Canada: The Ontario Government Issues Directives On Energy Supply Mix And Transmission Capacity

INTRODUCTION

On February 17, 2011, the Ontario Ministry of Energy announced that it has issued directives to the Ontario Power Authority (OPA) and the Ontario Energy Board (OEB) for the implementation of its 20-year Long-Term Energy Plan, Building Our Clean Energy Future.

The Government has issued the final directive that requires the OPA to implement the key aspects of the supply mix. The OPA will now begin formal consultations with industry stakeholders and the public as it develops the comprehensive energy plan for submission to the Ontario Energy Board later this year.

This bulletin provides a summary of the key aspects of the Supply Mix Directive and the other Directives to the OEB that will be of interest to Borden Ladner Gervais LLP's (BLG) clients.

THE SUPPLY MIX DIRECTIVE

As anticipated, the Supply Mix Directive outlines in a comprehensive manner the Ontario government's objectives for the energy sector. The Directive instructs the OPA to prepare a plan that covers the following:

  • Demand: the plan should use a medium demand growth scenario of roughly 15% electrical demand growth between 2010 and 2030;
  • Conservation: peak demand reduction targets using conservation and demand management programs (CDM) of 7,100 MW and energy savings of 28 TWh by the end of 2030; the interim CDM targets are: 4,550 MW and 13 TWh by the end of 2015; 5,840 MW and 21 TWh by the end of 2020 and 6,700 MW and 25 TWh by the end of 2025. The definition of CDM should be inclusive of load reduction initiatives from geothermal, solar heating and cooling and fuel switching and customer based generation. The CDM programs should not include generation contracted for in the Feed-in Tariff or Micro Feed-in Tariff programs.
  • Nuclear: should continue to comprise 50% of total capacity and the plan should provide for the refurbishment of 10,000 MW of existing nuclear capacity at the Bruce and Darlington stations. The plan should also include procurement for two new nuclear units (roughly 2,000 MW) at Darlington.
  • Coal Phase-out and Potential Conversion: The plan commits to replace coal-fired generation by the end of 2014; the OPA will work with the Independent Electricity System Operator (IESO), Ontario Power Generation (OPG) to determine opportunities to advance the time from of closing additional units. In developing the Long Term Energy Plan, the OPA shall assess the conversion of some or all of the remaining units at Lambton and Nanicoke to natural gas under a range of scenarios for nuclear generation and system peaking requirements. The government will make decisions on some or all of the units for conversion in 2012.
  • Renewables – Hydro-Electric: The Plan will enable future hydro-electric development where it is cost effective to build and connect to the transmission system. The Plan calls for installed hydro capacity to reach 9,000 MW by 2018 or about 20-25% of total electricity generation in Ontario.
  • Wind, Solar, Bio-Energy: based on forecast assessments of what the system can manage, the OPA should plan for 10,700 MW of renewable energy capacity (excluding hydro-electric) by 2018.
  • Natural Gas: Natural gas should plan to play a strategic role in Ontario's supply mix by complementing intermittent supply from wind and solar power and meeting local and system requirements.
  • Transmission: The Plan shall include the five priority transmission investment projects identified by the OPA for system reliability and serving new load requirements by 2018. These include devices to enhance transfer capacity in southwester Ontario; a new line west of London, enhancements to the east-west tie long lake Superior through a new line and a new line to Pickle Lake. The Plan requires that the OPA work with Hydro One on the scope and timing of these projects. In addition, the OPA shall identify other cost-effective transmission and distribution solutions through its ongoing processes. Finally, the OPA shall develop a plan for remote community connections beyond Pickle Lake and consider the possibility of interim solutions to reduce consumption of diesel fuel.
  • Smart Grid: The OPA shall give consideration to Smart Grid developments and ensure that distribution level investment with smart grid and renewable connections is considered in the Plan.
  • Reliability and Operability: The Plan should consider potential storage and the availability of imports from other jurisdictions.
  • Impacts on Customers: The Plan will take into consideration total bill impacts on customers.
  • Consultation: The Plan requires that the OPA continue to manage the procedural aspects of consultations with First Nations while the government of Ontario continues to retain responsibility for addressing First Nations economic opportunities in the energy sector.

TRANSMISSION SYSTEM DIRECTIVE AND TIME LIMIT REVIEW DIRECTIVE TO THE OEB

The transmission system Directive to the OEB requires the Board to amend Hydro One's transmission license conditions to enable it to move forward with the priority transmission projects in Southwestern Ontario as well as transmission system work to facilitate the connection of small scale renewable generation facilities, including required upgrades to enable existing Micro fit-Feed-in Tariff applicants.

The second Directive to the OEB requires the OEB to review the Long Term Energy Plan no later than 12 months after the date the OPA submits the Long Term Energy Plan for review.

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