Ontario’s Coal Phase-Out A major climate accomplishment within our grasp AN OCAA ENERGY REPORT | www.cleanairalliance.org Ontario Clean Air Alliance FEBRUARY 2009 and 15.9 billion kWh in 2010. OPG can Introduction exceed these caps only if there is no other option to keep the lights on in Ontario.3 Thanks to the strong leadership of Premier Dalton In May 2008, the Government of Ontario McGuinty, Ontario will be able to achieve a - posted a draft regulation on the Environmen- virtually complete coal phase-out by January tal Bill of Rights Registry to establish a legal- 1, 2010. Ontario’s coal phase-out is the single ly-binding cap of approximately 11.7 billion largest greenhouse gas reduction initiative in kWh with respect to the total annual output North America – equivalent to taking almost of OPG’s coal-fired power plants for each year seven million cars off the roads.1 from 2010 to 2014 inclusive.4 (A final regula- tion has not yet been issued.) In this report we will review the coal phase- out’s progress to date and outline additional Coal-FiredCoal fired Electricityelectricity Generation generation actions that can be tak- 40 en to ensure a complete coal phase-out as soon 35 as possible and at the 30 lowest possible cost. 25 Progress to Date 20 Billions of kWh 15 - In April 2005, the 10 Lakeview coal-fired 5 power plant in Mis- sissauga was closed. 0 2003 2004 2005 2006 2007 2008 - In August 2007, the Government of On- tario issued a legally- binding regulation Electricity Demand vs. Electricity Exports requiring the cessa- tion of coal burning 158 12 at Ontario’s four 156 10 remaining coal-fired 154 power plants by De- 8 152 cember 31, 2014.2 6 150 In May 2008, the 4 - Exports Demand 148 Government of On- 2 tario directed Ontar- 146 io Power Generation 144 0 (OPG) to cap, on 142 -2 a best efforts basis, 2005 2006 2007 2008 its total coal-fired electricity generation Ontario’s electricity consumption (Billion kWh) at approximately 20 Ontario’s Net Electricity Exports (Billion kWh) billion kWh in 2009 Ontario Clean Air Alliance — Ontario’s Coal Phase-out | 1 - Ontario’s coal-fired electricity generation In short, Ontario has the capacity to achieve a has fallen by 36% between 2003 and virtually complete coal phase-out by January 1, 2008. Specifically, our coal-fired electricity 2010 –five years ahead of the government’s cur- generation has declined from 36.3 billion kWh rent schedule. in 2003 to 23.2 billion kWh in 2008.5 - In 2008, coal was responsible for 14.6% Proposed Additional Actions to of Ontario’s total electricity generation. Achieve a Complete Coal Phase-Out However, approximately 10.9 billion kWh as Quickly and Cost-Effectively as of our coal-fired generation was exported. Therefore, in 2008, coal-fired electricity Possible generation was used to meet only about 8.3% 1. Ban non-emergency coal-fired electricity of our actual domestic electricity needs.6 exports - According to Ontario’s Independent Electricity System Operator (IESO), as of Ontario has been a net electricity exporter for the December 12, 2008, Ontario’s existing coal- last three years. In 2008, Ontario’s net electricity free generation capacity is 7% greater than exports equaled 10.9 billlion kWh. That is, our Ontario’s forecast peak demand during the net exports were equivalent to 47% of our total summer of 2009.7 coal-fired electricity generation.9 Therefore, by - Furthermore, according to the IESO, an simply banning non-emergency electricity exports, additional 3,913 MW of coal-free generation we could have reduced our coal-fired electricity capacity will be added to Ontario’s electricity generation by approximately 47% in 2008. grid by June 2010.8 These coal-fired ex- ports are often dis- placing cleaner but Ontario’s Coal-FreeForecast supply Generation vs. peak demand Capacity- 2009 financially higher and Projected Peak Demand cost generation sources (e.g., oil and 30,000 natural gas-fired Wind generation) in the United States. They 25,000 are not required to Natural gas / oil keep our neighbours’ lights on and they 20,000 add to air quality problems on both Peak Demand Hydroelectric sides of the border. 15,000 Recommendation Megawatts #1: Energy Minister 10,000 George Smitherman should direct Nuclear the Independent 5,000 Electricity System Operator to cease making non- 0 emergency coal-fired electricity exports. 2 | Ontario Clean Air Alliance — Ontario’s Coal Phase-Out 2. Direct OPG to strive to cap its coal- 4. Sign up one million peaksaver fired generation at zero kwh in 2010 participants As noted above, according to the IESO’s most As the coal plants are phased-out, the Ontario recent reliability report, under normal operating Power Authority (OPA) is proposing to contract conditions, Ontario now has sufficient domestic for the construction of 1,350 MW of simple-cycle coal-free generation capacity to meet all of its natural gas-fired generation to meet the province’s electricity needs. Therefore, Ontario now has the peak day demands. As a result of their very low ability to achieve a virtually complete coal phase- energy efficiency (36%) and very low annual out five years ahead of schedule. capacity (usage) factors, the cost of peaking gas-fired generation is approximately $1.35 per This would be a major achievement in terms kWh.11 Ontario’s peak day electricity needs of responding to the urgent need for action on can be met at a much lower cost with the OPA’s climate change and improving air quality in peaksaver program which raises the temperatures Ontario. of residential and small-business central air- conditioners by up to 2 degrees Celsius on hot Recommendation #2: Energy Minister summer days (never on weekends or holidays). Smitherman should direct Ontario Power Customers don’t even feel the difference. Generation, that effective January 1, 2010, it should only generate coal-fired electricity when To-date Ontario’s electric utilities have signed there is insufficient domestic coal-free generation up only 6% of Ontario’s 2,000,000 potential capacity to meet our electricity needs. peaksaver participants.12 3. Direct the IESO to ban non-emergency Recommendation #4: Energy Minister coal-fired electricity imports Smitherman should direct the OPA to pay Ontario’s electric utilities (e.g., PowerStream, The IESO has a policy of importing coal-fired Toronto Hydro) to hire students to go door electricity whenever its “financial” cost (excluding to door to sign up one million peaksaver public health and environmental costs) is less than participants this summer. the “financial” cost of the next unit of domestic electricity generation. Therefore, everything else 5. Put energy efficiency on a level playing being equal, as Ontario ramps down its domestic field with new nuclear coal-fired generation, the IESO will import more coal-fired electricity from the United States. This The OPA’s Electricity Retrofit Incentive Program undermines the whole purpose of Ontario’s pays industrial consumers $150 per kW for groundbreaking coal phase out. We should only energy efficiency investments that reduce their import coal-fired electricity if there is no other electricity consumption. On the other hand, the option to keep the lights on in Ontario. OPA estimates that new nuclear reactors will cost $2,900 per kW.13 Moreover, according to In this context it is worth noting that the Western Moody’s Investors Service, the cost of new nuclear Climate Initiative’s draft rules require Ontario to reactors is more likely to equal $7,500 per kW.14 report the greenhouse gas emissions associated This means that the OPA’s incentives for saving with its electricity imports.10 electricity are equal to only 2-5% of the expected cost of new nuclear supply. Recommendation #3: Energy Minister Smitherman should direct the IESO to ban non- emergency coal-fired electricity imports. Ontario Clean Air Alliance — Ontario’s Coal Phase-out | 3 It just doesn’t make sense to pay less to save a kW than to create a kW with new generation. Conclusion In addition, energy efficiency investments can create jobs now and make Ontario’s industries Action on climate change can’t wait. We must more competitive. seize any opportunity for major progress on reducing emissions in the face of mounting Recommendation #5: Energy Minister evidence that climate change is happening faster Smitherman should direct the OPA to pay than expected and that impacts could be far industrial electricity consumers up to $2,900 per more severe than originally projected. Ontario kW for their energy efficiency investments. is providing global leadership with its coal phase out commitment. Reaching our coal phase out target by 2010 would be an achievement all 6. Establish a combined heat and power Ontarians can take pride in and would put the standard offer program province in an excellent position to compete in a North American environment where carbon Virtually every building in Ontario uses natural emissions are going to be increasingly costly and gas to provide just one service, namely, heating. green energy is the way of the future. It is much more efficient to use this natural gas to simultaneously produce two services, i.e., heat and power. Natural gas combined heat and power plants can have an energy efficiency of 80 to 90% versus the 33% energy efficiency of a nuclear reactor.15 On June 14, 2007 Ontario’s then Minister of Energy, Dwight Duncan, directed the OPA to establish a natural gas-fired combined heat and power standard offer program -- a program that would pay a fixed price for each kWh of electricity produced by combined heat and power plants.