May 12, 2011 / By Jatin Nathwani

A balanced approach to electricity planning and investment

There has never been a better time to have a dialogue about electricity supply in Canada. Our electricity generation, transmission, and distribution infrastructure is aging, and that’s a big problem for all of us. A well-functioning, reliable electricity system is the bedrock of our economic performance, social well-being and the quality of our lives.

Unfortunately, the debate about electricity has become polarized and politicized in many parts of Canada. Various interests argue for or against technologies such as nuclear, fossil fuels, and renewable sources like wind and solar. People often don’t want generating stations or transmission lines near them. Customers are upset about rising electricity bills.

Politicians wade in to try to “fix” the problems, but their solutions are often based on short-term political objectives, trying to make the problem disappear before the next election. Even worse, they use electricity planning for social engineering, without always understanding the long-term consequences of their decisions.

Electricity planning and investment needs a rational, long-term focus. It needs to balance objectives such as achieving the lowest-possible costs with providing the greatest possible value to customers. Always at the forefront of electricity planning are the needs to ensure high reliability, affordability for customers, and continuing improvements in environmental performance.

A balanced approach is key. It won’t do to have a lean and low-cost system that is not reliable or clean. It also won’t do to be a world leader in emissions reduction if the power is not there when you need it, or if it results in a consumer rebellion.

One of the fiercest areas of debate in my province, Ontario, centers on what types of generating stations to build. There’s a lot of heat being generated, but not a lot of light.

Most Canadians, including decision makers, would benefit from a better understanding of the relative strengths and weaknesses of the various forms of electricity generation, and how each relates to the core values of reliability, cost competitiveness and cleanliness.

We are very fortunate in Canada to have a large number of hydro installations across the country, producing more than half our power. They do so with no smog or climate change emissions, and they produce cheap power. Some facilities (like the Niagara Falls plants in Ontario) run continuously, while other types of hydro plants hold water behind dams for use during the higher demand periods of the day.

But new hydro plants are expensive to build and many provinces (Ontario, Alberta, Saskatchewan, Nova Scotia, New Brunswick, and PEI) have very little in the way of large-scale, economic hydro potential left to develop. Hydro facilities with dams can also have significant impacts on our land and water.

Nuclear is another form of generation that is designed to run continuously at a high capacity factor. Operating on Canadian uranium fuel, it produces reliable and affordable power today. New nuclear build and associated costs are viewed with suspicion by many and the concerns around long-term waste management remain in the public eye. The recent earthquake and tsunami in Japan and the damage to the nuclear plants will mean increased focus on safety in design and operation and a deeper consideration of the ramifications.

Fossil-fuelled plants have a key advantage of flexibility – they can run continuously if needed, or they can be quickly ramped up and back down to follow peaks in demand during the day. This is an important consideration since electricity cannot be stored, so supply needs to be in continuous balance with our demands for power.

Of the fossil fuels, coal plants are the cheapest to operate, but air pollution and greenhouse gas emissions are a big concern. Smog emission reduction technologies add to the cost, as will carboncapture and sequestration once this is a proven technology.

Natural gas plants are quick and cheap to build, but there is still the problem of the carbon (about half the amount of a coal plant). The price of gas is low today, but there is a significant risk of price volatility in the future. High gas prices would make these plants expensive to operate in the future.

Renewable forms of generation such as wind and solar are newer additions to power systems across Canada. These have the major benefit of being non-emitting sources of power, and are much-beloved by thegeneral public, who see them as using free fuel (wind and sun).

But like the other forms of generation, they also have drawbacks. First, they are intermittent, able to generate only when the wind is blowing and the sun shining. Otherwise, they need to be backed up with another form of generation, typically natural gas, which adds to the electricity system costs and emissions. Wind and solar need a lot of land, and they are expensive to build and operate – in Ontario, they are an increasing factor in the rapid increase in customer bills.

Finally, conservation and demand management are important tools in planning our electricity systems. These are often low cost ways of reducing the need for new facilities and helping customers manage their bills.

These are the major investment choices facing decision makers. Each has strengths and weaknesses. Some are designed to run 24/7 as the strong foundation of a reliable electricity system. Others are more flexible contributors, which is an important attribute in keeping supply in balance with demand. Many of these options are emission-free, which is key to meeting ourenvironmental goals. Some will be more expensive than others, although each option will tend to put upward pressure on electricity rates.

The job ahead of us is not to rule options out but rule options in. We need to find the combination that can be considered a good balance: “The Right Mix in the Right Amounts at the Right Price.” A hard look at each form of generation without demonizing any one of them is necessary. We ought to subject our choices to a “net benefit test” – what mix will maximize reliability, cost, and environmental performance, while also meeting the test of social acceptance?

Canada has the institutional and technological sophistication to be a responsible energy superpower and we need to develop a broad social consensus to enhance electricity trade between Provinces and with the U.S., to develop our energy resources consistent with high standards of environmental oversight and performance. Our electricity infrastructure needs to be renewed. It s a huge, and long-term, undertaking with high stakes – our quality of life and Canada’s economic productivity depend on it.

This should be a top priority for our politicians and for all Canadians.