UPDATE 2-Saskatchewan nixes nuclear power plan

Thu Dec 17, 2009 4:11pm EST

Related Topics

* Canadian province cites uncertainty about costs

* Says more information and consultation needed

* Bruce Power, gov't panel had urged reactor be built

By Cameron French

TORONTO, Dec 17 (Reuters) - The Canadian province of Saskatchewan, a top uranium producing region, said on Thursday it will not go ahead with construction of Western Canada's first nuclear power plant due to uncertainty about costs.

However, the government left the door open to future development and raised the possibility of co-operation with the neighboring Prairie provinces of Alberta and Manitoba.

The decision comes as rising upfront costs appear to be becoming a deterrent for construction of some reactors, a point of concern for a nuclear industry that has enjoyed a renaissance in recent years.

Construction of a 3,000 megawatt nuclear plant in Saskatchewan had been recommended by a government advisory panel earlier this year, while nuclear generating company Bruce Power said in a 2008 study that a 1,000 megawatt reactor would be a good fit for the province's energy needs.

The province currently consumes 3,600 megawatts annually, and is expected to have to generate another 1,200 to 1,750 megawatts for domestic use by 2020, due in part to the need to decommission some of its coal-fired plants.

"We carefully evaluated (Bruce Power's) initial plans, however uncertainty around long-term costs to consumers remain a lingering concern," provincial Energy and Resources Minister Bill Boyd said.

He said the large scale of the proposed plant requires a regional approach that would ideally involve Alberta and Manitoba.

Alberta, home to energy-hungry oil sands developments, said this week it would examine the merits of proposals to build nuclear power plants on a case-by-case basis.

EMBRACING NUCLEAR

Nuclear power has enjoyed a global renaissance in recent years, helped by soaring oil prices and tightening regulations on greenhouse gas emissions associated with coal-fired generation.

However, Saskatchewan is not the first region to balk at the multibillion-dollar up-front costs to build reactors.

The province of Ontario, home to most of the country's nuclear stations, recently shelved plans to build two new reactors, citing high costs.

Ray Goldie, a uranium equities analyst at Salman Partners, said the continuing rise of costs could be cause for concern on other nuclear projects.

"It's certainly a possibility that existing (projects) under way could be scaled back because of cost pressures," he said.

The right-leaning Saskatchewan Party government, led by Premier Brad Wall, has pushed for further nuclear development to create more revenue and jobs from the province's rich uranium reserves.

In its statement on Thursday, the government said it would continue to push uranium exploration and mining and direct provincial utility SaskPower to continue looking at nuclear power as an option for additional generation capacity in the long term beyond 2020.

"We're still optimistic that Saskatchewan sees a role in the future for nuclear energy," said John Peevers, a spokesman for Bruce Power, which is part-owned by Saskatchewan-based uranium miner Cameco (CCO.TO) and pipeline company TransCanada Corp (TRP.TO). The company operates the eight-reactor Bruce nuclear station on Lake Huron, northwest of Toronto, which has a generating capacity of more than 7,200 MW.

Saskatchewan's decision comes as the Canadian government said on Thursday it is looking to sell its Candu commercial nuclear division, which is operated by government-owned Atomic Energy of Canada Ltd, saying it needs outside investors to boost its chances for growth and help cut costs to taxpayers [ID:nN17167687].

Candu heavy-water technology represents almost 10 percent of reactor capacity around the globe, including all of Canada's installed nuclear capacity.

($1=$1.07 Canadian) (Reporting by Cameron French; editing by Rob Wilson)

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