November 5, 1997

A huge range of technologies and fuels are used to generate power around the world, but have been largely thwarted in Canada by our electric monopolies, which favour large-scale power sources such as nuclear and coal. Despite the odds, some small-scale entrepreneurial power development has been successful. In Ontario, 1600 megawatts (MW) of private generating capacity is up and running, using the following fuels and technologies:

• natural gas cogeneration, in which the combustion of gas generates both electricity and heat for industrial applications, results in a fuel efficiency at least 2.5 times that of Ontario Hydro’s coal plants, with virtually no sulphur dioxide emissions
• gas & wood-fired cogeneration, applying the same principle, uses waste wood in combination with gas. Plants are already in operation in Cochrane and Kirkland Lake
• hydraulic: the private sector has built or renovated many small-scale hydro stations
• landfill gas combustion, already in place in two Ontario locations, harnesses what would otherwise be an atmospheric pollutant, resulting in a net reduction in greenhouse gas emissions.

If there was a level playing field in the Ontario power market, many more small-scale generating stations would be built along these lines.

Ontario Hydro has been using its monopoly powers and the courts to block private sector construction of the following proven power options:

• natural gas combined-cycle turbines (CCGT), already generating many thousands of megawatts in the UK, are not as efficient as gas cogeneration but are fast to build and far less polluting than coal
• biomass cogeneration: markets for ethanol are expanding, and farmers can now use their corn (and perhaps someday wood and straw) crops to manufacture this environmentally attractive fuel if they can also sell electricity generated using excess process steam. A facility proposed for Sudbury was blocked by Hydro
• district heating cogeneration, which generates power and sells the exhaust for heating nearby buildings, is being blocked in London and Ajax
• wind power, not yet developed to a significant extent in Ontario, could contribute to meeting our electricity demands. Ontario Hydro launched a renewable energy program, received over 120 MW of proposals from the private sector, then abruptly cancelled the whole initiative, incurring a lawsuit. Alberta, which is de-monopolizing its electricity industry, leads Canada in windpower development

All of these power options – small-scale, fast to build, resource-efficient, and cost-effective – could easily replace the nuclear stations that will close. So great is the potential and the private sector enthusiasm for these technologies that when Ontario Hydro first opened its monopoly a crack in 1989 and invited tenders for independent power projects, it received proposals totalling 6,000 MW (only 25% of which it allowed to proceed). Since then, there have been repeated proposals for economically and environmentally appealing power development, and in every case Hydro has wielded its monopoly and denied them all. Since interest rates and equipment costs are now significantly lower than in 1989, private sector initiatives could easily top the 6,000 MW of capacity proposed then, to replace the 4300 MW of nuclear capacity now scheduled to close.

The technologies Energy Probe advocates have been available for a long time, and they are up and running in other jurisdictions, but Hydro itself has not and cannot build them: it has proven itself institutionally incapable. Nor will it allow the private sector to proceed. The technologies listed above will not flourish in the present monopoly structure, in which Ontario Hydro is the construction company, sales agent, and regulator.

What can we do to facilitate these power alternatives?

• Cancel "cogeneration avoidance rates": Hydro must cease buying off developers to abandon new generation construction. Hydro is now so desperate to be rid of the competitive threat posed by independent power that it will pay to have new private power projects cancelled. Domtar at Red Rock in April ‘97 and Shell Canada Products Ltd. in October ‘97 were the most recent recipients of "cogeneration avoidance rates", which trade subsidized power for cancelling self-generation plans.
• Remove Ontario Hydro’s generation monopoly: Alternate sources of power will never flourish in the absence of a level playing field for all power technologies and power developers. Energy Probe has been writing extensively on this subject, and on the design of a future power market, since 1982.
• Give consumers the right to choose their electricity source: In some jurisdictions, customers can order "green" power from renewable solar and wind generators, helping develop renewable markets and hastening the phaseout of more polluting electricity sources. Energy Probe is working with industry experts to design a new electricity market system that would make green power a reality.
• Strengthen environmental regulation: Were pollution rules well-designed and fully enforced, pollution would become costly, and consumers would receive clear price signals about the true social and environmental costs of their buying decisions. This would encourage switching to technologies with low environmental impact. One of Energy Probe’s priorities is to fill the existing loopholes in the air emission laws that Ontario Hydro must meet.

Conservation will also be an important element of meeting the nuclear shortfall. The most immediate and effective ways to decrease power demand are:

• Price power based on time-of-use: If the "peak" demand for power can be reduced, we can get by with running fewer generating stations. By pricing power higher at the times of greatest demand, consumers have an incentive to use power "off peak", which affects not the total volume of electricity consumed, but the number of stations needed to meet overall demand. This concept has been tested in Ontario, but hasn’t been expanded beyond the pilot project phase.
• Switch to other fuels for heating space and water, as these uses for electricity place great demands on the power system. Advertising campaigns and under-priced power over the past two decades had encouraged homeowners to switch to electricity for these applications, largely to increase demand for Ontario Hydro’s product, but Hydro can no longer fill the demand.

These barriers to energy conservation and alternative energy are a national problem, exaggerated in Ontario by its over-reliance on nuclear power but experienced by all Canadians whose electric monopolies have leaned toward megaprojects.