It would be nice to see more of these combined heat and power projects announced across Ontario, particularly those that take advantage of local wood waste. The Ontario Power Authority just announced that it has struck a 10-year power purchase agreement with St. Marys Paper Corp., a large paper mill in Sault Ste. Marie, which is in northern Ontario. The mill plans to build (and co-locate) a new power plant that will use bark and wood waste to generate 30 megawatts of electricity. Waste heat from the plant will be used by the paper mill for industrial processes. Construction is expected to begin next year, and it’s anticipated that 555 direct and indirect jobs will be created as the plant works toward commercial operation in 2014.

This project achieves many things. Jobs, for one, as well as green and efficiently used energy. It also makes St. Marys Paper more competitive, so in a way it provides some added job security for existing employees at the plant. One concern, however, is the fact that St. Marys has negotiated access to up to 400,000 tonnes of biomass annually from the area’s Crown forests for the life of the project. What this means, exactly, I don’t know. Does it mean St. Marys can harvest the forest slash or directly cut down trees for fuel? I would hope that whatever is harvested from these forests will go toward producing paper products first, and then whatever is left over can be used for energy production.

It would also be nice if the power authority disclosed exactly how much it’s paying for this electricity or any other incentives it may be offering. There’s a hint in this report that tens of millions of dollars may flow to the company from the province’s forestry sector prosperity funds, and this would be on top of the $17 million or so in financial aid that went to the struggling company after it was rescued from a bankrupty sale in 2007. The hope, one assumes, is that the CHP plant will lower energy costs for St. Marys and help it to eventually wean itself from corporate welfare.

My Clean Break feature today looks at the potential of combined heat and power (CHP) projects in Ontario, and explores why we’re not seeing more of it in the province — particularly those projects that can recycle industrial heat and flu gases. Several ambitious projects have been shelved because the developers behind them simply couldn’t make the economics work. The economic downturn — i.e. the credit squeeze — is playing a role, but many industry observers are also pointing fingers at the government (and the power authority) for setting the bar too high and making the rules too complex.

Their argument: government needs to do a better job of encouraging and supporting CHP projects.

Their reason: The projects not only make struggling industries more competitive, they will create jobs when we need them most and will produce cleaner electricity for the province’s grid.

Sounds reasonable. With all the talk about the need for economic stimulus, these are projects that should be pursued — not just because of their short-term job creation benefits, but because they will make Ontario’s manufacturing leaders more competitive in the long run and help clean up the province’s electricity mix.

We continue to dump money into clean coal and carbon capture/sequestration, but where are the loan guarantees for low-hanging fruit like CHP — projects that will actually make a real difference today?

This is one area where Ontario can — and should — step up.

The U.S. Department of Energy’s Oak Ridge National Laboratory just put out a report on the potential of combined heat and power (CHP) deployments in the United States and has concluded that it is one of the “most proven and effective near-term energy options” available to reduce CO2 emissions, improve energy security, relieve grid congestion, make industry more competitive, and create green-collar jobs. (more…)