Nuclear power, competition and sustainable development (8 September 1995)

Nuclear power will continue to be an important component of our electricity supply for the foreseeable future. But whether this will be on a diminishing or increasing scale will depend on the capacity of the industry to resolve public concerns over environment, health and safety risks and to compete successfully with alternative sources.

Remarks by Maurice Strong, Chairman, Ontario Hydro and Chairman, The Earth Council, to the Uranium Institute, London.

Let me first congratulate you on this 20th Anniversary and say how much I appreciate the opportunity of addressing you at the conclusion of this farewell banquet.

I have taken the heat from both sides of the nuclear controversy. Many environmentalists contended that I had abandoned or at least compromised my environmental credentials. And my new colleagues at Ontario Hydro speculated that I would be shutting down nuclear plants, while windmills proliferated in the Ontario countryside.

But let me make clear my commitment to the environment remains intact. I have always believed that while the Greenpeaces of the world make an important and necessary contribution by alerting the public to emerging risks and dangerous practices, it is also essential that people with an environmental commitment be at the centre of the real-world decision-making processes in which these issues must be resolved. It is, after all, the gross imbalances and distortions in our economic life and behaviour that have given rise to the environmental risks we now confront. And it is only through changes in economic management and behaviour that we can hope to achieve a secure and sustainable balance between our economic, environmental and social needs and aspirations in the period ahead.

Verdict not yet in

This is the essence of sustainable development; this is what the Earth Summit held in Rio de Janeiro in June 1992 was all about. And this is why I accepted the challenge of trying to set Ontario Hydro clearly on the path to sustainable development while at the same time restoring its financial integrity and effecting major improvements in its economic and operational performance, Although the verdict is not yet in as to the ultimate results of these changes, we have made some notable progress and set a new course for the Corporation.

To be sure one nuclear reactor will be shut down, on economic grounds, and a wind farm pilot project is just in the embryonic stages. But nuclear power continues to shoulder the lion's share of our generation and that isn't likely to change in the near future.

One major lesson I have learned over the past three decades as an environmentalist involved in industry is that the essential ingredients of sustainable development are economics and efficiency, or eco-efficiency as it is called - efficiency in the use of materials and energy and in the prevention, disposal and recycling of wastes. This was the main thesis of the book "Changing Course", produced as the principal industry input to the Earth Summit by the Business Council for Sustainable Development headed by the Swiss Industrialist, Stephan Schmidheiny, and including some sixty other world industry leaders. It made the point that the principal challenge we now face is to re-shape industrial civilization around the concept of sustainable development and that this will create a whole new generation of opportunities for industry.

Role of nuclear power

There is no sector of industry of which this is more true than energy. Energy is at the centre of the environment-economic interface. And we at Ontario Hydro share with you a profoundly important interest in addressing the role of nuclear power in our energy future. The controversy over nuclear energy has somewhat receded during the rather stagnant period of growth in the 1990s in which the dramatic drop in the demand for electricity gave rise to substantial surpluses of supply. But this controversy will soon heat up again as utilities, including Ontario Hydro, face decisions on the major new capital investments required to extend the life of existing, aging nuclear plants. At the same time, on a global basis, most of the growth in new energy demand is occurring in the rapidly developing countries of Asia and Latin America which are already evidencing a strong interest in the nuclear option.

Two other factors that will be given even greater weight in the renewal of the nuclear debate are increasing concern over the role of fossil fuels in global warming and the prospects of major new Chenobyl-type nuclear catastrophes in Eastern Europe and the former Soviet Union.

Whatever one's own position may be on the future of nuclear energy realism, surely makes it clear that neither the exhortations of the anti-nuclear abolitionists that we scrap nuclear energy now, nor the vision of some advocates of a new millennium fuelled primarily by nuclear energy are likely to prevail. Let me cite Ontario as a case in point. Nowhere is there a stronger or more pervasive commitment to the environment. At the same time, few places depend more on nuclear energy for their electricity supply. Some 60% of Ontario Hydro's base load generating capacity is nuclear and I see little evidence that Ontarians are prepared to accept the severe browning of our province that would result from the closing of our nuclear plants before suitable alternative sources of supply are available. At the same time, I know that most people in Ontario will want their concerns as to nuclear safety and the disposal of nuclear wastes satisfied before they support a major new commitment to nuclear energy for our future electricity supply. And they will want clear evidence as to how nuclear compares, in both economic and environmental terms, to other supply options.

Peaceful uses of atomic energy

Undoubtedly the same considerations will apply in varying degrees elsewhere. Ontario Hydro has reason to be proud of its nuclear performance. It was one of the first to give practical effect to the transition to the peaceful uses of atomic energy when in 1958 it joined with Atomic Energy of Canada in installing the first nuclear reactor at Douglas Point to generate power for our system. Since then, Candu reactors have proven to be world-class in terms of reliability and performance and Ontario Hydro has been a leader in setting high standards of safety, reliability, and efficiency in its nuclear operations. Our highly experienced and competent nuclear team is confident that it can meet the challenges of maintaining these standards as the aging of our plants imposes even more stringent demands on them.

The previous government of Ontario had imposed a moratorium on the development of nuclear power, largely on the basis of environmental and safety concerns. But our surplus of supply and the major cost over-run at our newest and largest nuclear facility, Darlington, had produced a de facto economic moratorium in any event. Primarily as a result of the over-run at Darlington, we face a write-down of our nuclear generating assets of some 10.8 billion dollars. Fortunately, we can absorb this through re-evaluation of other assets, primarily our hydro-electric generating plants.

The intensification of competition in the electric power industry and the movement towards open markets and customer choice is fundamentally changing the nature and structure of our industry. Electricity, like other energy sources, is becoming a commodity. All of this has a direct bearing on the future role of nuclear in the industry.

Reducing costs

The large-scale restructuring we have carried out at Ontario Hydro has reduced our costs dramatically, we have scaled back our work force by more than one-third to the levels of more than forty years ago when our operations were only some ten percent of what they are now and moved from the largest loss in our history to the highest profit while capping our rates and even effecting some reductions for industrial customers.

Recently I called for changes in our legislative and regulatory regime in which we would yield our current monopoly status and regulatory role, open up our market to competition and put ourselves in a position to compete as a private business corporation.

One element of these proposals which may be of particular interest to you is my proposal for merger of Ontario Hydro Nuclear with Atomic Energy of Canada and perhaps also the nuclear components of Hydro-Quebec and New Brunswick Power, if they wish to participate. This new "Nuclear Canada" would combine in a single integrated organization, research, design, operating and marketing expertise in order to better position itself to deal with the challenge of our nuclear future both in Canada and internationally. And I would expect this to be accompanied by introduction of private capital into the corporation.

Economic issues

Two other initiatives we are considering will also have a bearing on the future rote of nuclear. One is the possibility of using weapons-grade plutonium as a fuel while at the same time helping to resolve the daunting problem of disposing of the stocks of this highly dangerous material made surplus by the progress towards nuclear disarmament. Candu reactors are particularly adaptable for this purpose. As you will certainly appreciate, this could have important implications for the uranium industry. The other is the possibility of siting near Ontario Hydro's Darlington Nuclear Plant, the experimental fusion facility planned by the International Thermonuclear Experimental Reactor project. Both of these raise important environmental safety, as well as economic issues which would need to be thoroughly examined and debated before any decisions are made.

No major source of energy is entirely safe or environmentally benign. But the very magnitude of the consequences of a nuclear accident and the long-term nature of the risks associated with disposal and storage of nuclear wastes lend special importance to the environment, health and safety issues which the nuclear industry must face. Overall, the safety record of Ontario Hydro and other western nuclear generators is an impressive one, although as I indicated earlier, the costs of maintaining these high standards in aging plants under intensifying competitive conditions will be a challenge. Also, our people are confident that our nuclear wastes can be disposed of safely in underground sites. But in Canada as in other countries which are using or contemplating the use of nuclear, the public, too, must have confidence in these solutions if nuclear energy is to have the strong and sustained political support required to give the industry a new lease on life.

Balancing risks

Society will increasingly face the difficult task of balancing the magnitude of these risks against the more pervasive risks of climate change which would be exacerbated by increased reliance on fossil fuels and could be even more decisive to the human future.

One of the most important changes occurring in the electric power industry that bears on the future role of nuclear is the tendency towards decentralization of generation. The availability of increasingly efficient gas turbine generators in small packages and the prospect that other new technologies, such as fuel cells, which lend themselves to decentralized generation may become more cost-effective will tend to accelerate the movement away from highly centralized, capital intensive generation of which nuclear is the primary example.

In the final analysis, economic considerations will be the primary determinant of the future of nuclear and the way in which the industry deals with its environment, health and safety challenges will have a major bearing on its economics. Nuclear power has benefited from strong government support from inception and continues to depend on this. With all governments facing severe budgetary constraints, it would be imprudent for the industry to base its hopes and plans for the future on the continuation of such support. All sources of energy supply will need to compete on a level playing field. On this basis, it is clear that the nuclear power industry will have to internalize the full costs of meeting environmental, health and safety standards and it has already made significant progress in this direction.

One of the central challenges we face as we move into the 21st century is that of ensuring that developing countries meet their rapidly growing energy needs in ways that will not move the human community beyond the thresholds of environmental security. We cannot expect them to respond to mere exhortations not to repeat the wasteful and harmful practices by which we in the currently industrialized countries have moved us dangerously close to these thresholds. We must set them an example by effecting major efficiencies in our own use of energy and leaving space for them to grow. We must ensure that they have access to the latest, most environmentally sound and efficient energy technologies and the finances they require to afford them. And we must take the lead in research and development of new technologies and finding solutions to the unresolved problems of existing technologies, including nuclear.

Energy efficiency

The most immediate and cost-effective course is energy efficiency. Despite progress in the more industrialized countries in recent years towards greater efficiency in the production and use of energy, the potential for even greater efficiency is immense. The Electric Power Research Institute in the US, hardly a radical organization, has estimated that US energy needs could be met without reductions in the standard of living with 55% less electrical energy than is now consumed. Others estimate that the savings could be as much as 75%. In developing countries which are even less energy efficient, the potential is even greater and the economic incentive more compelling. For as was pointed out in the report of the World Energy Council's Task Force on "Energy for Tomorrow's World", developing countries will require by the year 2020 an estimated 30 trillion dollars of new investment in energy facilities if they meet their growing needs on the basis of current patterns of use and efficiency. This is nearly 50% greater than the entire world GNP - clearly an unlikely prospect.

At Ontario Hydro, we are trying to set an example of how these changes can be effected and how much they can mean to our own bottom line. To give effect to this, we have embarked on a program designed to reduce our own internal energy consumption since it turns out that the largest customer of Ontario Hydro is Ontario Hydro. Our internal consumption is some 50% greater than the amount of electricity consumed by the City of Toronto.

For Ontario Hydro, the savings from our energy programs will have a significant impact on our bottom line. As suppliers of fuel to the nuclear industry and as producers of nuclear power, we have a common interest, though not an identical interest, in the role which nuclear power will have in our energy future. Whether in the perspective of history, nuclear will be seen as a transitional energy source or will live up to the earlier vision of its proponents as the key to future energy abundance, has yet to be decided.

Ignoring our energy dilemma

Decisions will not come easily or soon. But the long time horizons that characterize the development of new facilities and adoption of new technologies dictate that both the energy industry and governments must give much higher and more urgent priority to initiating the processes by which these decisions must be taken. Unfortunately, I see all too little evidence of this at this point. Governments, preoccupied with more immediate and pressing issues are loathe to come to grips with issues which will only mature well beyond their terms of office. Yet the cost of ignoring our energy dilemma will be immeasurable and will have a profound, perhaps even decisive, effect on the future of the human community.

I offer no ready answer to this dilemma except my strong conviction that we must begin to address it now. While we can hope for new technological developments that may provide an easyway out, it would be illusory to pin our hopes on miracle cures.

What is more plausible is a mix of solutions in which a massive commitment to energy efficiency is accompanied by strong new incentives for development of alternative technologies and improvements to existing ones. Nuclear power will continue to be an important component of our electricity supply for the foreseeable future. But whether this will be on a diminishing or increasing scale will depend on the capacity of the industry to resolve public concerns over environment, health and safety risks and to compete successfully with alternative sources.

In the process of building and revita1izing Ontario Hydro we are deeply engaged in developing answers to these questions which are so central to the future of our own corporation, our industry and to our society. The uranium industry has a profoundly important interest in these issues and the importance you attach to them is evidenced by the opportunity you have accorded me this evening to express some of my own views concerning them.