The Canada Energy Regulator (CER) should hedge its bet on solar and wind making up the bulk of the country’s new power-generating capacity into 2050, according to a new report suggesting small nuclear reactors are the best option to do so.
Canada is uniquely positioned to take advantage of small nuclear reactor technology, having operated reactors for over 70 years, the C.D. Howe Institute says in a report released Tuesday. Canada has 19 operable reactors, and is the world’s second-largest producer of uranium, a key component of nuclear fuel. In 2021, Ontario Power Generation said Canada could support 70 to 80 per cent of a nuclear supply chain, from fuel production to parts manufacturing.
However, the CER’s projection includes no expansion of Canadian nuclear assets, only refurbishment of existing reactors. Wind and solar account for about a quarter of the nation’s total expected power generation by 2050, the year Canada has committed to net-zero emissions.
Solar and wind are set to make up 60 per cent of the increase in new capacity added between 2019 and 2050, according to C.D. Howe's researchers. But that means added costs for energy storage.
“The Achilles heel of wind and solar is provision of adequate storage, at reasonable cost, of power not needed in the middle of the day, but needed when the sun is not shining and/or the wind is not blowing,” authors John Richards and Christopher Mabry wrote in the report.
C.D. Howe’s findings follow a report from Royal Bank of Canada in September calling for energy consumption in Canada to surge 50 per cent in the next decade. The bank warned of power shortages as early as 2026.
Counting the cost of small nuclear vs. wind and solar
In their report, Richards and Marby rank the cost of various power sources, with nuclear power from small modular nuclear reactors (SMR) being the cheapest to operate, once storage costs for wind and solar energy are accounted for. Unlike larger nuclear power plants, which often overrun cost estimates and experience construction delays, SMRs are less complex and require less material and labour.
The International Atomic Energy Association (IAEA) defines small reactors as having capacity under 300 MW of capacity. Last month, the Canada Infrastructure Bank announced a deal with Ontario Power Generation to provide $970 million to build the country's first small modular reactor next to the Darlington Nuclear Generating Station in Clarington, Ont. The federal government’s fall economic statement also included a tax credit of up to 30 percent for investment in clean technologies, including SMRs.
C.D. Howe calls Ottawa’s recent nuclear policy offerings “a modest down payment in its green energy financial support,” while stressing that Canada’s net-zero goals will require a “massive reconfiguration” of the power sector.
“These are welcome actions from Ottawa, however nuclear energy is still excluded from some major federal clean energy funding programs such as the Green Bond Framework,” Richards and Marby wrote. “Much more funding will be needed to ensure we don’t put all our eggs in the wind and solar basket.”
The energy crisis in Europe ignited by Russia’s invasion of Ukraine has helped nuclear power overcome some of its reputational baggage amid greater focus on energy security. Governments from Japan to South Korea to the United States have made policy “U-turns” on nuclear power over the past year amid soaring energy prices, according to a large Canadian uranium investor.
"What politicians have figured out is that we've loaded a lot of intermittent power into the grid over the last 20 years, and that's been a good thing. But it's not a magic bullet," Sprott Asset Management CEO John Ciampaglia told Yahoo Finance Canada in August. The Toronto-based financial firm operates the world’s largest physical uranium investment fund. (U-UN.TO).
"You need backup baseload power generation to offset the intermittency of renewables,” Ciampaglia added. “There are only three ways to do that. You can burn natural gas. You can burn coal. Or you can have nuclear power plants."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.