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Ontario Electricity: New Thinking?

eLeKTRon

TRIBE Member
March 3, 2004 - A report called New Energy Directions,
offering a low-cost, low-risk electricity strategy for Ontario,
has been released today by a broad coalition of electricity
generators, public utilities, district energy companies, energy
cooperatives and public interest organizations.

The report offers a blueprint that is in keeping with the
objectives of Premier Dalton McGuinty’s government — to ensure
consistent supplies at reasonable cost with maximum
conservation and minimal environmental impact. The premier has
called for phasing out Ontario’s coal-fired electricity
generators by 2007.

The report’s key recommendations call for the Ontario government to:

- Mandate the Independent Electricity Market Operator, or
another provincial agency, to bring in a competitive bidding
process and long-term power contracts for providers of
electricity to the province

- Recognize that energy conservation and efficiency, new
renewables (wind, water, biomass), district energy,
co-generation and high-efficiency natural gas combined-cycle
power plants are the low-cost, low-risk options to phase-out
Ontario’s coal-fired power plants

- Obtain the province’s additional electricity supplies from a
diverse and decentralized pool of power producers — energy
cooperatives, municipal utilities, district energy companies,
shopping centres, hospitals, manufacturing companies and
investor-owned power companies.

New Energy Directions can be downloaded from: www.cleanairalliance.org.
 
Alex D. from TRIBE on Utility Room

AdRiaN

TRIBE Member
I honestly hope the government backs away from its commitment to retire all coal plants in Ontario by 2007. It's a recipe for disaster. I cannot understand switching our fuel mix to rely so heavily on natural gas at a time when natural gas is becoming increasingly scarce across North America and when natural gas prices are significantly more volatile compared to coal.

The environmental benefits are a noble motivation, but the reality is that Ontario's coal plants are responsible for a small fraction of total air pollution and these plants could be fitted with pollution abatement technology for less money than building a bunch of new gas plants.

Even worse, the loss of coal capacity in Ontario will inevitably lead to higher electricity imports from the neighbouring Great Lakes states ... electricity that is generated with, you guessed it, coal. Considering the majority of our air pollution blows in from these states, the air quality in Ontario will not improve significantly.
 

swilly

TRIBE Member
Originally posted by AdRiaN
I honestly hope the government backs away from its commitment to retire all coal plants in Ontario by 2007. It's a recipe for disaster. I cannot understand switching our fuel mix to rely so heavily on natural gas at a time when natural gas is becoming increasingly scarce across North America and when natural gas prices are significantly more volatile compared to coal.

The environmental benefits are a noble motivation, but the reality is that Ontario's coal plants are responsible for a small fraction of total air pollution and these plants could be fitted with pollution abatement technology for less money than building a bunch of new gas plants.

Even worse, the loss of coal capacity in Ontario will inevitably lead to higher electricity imports from the neighbouring Great Lakes states ... electricity that is generated with, you guessed it, coal. Considering the majority of our air pollution blows in from these states, the air quality in Ontario will not improve significantly.

Several reasons
1) There are tonnes of natural gas reserves in the north espeicially along the hudson bay lowlands that have as of yet untapped.

2) We could build a stronger connection with the quebec hydro network and use thier hydro from james bay which would be better for the environment.

3) Adding new filters is more of band aid then anything. Although i do agree that coal fired plants are a small part of the problem. The real problem is our auto denpendancy and lack of decent public transit.

4) I thinking meeting the Kyoto protocal is a good idea. Even if our redneck neighbours to the south of us do not attempt to meet it. AS well as our redneck relatives in alberta. If all other states said "well the US is not doing then why should we " then there would be a serious problems in the world.

5) finally, getting rid of those coal fired plants will make force us to find another alternative. To be honest how much did that stupid refurbishment of those nuclear power plants cost several billion i am sure. We constucted massive fields of wind farms in lake ontario with that money let alone the far north.
 

AdRiaN

TRIBE Member
1) There are tonnes of natural gas reserves in the north espeicially along the hudson bay lowlands that have as of yet untapped.
Good luck convincing the native bands and environmentalists. In addition, the reason certain reserves remain untapped is because extraction is too costly given the outlook for natural gas prices. If natural gas prices rise, then electricity prices will rise accordingly. Not to mention that demand for natural gas is very high during the winter months for home heating, and adding on the demands for electricity generating plants could lead to shortages in Ontario.

2) We could build a stronger connection with the quebec hydro network and use thier hydro from james bay which would be better for the environment.
Quebec has no obligation to sell into Ontario, and quite frankly, they would rather sell into the United States because prices are higher. Quebec has no reason to sign firm contracts with Ontario for power, so we'd essentially be at their mercy in case of a tight supply situation. In addition, improvements to our intertie capacity would require a massive investment (not to mention environmental approvals), which again pushes up electricity prices.

3) Adding new filters is more of band aid then anything.
Pollution abatement technology for coal plants can reduce NOx emissions by 90% and SOx emissions by 97%. Why is making our coal plants cleaner only a bandaid solution?

4) I thinking meeting the Kyoto protocal is a good idea. Even if our redneck neighbours to the south of us do not attempt to meet it. AS well as our redneck relatives in alberta. If all other states said "well the US is not doing then why should we " then there would be a serious problems in the world.
We already have a serious problem with Kyoto in that emissions of CO2 will not be reduced under the current environment. All of the major emitters (e.g., United States) have refused to sign, or have been granted exemptions (e.g., China and India). Europe does not require any major reductions and Russia actually has a surplus of emission credits. Basically, only a few industrialized countries are required to comply and spend billions of dollars to make a tiny drop in the bucket of global CO2. If you ask me, Canada is a sucker for spending the money and killing our competitiveness for no real benefit.

5) finally, getting rid of those coal fired plants will make force us to find another alternative. To be honest how much did that stupid refurbishment of those nuclear power plants cost several billion i am sure. We constucted massive fields of wind farms in lake ontario with that money let alone the far north.
Ontario is already investing in renewable sources of electricity (1,350 MW by 2007) and conservation (1,350 MW by 2007) but they are not sufficient to replace the 7,500 MW of coal-fired generation. Not even close. Wind power is not reliable enough to meet a substantial portion of demand, regardless of how much money you spend and how many wind turbines you erect.

Nuclear plants are still a better investment than wind power. The refurbishments at the Bruce A nuclear station were completed at a reasonable cost, and even the overruns at Pickering A still put the plant's power at a lower price than wind. Unfortunately, the public has no appetite for additional nuclear plants and they require many years of approvals before further years of construction.

The bottom line is that phasing out coal is extremely expensive and the benefits are not substantial. The required increase in electricity prices in Ontario would have serious consequences for our economy and the improvement in air quality would be relatively small. It's not worth it.
 

~atp~

TRIBE Member
I agree with Adrian on this one. My girlfriend's father is a geologist specializing in the oil & gas industry, and works for the ministry of natural resources.

All the numbers he's ever seen, even the most optimistic are dismal in terms of natural gas supply. And I think we all know what the deal is with oil reserves.

Striking out coal plants "just because we're trying to be clean" isn't smart. It's stupid and unnecessary until we have a clearly-defined, realistic plan for energy production in the next 20 years.
 
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eLeKTRon

TRIBE Member
My take on the New Energy Directions report is that it was prepared as a response to the Government’s intention to phase out the coal plants. The report is effectively saying … “ok if the phase out is in fact proceeding, then this is how we should move forward on everything else”. The phasing out of the coal-fired plants is really nothing more than pure politics geared to make it appear that something significant is being done about air pollution. And Adrian is correct, the “dirty coal polluter” argument doesn’t hold up well under even the slightest informed scrutiny. But I don’t think that it is a “recipe for disaster”, as Adrian put it. The coal plants are old technology and the newer natural gas plants offer a number of advantages. They make excellent peaking plants, they are fast, reliable, efficient, scaleable and can be strategically placed to alleviate the need for expensive transmission infrastructure.

Concerns about natural gas supplies? I don’t think we have anything to worry about. I have yet to read a convincing study on the demise of Canada’s natural gas reserves. Remember the “sky is falling” doomsday scenarios on oil? Guess what? Didn’t happen. Why? Because economics will drive innovation, exploration and production. The stuff is there, and I believe in great quantities - it is just more difficult (read: expensive) to produce. The easy-to-produce gas is being depleted, no doubt, but that is no reason to panic. Technological innovations will undoubtedly increase gas reserves and help to reduce production costs, just as they did for oil. Still, steadily increasing gas prices are likely to result - but not to the extent that they will render gas-fired electricity generation uneconomic. The most recent study I have read shows that a brand new 375 MW gas plant in Ontario is feasible if it can fetch electricity prices in the 6 to 7 cents/kWh range. And that is with natural gas at between $6 and $10/MMBtu -- higher prices than we have seen, on average over the last year. I’m not sure how the loss of the coal capacity will “inevitably lead to higher electricity imports” from the USA , especially if new replacement generation comes on stream and is phased in correctly. Fuel price volatility can be mitigated through the use of forward contracting. In fact, that is what is currently being done by Ontario’s NUG generators which are essentially private natural gas cogen companies. Under my plan to fix the electricity mess in Ontario, new generators will be beating a path to this province. (More on my plan in later threads.)

I think one of the report’s more interesting recommendations, and one that seems to have been missed by the readers, is for competitive bidding/long-term power contracting. This is something we’ll be hearing a lot about in the coming months/years. I can guarantee that. The province’s unfortunate experiment with across-the-board spot market pricing simply did not work. Especially when there is one dominant generator (OPG) controlling 75% of that market. However, bidding/contracting raises a number of concerns in and of itself, e.g., what happens if a utility defaults? How are the market rules established? Who oversees it? What is the appropriate mix of fixed and spot price? (These concerns should also be the subject of a future thread.)

The demand side of the equation is another topic that warrants further exploration in another thread. I noticed that Woodstock’s pre-paid power program was a recent subject of interest in the Tribe General Stuff forum. I like to see good debates about electricity and I really like to see the debates involve ordinary people and not just energy geeks. Hopefully there will be more.
 

AdRiaN

TRIBE Member
The most recent study I have read shows that a brand new 375 MW gas plant in Ontario is feasible if it can fetch electricity prices in the 6 to 7 cents/kWh range.
True, but there are a few other factors at play. Although reserves may be sufficient on an annual basis, the problem with natural gas demand in Ontario is that home heating customers will be competing against electricity generators for an already tight supply (i.e., because of the cold weather). A real possibility exists for shortages during these peak periods.

Buyers of natural gas can sign "firm" contracts to guarantee delivery of supply, but the premium for such a contract would likely add at least another $1/MMBtu to price (not to mention that premiums would probably rise as more and more generators are seeking firm delivery). Again, electricity prices would rise substantially.

Higher electricity prices are not inherently evil, but they need to be justified by an offsetting benefit to the public. If these higher power costs do little to improve air quality in Ontario, what is the point?

As for my comment about increased electricity imports from neighbouring states, I am referring to the fact that a natural gas plant in Ontario with costs of 7¢/kWh is going to be under-cut by coal plants in Michigan, Ohio, and New York with costs of 4¢/kWh. These coal plants will then blow even more pollutants into Ontario than is already the case.
 

~atp~

TRIBE Member
Originally posted by eLeKTRon

Concerns about natural gas supplies? I don’t think we have anything to worry about. I have yet to read a convincing study on the demise of Canada’s natural gas reserves. Remember the “sky is falling” doomsday scenarios on oil? Guess what? Didn’t happen. Why? Because economics will drive innovation, exploration and production. The stuff is there, and I believe in great quantities - it is just more difficult (read: expensive) to produce.


This is incorrect. However, for me to back up my position I would have to go bug my girlfriend's dad for some stats on it.
 

eLeKTRon

TRIBE Member
Originally posted by AdRiaN True, but there are a few other factors at play. Although reserves may be sufficient on an annual basis, the problem with natural gas demand in Ontario is that home heating customers will be competing against electricity generators for an already tight supply (i.e., because of the cold weather). A real possibility exists for shortages during these peak periods. [/B]
There wouldn't likely be shortages in physical supply as Ontario has ample natural gas storage facilities and additional storage is being developed now. There may, however, be distribution bottlenecks. This is overcome now by the use of an interruptable rate feature whereby on very cold days, gas customers switch to an alternate fuel. Gas is then re-directed to custmers who really need it, including electricity generators. Also, distributors can, and regularly do, expand their system capacity.
Originally posted by AdRiaN
Buyers of natural gas can sign "firm" contracts to guarantee delivery of supply, but the premium for such a contract would likely add at least another $1/MMBtu to price (not to mention that premiums would probably rise as more and more generators are seeking firm delivery). Again, electricity prices would rise substantially. [/B]
I am not sure about the $1 premium (sounds high) but what you're talking about is long-haul pipeline capacity, which is different from the physical commodity and the price of the commodity. Pipeline space and commodity were separated a few years ago. Also, hedging and other risk management techiques can reduce volatility and often, reduce the average price.
Originally posted by AdRiaN
Higher electricity prices are not inherently evil, but they need to be justified by an offsetting benefit to the public. If these higher power costs do little to improve air quality in Ontario, what is the point? [/B]
I absolutely agree. As long as the US Midwest continues to burn dirty coal, and as long as the wind blows north, our air will be polluted. One benefit of our "off coal" may be to help put pressure on the US to start cleaning up its act. And its not as though our reputation is stellar on the pollution front, in any event. Remember that Canada has been lagging them on other pollution matters, such as the Great Lakes clean up.
Originally posted by AdRiaN
As for my comment about increased electricity imports from neighbouring states, I am referring to the fact that a natural gas plant in Ontario with costs of 7¢/kWh is going to be under-cut by coal plants in Michigan, Ohio, and New York with costs of 4¢/kWh. These coal plants will then blow even more pollutants into Ontario than is already the case. [/B]
I don't think the market works that way. Individual power plants from outside of Ontario don't bid into the Ontario market (i don't think -- I'll check that). Ontario imports power when it needs it -- at extremely high prices. I suspect that where there is an ISO (such as New York), the price is based on the ISO's market clearing price and then a premium is added. That price would be a blend of all generation types, including coal, plus a market premium. Ontario has lots of cheap generation, but any incremental generation is going to be expensive, no doubt. Some hydro plants can operate profitably at 2 cents/kWh. Some nukes can operate, not including capital replacement, on 3 cents/kWh (its the refurbishment costs that kills the nukes).
 
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eLeKTRon

TRIBE Member
yet another report ...

haha! There is a real "bun fight" going on between the OEB and the environmentalistas. expect more ...

Today from teh Clean Air Dudes:
The Ontario Energy Board (OEB) is attempting to sideline
innovative and cost-effective approaches to energy conservation
in Ontario. In its March 1, 2004 report to the Minister of
Energy, the OEB is calling for the creation of a large
centralized agency to run all the electricity conservation
programmes in the province.

This highly centralized, top-down approach will entail
significant delays and cost increases in the delivery of the
kinds of conservation programs that are being called for by a
wide spectrum of energy experts. It also flies in the face of
the proven experience of the natural gas sector, where
utility-driven programmes are reducing customers’ bills by more
than $1 billion.

Time is of the essence if Ontario is to achieve a coal phase-out by
2007. We cannot afford to lose two or more years of conservation
activity while a conservation bureaucracy is being created. Instead of
creating a large new bureaucracy to deliver energy programs,
Ontario’s Energy Minister should direct the OEB to make the
aggressive and cost-effective promotion of energy conservation
a profitable course of action for Ontario’s municipal electric
utilities (e.g., Toronto Hydro) and Hydro One.

Please join us in urging Energy Minister Dwight Duncan to
reject the OEB’s approach and to instead favour innovative,
customer-focused energy conservation programmes that are
designed and delivered by Ontario’s electric utilities, not a
centralized bureaucracy. Minister Duncan can be reached at
Dwight.Duncan@energy.gov.on.ca.

Please pass this message on to your friends.

Thank you.

Raví Mark Singh
Communications & Membership Co-ordinator
Ontario Clean Air Alliance
Ph: (416)926-1907 ext. 245
NOTE OUR NEW EMAIL ADDRESS: info@cleanair.web.ca.

The Ontario Clean Air Alliance is a coalition of health,
environmental and consumer organizations, faith communities,
unions, utilities, municipalities and individuals working for
cleaner air through strict emission limits and a phase-out of
coal in the electricity sector. Our partner organizations
represent more than six million Ontarians.

To subscribe or unsubscribe to this list please visit
www.cleanair.web.ca/getin.

For more on how you can contribute to clearing Ontario's air through
your electricity purchases, please see our consumer-advice website:
www.electricitychoices.org.
 

~atp~

TRIBE Member
Originally posted by eLeKTRon
what's incorrect?

That we do not have "anything to worry about" or any "concerns" about "natural gas supplies" .

This goes against the current understanding of natural gas supplies, from a resource perspective and a cost perspective. Suggesting that "technology" will save us is a big risk, at best, and it is by no means a certain things.

Expect natural gas prices to skyrocket out of control in the next 10-15 years. Supply will not last. We already ship natural gas into Ontario from Alberta and store it in empty oil wells, most projections recognize natural gas as being highly limiting.
 

AdRiaN

TRIBE Member
There wouldn't likely be shortages in physical supply as Ontario has ample natural gas storage facilities and additional storage is being developed now.
The problem is not immediate. However, consider that National Energy Board figures show that Canada's natural gas production peaked in 2001 and is already in decline. Production dropped 5.3% in 2003. In addition, our existing gas wells are becoming increasingly depleted and optimistic scenarios show a substantial decline of supply expected to begin around 2015 (or 2009 under pessimistic scenarios). A similar picture exists in the United States where production also peaked in 2001 and has been declining by 1.1% ever since.

Any new discoveries and developments of natural gas will not only need to replace these declines, they will also need to meet growing demand. Judging by the brisk construction of natural gas plants in the United States, and massive construction in Ontario to replace our coal plants, the supply-demand balance does not look promising. Nobody is suggesting that shortages are imminent or "the sky is falling". However, the logic of making a wholesale shift from coal into natural gas by 2007 is questionable when this imbalance could creep up in a matter of years and when the environmental benefits are minimal.

Pipeline space and commodity were separated a few years ago. Also, hedging and other risk management techiques can reduce volatility and often, reduce the average price.
That's fine ... but regardless of hedging, the delivered price of natural gas to electricity generators is going to be much higher than today, and electricity prices are going to be much higher. Period. And for what? All of this money is better spent on cleaner coal technology.

One benefit of our "off coal" may be to help put pressure on the US to start cleaning up its act.
Coal in the United States is not going anywhere. Americans are willing to abide by clean air standards, but only by installing pollution abatement technology on coal plants, not moth-balling coal plants and replacing them with new gas plants. Again, I believe this approach is a better value for the money.

I don't think the market works that way. Individual power plants from outside of Ontario don't bid into the Ontario market (i don't think -- I'll check that). Ontario imports power when it needs it -- at extremely high prices.
Anybody with an interconnection and the necessary transmission rights can bid into the Ontario market any time of the day. Much like how our nuclear plants routintely bid their cheap power into the U.S. market during off-peak hours. You are thinking of the Import Offer Guarantee (IOG) paid by the IMO to secure capacity from neighbouring jurisdictions when all of Ontario's available capacity is being utilized. This only occurs during a few hours of the day and a small number of days during the summer and winter peaks.
 

eLeKTRon

TRIBE Member
~atp~ ^^That's just my opinion -- I am a bit of a "contra" guy when I keep reading things that just don't quite make sense to me. I am aware that there are a number of studies that suggest natural gas reserves are, or will be, in decline. There was another one in today's Mop & Pail from CERI that said there wasn't enough gas from MacKenzie to feed the oil sands extraction process. Then it said that they might resort to nuclear energy to replace the natural gas. The trouble with these [reserve] studies is that they don't give credit to humankind for being innovative in the face of need. And history has shown that we always, somehow, manage.

The studies aften rely on the old "proven and probable" reserve methodology which basically says that "if you can't see it, then it ain't there." That's like standing on a beach in California and saying that the Pacific Ocean is only 30 miles wide because that's the only part of it that we can see.
Remember, oil was going to run out. All potable water would be gone. The Earth shall warm up and we'll all die!
;)
 

eLeKTRon

TRIBE Member
Pollution abatement technology for coal plants can reduce NOx emissions by 90% and SOx emissions by 97%. Why is making our coal plants cleaner only a bandaid solution?

These are pretty impressive numbers, Adrian. I would, however, question: (a) whether these numbers have actually been achieved on any existing retrofitted coal plant; and (b) whether these results could be achieved on Ontario's specific mix of coal-fired plants and the specific types of coal that they use. All coal is not created equally, nor is it priced equally. Some coal is dirtier, cheaper and harder to scrub. Additionally, some of the plants are dual-fuel. I would also question the cost of installing the abatement technology. I am not aware of any studies that that provide, with any reasonable assurance of accuracy, the actual cost of retrofitting the Ontario plants. I would be curious to know the impact on the economics of operation after installation. Would it be as high as 6 to 7 cents/kWh? I think it could be. Also, would you disagree that OPG has an abyssmal record on project management, financial/cost management and planning in general? I don't think I would trust them to deliver this program on time and within budget.

Coal in the United States is not going anywhere. Americans are willing to abide by clean air standards, but only by installing pollution abatement technology on coal plants, not moth-balling coal plants and replacing them with new gas plants. Again, I believe this approach is a better value for the money.
As for my comment about increased electricity imports from neighbouring states, I am referring to the fact that a natural gas plant in Ontario with costs of 7¢/kWh is going to be under-cut by coal plants in Michigan, Ohio, and New York with costs of 4¢/kWh. These coal plants will then blow even more pollutants into Ontario than is already the case.


Presumably, if the Americans are going to proceed with the same abatement programs as you advocate for Ontario, then their costs of power production will rise commensurately. I would then question the sustainability of the 4 cents/kWh you cited, on a going forward basis. Also, at an exchange rate of $1.25, the 4 cents becomes 5 cents. I could see the cost of "clean coal" being within the range of the new gas generators, without a great leap of logic. When I consider the pure economics and then add to that the many other benefits of gas-fired generation, I remain unconvinced that retrofitting old coal plants is best approach.
 
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AdRiaN

TRIBE Member
These are pretty impressive numbers, Adrian. I would, however, question: (a) whether these numbers have actually been achieved on any existing retrofitted coal plant; and (b) whether these results could be achieved on Ontario's specific mix of coal-fired plants and the specific types of coal that they use.
OPG recently completed a $250 million installation of SCRs at Lambton and Nanticoke. This technology will reduce NOx emissions by 80%. In addition, Nanticoke is beginning to use lower sulphur coal (Powder River Basin) to further reduce SOx emissions. Believe it or not, OPG actually has a good track record in terms of implementing pollution abatement technology for its coal plants. NOx emission rates have steadily decreased from around 1.8 t/GWh in 1996 to 1.0 t/GWh in 2002. Similiarly, SOx emission rates have declined from 4.18 t/GWh in 1996 to 3.72 t/GWh in 2002.

Admittedly, "clean coal" technology is still developing and no guarantees exist with respect to cost and effectiveness. However, the technology is promising and both the American and Canadian governments plan to invest billions of dollars over the next few years to test this technology and assist plants in implemented the most up-to-date pollution abatement equipment. As I mentioned earlier, nobody in North America is planning on abandoning coal except for Ontario. We are putting ourselves at a major disadvantage.

I would be curious to know the impact on the economics of operation after installation. Would it be as high as 6 to 7 cents/kWh? I think it could be.
If natural gas conversion were more economic than investing in cleaner coal, then you would see a lot of plants doing so across North America. Obviously they are not. OPG's cleaner coal plants (Lambton and Nanticoke) are still very cheap compared to natural gas, so much cheaper that many of these units ran as baseload and intermediate plants. When coal costs US$1.50/MMbtu and natural gas costs US$5/MMbtu ... you have a lot of room for increased capital costs. I have seen some estimates that electricty from clean coal might be in the neighbourhood of 5-6¢/kWh. This would still be lower than gas assuming current natural gas prices, but we've already agreed that natural gas prices are going to rise.
 
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