ACR-1000 Cost Overruns Already?

Team CANDU, the consortium formed to construct the ACR-1000, is asking the federal government to cover cost overruns on ACR-1000 construction years before even the first shovel goes in the ground.  Wow, is that ever a vote of confidence in the design!

Like many others, I had the impression that Team CANDU had sufficient financial weight of its own to cover any budget slippage.   Surely industrial heavy weights such as SNC-Lavalin, Babcock & Wilcox Canada, and GE-Hitachi Canada ought to be able to absorb some of the budget overrun. AECL, the other Team CANDU partner, is an agency of the federal government and at least theoretically has access to the huge resources of the feds.

If Team CANDU is issued a blank check by the feds, apparently what they want, what incentive will they have to stay on budget? It looks like an open-ended cash-for-life deal. An unwillingness to take any risk would tell me they have no tangible commitment to the reactor.

Team CANDU complains that Westinghouse and AREVA have government subsidies and that makes them favoured. Aside from the fact that AECL, a federal government agency is doing all the development and design of the ACR-1000, the real problem is that AREVA‘s EPR and Westinghouse’s AP1000 are so much closer to realization than the ACR-1000. Chances are the wrinkles in AECL’s two competitors will all be worked out in other countries and at no expense to Canadians before construction even starts on the first ACR-1000. Nothing in the way of federal subsidization can make up for that gap. 

The financial model that I would prefer is firstly that the bid price accepted by Ontario be realistic. (It’s necessary to state this because Ontario Power Authority tosses around prices of $3 billion per reactor, low balling by a factor of around two.) Let’s say the actual bid price is about $5 billion for an ACR-1000. As first of a kind construction, it’s likely that it would be over budget by at least 50%, giving $7.5 billion as the true cost and even that’s being very optimistic.

In order to be credible Team CANDU must absorb some of the inevitable loss on the first one built. For example, a billion or two of the overrun would be a reasonable fee for the experience gained especially when divided between the five large corporations. Otherwise Team CANDU is just making political noise to get a risk-free government subsidy for an open ended project.   There’s nothing unusual about that and we Canadians have seen that many times before but it just doesn’t bode well for the fate of the ACR-1000.

Sad to say AECL’s abandonment of the MAPLE reactors raises a finite risk that the first ACR-1000 might never be successfully completed.   I’d like to see the Team CANDU partners take on some of that risk. Personally, I wouldn’t give Team CANDU a nickel unless they ante up a sizeable chunk of their own cash.

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