Canada’s decades-long nuclear energy slump is over. While nuclear power currently supplies about 15% of Canada’s energy, industry growth has been stalled out for years thanks to fears about safety and high entry costs. Ontario is about to break ground on the country’s first large scale nuclear project since the early nineties – and that’s just the first step of what is set to be a large and ambitious plan to start a nuclear renaissance in the country’s most populous province.
Newfound public and private support for nuclear power represents a marked turnaround for the Canadian energy sector. Just last year, the federal government was critiqued for its lack of support for nuclear energy when the country’s green bond framework failed to include the controversial power source. However, widespread energy security challenges and price shocks stemming from Russia’s illegal war in Ukraine and its subsequent energy war with Europe have forced many governments – including Canada – to reevaluate their priorities.
And Canada isn’t just returning to the nuclear power sector, it’s returning with a bang. The 2023 Federal Budget shows strong support for nuclear power, including nuclear energy as eligible for its refundable Investment Tax Credit (ITC) for clean electricity and a 30% ITC for clean technology manufacturing. The question of whether or not to classify nuclear as a clean and/or renewable energy has been a subject of major debate and no shortage of contention on the world stage. In Europe, a drawn out back-and-forth has been building for over a year over this topic, as it will have major implications for how money – and we’re talking about a lot of money – is allocated in the bloc’s decarbonization plans.
The same is true in Canada. Including nuclear energy in the clean energy taxonomy has major implications moving forward for the development of the sector as well as its political legitimacy as a platform of the global energy transition. “The budget also explicitly backs nuclear power through a range of other initiatives, such as an extension of reduced tax rates, financing from the Canada Infrastructure Bank, cash for the regulatory authority, and half a billion dollars in SMR project investment,” Reuters recently reported.
Since the new nuclear-friendly budget was released in March, the sector has wasted no time laying ambitious plans. One of the power plants currently being expanded in Ontario could very well be the largest in the world. Ontario is the obvious choice for the buildout of the new Canadian nuclear sector. The province is already home to 18 out of the country’s 19 existing nuclear reactors, most of which were built between 1960 and 1990. “We are returning to our nuclear roots, and it couldn’t happen at a more important time,” John Gorman, president of the Canadian Nuclear Association, recently told Bloomberg.
The nuclear resurgence is in part a response to a surging demand for electricity in Ontario. As the province continues its decarbonization trajectory, more industries will be trying to plug into the grid to replace fossil fuels, and increased EV uptake will also rely on electricity capacity instead of gasoline. What’s more, the province’s population is growing rapidly due to immigration, further ramping up energy demand. Accordingly, projections show that Ontario will need to double its electricity generation capacity by 2050 to reach 88.4, which is expected to cost about C$400 billion ($303 billion).
It’s not just Ontario that will need to massively increase its clean energy production. Canada is currently developing plans to mandate a net-zero power grid nationwide by 2035. For some provinces, particularly those currently reliant on fossil fuels (unlike Ontario whose grid is already nearly 90% clean), this will require a massive pivot toward clean energy production.
Nuclear is well positioned to help bridge this production gap. Though it is costly up front, it presents a carbon-free, efficient, and non-variable power source that could be invaluable as Canada tries to balance its own version of the energy trilemma: providing energy that is 1) available and reliable, 2) affordable and accessible, and 3) environmentally sustainable.
By Haley Zaremba for Oilprice.com
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