Ontario energy plan warrants scrutiny

ONTARIO - Ontario Energy Minister Brad Duguid has reason to be leery about the fate of the long-term energy blueprint he presented in late November.

Plans for the future of Ontario's electricity system over the long haul — even when they promote cleaner, greener power sources, as Duguid's do — aren't noted for lasting long.

The Integrated Power Supply Plan IPSP, produced in 2007, was supposed to focus on a sustainable energy supply and “improve current natural gas and renewable assets at a sustainable and realistic cost.”

But it was already mired in a regulatory review by the Ontario Energy Board OEB in 2008 when the energy minister of the day, George Smitherman, all but sank it. He directed the Ontario Power Authority to revisit the file and give more attention to areas such as renewable energy sources, conservation and consultation with First Nations, all of which were prominent in the Green Energy Act he was about to spring on the province.

“That materially changed the type of plan the OEB was looking at,” says Jan Carr, who was CEO of the Ontario Power Authority during the time it developed the original power supply plan. “Suddenly the plan in front of the OEB had no legal framework around it.”

Faced with reconciling the power supply plan and Smitherman's new directive, the energy board suspended hearings and shelved the plan, removing it from its website.

But it didn't disappear from the government's consciousness.

Duguid's long-term electricity plan, presented in late November, may more closely resemble a colourful election brochure than a government document. Its content, he says, is more or less a resurrection of the original IPSP — still unapproved, but now refreshed: “What we've done is put together our entire vision of where we think energy will be going over the next 20 years,” he says.

Carr thinks the delay could have been avoided. “If the minister had counted to 10 and waited for the OEB to come out with a decision, he'd have had a plan in place and could then set about revising it,” he says.

Instead the latest plan still has to face the somewhat sclerotic scrutiny of the OEB, so it could be a year or so before it's finalized.

That may be just as well. Influenced by the Green Energy Act passed in 2009, the latest plan re-emphasizes the province's initiative to ditch coal-fired electricity and projects an even cleaner energy future than its predecessor. But the assumptions it makes to reach its objectives bear some scrutiny.

So does the cost.

Overall, the McGuinty government projects that capital spending on the electricity system will total $87 billion over the next 20 years. It says that will boost electricity capacity — potential power as opposed to that actually generated — by about 11,000 megawatts, to 48,000 megawatts.

About 38 per cent of the total spending will be on nuclear and hydro, which is appropriate considering they'll continue to do most of the heavy lifting. By 2030, they're expected to be generating 66 per cent of the system's baseload — the bulk electricity supplied at a constant rate.

Some other spending areas, though, seem a leap in logic. The plan earmarks $12 billion over the next 20 years to bump up the role of conservation in the energy mix. It calculates that the money will accelerate a drop in consumption from 4 per cent this year to 14 per cent in 2030.

Given that conservation isn't of much use for lighting or air conditioning a home, categorizing it as a power source seems a stretch. Nonetheless, Colin Andersen, the OPA's current chief executive, maintains not using electricity is tantamount to making it.

“We compare it conservation to other sources of supply and equate it to generation, in that we can avoid having to build capacity other ways,” he says.

Renewables remain a prominent component of the coal-replacement strategy. Duguid envisions spending $27 billion over the next 20 years to boost generation from wind, solar and biomass to about 14 per cent of the total electricity produced. Wind energy alone will get $14 billion, which Duguid figures will mean wind power will rise from 2 per cent of the supply this year to 10 per cent by 2030.

Environmentally minded groups reckon the government should go even further. Cherise Burda, Ontario policy director for the conservationist Pembina Institute, sees the current economic slump as an opportunity to swap 10 per cent of projected nuclear generation for renewable sources.

“We have some breathing space to do some planning, since demand is steady or declining, so there isn't the urgency to develop nuclear,” Burda says.

But Carr believes the Liberals' enthusiasm for all things green has already proved distracting, without addressing the cost to citizens.

“The government is attempting to pick winners, but on the basis of a lot of advocacy lobbying and popular public opinion, not economics,” Carr says. “The one big lobby group that is absolutely missing is the consumers.”

Ironically, subsidies paid by the province for wind energy under the Green Energy Act's feed-in tariff program actually contribute to higher electricity costs when there is too much wind and system demand is low. Electricity can't be stored or dumped into the system at times of low demand without overloading the supply side.

Burda contends that one solution is to feather turbines to reduce output. But even if feasible on short notice, it would mean determining which operation, among the many already selling electricity to the province, would have to shut down. A wind farm that harvests about $1.5 million worth of electricity out of the air, as some do, isn't likely to welcome such a call.

Normally, the electricity system operator defaults to the lowest cost source when creating supply. But giving wind or any renewable source priority on the grid can mean displacing a lower-cost source.

An option is to export the surplus. But selling wind-powered electricity can be a money-loser. The selling price will inevitably be a floating spot-market price that is certain to be lower than the subsidized fee the province paid for wind energy.

Energy consultant Tom Adams notes that Denmark, lauded for the heavy wind component in its electricity supply, sells surpluses to Norway, which effectively “stores” it by using it to displace its own hydro power, which remains behind a dam for future use. When Denmark encounters a low-wind period and needs extra electricity, Adams says, Norway sells it back — at a premium.

One consequence is that Denmark, extolled by wind advocates as an exemplar, charges homeowners about 40 cents a kilowatt hour for electricity — about six times what Ontarians pay.

None of which is to say wind power isn't viable — but only with natural gas in a supporting role, and then only to produce peak-load electricity. Gas is plentiful and relatively affordable if not exactly cheap. Gas-fired power plants are faster, easier and cheaper to build than nuclear facilities.

Indeed, the province plans to spend only $1.8 billion on gas-fired electricity over the next 20 years, the lowest amount it is allocating to any fuel. Projected capital expenditures on other green energy development: $14 billion for wind, $9 billion for solar and $4 billion for biomass.

But for all its positive attributes, gas is still a fossil fuel that produces emissions. Nor are gas-fired generating plants especially welcome by homeowners. Residents of Oakville proved that this year when they successfully lobbied the McGuinty government to abandon a proposed facility there.

TransCanada Corp., which had been awarded a 20-year contract to build and operate the Oakville plant, is in talks with the province for compensation. Local MPP Ted Chudleigh warns a stalemate could lead to a $1 billion lawsuit.

Nonetheless, given the forecast growth of wind energy that relies on them, more gas plants will be built somewhere. The province calculates wind will account for 10 per cent of the electricity supply by 2030. To meet that objective, Ontario's current inventory of 700 or so wind turbines will need to grow to at least 4,400 units.

That won't sit well with opponents of wind power who claim turbines are unsightly, noisy and swat birds out of the sky. Wind Concerns Ontario, a province-wide organization, notes that Suncor Energy and TransAlta, both of which own and operate wind farms, also invest heavily in natural gas.

Both pro- and anti-wind contingents argue that studies support their case. Wind-farm opponents cite a United Nations paper that attaches a real, if unquantifiable, cost to wind turbines' intrusion on pastoral landscapes.

The OPA's Colin Andersen adds that wind power, even necessarily coupled with natural gas, is cleaner than coal. He says studies have indicated that “there's economic value in better health that comes with cleaner air through lower emissions.”

Whether green energy actually creates jobs is another point of polarization on the subject. The Liberals, naturally, argue that it does, which partly justifies its subsidization. Their 2010 budget forecasts 50,000 jobs over three years through the Green Energy Act.

But if subsidies drive electricity prices higher it could have an unintended consequence: businesses fleeing Ontario for jurisdictions with cheaper power could take jobs with them, the opposite of what the government projects.

On the other hand, higher electricity prices may already be contributing to the province's conservation goals. As electricity costs rise, more consumers will find ways to avoid using it.

But they may not be happy voters.