22 June 2009
Vice-president of the Society of Professional Engineers and Associates
Following World War II, scientists and engineers in Canada turned their minds to the development of nuclear power for peaceful purposes.
Under C.D. Howe, the National Research Council laboratories at Chalk River became part of a new company called Atomic Energy of Canada Ltd., and development of a Canadian nuclear reactor for generating electricity began in earnest.
However, unlike the United States, the Soviet Union or Great Britain, Canada was a country of modest industrial capability. Reactors in these other countries were based on the Westinghouse nuclear submarine reactor design of the early 1950s.
When scaled up for power production, they required large stainless steel pressure vessels that we could not build in Canada. These reactors also used enriched uranium and in Canada we did not have enrichment capability.
Thus, Canadian scientists and engineers were in a difficult position. Should they design a reactor for which we could not make the major components or the fuel?
The answer was No. With tremendous ingenuity, they designed a unique product that became known as the Canadian Deuterium Uranium (CANDU) reactor, 100 per cent of which could be made in Canada. It has been named one of the 10 Canadian technical achievements of the past century.
Today there are more than 440 operating reactors in the world, about 10 per cent of which are CANDUs. They operate in seven countries and have found favour with those who desire self-sufficiency in fuel supply. They are one of the most reliable reactors in the world. In any given year, three or four of the top performers in the world are CANDU reactors.
The nuclear industry in Canada is one of the very few that generates wealth throughout the entire production chain. We mine the uranium ore, refine it, turn it into fuel, design the reactors that use the fuel, build those reactors, operate them, maintain them and make all the parts for them. This is a team effort, involving technology workers and the Canadian building trades. There is no other industry like it in Canada.
While most Canadians think that the nuclear industry consists only of AECL, the crown corporation that developed CANDU technology is only a small part of it. Unknown to most Canadians, AECL is the only nuclear vendor in the world that never stopped building reactors. The result has been the development of a supply chain that consists of more than 120 private sector companies, located mostly in Ontario, that employs more than 30,000 highly skilled manufacturing and technology workers.
Because operating CANDU reactors now range in age from 2 to 40 years, there is a steady business providing parts and services to the reactor fleet: more than $5 billion per year.
Unlike much manufacturing, nuclear reactor parts tend to be high precision components with very strict quality control requirements that are overseen by the federal regulator. This requires nuclear vendors like AECL to keep their supply chain close to home and makes it one of the few manufacturing industries that cannot be easily outsourced to low-labour-cost countries.
For example, when AECL built two reactors in China earlier this decade, more than 80 per cent of the parts were made in Canada and shipped by boat to be assembled on the construction site. Usually such traffic is in the opposite direction.
Today, several countries once cool to nuclear power are changing their minds. Developing nations like China and India are undergoing huge expansions in nuclear power. A renaissance in the industry is coming and the size of the business over the coming decades will be in the trillions of dollars.
With this background, we have to ask ourselves: Does it make any sense to sell Atomic Energy of Canada?
The current nuclear business owes its existence to the intellectual property that AECL developed and, as other successful Canadian technology companies like Research in Motion and Bombardier have shown, intellectual property breeds wealth and jobs.
An influx of capital and private sector management expertise may be necessary for AECL to compete with its larger competitors, but it does not have to be privatized to do this. The French government-owned nuclear vendor AREVA, for example, has become very successful through strategic alliances with private sector companies, together with strong government support.
The nature of the proposed sale, in particular the buyer, will have a profound impact on jobs and on potential future business in Ontario. The timing of the sale could not be worse.
The recent shutdown of the 52-year old NRU reactor and the resultant isotope crisis do not help AECL's asset value, and in the current climate the actions of the federal government give the appearance of someone holding a fire sale.
Conditions are ripe for a predatory takeover. With a potential of trillions of dollars of business in the coming decades, spending a few billion to buy a competitor in order to put it out of business would be a prudent strategy. What guarantee will Canadians have that a potential buyer will support CANDU technology rather than seek to kill it?
If done prudently, private sector involvement in AECL could be a great thing. Done poorly, it could be a catastrophe.
Canada is one of only five countries in the world that has the capability to deliver a reactor anywhere. This unique capability is thanks to the ingenuity of Canadian engineers, scientists, technicians and technologists. It took decades to develop.
Let's not do something foolish and destroy it with the stroke of a pen.
China's Qinshan nuclear power station includes two CANDU 6 reactors that were built on schedule and under budget. About 10 per cent of the world's more than 440 nuclear reactors are CANDUs (AECL File Foto)