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You will recall that at the last meeting on atomic energy
matters in Mr. Bryce's office there was some discussion of the
possibility of arranging for cooperation with Euratom in the
development of atomic power in Western Europe. It was the general
view that such cooperation would be useful, both for political
reasons of various sorts and as a means of developing commercial
outlets for Canadian uranium and reactors or reactor components.
Mention was made of two possibilities, one that Canada might undertake some direct arrangement with Euratom and
the other than Canada might join with the United Kingdom in a programme of cooperation with
Euratom which would presumably focus upon the installation in Western Europe of reactors of
the type developed in the U.K. It was left that a paper on this general question would be prepared
for consideration at an early meeting.
As Mr. Kirkwood told you the other day, Mr. Watson undertook a first draft for such a paper.
I attach a copy of the text which he has now sent over on a personal basis to Mr. Kirkwood. In
sending it over Mr. Watson explained that he was not entirely satisfied with it, but that he had
been inhibited from coming to grips with the important financial considerations involved by his
understanding that Mr. Plumptre was reluctant to consider any significant financial contribution
in support of a Canadian - Euratom cooperative programme. You asked Mr. Kirkwood to prepare
some comments on this aspect of the question, for transmission to you together with Mr. Watson's
paper, in order that you might explore the question further with Mr. Plumptre. As Mr. Watson's paper makes clear, there is a powerful incentive in Western Europe for the
early establishment of substantial atomic power production facilities. The fulfilment of this
objective, however, raises two important questions. It must be decided what type of reactor
should be built and suitable arrangements must be made for the substantial capital investment
which that construction will involve. Both the United States and the United Kingdom anticipate an important market for power
reactors in Western Europe within a few years, and are eagerly competing for as much of this
market as they can get. The United Kingdom is able to offer reactors which are fairly close to a
normal commercial product, while the United States is as yet only in the development stage on
power reactors. This comes about, however, because the United Kingdom with its domestic
problem in mind concentrated early in the game on a relatively simple design which has the
disadvantage that its ultimate economic potentialities are rather limited. The United Kingdom
reactors are based on the natural uranium graphite concept. The United States on the other hand
has been influenced by the fact that conventional power in North America is less expensive than
in Western Europe and, at the expense of some delay in producing commercial versions, has
continued to explore a number of designs offering better long-term prospects for economic power
production. As it happens, in spite of the variety of the U.S. projects, all those on which
significant progress has so far been made are based on the use of enriched uranium fuel as a
result of the ready availability of this material in the United States. Like the United States, Canada has concentrated upon a design likely to lead in due course to
power costs comparable to the relatively low cost of conventional power in North America.
Lacking facilities for the production of enriched uranium, however, the particular design chosen
is the natural uranium heavy water type which has not as yet at least been taken up seriously by
any other country. Last year Euratom sent a team of "Three Wise Men" to the United States, the United
Kingdom and Canada, whose task was to consider what type or types of reactor Euratom might
seek to build, and to recommend a particular initial programme.37 Their report proposed an
ambitious programme of construction but did not specifically come out in favour of any one type
of reactor. It appeared to be their judgment that as yet the design which would prove most
satisfactory in the long run could not be determined, and that in the meantime construction of
several types might well be the most satisfactory approach. The Canadian authorities consider
that our type of reactor when developed to a commercial stage should prove satisfactory and
competitive with any other now in sight. In particular, it should be suitable for the production of
atomic power to meet domestic requirements in Canada when this becomes economically
feasible. It will be a number of years yet however before there will be a market within Canada for
reactors of this type and indeed it will probably be a very considerable time before this market is
large enough to maintain a vigorous atomic engineering industry. In the meantime, therefore, it
would appear important to seek foreign markets for reactors of this type in areas such as Western
Europe where they may be competitive in the near future, so that when the time comes, there will
be in existence an atomic industry capable of exploiting the excellent research and development
work which Canada has so far carried out and of supplying Canada's atomic power requirements
from domestic sources. These concepts are elaborated by Mr.Bennett in his attached speech to
the Canadian Institute of Mining and Metallurgy, a Canadian Press report of which is also
attached. In addition to seeking the early construction in Western Europe of reactors of Canadian
design, there is another important consideration before us. Apart from the United Kingdom with
which we already have arrangements in the matter, Western Europe would appear to offer the
only significant early market for uranium for civil power reactors. It is certainly in our interest to
do what we can to encourage Euratom to devote at least a substantial portion if not all of its
effort to reactors using natural uranium fuel. The United States has now developed domestic
production of uranium to a point where it may well within a few years satisfy U.S. requirements
even perhaps including requirements for export purposes. Hence the construction in Western
Europe of reactors using enriched fuel to be obtained from the United States might well afford
little or no additional outlet for Canadian uranium even on an indirect basis, since the United
States might be able to obtain domestically all the natural uranium required to produce the
enriched fuel in question. These various considerations, most of which indeed emerge from Mr. Watson's attached
paper, suggest that there are two types of project involving cooperation with Euratom which we
might consider. One would be a project directed to the construction by Euratom of one or more
reactors based on the Canadian natural uranium heavy water design; such a project would tend to
provide an outlet for our uranium and would at the same time be of great assistance to us in
developing and maintaining an atomic engineering industry which would apply the research and
development work so far carried out. An alternative project would be to join with the United
Kingdom in cooperation with Euratom in the construction of natural uranium graphite reactors in
Western Europe; this approach, as Mr. Watson's paper explains, would probably provide for a
larger uranium market but would contribute little or nothing to a Canadian atomic engineering
industry. Either of these two approaches to cooperation with Euratom would appear to deserve
some serious study. I might now revert to what was originally intended as the subject matter of this memorandum,
namely the financial aspects of cooperation with Euratom. The United States has proposed for its
part to undertake a programme of cooperation involving the construction of up to six reactors
(which would undoubtedly be based on enriched fuel) under which the United States would
arrange a long-term low interest loan of $100 million to assist in the construction programme.
The United Kingdom has not as yet (at least as far as we know) offered such enticing bait for
concentration upon reactors of the United Kingdom type, but there is no doubt that the United
Kingdom has been making and will continue to make vigorous efforts to promote their reactors.
If we are to work out some programme of cooperation with Euratom along either of the lines
suggested, we should consider very seriously what inducement we are prepared to offer. We can
of course offer an assured supply of natural uranium fuel, but so can several other countries and
in particular South Africa. We can also offer the results of our ten years of experience with
natural uranium heavy water reactors. It is difficult to say, however, that these assets in
themselves will be sufficient to induce Euratom to look to Canada as an important partner in its
programme of atomic construction or to offer us any preferred position either for the supply of
fuel or for the development and construction of reactors and reactor components. It would seem
to be probable that in order to obtain such a position we would have to offer something more; in
effect, we would have to propose an arrangement where Canada had a stake in the project. This
might be done by the device which the United States has decided upon, namely a long-term low
interest loan of sufficient size to be attractive. I understand however that this particular approach
does not appeal to the Department of Finance. It is questionable moreover whether we could
effectively compete with the United States or even perhaps the United Kingdom at this particular
game. Although the suggestion would obviously require pretty careful study in view of its
manifold implications and consequences, I have the impression that a more promising and more
constructive approach might be based upon the concept of a joint construction project. We might
propose for example to enter into an agreement with Euratom jointly to build a full scale atomic
power plant using a natural uranium heavy water reactor, the reactor portion of the plant to be
designed and manufactured in Canada, the turbine and generator portion as well as such ancillary
elements as buildings, etc. in Europe. Design development and construction costs for the reactor
might be paid by Canada, all costs for the generating portion of the plant by Euratom and all local
costs such as on site labour, etc., by Euratom.
At first glance such an arrangement might appear to involve Canada in assuming a
disproportionate share of the costs. It should be recalled, however, that AECL has already
budgeted a very substantial sum to cover the cost of design and development work for the
construction of a somewhat similar reactor in Canada. Iwould see no insuperable barrier to a
plan under which this design and development work could be lent to the construction of two
more or less identical reactors, one in Europe and one in Canada. In that case the costs
chargeable specifically to the European reactor as opposed to the one which it is already
proposed to build in Canada would be mainly limited to the actual fabrication costs of the reactor
components themselves.
Mr. Watson suggests by implication that this approach might be possible, with the reactor for
Europe where conventional power costs are higher being constructed somewhat earlier and with
less refinement of design, but concludes that there would be political difficulties in building such
a reactor abroad before it could be done in Canada. I am not myself convinced that this is
necessarily the case. There seem to me very practical reasons as outlined above for regarding
such a project as advantageous to Canada in practical and commercial terms. If this proves upon
expert and more detailed examination to be the case, it should not be impossible to persuade the
Canadian Government and public to contemplate such a plan. This memorandum has gone on probably longer than is justified by the very preliminary
thinking which we have so far put on these matters. Iwould not propose to explore these
concepts in greater detail at present therefore, but would suggest that if they commend
themselves to you they might be discussed at an early meeting at which there could be present
officials better qualified than we to comment upon the various factors involved. If you found it
convenient, a preliminary discussion might take place at your meeting tentatively scheduled for
2:30 on Tuesday, April 29.
RODNEY GREY
[PIÈCE JOINTE/ENCLOSURE]
Note du secrétaire de l'Énergie atomique du Canada Ltée
Memorandum by Secretary, Atomic Energy of Canada Ltd.
[Ottawa], April 9, 1958
CANADIAN ASSISTANCE TO EURATOM
The Energy Situation in the Euratom Countries
It is clear that the Euratom countries have a strong and urgent need for atomic power. Their
electricity consumption is growing rapidly, doubling every 10 to 12 years. These countries
already import 23% of their total energy requirements and even with the maximum development
of their indigenous sources of energy they cannot expect to meet in this way more than one-third
of the increase of their electricity needs in the next 20 years. Their energy problem is more
threatening than the one the United Kingdom faces. In the report "A Target for Euratom" an
ambitious target of the installation of 15 million kilowatts of nuclear power by 1967 is proposed.
This would allow for the stabilization of fuel imports from 1963 onwards.
The availability of the very large capital investment involved is a major problem. The present
rapid growth of electricity demand is already putting a severe strain on the investment resources
of the electricity industries in the Euratom countries. The capital investment for a nuclear plant is
at least twice that for a conventional generating plant of the same output. The building of nuclear
plants instead of conventional ones, therefore, would substantially increase the investment
problem.
In order to construct nuclear power plants at an early date Euratom feels it will be necessary
to purchase a considerable proportion of the reactor components abroad. This will pose a balance
of payments problem in addition.
In summary it would appear that the Euratom countries want:
technical and manufacturing knowledge and assistance from countries more advanced in
nuclear power technology than they are, availability of capital with which to construct nuclear power plants, a supply of fuel for the reactors built.
Euratom is looking forward to co-operation with Canada and the following quotation from
the report "A Target for Euratom" is of interest. It follows paragraphs concerning co-operation
with the United Kingdom and the United States.
"Canada is equally prepared to co-operate. It can do so in two important ways. To begin with,
it is one of the world's major sources of natural uranium. It would be ready to provide natural
uranium to supplement European resources, provided it receives notices several years in
advance, and that any agreement with Euratom guarantees the use of the uranium exclusively
for peaceful purposes."
"Further, Canada had done important original work on a type of reactor which promises to be
particularly well adapted to European requirements, combining as it does many of the
advantages of the natural and slightly enriched uranium approaches followed so far by Britain
and the United States respectively. This reactor is well into the development stage. We have
every reason to believe that Euratom would find the
Canadian authorities willing to co-operate on the construction of prototypes."
The Canadian Interest
Canada has two main trading interests in encouraging the rapid installation of nuclear power
plants in the Euratom countries. The first is the potential market for the sale of uranium; the
second is the supply of nuclear reactors or reactor components.
There is a firm market for Canadian uranium until 1962-63. Beyond that date there is a real
possibility that uranium will be in surplus supply and that there will be insufficient markets for
the productive capacity of the Canadian uranium mines. Any real or potential increase in the
present foreseeable market is, therefore, of considerable interest to Canada.
It is anticipated that nuclear power will begin to replace conventional thermal power stations
in Canada within a decade. The Canadian Government has therefore an interest in the
establishment of a nuclear manufacturing industry in Canada so that when nuclear power stations
are required in Canada, Canadian manufacturers will be in a position to compete competitively
for this business.
Canada's greatest concern is to build up a market for Canadian uranium. The United States
and Euratom are presently having discussions regarding the ways in which the United States can
assist Euratom in building nuclear power plants at an early date. The U.S. have proposed that
they should assist both technically and by the provision of a low interest loan in the construction
of up to six nuclear power stations with a total capacity of one million kilowatts. It can be
assumed that any such reactors constructed will be based on enriched fuel technology and that as
a result these reactors will not open up a market for Canadian natural uranium. Furthermore, the
introduction into the Euratom countries of this type of technology will undoubtedly influence the
choice of other power plants which the Euratom countries will themselves build in later years.
This could have a serious long term influence on the demands for Canadian uranium.
Natural uranium will be used in the Canadian type of nuclear power plant and it is also used
in the power plants which are now being built in the U.K. for the Central Electricity Authority.
These U.K. stations are much further advanced than the one being developed in Canada and in
addition they have the advantage, from the uranium producer's standpoint, of requiring much
more uranium. The U.K. stations need a much larger initial charge of uranium and as they do not
utilize the uranium so efficiently, the continuing replacement quantities of uranium needed are at
least twice as much as that of the Canadian counterpart. A 300,000 kilowatt station of the
Bradwell type requires 500 tons of uranium as an initial charge and will consume 100 tons of
uranium per year. In comparison, the first fuel charge for a 200,000 kilowatt station of Canadian
design will only require about 70 tons of uranium and the annual replacement needed will be 30 -
40 tons of uranium. Hence, if only the interests of the Canadian uranium mining industry were
considered, the best thing would be to get the U.K. type nuclear power plants built extensively in
the Euratom countries. Perhaps the U.K. and Canada should jointly consider the possibility of
assisting Euratom by which C.E.A. type stations are built in Europe with a guarantee that the
initial and continuing supply of uranium required are purchased from
Canada.38
However as Euratom already has a certain supply of natural uranium from its member
countries and Canada will not be the only country in the world which will have surplus uranium
available, it is not clear why Euratom should tie itself to Canada for the supply of uranium unless
there is a financial interest in doing so. The obvious incentive is low price Canadian uranium. If
the lowest price the Canadian uranium producers can afford to offer and still stay in business is
insufficiently low to bring sales, then this situation will further aggravate the likely position of
the uranium mining industry in the post 1962-63 period.
In the interests of the Canadian manufacturer it would be desirable to have nuclear power
plants of the Canadian type (heavy water moderated, natural uranium fuelled) built in the
Euratom countries. At present a development programme on such a power station has just been
started and it is expected to take three to four years to complete. In order to meet the less difficult
goal of economic nuclear power in a European country compared with that in Canada, this
development period might be shortened to perhaps two years. However, it does not seem realistic
to suggest that Canada should participate in the construction of a large Canadian designed
nuclear power station abroad before one has been constructed in
Canada,39 and there would
appear to be no justification in building in Canada a large station before it is competitive in the
Canadian context.
As a practical means of collaboration with Euratom on the natural uranium-heavy water type
of reactor which the Euratom "Three Wise Men" considered particularly well adapted to
European requirements, some qualified Euratom experts could be attached to the Nuclear Power
Plant Division of Atomic Energy of Canada Limited. There the experience and contributions of
these experts would be of value to the NPP Division and at the same time the Euratom experts
would gain by having a thorough understanding of the advantages and possibilities of this type of
nuclear power station. On the other hand, such an arrangement would be against the interests of
the Canadian manufacturers as the consequence would inevitably be that European
manufacturers would be put in the position of being able to manufacture components for the
reactor and that no orders would be placed for Canadian made equipment.
D.W[ATSON]
37 Voir/See Volume 23, Document 400.
38 Note marginale:/Marginal note:
But UK will fabricate the final elements Rodney Grey
39 Note marginale:/Marginal note: auteur inconnu/author unknown
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