The Ontario government’s Long-Term Energy Plan released November 23, 2010, declares that the Liberals will fight the next election without changing course on their Green Energy Act.
Rather than dealing with the causes of the green rate shock now just getting started, the plan calls for an even larger portfolio of drastically expensive solar power, wind power and associated transmission lines than the Ontario Power Authority had called for in 2007.
Usually power system plans present their evaluation criteria, survey of options, and land on a preferred portfolio of investments with an atmosphere of detachment. Instead, this plan is grounded in inflated political rhetoric. The Liberal government’s track record is extolled at length ““ saving lives and cutting health care costs by vanquishing evil coal, revitalizing the economy through jobs and investment in electricity, and leading the world in progressive thinking and the protection of grandchildren. The contribution of all previous governments was of course negative in all respects.
The plan features obviously political but otherwise arbitrary policy zig zags. The government has decided to fiddle with the allocation of skyrocketing costs between consumers and taxpayers. Time of use rates are also the subject of manipulation, with a decision to contract peak price periods explicitly identified as responsive to, not costs, but public opinion.
The gas generation elements of the plan illustrate the contradictions Ontario’s power system is now torn between. The McGuinty government just cancelled a large, efficient modern gas project in Oakville, just west of Toronto. This project would have contributed several benefits, including east-bound transmission loading relief for power coming into the Greater Toronto Area. The government claimed that the Oakville gas plant cancellation decision was not driven by NIMBY politics but because the plant was no longer needed. This claim is directly contradicted by the new plan. The plan contemplates converting the 1970s vintage coal plants at Nanticoke and Sarnia to gas. These converted coal plants would burn at least 50% more gas per unit of delivered electricity as compared to the Oakville project just cancelled.
As an illustration of the risks and uncertainties in the near future, the government is assuming that Bruce Power will refurbish all of its remaining six unrefurbished reactors, notwithstanding the severe problems now being incurred with the two current and incomplete refurbishments. Now that Bruce Power has a clearer understanding of the true cost of Candu nuclear power, consumers can expect that Bruce will be unable to move ahead with new refurbishment investments without substantially richer compensation than it agreed to for the first two refurbishments.
Much of the reaction to the plan so far has focused on the projected cumulative impacts over the full 20 year horizon of the plan, such as the investment or rates figures. With the government facing an uphill battle in the polls heading toward next October’s election, the opinions of the current energy minister on what rates or investments will be in the year 2029 are of much less value than the outlook for the next couple of years.
The Ontario government’s official forecast is that residential rates will rise at about 10% per year over the next 3 years. This pace is significantly faster than had previously been estimated by independent analysts.
Even if the government planners had clear crystal balls, future investment figures are easily manipulated by wily communications advisors. For example, without details on the treatment of such factors as the treatment of interest during construction, investment and rate forecasts are impossible to understand accurately.
Ontario Hydro issued such a similar long term power system plan in 1989. It resulted in very little of lasting value. This plan looks to be headed for the same result.
Can you provide some guidance on the following:
Given the nature of the transmission upgrades in southwestern Ontario, including series compensation, rewiring and a new line west of London, the government intends to direct Hydro One to carry out these projects immediately. (LTEP, page 46 (25 of pdf)).
I was under the impression that new transmission projects, i.e. new west of London line, would be open to competition/designation process. Would that not apply in this case?
The series compensation and reconductoring in southern Ontario would involve existing Hydro One facilities, so I don’t see much reason for a designation process. I could be wrong, but it appears that the siting and design of the new line west of London is still up in the air. It may be that Hydro One facilities would be embedded in some of these development options.
The plan explicitly contemplates a designation process of the new line across the top of Superior. The plan is not explicit on the designation of the new Pickle Lake line.
Many aspects of the Ontario government’s Long Term Energy Plan could work. The LTEP contains many of the right technical ingredients for a successful plan. What seems to me to be the most unstable aspect of the plan is the extent to which is politicizes decision making for Ontario’s electricity future. Where once the McGuinty government promised to depoliticize electricity decision making, now the decision making is presented as part of the government’s election platform. Asking voters every four years to select a direction for the power system is a governance model that creates risks, particularly given the capital intensive, long lead-time, long lived nature of the assets.
Government-financed power systems have a significant cost of capital advantage over privately owned systems. However, critics of the government financing model, such as James Mavor, have argued that financing inherently involves influence and that influence can direct decision making away from efficiency towards political objectives.
The Green Energy Act and the LTEP that flows from it clearly illustrate the strength of Mavor’s critique.
Tom, is the proposal to build a new 500KV line from Sarnia to the Buchanan TS and than on to Hamilton necessary for grid stability or is it a billionare dollar gift to the wind industry to open up grid capacity west of London?
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