An Ontario Power Generation facility at the Darlington Power Complex, in Bowmanville, Ont., in May, 2019.Cole Burston/The Canadian Press
Brandon Schaufele is an associate professor of business, economics and public policy at the Ivey Business School of Western University. He is also the director of the Ivey Energy Policy and Management Centre.
Ontario is placing a $47.7-billion bet on nuclear refurbishments and small modular reactors, largely through Ontario Power Generation (OPG). Nuclear power is seen as necessary to meet surging electricity demand from electrification, data centres and industrial growth. But being necessary does not make it cheap.
Recent reporting highlights the uncomfortable reality of nuclear construction. Billions in OPG expenses are working their way through the system. Eventually, these costs will lead to higher electricity prices for households and businesses – or to even greater subsidies from government sources. For example, the company applied to the Ontario Energy Board to request payments of nearly $207 per megawatt hour for electricity it generates from its nuclear power stations beginning in 2027, more than double what they received in 2025.
OPG is a Crown corporation owned by Ontarians. It is the largest generator of electricity in the province. By most measures, OPG is successful. It owns profitable hydroelectric facilities, natural gas plants and renewable generation in Canada and the United States. It also owns nuclear plants at Darlington and Pickering, and the Wesleyville site, west of Port Hope, which is being considered for a new nuclear plant.
Unfortunately, successful businesses frequently offer irresistible temptations for politicians of all affiliations. When politicians direct where and how companies should expand, the line between commercial decisions and political ambition blurs. To protect Ontario’s economic future, the province must insulate Crown corporations from political impulses. Ontarians should shift risk away from taxpayers and ensure that OPG’s expansion is dictated by prudent decisions, not political expediency. Unfortunately, the best method to achieve this is likely to be unpopular: It may be time to sell a portion of OPG.
Ontario Power Generation seeks rate increase for electricity from nuclear plants
Privatizing OPG is guaranteed to spark controversy. Many Ontarians will resist relinquishing control over electricity infrastructure, just as they did in the late 1990s. However, conditions are especially favourable for the province to reconsider partial divestment of OPG.
First, Ontario’s electricity sector is experiencing rapid growth. The province’s system operator projects a 65-per-cent increase in electricity demand by 2050. This, combined with the successful, on-time and on-budget refurbishment of the Darlington nuclear plant, has reinforced the government’s belief that nuclear power is vital to the economic future. Regardless of technology, Ontario must rapidly develop infrastructure while ensuring the right projects are prioritized and completed efficiently. OPG is an especially appealing property in this environment.
It is useful to understand how a sale would work. Selling the company would allow Ontarians to capture OPG’s future profits today. Put differently, this strategy exchanges uncertain future earnings for immediate value. In 2023, OPG earned approximately $3.3-billion before interest, taxes and depreciation. A conservative estimate places its value around $50-billion.
To put this in context, Kathleen Wynne’s Liberal government privatized Hydro One, the province’s transmission owner, in 2015. At the time, Hydro One earned roughly $750-million and had a total value of about $12-billion. C.D. Howe Institute research by Benjamin Dachis and Joel Balyk also showed that privatizing Hydro One yielded significant efficiencies, with administrative costs falling by $90 a customer. As with transmission, similar gains could emerge in generation.
Second, for many, selling OPG seems destined to increase energy prices. Yet most of the company’s revenues are governed by Ontario’s energy regulator. Its role is to safeguard the public interest in the sector. Privatizing OPG could be paired with a reaffirmation of its mandate, reinforcing oversight of rates and investment decisions as the province moves forward with the energy transition.
Third, OPG’s sale could be used to support economic reconciliation with Indigenous populations. Privatization presents an opportunity to reserve a portion of OPG equity for Indigenous partners. Moreover, the province could backstop loans to support acquisition of this equity. Through this, Indigenous communities gain access to a company with an investment grade bond rating, just as other Ontarians will be free to purchase shares.
Finally, nuclear energy is poised to be central to Ontario’s energy transition, offering emission-free, baseload electricity. However, building new nuclear facilities presents significant financial risk. Although the successful refurbishment of the Bruce and Darlington plants is encouraging, it does not eliminate the possibility of future cost overruns.
Construction costs at Hinkley Point C in Britain were nearly double early estimates, while the Vogtle expansion in the U.S. experienced an overrun of more than US$20-billion. Both cases illustrate the scale of financial risk inherent in large nuclear builds.
By selling a portion of OPG and establishing a public-private partnership for new nuclear developments, the province can shift some financial risk away from taxpayers and electricity ratepayers to the private sector. This would preserve nuclear power’s role in the energy transition, while introducing stronger market discipline to control costs.
Canada has recently witnessed several instances – such as the Trans Mountain pipeline expansion, Site C Dam and the Muskrat Falls hydro generating station – where government-led energy projects encountered costly overruns and delays. Privatizing OPG could help Ontario avoid similar outcomes, while still encouraging nuclear development.
Selling OPG is an old idea. It’s a controversial idea. But, maybe, it’s an idea whose time has come.