By Michael MacMillan
When the results of Ontario Hydro's internal nuclear probe first became public, the question on everyone's mind was, "how could this have happened?" The answer, even a month after the dramatic news conference, is uncertain. William Farlinger, Ontario Hydro's Chairman and acting President and CEO -- following the resignation of Dr. Alan Kupcis on August 12 -- pinned the nuclear division's troubles on poor management, the so-called "nuclear cult."
But it is an entirely different question, "Where is our power going to come from now?" that has dominated public debate ever since. It is hard to overstate the scope of Ontario Hydro's predicament. A full two-thirds of Ontario's entire electric power supply is nuclear in origin. By shutting down seven of its nineteen reactors, Ontario Hydro is looking at an estimated 4,4000 MW shortfall.
Farlinger insists falling back on traditional coal and fossil fuel resources will make up for the loss of nuclear generation. To that end, Lambton, Nanticoke and Essex generating stations are undergoing extensive renovations. By Ontario Hydro's own estimate, it will cost an estimated $8 million to bring the stations back into serviceable condition. A large sum, but small potatoes compared to the $5-$8 billion it will take to bring the three nuclear stations in-line with international safety standards.
John Earl, a spokesperson for Ontario Hydro, said the utility is committed to a zero-rate increase. And the only way to keep its promise is by squeezing more energy out of existing facilities.
"We have the generation capability in our system," he said. "(The coal generating stations) are already there, and can provide the power that we need."
While few doubt that coal can make up for the power shortfall, critics argue that the cost of fossil fuel power goes far beyond economic factors. They insist increased emissions from the coal plants will make Ontario's growing pollution woes even worse. Others are decrying the measure as a short-term, band-aid solution that fails to take future market forces into consideration.
Ontario Hydro's determination aside, the future of generation in Ontario seems uncertain. Will the utility have the resources to keep up with customer demand? Is dusting off several aging generating stations the best option for the province?
Not according to David Argue, an economic consultant and author of "A Review of the Economic Cost of Power In Ontario," a recently published study of Ontario's generation options conducted on behalf of the Independent Power Producers Society of Ontario (IPPSO). In the report, he compares the cost per kWh of several generating options currently available to Ontario Hydro. He concluded that "dispersed generation," generating power through small, community-based and widely distributed facilities is a cost-effective and environmentally friendlier option to the traditional mega-station scenario.
"If we've learned anything, it's that you don't put all your eggs in one basket," Argue told ET. "The approach to take is that there are many options out there, to look not just at the next two years."
After factoring in capital costs, fuel and maintenance fees and long-term environmental impact, Argue found that cogeneration, small hydro and micro-generation are the three cheapest forms of generation at between 6.6¢ and 9.2¢ respectively. Nuclear, hydroelectric and fossil fuel power, on the other hand, all exceed 10¢ per kWh.
He insists he is not singling out Ontario Hydro or fossil-fuel generation for criticism. Fossil fuel generating stations have a place in the future and should be treated as such. But merely shifting Ontario's generation base from nuclear generation to fossil is short-sighted. Ontario Hydro must stop centralizing its generation base, and explore other opportunities. Independent power producers are capable of producing 11,000 MW of power, chiefly in the area of natural gas cogeneration. And whether they are willing to admit it or not, he thinks Ontario Hydro needs independently produced power.
"They will not be able to meet their obligations, and that's not even taking into account increased load demand."
Argue and other "ipp" supporters say looking at the big picture -- and all the options -- is more important then ever.
James Temerety, CEO of Northland Power, said ipp's have much to contribute to Ontario's generation system. But he does not think they can fill in the gap, at least not overnight.
"I'm speaking about the big projects," he said, "but there are short term things that can be done."
He has a plan to offer Ontario Hydro if they ever come calling. Most ipp's have at least some excess capacity. This is power that can be contributed right away. After this initial contribution, they would expand their generating capacity, adjusting their load to whatever the market could bear. Thirdly, cogeneration plants would be spread across the province, effectively "taking back control" of generation, as Temerety puts it.
"These things can be rolled out pretty fast," he said. " I sure hope the powers that be look at that when they consider the options."
Not everyone within the ranks of independent generation feels as strongly as Argue and Temerety. Michael McEwen is president of Great Lakes Power, a Sault Ste. Marie-based private electric utility whose clients include Lake Superior Power and the town of Sault Ste. Marie itself. The company's generating assets include a 499 MW hydro facility, and a 95 MW cogeneration facility.
"Every little bit helps. There are lots of different emission-sensible projects that can be put into place across the province, reducing some of the coal-fire," he explained.
But he does not think independent generators should, or could, attempt to fill in a power gap in the wake of the nuclear station shutdowns.
"Stability and reliability have to be maintained. All the other players are on the fringe. . . they're an assist more than a complete solution on their own," McEwen said.
Earl agrees. Ontario Hydro, he explained, is capable of making up for their power shortfall without any outside intervention. "We believe we can manage from the increased use of our fossil generation." He admits, however, that management are keeping their options open, and that Ontario's assist generators may yet be called upon to produce power for the utility.
"We could go looking to the marketplace, which could mean the increased use of (ipp's) or imports," Earl agreed.
Not that ipps are the only "assists" waiting in the wings. Neighboring utilities are looking closely at Ontario Hydro's generating capacity, in hopes of finding sales opportunities.
According to Steven Flanagan, spokesperson for Hydro-Quebec, not only can that province's utility provide Ontario with surplus electricity (although he stressed that no formal inquiries have yet been made), they can also store electricity for them in their reservoir. The bottom line, he said, is that the two utilities have shared a good business relationship in the past, and he hopes it will continue.
"We told Ontario Hydro that we are ready to help them if they need it," he said, "but we should understand that Hydro-Quebec is not the only one who wants to be kind to Ontario Hydro."
In Manitoba, there is even talk of resurrecting the proposed Conawapa generating station which was to be built under a deal with Ontario Hydro. The 13,000 MW plant was supposed to be a source of cheap reliable power for Ontario. It was scuttled in 1991 after Ontario Hydro opted out. The matter is still before the courts. Officials at Manitoba Hydro, however, are quick to play down Conawapa, adding that such talk was premature.
"It seems unlikely," said Manitoba Hydro spokesperson Glenn Schneider, "these days, there's a trend towards short-term projects, things you can bring in quickly...and within budget." Even if Ontario Hydro were willing, he doubts Conawapa would do much good. Even a 200 MW purchase deal with Ontario Hydro, scheduled to take effect next year, Schneider added, will be of little help to densely populated southern Ontario because of inadequate transmission links between the north and south sections of the province.
Then there is the renewed push for industry restructuring. One of the biggest supporters of change is the Municipal Electric Association (MEA), an umbrella organization representing more than 300 municipal utilities in Ontario. If a move in this direction is going to be made, and everyone from casual observers to Farlinger believe it is only a matter of time, then the MEA is urging that it be made soon.
"(Ontario Hydro) has lost a lot of capacity," commented Bob Kundeth, spokesperson for the MEA. "They will have to look at all possible options."
Not only will household customer demand put the generation system under stress, he added, Ontario Hydro must also fulfill its contractual obligations with industrial users and U.S. customers.
Kundeth said he has already noticed a change in outlook at Ontario Hydro during a recent meeting with their executives. And from what he is hearing out of Queen's Park, he thinks big change is just around the corner.
Until competition arrives, Ontario Hydro's options remain relatively few. For now, officials are confident that their plan will help the utility make a full recovery.
"The plan we put forward is the best," Earl said. "It takes advantage of the best solutions." ET