Tag Archives: Ontario Power Generation

In major policy shift, government lets Ontario Power Generation bid for large renewable projects

lakeviewIt’s been eight days since Ontario Energy Minister Bob Chiarelli directed the province’s power authority to eliminate large renewable-energy projects from the feed-in-tariff program and design a competitive procurement process that will get the best deal for ratepayers. We knew this was coming, as Chiarelli said as much in a speech a couple weeks earlier. What we didn’t know is that the energy minister would direct the power authority to let Ontario Power Generation bid for these large projects (see page 3, third paragraph of directive).

This is a major policy shift, and I’m surprised it hasn’t received any coverage in the mainstream Ontario media. OPG is a crown corporation. Under its 2005 agreement with the Ontario government, “OPG will not pursue investment in non-hydroelectric renewable generation projects unless specifically directed to do so by the Shareholder.” Instead, OPG’s mandate has been to maintain its fossil fuel, nuclear and hydroelectric fleet of generation, and pursue new large hydroelectric projects. The reason for this restriction was to limit OPG’s clout in the marketplace and give independent power producers a chance to establish a foothold in the generation mix. The decision to let OPG bid for all large renewables — including wind and solar — is significant for a number of reasons:

  • This is getting close to what the Ontario NDP said it will do if elected. According to the NDP’s energy policy, “We will maintain the feed-in-tariff for small and community-based projects” and “for new larger projects we will move towards public ownership” through OPG. The Liberal government isn’t proposing complete public ownership of large renewables, but it is letting OPG bid for some ownership in a competitive process. Could this be part of a compromise that won it NDP support for the provincial budget?
  • Independent power producers, I would imagine, aren’t very happy about this. They will assert that they can’t compete against a giant like OPG that just happens to have the government in its corner. Is it a fair fight? Maybe not. But will it get the best deal for ratepayers? Presumably, yes.
  • Having OPG compete for renewables will create more opportunities to develop renewable resources in remote areas, and to partner with aboriginal communities. OPG has experience in this area, and many private developers are too risk-averse to go into these markets. They prefer to go after the low-hanging fruit, even if the orchard isn’t located in the best area.
  • Letting OPG compete in renewables could turn the Power Workers’ Union into an ally over time. Right now, renewables mean competition with union jobs. The PWU doesn’t like that — the fact that jobs at coal-fired power plants are being phased out and there is a significant threat to nuclear jobs as well. Renewables could be a path to save OPG jobs.
  • On that note, could letting OPG get into large renewables also be a signal that the province under this government is going to abandon efforts at building new nuclear reactors?
  • Finally, as a crown corporation, OPG can be directed to do things that other private developers would never take on — such as experimenting on a large scale with energy storage technologies, and being a test bed for energy innovation coming out of the province. Indeed, it would be interesting if OPG was directed to set aside a certain percentage of profits for R&D and to support pilot projects.

So that’s why I think this latest government directive is significant and should get more attention. Perhaps I’m reading too much into this, but my gut tells me no. I’ve long argued that OPG should be able to compete for large renewable energy projects. It’s something the Society of Energy Professionals, a shareholder in the nuclear business of Bruce Power, has called for since at least 2007. Many will complain, and for good reason. If a giant like OPG is to compete for these projects, how do we make sure it’s a fair competition? Will the process be transparent? Reasonable questions, but not a reason to not do it.

The biggest roadblock to building new nuclear plants in Ontario: skilled construction labour

Ontario’s Liberal government says we need to refurbish our province’s nuclear fleet and build another major plant near Toronto. The opposition Progressive Conservative leader, confident he will win this October’s election, says nuclear will be a cornerstone of his party’s energy policy. Indeed, as countries such as Japan, Germany and Switzerland vow to phase out their nuclear fleets or rely less on nuclear power, Ontario appears intent on not only preserving the 50-per-cent share of electricity that nuclear power generation supplies in this province; it is open to giving nuclear an even larger share of the power mix.

There are many reasons to oppose nuclear: high cost, toxic waste, risk of disaster, uranium mining, etc… What I haven’t seen raised so far is the ability of a province like Ontario to carry out an aggressive nuclear refurbishment and new-build strategy. In other words, do we have the skilled labour at our disposal to take on such an initiative?

It doesn’t appear that way.

Recent data from the industry-led Construction Sector Council has raised a red flag, warning that Ontario will face an extremely tight labour market between the period 2014 and 2019. During this time about 85,000 new construction workers will be needed. Problem is, 73,000 existing workers are expected to exit the labour force because of retirement (or mortality), and only 60,000 new entrants are expected. “This leaves a gap of almost 100,000 workers that need to be recruited from either other industries or outside the province,” according to the Council.

Don’t let the recent recession fool you. Ontario is only a year or two away from reaching pre-recession construction employment levels, largely because of new mining and processing facilities planned for Northern Ontario, the need for new facilities in time for the 2015 Pan American games, the deployment of renewable-energy projects that have been enabled by the Green Energy and Green Economy Act (and FIT program), and plans for the refurishment of several nuclear reactors over the period. The Council estimates this will carry construction employment “to new record levels,” with non-residential construction activity more than double that enjoyed in pre-recession years.

The Greater Toronto Area will be hit particularly hard, and the Council pegs much of that to nuclear refurbishment and new-build plans. This is supported by comments from Mark Arnone, vice-president of nuclear refurbishment execution at Ontario Power Generation. “For those working on the nuclear plants, supply will be particularly tight,” Arnone is quoted as saying in the Council press statement.

How tight will it be? The Council’s report ranks a number of different construction trades in each region of Ontario, including the GTA. It ranks them on a scale of 1 to 5, with 1 representing no problems with the labour pool and 5 representing severe shortages. Specifically, a ranking of 5 means “Needed workers meeting employer qualifications are not available in local or adjacent markets to meet current demand so that projects or production may be delayed or deferred. There is excess demand, competition is intense and recruiting reaches to remote markets.”

In the GTA, four key trades carry a 5 ranking between 2012 and 2019: boilermakers, construction managers, construction millwrights and industrial mechanics, and industrial instrument technicians and mechanics. In all cases, blame is placed on major industrial and utility projects, with particular troubles occurring between 2015 and 2018 as planned nuclear projects enter high gear. Electricians, gasfitters, pipefitters and welders will also be in short supply.

So what does this all mean? First, the Ontario government and its opposition are underestimating the impact of baby boomer retirements during a period of what is expected to be high construction activity. Big projects, such as nuclear refurbs and new reactor builds, will suffer and will be at serious risk of delay. Getting the necessary skilled trades will mean bringing in workers from distant locations. In this environment of tight labour supply wages will surely skyrocket, causing project costs to rise. Ontario will be competing with other jurisdictions, such as Alberta, and this will cause both labour markets to overheat.

Simply put, Ontario will have a very difficult time refurbishing its fleet of reactors AND building a new plant at Darlington. It will be difficult enough trying to refurbish the existing fleet and keep it on schedule. Adding a new build into the mix could spell major trouble for an industry already struggling to keep up with the backfilling of its retiring workforce. Sure, skilled workers can be imported — at a premium. It makes one wonder: Do we need these jobs? How can job creation be a justification for these large projects, which create jobs but not necessarily ones that Ontarians can/will fill?

You might be thinking that this applies equally to other power-sector projects, such as the building of wind farms and big solar plants. To a certain extent it will, but there will be less of an impact because of the small scale and distributed nature of renewable-energy projects. Labour tightness might delay a few small projects, but that will have much less impact than the delays and cost-overruns associated with massive centralized projects that currently lie at the beating  heart of our electricity system.

So when Tim Hudak, leader of the Progressive Conservatives, says he wants to go full steam ahead with nuclear power, one must wonder if he’s setting up the market for failure and promising something he won’t be capable of delivering. He has said that “a PC government will stop dithering and delays and invest in nuclear power,” but a PC government will be powerless in that regard. Perhaps he’ll address some of the dithering, but the delays will be imposed by the market.

All of this isn’t to suggest Ontario shouldn’t go forward with some nuclear refurbishment projects. What it does suggest is that building new reactors at Darlington, while at the same time tackling a logistically difficult refurbishment program, will cause delays, cost-overruns and market stresses that could have been avoided. Sound familiar?

Ontario, in other words, must be careful that it doesn’t bite off more than it can chew. Sure, it means many jobs won’t be created. But those jobs will be more expensive to fill, and there’s a good chance it wouldn’t be Ontarians filling them. In my humble opinion, the province would be far better off ditching its plans to build a new nuclear plant at Darlington and re-evaluating its existing fleet refurbishment plans. More thought should be put into industrial efficiency, conservation, hydroelectric imports from Quebec (or Newfoundland and Labrador), combined heat and power plants, offshore wind and community power projects based on renewables.

OPG initiates switch from coal to biomass at Atikokan generating station. Is it a good move for the climate?

The Ontario government directed the province’s power authority today to negotiate an agreement to purchase biomass power from Ontario Power Generation, a move that marks the beginning of a three-year coal-to-biomass conversion project at the Atikokan power station about 200 kilometres northwest of Thunder Bay. “Once converted, the plant is expected to generate 150 million kilowatt-hours of renewable power, enough to power 15,000 homes each year,” according to a government press release. “The annual fuel requirements for the plant, made up of dried wood pellets, are estimated to amount to less than one per cent of the total allowable forest harvest in Ontario each year.”

The Atikokan station was built 25 years ago and has a capacity of 230 megawatts. The plant has produced annually as much as 1.5 billion kilowatt-hours of electricity. If it’s expected to generate 150 million kilowatt-hours when burning biomass — or one-tenth of peak annual output — it means the plant will be used primarily as a peaker and for other backup purposes.

I know there are concerns within the environmental community, also expressed by Ontario’s environmental commissioner, about the wisdom of using biomass for power generation. The fear is that the biomass that makes up the fuel wood pellets won’t be harvested sustainably, and there is also skepticism related to the “carbon neutrality” of biomass when used as a fuel. Also, particulate emissions are still a concern with burning biomass, so while it may serve a climate change strategy it won’t necessarily address local pollution problems. Obviously, these concerns need to be addressed so that all stakeholders are satisfied, but given the choice, I still believe that biomass is a better option than coal, particularly when it’s only used sparingly and for backup.

What do you think?

Attention all suppliers: Ontario Power Generation needs your wood pellets!

Ontario Power Generation issued a call today to potential suppliers of wood pellets to the Atikokan coal plant, which the utility plans to beginning converting to 100 per cent biomass burn in 2012. OPG requests that proponents provide pricing for a minimum volume that is between 22,500 and 30,000 tonnes (a year) and pricing for the entire 90,000 tonnes (a year) requirement,” according to the company’s ” request for indicative prices.”

In other words, it expects it will need 90,000 tonnes annually but wants to break this down into three our four chunks so it can have several suppliers. The final stage of conversion will begin in June 2012 and commissioning of the new equipment will likely start in August. OPG expects full-on commercial operation will happen by December. “The wood fuel pellet supply being considered under this RFIP will have a local content requirement such that the source of the wood fibre and the location of the production facilities that will produce the wood pellets shall be within Ontario,” according to the company. “OPG will require that the wood-based fuel pellets be accompanied by Chain of Custody Certification ensuring that the wood pellets supplied to OPG are manufactured from wood fibre sourced from well managed forests.”

In the Great Lakes St. Lawrence forest region of Ontario it’s estimated that there is about 1.475 million oven dry metric tons of wood fibre available for sustainable harvesting each year, or about 1.25 million if we take into account that some of the biomass will be used as fuel to dry the biofibre. So what OPG is requesting in this initial round is roughly 6 per cent of what’s available — and let’s not forget that pellets made of grass crops are also a potential source of fuel. Let’s keep in mind these converted coal plants will be used as peakers when using biomass fuel. This means there is plenty of biomass available for several units being targeted for conversion at the massive Nanticoke coal plant.

What we’re witnessing here is the beginning of the creation of an entirely new industry in Ontario developed around the need to economically harvest, pelletize and transport biomass fuel pellets to support the province’s coal phaseout strategy. This will create many jobs in parts of the province where jobs are needed most, and will establish a made-in-Ontario biomass fuel supply chain that can support the move to more distributed forms of biomass energy generation. There is plenty of opportunity here for entrepreneurs looking to play a role.

100% coal-to-biomass conversion reduces GHGs by 92 per cent: study

Ontario is making solid progress with its plan to convert some of its coal-fired power plants to biomass. And not just co-firing, like what many U.S. jurisdictions are considering, but full out 100 per cent biomass burn. It will prove a key part of Ontario’s greenhouse-gas reduction strategy. A new University of Toronto study has concluded that converting coal-fired units at the Nanticoke and Atikokan plants to burning wood pellets would reduce GHGs by roughly 92 per cent, and this is based on a full lifecycle analysis. On top of that, it would create a local biomass supply chain — for harvesting, pelletization, transportation, etc. — and local jobs that simply don’t exist under a coal-only regime. OPG also plans to operate the plants as peakers, meaning they could be used to help manage renewables (i.e. there would be less natural gas required to perform this balancing act).

I have an update on Ontario Power Generation’s biomass strategy in today’s Clean Break column. OPG will likely convert Atikokan to 100 per cent biomass by 2012, with some units at Nanticoke likely to follow a year later. Lambton and Thunder Bay plants are also being considered. The OPG executive heading up the transition, Chris Young, says the company is seriously investigating a fuel pellet mixture with both wood and agricultural residues (or dedicated crops, like switchgrass). OPG figures that coal plants converted to burning biomass will likely operate for another 10 years before decommissioning, at which point the pellet supply chain will be firmly established and the move to build a distributed fleet of newer biomass-burning plants can begin.

And what is U of T’s estimated cost of supplying electricity from an existing coal plant converted to burning 100 per cent biomass? Roughly 12 cents per kilowatt-hour, which excludes the impact of carbon prices. Given that natural gas won’t stay low forever and will eventually be subject to carbon pricing, this makes the biomass option competitive (also with wind and nuclear) and at the same time is a winner when it comes to local green-collar job creation.

If OPG can pull this off, it would be another Ontario first — and something other jurisdictions can learn from.