In conversation with Bruce Power – why nuclear is an important piece of the climate puzzle

Dominique Barker: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape with a view on addressing current issues in a concise format to help you navigate and take action. I’m your host, Dominique Barker. Please join me as we explore today’s most pressing matters with special guests that will give you some new perspective and help you make sense of what really matters.

Kevin Kelly: Rather than calling it nuclear waste, it’s actually a nuclear asset. When you look at used fuel, for example, there’s a number of markets in Europe that are reprocessing the fuel. There’s still a lot of stored energy in those used fuels.

Dominique Barker: We are glad to welcome Kevin Kelly, EVP and CFO, and James Scongack, who’s EVP and Chief Development Officer of Bruce Power. Bruce Power is Ontario’s largest independent electricity producer and operator of the world’s largest nuclear facility. And excitingly, we’re going to talk about this. Bruce Power recently issued a five hundred million dollar green bond, which was a first of its kind for the nuclear industry globally. On today’s episode, we’re going to be focusing on nuclear energy and the vital role it plays in achieving net zero by 2050. One quote I wanted to read to you today is from the Honourable Seamus O’Regan, who is a member of Parliament in Canada and was previously Minister of Natural Resources. He has said quote, we have not seen a model where we can get to net zero emissions by 2050 without nuclear, end of quote. So good morning, Kevin and James, and thank you for joining us on The Sustainability Agenda and congratulations on the recent green bond.

Kevin Kelly: Thank you, Dominique. It’s real pleasure to join you here today. Thank you very much.

Dominique Barker: Great. So we always like to start with context. Can you give a bit of context for our audience today and talk about what Bruce Power does? I mean, we know it’s nuclear energy, but really the impact that it has on the province of Ontario?

Kevin Kelly: Yeah, sure. Dominique, just by way of background, it was formed as a private company in 2001 under a lease arrangement with Ontario Power Generation. We have two majority equity owners in the business, namely OMERS and TC Energy, and both of these companies have played a key ownership role since 2003. As you said, we are a nuclear operator. We produce 30 percent of the province’s electricity needs on both a reliable emission free and low cost basis. But we’re also a leader in the production of medical isotopes that are used worldwide in cancer treatments, as well as the sterilization of medical devices. We, to date, we’ve been primarily focused on the production of Cobalt-60 and are currently in a planned outage for unit seven that will install a production system that will now produce the Lutetium-177. In terms of Ontario, we are currently undergoing a life extension project on unit six at Bruce P. We started that project in 2020 and it’s scheduled to be completed in 2023. And if you look at this, it’s really the first of six life extension projects that we’ve planned, which will secure about an additional 5,000 additional direct and indirect jobs. And this is in addition to the 22,000 direct and indirect jobs that you see today off of the Bruce Power operations and at the same time over the next several years, injecting billions of dollars into Ontario’s economy. And as you said at the outset, we achieved, you know, a first recently, we were the first nuclear power plant in the world to issue a green bond. And you know, for us, this really reflects our commitment to investing in green technology and the vital role that we feel nuclear plays in fighting climate change and really enabling a net zero future.

Dominique Barker: And so the next question I had actually leads into that, and that’s why you believe that nuclear energy is so important to our fight against climate change, but maybe you could also balance it out and give us the negative case. Why are some policy makers or business leaders and even some countries hesitant or perhaps negative on nuclear energy?

James Scongack: And I’m happy to drive that, Dominique, and really to build off what Kevin said. I think there’s really three key sort of takeaways that I think answer that question, and I think the first and most important thing to say is that if we are going to tackle climate change. If we look at the size of the climate change challenge that we all collectively have as a country, as a world, as a society, we need to start recognizing that we need every tool in the toolbox to tackle climate change. The world currently is losing the fight against climate change, and I think part of the reason why we’re losing the fight against climate change is because we are seeking out perfection where perfection doesn’t exist. My parents always used to tell me, don’t let perfect be the enemy of the good. The truth is, there is no energy form that is perfect. Nuclear included, wind included, solar included, hydrogen included, hydroelectric included. The list goes on and on. And so I think what’s happened is we’ve got into a polarizing political debate and not a debate about actually tackling the problem. Ontario is a very unique example of where climate change has been tackled in, I think, a very globally recognized way. Ontario is one of the only jurisdictions in the world that went from about a quarter of their electricity from coal to zero. If we were able to phase out coal across the world, we would be having a very different discussion about where our climate change targets are now. How did Ontario do that? They did it with 70 percent nuclear from Bruce Power. 15 percent nuclear from Ontario Power Generation, addition of gas for some peaking capacity and wind and solar. And so there was a mix. So I think the problem is we try to make this a polarized debate when it isn’t. There is enough space for every energy source to play in this. I think if you went to every energy source and you said put on the field your best players, if everybody doing the most they can is still almost not enough, which is really why this is the challenge that it is.

Dominique Barker: Can you talk about the benefits of nuclear? And I guess I’m thinking about how it fits in with some of that intermittent power, such as solar and wind, for example?

James Scongack: Yeah, absolutely. Well, nuclear is a baseload source of electricity. It’s highly reliable. It’s a stable, long term asset. So I very much look at it as is if you’re going to put a hockey team on the ice, nuclear is one of the key players you want to put on the ice to be that centre man or woman on the ice that’s going to play that absolutely critical role, no matter what the market needs. So nuclear is that anchor that you can count on. We don’t need to wait for the wind to blow or the sun to shine to produce for nuclear power. It can meet that heavy baseload demand. But also, if you look at what we’re doing at Bruce Power, one third of our output is actually flexible. We’re the only nuclear plant in North America that provides that capability, so we are also enabling wind and solar as part of the market. So we need to look at every energy source and say, what are the attributes of that source and how do we bring all of those attributes together to bring together the best supply mix? Every jurisdiction will have a slightly different mix, but it’s impossible to put together a mix that does not include anchors like nuclear power, especially if you’re working on the thesis that some of the more reliable sources of electricity, like coal or natural gas is somewhere we need to reduce our reliance on and move away from over a period of time. Reliability is very important in energy. You know, a lot of people talk about storage, but storage actually requires a form of energy to start with. And so again, storage is a big part of that as well

Dominique Barker: Right. Ok, thank you for that. And yeah, that reliability, that public safety is paramount. You need that reliable electricity, as we saw in Texas this past fall. So Bruce Power is currently pursuing a number of innovations and in particular, I want to focus on the small modular reactors. We saw an announcement from OPG at the end of 2021. Why don’t you talk about what small modular reactors are and how they could potentially change the landscape in nuclear energy?

James Scongack: Kevin and I can tag team this one because I know Kevin sits on a number of small modular reactor advisory groups. At the end of the day, we need to look at all the tools in the toolbox, and once we’re done renewing and life extending our current assets that we have, we need to look at what is the long term. Climate change is a long term challenge. So we’re looking at all forms of new nuclear, whether that’s small micro reactors that can be deployed in remote locations, small modular reactors like was announced recently at OPG Darlington and also larger commercial units like the ones we have today. Obviously, in the short term, we’re focused on the life extension of our projects. As Kevin noted, it’s one of Canada’s largest infrastructure projects, but we very much look at this as again, another tool in the toolbox. Good businesses, good innovative sectors develop long term options.

Kevin Kelly: Yeah. And I tend to agree with James. This is certainly key to the landscape. You know, the energy policy in Canada here and one that is, you know, front on our radar screen and like any investment, you know, we’ll continue to do the due diligence on the technology and the cost and, you know, prioritize it within our existing business plan. But certainly, you know, do support, you know, the move towards SMRs in Canada and what it brings, you know, from an energy policy and in particular supporting, you know, some of the northern communities that could really benefit from this technology as well.

Dominique Barker: And how confident are you that the SMRs, or small modular reactors, one of the benefits is that because it’s modular, it can come in on time and on budget. How confident are you that that would be the outcome?

James Scongack: Well, I think if you look at any large scale energy project, whether it’s hydroelectric projects, nuclear projects, large storage projects, certainty around project execution is absolutely important. So I think you look at the nuclear industry here in Ontario, you have Darlington Refurbishment project, Bruce Life Extension project on track, on time, on budget projects. Why of those projects been successful? They’ve been successful because we’ve had a stable policy environment. We’ve taken the time to properly plan those projects. We’ve leveraged the made in Canada made in Ontario supply chain to the needs of that. We’ve applied some of the best project management principles. And so we shouldn’t look at on time and on budget predictability as a technology issue. It’s a philosophy around deploying any project. And so whether it’s a small modular reactor or micro reactor, an existing nuclear plant, our brand new large commercial scale plants, which we’re going to need, it’s really we’re going to need to follow those same principles, which is designed complete early, regulatory certainty, advanced procurement, training and preparation. And I can’t emphasize enough how important that regulatory certainty is. I was up recently prior to the pandemic, up at a conference in Ottawa, and somebody I wouldn’t say was the greatest nuclear supporter, challenged me on a panel and said the problem with nuclear power is that you can’t get power on the system quick enough. If we want to build a new nuclear plant today, that’s 10 years away, and this was an individual who worked actually on Parliament Hill. And it’s a fair challenge. But the comment I made to that individual as I looked out the window and I said, if you look at the Parliament Buildings right now, that is a 12 year refurbishment project on Parliament Hill, you’re not going to be in that building for 12 years. If we had regulatory certainty, we could get a new nuclear plant online quicker than you can renovate Parliament Hill. So we got to put these things in perspective that all projects have that long term lead time and all projects need that time to be successful.

Dominique Barker: Ok, that’s good perspective and helpful in terms of how maybe government policy can help accelerate things. Let’s talk about one of the main issues for opponents to the nuclear energy industry, and that’s waste. We all know that there have been some accidents in the past and it’s an issue, obviously. So maybe just talk about specifically at Bruce Power, how waste is managed and if you have any other comments on waste management in general, how it could evolve, that would be helpful.

James Scongack: Kevin, I’m happy to take that one, and I’m sure you’ll have a perspective as well. You know, at the end of the day, all processes, all industries have a waste by-product from what they do. It’s really an issue of what is that by-product, how do you safely handle it, how do you safely dispose of it, how do you fund it? And that’s really how we look at it. And most importantly, how do you minimize it? So I hear this nuclear waste issue all the time, to be honest with you. It’s one of the things that people raise about nuclear power, and they sort of put that negative piece beside it. But as somebody that works in the industry every day, I look at it through a glass half full and I say we safely have managed nuclear by-products for over half a century. It’s not a long term liability that somebody is going to have to pay for later. We fund that, we pay as we go. It’s not an IOU in a bank account. We’re required under federal law and the Canadian Nuclear Safety Commission to have that fully funded. We have actually long term plans that if they could get approved, the money is there to execute projects to safely manage. And if you look at how we are reducing, reusing and recycling, I think we’re industry leaders. So there’s not many sectors I think you could get on a podcast and you could say, have you fully funded every waste by-product from your operation? Nobody would be able to answer that. Now is the by-product from nuclear different? Yes, it is. And with that has some extra care and control, and I’m not being flippant about that at all. But look at the track record, it’s there. And so I’m very proud of our record on waste. I would like to start talking every conversation on nuclear power to start with waste because I think it’s a strong suit. I think all industries could follow the example of what we’ve set around those key pillars.

Kevin Kelly: And I’d really like to turn the conversation around rather than calling it nuclear waste, it’s actually a nuclear asset. When you look at used fuel, for example, there’s a number of markets in Europe that are reprocessing the fuel. There’s still a lot of stored energy in those used fuels. So, you know, before we, you know, advance things too far down the road here, let’s seriously, you know, start to take a look at how do we, you know, convert this into an asset to reprocess and use again, because there is, as I said, a lot of stored energy that’s still available and there are other markets out there. And as an industry in Canada, I think, you know, we need to continually seriously look at this as an option for us as well.

Dominique Barker: And I believe there’s a company that is using recycled waste to reprocess it as nuclear power. You’re probably familiar. I forget the name of it. I think it’s UK based and I would just observe, I’ve been to Bruce Power and I’ve seen some of the waste that every single milligram of uranium and by-product is accounted for. And I would just point out that Cadmium Telluride, which is part of solar panels, is very toxic. And I just wonder we don’t really account for that waste. So we’re being a bit, my own personal views, is there’s a bit of unfairness that is very well accounted for and the amount of waste, according to the Government of Canada website, I believe it’s like four hockey rinks full up to the boards. I don’t know if you’ve seen that stat, but that’s for all the waste that have been produced in Canada for the past 50 years or so.

James Scongack: Dominique, the one thing I would say to that I agree with everything you said, but I also think the nuclear industry needs to take some accountability for how we’ve communicated and engaged on this issue, right? If you go to a nuclear plant, a good culture in a nuclear plant is people who are always focused on the glass half empty, right, because that’s the culture we drive around excellence and safety. We’re a very technical industry and sometimes I do not think we as an industry have done a great job of really talking about this in a plain speaking way to people. So we also have to take some of that accountability on and understand, hey, whether we agree with some feelings on it or not, they’re there and we shouldn’t be afraid to talk about it. And I really appreciate you raising it in this podcast. When Kevin and I were through a lot of the green bond investor meetings, we got this question and I’m glad we got asked the question because almost universally everybody said, you know what, that’s not an angle that anybody’s talked about. So we also need to do a better job of that, Dominique.

Dominique Barker: Yeah. Well, let’s speak about that green bonds next, actually. You said you’ve got a lot of questions. I’d love for you to talk a little bit about the framework that you proposed and some of the challenges and opportunities that came from issuing the first global green bond for nuclear energy.

James Scongack: Yeah. Thanks, Dominique. As I said in my opening comments, really an exciting initiative and really, you know, a benefit not only to the Bruce Power, but you know, the industry as a whole. And when you look at, you know, the backbone of the framework, it really, you know, encompasses a continued capital investment into three areas of our business. First, the investment in our life extension program. I spoke earlier about unit six underway. We’re going to be refurbishing units three through eight, unit six currently underway and unit three starts in 2023. The second area is what we call investment in asset management. So think of this as replacing key components and equipment that can be completed during a normal planned outage and not a life extension refurbishment. And then finally, it focuses on the third area being investments related to increasing power output from our existing units. And really, this, you know, enables the province to reduce reliance on other emitting electricity producers. And, you know, as James said earlier, it’s important to recognize that when we refurbished units one and two, it should be recognized that the clean energy from these were a key contributing factor to the province moving off its reliance on coal. So the use of proceeds from the framework are eligible to fund these investments, and that’s within 36 months before after the issuance itself. And then, like you would expect from a governance perspective, we’ve established a sustainability committee that may be responsible for reviewing and recommending investments that qualify under the framework. And then you raise a good question around the challenges and opportunities, like any financing strategy, you know, you’ve got to have a plan and you need to have trust advisors to work with. And given the uniqueness of this offering, it was clear that we needed a third party opinion to provide a view on the qualification of the technology. And from an advisory perspective, you know, we’re very fortunate to have relationships with all, all the major banks in Canada and their advice into our approach and timing and strategy, you know, played a key role. And then from a third party opinion perspective, you know, I look at it much like a credit rating service. You know, you want to have a firm that knows your business and is willing to spend the time to get it right and provide you with a fair assessment. And for us, you know, that choice was Cicero. We spent most of last summer and into the fall working with them, and I believe we received a shade of green that was reflective of our technology and their framework that we had established. And you know, and finally, like any financing timing is everything. You know, you take into account the expected rates, other potential issuers going to market at the same time. And for us was, you know, was really around discussions that COP26 at the time and perhaps any influence that the media may have had on potential bond investors making the decisions. But I look at it and say, look at the results, the results speak for themselves. We had a $500 million bond that was issued. We had almost six times oversubscription and really, you know, you look at it and you step back and say there’s 56 investors in Canada that were willing to support a green bond for a nuclear power plant. So a great outcome. And from my perspective.

Dominique Barker: Great. Well, congratulations. And today is January 7th, and earlier this week we saw another drop in the EU taxonomy and it looks like nuclear is included as being green, so congratulations to you and hopefully that will be the start of a movement in the nuclear energy industry. So one last question. You recently launched one million dollar Carbon Offset Accelerator Fund to support carbon sequestration and offset projects. What’s that about?

James Scongack: Yeah, so really builds in what Kevin was talking about with the green bond framework. So the first thing is we are committed to being a net zero operation by 2027. So even though we, in our core operations, are an emissions free source of electricity, like all large operations, we have utilities, we have vehicles. So we are committed to being a net zero organization by 2027, that’s a very ambitious target. Usually when you hear these are decades out. We’re going to be net zero by 2027. How are we going to achieve that? Well, we’re really going to achieve that and it’s outlined in the green bond framework through two things. The first thing is we’re going to do whatever we can as small as the emissions are to minimize the emissions from the operation so that ESG committee that Kevin talked about, it’s led by our executive vice president, team of Kevin, myself and our colleagues to make sure this is a top priority. You’ve got to reduce before you think of offsetting and then this fund is really to work with an organization we launched called the Carbon Offset Coalition. We do not want to buy carbon offsets from some rainforest in South America. Not that there’s anything wrong with that, but we want those investments to be here in Ontario, here in Canada. And so these partnerships and that accelerator fund is about us investing in those offsets in our own backyard, community driven projects, grassroots projects, other energy projects. And this accelerator fund is really us putting our money where our mouth is. Instead of saying instead of just buying credits, we’re going to go invest in projects that help us get there. We think it’s really important that we not only be a leader in reducing emissions, but we have to be a leader in carbon offsets because net zero implies by its very name we are going to still have emissions in our society. The issue is how do you offset those? And we think this is a very novel approach to this. We’ve had great inputs from everything, from small community groups to large, large companies that want to partner with us. And you’ll see some really exciting news throughout 2022 on some of those projects that are going to help us get to that net zero by 2027.

Dominique Barker: That’s great. Listen, James, Kevin, thank you so much for joining me today on The Sustainability Agenda. From a CIBC perspective, we see nuclear as being critical. We’ve got so much electricity that needs to be developed over the next 10 years for things like mobility, hydrogen, heating and decarbonization. Direct air capture is very energy intensive. So not only does all this electricity, the current coal, James, as you mentioned, need to be replaced, for example. But there’s going to be so much demand for additional electricity and nuclear has to play a role. So thank you very much for explaining this complex topic to our listeners and thank you for joining me today.

Kevin Kelly: Thank you, Dominique. Very much enjoyed this. Thank you.

James Scongack: Thanks for having us, and thanks for CIBC for spearheading these discussions. I’m an avid listener and great to be a part of this. Thank you, Dominique.

Dominique Barker: Thank you.

Dominique Barker: Please join us next time as we tackle some of sustainability’s biggest questions providing different perspectives to help you move forward. I’m your host, Dominique Barker, and this is The Sustainability Agenda.

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