Somebody Blew It

The Province has created a problem for itself.  They have extended contracts to generators to buy power that exceeds the capacity of the lines to carry it.

The root of the problem is the refurbishment of two additional nuclear units the Bruce A.  When the Bruce plant was built by the Davis government in the 70’s, the area was scheduled for major industrialization.  The Bruce A units were designed to make 675 MW of electricity, and 75 MW of steam.  Of course the steam from a nuclear reactor would be a very high grade steam, with sufficient temperature to be used in any industrial process that requires steam, such as oil refining.  It turns out the market to use the steam never materialized.  A few green houses were built, but they only need low grade steam for heat, so they underutilized the resource.

When Bruce A was “laid up”, Ontario Hydro had to build an oil fired steam generating station to fulfill the steam contracts with the greenhouses.  Clearly, the decision to make steam was an utterly failed idea, that cost electricity consumers dearly, and continues to be paid for by the Debt Recovery Charge on your power bill.

The refurbishment of the Bruce A reactors includes considerable upgrades, including converting the energy output of steam to electricity.  This means the capacity of the refurbished reactors will be larger than 675 MW.  It is possible the refurbishment may make them as much as 825 MW.  In addition, there are several hundred MW’s of wind that the province has provided contracts for in the Renewable II Request for Proposal (RFP) in the Bruce area.

But the transmission lines to the plant were never designed to accomodate this much power.  When the plant was first built, it included a heavy water plant, that has since been removed.  So the load for that plant is gone. That means even more power from the plant must be sent out the transmission lines.

The Independant Electricity System Operator says that there will be some constraints on transmission when one of the units returns to service, and even more problems when two return to service.  The need for additional transmission is clear, but the lead times to build it are long.  There has been little transparency on the methodology employed in determining the transmission limits.  What assumptions have been made about the Bruce Plant operating rates?  Today, 2 of the 6 working reactors are off line.  With 8 operating reactors, it will be highly unusual that all 8 would be in operation.  Nuclear reactors need repairs.  What assumptions have been made about local load?  If power is used along the way, surely the transmission constraint is reduced.  The Bruce area doesn’t have big load, but it is not zero.
The province, meanwhile, has been working with the Ontario Power Authority to release its Standard Offer Program.  This is a program to offer 20 year purchase contracts to small generators, to simplify the procurement process.  The rules have been released, and the contracts will be ready for later this month.

But there is a big embargo area.  No contracts will be awarded in the embargo area, which includes Owen Sound, Meaford, Seaforth, Hanover, Orangeville, Palmerston, Wingham, Grand Bend, Goderich, Stratford, and the Longwood Substation west of London.  This is a huge area that is effectively excluded from wind development, including all of Bruce County, Huron and parts of Grey County, Perth, Dufferin, Wellington, Middlesex and Lambton.

What’s worse is that the discovery of this transmission problem seems to be recent.  Many developers have been measuring winds, working on zoning and environmental assessment, paying for connection studies etc., and suddenly they are told that there is no opportunity to develop where they have spent their time.  Millions of dollars have been spent.  And there are some rightfully furious developers and landowners.  And with no transparency on how the transmission constraints have been calculated, nobody can argue or discuss whether perhaps the assumptions used are wrong.

Interestingly, the Renewables II Request for Proposal did not outline these problems, so it would be perfectly reasonable for developers to assume that some projects in the Bruce area could be connected.  It would also be reasonable to assume that the further away from Bruce you go, the local load should reduce the transmission contraints.  It is extremely unclear why the constrained area goes as far as it does.

The Ontario Power Authority (OPA) has stated that they will look at reducing the embargo area, to allow some wind development, but that their priority was to at least get the program out.  This makes sense.  We can deal with the embargo later.  The plan grandfathers projects that are already built, or that have invested in their Customer Cost Recovery Agreement with the local distribution company.  Only a small number of projects have done this, as the cost to do so is high, and why would you make that investment until you had a contract to sell the power?  At least those who have made the largest investments will not be penalized.

The process the government used to provide contracts for the Bruce refurbishment has been shrouded in confusion.  The Globe and Mail reported this week that there was considerable controversy at the Ministry of Energy about what price to use in media reports.  The price of power in the contract is supposedly 5.7 cents/kWh, plus fuel costs, which are currently .6 cents/kWh.  But the prices in the uranium market are going up strongly.  Mines produce only about half of the fuel we use, with the other half coming from Russion stockpiles from decomissioned nuclear weapons.  Clearly that stockpile is diminishing, and so uranium mines will need to be greatly expanded.  But this will only occur with sustained high prices.  So uranium prices will stay high, and may well go much higher.  The ratepayer takes all of this risk.  The ratepayer is also assuming some risk of cost overruns, and the contract increases with inflation.
If a Standard Offer generator wants to connect, and upgrades to the distribution or transmission system are required, then the generator pays for those upgrades.  Not so with the Bruce plant.  The transmission upgrades to  get the power out are going to be paid for by the rate base.  And in the meantime, the contract to buy the nuclear power is going to keep a lot of renewable energy from being developed.

When the nuclear lobby talks about how cheap nuclear power is, don’t buy it for a minute.  They have been masterfully successful at transferring their costs to other parts of the system, and to future generations.  Perhaps the lack of cost transparency is the greatest problem of all.

I hope the OPA and the IESO are able to find a way to accomodate some wind energy in the Bruce area.  Fairness requires it.  And the system can use the juice from clean transparent sources with transparent costs.

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