Lessons from Point Lepreau

Posted on July 06, 2011 | Atlantic Business Magazine | 0 Comments

That New Brunswick remains the only province in Atlantic Canada to house a nuclear power station is a distinction even the most ardent admirers of atomic energy must, by now, recognize as dubious. Commissioned in 1983 at a cost of $1.4 billion, the Point Lepreau generating station on the north shore of the Bay of Fundy has become, over the years, a literal incarnation of the proverbial white elephant: a behemoth government can neither afford nor discard.

From the beginning, almost nothing about this “engineering marvel” was auspicious. Cost overruns and labour conflicts plagued the build. In the 1990s, leaks in the reactor core forced three shutdowns. And when time came to debate the wisdom of refurbishing the plant, public opinion was sharply divided. Its titular owner, NB Power, and the provincial government under Bernard Lord argued for its rehabilitation, even as the New Brunswick Energy and Utilities Board ruled “there is no significant economic advantage; it is not in the public interest.”

The observation was more prescient than the board’s members could have imagined. Lepreau’s refurbishment is now three years overdue (the plant is expected to become operational again only next fall) and $2.4 billion over budget, thanks almost entirely to the steep learning curve endured by the utility’s manufacturer, Atomic Energy of Canada Ltd., which is doing the work. And there’s no guarantee the new schedule will stick or that the federal government will pitch in to cover all or part of the rapidly accumulating shortfall.

The situation is, in short, a mess, at a time when provincial coffers are bleeding deficits at a rate of nearly $1 billion a year on capital debt approaching $10 billion.

Still, financial catastrophes like this do sometimes provide governments with opportunities for sober reflection. And if Point Lepreau teaches anything, it is that when hyperbole supplants judgement in the administration of major infrastructure, horrendously costly mistakes are inevitable.

In this province, pondering the future of energy is too often an exercise in star gazing. Not long ago, the heavens seemed to glitter with endless possibilities, as entrepreneurs, industry lions and public officials spun gossamer tales of the province’s emerging dominance as a regional hub for generating and transmitting cheap, reliable and abundant sources of power up and down the eastern seaboard.

But when market conditions and aggressive competition from neighbouring jurisdictions refused to co-operate, these golden promises turned to dross. A plan to build a second oil refinery in Saint John vanished. A scheme to construct new connection capacity into the United States withered. Meanwhile, the costs associated with renovating a hydro dam at Mactaquac on the Saint John River loomed. And then there was Lepreau; always Lepreau.

There’s nothing wrong with thinking big. But in a province of New Brunswick’s size, two factors familiar to every successful business owner must temper and inform ambition: scale and niche.

If the nuclear plant is a clear drain, it’s also one New Brunswick seems doomed to suffer, at least until it begins to turn an operational profit. But that doesn’t mean the government can’t use it to transition the province into more sensibly sized, sustainable and economically suitable forms of energy production.

In fact, right now New Brunswick enjoys a compelling, if largely unrealized, competitive advantage in wind power. It is one of perhaps five other locations in the world where steady offshore breezes easily justify constructing 5,000 megawatts of installed capacity from turbines. There’s also biomass and tidal, both of which the province could convincingly develop, thanks again to its peculiarly efficacious geography and topography.

Critics argue these energy sources are underdeveloped and expensive. But so were, at one time, nuclear, hydro, coal and oil. Indeed, if the actual costs of these sources — government subsidies, taxpayer funded environmental remediation — appeared at the bottom of the average power bill, the partisan bickering over renewables and non-renewables would disappear overnight.

Besides, the happy confluence of market demand, research and development and technological innovation inexorably yields long-term commercial viability in every sphere of industrial activity, especially energy.

Ironically, as Point Lepreau continues to blight New Brunswick’s present, it can also usher a better, more realistic future – one where white elephants finally go to die.

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