Canadian Power – Key Developments in 2019 – Trends to Watch for in 2020: SMRs – The Link to a Bright Future?

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The following is a chapter from our Power Group's fifth annual Canadian power industry retrospective Canadian Power Key Developments in 2019, Trends to Watch for in 2020. A PDF request form is available at the end of the article.

Small modular nuclear reactors or ‘SMRs’ have grabbed the nation’s attention with the announcement on December 1, 2019 by Ontario Premier Doug Ford, Saskatchewan Premier Scott Moe and New Brunswick Premier Blaine Higgs that Ontario, Saskatchewan and New Brunswick have entered into a memorandum of understanding (the “SMR MOU”). The SMR MOU documents these provinces’ commitment to collaborate on the development and deployment of SMRs in an effort to advance the needs of such provinces in connection with climate change, regional energy demand, economic development and research and innovation technologies. SMR technology, however, has been on the radar of many stakeholders working in the Canadian energy sector for some time. For example, the SMR MOU was preceded by the publication in November 2018 by Natural Resources Canada of ‘A Call to Action: A Canadian Roadmap for Small Modular Reactors’ (the “Roadmap”)[1].

Prepared by a steering committee constituted by provincial and territorial governments, power utilities, Natural Resources Canada and Atomic Energy of Canada Limited, the Roadmap articulates the following collective vision statement by participating stakeholders for implementing SMR technology in Canada: “Small Modular Reactors as a source of safe, clean affordable energy, opening opportunities for a resilient, low-carbon future and capturing benefits for Canada and Canadians.” With this Roadmap, Canada has declared its intention to be at the forefront of SMR technology and industry not only domestically, but internationally, and has set forth a guide for actions to be taken by Canadian stakeholders to achieve that goal.

The current buzz around SMR technology shouldn’t really come as a surprise. With the world focused on pursuing low-carbon and clean energy technologies to address the climate crisis and reduce greenhouse gas emissions, innovators looking for solutions have zeroed in on nuclear energy, which is effectively a zero-emission source of electricity. In particular, such innovators have focused on SMRs as a means of harnessing the benefits of nuclear power while mitigating some of the industry’s current perceived disadvantages. While gaining recent attention, SMRs – nuclear fusion reactors designed to be built on a smaller scale than traditional nuclear power facilities – are hardly novel and have been used in certain sectors, such as in university research reactors and the propulsion of marine vessels, for decades. The Interna­tional Atomic Energy Agency, the UN organization for nuclear cooperation, considers a nuclear reactor to be small if it has a capacity of less than 300 MW. To put that in perspective, current “Generation 3” nuclear reactors are designed to produce between 1,100 MW and 1,750 MW of electricity depending on the manufacturer and model.

" The re-scaling and repurposing of nuclear technology in the form of SMRs makes nuclear technology cheaper and more flexible in terms of locations, site transportation and use. "

Since SMRs are ‘modular’, these reactors can be used to expand already existing nuclear power plants or to work as single standalone reactors. New proposed designs for SMRs incorporate features such as, a passive safety system (i.e. an automatic shutdown mechanism for systems that are not actively managed), safety features to prevent harmful emissions, a design that enables a relatively simple manufacturing process and a long period of operation on a single load of fuel. In order to address a long-standing concern about nuclear power, some innovative designs can also use spent fuel from existing reactors as fuel.

The Roadmap envisions three major areas of application for SMRs in Canada: (i) on-grid power generation given the regulatory requirement to phase out coal electricity generation by 2030, (ii) on-grid and off-grid heat and power for heavy industry; and (iii) off-grid power, heating and water desalination in remote communities that currently rely on diesel fuel. To get there, the Roadmap sets forth four thematic pillars to guide the actions needed to be taken by stakeholders to ensure that Canada is at the forefront of SMR technology: (A) demonstration and deployment of SMR projects; (B) policy, legislation and regulation; (C) capacity, engagement and public con­fidence; and (D) international partnerships and markets.

While the Roadmap has generated widespread interest in SMRs, and has served as a call to action by stakeholders for the development and implementation of SMRs in Canada’s energy infrastructure, the Roadmap is not the only part of Canada’s SMR story. For example, in an effort to encourage SMR technology in Canada, the Canadian Nuclear Safety Commission (the “CNSC”) has established an optional pre-licensing vendor design review. Such review permits a vendor seeking to build and operate a new nuclear facility in Canada to submit its project design to the CNSC prior to the submission of the much more involved nuclear reactor license application. Pre-licensing requires the CNSC to verify, at a high level, the acceptability of a proposed design with respect to Canadian nuclear regulatory requirements, codes and standards. This review consists of three phases but does not certify a design or result in the issuance of a license to proceed with a project. If the results of the pre-licensing verification are positive, a proponent of a particular SMR technology could then decide to proceed to a full licensing application to certify its design. This process is separate from the much more stringent licence application and hearing process required to prepare, construct, and operate a nuclear facility in Canada.

While at least eight vendors have applied to the CNSC pre-licensing review program for an SMR design, only one vendor to date, Global First Power, who is supported by Ontario Power Generation and Ultra Safe Nuclear Corporation, has submitted an application for a “License to Prepare Site” for an SMR project. The proposed location of this demonstration project is on the property of Chalk River Laboratories, the birthplace of Canada’s nuclear sector, located in the pre-Upper Ottawa Valley, Ontario. Media sources have indicated that the facility proposed by Global First Power is not expected to be operational until 2026.

Two other vendors that have applied to the CNSC pre-licensing review program are Advanced Reactor Concepts LLC and ARC Nuclear Canada Inc. (collectively, “ARC”) and Moltex Energy. Both of these companies were invited to open offices in New Brunswick by New Brunswick Power and have agreed to collaborate with New Brunswick Power on the fostering of SMR research and development through a nuclear research cluster. New Brunswick Energy Solutions Corporation, a provincial Crown corporation, committed $10 million and each of ARC and Moltex committed $5 million to this project. Currently, New Brunswick Power operates Point Lepreau Nuclear Generating Station, the only operating nuclear reactor in Atlantic Canada.

Canada is not alone in its commitment to be a leader in SMR technology and shares that ambition with several other countries. The United States, China, Russia and Argentina, among others, are investing in research and construction of SMRs and challenging Canada’s ambitions of dominance. The World Nuclear Association identifies China as having “the most advanced small modular reactor project”. Russia has multiple small reactor designs with advanced development and with some under construction. Such reactors include the Akademik Lomonosov – the world’s most advanced floating nuclear power plant built on a non-self-propelling barge – which arrived in Russia’s remote north-eastern region earlier this year. Argentina is also in the process of building an SMR prototype, with completion scheduled for 2020. Other nations at the same stage as Canada – advanced design development with construction not yet started – include the United States and South Korea. India, Japan, the United Kingdom, and South Africa have also entered the SMR race but are at earlier stages of development.

Are Canadians ready to embrace SMR technology? While the benefits of SMRs are numerous, the technology is not without its downsides and detractors. Some of the biggest concerns are not environmental, but economic.

Current nuclear generation stations rely on economies of scale to compete with cheaper hydrocarbon alternatives and increasingly affordable renewable alternatives. SMRs sacrifice scale to reduce capital costs, meaning they would need multi-reactor facilities for scale in order to compete on a cost basis with existing alternatives. Beyond economics, SMRs share many of the same environmental concerns as conventional reactors, including the consumption of nuclear material and the production of nuclear waste, both of which will need to be transported and stored. This is a particularly difficult issue for some of the proposed uses of SMRs, such as deployment in remote communities or industrial applications which may require the transportation of spent fuel over greater distances. Some First Nations communities in Canada have pre-emptively stated that they will never permit nuclear waste to be stored on or transported through their lands, citing unacceptably high contamination risk. The proliferation of nuclear facilities also creates more opportunities for incidents due to natural disasters, human error, or terrorist attacks. These concerns are heightened by the arguments by many SMR developers that the nature of the technology does not require as stringent regulations for fail-safes and back up systems, or setbacks from urban populations, as do traditional nuclear facilities. Proponents argue that rethinking such regulations is necessary for SMRs to be feasible and that the risks are substantially lower than for conventional nuclear reactors; opponents point to the high cost of nuclear disasters and the increased risks created by proliferation. Beyond the technical and economic challenges faced by the SMR industry, the public relations battle may be the most important – and most difficult – one it faces.

The Roadmap has sent out a call for action to stakeholders on the development and deployment of SMR technology but does note that there is much work to be done before SMR technology can be applied in Canada in any meaningful way. The future of SMRs in Canada remains to be seen. What is certain, however, is that the stakeholders who charted the Roadmap believe that the opportunity for an SMR market is a real one and that the dialogue and efforts to carve out a place for SMR technology in the Canadian energy sector will continue.

Click here to request a PDF copy of the publication: McCarthy Tétrault’s fifth edition of Canadian Power

[1] https://smrroadmap.ca/

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