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Highlights of the Ontario Government's Long Term Energy Plan

On November 23, the Ontario Government released its Long Term Energy Plan, designed to serve as a framework document for planning the electricity system for the period to 2030.

Key Assumptions

The Government foresees growth in power demand in Ontario over the next 20 years, driven by significant population growth and increasing urbanization, but offset somewhat by slower growth in manufacturing demand as Ontario's economy continues the transition from being based on manufacturing and resource-extraction to being essentially a service economy.

The Plan identifies three regions in Ontario that are particularly in need of expanded sources of power. These are the Greater Toronto Area (where population is expected to grow by 38% over the next 20 years); northwestern Ontario, which will be impacted by the closing of coal-fired stations in Atikokan and Thunder Bay; and, the Kitchener-Waterloo-Guelph-Cambridge area, where on-peak demand is growing much faster than the provincial average.

The Natural Gas Era

The document points out that over the last 7 years, there has been a significant investment in new generation capacity to alleviate the shortage of capacity that existed in 2003, and to pave the way for the phase out of coal-fired generation by 2014. The bulk of that new generation capacity has been natural gas-fired generation.

The plan points out that gas will continue to provide a growing source of power generation, since gas is cleaner burning than coal, but provides operational flexibility like coal, and is relatively inexpensive and quick to build. In the Greater Toronto Area where more generation capacity is required, natural gas in a district energy scheme is considered an important strategy (gas is burned in an engine or turbine to run a generator, and the waste heat is captured to provide space and water heating in surrounding buildings).

The Era of Renewables

The period from 2010 to 2015 will be dominated by the growth of renewable power's share of Ontario's generating capacity. This type of generation is made up of wind, solar, hydroelectric and biomass. Much of this expansion is driven by the provisions of the Green Energy and Green Economy Act (2009) and has received widespread attention. What is less well understood is the requirement for significant expansion of the transmission and distribution network to attach renewable sources of generation, which are often geographically dispersed (and located, for example, where the wind resource is, not necessarily where the load is).

The Long Term Energy Plan indicates that transmission system expansion will be focused as much as possible along existing corridors. This recognizes the significant challenge to getting approvals to site new transmission corridors. The consequence may be a limitation on the ability of many renewable energy projects to get connection to the grid, if they do not lie along main transmission corridors. This is not necessarily a bad thing, as it is generally perceived that the Ontario Power Authority has more applications for renewable projects under the Feed-In Tariff program than it can deal with.

The Plan confirms the Government's goal of eliminating coal-fired generation by 2014. Between now and that date, coal-fired generation will be reduced by limiting the operating output, and 2 units at Nanticoke will be shut down ahead of schedule in late 2011.

The Nuclear Era

The period beyond 2015 marks the nuclear phase of the plan. Nuclear power represents about 32% of Ontario's capacity at present, but about 50% of Ontario's energy output (reflecting that nuclear operates at a steady, high rate of production).

The Plan aims to see nuclear maintain this share of the generation mix. Beyond 2015, the nuclear fleet that was built in the 1970's reaches the end of its working life. Plans are to seek to extend the operating life of units at Pickering for a period of up to 4 years, after which they will be removed from service. Between 2016 and 2022, 10 nuclear units in Ontario at the Bruce and Darlington stations will be taken out of service 2 at a time, for periods up to 3 years, for refurbishment. Successful refurbishment could extend their operating life for another 30 years.

Experience with refurbishment projects already undertaken at the Bruce and Pickering stations suggests these projects often take longer and cost more than initially expected, so this represents an area of some risk in the Plan.

In the 2020's, the expectation is that new nuclear capacity will be added at the Darlington site. While building new nuclear capacity may be controversial in some jurisdictions, in communities such as Darlington - where a plant has operated effectively for decades and is a major local employer - the strategy is not contentious.

Cost Impacts

The Plan reconfirms the Government's commitment to promoting conservation as the cleanest and most cost effective form of energy "supply". Of course, this is true for well-considered conservation measures, but not necessarily true for all measures undertaken in the name of conservation.

The Plan projects that the investments described in the Plan will result in residential rates rising by an average of 3.5% per year over the 30 years of the Plan, essentially doubling in that period. Importantly, rates are projected by the Government to rise by 46% over the next 5 years (implying they will rise much more slowly after that). Industrial rates are projected to rise by 2.7% per year.

The Government has announced the Ontario Clean Energy Benefit to offset the steep near-term increases facing residential users, small businesses and farmers. The Benefit provides a credit of 10% of the total bill (including HST), to be funded from general tax revenue. The Benefit is to be implemented effective January 1, 2011 and remain in place for 5 years.

The Electricity Policy Environment

The Plan provides a high level direction for the evolution of Ontario's electricity system. The next step is for the Ontario Power Authority to develop an Integrated Power System Plan (IPSP) that adds needed technical detail to implement the Government's long term vision. The IPSP is expected to be completed by the end of 2011 and will be subjected to public hearings at the Ontario Energy Board. Ontario regulations require the OPA to produce an updated IPSP every 3 years.

The Government's Long Term Energy Plan, while providing an overall vision for the evolution of the electricity system, is at the same time a very political document. The tone of the document reflects the fact that Ontario is one year from a provincial election, an election in which electricity policy and particularly electricity costs are expected to be hotly discussed issues. One of the curses on Ontario's electricity system has been the highly politicized nature of electricity policy over much of the last 20 years. Radical changes in policy follow each change in government, and even spring forth when the government of the day determines a change in course is politically expedient.

Whether the October 2011 election produces a change in government or not, energy industry insiders are hopeful that the Long Term Energy Plan and the Integrated Power System Plan that flows from it can form the basis of a more stable, long term policy direction. They are also hopeful that the responsibility for managing electricity system development increasingly will fall to technical agencies such as the Ontario Power Authority and the Ontario Energy Board, leading to a stable and predictable planning environment, reducing risk and better supporting the huge capital investments needed to develop and maintain the modern power system.

Ontario Government's Long Term Energy Plan Read more»

Ontario Clean Energy Benefit - A Short-Term Conservation Killer? Read more»

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