Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 7 - Evidence - June 1, 2010

OTTAWA, Tuesday, June 1, 2010

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:10 p.m. to study the current state and future of Canada's energy sector (including alternative energy).

Senator W. David Angus (Chair) in the chair.


The Chair: Good evening, colleagues, ladies and gentlemen in the room, and to our viewers on the CPAC network and those on the World Wide Web.

This is a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources, and we continue our study of the energy sector in particular and our investigation to develop a framework for an energy policy for Canada in the future.

Tonight we have very special witnesses and guests with us. I want to go beyond my usual introductions to say a few special words.

The lady sitting directly at the other end of this table is Denise Carpenter, President and Chief Executive Officer of the Canadian Nuclear Association. With her, from the Ontario Power Generation, is Laurie Swami, Vice-President, Nuclear Regulatory Programs, who is here for technical support. As we go through this evening in this field of nuclear energy supply, we all need technical support.

I am Senator David Angus from Quebec, and I am the chair of this committee. Senator Grant Mitchell from Alberta is the deputy chair. Sam Banks and Marc LeBlanc are analysts and our resource at the Library of Parliament. Also present today are Senator Richard Neufeld from British Columbia; Senator Bert Brown from Alberta; Senator Judith Seidman from Quebec; Senator Linda Frum from Ontario; Senator Dan Lang from the Yukon; Lynn Gordon, the very efficient clerk on this committee; my predecessor Senator Tommy Banks from Alberta; and Senator Elaine McCoy also from Alberta. Also present are Senator Robert Peterson from Saskatchewan, our resident expert in the nuclear field — we call him the "king of uranium"; Senator Paul Massicotte from Quebec; and Senator Fred Dickson from Halifax, Nova Scotia.

You can see we have an eclectic group, and we are all focused on what we are doing on this study.

I have had the privilege of meeting with Ms. Carpenter and some of her people at the Canadian Nuclear Association. As you know, our interest has been titillated by the amazing amount of energy that is already being generated by the nuclear industry in Canada — 50 per cent in Ontario and a substantial amount in New Brunswick and Quebec. A significant percentage of Canadian power is already coming from this source.

Senator Banks, when he was chair of this committee, led a group of us over to France where we saw what a major nation can do. A vast majority of its electricity is generated from the nuclear side. We are very interested as a committee in what you can do.

The deputy chair and I were recently interviewed in Vancouver by Resource World Magazine. They wrote a long editorial in which the cat kind of got out of the bag because we were widely quoted as stating that we are very interested in this particular source of energy. We think it will play a major part in our ultimate findings, but we are not prejudging anything.

I also wanted to say, colleagues, these people have very generously, as early as the beginning of April, invited our committee to go up to Ontario and to make a fairly extensive tour, where we would see not only refining of uranium but also various types of nuclear reactors, and we would visit the most modern power plants. The point I am making here is that through the good offices of Ms. Carpenter and her friends at Bruce Power, this invitation was extended.

We have tried to find a proper window where we could go there. We have had various iterations of the trip. The steering committee has concluded that we are not going next week, as you all know — not only because of our special study on offshore oil drilling, which we are in the midst of, but also because we want to do full justice to your very generous invitation. However, we will try to find a time perhaps this summer or in off-Senate hours if I can convince you it is worthwhile. I think tonight you will be convinced.

Ms. Carpenter will start her verbal presentation and then interrupt it and we will see a very short video. I have just come down from watching it again upstairs. It is punchy and to the point, and I think a grabber, but you will judge for yourselves. She will then continue her presentation, followed by questions, and then the gentleman from Bruce Power will be here for the second hour. I think it will be a fascinating evening.

Ms. Carpenter was appointed the president and CEO of the Canadian Nuclear Association, CNA, effective November 23, 2009. Prior to this, she was the senior vice-president of public and government affairs with EPCOR Utilities Inc. While there, she was responsible for the organization's positioning, reputation, strategy and communications that paved the way for the company's transformation into a North American power and water company.

Ms. Swami, once again, is the Vice-President of Nuclear Regulatory Programs with Ontario Power Generation, OPG.

Without further ado, colleagues, over to you, Ms. Carpenter. We look forward to this evening.

Denise Carpenter, President and Chief Executive Officer, Canadian Nuclear Association: Thank you, Mr. Chair. I want to extend my thanks to you personally for allowing us to have a full evening to tell our story. It is a story of which we are very proud, and we hope that after you see our video, you will break out the Kleenex and be very proud along with us.

As the chair indicated, I am new to this position. It has been for the last six months, and I am still in a learning mode. After two hours, if you have learned everything, please tell me the secret because it is a constant learning adventure for me. Fortunately, I come from the energy sector, so I understand energy and the impact it has on Canadians; and also fortunately for me, I have my lifeline, Ms. Swami, to help me with all the difficult questions.

The CNA has more than 95 members, representing the entire spectrum of the nuclear industry — electricity producers, manufacturers, uranium mining and fuel processing, labour unions, engineering and universities.

Our vision is to seize this opportunity presented by the global renaissance to build and sustain a strong, vibrant and growing industry. Globally, there are over 438 operating reactors; 54 under construction and another 450 are planned or proposed around the world today. Our industry wants to be the global player and create economic wealth and thousands of high paying jobs for Canadians.

Canada has a unique history of nuclear innovation and achievement. Our job today is to build on this record of accomplishment by looking to the future for growth. To help frame the story, I think you will enjoy this very short video that the chair has mentioned, and then we will continue our presentation afterwards.

[Video played]

The Chair: Ms. Carpenter, that is an excellent video. Is it a recent production?

Ms. Carpenter: Yes, it was done to celebrate the fiftieth anniversary of the industry in Canada.

The Chair: Which was when?

Ms. Carpenter: It is 2010. The video was launched at our conference in the first quarter of this year. Some changes have occurred in the industry since that video was produced four months ago. However, it is the same as anything else; everything in this industry changes daily.

The Chair: At a nuclear rate.

Please proceed with your presentation.

Ms. Carpenter: The video provides a great deal of information in a quick format. To help assimilate those facts, I will take a couple of minutes to position our industry in the public-policy context. I will summarize the information you were provided in the PowerPoint narrative. I will focus on four main messages before opening up to questions and answers.

First, the Canadian nuclear industry is large. This industry generates 15 per cent of Canada's electricity, including 55 per cent in Ontario. It is responsible for over 70,000 highly skilled and high-paying direct and indirect jobs.

Canada, specifically Saskatchewan, is the world's second largest uranium producer with 20 per cent of the world market. We are a global leader in nuclear medical technologies, and we have state-of-the-art research facilities in Chalk River, Ontario.

However, as we all know, size is not everything. Therefore, my second message is that this industry is important from economic, environmental and health public-policy perspectives. Simply put, nuclear energy is more than affordable and competitive — it is a low-cost energy source. The cost of nuclear power is competitive with coal and natural gas and much lower than the two most promising renewables we have today, wind and solar energy. At the same time, it has high capital costs that generate large and positive economic impacts across Canada.

Nuclear power is secure, safe, stable and reliable. Perhaps most important in today's concerns about climate change and our environment is the simple fact that this is clean electricity generation and non-emitting. No other base-load power source is similar to it.

Nuclear goes well beyond electricity generation. In Canada, it is also the basis for vital cancer-fighting medical technologies, diagnosis and treatment, medical sterilization and food irradiation, and, a little known fact, desalination of water around the world and other emerging technologies. You saw some of that on the video.

The Canadian industry cluster in Chalk River is second to none. Half of the world's medical isotopes were produced by Atomic Energy of Canada Limited's National Research Universal — NRU — reactor at Chalk River.

My third message is that we need to act now; we need to focus on this industry now. The Canadian industry is entering a period of unprecedented uncertainty due to the prospective sale of Atomic Energy of Canada Limited, AECL. The CANada Deuterium Uranium reactors, or CANDUs, have been a remarkable success story, but their future and all those associated jobs and companies are at risk. This sale could have unknown impacts on Canada's industry, the supply chain and the potential of this industry at large.

While our association acknowledges the reasons behind the federal government's decision to sell AECL's power generation CANDU group, we urge the government to examine and address the potential consequences on the rest of Canada's industry. It will be vitally important to ensure the sale will advance the industry and the hundreds of Canadian companies that are part of the CANDU supply chain and make it more competitive rather than risk repeating the misfortunes of other countries following the sale of their core nuclear power assets.

This brings me to my fourth and final message to you. Government has a critical role to play in establishing the framework for continued growth in our industry. Government should maintain our strong and predictable regulatory environment under the Canadian Nuclear Safety Commission. Government should recommit to our enviable R & D activities and mobilize continuous innovation in our country and industry. Government should nurture and strengthen our education and skills-training capacity in our universities and colleges that are part of the heart and soul of this industry. Government and industry together should grow Canada's nuclear electricity generation capacity to 18,000 megawatts by 2025. We will do that through 12,000 megawatts of refurbishments and an additional 6,000 megawatts of new builds. Government should also take responsibility to increase Canada's uranium mining, production and refining. Finally, government should define nuclear as clean energy and make it a cornerstone to our national strategy to lower greenhouse gas emissions and air pollutants caused by hydrocarbon-fired electricity.

That is our summary of the video and the PowerPoint presentation that was given to you earlier this week. We thank you for your attention and for watching the video. Senator Angus has also extended the invitation to come and tour some of our Bruce Power and Ontario Power Generation facilities and the Cameco Corporation facility. We look forward to hosting you in that. I would like to open the floor to questions, as I am sure there will be many.

The Chair: Thank you very much, Ms. Carpenter. Indeed, it was interesting. I will start off by asking you what you mean when you say that the government should define nuclear as clean energy. I know in many American states, for example, unless a power source is renewable and clean, they are not allowed to buy it from Canada, and apparently hydro is not considered renewable by many states. Are you saying that the Canadian government does not recognize nuclear as being clean?

Ms. Carpenter: They do not at this point.

The Chair: Do they consider it to be something other than that, or is it non-declared?

Ms. Carpenter: It is non-declared, and that is the issue. We need to declare it, and the government needs to show support for nuclear as a clean energy.

Senator Mitchell: Thank you for the presentation and the video. It is not often that we hear an industry association come before a committee such as this or any other group, it would seem, and say that they want government ownership. I think that is what you are saying about AECL and your concern about its sale. Am I right?

Ms. Carpenter: No, we just want the sale to be managed appropriately. We understand the government's reasons for selling it. We are saying that we need to be respectful of that supply chain and the commitment that AECL has had to the industry, particularly in the R & D area.

Senator Mitchell: One of the big issues in the sale is R & D, obviously, and also the level of R & D and the evolution of the CANDU reactor and so on. Is part of your concern that somehow whoever buys it will not have the wherewithal to ensure that is fulfilled?

Ms. Carpenter: Research and development is the heart of this industry, and it allows the industry to become more productive and innovative. The universities feed into it for a pure science point of view. There is commercialization and material testing. People do not understand that AECL was in the top 15 of Canada's R & D companies. We are saying that we need to be respectful of that and ensure that we protect the R & D component of that organization.

Senator Mitchell: You point out that you want to avoid the misfortunes that have occurred in other cases where government nuclear assets have been sold. Could you elaborate on that? What are some of the misfortunes, and how certain are you that they can be avoided by doing what?

Ms. Carpenter: Off the top of my ahead, I would mention Great Britain. I do not know all the details, and I will have to look to one of my colleagues behind me for assistance. Many years ago, they divested their government involvement in nuclear assets. Fast forward to today when they want to build their industry, and they have to rely on other organizations and, indeed, other governments, for example, the French government, to rebuild their industry.

Senator Mitchell: You answer so quickly that it gives me a chance to ask more. As one Albertan to another, there has been talk, although not so much recently, about nuclear power for the oil sands. What is the status of that? What are some of the pros and cons of doing that? Is it possible? Are the economics there? Is the scale appropriate?

Ms. Carpenter: Senator Mitchell, as you know, Alberta is a deregulated market. Therefore, for any energy source to be built in Alberta, you need to have a mix of contracted and merchant-available power. The Alberta government has gone through a consultation process and said that they would be open to a developer having a relationship in Alberta. I will leave it to Mr. Hawthorne, when he speaks later, to talk more about what Bruce Power has been doing in Alberta.

Senator Mitchell: Finally, the government has made the point that they want to see coal-fired electrical plants phased out. I am not trying to put you on the spot with this, but are you aware of any specific steps? Is there some intention across the country — although this would be jurisdiction by jurisdiction — that no new coal-fired plans would be allowed?

Ms. Carpenter: Certainly Ontario has made the commitment to have them phased out by 2014.

Laurie Swami, Vice-President, Nuclear Regulatory Programs, Ontario Power Generation: Some of our plants will be coming out of service over the next few years. That is certainly a policy of the Government of Ontario. As for other jurisdictions, I think Ms. Carpenter could speak about that.

Ms. Carpenter: In Alberta, they have 800 years of coal. I think that would be a difficult policy for them to have.

Senator Banks: Thank you for being here, Ms. Carpenter and Ms. Swami.

Yesterday, significant engineering layoffs took place at Chalk River. If I were about to sell a business, I would try to ensure that it was in the best possible shape before I sold it and operating at full-bore capacity when I was interested in buying it. That is a comment, not a question.

You said that you understand the government's reasons for selling AECL. I have heard them. However, I do not understand them, and I do not agree with them. Could you assuage my doubt? If you understand them, could you explain them to me, please?

Ms. Carpenter: I certainly cannot speak on behalf of the Prime Minister of Canada.

Senator Banks: You said that you understand it.

Ms. Carpenter: Our industry association understands that the Government of Canada wants to mitigate risk and financial risk. By selling the CANDU reactor division, they believe they are mitigating their financial risk.

Senator Banks: That is it? Okay.

Speaking of financial risk, I will ask you about insurance, a subject about which you and I have spoken before. A bill will no doubt come to this committee that will have the effect of raising the coverage that Canada will be required to maintain to cover untoward events that might derive from nuclear undertakings. Everyone knows that it is too low now, and it is proposed to be raised to a higher level.

A suggestion was made when you joined our committee, chair, that, since an event of the worst possible type — and insurance is a bet against something of the worst possible type happening — would exceed even the new limits that might be purchasable under the insurance, it might make more sense for the industry, and you are the industry's representative, to put that money into a self-insurance fund rather than to pay premiums. Over time, it would return certain aggrandizements of its capital amount, one assumes, rather than simply spending the money, most of which goes out of the country because Canada's insurance industry has a tough time handling that type of contingent liability. It is elsewhere — at least it used to be; I do not know if it is now.

Does your association have a view about the difference, if there is one, between your members paying for insurance, which has a finite end to it anyway on the one hand, and self-insuring? I ask that question because once that limit is reached, in the event of a catastrophic event, which is what insurance is about, Canada is on the hook for anything over and above that.

In my way of thinking, Canada is self-insuring the nuclear industry, and it has purchased a deductible of whatever that amount might be. However, over and above that, Canada is on the hook because this is a Canadian industry. First, would that change in the event of a sale? Second, have you made comparisons between the cost and the risk; that is, how good a bet is insurance as opposed to self-insurance and the costs to the industry of the new amount of insurance, et cetera?

Could you address that question in the most general way that you can, with your association's views?

Ms. Carpenter: From a cost point of view, the industry has assessed the cost to industry to the new recommended amount as well as to additional amounts. Yes, it is a significant amount. From where we are today to the recommended limit of $650 million, it is a sixfold increase in insurance premiums. However, the industry also recognizes the need to increase that amount.

As far as self-insurance, I cannot say that the industry has a position on that.

The Chair: Senator Banks, would you mind if I made the following observation, namely, the bill on the Nuclear Liability Act coverage will be coming to this committee. We will have full hearings, and we will have our friends from the nuclear industry come here to give us a full answer then.

The object of this evening's exercise is more in line with telling us about the state of play in the industry in relation to the terms of reference of our study. I think the witness is prepared more for that than to talk about this coming bill.

Senator Banks: Good idea.

Ms. Carpenter: We will have an answer for you, Senator Banks, when we come forward.

Senator Banks: When that occurs?

Ms. Carpenter: Yes.

Senator Banks: My final question will be about the state of the industry. When was the last time we sold a CANDU reactor? What is the prospect of selling the next one?

Ms. Swami: The last time we sold a CANDU reactor AECL would have been involved with that. It was a number of years ago, and it came into service in offshore jurisdictions. The CANDU industry for sales from AECL would be part of their business strategy and plans, so I cannot speculate on when they might actually have a sale in the future. It would be up to how the evolution of the sale of AECL proceeds, as well as what their best business strategy will be down the road.

Senator Banks: Are the production of CANDU reactors and the companies that do that among your members, Ms. Carpenter?

Ms. Carpenter: Yes.

Senator Banks: Does your association hold out hope for the prospect of the sale of CANDU reactors?

Ms. Carpenter: Absolutely.

Senator Peterson: Thank you for your presentation this evening.

All appearances are that the nuclear industry is just on the verge of really moving ahead. We have had a number of experts come before us who have said that if we have any hope of reaching our greenhouse gas commitments, we must have nuclear reactors.

At the same time, people wonder about some issues. I do not know if you can comment on them. The three issues are waste management, reactor safety and capital-cost control.

Ms. Carpenter: I will ask Ms. Swami to address the safety question. Safety is at the heart of this industry, and every individual I have met in this industry talks about safety first. I would absolutely like to have her address these questions on safety and waste, and then I can talk about capital costs.

Ms. Swami: As mentioned, nuclear safety is obviously a fundamental part of our business. We have many programs and processes in place to ensure that our reactors operate safely and have operated safely in the past. This includes ensuring that the design barriers are in place should there be any perturbations in the reactor. Shutdowns and control mechanisms will be in place to prevent an excursion from becoming a serious event.

We also have extensive training programs. The staff members that actually operate our reactors are heavily trained. They go through an extensive qualification program. The staff members who are in our control rooms are licensed by the Canadian Nuclear Safety Commission. They do a significant oversight of that training program, which includes simulator- based training. They are actually trying on simulators as opposed to just going into the control rooms. That is a very important part of our process.

We also participate in external organizations, such as the Institute of Nuclear Power Operations, INPO, and the World Association of Nuclear Operators, WANO. Following some events in the U.S. and after Chernobyl, organizations in the industry were created so that they could hold all operators accountable for the safe performance of their plant.

We, as an industry, participate fully in evaluations of other generators, and we also have those generators, the worldwide experts, come in and look at our facilities, provide us feedback and suggestions on how we can make improvements so that we can always prevent these events from taking place.

It really is a fundamental way that we operate our business.

Ms. Carpenter: The Canadian industry has been performing as one of the safest in the world. Our Canadian nuclear industry has one of the safest operating records around the world, and that is important to know.

The Chair: Will you move on now to the other part of the question?

Ms. Swami: I assume you are referring to long-term management of spent fuel. A program led by the Nuclear Waste Management Organization has been tasked by the federal government to establish a waste repository for fuel. That process is under way, and they have begun the consultation with communities to locate a storage facility. Of course that process requires that they identify a willing community to take that waste. They are going through that process now.

They will take a number of years to assess an appropriate site and work with communities and others in and around where waste repository could be located. Once they have selected the site, they will then begin to move into construction, and then we will have a waste repository for the nuclear fuel that has been generated. Currently, the waste is stored safely on the existing sites, as it has been for many years.

Senator Peterson: On the original designs, I believe the number was that only about 3 per cent of the uranium was used in the development of power, and under the newer designs now, they are getting up into the 8 per cent range. Some of this fuel could possibly be recycled, put back into the process. Have you any comment on that?

Ms. Swami: Generally, the CANDU design uses natural uranium. The advanced designs and the pressurized water reactors that are used in many applications, and the boiling water reactors use enriched fuel, which is slightly higher in uranium content.

Those processes have a higher yield, and we could recycle that material. Our process in Canada has been Adaptive Phased Management of used fuel. The process is such that we will establish a long-term repository but have the option, should we want to retrieve the used fuel, to bring it back, reprocess it and use it as an energy source in the future.

Ms. Carpenter: On the capital costs question, I will punt that to Mr. Hawthorne to deal with when he comes up. He is very knowledgeable in that area, and, as you know, it is a challenging discussion.

The Chair: Perhaps just as a supplementary question to your response about the natural uranium and the enhanced or enriched, we have been told by others that the Canadian industry, particularly the CANDU reactors, use a type of material that cannot be used for non-peaceful means. Can you describe the other type? I understand it is quite a significant factor to take into account when you are deciding the way forward.

Ms. Swami: That is correct. For instance, in the U.S. they have a program where they enrich the fuel to a higher uranium-235 content, and they use that to actually manufacture in support of, perhaps, their weapons program, but they would also use it in support of an energy program. We do not have those types of programs in Canada. Right now, we would generally use the natural uranium.

We are, as an industry, considering, in some of the new designs, what uranium content we would require. That would, of course, have an impact on the supply chain and how that material would be brought into Canada and used in energy production.

The Chair: Would it affect the safety parameters that you have described?

Ms. Swami: No, all plants operate safely around the world. This material is used today in pressurized water reactors and boiling water reactors in many jurisdictions.

Senator Lang: I would like to go back to your statement where you said. "Nuclear is more than affordable and competitive — it is a low-cost energy source." Then at the end of your presentation you have indicated that you would like to perhaps see an additional 6,000 megawatts in new builds.

Are you telling us that if today we were to go with a nuclear build program and you were contracted to build the 6,000 megawatts, you would be able to build it for less than the cost of a hydro project or a gas installation?

Ms. Carpenter: I am saying that the cost of producing the power is competitive. To sell the power after it is built is very competitive. We will be releasing a study in the next two weeks that has been done by Canadian Energy Research Institute, CERI, comparing all the costs of power, the impacts of all the different power sources. We have not included the capital cost in that study. However, there is a high capital cost to it.

Senator Lang: How could you give us a price without including the capital cost? That is from where your costs all originate. We will be comparing apples and oranges if we take a hydro project and compare our capital costs and build that into the rate base. If you take a nuclear installation and do not take the capital costs into consideration, I do not think that is a fair comparison.

Ms. Carpenter: Let me clarify that because I gave you incorrect information.

The study that will be coming out over the next couple of weeks is comparing the cost of producing nuclear, coal, integrated gasification combined cycle — or IGCC — gas, biomass and landfill. I am not an economics expert, and this is just coming out onto the market now. However, it does show, all costs in, also including $30 a tonne for carbon, that nuclear is competitive to coal and gas.

Senator Massicotte: Is that on page 7 of your report?

Ms. Carpenter: Yes.

Senator Lang: I would like to discuss another area. You mentioned that nuclear power is secure, safe, stable and reliable.

Ms. Carpenter: Yes.

Senator Lang: I would probably say that I believe that statement. However, at the same time, I know that many Canadians have experienced and saw what happened in the United States and then in Chernobyl. Could you tell those Canadians who are listening what are we doing differently to ensure that those types of situations do not happen in the future?

Ms. Swami: I will just go back to some of my earlier comments. As a result of those events, organizations such as WANO, of which we are a member, were created in response, primarily to drive the nuclear operators and owners to ensure that we had in place all barriers to prevent such events from happening. That continues today.

A large part of that program is learning from the experience of those other nuclear operators. Whenever there is any type of situation or low-level event at an existing facility, we learn about that and take action to improve our processes. It drives us in that direction, directly as a result of those events that took place many years ago now. Certainly we are learning from those and continue to learn as an industry. It is a very important part of the nuclear industry. We recognize that all of us are part of the world nuclear operators, and it is very important to all of us that we all operate safely. We all take the steps necessary to ensure that no events take place.

Senator Lang: Has technology advanced significantly since then, from a safety point of view, to give us that much more comfort from the point of view of a new installation?

Ms. Swami: The original design of our nuclear facilities included many systems that would automatically shut a reactor down. Many monitoring systems at the reactor itself monitor reactor power, monitor the conditions that are under way as we speak. They will monitor these conditions, and an automatic response through computer systems or automatic control systems will take action to prevent any type of an event. That is all part of the original design.

The other part of the design features that we have in our CANDU facilities, in addition to the control systems and the shutdown systems, are systems for containment. If an event did occur, it could be contained within the reactor itself. If a mechanical barrier failed, there would be containment systems.

If you are familiar with our facilities, you would see vacuum buildings. The newer designs now have containment structures, which serve to prevent any release of radioactivity into the environment. We also have site requirements; we have exclusion zones around our facilities so that if there was a release, a certain area — essentially around a kilometre from our reactor buildings — has been designated as an area where no one can live permanently.

We also have emergency response plans that would allow us, if there was an event, to ensure that all public safety was addressed. We have never had an event, as Ms. Carpenter reminds me.

Senator Lang: We do not want one.

Ms. Swami: Absolutely.

Senator Neufeld: Thank you for your presentation. When I listened to it and read it, it sounded to me as though government must do it or it cannot be done. I am sort of happy with your response that government does not have to do it. However, your paper certainly would lead anyone to think that the government must do it or it cannot be done.

I want to ask you about your points. You said that government should maintain our strong and predictable regulatory environment under the Canadian Nuclear Safety Commission. Does anything suggest to you that that would change from what it is presently?

Ms. Carpenter: No; there are changes.

Senator Neufeld: Are you just reinforcing that that should stay?

Ms. Carpenter: Absolutely.

Senator Neufeld: We already spoke about the R & D. I do not believe I have a problem with that. You say that government should nurture and strengthen our education and skills training capacity. Is there a shortage of training capacity for people that work in your industry?

Ms. Carpenter: Certainly, as any industrial industry is experiencing now, we have the age wave that is affecting it. Because this industry is highly skilled, if the growth that we see manifests itself, we will see a skills shortage, absolutely.

Senator Neufeld: You are saying that all industries are experiencing that. It is not just your industry that is presumably being targeted.

Senator Lang asked about growing the industry by 6,000 megawatts of new builds and 12,000 megawatts of refurbishments. Does that mean you are just refurbishing plants that are already in place — the 12,000 megawatts? It does not add 18,000 megawatts; it adds 6,000 megawatts. Is that how I read that?

Ms. Carpenter: Yes.

Senator Neufeld: You say that governments should responsibly increase Canada's uranium mining production. Does that not come with the business? If someone wants more uranium, would Saskatchewan not go out and mine more uranium? I do not know how the federal government should be involved there.

It bothers me a bit that when you talk about the 6,000 megawatts of new builds in Canada, as I understand, when we questioned AECL earlier, that hundreds of millions of dollars from the Canadian taxpayer on a yearly basis goes into Bruce Power to refurbish, fix up and modernize — and also in New Brunswick, I believe. It bothers me that other Canadians have to pay that money on a yearly basis to upgrade and do whatever is necessary to those plants because of guarantees that were made. I guess they were new in the industry.

If AECL did not have to do that, that would make me happier. In my province, we cannot go to the Canadian government and ask them to fix it for us or help us fix it because it will cost a large amount of money, and we cannot afford it.

The Chair: You are obviously not from New Brunswick.

Senator Neufeld: Exactly. If I was, maybe I would be talking the other way. Right now, I am from British Columbia and that bothers me a little that we should be doing that. As I understand, for the other plants around the world, we do not have that responsibility. That is what we were told by people that were here.

Therefore, for other plants, CANDU reactors around the world, the Canadian taxpayer is not faced with that; but within Canada, we are. You want to build 6,000 megawatts more. If it was a private company, the private company would have to figure that in the upfront costs.

Ms. Carpenter: Let us be clear. The 6,000 megawatts of new builds are not technology-specific. It could be a CANDU reactor or another technology. The new build could be either-or.

Senator Neufeld: Another new technology would lead me to believe that someone would have to come in to back it up later on with some more investment. That is the part that bothers me. If it goes to the private sector, they have to work that out up front in the cost of building those plants. Those dollars are real.

Ms. Carpenter: I do not think we are disagreeing. We are saying that AECL, the CANDU reactor area, is up for sale. With that, there is intellectual property, there are the reactors.

Remember, Bruce Power — which reports to a shareholder, so it is a private company — is using a CANDU reactor. They are refurbishing it, and I am sure that Mr. Hawthorne can talk to that a little more. I think we need to have a little clarity on what AECL is. They are a supplier of a reactor.

Senator Neufeld: The clarity to me was pretty clear from AECL — the numbers of hundreds of millions of dollars to refurbish those two plants.

I want to tell you what bothers me a little. If you could at some point in time guarantee — your association or someone — that it will never happen, that may be a different story, but I do not think that would ever happen.

Does the U.S. and France consider nuclear energy clean?

Ms. Carpenter: France does, yes; and in the U.S. it is considered a clean energy.

Senator Neufeld: In Canada, I have never heard the minister say that it was not clean. In fact, when the minister came to testify to us, he said that in Canada we generate 75 per cent of our electricity from clean sources. That would include nuclear. I believe that the Canadian government does believe that it is clean and includes it — because that is what they are saying — in that 75 per cent. When I go to the charts, you have about the same number, so it must be included. Do you agree with me?

Ms. Carpenter: Yes, but it needs to be defined properly.

Senator Neufeld: What do you mean by "defined"?

Ms. Carpenter: If it is defined as clean energy, it is available for carbon credits.

Senator Neufeld: I am saying that they are defining it as clean energy now.

Ms. Carpenter: However, it is not available yet because we do not have any legislation. We have to work collaboratively with them to ensure that happens.

Senator Neufeld: The waste issue was dealt with.

Senator Peterson: Supplementary to Senator Neufeld's question about why Saskatchewan would not mine more uranium, the mills are licensed by the Canadian Nuclear Safety Commission, CNSC, for so many millions of pounds per year. In October, if you hit that, you shut the mill down. It does not make much sense. That is what they are alluding to in the question — why would you apply that restriction?

The Chair: Ms. Carpenter, sometimes I have to swear in my own members as witnesses, I have such expertise. They have the right to ask questions, and they really should not testify, but it is interesting to hear.

Senator Frum: I also want to highlight the sentence in your presentation about nuclear power being secure, safe, stable and reliable. Like Senator Lang, I am inclined to agree with that, but clearly the industry has a huge marketing issue to deal with. I presume the video you showed us is part of that. I am curious about the intended target for that video; who are you showing it to?

Ms. Carpenter: This video has been circulated to schools across Canada. We have an extensive school program in which we work collaboratively with teachers to educate young people on the industry. It was sent to every member of Parliament in the Government of Canada and selected provinces. Industry members have shown it to their communities and employees. It has wide use and is published on our website.

Senator Frum: We know there is great growth in nuclear reactor construction around the world. China currently has 20 nuclear power plants under construction. Concern is over security and safety and transporting nuclear material. One witness explained the virtues of the industry, but just the idea that enriched uranium must go from point A to point B disqualified it for him. The potential for danger is enormous.

What safety standards are in place in countries such as China? How will that affect the way Canadians think about what will happen here?

Ms. Carpenter: Before I ask Ms. Swami to answer that question, I will point out that in Canadian communities where we have nuclear reactors, we have extremely high support for the industry. That is because people who live in those communities understand the industry. Therefore, if we can help our communities understand the industry and share that with other Canadians, we will build that knowledge base.

As far as what happens in China affecting Canadian attitudes, I think Canadians are smart. They know that the Canadian industry is highly regulated, that we have never had a death in Canada due to an accident and that safety is number one for our industry in Canada. Canadians will see that.

Senator Lang: I do not totally agree with that. Following up on Senator Frum's question and the video, I think that the video is very well done. It gives an introduction to the industry. However, it did not talk about a key concern to Canadians, namely, safety and what the industry is doing in this area that would give Canadians the comfort that this type of industry can play a large part in our future. I think that is important if you are to sell and market the industry. We speak for many Canadians when we ask these questions. It is an area that I and most Canadians know little about.

Senator Frum: I will repeat a question of Senator Angus' for clarity about the movement of enriched material from place to place. Material is not enriched on site; it must come from somewhere else. What are the safety and security measures in that regard?

Ms. Swami: Fuel is monitored at our facilities by the Canadian Nuclear Safety Commission and also by the International Atomic Energy Agency. They have cameras located at our facilities to ensure no tampering, et cetera, occurs with the fuel supply or used fuel. Nuclear material is tagged and monitored.

We have a high regard to ensure that we meet Canada's requirements for safeguarding nuclear material. We participate in that process as do many other countries with which I am sure you are familiar. That process is used generally for managing nuclear fuel, whether in Canada or other jurisdictions.

It is clearly important to many people how nuclear material is handled and managed safely as it moves and who is responsible for it. That is why there is such high regard for the process among our operating staff and management as well as the regulatory bodies and international agencies.

Ms. Carpenter: We can also do more to help Canadians feel safe. I absolutely understand your point.

Senator Massicotte: I want to raise a series of issues for clarification for which answers were given to ensure that I understand.

On page 7 of your PowerPoint presentation, you itemize costs. Do those include amortization of acquisition and development costs? If I remember correctly, the lowest scale is a 5 per cent discount rate and the top rate is 10 per cent.

Ms. Carpenter: Yes, that is correct.

Senator Massicotte: That is different than what we heard from others relative to capital costs.

Ms. Carpenter: This study has been recently completed. The numbers have just been verified, and this is probably the first time people have seen these numbers.

Senator Massicotte: Does that include treating waste and carrying it for the decades required?

Ms. Carpenter: Yes, they include the full-cycle costs.

Senator Massicotte: You mentioned that Canada has not sold CANDU technology for years. If you look at the money invested historically, someone may say that government is not the best manager or developer of new technology. Nothing is currently happening in this regard. Therefore, we could get the private sector involved and sell the technology. You said that you have no problem with the sale, but you worry about how it is done and that it respects certain criteria. What are your concerns?

Ms. Carpenter: Your question is about what is keeping us up at night. Canada has a strong R & D infrastructure. Universities, labs and companies feed into the nuclear industry. We are saying that we must be respectful of that infrastructure. Whatever happens and however the sale is addressed, we must consider the need to keep R & D in Canada.

Senator Massicotte: I will play a lawyer. If I draft a sale agreement, what must that paragraph say to respect the infrastructure? What do you want the purchaser to commit to contractually?

Ms. Carpenter: The Government of Canada has realized the need for this because they have split up AECL. They took the research and CANDU components. They have acknowledged the need to keep an R & D component in Canada. How that happens and the model used will be negotiated down the road.

Senator Massicotte: What do you recommend to address your concerns?

Ms. Carpenter: I cannot say that I recommend a corporate structure. Much discussion has taken place around public-private partnerships and government partnerships with industry. Those are both viable options.

Senator Massicotte: You disagree with whatever will be done, but you do not know what should be done; is that what you are saying?

Ms. Carpenter: We want the government to continue to invest in universities and research facilities, whether it is through the National Research Council Canada or the work that was done at Chalk River.

Senator Massicotte: The government has said, thus far, that they would do that. They are keeping the R & D component. From a policy point of view, it appears that that will be maintained. If they maintain what they say they will do, then you have no problem with the sale.

Ms. Carpenter: Yes, that is correct.

Senator Massicotte: We helped South Korea's nuclear industry about 15 or 20 years ago. They bought our CANDU reactor and developed a significant nuclear industry in South Korea.

South Korea has now developed its own technology. They recently won the most recent large-scale reactors sales. What happened? Can Canada learn something from that? Why did they not use our technology to re-sell in the world? South Korea is now one of the largest producers of new reactors and the most aggressive seller of new nuclear technology.

Ms. Carpenter: I do not have an opinion on that.

The Chair: I would remind honourable senators that the witness is the CEO of the Canadian Nuclear Association and relatively new in the position. It seems that would not necessarily be within your purview. Do not feel embarrassed by not knowing the answer.

Next is Senator McCoy, who knows many answers.

Senator McCoy: I do not know many answers about nuclear because I am from Alberta, and we did not need to know about it. I am very much looking forward to our site tour, which will give us more time to delve into many of these questions. I will save all my anecdotes until then because we do not have much time.

I am curious about three things. First, you made the clear distinction between R & D and the CANDU reactor business. Of course, AECL was an original equipment manufacturer, OEM, which is a pretty big deal. How many OEMs of nuclear reactors are there in the world?

Ms. Swami: I do not know off the top of my head.

Senator McCoy: Will you find out and get back to us on that, and also identify who they are?

Ms. Swami: Yes.

Senator McCoy: I think General Electric Company and France are two OEMs.

Ms. Swami: There are a number of them — AREVA, GE, Westinghouse Electric Company.

Senator McCoy: It would be helpful for us to know how many there are.

The Chair: Do you want the ones in Iran?

Senator McCoy: I am not sure. Iran is trying to buy. I do not think they are building.

Ms. Swami: There are Russian reactors as well.

Senator McCoy: It puts the thing in context, and we have more to delve into here. We are talking about a strategic commodity.

Let me go to page 7, of your PowerPoint presentation, which is the same one others have gone to. It is the comparative costs. I see the source is CERI, May 2010. That is the Canadian Energy Research Institute in Calgary.

Ms. Carpenter: Yes.

Senator McCoy: They were very kind to be witnesses for us, so maybe they or you would share a copy of the report so that we do not have to spend $2,000 to buy it.

Ms. Carpenter: Absolutely. We will share the report. We got a little ahead of ourselves by using this, to be honest. We just reviewed and verified it over the last couple of days.

Senator McCoy: It says, "LUEC costs." What does LUEC stand for?

Ms. Swami: It is levelized unit electricity cost.

Senator McCoy: That is not a phrase that is on the back of my hand for blogging, I will tell you that. It goes on to declare coal and gas, of course. These are electricity generators. It talks about coal and IGCC, which is something or other about combined cycle. What does the IG part stand for?

Ms. Carpenter: It is integrated gasification combined cycle sequestration.

Senator McCoy: You know a great deal about that from EPCOR. Does "CSEQU" mean carbon sequestration?

Ms. Carpenter: Yes.

Senator McCoy: Estimates on the grapevine for carbon sequestration at an electricity-generating plant in Alberta have been wildly circulating at huge costs. Does CERI have recent costs for kilowatt hours?

Ms. Carpenter: Yes.

Senator McCoy: I look forward to that.

Ms. Carpenter: That is why it is in here. You can see the comparison. That is why the industry is competitive.

Senator McCoy: Yes, and that is what tipped the balance. It is not competitive unless you have to load up the other generators in terms of gas and coal with these captured devices.

Senator Massicotte: Is it $30 a tonne for that, too?

Senator McCoy: I do not know if that is relevant. It is the cost to capture and sequester it. We will wait for that. The next one is advanced compliancy cycle, which I suppose is one technology better than your latest plant, or EPCOR's.

Ms. Carpenter: I cannot speak to that.

Senator McCoy: We see that biomass is better than anything still, which includes wood. We can always go back to wood.

On pages 9 and 20, I am curious about the performance statistics that you have. The capacity utilization, of at least the CANDU nuclear reactors, is 10 per cent lower than those in the U.S. That is on slide 9, the first two bullets. On slide 20, you talk about the go-forward potential third generation, which talks about increasing that capacity figure. However, it also talks about reducing construction times from five years to four years. How does the construction time compare with a coal-fired plant? We are talking construction here, so after approval is given. This is after all the regulatory process is complete and the permit to build is given. That is what you are saying here.

Ms. Swami: Part of my responsibility is actually driving the licensing and environmental assessments for nuclear for Ontario Power Generation. If everything goes from step one to the final step and the decision-making process, it is about 10 years. Those 10 years include the time that you begin the approvals process to the time that you would put the system or the unit into operation.

During that period of time, there are many licensing steps, so you cannot say that the licensing has ended at a certain point in time. Generally, we are seeing the construction period in the range of four to six years to seven years. It depends on the technology and the decision-making processes that we have in place.

Senator McCoy: That was my question. We isolated construction, which is beyond the regulators. I wonder how long it takes to build a coal-fired electricity generator, just the construction period.

Ms. Swami: Just the construction? It is a much faster construction period.

Senator McCoy: Is gas even faster?

Ms. Carpenter: Gas is about 18 months, and coal is about three or four years.

Senator McCoy: These are the comparisons I was hoping to draw out. Of course, the capital cost is $2,000 per kilowatt for nuclear. You can always give us these details later. I would like to know the comparison of that. Maybe it is in the CERI report, but could you give us the comparison with the gas, coal and large hydro?

Ms. Swami: I would mention, along with the difference between the nuclear construction costs and the other generating types, that while there is a large investment in capital early on in a nuclear facility, the operating and maintenance costs for that facility and the fuel costs tend to be lower. We use this measure of levelized unit electricity cost so that you can get a comparison between the different types of generations. If you break it down in that way, the comparisons are odd-looking.

Senator McCoy: I agree. I threw large hydro in because there is something of a parallel with high capital costs and low operating costs there. If you could provide me information, that would be super.

Ms. Swami: Certainly.

Senator McCoy: I can see the operating life from average 40 to 60 years. I would be curious to know how you plan to do that. Again, I am thinking, because of time tonight, you might want to give us a supplemental response later and provide it to the committee.

Ms. Swami: That is not a problem. The design life is per the designer's specifications. Generally, the new designs have 60-year operating lives. That is generally what the designer is providing at this point.

Senator McCoy: The last one here is the thermal efficiency. I did not understand that.

Ms. Swami: Thermal efficiency is heat generated in a nuclear reactor that is converted into electricity. A large percentage of the heat is waste heat, if you will. There has been an improvement of this efficiency of using the heat- generated by about 10 per cent. That is really what it is referring to.

Senator McCoy: Again, can you provide us with a comparison with the other typical steam technologies, which are gas and coal?

Ms. Swami: Yes.

The Chair: I was so interested in the exchange that I forgot that we have another witness here, namely, the CEO from Bruce Power. I have three senators on the list still, and I do not want to deprive you of your questions. Senator Seidman, Senator Brown and Senator Dickson, if you would like to pursue your questions, I will give each of you two minutes.

Senator Brown, you are first; Senator Seidman, and then Senator Dickson, because I do not want to shortchange you, senator. You are very patient. Some of my colleagues tend not to realize that I might be sitting here alone after seven o'clock, and I do not like sitting here alone.

Senator Brown: Thank you for your presentation. The issue of safety has arisen two or three times here. On page 11, am I correct in saying that the Three Mile Island plant never had any radiation escape from it at all? It was actually an event contained within the reactors, is that correct?

Ms. Carpenter: Yes.

Senator Brown: Is Chernobyl the only bad event that we have ever had worldwide? Has there been another Chernobyl anywhere?

Ms. Swami: At a power reactor, that would be the worst event.

Senator Brown: That is what I thought.

Last, do you know anything about breeder reactors? I understand that the development of enriched uranium is also used for breeder reactors that produce more electricity than the original spent fuel.

Ms. Carpenter: I cannot comment on that.

Senator Brown: I am sorry. I just read about it not too long ago and wanted to ask if you knew anything about it.

Senator Seidman: Nuclear power seems to be so obvious from the point of view of alternative clean energy, to say nothing of all the other benefits, for example, isotope use in the health field. You concluded by saying that it is continuous, affordable and emissions-free 365 days a year.

However, we have this public confidence problem that I would like to come back to, if I might. It is absolutely necessary to have public confidence to have a real increase in the share of electricity provided by nuclear power. Out of curiosity, have you done any public-opinion surveys measuring the level of public support or concerns?

Ms. Carpenter: Yes. As an association, we do public-opinion surveys annually. We just finished one in May. The mental-model research that we are presently doing to try to understand the values of Canadians when it comes to this industry might be of more interest to you. That is looking at what concerns them, what their thinking is around it and how can we help them understand the industry more from a behavioural point of view and a values point of view instead of from a public-opinion point of view. We are in the market right now with that.

Senator Seidman: It is wonderful that you are doing that because it is important to understand. Would that lead, then, to some type marketing strategy to help educate the public?

Ms. Carpenter: One of our mandates of the association right now, which has just been approved by a board, is to engage in a dialogue with Canadians about the industry. It was approved three weeks ago; it is going to our board on June 11. We are presently developing strategies and tactics to engage on a fulsome dialogue with Canadians so that it is a two-way dialogue.

Senator Seidman: I will finish for now.

The Chair: We will put you early on the list, if you like, with the next witness. You have to get on the list early.

Senator Dickson: I was very impressed with your presentation. I come from of Nova Scotia, where there is a moratorium on uranium production and exploration, as you are very much aware. It is good for Saskatchewan if we keep the moratorium in place.

I was around when Nova Scotia had the 50-50 shot at getting the nuclear reactor that is now in New Brunswick, and I have an idea about public opinion against uranium mining and all the risks involved with it. You may not have the opportunity to answer this now, but you can always answer in writing. I am looking at the page that is entitled, "Canadian Nuclear Medical Technologies," and also "Growth Strategy," "Maintain R & D and mobilize innovation." That is my focus. The rest of the senators have a large amount of background in electrical generation and whatever; I do not.

I wonder about the interrelationship between what we are selling and carrying forward with an effective program insofar as R & D is concerned and medical technologies. Following up on Senator Massicotte's line of questioning, are there any conditions that are absolutely necessary to be included in the conditions of proposal that a proponent will respond to when they buy these assets of the Government of Canada? Are there any conditions that you want attached, or are there no conditions, devil be damned? Is there a relationship? If there is one, how do we protect it?

Ms. Carpenter: I do not know the answer to that, senator.

Senator Dickson: Well, you can follow up with that, then. Thank you.

Ms. Carpenter: Yes.

The Chair: Honourable senators, first, on your behalf, I wish to thank Ms. Carpenter and Ms. Swami for your presentations, your answers to our questions and your undertakings to give us more data. We look forward to seeing much more of you both and to working with you, to the tour, and to helping us on the bill, the Nuclear Liability Act, when it comes to us, which we understand it will.

As you know, Duncan Hawthorne of Bruce Power is waiting patiently. I will ask Mr. Hawthorne to come forward. If you could relinquish your chairs, ladies, that would be very kind. Thank you very much. We will look forward to seeing you soon.

Honourable senators, as mentioned earlier, we are privileged to have with us this evening as part of our overview — and, I think, as preliminary overview of the nuclear industry in Canada, the association has done a wonderful job of getting our appetites whetted — Mr. Duncan Hawthorne, President and Chief Executive Officer of Bruce Power, the largest independent power generator in Ontario. With roughly 30 years in the power generation business, Mr. Hawthorne began his career as a craft apprentice in the Scottish electricity industry and advanced to hold senior positions in power companies in the U.K., the U.S. and Canada.

As the executive lead during the acquisition of several power plants in North America, Mr. Hawthorne was responsible for the acquisition of the Bruce nuclear facility and the formation of Bruce Power. He is an active advocate for the nuclear industry and is the past chair of the Canadian Nuclear Association and current chair of the prestigious board of governors of the World Association of Nuclear Operators, Atlanta Centre.

From some meetings that I have held with Hal Kvisle, I understand that there is an association or an ownership involvement with TransCanada Corporation. Could you tell us about that? I know you have a presentation. All my colleagues have copies, so, without further ado, welcome to you, sir. Thank you for your patience. Please proceed.

Duncan Hawthorne, President and Chief Executive Officer, Bruce Power: Thank you for the opportunity to speak here. I was sitting at the back listening to some of the questions that you peppered Ms. Carpenter with. Hopefully, I can give you a bit more colour to some of those points. I cannot make an excuse because I have been in the industry almost 40 years, so I can cover mostly energy policy internationally and put a bit more colour on it.

I was invited two months ago to the Mexican Senate, where they asked for presentations from all across the world on international policy, as they were seeking to make decisions on nuclear build and whether they should have more nuclear plants. They wanted to hear what was happening in other countries, so they invited me to come and speak about what was happening in Canada.

I thought this slide pack would be helpful because sometimes when you are talking to another country about your country it brings into focus some of the challenges you have. In addition, I would like to talk about some of the issues that you have asked questions about from my own position because we are a private-sector nuclear operator.

The first nuclear power plant I bought when I came to North America was Three Mile Island, and people would ask what that was all about. That, to me, speaks to the lack of knowledge and understanding of our industry. I would like to answer some of those issues because it is important that this committee, as well as hearing from a broad spectrum of people, hears from people who have been in the industry for a long time and understand what it is like being in the industry. That helps us to understand why we are where we are, what is happening internationally and what role Canada can play in that.

If I could just go through the slide pack, I will not belabour many of these points because Ms. Carpenter did a good job covering our industry.

The Chair: Tell us first about Bruce Power.

Mr. Hawthorne: Let me start by explaining. The more astute of you would have gathered that this is not a natural Canadian accent. As you pointed out, I started in the U.K. Interestingly enough, I started my career in British Energy. We were a government-owned entity. In 1992 the government, under Margaret Thatcher, was looking to privatize the whole set of the electricity marketplace, having successfully done gas and telecom and other things.

In 1992, she decided to privatize the electricity sector. Almost at the eleventh hour, she decided not to progress with the nuclear privatization. The reason for that was that when they started asking investors then, the nuclear piece was seen to be a liability that would have depressed the sale. Therefore, in 1992, they decided to privatize everything else but nuclear and gave the nuclear industry four years to become commercial, between 1992 and 1996, during which time it received a nuclear levy that everyone paid on their bill.

That was a challenge for the industry because, for the first time, it became a concern that the industry, although providing a significant amount of the U.K.'s energy, could not be commercial and could not operate in a commercial environment. If it did not get its act together in four years, then no nuclear subsidy would exist and the industry would decline. Between 1992 and 1996 British Energy was formed, and their job was to make the industry more commercial.

The reason I tell this story is because it does answer your question about TransCanada, but at the same time it talks about the move from public sector to private sector and what that does to policy and what it does to direction.

In 1996 British Energy was indeed successfully privatized. At that time, I came across to North America as the executive director for British Energy, and our intention was to acquire nuclear plants in North America that we believed would become available as a consequence of significant deregulation that was taking place in the United States initially.

I was based in Philadelphia, and there, as the president of the company, we acquired three power plants in very quick succession, the first one being Three Mile Island. People would ask if I was smoking something funny when I was in Philadelphia, but the reality is that there were two nuclear reactors on Three Mile Island. Who knew? One of the best performing pressurized water reactors in the world is on Three Mile Island. We successfully acquired that in 1997.

The point of the matter is, and to answer an earlier question, the Three Mile Island Unit 2 had a nuclear event. It was actually a commercial event. It destroyed the internals of the reactor. It caused no radiation. It caused no injury. It caused no damage to health, but boy, it sure scared the entire industry, and it spelled a significant cessation to any nuclear construction that was taking place in the U.S. at that time. Approximately 18 plants were in partial stages of completion. They were all halted at that time, and some of them today sit partially completed. It had a major chilling effect on a nuclear expansion program in North America and, frankly, an effect on the world.

Right after that event, a review of the event indicated that this very fault that occurred on Three Mile Island had occurred no more than seven miles away on a similar plant that was in the process of being commissioned. The fault was detected, corrected by the operators and there was no event. The same fault was not communicated to another operator, and they reacted to that simple fault in a different way and caused a reactor meltdown, which wrote off the reactor.

The industry responded to that. They formed a group called the Institute of Nuclear Power Operations, INPO. Every operating plant in the U.S. became part of that, and they agreed they would always share operational information. Sounds easy, but had they done so earlier then the Three Mile Island incident would never have occurred.

My point in telling that story is that when we came across to North America, the regulator's view of the industry in the U.S. was that a number of plants were likely to close early because they could not operate in a deregulated world. It sounds very similar to the U.K. situation.

The reality is that in a 10-year span from 1998 to 2008, not only did plants not close early, but 70 per cent of the U.S.'s nuclear plants have applied for a 20-year life extension. My message in that is that in 10 years the entire environment in North America has changed, particularly in the U.S. because of security of supply and incredible performance improvement in the nuclear fleet, and the concern about climate change.

Reality is that we picked up three nuclear power plants very cheaply, and very shortly thereafter it became a heavily competitive environment. We came to Ontario as British Energy with our partner and successfully acquired the Bruce facility. Our partner then was Cameco Corporation, which is where I recognize the senator from. British Energy and Cameco formed that relationship — 85 per cent owned by British Energy, 15 per cent Cameco.

In 2002, British Energy got into financial distress in the U.K. and sold their interests. At that time, we formed an all- Canadian partnership, which is what we have today. It consists of TransCanada PipeLines Limited, Cameco Corporation and Ontario Municipal Employees Retirement System. We are an all-Canadian company operating the western hemisphere's largest nuclear facility, 6,300 megawatts on the shores of Lake Huron.

The Chair: What are the ownership percentages?

Mr. Hawthorne: It is complicated, but 31.4 per cent for each of those three entities. Our trade unions and our employees also own 5.2 per cent because we wanted to create a partnership with our staff.

That gives an indication of what has happened and the change in fortune of our industry. If I give you that background, I can then explain some of the context. Ms. Carpenter did justice to that in her presentation, but someone asked about changing designs and changing arrangements and what is different about new plants from the previous ones.

The reality is the same as for your 40-year-old automobile; if you think about all the features and attributes we now have such as power-assisted steering and ABS braking, all of those things came from operating experience. The nuclear industry is no different. As we have built new designs, we have continued to add enhancements, improved safety characteristics, more robust designs, et cetera, as you might expect as the technology is developed. Therefore, the Generation III plants that have been offered today are actually modifications of the earlier series.

I have tried to show on the graph, if you look from 1950, how the designs looked in Canada and how they have evolved to where we are now with the advanced CANDU reactor, which is intended to be lower capital cost, shorter construction time, less complexity and higher capacity factor; all of those features you would expect to get. When someone markets a car today, they say that it has power-assisted brakes, better fuel consumption and all these things. This is no different. You can make this very complicated, or you can make it very simple.

As you would expect, there is a great deal of intellect in our industry, so they develop enhancements and improvements and we implement them when we bring a new build. That is what I would say is the difference between them.

If you think about it, Ms. Carpenter said that we have 440 reactors in the world. Most of them, on average, have operated 25 to 30 years. That is a huge amount of operating history and operating experience, and, not surprisingly, new designs put those lemmings into play.

The one thing I want to say, which I think I can say without fear of contradiction, is that I have been in the industry internationally, and Canada has always been at the forefront of this technology; shame on us if we lose that spot.

I can talk to you about the sale of AECL. I can be very specific on what needs to happen, to your question, but very much do not let the CANDU flag fall. Do not let this be about simply removing liability because that would be a great travesty to the people that pioneered this technology.

I honestly believe that the government, in this proposal to divest the AECL, has been very specific about what they expect a new acquirer to do, including completing the new designs and supporting the technology for the operational units.

If you imagine my position, we are spending billions of dollars to extend the life of the existing CANDUs by 30 years. I want to ensure the design authority is still there because the expertise that exists in AECL is critical to our ongoing operations. Not surprisingly, the government and the restructuring want to ensure that whoever acquires it continues to maintain the capability to support the existing fleet. That is a specific requirement. Whoever is successful will have to demonstrate a commitment to maintain the expertise to support the CANDU technology at home and abroad. That is a key part.

When I look through the need for nuclear or when I talk about the energy challenges facing Canada, this is how I explain Canada's challenge to the Mexicans and to anyone else. We, as Canadians, actually have a very large energy footprint compared to other sectors. That graph shows the per capita energy consumption in Canada.

Some of that is obvious to explain. We have a cold, long winter and a need for energy. We have warm summers in many places and a need for energy, and obviously we want to support our manufacturing base. However, compared to other sectors, we do not do a very good job of energy conservation in Canada. We just do not. We have to accept that; compared to others, it has never been something that is highly visible.

An example I would give you, which I am sure many of you would recognize, is if you travel internationally in Europe, in almost every hotel room you go into, the power goes on and off with your room key. How many of you have been in hotel rooms in Canada that do that? We do not have many. That sends a message about how we feel about energy.

With those types of examples, I believe we need to do more — all of us. We need to do a better job of conserving energy and treating that appropriately in schools and education programs so that the energy we do need is optimized. That is an example of a challenge.

The Chair: Are we the largest consumers per capita in the world?

Mr. Hawthorne: We are the second largest. We are right up there.

I want to talk about China. However, I will get to that later because that is an interesting story, too.

The Chair: Who was first again?

Mr. Hawthorne: The United States is the largest.

The Chair: On this graph, it does not show that; it shows the reverse.

Mr. Hawthorne: No, it does not show that. When you look at it, the U.S. have reduced there's quite significantly in comparison. The reason for this graph was because it was a North American presentation, so I was looking at Canada, the U.S. and Mexico. The United States was number one for a long time; we are just marginally ahead of them now.

The Chair: We are the largest? That is what we have been told.

Mr. Hawthorne: Yes, in terms of the situation right now, we are. We were second place until 2002, and we have been since then. It is an interesting challenge. That is not something you want to be first in. It is not a competition to be first, I do not think.

Ms. Carpenter has talked about the supply mix slide. The interesting one for me is the graph that talks about the sources of provincial supply. For me, it highlights a number of things — first, why it is very difficult to have a national energy policy. I was not here when people tried to have the national energy policy debate, but I will explain with this graph why it will be a challenge.

If you look at the situation in Quebec, which is 95 per cent hydro, you are blessed with hydro assets versus Alberta, which is 95 per cent thermal. I like to joke that you cannot plant a rose bush in Alberta without hitting coal, so it is no surprise they are using coal.

I will talk to you about polling in a moment because someone asked that question. We have done extensive polling because we are proponents for new build in Alberta and Saskatchewan; and obviously, we have done a great deal in Ontario. I can tell you one of the most striking pieces of data you can get is if you ask people in Quebec, first, whether they believe climate change is real, they will say, "Absolutely." Second, if you ask them do they believe it is affected by the activities of man, they will say, "Absolutely, and we should stop developing the oil sands."

However, if you go to Alberta, people will say one of three things: "What climate change?"; "It is a natural cycle of the Earth"; and, "It should not affect anything that we are doing."

How then to produce a national energy policy?

The thing that drives Alberta and Saskatchewan to do other things is a type of social responsibility element, but it is also a function of what they find themselves with right now. If you consider oil sands development, which someone asked, we have worked extensively in Alberta. People know we have a site at the Peace River area that we have been developing.

Ms. Carpenter is right that it is a competitive market in Alberta, but the reality is that the oil sands producers want to do something else. Nothing can come on line after 2011 without the ability to capture carbon. That is legislation.

When Ms. Carpenter talks about how do you recognize nuclear, currently Alberta and Saskatchewan both have a technology fund that polluters pay into. However, what they cannot do today because of the lack of recognition of nuclear is draw from that fund to develop a nuclear project. It is not considered to be the appropriate use of that technology fund.

That is the difference between recognizing it as being clean. You can draw from the fund to do solar projects; you can do clean coal; but you cannot draw from it to do nuclear. That is a mistake.

The Chair: Is that a law in Alberta? It is not a federal law.

Mr. Hawthorne: That is a provincial law, yes. When I worked in the United States, I used to say that you can put the "United" piece in inverted commas because I worked in all of the states and everyone had a different rule and deregulation was done differently in other places.

The Chair: If we were in Glasgow now, they would say that you are on thin ice because this is a man from Alberta who really believes very much in climate change.

Mr. Hawthorne: I do, too, but my point is that the Alberta government has very strict controls on climate change. They have very aggressive goals and targets of their own making. They took a very responsible view with nuclear because they had a debate with Albertans. I think that was the right thing to do. Saskatchewan did the same thing.

It is new technology. People need to be convinced, so we hold a public debate. The Government of Alberta said that they have no ideological opposition to nuclear, which I think is a good piece of public policy. However, they also say that they do not intend to subsidize it, which, again, I also think is not an unreasonable piece of public policy. I have not asked for a subsidy anywhere I have gone. I think it is important for people to understand that because we are a private-sector operator.

Someone talked earlier about AECL paying Bruce Power. AECL signed a commercial contract. If it was a bad contract, that is not my issue. That is part of the reason why AECL needs to be restructured. It is about capability to deliver projects; it is not about being subsidized. We signed a commercial contract with a company who could not then execute the contract, and that is a different position entirely.

If you go to the slide on support for nuclear programs, this will show the polling that we have done pretty extensively across Canada. On national support for nuclear, you can see the numbers are pretty high — 64 per cent, 67 per cent in favour of upgrading and refurbishment. Those are good numbers.

Sometimes people cannot take yes for an answer. In the political world, I am pretty sure any politician would go to the polls with those numbers. If we are waiting for unanimous consent, it is not coming.

Obviously, in Ontario, we have a great deal of misinformation. I always say that facts are our friend. It is a complicated industry, there is no question, and we do not help because largely we are all engineers, and we like to talk technically. That loses the public debate.

When you look at Ontario, Ontario is 50 per cent nuclear energy. Every second house, school, factory and hospital today is powered by nuclear power. If you do not want it, fill in the blank. It is hard to do that, and Ontario has given a strong commitment to nuclear power.

When you look at the Ontario support for nuclear power, which is the next slide, you can see, again, the percentage is in the high 60s. Interestingly, if you look at that slide, you can see when the dip took place in 2005. That was about cost overruns on projects. Interestingly, what affected the public sentiment was not safety or nuclear waste, but whether we, the rate payers, were on the hook for poorly run projects. That is a pocketbook issue, which is not unreasonable. It was not an ideological opposition to nuclear because when the project was finished and the units came back online, the support came back. It has been steadily in that high 60s band percentage wise. Therefore, we do have good support for nuclear.

As I said, we have been active in Alberta and Saskatchewan, as we have sought to explore those new opportunities. We thought those provinces were good targets because both Alberta and Saskatchewan are 95 per cent reliant on fossil today, and with the increasing possibility of tighter climate regulations being imposed and both provinces' own desire to do a better job on environmental things, the opportunity for nuclear to play a role was there. Both Alberta and Saskatchewan are doing very well with the energy demand increasing significantly, as forecast by they are own market operator. Alberta is very short of water, so hydro is not a possibility; it is either gas, clean coal or nuclear.

To the earlier point on costs, our view would be that everything that comes next is much more expensive than what we have today. People in Alberta are used to paying about $40 per megawatt, or 4 cents per kilowatt. That is what they pay today. The biggest challenge we have, regardless of the energy source, is telling people that they have to pay double for whatever comes next. That is a challenge.

To your earlier point, I have been involved in that clean coal project. It is $200 per megawatt compared to $40 per megawatt for the coal plants we have today. That is a big swallow for people. That is the effect of cleaning up coal. If nuclear was never in the equation, we would say that we will no longer burn coal plants unless we can sequester CO2, and that means instead of $40 per megawatt it is $200. That is the reality of the environmental cost. However, if we say that another option is to build a nuclear plant, and that will be $90 per megawatt, suddenly it looks better. It is better than clean coal but still twice what we are paying today. That is the big challenge.

However, the reality is that a new coal plant today would not come in at $40 either. There is a big educational thing about what happens next. It is a tough political story in all provinces because every one of these plans — coal, nuclear, whatever — were all built around the same time, so they are all the same vintage. They are all requiring to be replaced by something. Therefore, my position in Alberta has been that if we have to replace with something, why not consider nuclear as a competitor with coal with sequestration? That is what we are competing with; we cannot compete with the status quo. None of the new technologies can.

We built the first wind farm in Ontario. I get paid today $116 per megawatt from the Ontario Power Authority for the output from the wind farm. I get paid $57 per megawatt for the output from my nuclear plant. There is the economic equation: It is $57 for nuclear and $116 for wind; choose one.

The other factor, of course, is that the wind farm will generate when the wind blows. We have capacity factor of 26 per cent from our wind farm and a nuclear plant that has a capacity factor of 92 per cent. It is high reliability. That is not to beat up on other technologies but rather to recognize that each technology has attributes, and you have to find the right supply mix. The challenge for this committee is to determine what the right policy framework is to achieve that supply mix.

Let me talk a little about the future of AECL. As I said, we should take great pride in the technical acumen of AECL. There are some very bright engineers. In my experience, we have many engineers with capabilities here that I have not seen in my travels. We have very bright, young engineers and good capabilities, as evidenced by the fact that we designed an entire design of our own. We did not align with anyone else. The CANDU design has some very unique features. It has the ability to refuel on load, which no other reactor in the world can do. It has the ability to burn natural uranium fuel, which no other reactor in the world can do. It has the ability to take the spent fuel from other reactors and reuse it, so reducing the environmental liability of spent fuel for every other design. Its proliferation resistance is better than most.

You might ask why we cannot sell it to everyone else. We are a niche player. We have always been a niche player. In a period when no one was building nuclear plants, we were still building CANDU. We built in China and Romania. We have continued to build. The most recent build experience, apart from what has happened in the past three or four years, was actually in AECL.

We have not penetrated the market at a great rate because people had a natural affinity with their own technologies — pressurized water, light water reactors, was a dominant one. CANDU reactors are complicated, unless you know them. In my career, I have operated every type of reactor. As I say, each one of them has pros and cons. I still believe a significant market exists for CANDUs.

I will give you an example to answer this proliferation question asked earlier. I attended the Washington summit that President Obama held. Twenty-eight countries were represented there that do not have nuclear today but desperately need energy and want to pursue nuclear. The concern President Obama had, of course, is the proliferation risk that occurs when you actually start listing the countries that now want nuclear. As I say, it is not for me to make political statements, but I can list some of them for you: Nigeria, Vietnam, South Africa and almost all of the Middle Eastern countries all want nuclear power today. None of them have a framework or regulatory environment in place, but they are all desperately short of power.

We, in the Western world, have to recognize that, if they do not get it from nuclear, they will do other things that will be damaging to the environment. It is all about how we can enable those countries to have nuclear power without increasing the proliferation risk.

A strategy has been developed where the Western world will provide the fuel to them, they will use it and then we will take it back. It is not a bad policy, but it is quite a significant change. Each country must be prepared to do that. That is what the whole GNEP policy is about — the Global Nuclear Energy Partnership — of which I am sure some of you are aware. We cannot deny nuclear technology to these countries; they need to meet their energy needs.

Let me give you an example of China. From the statement on China, I could have inferred a concern about what China might do with nuclear power. At the Atlanta Centre, which I chair, we just welcomed the China Guangdong Nuclear Power Group, CGNPC, as a member of the WANO Atlanta Centre. They came and asked to join the North American Atlanta group so that we would govern their activities. They are very keen to be part of the nuclear community. The president of WANO just elected at our bi-annual general meeting in Mumbai is actually Chinese. He will be the next president of WANO, and the next bi-annual general meeting will be held in China. They are very much looking to develop as part of the nuclear community, very aggressively so. They are very much trying to be part of this.

The issue for AECL is that AECL has an incredible engineering technical skill set but it actually does not have a good field capability; they cannot build plants. I heard talk about them being an OEM; AECL has always been a designer. They have a design capability. Therefore, when they have gone out and tried to do refurbishment projects, they have not done them well. They have not had the ability project manage in the field. As a consequence, the contracts they signed are under water. I know because one is my own project, which is running late and over budget because we have taken on things that we did not have the capability to do.

The Chair: Is that why big problems exist with the projects at Point Lepreau and at Chalk River, the NRU reactor? What is happening?

Mr. Hawthorne: Yes, all of those because it is not a skill set they naturally have. I said that they kept building in Romania and China, but it was not AECL people doing the building; they were providing the engineering oversight and the design authority because it was their design being built.

An architect does not lay the bricks and put in the electrical because that is not his skill set. His skill set is to develop the design and to provide the design advice to a capable construction company. In my view, AECL overextended themselves in areas where their expertise was not there, and it has resulted in problems.

Part of the intent of restructuring is not just about liability, although I am sure that is a part of it. Part of it is to create an entity with a capability to meet the market need. It gives it a bit more depth. It rounds it out a bit so that it can take a share of the growing market. The market is large and the technology AECL offers is still attractive, but it must be a profitable venture. More skills need to be added to the AECL tool box to do that.

The Chair: Is it inappropriate to ask if Bruce Power is bidding?

Mr. Hawthorne: It is never inappropriate to ask; it would be inappropriate to answer.

The Chair: We have a Judge Oliphant here.

Mr. Hawthorne: Bruce Power is currently AECL's largest customer. We are spending close to $4 billion refurbishing two units. We intend to make a commitment to spend another $12 billion to refurbish the other six units. I care what happens to AECL; I am not an impartial bystander.

I would be interested in playing a role, although I do not know how that will look. I am committed to seeing the CANDU industry continue; all of us should be. When we talk about the conditions for that, we should ensure that that is one of the deliverables.

The Chair: I was not being facetious. You describe a new configuration for AECL. The government terminology is that we will restructure and partially privatize. There are various models as Ms. Carpenter suggested, including private- public partnerships. The SNC-Lavalins of the world bring one thing to the party in terms of construction, engineering and development with expertise in nuclear. You are saying that various components are needed to make a proper pie at the end of the day. Have I understood you correctly?

Mr. Hawthorne: Yes. Someone asked who AECL's competitors are. They do have competing technology. For example, AREVA has their own design, a big 1600-megawatt design that appeals in some markets, but not all. They won some orders, and they are building currently in Finland and France. They sold four reactors to the Chinese. They are already starting to receive orders.

The Chair: What about GE?

Mr. Hawthorne: General Electric's boiling water reactor is a unique design. It has not done much on the market, and they have not won any orders. I am not sure they will.

Westinghouse is very aggressive. They have a design called the AP1000 that is a pressurized water reactor. It is attractive in the market currently because the majority of the plants in the world are pressurized water reactors. People want technology with which they are familiar. Westinghouse sold a number of plants in China already. They have an order for four reactors. Westinghouse was the first to get licensed in design in the U.S. They expect to capture a big piece of that market. Toshiba bought Westinghouse from the U.K. government for a massive premium on the expectation that they could win a large market share.

My point about skill sets is that a part owner of Westinghouse is Shaw Group Inc. They have a Westinghouse design and a Shaw Group capability, an EPC contractor — engineering, procurement and contracting — that provides a complementary skill set. Similarly, AREVA tied to EDF, an operator, so there is a complementary skill set.

AECL currently has limited scope. We hope part of this restructuring would add the comparative depth of its competition. I do not believe that AECL can succeed if it is 100 per cent privatized unless the Government of Canada stands behind it. I refer to it as risk-free advocacy, if I can say that.

A company cannot go into other countries and compete without support from its government. That support is not about writing cheques, but active advocacy in favour of your technology. The Prime Minister does it for Bombardier and others. We need to do it for the nuclear industry.

I have travelled around the world. For example, Jordan is desperate to have two nuclear reactors. I can bet you that French President Sarkozy was there before AREVA arrived. He will have talked about the attributes of the French design and the political support in France. That matters. I am talking to a group that knows this better than I. With such a large purchase for a country without nuclear power, they want to know the host country's position on nuclear energy.

Although selling the company might be the right thing to do for AECL, it does not allow the Government of Canada to say that it now does not care what happens. That is a mistake. Canada should not abdicate that role especially when we had a leadership role for many years. To the extent I am interested in the AECL discussion, the Government of Canada must continue to advocate for the nuclear industry and the technology.

With your indulgence, I will talk about a couple of questions. Someone asked about South Korea.

Senator McCoy: I am sorry, but I must leave. I am sorry that I will not be able to ask you any questions.

The Chair: We will have Mr. Hawthorne back.

Mr. Hawthorne: With South Korea, four units were sold to the Wolsong nuclear power facility by AECL. This is one example of an opportunity missed. The Koreans wanted to procure two other units from AECL, but they asked for a design that AECL was not offering at the time. They defaulted to pressurized water reactors, PWRs. It was not their first choice; they wanted two CANDUs, but they did not get an offer that made sense, so they went elsewhere.

By going elsewhere, Canada created another competitor. We did that to ourselves. Once South Korea had the PWR technology, a condition of the deal was that they received the intellectual property rights, IPR, with it. South Korea then made its own variant, which is what China did with other people.

South Korea depends significantly on CANDU for their own four reactors, but they have their own design that they market and have sold successfully in the United Arab Emirates for a very aggressive loss-making bid. It was a loss leader to break into the vendor market to successfully get that.

Senator Lang: Do they offer the same technology as Canada?

Mr. Hawthorne: South Korea has CANDU reactors, the same as Canada.

Senator Lang: Are they selling them?

Mr. Hawthorne: No. They sell their own version of a pressurized water reactor.

A more proactive approach might have been to jointly develop the new CANDU reactor with South Korea and jointly market them. That is what I mean by thinking the same as a business. If I had been in that position, I would have said that this is an opportunity for two orders, and I will jointly market with people who can take me into parts of the world where I might not be able to go on my own.

We believe that a number of countries internationally would find the CANDU reactor very attractive. Largely, on an earlier question, some countries do not want enriched fuel. For example, Jordan has its own uranium. If a plant is to be built in Jordan, it will be in the Gulf of Aqaba next door to Israel. You can bet that no one is building an enriched fuel reactor there. The CANDU 6 would fit nicely. It uses natural uranium fuel. It also allows localization of the fuel cycle to make the fuel locally and supply other plants in the region.

There are opportunities for the CANDU reactor because it is a small unit that uses natural uranium. However, the company must be structured to pursue the opportunities.

The Chair: Are you on the last page?

Mr. Hawthorne: Yes. The issue about skill sets, et cetera, is simply common sense. If you have a long-term vision, then you can attract people. I said in my opening remarks that I have been in this industry almost 40 years. However, when I started, I could see 40 years ahead of me. The industry was new and offered a great deal of exciting new technology.

If we do not have a long-term vision for our industry, we will never attract the young, bright minds that came to the industry 35 or 40 years ago. One reason we have been successful in recruiting to our site is because people can see us investing for the next 30 years. I go to universities and tell people they can start and finish their careers on our site. That is what it is all about.

Ms. Carpenter talked about a 60-year build for a new plant. If we have clarity of purpose, then the remuneration, the challenge and skills in this industry are second to none, but we must have a long-term vision. We cannot be schizophrenic about the industry.

One reason the French have a strong program is that they can tell you what they will be doing in 2050. I cannot tell you what I will be doing two years from now. That is a tough position to be in to recruit young people and the needed skills. My expectation from committees such as this and others is that you will recognize the long-term commitment. We cannot change with every election cycle.

The industry cannot make that change. We must have a long-term policy and support that policy regardless of election cycles. I know that is a challenge, but if I had one wish, that is what it would be. This industry needs certainty. Some issues should not be kicked around in election cycles.

The Chair: The tour that the association invited us on included a visit to Bruce Power in Tiverton, Ontario. That is you. Is the invitation still open?

Mr. Hawthorne: Absolutely; you are very welcome. I have always found that facts are our friend. Once people see the facility and the people who work in it, it puts in context what you have seen on the slides. You are very welcome any time.

Senator Mitchell: I should mention that my father wore a kilt to work every day he could. He was in the Black Watch, so I appreciate where you come from.

I feel that a tremendous danger exists that I cannot underemphasize in climate change. I think there is a place for nuclear power and that we have to get serious about it.

On costs, I find compelling your remark that anything new will cost more. Being from Alberta, I would like to put it in context. You are doing some work there.

What is the exact cost comparison between a new nuclear plant tomorrow in Southern Alberta and a new coal-fired plant in more or less the same region?

Mr. Hawthorne: If I do a straightforward comparison, it is logical to compare the type of coal plant you could build in Alberta with the type of nuclear plant you could build there. It is already confirmed that in Alberta no coal plant can come on line after 2011 unless it has the ability to capture carbon. That is a government policy.

I work on the basis that the best economics right now involve carbon capture and sequestration, and the best numbers we have now come from a plant that is being developed in Weyburn, Saskatchewan, which range from $150 to $200 per megawatt. I can put a nuclear plant in Alberta for $100 to $110 per megawatt right now.

The challenge is that we are competitive with the future; we are not comparative with today. I have spoken at length with the premier and the energy minister of Alberta. The challenge is how to migrate from $40 to whatever that other number is.

The Chair: You said $110.

Mr. Hawthorne: We talked about building in Saskatchewan because there is more water there and importing the power into Alberta, which is an option. It has been a lively debate, and no one has been close-minded about it. The issue is straightforward, hard-nosed economics. I never respond to PowerPoint slides. I say, "What would you sign a contract for?" because that is where the rubber hits it road. I have told the oil sands producers that if they want to sign a contract, I will provide them a plant for that power price. That is a conversation that we are actively having with the producers in Alberta today.

Senator Mitchell: That is excellent.

You have made an impassioned plea on behalf of CANDU reactor technology, and it makes a great deal of sense. There is some suggestion that the new ARC-1000 reactor technology has certain problems and may not be accepted in Ontario. Can you comment on that?

Mr. Hawthorne: Yes. I will explain that in two points. First, I was part of the bid process in Ontario because I was on the steering committee. Every one of the bids was ugly. They were all significantly higher than anyone expected, but they were also all significantly higher than any bid anyone has seen anywhere in the world for a new nuclear plant to date. We had to ask what type of questions we had asked. I think we asked the bidders to price in many risks that they would not normally take, and they added a significant premium, so we ended up with very high bids from all the bidders.

On the ACR-1000, the only compliant bid we received came from AECL, but it was still far too high. The reality is that the design for the advanced CANDU reactor is not complete. There is a question mark as to how much it will cost to complete and, when it is completed, what the market will be for it. As we talked about earlier, an attractive feature of the current CANDU design is that it does not use enriched fuel. The ACR-1000 does. We have now perhaps lost one of our attributes in order to get into another market.

I personally do not think that is the right strategy. We do not have to compete head to head with people we cannot beat. My personal feeling is that we have to offer a product that they do not have.

Senator Mitchell: You mentioned that a long-term commitment, a long-term vision, some idea of direction is lacking. From whom are you asking for that, and if you were to hold a press conference tomorrow, what are the five elements that would define it?

Mr. Hawthorne: I have to plump for Ontario's position right now. They have produced an integrated power system plan that lays out the energy supply mix for the next 25 years, and in that they say that we will have 14,000 megawatts of nuclear power. They came out strongly in favour of nuclear.

The question mark, as I said before — and it is a very complicated — is what the national policy is because each province has the ability to make its own choice. Someone such as me must recognize that the federal government can do some of the things that Ms. Carpenter mentioned. If we believe that nuclear plays an important role, we do not have to fund it federally, but we should set up a policy framework that drives people to actively consider it, and putting a cost on carbon would do that right out of the gate.

If we want nuclear to be part of the mix, we do not have to say, "Build nuclear plants"; we just have to say, "If you want fossil-burning plants, here is the penalty." That is the simplest thing that federal policy can do, and that is what I advocate. Each province is smart enough to do its own thing.

Senator Brown: I will ask a question for Senator Neufeld. He wanted me to ask whether you have polling data from your power site in Northern Alberta.

Mr. Hawthorne: Yes, we do. To be fair, the Alberta polling generally is nowhere near as positive as the local polling. I can explain that. On "The Nature of Things" on CBC, David Suzuki did a show about two ladies from Peace River who came to our site. He had interviewed them about their concerns about nuclear power in their community, and when they came and spent time in our community, their views changed.

As I said before, facts are our friend. However, there is no doubt that in Alberta a body of anti-nuclear sentiment exists that has had an impact on the community. However, since we have been there, the polling has improved. The percentage polling that I showed you is actually the same for the Peace River area.

I do not fool myself about why that is the case. We provide high-quality jobs. The economic impact of our nuclear plant there is very significant to that community. Often the support we receive is self-serving. They want community development and high-quality jobs. They do not want their kids to have to move away to find quality work, and the polling typically reflects that view.

We produce an economic-impact study. We tell them that if we build a plant there, it will create 2,000 high-paying jobs; we show the economic benefit to the community. When people become aware of that, that matters. Alongside that we provide facts on the industry; the real performance, not the scary Chernobyl information that has gone out. The Government of Alberta ran its own independent expert panel that sort of laid all those myths on the industry.

However, the polling has been strong in the Peace River area. Frankly, I have been receiving some pressure from the community to hurry up and move forward. Of course, the reason we have not is because there was a major economic chill when oil prices dropped from $140. The reason we have not moved forward in Alberta is economics and not public support.

Senator Brown: You mentioned that the cost of nuclear is less than half the cost of wind power due to factors such as the unreliability of wind and that nuclear power is much more reliable.

I spent some years on the board of a coal-fired plant and know that you cannot just shut off the switch of a coal- fired plant. Thousands of tonnes of coal are burning and heating the turbines. You cannot just throw a switch and say that you are not putting anything out. What can you do with nuclear? Can you recycle the steam? What can you do if you need to shut it down?

Mr. Hawthorne: One of the things I have said before is that the elephant cannot dance. We are a baseload, 24/7, flat- load power generator. One of the real challenges Ontario has is that they choose to migrate from coal. How do they get a technology that is as flexible as coal? The coal plants are superb at ramping up and down quickly. Of course, we consume power in a peaky manner, and I make it as a flat product, so that does not work.

One of the challenges for Ontario is to find the right supply mix. Some will be gas plants; gas plants can flex to some degree, but they have to find some storage capacity. Quebec is perfect because not only do they have a large amount of hydro, but they have the ability to store it. The problem we have in Ontario is that we have hydro in the form of Niagara Falls, but we cannot store it. It is run of the river. That is the reason that I say that nuclear should not be more than 50 per cent for Ontario because we need something flexible, and so the challenge is how you build that mix.

Senator Brown: We have a gas-fired plant just outside of Calgary. It used to belong to California, but now it belongs to Calgary. It is a giant jet engine. It has its own gas-feed line, and it can shut down immediately. They turn it on and off. Depending on the price showing up on their computer boards, they will shut it off. What happens in that case that is different with nuclear?

Mr. Hawthorne: I need to explain two things. One is about the plant, and one is about the economics. Nuclear plants, although they are low marginal cost, are very high fixed cost. Only 10 per cent of our cost is the cost of the uranium. The other 90 per cent is salaries and a whole set of other things. The good news is that it makes our price very stable, but the bad news is that if the plant is not running, you still have 90 per cent of the cost, whereas, if you run a gas plant, about 70 per cent of the cost of power is the cost of the gas. I can afford to shut it down during periods when it is not economic. A nuclear plant has to run because of the plant design and because of the economic case.

Senator Massicotte: Thank you for being with us tonight. Let me discuss the cost side with you. I want to ensure I understand what you said. You basically said that the construction cost for a nuclear facility was $110 per megawatt, total market price, no guarantee from the government, no financing from the government, just straight up, build it, here is the return I need. Is that correct?

Mr. Hawthorne: Let me explain how nuclear plants work in that case. Right now, at our site, 0.92 of a dollar per megawatt goes to the storage of spent fuel, just short of a dollar. Let us call it a dollar and make it easy. A dollar per megawatt is the cost of storing spent fuel. That is pay as you go.

We also have payments for the decommissioning liability. We are actually funding the storage of spent fuel and the decommission of our facility when it falls through. That is part of the all-inclusive cost.

Senator Massicotte: How much is that?

Mr. Hawthorne: It is hard to give you a number on that because it depends on the life of the asset. In our case, we took over this facility when it was already partially through its life. As you extend the life, you push the liability out. If you think about it, if a plant is operating for 60 years, then you are provisioning for a liability that falls due 60 years from now. It is a very small number.

I know people think about all this liability, but anyone with any financial acumen will ask what a dollar put in a bank today looks like 60 years from now. You are provisioning for a long-term liability, so it is not a material issue.

Right now, on our site, we pay roughly $25 million per operating unit per year in payments to our landlord, and that includes decommissioning.

Senator Massicotte: Does that include the spent fuel?

Mr. Hawthorne: Spent fuel, as I say, is 0.92 of a dollar.

Senator Massicotte: Do you pay that to the Ontario government?

Mr. Hawthorne: Yes.

Senator Massicotte: They assume responsibility for storage and safety.

Mr. Hawthorne: They own the liability, and we fund it. That was part of the deal with the Ontario government.

Senator Massicotte: Does 92 cents represent a market cost today for that?

Mr. Hawthorne: That is the full cost of storing spent fuel for the entire period.

Senator Massicotte: Do they make a reasonable return for the risk they take?

Mr. Hawthorne: They do not get any return on that.

Senator Massicotte: They just assume the liability risk at no compensation.

Mr. Hawthorne: The Nuclear Waste Management Organization is managing that.

On the construction cost, here is the simple logic: Let us say that it is $5,000 per installed kilowatt to build. If you are looking at coal plants, you talk about installed cost per kilowatt. At $5,000 per installed kilowatt, for a 1,000-megawatt unit, that is a $5 billion capital expenditure, which you are spreading over 60 years. Then you put in your operating costs, which is when you arrive at dollars per megawatt. I am saying that, on the basis of that, sign me a deal for $110 per megawatt, and I will get my rate of return. I make some assumptions about how to finance it.

Senator Massicotte: Your construction costs, capital costs, are $110 per kilowatt. Is that what I hear?

Mr. Hawthorne: No, it is $5,000 per installed kilowatt. Building a plant would cost me $5 billion, and then I have my operating costs. Over the course of the 60 years, if you sign a contract, that is how much you pay me for every megawatt.

Senator Massicotte: However, the construction costs would be $5,000 per kilowatt. What was the figure of $110? That is the delivery cost. That is the usage cost, including returning your money and amortization of capital costs, including an interest cost with respect to the construction costs, I presume.

Mr. Hawthorne: That covers my rate of return as the investor, whatever my rate of return is. That assumes 40 per cent debt-equity. It assumes you can put 40 per cent debt into the thing when you are financing it because obviously you are pricing debt versus equity.

Senator Massicotte: What price do you pay on the debt side? Do you need a government guarantee?

Mr. Hawthorne: No. I am actually borrowing against the long-term power purchase agreement. That is what I am financing against.

Senator Massicotte: That is government-guaranteed, so it is pretty good financing, I presume.

Mr. Hawthorne: Ontario Power Authority recovers that cost from their marketplace. It is a triple-A rated credit, so I can borrow against that to finance projects.

Senator Massicotte: The Canadian Nuclear Association gave us a handout with the converted costs of different energy sources, and they have a 10 per cent discount rate, which is much higher than yours at 5 per cent discount rate, it is maybe 8 cents.

Mr. Hawthorne: That is what I said to you before. I am an operator. I will tell you how much it costs. I will not tell you any academic numbers for anything.

Senator Massicotte: Therefore, per kilowatt, yours would be 11 cents. Am I correct in saying that?

Mr. Hawthorne: People cannot buy a LUEC. How much is that per megawatt? I do not use this terminology. That is just a good way to do a comparison.

Senator Massicotte: In your experience, it would be 11 cents for a new plant?

Mr. Hawthorne: Yes.

Senator Massicotte: I want you to respond to my impression. When you talk about the CANDU reactor, and questions were asked about why are we not selling and why is it not working, you were very complimentary to CANDU, but you basically described it to be a niche market. The services offered historically are design services, not OEM, as you expressed. I would have said that the trend for the last 10 years at least, probably 20 years in the world, is build-to-suit. In other words, I will be a government, not an expert. You are the expert; build me a plant, and if possible, even finance it, which is what you are doing.

If that was my reaction, when you described the CANDU to us, I thought, boy, why did we not sell it before? Of course we should sell it. We are a niche player. We are a design firm. If you will not sell it, Mr. Designer, you better find a significant player who can do the rest because countries do not want to get involved in learning technology. They want a built-to-suit situation.

Mr. Hawthorne: Let me perhaps say it a different way. If I am a new entrant in nuclear power, I need a safety net. You are the design authority. You will make sure that the plant is built to design, and you will provide services to support me over the operational life. I will give the example of Jordan. Jordan will place an order with someone who will choose a design. They want someone to operate the plant for them because they have no operational experience. They want someone to build the plant for them because they have no construction experience. They want a turnkey product.

Senator Massicotte: Exactly.

Mr. Hawthorne: AECL can achieve that with contractual alliances. They can say to SNC-Lavelin, "You be the architect, engineer and you build." That is one example.

If you go to Turkey, as another example, they say that you must use a Turkish construction company. Finland is the same situation with AREVA. AREVA were told that they must use Finnish construction companies, whether they have the expertise or not. That was a requirement. Every country does it its own way.

Senator Massicotte: Is that not even more reason to sell it and get out of the business?

Mr. Hawthorne: I did not advocate keeping it. I do not think you heard me say to leave it where it is. I have not said that. In fact, it would be a massive mistake to leave AECL where it is because it cannot compete where it is.

Senator Massicotte: It is not providing a turnkey.

Mr. Hawthorne: It does not know what it is. Every time an election happens, it have to go to Treasury Board and ask for money. It has not got a sense of itself.

Senator Massicotte: Why not do it like Britain did and use the word "commercial"? I suspect Ms. Thatcher would say, "It is not commercial." We should not hold it because it is not commercial. It is actually requiring incentives and subsidies every year. Let us get on with it.

Would you agree with that also?

Mr. Hawthorne: Yes, and what Ms. Carpenter said is also true. I was part of that in the U.K. The government said, "Let it be commercial. If it makes a profit, it makes a profit. However, we, the government, care about what happens in nuclear power, so we will maintain an R & D budget; we will maintain our leadership position because we will keep our liabilities company. We will keep our experimental laboratories."

That is what the Canadian government is currently considering doing.

Senator Massicotte: In fact, you cited earlier what commitment they were making, which is somewhat equal to that; they will maintain that.

You seem to be quite happy with the sale process and the objectives defined by the Canadian government.

Mr. Hawthorne: Yes, because I am in the land of status quo is not an option. I am sorry, but I am in that land that says that AECL will never be able to compete where it sits today.

Senator Massicotte: It will never be a player.

Senator Lang: It is getting late. I appreciate you taking your time and being so patient.

I want to go back to get an understanding of the CANDU reactor. You referred to natural uranium versus enriched uranium, and that CANDU 1 has a niche market. If there is a niche market out there, what I do not understand is why no one is buying it.

Mr. Hawthorne: No one is buying anything on a grand scale right now. I would say that, based on my experience, there are six good prospects for CANDU design, for CANDU orders right now. I can name the countries: Argentina, Romania, Jordan, Turkey and Ukraine. They are all markets, all lively dialogue and all interested. They have not signed yet, but part of the reason they have not signed is because of the question of what type of company this will be. What will own it? With whom are they signing? Status quo is not an option. Stabilize the ownership and allow those contracts to proceed. There is definitely an interest.

Why those countries? They are small markets; they cannot stand those big units. We should acknowledge that the Canadian flag takes us into many places others are not welcome. They do not want to deal with the Americans or the French. They want to deal with the Canadians.

Senator Lang: Let us just follow up. This is a technical question, Mr. Chair.

With this niche market that we have with the natural uranium, are we the only ones prepared to offer that, or are we in competition with other companies?

Mr. Hawthorne: Right now, the only reactor design that uses natural uranium is the CANDU design. Let me explain that. Without getting too technical on you, this is helpful to know. Natural uranium mined in Saskatchewan, our uranium fuel here, has about 0.8 per cent of uranium-235. That is the percentage that is naturally in there. If you look at the pressurized water reactors, the other ones around the world, they have about 3 per cent, so they are enriched to provide more of that uranium-235 in it.

When the fuel leaves those plants, having been burnt up, it still has 1.5 per cent U-235 in it. I can take that fuel and load it right into a CANDU and complete the cycle. That is the attribute that the CANDU has that no one else has.

Therefore, if you are in Jordan, you do not have to build an enrichment facility; you do not have to start thinking about getting international approval for such a thing. You just need the help to build a manufacturing capability. There is much less angst, if I can say that in the political world, about doing that. That is what we are selling. We are selling nuclear to countries that do not have to create a proliferation risk. That is what I would be selling. If ever there was a role for Canada, that would be it.

Senator Lang: I think I would hire him as a salesperson, Mr. Chair. I will recommend that.

Following up on that, on the costs of the CANDU 1 versus the other, are the costs competitive?

Mr. Hawthorne: The reality is that the reason people have increased the size of the plants is just a simple economic question. The CANDU 6 is a 750-megawatt unit, so you have to spread the capital cost over fewer megawatts. You have to value that.

The reason people kept jacking the power level up is because the more megawatts you have to spend the cost over, the better the incremental cost looks.

You have to get comfortable. As I said, everything in technology is a trade-off. I want natural uranium, which means I receive a smaller unit; that means the cost might be a bit higher. It might be 10 per cent higher, but I get the advantage of the local fuel cycle and other things versus this one where I have enriched fuel, I am dependent on someone else to give me it and the price is cheaper.

Senator Peterson: Mr. Hawthorne, your presentation was exhaustive and thorough. There is some talk about modular nuclear reactors, 450 megawatts, and you can add to them. Is that going anywhere?

Mr. Hawthorne: You are right. There is a conversation. When you look in places such as Alberta, that is a good example. One thing that has been talked about is the ability to have small modular reactors that you would site around in areas where you do not need a big demand or, indeed, you need local sources. The oil sands is a great example of that.

Some designs are out there. None of them are market-ready today, but there is no doubt that an opportunity exists for those units. We ourselves are involved with one that has been developed by Babcock & Wilcox. It is a 125- megawatt reactor. It is intended to replace the old coal plants. Typically, the older coal plants are about 100 megawatts. You could replace that with a single unit.

Talking about regulation, our current Canadian Nuclear Safety Commission regulations treat any reactor of more than 20 megawatts as a power reactor. That would really burden those plants with a great deal of legislation. They are treated as class-1 facilities, which makes them uneconomic. However, at some point, if we did have a small modular reactor design that we wanted to propose for Canada, then we would need to change the regulations to deal with that. That is not necessarily problematic.

The Chair: It has been a most enlightening session. I cannot say how much we appreciate you taking the time to come, as well as the association people. We look forward to continuing the dialogue. This is only putting our toes in the water tonight.

Mr. Hawthorne: Senator, can I just say, first, thanks for your attention, but there is one point I wanted to close out with. Someone asked about the Nuclear Liability Act.

The Chair: It was Senator Banks.

Mr. Hawthorne: Seventy-five million dollars was never a real number. I never agreed with that. I came here and was surprised it was so low. We have supported the $650 million; it puts us in line with others. We are looking as an industry to self-insure around that. In the U.S., there is a nuclear energy insurance pool of which we can make use. We have talked about the possibility that they would allow Canadian operators in that pool. We are looking at different ways to do that.

My position on public reassurance is if the public has to be reassured that the industry is responsible, I personally have no problem at all with that number being raised significantly. We have always assumed it would be and it should be.

The Chair: The bill is in its third iteration now because Parliaments have dissolved or prorogued. The bill this time will come and we will study it, but it should not be delayed that long.

Again, thank you, sir.

(The committee adjourned.)

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