willing host community?
The industry will have every financial incentive to follow a financially risky proposition because -- under
the federal Nuclear Liability Act -- the industry is absolved of all costs in the event of a major incident,
apart from a $75-million payment.
Great costs, and possibly great risks, loom ahead of us. Canada has designed an unaccountable
nuclear industry. The costs will come home soon enough.
MASSAGING THE NUMBERS:
Interest rate: 4%
Investment to get 1-billion in 25 years: $375-million
Investment to get 1-billion in 75 years: $53-million
Interest rate: 6%
Investment to get 1-billion in 25 years: $233-million
Investment to get 1-billion in 75 years: $13-million
Normand de la Chevrotiere is an actuary and research consultant for the Bruce Centre for Energy
Research and Information, a non-profit organization.
READ THE RESPONSE OF THE CANADIAN NUCLEAR ASSOCIATION