Big chill ahead for Ontario energy
Cutting coal-fired plants questioned
Policy could leave us out in the cold
Toronto Star - February 24, 2004
by John Spears
Closing Ontario's coal-burning power generating stations will force the
province to increase natural gas-fired generation by five to eight times
at a time when Canada's gas supply is dwindling, according to analysis by
the federal geologist.
Using National Energy Board figures and other published projections, David
Hughes of the Geological Survey of Canada paints a startling picture of an
impending energy squeeze in Ontario.
And the Liberal government's promise to close all coal-burning plants by
2007 will create unprecedented pressure on gas supplies, Hughes says.
So far, the province has insisted it will stick with its promise to close
the coal-fired plants, starting next year with the Lakeview generating
station in Mississauga, and extending within two years to other stations,
including the giant coal-burning plant in Nanticoke on the shores of Lake Erie.
Hughes' analysis, recently presented to provincial officials, outlines the
implications of shutting down the coal-fired generating plants.
Last year, Ontario generated 24 per cent of its electricity from coal,
according to the Independent Electricity Market Operator, or IMO.
The IMO doesn't break out separate gas figures, but other sources indicate
gas-fired plants account for about 8 per cent or less of Ontario's electricity production.
Replacing lost coal-fired production, certainly in the near term, means
burning more gas, according to Hughes' analysis of National Energy Board
data and projections by other experts.
Gas-fired plants can be built much more quickly than nuclear or hydro
plants — although several proposed gas-fired plants in the Toronto area
continue to languish at the drawing board.
Energy board figures, however, also show that Canada's natural gas
production peaked in 2001, and is already in slight but steady decline.
The production drop in 2003 alone was 5.3 per cent; exports to the United
States dropped by more than 15 per cent.
Meanwhile, NEB figures show that gas wells are becoming ever less
productive as current fields are depleted. Canada is on a treadmill of
drilling more wells for less gas.Under the most optimistic scenarios,
conventional gas supplies start to fall off much more sharply starting
around 2015. (Those include Alberta, Atlantic offshore production,
Mackenzie Valley gas and possibly some liquefied natural gas.)
Under more pessimistic assumptions, the steep decline in gas production
begins in 2009, just two years after Ontario has closed its coal-fired
plants and is committed to increased generation from other sources.
In either case, assuming a slow growth in over-all demand for electricity,
gas-fired energy generation would have to increase by five to eight times
from current levels.
Put another way, boosting Ontario's gas-fired power generation to make up
for lost coal-fired plants would require a 10 per cent increase in
Canadian gas output, while current projections show production trending lower.
Even this analysis has some interesting assumptions built in to it.
For example, Hughes's most optimistic forecast shows gas-fired electricity
production jumping by 470 per cent in Ontario almost immediately as the
coal-fired plants are shut down.
But it also assumes that nuclear-powered electricity production will
double over the next 20 years.
That would mean a huge nuclear building boom, especially as every one of
Ontario's existing nuclear plants will reach the end of its normal operating life in less than 20 years.
Doubling nuclear capacity would likely mean overhauling existing
generators to extend their lives, plus aggressively building a string of new stations.
Whether that's a realistic assumption is questionable.
Atomic Energy of Canada Ltd. is pushing a scheme to build eight new
reactors in Ontario, but the province has already been badly burned by
reactors that chronically were late, had huge cost overruns and were unreliable.
Another assumption in Hughes' analysis is that power production from
renewable sources will jump about 12-fold by 2025.
If atomic production doesn't double, or renewable sources don't develop,
the pressure on gas-fired power generation will be even more severe.
Higher demand in the face of diminishing natural-gas supply invariably
will translate into increased prices.
Increased hydro-electric generation is not seen as new supply source,
since Ontario has already developed most of the sites suitable for big hydro projects.
The Hughes analysis ties Ontario's electricity supply directly into the
over-all North American energy picture, since natural gas is traded on a
continental market basis.
The squeeze on natural gas is not confined to Canada. The United States,
too, is facing tighter gas supplies, Hughes points out.
The Americans are building more gas-fired generators, even though their
natural-gas output peaked in 2001 and has been declining at an annual rate
of 1.1 per cent ever since. Despite sagging production, the Energy
Information Administration projects a 1 per cent annual increase in gas
production through 2010 in order to meet U.S. needs.
Gas producers are eager to drill in the Pacific Ocean, off British
Columbia, but even if that goes ahead and the expected deposits
materialize, Hughes notes that the total estimated reserve would only be
equivalent to about five months' worth of U.S. consumption.
"If supply and demand forecasts are to be believed, there appear to be
serious shortfalls in continental natural gas coming," says Hughes' report.
One solution could be to import more liquefied natural gas by tanker from
outside North America.
But that would require a huge new investment in facilities to chill the
gas to liquid form, ships to carry it to market, and terminals to receive
and distribute the gas.
The process also involves boiling off methane contained in the gas into
the atmosphere — and methane is among the most potent greenhouse gases.
Alternative fuels to natural gas are coal — which Ontario has ruled out —
and oil whose reserves are also low.
Another way of preserving natural gas as a fuel is to shut down industries
that use it as a feedstock — but that would knock a huge hole in North
America's fertilizer and chemical industries that use it as a raw material.
Extracting methane by drilling into coal beds is another option, but
existing production is negligible and even a big effort to boost
production would only stall the decline in gas output for a few years.
What about oil? Worldwide, discoveries peaked in 1965, and since about
1980 consumption has outstripped new discovery.
"We've been eating into the oil bank account," says Hughes. "We're using
at least two barrels of oil for every one that's being added to the reserve bank."
Canada and Venezuela have huge oil-sands reserves, but extracting oil from
them is costly and, ironically, requires large amounts of energy.
Moreover, building the plants to refine heavy oil is slow.
The energy board projections on which Hughes bases his analysis show
steadily rising demand for energy. That could be moderated by improved
conservation and efficiency, Hughes says, but it's unlikely to be the whole solution.
Ontario's task force on electricity supply and conservation — which had
access to the Hughes presentation — calls for a "balanced approach" to
eliminating coal, with new gas-fired generators, more renewable power and
added nuclear and hydro-electric capacity.
Hughes' analysis shows it won't be easy getting there.
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