Canadian Press
Toronto Star
June 29, 2004

A Niagara Falls generating project that will power the annual electricity needs of an estimated 160,000 Ontario homes has been given a green light by the province as it searches for new energy supply.

The Niagara Tunnel Project, expected to be completed by 2009 and to cost an estimated $600 million, will be one way to help the province deal with its electricity supply challenges, Energy Minister Dwight Duncan said in an interview from Niagara Falls.

"It will give us enough juice for a city of about 160,000 people but it’s only one step," Duncan said.

The province has also put a call out to the private sector to build 300 megawatts of renewable energy and 2,500 megawatts of other energy, he added.

"We’re moving quickly. We’re almost at the halfway point in terms of the generation we need to replace coal," he said, referring to the government’s promise to close the five coal plants, which produce more than 20 per cent of the province’s power, by 2007.

The tunnel project would expand the capacity at Ontario Power Generation’s Sir Adam Beck hydro generating station by about 15 per cent by boring a new 10.5-kilometre-long tunnel under the city of Niagara Falls to divert more water from the Niagara River to the station.

The new tunnel – the third feeding water to the station – would increase the amount of water flowing to the existing turbines at the 50-year-old Adam Beck station, allowing it to produce an estimated additional 1.6 terawatt-hours of renewable electricity per year.

The station already produces 12 terawatts annually. Overall Ontario uses about 150 terawatt hours each year.

Under agreements with the United States, Ontario is allowed to draw more water from the river to its hydro generating station, said Ontario Power Generation spokesman John Earl.

"This new tunnel project, when built, will allow us to make better use of the water that’s entitled to Ontario under this international treaty," he said.

Ontario Power Generation will now seek competitive bids on the project from international companies that can do this kind of work and will choose the best bid, Earl said.

The tunnel project has been discussed as far back as the late 1980s and environmental assessments on the projects have already been completed, Earl said.

The government gave the go-ahead to provincially owned Ontario Power Generation after calculating that with the province’s new regulated higher electricity price, the tunnel is economically feasible, Duncan said, adding that electricity currently produced by the station costs about 1.5 cents per kilowatt-hour.

The government expects the project will create 6,000 person-years of direct and indirect employment, in the range of 2,500 jobs or more.

Last fall, the province raised the cap on electricity prices to 4.7 cents per kilowatt-hour for the 750 kilowatts used, and the price jumps to 5.5 cents per kilowatt-hour beyond that level. That’s up from a previous price cap of 4.3 cents per kilowatt-hour, which was below the cost of production.

As of next May, the Ontario Energy Board has been given the power to set prices, which will be based on a blended regulated price from the power generated by Ontario Power Generation and private-sector producers.

It won’t be cheap to build this tunnel, but the project is the right move, said Tom Adams, executive director of energy watchdog Energy Probe.

"It’s seriously necessary. Ontario has a major shortage on its hands," Adams said, but there’s still a huge amount of new energy supply that has to come online to deal with the shortage and the closure of the coal-fired plants.

"It’s a meaningful contribution but in the scheme of things it’s relatively small potatoes."