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The Ontario Coal Conundrum

Tough plant-retirement decisions being made in Canada to reduce its carbon footprint contrasts with America’s embrace of coal-based generation.

Fortnightly Magazine - September 2006

the previous 2002 record was exceeded during nine days in June and July, putting the Ontario system to the test, and although the IESO did not have to resort to rolling blackouts, the systems operator reduced the voltage on a couple of occasions to conserve capacity. Ontario has 30,520 MW of generation capacity. Nuclear capacity comprises 36 percent (10,850 MW) of total capacity. Coal and hydro each command 25 percent shares of total capacity, with oil and gas comprising the bulk of the remaining capacity (14 percent).

Most of Ontario’s transmission system (97 percent) is owned by Hydro One, another Ontario Hydro successor company—and also owned by the provincial government. The system, however, is managed and operated by the regulated, non-profit IESO. The IESO is a participant in the Northeast Power Coordinating Council (NPCC), and therefore operates the system in compliance with NPCC (and NERC) standards. Ontario is relatively well interconnected to neighboring jurisdictions. In order of importance, Ontario is interconnected with Michigan, New York, Québec, Manitoba, and Minnesota. Table 1 summarizes the main characteristics of today’s market.

Current Status of the IESO

The main issue for the IESO over the next five years is no doubt how to deal with reliability while closing down all coal-fired plants. These closures, an election promise from the sitting Ontario government, are driven in part by a desire to reduce emissions of NOx and SO2 and in part by Canada’s commitment under the Kyoto Protocol to reduce greenhouse gases. All of Ontario’s coal-fired capacity, more than 7,500 MW, is targeted to be closed in this decade, with the first plant (the 1,148-MW Lakeview station) already closed in April 2005. Other closures are scheduled for 2007-2009. As a means of replacing this capacity, the newly created OPA is contracting for refurbished and new capacity using an RFP process. So far, about 2,400 MW of capacity has been awarded for the construction of five new plants: Greenfield Energy Center (1,015 MW); St. Clair Power (688 MW); Greater Toronto Airports Authority (117 MW); Greenfield North (330 MW); and Greenfield South (284 MW). The Greenfield North project however, was canceled in August of 2005. In addition, 10 MW of demand response has been awarded.

Further, in April 2004, the Ontario government initiated a renewable energy supply (RES) program that aims at a substantial increase in the use of renewable energy. The Ontario RES program involves renewable resource targets of 5 percent (1,350 MW) and 10 percent (2,700 MW) of Ontario’s generating capacity by 2007 and 2010, respectively. To this effect, 395 MW of renewable capacity additions were awarded in November 2004 as a result of an RFP process.

Two more RFPs were issued in April and July of 2005 to procure another 1,200 MW of renewable capacity. An agreement also was reached between the units’ operator, Bruce Power, and the government in October 2005 to re-start the nuclear Bruce A 1 & 2 units. This agreement will provide about 1,540 MW of laid-up nuclear capacity that is targeted to come on line by 2010-2011.

After a brief and unsuccessful