Three new Ministerial directives shape the future of Ontario's electricity system
On February 17, 2011, Ontario's Minister of Energy Brad Duguid issued three directives that will help shape the planning of generation and transmission in the province for years to come. The three directives, summarized below, sketch out Ontario's future mix of electricity generation technologies, identify some priority investments in transmission infrastructure, and require the Ontario Energy Board ("OEB") to expedite a hearing regarding the supply plan that the Ontario Power Authority ("OPA") will file later this year.
The directives are further evidence of the active role that the government wishes to play in the planning of Ontario's electricity infrastructure. The three directives touch on many of the "hot button" electricity issues of the past few years, including the commitment of the government to renewables in the face of grid constraints, the cancellation of the GTA West gas plant, the procurement of new nuclear generation at Darlington, and the phase-out of coal-fired generation. However, the timing contemplated in the directives virtually ensures that the OPA's electricity strategic planning decisions will be finalized only after the provincial election this fall.
The government directed the OPA to develop an Integrated Power Supply Plan ("IPSP") consistent with the following goals and principles:
Demand (which dropped 6% during the recession) should be assumed to grow at approximately 15% between 2010 and 2030. The government describes this assumption as a "medium electricity growth scenario" based on reasonable residential and commercial demand growth, but only modest industrial demand growth.
The IPSP should provide for peak demand reduction of 7,100 MW and energy savings of 28 terawatt-hours by the end of 2030, to be achieved in accordance with the following milestones:
All targets are relative to 2005.
Conservation and demand management can include load displacement by things like geothermal heating and cooling, solar heating and fuel switching, but does not include green generation under the Feed-in Tariff program.
Nuclear generation should continue to provide about half of Ontario's power. To that end, the IPSP should include the refurbishment of 10,000 MW of capacity at Darlington and Bruce.
It should also include the procurement of 2,000 MW of new generation at Darlington. The government therefore seems intent to reviving the Darlington New Nuclear Project which it suspended in June 2009 after receiving pricing from private sector bidders. Then-Minister of Energy George Smitherman described the proposal (from AECL) as being "many billions" of dollars too high. The procurement of new nukes will likely not proceed until AECL's fate is more certain. SNC Lavalin and Ontario Municipal Employees Retirement System (OMERS) recently announced that they will team up to bid for the commercial business of AECL.
The government still expects all coal-fired generation to be phased out by the end of 2014, but has asked the OPA to accelerate the shut-downs, if possible.
The government also hopes to covert the coal stations to other forms of generation, specifically:
Assuming Nanticoke will be converted to gas, the government expects planning and approval of natural gas pipeline infrastructure to begin soon.
The government expects that 20-25% of generation will come from hydroelectric stations, with 9,000 MW to be in service by 2018. In meeting this target, the IPSP should account for the completion of the Niagara Tunnel and the Lower Mattagami redevelopment and should allow for future hydro development, where it is cost effective.
Renewables (other than hydroelectric)
The government expects that 10-15% of generation (or about 10,700 MW) will come from renewable sources (other than hydroelectric) by 2018. The implementation of renewables will continue to be dependent on available grid capacity.
Gas-fired generation will continue to provide load balancing and to ensure system reliability.
The directive confirms that two of the three plants proposed in the OPA's 2007 IPSP, including the controversial GTA West plant in Oakville, will no longer be required. Only the Kitchener-Waterloo-Cambridge plant is to proceed, with GTA West's reliability issues to be addressed through a "transmission solution."
The IPSP must include the following five projects, which the OPA has already identified as being priorities to ensure system reliability, to serve new load and to accommodate renewables:
The OPA is to work with Hydro One to implement the projects above and to address the requirements of the Transmission Directive described below.
The OPA must also begin planning to connect remote communities north of Pickle Lake to reduce reliance on diesel generation.
The OPA should "give planning consideration" to smart grid enhancements and distribution level investment in such enhancements.
Reliability and operability
The IPSP should consider imports, energy storage and other means of enhancing reliability and operability of the grid.
With respect to storage, the plan should assess the economics of electricity storage with reference to peak and off-peak electricity pricing differentials, capital and operating costs of such facilities, and costs relative to other peak management options.
The OPA must be "mindful" of customer bill impacts when developing the IPSP. No specific rate impact targets are included in the directive.
The government issued a directive requiring the OEB to amend the terms of Hydro One's transmission license to require that Hydro One immediately pursue the following four projects:
The fourth project appears to be intended to relieve capacity constraints that have recently led the OPA to reject many microFIT applications and to amend the application process for microFIT and capacity allocation exempt FIT projects.
The government anticipates that the OPA will submit a revised IPSP later this year. The IPSP will lay out an economically prudent and cost effective plan for complying with the Supply Mix Directive. The OEB will hold a public hearing to approve the IPSP.
In an effort to balance the public's right to participate in such a hearing with the public's interest in having it proceed expediently, the government directed the OEB to complete the hearing no later than 12 months after the date the OPA submits the IPSP.