Nuclear Power and SMRs in Canada

On the ninth episode of Cowen’s Energy Transition Podcast, John Gorman, President & CEO of the Canadian Nuclear Association joins Marc Bianchi, Industrial Gas & Equipment and Energy Oilfield Services & Equipment Analyst. They discuss Canada’s outlook for nuclear power, including significant life extension programs for existing reactors and efforts to support the deployment of small modular reactor (SMR) designs.

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Transcript

Speaker 1:

Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Marc Bianchi:

Hey everyone. Marc Bianchi here from the Cowen Energy team with another installment of our Energy Transition podcast series where we’re currently focused on small, modular, and advanced nuclear reactors. Today we’re joined by John Gorman, who is president and CEO of the Canadian Nuclear Association, or CNA, as they’re often called. Canada’s a really interesting market to watch for nuclear because they’re super supportive of the technology, have an extensive refurbishment program for their existing fleet, and see nuclear being a major component of their energy transition. They also have some ambitious plans around SMRs that we’ll discuss, and Canada’s going to be a very important market to watch for these SMR deployments. What I found interesting about John is he has a background in renewables, which in some circles is viewed as being in competition with nuclear. I think this exemplifies the collaborative approach that Canada is taking in their energy transition, which you’ll hear throughout our discussion. So sit back and enjoy as we spend some time with John Gorman learning about the Canadian nuclear market.

John, thanks so much for joining us. Really appreciate having you here. Maybe to kick it off you could tell us a little bit about your background and what brought you to CNA.

John Gorman:

Thank you, Marc. Yeah, delighted to be here. Yeah, what an interesting story, when I reflect on it, in terms of how I ended up in nuclear, because, for those folks who know me outside of the nuclear world, it’s been almost two decades of work in renewables. So I come to the nuclear space after serving with utilities and being a developer of renewable project, being Canada’s designate to the International Energy Agency for renewables on the solar side, and as president and CEO of the Canadian Solar Industries Association for about seven years. And I spent the last two years of my mandate at the Solar Association working with my counterpart at the Wind Association to merge solar, wind, and battery storage into a new super association we have here called the Canadian Renewable Energy Association. So a long history in electricity and renewables, Marc. It was a conscious decision to get into electricity and clean electricity about 24 years ago now. I wanted to marry what I did in my day job with my own personal ambition to make a positive contribution to addressing climate change.

I don’t think that 24 years ago I understood how important clean electricity would be to the energy transition into the decarbonization of our economies, but understanding now, as I think most of us do, that clean electricity is absolutely central to this energy transition. I’m delighted to be in the space. And as to your question about why I made the switch over to nuclear, it’s because at a certain point, after having worked with a lot of great people here in Canada and internationally and having achieved quite a bit, especially in solar in terms of bringing down the cost of solar, of course we’ve seen some incredible adoption of solar, some growth of solar, it seemed to me that renewables was well set to play an important role going forward. And I looked at nuclear and saw that there needed to be a lot of work done there to bring nuclear to the forefront. We’re going to need absolutely every clean electricity technology at our disposal to fuel switch and to electrify our economies. Wind and solar are important parts of that, and so our hydrogen and other things.

But we’re going to need a lot of nuclear is the bottom line. There’s no pathway to a net zero future without a lot of new nuclear in the mix, and so I’m excited to be part of a growing contingent of policy makers and advocates and industry experts who are helping make the most of nuclear to help bring it to its new potential.

Marc Bianchi:

That’s fantastic and a really unique perspective that you bring, having worked on the renewable side as well. Maybe talk a little bit about the association and what the mandate is there and the mission. What does the membership look like? Just give us a little more flavor for it. I think of it as I’m familiar with the Nuclear Energy Institute in the US, and I think of this as the Canadian version, but maybe you’ve got some more color you’d share on that.

John Gorman:

It is a Canadian version of the NEI. Work very, very closely and collaboratively, our two organizations, and especially me and Maria Korsnick, the head of NEI, such a terrific leader and collaborative person. We’re working together to explore a continental nuclear collaboration between our industries and our governments and our regulators, and we’re making a lot of progress on that front. In the Canadian context, the Canadian Nuclear Association, it’s a national advocacy body that seeks to educate, perform research and policy, bring forward sound policy recommendations to policy makers at the provincial and federal levels of government to allow nuclear to really deliver to its full potential. We represent the full nuclear ecosystem here in Canada, and that’s saying something, because we’ve got the entire ecosystem here in Canada, right? We’ve got the uranium mining. We’re the second largest exporter of uranium in the world with some very deep expertise there, not just the large companies that you’ve heard of like Cameco and Orano, but some of the junior mining companies that are doing a lot of promising work right now, like Denison Mines and Next Energy.

It goes from fuel right to the operators of nuclear plants. About 15% of Canada’s electricity comes from nuclear. We’ve been doing this in Canada with the Candu technology for about 60 odd years now, 60 some years. The association has been in existence since 1960. We have a incredible supply chain that we represent. We work with nuclear laboratories, they’re our members as well. We do some incredible work with the management of our waste and spent fuel. We’ve got really innovative work being done by small modular reactors, Next Generation Nuclear, including a fusion company, General Fusion, that people know about. If you want to look even further out, we’re doing amazing work in medical isotopes, and so we represent the number of the companies that are doing that as well. So you can see we represent the full cycle, from cradle to grave, for nuclear as well as a lot of the innovation that’s going on, and then all of the services and supply chains that participate in that.

Marc Bianchi:

You were telling me a few months ago when we spoke that you were looking to build communication lines with the investment community. How would you define success there in the near to medium term, and really what’s the impetus for that effort?

John Gorman:

Well, success, in my view, Marc, with the financing community here in Canada would be… In the immediate term what it is a recognition that there are developing opportunities to invest in nuclear, firstly. I’m sure we’ll talk about the refurbishments of our nuclear plants that are going on right now, and there’s some investment that’s happening there, but there’s a lot of projects that are being developed and deployed and planned right now with the small modular reactors, and now looking at some new large reactor sites. But these are real projects on the small modular reactor side, we’ll be speaking about those. So short term, the financing community needs to realize that there are projects that are now beginning to be developed, and in fact you could say construction has started in terms of site preparation for a number of these projects. So there are actual projects. We need recognition there that has to be done, and that there is opportunity there. And then we need the financing community to get their head around the potential risks and rewards.

And importantly, if we’re talking about this medium term, Marc, I think we need to realize that the public and private investment communities are going to have to work together to get these first of a kind projects off the ground when it comes to small modular reactors. So right now it’s recognition that these projects are going to happen. It’s familiarizing the investment community with the technologies and the opportunities and the projects that are underway, and then it’s this joint discussion between industry public policy makers and the private funding so that we can look at de-risking these first of a kind projects to the extent that the private sector is willing to come into the game. That would be success.

Marc Bianchi:

Mm-hmm. Where do you think the biggest gap exists in educating or getting buy-in from the investment community?

John Gorman:

Large nuclear projects of late have had a terrible track record in the free world, in terms of cost and time overruns, which have left a bad taste in the mouth of the investment community. And then the small modular reactors, while very promising, are unproven and are going through a first of a kind build out, and as I said, Canada is a leader in that area. So on one hand, it seems to me that with large reactors you’ve got this proven technology in a questionable business case, and then, with small modular reactors, you’ve got a very promising business case and an unproven technology, right? And so for the financing community to be exploring small modular reactors and revisiting large reactors is quite challenging, and this needs to be done I think under the context of everyone understanding that there is going to be a lot of new nuclear being built, large and small, in Canada and in the United States and globally.

And with that certainty, and it is a certainty, there comes the conclusion that we have to be able to make this work for the private financing community to unleash those dollars, especially in the small modular reactor space where it’s more accessible and the projects are more bite sized and smaller. So there’s a need to solve this, and when there’s a need to solve it, I’m confident that we’re going to be able to bring together the public and private sides with the industry to be able to solve it. And I know that we’ll do it successfully, because we have to.

Marc Bianchi:

We were chatting earlier about a recent outlook from the Ontario system operator projecting, I think you said, 18 gigawatts of incremental nuclear. Can you talk about the timeline there? What was involved in that study, and given your background in renewables, how do renewables fit into that mix, and is there a threshold where we can only have so many renewables? What’s your thought on the range of contribution of renewables versus nuclear to the overall grid?

John Gorman:

Well, firstly, Marc, let me say I think what we’re seeing here in Canada, and it’s being reflected globally, the United States is a good example of this as well, is policy makers have come to the conclusion that we need to reach a net zero future, and that decarbonizing our electricity systems, growing them so that we can fuel switch other sectors that are dependent on fossil fuels, whether it’s transportation or building heating or industrial processes. I mean, policy makers are there. We see this coming out of the United Nations COP discussions and other places. We’ve set targets, as nations, to decarbonize and reach a net zero future. But what we haven’t seen until very recently is, on the electricity side anyway, a catching up of the actual systems planning that needs to be done to achieve that net zero future.

And what we’re seeing right now is the system operators actually catching up to the policy makers in terms of doing those projections of what is actually needed to be built to reach that net zero future, both in terms of decarbonizing our existing grids, but also building additional capacity that will be needed to fuel switch in different sectors. So Ontario, which you mentioned, is a great example of that. It’s Canada’s largest economic region, and it has just come out with its latest projections on how we’re going to decarbonize and reach a net zero future, and it is calling for an additional 18 gigawatts of nuclear to be built out in order to meet that demand. That’s in the context of a grid that today has a capacity of about 42 gigawatts, so Ontario has a installed capacity of about 42 gigawatts.

Our systems operator now projects that we’re going to need 88 gigawatts of electricity, all of it clean, by 2050, and 18 gigawatts of that new 46 gigawatt incremental clean electricity is going to be nuclear, and then some significant amounts of wind and hydro. And we’ll have to bring hydrogen in there as well, Marc. But just to finish on this in answering your question, the Ontario grid really does have a variety of clean technologies on it, and we need all of them in the right mix to be able to make a resilient grid that is going to provide as much clean electricity as we need. And in Ontario’s case, that’s nuclear working very closely with hydro, wind, solar, and all of them working together to help produce the hydrogen we’re going to need.

Marc Bianchi:

Was there any prescription in that outlook around what type of nuclear technology would be employed? So are we talking about small? Are we talking about advanced?

John Gorman:

Great question. Well, a lot of the industry and policy attention has been focused on small modular reactors in Canada, over the last three years in particular. And as I said, we’ll probably talk about some of the projects that are being developed and deployed right now with various technologies. Exciting stuff. But what this plan from the systems operator has telegraphed to policymakers in Canada is that we’re going to need large nuclear as well as small. In the Canadian context, large nuclear is back on the menu, and it’s going to only increase in relevance as we see other systems operators coming out with their new forecasts about how we’re going to meet the generation needs and the growing demand for clean electricity as we go forward. So you’re going to see now, in Ontario certainly, and increasingly in other provinces, planning beginning for large nuclear as well as small.

Marc Bianchi:

Okay, great. Would any of those larger ones potentially use can do?

John Gorman:

Well, that’s a great question. There’s a very long proud history of Candu here in our nation. The existing and the operating plants here in Canada are all Candu technology in various sizes. It’s a heavy water technology that does not use enriched uranium. And we’ve got five plants here and 22 reactors, as I said, all of them Candu. We also have a refurbishment project going on here in Ontario of about 10 of our units. It’s a very large infrastructure project, in Canadians terms, $26 billion, which is extending the lives of the Darlington and Bruce plants, in some cases, into the 2060s. You and I were speaking just before we started this recorded conversation, Marc, about the decision now to look at extending the life of Pickering, another plant here in Ontario. But my point is that these Candu plants, the refurbishments, which are now well underway, are proceeding on time and on budget, and we have a very robust supply chain that is supporting the refurbishment of these Candu reactors and a long history in Candu.

So it’s backing into answering your question, which is if Candu can be competitive with some of the other large technologies that are out there, we have a lot of experience with it and we have a supply chain that is really geared up for working on Candu, so it will certainly be a contender. That being said, we may be speaking later about Cameco acquisition.

Marc Bianchi:

It was Westinghouse.

John Gorman:

Of Westinghouse, right. Along with one of the Canadian financial funds here, Brookfield, Mark Carney. And that that’s the AP1000 and the eVinci Technologies about the AP1000. It’s a large one. We know that EDF and the Koreans have viable technologies there that are interested in the Canadian market. So it’s to be determined, and much of this will come down to both cost and also timing, right? What can be done quickly?

Marc Bianchi:

Let’s talk a little bit more about the refurbishments, because it’s interesting how much Canada is leaning into this. And I’m curious if there’s anything unique about Candu that lends itself to refurbishment, or is there anything just in the way these plants were constructed, or how Canada thinks about nuclear assets versus the rest of the world?

John Gorman:

So the success that we’re having with these refurbishments has a lot to do with our familiarity with Candu, and as I said, multiple decades of working with Candu and understanding it and modernizing it as we went along, making incremental improvements. So familiarity has been important, but Marc, I’d say the other thing that’s been really astounding is the collaboration that is going on between the utilities, Bruce Power, which is essentially a private company owned by OMERS and TC Energy, and then Ontario Power Generation, who owns the Darlington facilities and their Crown Corporation. But the collaboration, the sharing of best practices and even personnel that is going on in lockstep with refurbishing these units has been resulting in some incredible efficiencies. I mean, in many cases, allowing these utilities to beat their forecasts in terms of time and cost. And then we’re seeing that same bubbling up of sharing of best practices and efforts by the supply chain, and we got a very, very healthy supply chain here.

So there’s this understanding that the refurbishments represent the bedrock on which Canada’s nuclear innovation in small modular reactors and isotopes in other areas is succeeding, that we need to succeed with these refurbishments in order to keep the public trust so that we can allow nuclear to expand and deliver to its full potential. And you’re seeing an industry here in Canada that is collaborating to make that happen. And I mean, not very genuinely. I don’t know if this happens in many other industries, but obviously a lot of fierce competitors in the industry, but there’s also this coopetition that’s going on, understanding that we really need to succeed here. And we are succeeding, so that’s important.

Marc Bianchi:

Pickering is, I guess, the story is we’re extending it to 26, but there’s an evaluation going on about a refurbishment that could take it another 30 years into the future. What’s that evaluation process like? Is the decision all about cost? And I think that’s for the reactors five through eight at Pickering. Is there any hope for reactors one through four, which I think are on schedule to retire in 2024?

John Gorman:

Well, let me say first Ontario is in a bind. We spoke about this projection by the systems operator needing to go from 42 gigawatts today to 88 gigawatts in 2050 and making sure that all of its emissions free. How do you accomplish that while phasing out Pickering, which represents several gigawatts of clean electricity? It’s challenging to do. The business case for looking at refurbishing Pickering has changed very significantly. I mean, I think a decade ago the systems operator here in Ontario, and most systems operators in Canada, would’ve said, “We don’t need more electricity generation, and so we can look at retiring Pickering.” And things have changed very dramatically. And Marc, I’d also say what we need to build or what we need to maintain has changed as well, right? We don’t have the same options that we had before. Here in Ontario, sticking with Ontario, we phased out all of our coal fired electricity generation several years ago. It used to represent about 25% of our electricity generation, mostly through incremental nuclear power. 90% of that coal was replaced with nuclear and we phased it out.

But the point being that even if coal was really cheap to build, we’re not going to be building that out, because of the emissions associated with it. We need to be building carbon free electricity. And in addition to that, we need to make sure that the balance of clean electricity in their systems is well maintained. You can’t have too high a penetration of renewables or intermittent sources. You get an unstable grid. And similarly, we don’t want to build massive amounts of new gas because of the emissions. So in the Ontario context, what we’re looking at doing with Pickering is being put through a different lens. It’s how cost competitive is this based on what we need from an attributes point of view and within a timeframe that is meaningful to us? And it’s my understanding that when the province looks at Pickering and the economics around it in this new context, the nuclear refurbishment at Pickering will prove to be economic. So this will be the subject of Ontario Power Generation’s study around the economics of it.

But to me, I think the calculus today is different than it would’ve been 10 years ago as to whether it’s economic or not.

Marc Bianchi:

Great. Well, before we jump into talking about SMRs, I just want to ask you to comment a little more, if you could, on the radioisotopes and what that effort entails. I think Bruce Power is producing some of those, and one of the thoughts is there’s a lot of drugs that are under development, and if there is success, that could be a pinch point in supply for those drugs. So I’m curious if you have any thoughts on that and what the outlook is over the next several years here.

John Gorman:

There is a growing demand for medical isotopes, as you point out, Marc, and I’d say that there is already a pinch globally with the provision of medical isotopes just given current demands. Canada is a world leader in the production of isotopes. It has been for a number of decades. For example, we produce 70% of the world’s Cobalt-60, which is used to sterilize all sorts of one-time medical equipment. But more than that, we have a history of nuclear laboratories and academia institutions that have been producing a variety of isotopes, life critical supplies of isotopes in all sorts of different areas for different applications. What’s exciting, and I think what you’re referring to, is Bruce Power and now Ontario Power Generation and some of our larger supply chain companies like BWXT Canada that acquired Nordion beginning to produce new types of isotopes from operating reactors.

So in addition to this work that’s been going on through the decades in laboratory settings with very small laboratory reactors to create isotopes, we’re now beginning to harvest new types of isotopes from operating Candu reactors, and this has been a very exciting development for lots of different reasons, and market demand for these things is going to be only growing in the future. So very promising area for the Canadian industry here, and I think good news for folks who need this type of medicine and treatment.

Marc Bianchi:

Is it something that’s unique to Candu where this can be a byproduct of the power generation, or is that just typical of any reactor that could produce isotopes? It can produce power and isotopes. Or is there something unique to Candu that lends itself to this?

John Gorman:

My understanding is that Candu lends itself to it. I’m not a technical expert in this area, so I don’t know exactly the rationale for that, Marc, but we certainly see that the Candu reactors are more accessible for this type of isotope production, which is why we’re seeing the innovation here.

Marc Bianchi:

Switching over to talking about the SMRs and the opportunity. So Canada has been supportive of SMR development. There’s a small modular reactor action plan that I’m aware of. Perhaps you’ve got some other initiatives that you’d like to mention. But maybe just talk about the background here and the philosophy, and what the level of support is for SMRs in Canada.

John Gorman:

I think Canada did something important when it launched the SMR Roadmap initiative. This was about seven years ago. Our federal government, through Natural Resources Canada, which serves as our Department of Energy, reached out to industry and said, “Look, let’s work together with all of the stakeholders across Canada and see if there is a roadmap here, an opportunity, a pathway to develop and deploy small modular reactors.” That gave a sense of purpose to the industry and to several provinces in terms of working together to look at the application of small modular reactors to help meet our energy transition needs. So it provided structure and it organized our industry and policy makers around a way forward for small modular reactors. We don’t want to spend too much time on this here, but the small modular reactor, the SMR Roadmap, has been now emulated by other countries because of the way that it has coordinated federal and provincial levels of government with our regulator, with our industry, and with our supply chain, and with our eventual customers and indigenous peoples around small modular reactors.

It’s created a common vision, which over the last three years we’ve been able to execute on. And Canada has the advantage of being a relatively small nation, and much of the activity here on the electricity side, on the nuclear side, is driven by the Crown Utilities in the provinces. So we’ve been able to push this collaboration and this coordination to pretty extreme levels, and it’s resulted in us being, I would say, the world leader now, in the free world anyway, in terms of the development and deployment of small modular reactors. And indeed what we’ve seen is four of our 10 provinces now have plans for the deployment of small modular reactors in different sectors, different sizes, different technologies. They’re being very supported by the federal government in pursuing this. We have a very respected regulator who is able to assess these new technologies and work with the technology providers to purpose fit these technologies into the regulatory system, and the federal government has now been funding the regulator to fast track that work.

And what we’ve seen as a result are announcements like the one from Ontario Power Generation that they will connect to the first 300 megawatts small modular reactor, a General Electric Hitachi unit, to the grid in 2028, and then we see at least three or four more units being done in conjunction with that in Ontario. Saskatchewan has announced that it will be rolling out three or four of this same unit. And similarly, we’ve got other technologies, including fourth gen technologies, that are now going through the first of a kind build out. So a lot of exciting stuff happening here in Canada on the SMR front.

Marc Bianchi:

That 2028 reactor, this is the one where there’s a billion dollars of government support. This is the Darlington reactor. Can you talk a little bit about that? That seems like this is a government loan. Are there other funds available? I think about in the US, I guess I keep comparing everything to what I know in the US, but we’ve got the Loan Program Office, and that’s got hundreds of billions of dollars of authorization to fund these things. What does the capacity look like and the appetite look like for public funding, and then what does the private side end up being in terms of a contribution?

John Gorman:

Our private side, if I can include public utilities in that, they’ve been forging ahead for the last several years making investments in a vacuum of public policy and support. So we had that SMR Roadmap in place. The industry drove, I think, ahead of government, provincial and federal, to start making investments and plans so that we wouldn’t lose time. And now what we see is the provinces and the federal government have caught up. The significance of that billion dollars from the Canada Infrastructure Bank in low interest loans to Ontario Power Generation for the GE Hitachi first of a kind, yeah, a billion dollars in low interest loans, that’s great. But the significance of it really, Marc, is it’s the government’s tangible indication that they are fully behind nuclear. And this is just part of the story. We had our fall economic statement, which is the mini budget that came out in November, that has announced an investment tax credit for small modular reactors. And now we are in the process of extending that 30% investment tax credit to large nuclear and to Crown Corporations as well as private corporations.

So we’re seeing that work through into our budget, which is happening this spring in 2023. We’ve seen millions of dollars invested in small modular reactor technology through the federal government strategic innovation fund. I mean, Moltex, based in New Brunswick there, the molten salt reactor received $50 million just recently. I think we saw 20 million go to Terrestrial, almost 30 million going to Westinghouse’s eVinci, we expect more announcements out of them. So there’s been a very significant gelling of federal support, both financial and policy-wise, behind nuclear over the last 18 months or so, and it’s translating into the financial announcements that you saw. If I could just say, Marc, I think it’s worth your listeners watching what happens here with the investment tax credit in Canada.

As I said, 30% investment tax credit, which is going to be partially Canada’s response to the Inflation Reduction Act in the United States, right? I mean, good on the Americans for having set a very ambitious goal and ambitious program with the $369 billion worth of incentives that’s going out to clean energy, and you’re seeing nations like Canada, which are beginning to level up to that standard. And so we’re doing it in our own Canadian made way, but it appears that Canada is going to be able to match that incentive framework and treatment with its own combination of things, including this investment tax credit.

Marc Bianchi:

I want to go back to the Darlington SMR. I guess the question that I had was you rattled off several other plans that are out there. I think OPG wants to do another three. You mentioned other provinces, Saskatchewan comes to mind. When could we see another announcement like a Darlington come forward? That seems to be a firm project that’s really on track. Is there a second or a third project that you would point out that’s maybe moving forward very quickly and we could see an announcement in the next 12 to 18 months?

John Gorman:

Yeah, I don’t think it’s a secret that Ontario Power Generation is going to be building out more than one unit at Darlington of the GE Hitachi, right? So a lot of focus being given to this 300 megawatt unit being attached in 2028, but the other ones will be attached in rapid succession. Saskatchewan has announced that they are deploying three to four of the same unit, and they’re working with Ontario Power Generation to achieve that. And they’re going through site selection right now. So they’ve selected the technology, they’re going through site selection. They’re looking at the early 2030s for their first unit to be hooked up. So I think what’s important here is that just in those two provinces alone we’re looking at a fleet approach for these GE Hitachi units, right? So we’re looking at a minimum of six, probably eight over the next decade or so, or just more than a decade. Which means that you’re going from first of a kind to a scale, a fleet that are going to enable the cost efficiencies that you can get out of these small modular reactors.

So a lot of attention and focus being given to ensuring that we get these first ones right and that we have a fleet here in Canada. That being said, as a first mover with GE Hitachi, Canada has been able to extend the agreements it has through Ontario Power Generation and GE Hitachi into other countries as well. I think Poland has announced that they’re going to build 10 of these units in cooperation with Ontario Power Generation and Hitachi. We see Tennessee Valley Authority, Jeff Lyash, the CEO over there, has now announced that they’re going to be building out the GE Hitachi models as well. I think it’s worth noting for your audience that Jeff Lyash used to be the CEO of Ontario Power Generation, right? So Ken Hartwick here in Ontario and Jeff Lyash are working very closely together around deploying this technology. That’s exciting. And then we have a number of their other announcements as well, some partnerships that have been made between the utilities and other technologies.

And in New Brunswick, which I don’t want to skip over, Marc, because New Brunswick, Candu reactors operating there, about a third of their electricity, but they’re developing two gen four technologies. Moltex, which I mentioned, molten salt technology, and Arc Energy, which are both fourth generation technologies with different attributes that are really needed in the Canadian context. And so a lot of partnerships and customer development activities that are going on with those technologies. X-energy has signed a partnership agreement with Ontario Power Generation. I know that Terrestrial, the Canadian SMR company, has signed an agreement in Alberta. So yeah, lots of things happening. Two of our laboratories are building out first of a kind micro reactors, one from Ontario Power Generation called Global First Power, and then in Alberta through the Advanced Research Council, they’re building out a Westinghouse eVinci. So a lot of activity going on here.

Marc Bianchi:

Yeah, there certainly is. I asked this question to Maria and other stakeholders. With all these SMR designs and advanced reactor designs out there, it seems like there we could be at a place where 10 years from now we’ve got, I don’t know, 10, 15, 20 different designs running around, but that’s not usually how things end up, right? It usually focuses down to maybe one or two or three core designs. And it seems like GE Hitachi really has a first mover position right now, but there’s a bunch of other irons in the fire. I’m just curious how you see this playing out. There’s some thought that maybe certain reactors have a better purpose for industrial activities and others are better for power gen. So just curious how you see all of this playing out.

John Gorman:

I’m sure that an element of this is going to be that there will be winners and losers, and the competitive process will play this out for us. But to your point, Marc, that the interesting thing about small modular reactors is that it’s not just a competition to find that one small modular reactor that’s going to be the silver bullet. As it turns out, there’s so many applications for the small modular reactors that we’re going to see in a number of dominant technologies in different spaces. GE Hitachi is early out of the gates with a relatively large small modular reactor, right? A 300 megawatt reactor is pushing the limits of what small is. It’s a third generation technology. It’s a fairly proven technology. It’s a light water reactor, and it’s great at producing electricity in a smaller chunk. But it’s a lower temperature reactor, right? Some of the exciting applications for small modular reactors have to do with the very high temperature heat that some of these fourth generation reactors produce.

And you can take that scalable high temperature heat and be using it in heavy industry, steel cement, extraction of oil and gas, or you can be using it to produce smaller amounts of electricity or hydrogen, or be doing all of those things at the same time, right? Scale it to an operation like a mining site that requires hydrogen for its heavy transport and electricity for its operations, and high temperature heat for its industrial processes. I mean, they’re like a Swiss army knife. So these different technologies represent different size and limits. So we’re going to see dominant technologies emerge in these different size tranches, and then we’re going to see dominant technologies emerge in the different attributes, specifically high temperature heat versus simply electricity production. So yes, the field will thin out, but there will be multiple technologies that are needed for different applications.

Marc Bianchi:

One thing that occurs to me as we’re talking about fourth, a lot of those reactors will be using HALEU fuel as the starting point for their fuel, which in the US, well really outside of, I guess, Russia, there really isn’t any meaningful production of HALEU. And particularly for Canada, used to using Candu, where you’re basically putting the unenriched uranium into the reactor, so you don’t really have a need for enrichment now, but you could be needing significant enrichment that isn’t available anywhere someday if you’re looking for the fourth gen. So how is Canada helping manage that fuel supply roadmap?

John Gorman:

It’s a consuming issue for the free world, right? I forget the stats now of how much of the uranium came from Russia, including enriched and advanced fuels from Russia, and the need now to become independent of that fuel supply to get the enriched uranium that we need, and then, to your point, get into these advanced fuels like HALEU. So a lot of activity going on now and a lot of bilateral discussions between governments in terms of how to do this. Canada and the United States have been spending a lot of time looking at this issue and considering different manners of collaboration, right? As I mentioned, Canada is the world’s second largest exporter of natural uranium. We’ve got some great processing facilities here, but we don’t do any enrichment here. The US uranium, not as available, but already enriched capacities to do enrichment, and so it makes a lot of sense to look at a continental fuel cycle. I think that for other reasons, including fuel security and things like that, we may broaden out this Canada-US continental approach to include other allies as well, whether it’s France and the UK, nuclear nations.

But yeah, we do have to solve the fuel cycle issue, and while I’m not part of the bilateral discussions, what I can say is that they’re becoming quite advanced now in terms of how government to government is going to support this ecosystem. And I think the missing part of the puzzle now is how we’re going to keep the private industry whole in terms of producing those new types of fuels. We’ve got smaller contracts that have been issued by the US government and other governments to produce smaller amounts of it, and it’s leading up to a more commercial production of HALEU and other types of fuels.

Marc Bianchi:

I wanted to go back and talk about costs because you had mentioned the first of a kind going to nth of a kind on the SMRs. I’m curious if you have a sense of what OPG and others are thinking that that cost structure would look like for the first of a kind, and ultimately the nth of a kind, and how many we need to build before we can really get to that nth cost.

John Gorman:

So I think the nth cost is going to depend on which technology we’re speaking about. In the case of GE Hitachi, as you mentioned, Marc, it’s a gen three technology. It’s a larger small modular reactor, more proven technology that does a certain function. Because of its size and it’s pedigree, a relatively small number of units, if you asked Ontario Power Generation, are going to lead to the cost effectiveness that we’re looking for from nth of a kind. So it could be that five, six, seven of these units actually bring you down to the cost competitiveness that you’re looking for, and that’s what I think the business case is showing. So even within the Canadian market itself, there’s a high degree of confidence that this fleet approach with a small number of units is going to give us that cost effectiveness we’re looking for. I think nth of a kind for other technologies is going to be different. How many of the micro reactors do you have to produce in a manufacturing facility and put on the back of a shipping truck to reach an nth of a kind?

So I think the industry and the community just has to look at it on a case by case basis.

Marc Bianchi:

And when you look at the plans that are in place now, so I’m thinking more of the GE Hitachi type reactors or the 300 megawatt power reactor applications, what are the biggest risk factors in your mind to getting those constructed on time and on budget? I mean, certainly that’s the point of a small modular reactor is that it has more certainty on time and on budget, but I think investors have a lot of questions about that. So I’m just curious how you’re thinking about it.

John Gorman:

I’m not exactly sure how to answer that other than to say, in the Canadian context, we’re addressing the first of a kind risk by selecting a technology that elements of which have been proven and already licensed and approved from a timing perspective, because that’s obviously certainty around timing of these projects and getting approvals that you’re looking for is a big risk that we’re trying to manage, to your question, Marc. So the technology selection of GE really plays into timing certainty. And then the other big risk factor, which has a lot to do with the operator itself and the client who’s building this out, with Ontario Power Generation, you’re working with a utility that has over 60 years of experience in the nuclear sector and is already demonstrated a very high degree of success and sophistication around nuclear projects that it is building, operating, and now refurbishing. So I think we have use the right client, we’ve got a technology that has minimized the timing risk, and we have a lot of attention being given to ensure that the first one is completed on time and on budget.

So I think, importantly, you have the attention that’s needed to make sure these succeed. So those are some of the ways that we’re trying to mitigate risk here.

Marc Bianchi:

We talked about the prospects that are out there, the several four at OPG, SaskPower, we’ve got the X-energy and OPG. So maybe we could count up almost 10 of these or maybe a high single digit number that are really firm on the planning board. Where do you think this goes by 2040? How many SMRs do you think are operating in Canada? What’s the expectation from your group?

John Gorman:

I think the potential market demand is enormous for the small modular reactors, in the Canadian context. So I’m not trying to avoid the question or hedge too much. I’m not going to give a projection, but what I will say is this. The amount of incremental nuclear or clean electricity that has to be built in Canada is, like other nations, pretty extraordinary. We’re going to have to probably double the amount of electricity generation we have by 2040, which is the date that you threw out. We’ll probably have to almost double the amount of electricity generation we have by then, because by 2050 we’ll probably have to have tripled it. And in the Canadian context, because, as I said, we’re a small nation over a vast territory, it means that many of our provinces can only accommodate smaller electricity generation sources. So many of our provinces will not be contemplating large reactors. They’ll be sticking with smaller reactors.

And it’s just a fact that the wind, solar, and water resources that are available province by province are going to vary, and that there are some provinces that are going to depend on nuclear and small modular reactors because they don’t have the resources to be able to harvest or harness enough of the other sources. So as long as we get these first ones right, in this Canadian grid context, there’s a lot of need for incremental nuclear, and these small modular reactors will play that role. But what I’d like to say, Marc, is even perhaps more distinctly Canadian is this fact that our economy is so heavily dependent on heavy industry and natural resource sectors. They need to be decarbonized. I mean, the challenge is a little bit different from what you face in the United States, right? I think you’ve got a grid that is 60% fossil fuel driven right now. Is that fair to say? Maybe 60% fossil, 40% non-emitting. In Canada, we’re already at 83% non-emitting on our electricity grid.

So we don’t have this issue of needing to clean up the majority of our electricity grid before we start building new electricity. We have a little ways to go to decarbonize our existing grid, and then we have to worry about doubling or tripling its capacity. But the bigger challenge for us from our emissions profile, that’s my point, our emissions profile right now, it’s not coming from the electricity sector, it’s coming from heavy industry: oil and gas extraction, mining, creation of steel, creation of cement, potash, et cetera. And it’s in these contexts that Canada needs to deploy these high temperature heat small modular reactors to decarbonize our heavy industries and our natural resource sectors, while at the same time producing the hydrogen that’s required to complement that effort. So you’re going to see the market demand for small modular reactors in our heavy industry and natural resource sectors is a huge priority for Canada from a policy and targets point of view for decarbonization.

And I can tell you that the discussions that are happening now between the technology vendors and the operators on the nuclear side and these industries, oil and gas, mining, steel, cement, a very advanced discussions happening right now for the deployment of these things. So I’m very bullish on 2040 and the penetration. A lot is going to depend on making sure that these first of a kind technology deployments go well.

Marc Bianchi:

That’s great. John, you’ve been very gracious with your time. To wrap it up, I guess, ask everybody to talk about what investors should be expecting from in terms of headlines or announcements over the next 12 months or so. So is there anything that investors should be looking out for in terms of a catalyst or announcement that verifies that Canada’s on track with all the plans and deployments that we’ve been talking about?

John Gorman:

Yeah, I think generally speaking your listeners should be watching the Canadian federal policy decisions that come out of the budget and also moving forward. As I said, there’s a intense effort underway to ensure that Canada levels up to achieve what the Americans have done with the Inflation Reduction Act. And that’s not just with nuclear. It’s with all clean energy technology. So look carefully at the incentives that we’re rolling out to compliment what we already have in place when it comes to support for making it attractive to invest here in Canada, ensuring that it continues to be attractive to invest in clean energy and nuclear, specifically. Look for that investment tax credit treatment, look at what the government does in terms of leveling up its support for nuclear compared to renewables, because there are certain green bond treatments and manufacturing tax credits and things that have been extended to renewables, which need to be extended to the nuclear sector. Look for announcements from new sectors. So we’ve seen the partnership agreements come out of the utilities with the technology vendors now.

We see some great support between the utilities, the governments, and these technology vendors, whether it’s in New Brunswick with Moltex, Arc, or moving in through Ontario and Saskatchewan and Alberta with X-energy and GE Hitachi and eVinci and et cetera. But now start looking for announcements that come out of sectors, whether it’s oil and gas or steel, mining, et cetera, about customers that start appearing. I think that will be sure indication that we’re beginning to move ahead. And then lastly, keep an eye on what the systems operators are beginning to project in terms of new generation and generation mixes. We’ve seen Ontario’s latest one, which is calling for a doubling of generation, as we discussed, and 18 new gigawatts of electricity. I think we’re going to see similar types of projections coming out of the other provinces, and that will be a good indicator of where the generation is going to be built.

Marc Bianchi:

Well, that’s fantastic. John, thanks so much. Really appreciate it. John Gorman, president and CEO of the Canadian Nuclear Association. Thank you so much for joining.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of Cowen Insights.


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