Canada/US Renew Commitment on Clean Energy: Good News for SMRs in Canada

On June 24, 2021, Canada and the US demonstrated their continued bilateral commitment to clean energy by entering into a revised memorandum of understanding (the “MOU”) between the Department of Natural Resources of Canada and the US Department of Energy.

The MOU is a key milestone for Canada and the US to meet their commitments under the Roadmap for a Renewed US-Canada Partnership (the “Roadmap”), which was signed by Prime Minister Justin Trudeau and President Joe Biden on February 23, 2021. One of the Roadmap’s central objectives is to renew and expand the partnership between the two countries to address the climate crisis. To this end, Canada and the US have agreed to take a coordinated approach on energy to accelerate progress towards achieving sustainable, resilient, and clean energy infrastructure. Additionally, both countries expressed their commitment to strengthening the implementation of the Paris Agreement, with the US affirming its goal of achieving a net-zero carbon pollution free power sector by 2035 and Canada reaffirming its goal of achieving 90% non-emitting electricity by 2030.

In furtherance of the Roadmap’s climate objectives, the MOU aims to reinvigorate and expand the countries’ cooperation on clean energy to aid the transition to net-zero emissions by 2050. The MOU identifies 15 areas for energy cooperation, including sustainable and equitable energy transitions, climate change policy, clean energy innovation, connectivity, value chains, and low-carbon transportation. One area that the MOU highlights as key for cooperation is nuclear energy. Under the MOU, Canada and the US will share knowledge and explore options for enhancing cooperation in areas of mutual interest relating to nuclear energy policies, technologies and fuel cycles.

The MOU’s Support for SMRs

McCarthy Tétrault has been following the development of, and support for, small modular reactors (“SMRs”) as an emerging class of nuclear reactors that can produce reliable, emission-free electricity to help Canada achieve its emissions goals.

Canada’s Minister of Natural Resources, Seamus O’Reagan, has stated that there is no path to net-zero without nuclear power and that SMRs will be an indispensable tool to meet Canada’s greenhouse gas emissions targets. The Federal government has also shown continued support over the past year for the advancement of SMR technology in both its Small Modular Reactor Action Plan (the “SMR Action Plan”), released in December 2020, and its green-focused 2021 Canadian Federal Budget (the “Budget”).

Building on the SMR Action Plan and the Budget, the MOU highlights Canada’s continued support for SMRs and presents an opportunity for Canada to strengthen its key partnership with the United States to become a world leader in SMR development. The MOU will also allow the two countries to further their collaboration on SMR regulation and policy by pursuing complementary regulatory standards to reduce unnecessary regulatory burdens on stakeholders.

The countries have previously collaborated on nuclear regulation and policy, including in the area of developing SMRs. In August 2019, the Canadian Nuclear Safety Commission (“CNSC”) and the United States Nuclear Regulatory Commission (“USNRC”) signed the Memorandum of Cooperation on Advanced Reactor and Small Modular Reactor Technologies (the “Memorandum of Cooperation”). Under the Memorandum of Cooperation, the CNSC and USNRC committed to share best practices and experiences reviewing SMR technology designs, including developing shared SMR technical review approaches to facilitate regulatory reviews that address the national regulations of each country. The MOU builds on the Memorandum of Cooperation by its express commitment to enhancing cooperation on nuclear energy policies further advancing Canada’s pursuit to become a global leader in SMR development.

Updates in the SMR Industry

Since our last update, there have been many advancements in the global development of SMRs.

(a) Canadian Updates

On April 14, 2021, Alberta officially became the fourth province to enter into the inter-provincial memorandum of understanding (the “Inter-ProvincialMOU”) on SMR development. The participating provinces have agreed to work co-operatively to advance the development and deployment of SMRs to address the needs of New Brunswick, Ontario, Saskatchewan and Alberta with regards to addressing climate change, regional energy demand, economic development, and research and innovation opportunities. The provinces will also work together to address key issues for SMR deployment (including technological readiness, regulatory frameworks, economics and financing, nuclear waste management and public and Indigenous engagement), to positively influence the federal government to provide a clear, unambiguous statement that nuclear energy is a clean technology that is required as part of the climate change solution, and to provide support for SMRs.

Also on April 14, 2021, the collaboration among the major electricity utilities in Ontario, New Brunswick and Saskatchewan, including Bruce Power, Ontario Power Generation (“OPG”), New Brunswick Power and SaskPower (the “SMR Forum”) released its report, Feasibility of SMR Development and Deployment in Canada (the “Feasibility Report”). The Feasibility Report provides the SMR Forum’s feasibility assessment of SMR development and deployment, and its business case for SMR implementation in Ontario, New Brunswick and Saskatchewan. The SMR Forum assessed that SMRs have the potential to be an economically competitive source of energy, depending on natural gas prices, carbon pricing, other low-carbon alternatives available in each jurisdiction, and the level of support provided by the federal and provincial governments, along with the nuclear industry.

On May 14, 2021, Oregon-based NuScale Power (“NuScale”) and Prodigy Clean Energy (“Prodigy”), a Canadian company that develops marine nuclear plants, announced that they had entered into a second memorandum of understanding. This second memorandum of understanding aims to support business development opportunities to utilize SMRs in marine power plant systems for coastal power generation. Prodigy and NuScale have been collaborating since 2018 to determine the feasibility of integrating NuScale Power Modules into Prodigy’s Marine Power Station to provide a safer, more affordable, mobile, and flexible clean energy solution to better meet the growing demand for affordable, carbon-free power worldwide.

On May 19, 2021, Global First Power, a joint venture between OPG and Seattle-based technology company Ultra Safe Nuclear Cooperation, announced that its Micro Modular Reactor Project (the “MMR Project”) had reached a licensing milestone by fulfilling the requirements under its Licence to Prepare Site. The MMR Project will now proceed to the formal phase of the CNSC’s licensing process, which will involve a detailed technical review. This announcement brings Global First Power closer to constructing and operating Canada’s first SMR, which will be developed at Chalk River Laboratories and is scheduled for first power in 2026.

(b) International Updates

On April 27, 2021, the US State Department committed an initial USD $5.3 million investment to a grant program to promote the development of SMRs as part of the 3 Seas Initiative, which brings together 12 EU Member States between the Baltic, Black and Adriatic seas. This investment is intended to help the US gain market share as competition heats up to dominate the energy supply chain in these countries.

On May 26, 2021, the UK SMR consortium revealed its latest design and power upgrade for its proposed SMR. This new design follows the UK’s Department of Business, Energy, and Industrial Strategy opening the generic design assessment to advanced reactor technologies. The UK SMR consortium hopes to have its SMR design be the first design assessed by the UK regulators later this year. The UK SMR consortium aims to complete its first SMR by the early 2030s and the SMR program is expected to create 40,000 regional jobs by 2050 and generate £52 billion of economic benefit and an additional £250 billion of exports (with memoranda of understanding already entered into with Estonia, Turkey, and the Czech Republic).

Also in May 2021, the International Energy Agency released its report Net Zero by 2050: A Roadmap for the Global Energy Sector (the “IEA Roadmap”), which sets out a cost-effective transition to a net-zero energy system. The IEA Roadmap proposes a complete energy overhaul by 2050, with the energy sector being made up of 90% renewables and the other 10% being made up of mostly nuclear energy. In order to meet this target, current nuclear capacity will have to double by 2050. While doubling nuclear capacity is a positive step, the IEA Roadmap states that despite an increase in new construction builds and an emphasis on SMRs over the next 15 years, nuclear energy’s share of total generation in advanced economies will fall from 18% in 2020 to 10% in 2050.

On July 7, 2021, Argentina’s National Atomic Energy Commission announced that it had entered into an agreement with Nucleoeléctrica Argentina to complete the construction of the prototype CAREM-25 SMR. The agreement represents an important milestone in the reactivation of Argentina’s nuclear sector, with construction of the CAREM-25 to be completed within three years.

On July 12, 2021, the China National Nuclear Corporation announced it had begun construction of the ACP100 SMR, a key project in China’s 12th Five-Year Plan. The ACP100 was the first SMR to pass a safety review by the International Atomic Energy Agency back in 2016, and final approval for construction was given by China’s National Development and Reform Commission in June 2021. Construction of the ACP100 is expected to take 58 months and once completed, is expected to be capable of producing enough electricity annually to meet the needs of 526,000 households.

McCarthy Tétrault will continue to follow developments in SMRs and the industry. Please contact Gaëtan ThomasStephen FurlanSeán O’NeillAudrey Bouffard-Nesbitt, Emma Holmes or any other member of the Power Group at McCarthy Tétrault should you have any questions or for assistance.

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