The McKinsey Report on New Ontario Reactors

The McKinsey Report for the Ontario Government

The executive summary of the McKinsey report doesn’t tell us much.

The Ontario Ministry of Energy commissioned McKinsey & Company to report on the reactor choice issue and they duly produced an undated report entitled “A strategic assessment of Ontario’s economic and technology options in the growing global nuclear market”. 

The Ministry of Energy will only release the executive summary (ES) as posted on its website and that’s all that they will release.  The usual reason is quoted for hiding the report well away from public scrutiny namely “commercial confidentiality”.

You might well ask what confidential information reactor vendors would tell consultants representing a jurisdiction considering buying their products?  It’s hard to imagine they heard anything other than strong pitches from reactor salesmen.  It seems they are over playing the confidentially card.

McKinsey’s first criterion for assessing the competing reactor designs was the expected in-service date namely when the vendor could have a reactor on the grid. Of course, all the vendors said they could have a reactor on the grid by 2018 but presumably with an implicit “if all goes well” caveat. What recourse would Ontario have if a reactor falls behind schedule like for example the Areva EPR now under construction in Finland? The answer seems to be little or none.

The second was the LUEC (Levelized Unit Electricity Cost) which essentially includes all the costs involved with the plant. To say the least this is a very iffy estimate for reactors not yet constructed or in the design stage. In fact there are enough ways of handling the cost accounting of the existing reactors operating in Ontario to derive a range of LUEC’s. For example, utilities have overheads they can choose or not choose to assign to their reactors depending on the costs they need to book. Claims about the economics of reactors not yet built ring hollow.  Why not just set an electricity price in 2008 dollars that the design has to meet when the reactor is in operation?

 The third and final criterion concerns what they choose to call the “Macro-economic impact” which means the money that would go into the Ontario economy from the purchase.  However, they don’t consider any offsets “potentially offered by vendors” which would be the key to a sale by a non-Canadian vendor.  Applying this macro-economic criterion, cost overruns would increase the economic inputs from Ontario based suppliers and so be a good thing.  I’d suggest it might also be worth considering the impact on both Ontario and Canadian Taxpayers. 

The only specific conclusion I was able to find was the elimination of the so-called EC6 (Enhanced CANDU 6, an AECL product) on the grounds that “it would not benefit from the same economies of scale as its Generation III+ competitors”   Since the EC6 is just a slight variant of the successful CANDU 6 it could be built relatively easily with all aspects of licensing, engineering, construction, suppliers, and so on already well in hand.  That would be a huge advantage over all the other reactors under consideration but the authors of the report apparently would prefer to see Ontario spend a great deal of time and money going through the long and uncertain process of bringing new Generation III+ reactors into service or perhaps that’s what the Ministry of Energy would like.  

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