XYLENE POWER LTD.

OPA INTEGRATED POWER SYSTEM PLAN

COMMENT AND CRITICISM

By Charles Rhodes, P.Eng., Ph.D.

DEFINITION:
The Ontario Power Authority (OPA) Integrated Power System Plan (IPSP) is a set of documents prepared by the OPA that purport to lay out the problems and point the way forward for the electricity system in the Province of Ontario.

The IPSP documents deal with matters such as Load Forecast, Conservation and Demand Management (CDM), Sources of Electricity Supply, Transmission, Environment and Sustainability, Integration and Procurement.

HOEP PROBLEM:
The central problem with the OPA IPSP and the OPA incentive programs is that they are built on a defective foundation known as the HOEP (Hourly Ontario Energy Price). The present implementation of the HOEP does not recognize the value of reducing carbon dioxide emissions to the atmosphere, does not recognize the cost of repaying existing stranded electricity debt principal, does not discourage generators from inefficient use of the transmission system, effectively subsidizes existing nuclear generators at the expense of other generators, effectively subsidizes major generators at the expense of small behind the meter distributed generators and does not recognize the transmission efficiency and cost saving gained by locating a generator close to its load. One of the major problems engendered by these HOEP defects is that the value of energy storage both adjacent to the generator and adjacent to the load is not recognized. Until the value of such energy storage is fully recognized Ontario will face ever increasing costs and problems related to transmission constraints and supply of peaking generation. In order to fix the IPSP it is first necessary to recognize, quantify and compensate for the problems in the existing implementation of the HOEP.

HOEP CORRECTIONS AND THEIR CONSEQUENCES:
The approach used herein is to calculate various required corrections to HOEP, as set out at www.xylenepower.com/Electricity Contents.htm and then apply the corrected HOEP values to the decisions inherent in the IPSP and the OPA incentive programs. Correcting HOEP requires an assumption as to the capital cost of non-fossil fuel generation. The assumption used herein is that new non-fossil fuel base load generation costs $8000 / kW. This number is supported by actual experience with both nuclear and wind generation. The Darlington Nuclear Generating Station, construction of which started 30 years ago, cost over $4000 / kW. Since then inflation in material and labour costs have doubled this amount. Present costs for wind generation with balancing energy storage are also in the neighbourhood of $8000 per base load kW.

If electricity in Ontario is revalued to the average cost of non-fossil fuel supply, the new electricity price will likely trigger a two order of magnitude increase in Renewable Energy Standard Offer Program (RESOP) participation. Energy storage would be used to match the random generation profile to the load profile.

The new electricity price structure will justify a 10,000 MW increase in the cap on total nuclear power capacity to meet known CO2 emission reduction requirements.

The new electricity price structure will enable paying down the existing stranded electricity debt, which in turn will enable a two fold reduction in the cost of financing new electricity projects.

The new electricity price structure will enable widespread use of energy storage by generators and load customers to minimize both generation and transmission-distribution costs.

HISTORICAL CONTEXT:
During the late 1960s Ontario Hydro in partnership with the relevant LDCs, offered major building developers 10 year electricity supply agreements at the rate of $.01 / kWh and $6.00 / monthly peak kW. As a result of this offer, by the early 1980s there were over 20,000,000 square feet of commercial building space in Toronto fitted with thermal energy storage for minimizing load swings on the electricity grid. I know this because I was president of the company that supplied, installed, operated and maintained the load management control systems in many of these buildings and I represented the interests of these building owners at the Ontario Energy Board (OEB) hearings into Ontario Hydro rates.

During 1981 Ontario Hydro indicated to the OEB that it intended to gradually shift its rate structure towards the structure that is now known as HOEP. The motivation for this change was the increasing use of fossil fuels for electricity generation, especially at Nanticoke.

Unfortunately, at no time since its inception did the HOEP like rate structure actually reflect Ontario Hydro's true costs. At the 1981 OEB hearings into Ontario Hydro rates, I represented the Urban Development Institute (UDI). At those hearings I indicated to the OEB that if the end user electricity rates did not reflect Ontario Hydro's true costs, then the customer owned energy storage systems would soon be decommissioned. At that time the OEB discounted the concerns of UDI, and as a consequence, between 1983 and 1997 almost all of the major thermal energy storage systems in Metro Toronto were taken out of service.

At OEB HR-21 (hearings into Ontario Hydro wholesale electricity rates in 1992) I testified that Ontario Hydro would have to increase its then rate to about $.10 / kWh to meet its debt obligations and recover its ongoing costs. I further testified that Ontario Hydro needed to extricate itself from use of fossil fuels because of the ongoing accumulation of carbon dioxide in the atmosphere. Again the OEB chose not to heed my advice, and by 1999 Ontario Hydro had over $30 billion in debt that it could not service from its OEB approved rates and was becoming more and more dependent on fossil fuels for daily operations. The problem continues today because the Ontario Hydro successor bodies, as well as the Ministry of Energy, the OPA and OEB, still have no firm plan to pay down the stranded electricity debt principal.

As a result of my past experience with the OEB and the consequences of its decisions, it is my view that implementation of the OPA IPSP will be a failure unless the senior executives of both the OPA and the OEB have the bravery and moral fortitude to face the politicians, public and special interest groups with the blunt engineering and financial facts.

KEY IPSP ISSUES BEFORE THE OEB:
The politically difficult issues that the OEB must deal with in order to enable a viable IPSP are:
1. Implementation of an immediate increase in the average end user cost of electricity of about:
$.068 / kWh + GST,
with all of the extra rate revenue being applied to reduction of the existing stranded electricity debt principal;
 
2. Implementation of Time-Of-Generation (TOG) and Time-Of-Use (TOU) electricity energy rates with sufficient rate differential to allow the generators and load customers to finance energy storage systems for matching the generation profile to the transmission constrained load profile;
 
3. A redistribution of electricity rate revenue received by generators which has the same net effect as a fossil carbon emissions tax of $200 per emitted tonne of CO2;
 
4. A change in the provincial nuclear generation capacity cap from 14,000 MW to 24,000 MW;
 
5. A simplification in the process of approving new transmission;
 
6. Implementation of a change in the manner in which transmission-distribution costs are metered and allocated from monthly peak kVA to cumulative daily kVAh. Generators as well as consumers must be charged for use of the transmission-distribution system. This is a highly technical matter that is essential to minimizing transmission and distribution costs while efficiently implementing distributed generation, nuclear generation, energy storage and plug-in hybrid vehicles. Unfortunately this is not a matter that those outside the electrical engineering community will easily understand or appreciate. The details of this methodology are available at www.xylenepower.com;
 
7. Facing the reality that the cost of IPSP implementation in a manner that will meet the CO2 emission reduction levels required for continued life on this planet is close to $140 billion, not $60 billion as is presently claimed by the OPA. In the context of this enormous financing requirement it is of paramount importance that the cost of long term electricity debt be minimized. Minimization of interest costs requires immediate discharge of the stranded electricity debt.

IPSP QUALITY:
Some of these IPSP documents, such as the one titled Transmission, are of excellent quality and the contained information is clear and relatively non-controversial. The transmission issues should be addressed as fast as reasonably possible without being delayed by other aspects of the IPSP.

However, other important matters relevant to the IPSP are poorly dealt with or completely ignored. These shortcomings place the credibility of both the OPA and the IPSP at risk.

There are at least ten major issues that together undermine the IPSP. These issues are:
1. The will of the people of Ontario, as expressed in two general elections, to promptly close coal fuelled electricity generation. The reality is that the present version of the IPSP relies on ongoing continued use of coal fuelled generation to absorb load electricity growth related to substitution of electricity for fossil fuels in the transportation and heating sectors;
2. Failure by the government of Ontario and the OPA to value electricity from non-fossil fuel sources at a level which enables large scale privately owned non-fossil fuel generation;
3. A load forecast that does not take into account the reduction in CO2 emissions required to contain global warming;
4. A load forecast that does not take into account recent and projected increases in the cost of liquid fossil fuels and the consequent substitution of electricity for liquid fossil fuel energy in the transportation and rural heating sectors;
5. The cost of new non-fossil fuel base load generation necessary to meet the load forecast shortfall. The cost of this extra new generation at $8000 per base load kW is reasonably expected to exceed the entire present OPA IPSP budget;
6. Over reliance on natural gas. The price of natural gas could easily double in the short term if US electricity utilities switch from coal to natural gas to reduce their CO2 emissions;
7. Financing constraints caused by failure of the past and present Ontario governments to raise electricity rates sufficiently to pay down the principal of the stranded electricity debt;
8. The cost of private sector capital as compared to the cost of government guaranteed debt;
9. The complete failure of the OPA to include both generator owned energy storage and load customer owned energy storage in OPA IPSP planning;
10. Present ongoing support by the OPA of electricity rates, import/export arrangements and incentives that do not adequately penalize fossil CO2 emissions and that do not adequately reward: non-fossil fuel electricity generation, distributed electricity generation and energy storage, and do not penalize inefficient use of transmission.

THE WILL OF THE PEOPLE:
In October 2003 and October 2007 the Liberal Party of Ontario won general elections on platforms of closing coal fired electricity generation in Ontario by 2007 or 2011. The combustion of coal causes local warming, global warming and a wide spectrum of negative health effects. The people of Ontario chose to close the coal plants in spite of the cost consequences. However, in four years the OPA and the provincial government have done virtually nothing tangible to replace the coal fueled electricity generation. The OPA is now recommending that the coal fueled generation closing date be extended to 2014, and even that date is not firm. The Ministry of Energy and the OPA have had the opportunity to contract for large amounts of non-fossil fuel generation but have failed to promptly act. The prices offered by the OPA for non-fossil fuel generation are simply too low to make large scale construction of such generation a viable business endeavour.

AVAILABLE NON-FOSSIL FUEL GENERATION:
Many years have passed since initial discussions regarding obtaining hydro-electric capacity from Manitoba, Quebec and Newfoundland but no business arrangement has been concluded. The OPA has identified over 3000 MW of potential hydro-electric generation in northern Ontario, but the OPA has not sought environmental approval with respect to this generation. In each case the OPA was unable to conclude a contract because the price that it offered was considered too low by the generating party. The message has not sunk into the OPA executives that it cannot realistically expect to purchase power from generators without the generators making a modest profit.

Atomic Energy of Canada Limited (AECL), Ontario Power Generation (OPG) and Bruce Power have been ready, willing and able to build new nuclear reactors to replace the coal fuelled generation capacity, but the Ontario provincial government has made no firm decisions. The government of Ontario capped Ontario's nuclear capacity at 14,000 MW at a time when a cap of at least 24,000 MW is reasonably needed in order to meet announced CO2 emission reduction targets. The OPA executives have failed to confront the Minister of Energy regarding this issue.

Currently the OPA is offering small generators only $.1104 / kWh for electricity from random distributed generation. The OPA offers small generators no financial benefit for minimizing transmission-distribution use and the OPA offers almost no premium for electricity generated in high correlation with the provincial electricity demand profile. Current market conditions reasonably require at least $.30 / kWh for supply of grid load proportional electricity from new non-fossil fuel energy sources. Fitting wind generators with electro-chemical energy storage to reliably supply energy and to minimize transmission power swings approximately doubles the cost of wind energy but halves the cost of long distance power transmission.

LOCAL AND GLOBAL WARMING:
Combustion of fossil fuels increases the concentration of carbon dioxide in the atmosphere. This extra carbon dioxide reduces the effective emissivity of the earth over a wide band of infrared wavelengths. In order to maintain balance between the absorbed solar radiation and the emitted infrared radiation the average atmospheric temperature increases. This atmospheric temperature increase leads to a rising sea level and an increasing snowline altitude. The rising sea level threatens coastal cities and low lying countries around the world. The increasing snowline altitude has damaged winter recreation and has reduced the late summer availability of fresh water for agriculture and livestock production. The increase in the ocean surface temperature threatens aquaculture. The increased rate of dissolving of carbon dioxide in the oceans also further threatens marine ecology.

Global warming has already triggered widespread fresh water shortages and starvation in some countries. Other countries face eventual inundation by the rising sea. The ability of mankind to feed itself is at risk. Major population migrations are certain.

Preventing further global warming requires an immediate 75% reduction in fossil carbon emissions to the atmosphere by industrialized countries. Failure to immediately meet this fossil carbon emissions reduction has mortal consequences for the segments of mankind that are sensitive to agricultural failures or seafood collapse.

The people of Canada and the USA exceed the world average per capita fossil carbon emissions by about a factor of four. Since the oceans have only a limited ability to absorb fossil carbon dioxide, for each person in Canada and the USA, three people elsewhere have to do entirely without the minimal amount of fossil carbon fuels that they need to improve their lives. This inequity is promoting unrest in much of the world and is laying the foundation for prolonged terrorism and possibly outright world war.

Many European industrialized countries are sensitive to the consequences of global warming and have made major strides in reducing their per capita emissions of fossil carbon to the atmosphere. However, in Canada and the USA there powerful political factions that have a sense of entitlement. These factions, including the present senior executives of the OPA, believe that Canadians and Americans have a divine right to consume as much fossil carbon as they like without consideration of the consequences to others. This sense of entitlement is similar to the sense entitlement that the German and Japanese peoples had for additional land and resources in the 1930s and early 1940s. That sense of entitlement by those in political power caused World War II.

The problem at the OPA is two fold. Firstly there is a sense of entitlement against the rest of the world. Secondly there is a sense of entitlement against other organizations and persons in Ontario. In any scenario that reasonably addresses global warming the total fossil carbon emissions in Ontario must be drastically reduced. Why should electricity generation consume any part of the limited fossil carbon emission allowance when the OPA has reasonable alternatives that other parties do not? Surely provision of space heating on the coldest winter days is of higher priority than saving a few cents per kWh on the cost of electricity generation.

Continued use of fossil fuels also has serious system reliability consequences. Failure by the OPA to make provision for fossil fuel equity may ultimately lead to ongoing sabotage of Ontario's electricity transmission system.

Any reasonable assessment of fossil carbon emissions relating to global warming leads to the conclusion that the OPA should not use fossil fuels except for emergency backup purposes.

Eliminating fossil fuels from primary electricity generation will require much more non-fossil fuel generation, at a substantially higher average cost per kWh of electricity generated than has been projected by the OPA. Furthermore, eliminating fossil fuels introduces additional costs for dispatch of both generation and load to control the system voltage.

I remind the OEB panel that in 1992 I indicated to the OEB that, due to accumulation of CO2 in the atmosphere, it was essential that Ontario Hydro extricate itself from use of fossil fuels for electricity generation. Despite the passage of 16 years the executives of the OPA have not familiarized themselves with the basic physics governing thermal radiative emission from the earth and the effects of CO2 on this emission. For the benefit of interested parties this physics is reviewed at www.xylenepower.com.

OVER RELIANCE ON NATURAL GAS:
It is shown at: Carbon Dioxide that to cause the atmospheric carbon dioxide concentration to converge to its 1990 level of 354 ppm it is necessary to cap the world wide fossil carbon dioxide emissions to the atmosphere at:
.478 X 3.683 X 10^10 tonnes fossil CO2 / year
= 1.76 X 10^10 tonnes fossil CO2 / year.

The 2005 population of Ontario was about 12,450,000 persons.
The 2005 world population was about 6,500,000,000 persons.
Under a per capita allocation, Ontario’s share of the world wide fossil CO2 emissions cap is:
(12,450,000 / 6,500,000,000) X 1.76 X 10^10 tonnes fossil CO2 / year
= 3.371 X 10^7 tonnes fossil CO2 / year.

Figure 3.7 on page 77 of the OPA IPSP document titled "Integrating the Elements" indicates that by 2015 the OPA plans to is generate 30 TWh / year of electricity per annum via natural gas. Assuming that on average 40% of the heat liberated by combustion of natural gas is converted to electricity, the corresponding rate of fossil carbon emission to the atmosphere is:
(30 TWh / year) X (10^9 kWh / TWh) X (1.0/.40) X (1m^3 methane / 10.4 kWh) X (1000 lit / m^3) X (1 mole methane / 22.4 lit methane) X (273 K/ 288 K) X (44 gm CO2 / mole methane) X (1 tonne CO2 / 10^6 gm CO2)
= 1.342 X 10^7 tonnes CO2 / year.
Thus, even after all the existing coal fuelled electricity generating stations are shut down the OPA IPSP will still have committed long term about:
(1.342 X 10^7 tonnes CO2 / 3.371 X 10^7 tonnes CO2) X 100% = 39.8%
of Ontario’s entire fossil CO2 emission allocation to stationary electricity production. In so doing the OPA will be denying fossil carbon emission allocation to other parties in Ontario that critically need to use fossil fuels for aircraft propulsion, industrial processes, peak winter heating, remote area electricity generation, etc. This issue alone makes the IPSP in its present form unacceptable. As a minimum the OPA should be extricating itself from fossil fuel contracts, not executing more of them.

TOTAL ENERGY REQUIREMENTS:
The OPA has taken an extremely blinkered view in which it regards its responsibility as being limited to meeting only existing electricity loads. On page 2 of "Integrating the Elements" the OPA forecasts an electricity load reduction per capita. This forecast is an error that flows from a Load Forecast that totally failed to consider the constraints on heating and transportation imposed by global warming. These constraints have the effect of transferring additional load onto the electricity grid.

Plug-in series hybrid vehicles are poised to take over the automotive market. A typical plug-in series hybrid vehicle driving around 110 km per day requires about 10 kWh / day from the electricity grid. In twenty years there could easily be 5 million to 10 million such vehicles in Ontario, all adding to the average electricity load.

Micro-nuclear district heating systems and ground source heat pumps are poised to become the principal heating systems of the future. These systems typically require 600 to 2000 kWe-h per annum per person, which also must be supplied by the electricity grid.

Due to local and global warming atmospheric temperatures are increasing. Present trends indicate that the average summer temperature in Toronto will increase by about 3.0 degrees C over the next 40 years. This temperature increase will cause a major increase in summer air conditioning load that will offset the energy savings presently anticipated via conservation and demand management (CDM).

As set out in Energy Vision an optimistic projection of future electricity load, taking into consideration these factors, requires at least 10,000 MW of new non-fossil fuel electricity generation above and beyond the generation contemplated in the September 7, 2006 OPA Load Forecast. The cost of this additional 10,000 MW of base load electricity generation is reasonably estimated to be about $80 billion in addition to the IPSP cost put forward by the OPA.

FAILURE TO DISCHARGE PAST ELECTRICITY DEBT:
For about 75 years the Ontario Hydro system was built using relatively low cost long term provincially guaranteed debt financing. However, commencing in about 1992 the Ontario Energy Board, Ontario Hydro and the Ontario government, acting together, failed to raise electricity rates sufficiently to meet debt service requirements. By the year 1999 the accumulated stranded electricity debt was in excess of $30 billion. During the period 2001 to 2007 this stranded electricity debt was not materially reduced.

The presence of the stranded electricity debt makes it difficult for the Ontario government to offer meaningful guarantees for either the $60 billion dollars required to fund the OPA proposed IPSP or the additional $80 billion dollars required to fund the additional generation required for CO2 emission reduction. Without such government guarantees the OPA will have to rely on private sector financing to fund both the IPSP and the additional generation. The premium for that private sector financing has the effect of approximately doubling the future cost of electricity as compared to the future cost of electricity with government guaranteed debt financing. Thus, one of the IPSP implementation constraints is immediately paying down the existing $28 billion in stranded electricity debt so that the government can mitigate future electricity costs by guaranteeing the financing of future major electricity projects.

COST OF CAPITAL:
Absent repayment of the stranded debt the OPA may have to rely on private sector financing without government guarantees. The major sources of funds of the magnitude required to implement the OPA IPSP and the required CO2 emission reduction generation are RRSP, pension fund and insurance company capital. The required capital simply will not be available if the balance between risk and reward is inadequate. This author's experience financing small energy projects with private sector capital indicates that for distributed generation, without government guarantees, the average cost of capital including all applicable fees is close to 20% per annum. The OPA is either deliberately deceiving the public or is totally incompetent in this area. The present interest rate for financing $28 billion in stranded electricity debt with government guarantees is about 7% per annum. The effective interest rate without any government guarantees is almost three times that amount.

THE ALL-INCLUSIVE COST OF VARIOUS ALTERNATIVES:
The actual experience at the Darlington Nuclear Generation Station was that over a period of 10 years the projected cost increased from $3 billion to $14 billion. Much of this cost increase was inflation and cumulative interest on money spent during the early part of the project that further multiplied during a succession of project delays. The costing approach presently taken by the OPA in the IPSP is similar to the one used by Ontario Hydro and has the same pitfalls. This costing approach does not properly consider the cumulative cost of construction financing. By the end of the Darlington project interest alone at 8% per annum was costing about $3 million per day or over a billion dollars per year. The employees and executives of AECL , Ontario Hydro and the Ontario Energy Board (OEB) had no personal sense of the cost of every day of delay or the importance of taking prudent action to mitigate or prevent such delays. Their compensation did not include bonuses for on-time on-cost project completion. Their compensation packages effectively encouraged delays in project completion. Even today there is still a "somebody elses problem" culture relating to the cost of financing that has propagated into the senior executive of the OPA.

Today the OPA is facing potential charges of $3 million per day for fenced in power at the Bruce Nuclear Generating Station but still contemplates spending two years on environmental hearings before doing anything tangible in terms of building a new transmission line to relieve the situation. This lack of respect by the OPA and the government for prudent use of the taxpayers and rate payers money is beyond comprehension. The problem of fenced in power at the Bruce Nuclear Generating Station has existed for about 20 years. This issue was extensively studied by Ontario Hydro prior to 1990. The solution is simple. Build a new transmission line along or adjacent to an existing transmission line right-of-way. The technology is well known. If necessary multiple shifts and multiple contractors can be employed to get the job done more quickly. Right-of-way land purchases and materials purchases should have commenced in 2005, as soon as the OPA was formed.

The executives of the OPA are losing the respect of the people of Ontario by failing to seek governmental relief from unreasonably onerous environmental assessment requirements. Recently the government of Ontario expedited environmental assessments relating to public transit. The OPA should have sought and obtained similar expedited treatment of new transmission. I personally raised this matter at IPSP stakeholder consultations in late 2006. At that time the OPA still had no intent to seek governmental relief with respect to this matter.

The costs per kWh set out on page 84 of the IPSP document titled "Integrating the Elements" simply have no basis in physical reality. For example, the amount of on-peak electricity actually available at the quoted RESOP rate is not remotely sufficient to meet Ontario's requirements. The actual all inclusive costs of new build nuclear electricity, even with government financing guarantees, are more than double the quoted costs. New natural gas projects are unviable at the quoted costs unless the financing, fuel cost and load factor are all government guaranteed. Since the energy costs on page 84 of "Integrating the Elements" are used for IPSP planning and decisions, the IPSP at this stage is nothing more than a dream that fails to address the most basic financing and global warming constraints. Few rational decisions can be based on the IPSP in its present form. As a minimum proven actual costs, including cumulative interest on construction financing, should be used for cost projections.

IPSP REWORK:
The Load Forecast needs to be reworked to reflect additional load resulting from constraints relating to global warming. Politically imposed constraints related to total nuclear power capacity should be deleted. The document titled "Integrating the Elements" needs extensive rework to:
a) Delete all use of fossil fuels except for emergency backup;
b) Introduce realistic costing based on actual experience, not wishful thinking;
c) Change the RESOP payment rate $.2141 / kWh to $.3157 / kWh depending on the circumstances;
d) Introduce a requirement for wind generators to provide 80 kWh of recoverable energy storage per kW of net peak power output.
e) Introduce a requirement for wind generation system net output to be highly correlated with the provincial grid load;
f) Expand the RESOP to include reasonable payment for on-peak load reductions achieved via electro-chemical and thermal energy storage;
g) Reduce the RESOP contract period. Offer the RESOP and CESOP participants the opportunity to recontract after five to ten years at the then prevailing electricity rates. This strategy would provide a potential upside to a RESOP or CESOP investments making them more attractive for equity investors and would provide the ratepayers relief from extraordinarily high rates that may be necessary to kick start the RESOP and CESOP programs.

There is no doubt that the people of Ontario will be subject to electricity price shock. However, unrealistic costing of the IPSP and CO2 reduction generation will further undermine the credibility of the OPA and the OEB and will confirm their political bias. If the true cost of upgrading the Ontario electricity system to meet future total energy requirements is going to be $140 billion, then the OPA and the OEB should be frank about it. It may be that in the future the average personal RRSP/Life Insurance Policy will hold $10,000 in electricity sector related investments. The government of Ontario should revisit the price advantages of providing its financing guarantees on long term debt in order to mitigate the cost of electricity.

The IPSP is probably the most important set of planning documents in the history of Ontario. The present "Integrating the Elements" document is totally inadequate and must be extensively rewritten. The "Load Forecast", "Supply Resources" and "Sustainability" documents also need substantial additional work.

CONCLUSION:
The IPSP document titled "Integrating the Elements" needs much more work, especially in the areas of meeting global warming constraints. In the mean time several urgent issues need to proceed independent of approval of the total IPSP.

Examples of matters that should proceed independent of the completed IPSP are:
a) The Bruce to Milton transmission line;
b) increasing the RESOP compensation rates and changing their structure in order to: increase participation by two orders of magnitude, shape the generation profile to match the Ontario load profile and minimize transmission requirements;
c)Introducing a per kVAh charge for transmission/distribution use by all generators so that the RESOP is not confined by the limitations of the existing transmission and distribution systems;
d) Increasing the existing RESOP payment rate to between $.2141 / kWh and $.3157 / kWh depending on the circumstances;
e) Introduce a further doubling of the RESOP payment rate if the government is not prepared to provide a guarantee to take and pay for the RESOP electricity generated for at least 20 years.
f) Reducing the RESOP contract period but allowing contract renewal at the then prevailing electricity prices;
g) Expanding the RESOP and CESOP to include all forms of non-fossil fuel electricity generation;
h) Introducing a reasonable bonus for dispatchability in the RESOP and CESOP;
i) Identifying sites and transmission routes for another 10,000 MW of non-fossil fuel electricity generation and commencing environmental approvals with respect to these sites and routes (This author contemplates a new nuclear generating station adjacent to the existing Nanticoke Generating Station as well as additional units at both Darlington and Bruce);
j) Fixing the electricity rate structure in Ontario such that it naturally encourages the maximum economic electricity conservation and distributed generation without relying on RESOP or CESOP contracts;
k) Fixing the regulated electricity rate structure in Ontario so that it includes a Time-Of-Use (TOU) rate differential suitable for battery charging, off-peak chilled water generation and use of electro-chemical energy storage.

SURPLUS ENERGY SALES:
Another issue not addressed in the existing OPA business plan is the issue of surplus energy sales. The use of larger amounts of non-fossil generation inevitably leads to times or seasons when there is surplus power. Instead of constraining non-fossil generation the OPA should be encouraging development of industrial customers that draw power only when it is surplus. If surplus energy goes into storage there is typically only a 50% to 70% recovery efficiency. Hence if the OPA can sell surplus only energy at 50% of fair market price, it may be better off financially than constraining non-fossil generation. Parties that might be induced to enter surplus only energy contracts are sodium, lithium and ammonia producers.

POLITICAL CONSIDERATIONS:
One of the major problems with the IPSP is that it has been used as an excuse for a five year delay in getting on with the job of repairing and upgrading the Ontario electricity system. The OPA needs to immediately get on with several highly visible projects that the general public will recognize as providing near term relief to the electricity system. Examples of such projects are the new transmission line between the Bruce Nuclear Generating Station and Milton, the new power transmission corridor to service downtown Toronto and implementing a contract for a new nuclear generating station at Nanticoke. The urgency of these projects suggests that it would be appropriate for the Ontario legislature to expedite environmental hearings relating to these projects.

This web page last updated June 11, 2008.