canada electricity guide

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Building Tomorrows

Electricity System:

Electricity Fundamentals for Decision-Makers


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Copyright Canadian Electricity Association, 2009.All rights reserved. No part of this work covered

by the copyright herein may be reproduced or

used in any form or by any means without prior

written permission.

Canadian Electricity Association

350 Sparks Street, Suite 1100

Ottawa ON K1R 7S8

Tel.: 613-230-9263

Fax: 613-230-9326

Email: [email protected]

This paper was commissioned by the Environmentally Preferable Power (EPP)

Task Group of the CEA Generation Council. The EPP Task Group hopes this

guide will stimulate further discussion about the options for the future. It does

not intend to choose winners or losers among the available technologies or topromote a specific mix. Rather we seek to introduce the many considerations

that must go into deciding the future generation mix, various policy mechanisms

for developing the electricity system, and the established and emerging options

for generation supply and electricity delivery. CEA is solely responsible for the

contents of this publication.


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BuildingTomorrowsElectrici

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We Must Plan Today for a Vibrant Electricity Future

Canadas electricity supply is enviably diverse and is an important factor in the quality of life and economic

prosperity we enjoy in this country. The electricity system is part of an integrated whole, connected acrossjurisdictions, and involved in a vibrant marketplace. The sector also has a significant trade surplus with the

United States and our electricity prices continue to be among the lowest in the developed world.

Canadas electricity system is in critical need of renewal and new build. Significant investment in the

electricity sector is required if Canada is to meet the twin goals of reducing greenhouse gas emissions

and continuing to meet electricity demand. In its 2008 World Energy Outlook, the International Energy

Agency (IEA) has estimated that US$221 billion will be needed by 2030 in order to renew the Canadian

electricity system. Across the country, electricity providers, provinces and communities are considering a

range of diverse options for how to create the best electricity supply mix for future load growth, economic

development, and the optimal reduction of environmental and social impacts. The Canadian ElectricityAssociation believes that these decisions must be made in a way that continues to provide secure, reliable,

cost-effective, technologically advanced, and environmentally responsible electricity.

Investment in Canadas electricity infrastructure faces a number of barriers. Current regulatory regimes

are often costly and burdensome and are slowing down construction by increasing the length of time required

to obtain regulatory approvals for a power project. Public acceptance for new electricity infrastructure is

another critical factor that can create roadblocks to development and has a strong impact on projects across

the country. There are also intense debates about what types of generation are most appropriate to build.

Supply mix planning is harder than ever and there are significant challenges ahead for decision makersand electricity providers. One of the most important considerations in developing the right mix is that

different forms of generation are suited to different purposes in the electricity market. Baseload supply,

which is the minimum amount of electricity constantly demanded at all times, is only adequately

provided by certain generation technologies, such as hydro or nuclear. Peaking supply on the other

hand, is best provided by other generation sources. Certain emerging renewable technologies such

as wind power, which are a critical component of supplying low-emitting electricity, require special

consideration due to their intermittent nature. And energy efficiency and conservation measures are

becoming increasingly important and must be factored into electricity system planning.

Increasing and strengthening Canadas electricity supply diversity is a very good thing. The electricity

system of the future must include increased generation from renewable technologies. But renewable

solutions alone are not feasible on a system-wide basis. Like the electricity grid itself, the supply of

electricity is deeply integrated in society, and every decision has widespread impacts. As an extreme

example, a developed, urbanized society with a 100% renewable electricity system would experience

consequences such as increased transmission infrastructure, greater electricity reliability issues, and the

unique environmental impacts of the selected technologies (since all generation has an environmental

footprint of some kind). There would also be costs associated with developing new generation and the

likelihood that consumers would pay a premium for new generation technologies. This, in turn, could haveother consequences such as the need for increased electricity conservation, inflationary effects, or a need

for public financial assistance programs for individuals who could not afford the higher-priced electricity.

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In 2006, the Canadian Electricity Association (CEA) published Power Generation in Canada: A Guide to

help stimulate informed discussion among industry participants, governments and the public on the

electricity supply challenges we all face and the options for the future. 1 This paper updates some of the

key information provided in Power Generation in Canada, but is primarily meant to serve as a companion

to the guide, particularly as a reference for policy makers at all levels.

The Environmentally Preferable Power (EPP) Task Group of the CEAs Generation Council hopes this guide

will stimulate further discussion about the options for the future. As in the 2006 guide, this paper does not

intend to choose winners or losers among the available technologies or to promote a specific mix. Ratherwe seek to introduce the many considerations that must go into deciding the future generation mix, various

policy mechanisms for developing the electricity system, and the established and emerging options for

generation supply and electricity delivery.

Its About Demand, But So Much More

For many years, when electricity system planners in government and utilities sat down to forecast future

electricity system needs, the focus was on demand and the supply needed to meet that demand. In asimplified way, this was an exercise to predict electricity load growth over time and then factor in the

amount of additional electricity generation, transmission and distribution that would be required to deliver

that electricity. A limited suite of generation technologies was available and the choices to be made among

these were dictated largely by a regions geography and proximity to fuel sources. Similarly, electrical

transmission was more limited than it is today, requiring sources of electrical power to be located nearer

to the people who used it. In Canada, the regional nature of the electricity system was further encouraged

by the reality that most energy resources are a provincial area of responsibility under our constitutional

division of powers. Thus, the electrical systems in each province developed and operated independently,

with few interconnections.

About This Guide

1Power Generation in Canada continues to be a popular reference and is available in English or French at www.electricity.ca.

While such a radical revision of the electricity system would be technically and financially impossible in

the 10- to 20-year planning outlook of most utilities and system planners, the decisions that are made

now will be absolutely critical in renewing the electricity system for the future.

Planning must take into account the greater importance of the market model in todays electricity supply.

With long lead times, and longer-term technology commitments, there must be a certain amount of stability

and predictability attached to system planning. Democratic election and government policy-making cyclesare on a shorter timeline than electricity system planning. Repeated shifts in policy direction can create an

ongoing planning process that does not result in any of the long-term construction commitments needed to

ensure that the electricity system will continue to function. One solution is to remove the electricity system

from political control and allow it to develop with independent oversight, according to market principles.

Planners should take the urgent steps needed now to prepare a vibrant and diverse supply mix future but

should do so in the context of facilitating a market-based direction for the energy sector.


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As Canada became fully electrified through the 20th Century,

domestic and international technology breakthroughs provided

more choice for system planners in terms of generation technology,

and greater efficiencies became possible in existing technologies

such as hydroelectric generation or coal. Transmission lines were

engineered to efficiently move larger quantities of electricity over

greater distances. A trend developed toward building very large-

scale power generation projects further away from urban centres.

Gradually, markets became more integrated to allow the trade

of electricity between jurisdictions. This allowed the benefits of

market principles to be applied to electricity. However, even as

abundant, affordable electricity fed a growing demand for modern

appliances such as air conditioning, public acceptance began to

shift away from supporting new, and even existing, electricity

infrastructure. Demand has always driven the electricity systemand will continue to be a key consideration. However, it is no

longer enough to project population growth and break ground for

a new power plant. Environmental, aesthetic, political, economic,

and other concerns have presented new challenges to building

electricity generation and transmission today, even when it is

badly needed to prevent looming critical electricity shortages

caused by population or commercial growth and/or the need to

replace ageing infrastructure.

Todays electricity system planners have to analyze an increasingly

complex range of factors when deciding when, where, and how to

supply electricity. The resulting plan is generally known as the

supply mix, and it is just that: a combination of generation

sources designed to meet regular (baseload) and peak demand,

maintain system reliability and affordability, and minimize the

impact on the environment and nearby communities.

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The Ingredients for a Perfect Mix

There are many considerations today when it comes to renewing the electricity system. When planners

balance these factors appropriately, they ensure a reliable, affordable, acceptable electricity system. Amongthe important criteria used to determine the generation supply mix are the following:2

Projected Growth and Resource Potential

These are two of the most fundamental considerations related to future demand and supply. Population

growth and economic growth factors such as GDP, industrial development, productivity, inflation, and trade

must all be carefully analyzed to project future needs. Resource potential looks at unused system capacity,

the future availability of fuel sources, and environmental costs, and seeks to answer questions such as:

What are the known reserves of the electricity producing energy source that will be used?

Is this a domestic supply, or is it dependent on trade?

What are future prices likely to be for the energy source?

Will transportation be available to deliver the fuel to the generator?

Will there be adequate transmission to deliver the power, or will it be stranded?

Resource potential also involves examining regional and geographic constraints. Generation choices in Canada

tend to be regionalized, with abundant hydro resources in provinces such as British Columbia, Manitoba,

Quebec, and Newfoundland and Labrador, and almost none on the plains of Alberta and Saskatchewan,where coal generation dominates as it does in some Atlantic provinces. Only Ontario, Quebec and New

Brunswick currently use nuclear power. Figure 1 illustrates these regional differences.

Figure 1: Electricity Generation in Canada by Province and Generation Type, 20083

0

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Tidal

Wind

Combustion Turbine

Internal Combustion

Nuclear

Conventional Steam

Hydro

PEINSNBNFLDQCONMBSKABBC

Generation(TWh)

2Power Generation in Canada: A Guide (CEA, 2006) www.electricity.ca offers an additional overview of some of these factors. (pp. 11-25).

3 Statistics Canada, Survey 2151, 2009. Conventional steam is typically generated with coal. It should also be noted that New

Brunswicks nuclear reactor is currently off line for refurbishment.


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ElectricityFundamentalsforDecision-Makers

Ability of Technology to Respond to Changes in Electricity Demand

Different generation technologies meet different types of electricity supply needs, referred to as baseload,

peaking, mid-merit and intermittent generation.

Baseload generation runs almost constantly, providing a steady stream of electricity to meet the

minimum baseline requirements of the end users, or the load. Traditionally, baseload power needs

have been met by more cost-effective generation supplies such as hydro power, nuclear power and coal

generation.

Peaking generation tops up the baseload supply when demand is high. Electricity demand peaks

require generation that can be easily switched off and on to respond to daily demand spikes, which

typically occur in the morning and evening, or generation that can be activated when there are seasonal

peaks, such as in the coldest part of winter.

Mid-merit generation refers to a type of generation plant that has become a common source of peaking

generation. These plants, often privately owned, can provide a more economical source of power through

lower operating and maintenance costs and by the ability to provide electricity in a competitive market.

Mid-merit plants may include high-efficiency natural gas generation, hydroelectric plants, industrial

co-generation facilities that also provide steam and/or power for a manufacturing facility, or even older

fossil-fuel facilities that are no longer used for baseload generation.

Intermittent generation comes from an electricity source that is not constant, such as wind turbines

or solar photovoltaic cells. These types of generation rely on external natural forces that cannot be

controlled. Systems that have intermittent supplies connected to them need to be able to accommodatethe additional power that is generated whenever the wind is blowing or the sun is shining.


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Technology Development

Canada, with its abundant hydro-electric resources, was among the earliest adopters of public electric power

in the late 19th Century. Canadian innovators have continued to develop and adopt new technologies over the

years. Canadians created one of the worlds first civilian nuclear power programs and Canada continues to

lead in areas such as biomass generation, long-distance transmission, energy efficiency measures, as well

as geothermal, solar and fuel cell research. Emerging areas of interest include carbon capture and storage,

smart grids, and distributed heat and power. However, introducing any new technology to the grid comes

with myriad challenges for system planners and developers.

Environmental Footprint

All forms of electricity generation have environmental impacts. It is important for decision-makers to be

clear about environmental priorities and to understand the relative ecological and societal importanceof concerns such as preservation of habitat and species, water conservation, reduced greenhouse gas

emissions, and reduced air emissions.

Generation Cost

Electricity prices in Canada are among the lowest in the world. This is mainly due to the abundance of

legacy hydroelectric and coal-fired power generation. Accessible, affordable electricity is a key factor in

the high quality of life enjoyed by Canadians. It has also been an important factor in the development of

Canadas resource-based, energy-intensive economy, and in the manufacturing sector. However, a majority

of Canadians do not pay the true market value of the electricity they consume. It is difficult, however, toestimate the full amount and nature of electricity subsidies in Canada, due to the variety of approaches

to funding and accounting for the difference in the cost of electricity production and the price paid by

electricity users, as pointed out by TD economists in the 2005 report, Electricity in Canada: Who Needs

It? Whos Got It?4 This has led consumers to believe they are entitled to low-cost electricity and may be

hampering efforts to encourage electricity conservation. It also limits the ability of electricity producers to

raise investment funds for necessary capital projects, shifting the burden of development to taxpayers or,

more often, stalling development altogether.

In recent years, due to volatile prices for fossil fuels and the cost of building new electricity infrastructure,

consumers in most parts of Canada have seen rising electricity costs. This trend is expected to continue,

especially with the replacement of ageing electricity equipment, addition of new capacity and transmission,

and the increased costs associated with installing emerging renewable power generation technologies such

as wind and solar. The implementation of other environmental technologies, such as carbon capture and

storage, also have significant costs that are likely to be passed on, at least in part, to electricity consumers.

Providing appropriate price signals to consumer through demand management tools such as smart meters,

as well as providing choices through a competitive energy marketplace, are the measures most likely to help

recover system development costs and improve energy intensity in the electricity sector.

4 http://www.td.com/economics/special/electricity05.pdf P. 17.


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Figure 2: World Electricity Prices, 20075

Public Acceptance

Most parts of Canada have not had significant new electricity development for 20 years or more.

Infrastructure across the country is reaching the end of its useful life and requires refurbishment or

replacement. During the same time period, environmental assessment procedures and public consultation

requirements have changed significantly. The advent of social media also means that any project opponents

are able to communicate more effectively and build support for their causes. There is a growing list of

electricity projects that have been cancelled due to a lack of public acceptance. All forms of electricity

development have seen significant public protest: wind & solar farms, coal plants, nuclear, gas-fired plants,hydro, transmission lines. The not-in-my-backyard (NIMBY) phenomenon is now a standard consideration

for electricity development initiatives.

5 Source: NEB, http://www.neb.gc.ca/clf-nsi/rnrgynfmtn/prcng/lctrct/frqntlskdqstn-eng.html and International Energy Agency - Key

World Energy Statistics (2007) www.iea.org/Textbase/publications/free_new_Desc.asp?PUBS_ID=1199

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Electricity for Industry(g) (kWh)

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Smart Public Policy for Smart Electricity

In addition to the practical criteria, there are equally important and in many cases overriding governmental

considerations to be taken into account, particularly regulatory time frames and public policy directives. The

regulatory burden many Canadian electricity providers face, combined with frequently shifting government

policy, is a leading contributor to delays in new development that threaten reserve margins in the electricity

supply and increase electricity costs.

Electricity markets have evolved in Canada and the United States, allowing more commercial, market-based

trade in the electricity sector. This bulk power market has many reliability and cost benefits for power

purchasers and sellers, and has contributed to Canada establishing a trade surplus with the United States

for electricity. The North American grid has evolved from isolated regional islands to an interconnected

system with regional oversight provided through coordination of the system operators. In many areas these

physical interconnections could be strengthened to provide increased benefits, moving emissions-freeelectricity to another region, for example, or providing more summer peak power to the United States from

a region that peaks in winter, and vice-versa.

Where electricity trading and markets exist, most bulk electricity trading is done through long-term firm

contracts between electricity providers and customers, typically large industrial users or utilities. These

agreements provide for a certain amount of electricity, over a certain amount of time, at a fixed price. There

is a role here for power marketers, who may purchase and resell electricity according to market principles.

To serve real-time electricity demand, a day-ahead market allows electricity market players to buy and sell

electricity based on spot prices.There is no doubt that governments have an important role to play in the electricity system. By encourageing

appropriate market design, regulatory efficiency, and independent oversight though energy boards and

independent system operators, a government can ensure a reliable, affordable supply of electricity to

consumers. There are many ways for governments to direct how an electricity system develops. These

initiatives are most successful when they:

provide predictability and stability for market design, rules and operations,

avoid adding additional layers of bureaucracy and regulation to an already-burdened industry, and

fully consider the consequences for affordability, reliability and environmental impact.

Some of the many ways governments might choose to promote the way in which the electricity system

is built and operated are included in Figure 3. Whatever options are chosen, The Canadian Electricity

Association urges that all decisions be made in a timely and consistent way while still fully considering

each policys impact on electricity providers ability to deliver secure, reliable, affordable, technologically

advanced, and environmentally responsible electricity.


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Figure 3: Examples of Policy Mechanisms for Electricity Systems

MECHANISM EXAMPLES

Policydirectives

Targets Emissions reductions

Timetables & deadlines Directives or new construction or decommissioning o plants;

implementation o new technology, emissions reductions

Trade policy Taris, ree trade zones, interprovincial trade agreements

Regulatory

Lawmaking Environmental protection laws, clean air laws

Rulemaking Mandated efciency measures, emissions caps

Project licensing Regulatory efciency initiatives, service standards

Environmental assessments Cooperation agreements, ast-tracking or certain types o projects

Pricing Marginal cost pricing, time o use rates, charges or new development

Financial

Incentives

Subsidies Pricing enhancements, assistance programs

Tax programs Accelerated capital cost allowances (CCA), rebates, research and development incentives, venture

capital incentives

Direct investment Major projects unding, technology procurement, research and development

Loans & loan guarantees Financing or certain technologies

Specifc

measures

Perormance standards Energy efciency, emission caps , renewable portol io standards (RPS)

Market design Encouragement o market principles or electricity trading, eed-in tar is, standard oers, regional

cooperation, emissions trading

Other

support Inormation services Public education campaigns, data collection and analysis, mapping, benchmarking and best

practices


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Building on Success:Todays Electricity System in Context

As Figure 4 illustrates, traditional sources of generation continue to supply most of the electricity in Canada.

However, there have been recent changes in the development of new electricity resources. For example,

installed wind-power capacity has increased exponentially since the first commercial wind farm was built inAlberta in 1994. Over the ensuing 15 years, the installed capacity has grown to approximately 2500 MW,

and the Canadian Wind Energy Association estimates that 5% of Canadas energy requirements will be met

by wind power in 2016, if current provincial commitments for at least 12,000 MW of wind power are met.7

Figure 5 shows these changes in the generation supply mix since 1990.

Policy directives have a very direct impact on the supply mix. A planned phase-out of coal power in Ontario

could also have a significant impact on the future energy mix. The province is currently planning an increase in

renewable electricity sources and aggressive conservation targets as well as considering options for increasing

nuclear capacity to meet future electricity demand. Other provinces have made similar commitments torenewable electricity Nova Scotia is planning increased tidal generation capacity, Newfoundland and Labrador,

Quebec, Manitoba, and British Columbia, and Alberta are planning significant new Hydro developments. Other

provinces notably Saskatchewan and Alberta are considering the possibility of adding nuclear generation

to their supply mix, and New Brunswick is considering expansion of its nuclear station. Finally, new forms of

fossil generation are being developed, particularly coal gasification plants, new ways of utilizing oil sands by-

products as petroleum coke, and accompanying carbon capture and storage technologies.

In order to accommodate increased cross-jurisdictional trade in electricity as well as the addition of new,

smaller scale electricity generation projects and demand-management

systems, many jurisdictions are making and implementing plans forthe smart grid. This is an electricity transmission and distribution

network that incorporates technology that provides advanced

features such as the ability to better accommodate intermittent

electricity supplies such as wind or solar, to more easily trade

electricity, or for consumers to make energy choices based

on real-time price signals, and so on.

While these varied approaches to supply mix planning are

likely to shift the overall future Canadian mix representedin the pie chart, they continue to reflect regional and

geographic realities, as well as the commitment of

Canadians to minimizing environmental impacts while still

ensuring an economical and reliable supply of electricity.

These last considerations are rooted in the physical laws of

electricity which will ultimately continue to dictate how far

technical and engineering advances can go.

ConventionalSteam20.6%

Nuclear14.8%

InternalCombustion0.2%

CombustionTurbine4.1%

Tidal0.0%

Wind0.3%

Hydro

61.7%

Figure 4: Electricity Generation In Canada by Technology, 20086

6 Source: Statistics Canada, Survey 2151, 2009. *Numbers may not sum to 100 percent

due to rounding.

7 http://canwea.ca/media/release/release_e.php?newsId=4


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More Electricity Delivers More Benefits

The basic method of generating alternating current electricity was invented over 100 years ago: a kinetic

energy force flowing water, wind rotates a magnetic field within wire coils, which is then converted

into an electrical current though a generator. A generator can also be powered by capturing stored energy

by burning fuel or creating heat with nuclear fission to create steam. (More recent inventions, such as

photovoltaic solar cells or fuel cells, can be used to transform energy into electrical currents without moving

parts.) The generation source must match the frequency of the electricity system (60 cycles per second

known as a hertz or Hz) to ensure that the system remains stable.

Once this electrical current is generated, a transformer may be used to increase the voltage so that the

electricity can be carried in bulk over high-voltage transmission lines. Once the electricity has been delivered

to a local distribution system, another transformer will reduce the voltage to make the electricity safer for

distribution networks delivering the power for industrial and residential use. The analogy of water being

0

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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Ge

neration(TWh)

Figure 5: Electricity Generation in Canada by Technology, 1990 - 20088

8 Source: Statistics Canada, Survey 2151, 2009. Prior to 2008, wind and tidal generation are included in hydro.


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pumped into a system of pipes has been used to describe the flow of electricity. As with municipal water

pipe delivery systems, the pressure of the electricity on the system must be carefully maintained to

ensure that there is adequate flow of power to the end users, while still maintaining a balance that will

prevent the system from being overloaded and malfunctioning.

Electric system operators must carefully monitor the real-time flow of electricity on the network of wires to

ensure that available generation sources are providing an adequate and even supply, and that the wires are

properly loaded. At this time, there are no commercially viable means to store large amounts of electricity

for future use, and so the system must be prepared to ramp up to supply extra power during the times of

day and times of year when it is in most demand. These are known as peak demand times, or peaks. In most

of Canada, electricity demand peaks in the winter, due to electric heating. Ontario, like the United States,

experiences a summer peak, due to air conditioning.

To be prepared for extremes, system planners and electricity providers must be able to meet maximum

peak electricity demand without overloading the system. This requires reserve margin, or the amount of

unused capability of an electric power system at peak load for a utility system as a percentage of total

capability.9 Sufficient reserve margin and the ability to deliver that reserve margin through adequate

transmission and distribution systems will provide reliability. Maintaining adequate reserves is a common

business practice. A trucking firm, for example, might keep additional trucks parked so that they will be

available when needed. The firm carries the cost of owning and maintaining this inactive fleet but knows

that it will have the ability to quickly deliver service when required.

Where sufficient reserve margins exist, and where wholesale electricity markets exist, the reserve capacity

can also be sold to other jurisdictions. The electricity might be generated in a more cost-effective or

environmentally desirable way than the purchasing jurisdictions domestic supply. Or it might provide

electricity needed in a region with a tight reserve margin. This system allows a jurisdiction with abundant

power (hydro capacity in a wet year, for example) to profit from its reserve margin, while a purchasing

jurisdiction may be able to choose the most economical option to meet its peak load (choosing to import

hydro power, for example, over running a domestic peaking combustion plant when fuel costs are high).

All North American electricity systems are designed to anticipate and accommodate system problems such

as extreme weather conditions or equipment failure, but occasionally electricity customers experience the

effects of black-outs, when the system shuts down. The causes of these events invariably underline the

importance of careful system planning and maintenance. The electricity system is an integrated whole; it

cannot randomly grow or suddenly accommodate replacement of one source of generation with another,

dissimilar source.10 However, more electricity can be freed up through strong conservation and demand-side

management programs.

9

Abel, Amy. Electric Utility Restructuring Briefing Book. Washington: Congressional Research Service, Library of Congress, October 13,2000. http://ncseonline.org/nle/crsreports/briefingbooks/electricity/reliability.cfm

10 Canadian Electricity Association. Power Generation in Canada: A Guide. Ottawa: Canadian Electricity Association, 2006. pp 6-7.


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The Right Generation for the Right Job

As discussed on page 9, the base load in a given area is the typical minimum amount of electricity

needed for regular use, day and night. Base load electricity generation comes from reliable, large-scale

generation sources that have lower, and fairly consistent, operating and maintenance (O&M) and fuel costs.

These sources include fossil fuel combustion, nuclear power plants and hydroelectric installations. Power

generation such as wind, solar, biomass and geothermal generation can be added to the base load mix,

but these types of generation are not available on a large enough scale, and can only account for a small

percentage of the total base load supply. In addition, wind and solar power are not always available, being

intermittent generation, and must sometimes be replaced by other types of supply.

For times of day and seasons when electricity use peaks, (increases over the base load) it is necessary

for electricity providers to generate peaking electricity. While there is a certain amount of flexibility with

baseload generation, including nuclear, to ramp up or down slightly to respond to minor fluctuations indemand, it is not possible to use these sources to meet peak demand. Peaking sources of generation

must be highly dispatchable. That is, they must be generation sources that are quickly available to system

operators when it is needed, and then easily switched off again. Natural gas-fired generation is often

employed for this purpose. Hydroelectric power is also easily dispatched, since gates in dams can be

opened and closed at will.

Although they are technically dispatchable, wind and solar power are not considered suitable for peak

electricity because their actual capacity factors cannot be predicted at any given time. If the wind is not

blowing strongly during peak demand times, a wind turbine may only be generating a small percentage of

its nameplate capacity. To meet peaking demand, for example in the morning when business, industry and

household electricity needs overlap, most electricity providers also have the option of employing mid-merit

generation sources. These tend to provide more cost- effective electricity to meet rises in demand.


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Every electricity generator has a nameplate capacity

or the maximum amount of power a generator can

produce. However, when measured over a period

of time, no form of generation can achieve its full

nameplate capacity. This shortfall is due to a variety

of factors including planned and unplanned outages,

energy source fluctuations, and the age of the plant.

Planners must take into account the variance between

nameplate capacity and the actual amount of power

that is produced. Averaged over a specific period of

time, this difference provides a capacity factor, typically

expressed as a percentage of total generation.

For the purposes of forecasting electricity supply, it

is important to know the specific, historical capacity

factors related to a specific mix of generation, as

well as to understand the general range of capacity

factors for various types of generation. To be efficient,

baseload generation requires a high capacity factor.

However, a particular mid-merit plant or peaking plant

using a technology appropriate for baseload (such ashydropower) might register a lower capacity factor

because it is only run as it is needed.

Capacity factor is most frequently raised in debates

regarding renewable generation such as solar and

wind, which are both dependent on intermittent energy

supplies. Those in favour of these sources will argue for

higher capacity factors while opponents will weigh in at

the lower end of the range. As is the case for all types

of generation, factors such as technology, location,

and the size of the installation will have significant

impact on the ultimate capacity factor. Ultimately,

when it comes to system planning and policy making,

it is not productive to generalize about capacity factors

but rather to understand all the variables at play in

each specific case and to ensure that the generation

mix will be able to serve the needs of the public.

Figure 6: Suitability of Generation to Serve Load

GENERATION TYPE BASE MID PEAK

Hydro - storage

Run o river

Tidal

Nuclear

High-Efciency Combined

Cycle Natural Gas

Stand Alone,

Simple-Cycle Natural Gas

Co-Generation

Combustion

(coal, oil, etc.)

Biogas (landfll)

Biomass (wood waste)

Geothermal

Wind turbines

Solar

Fuel Cells

Demand-side management


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Build New Types of Generation, But Keep the Old

New generation capacity will certainly be needed in Canada in the next two decades. Since many forms

of generation have significant siting, public consultation, environmental assessment, regulatory and

construction lead times, it is necessary to ensure the process is begun early enough to allow the new

generation to come into service in time to avoid shrinking capacity margins. Time must also be allowed for

new transmission where required. It is estimated by CEA member companies that the concept-to-completion

time for a major new transmission line in Canada is about 10 years.

Figure 7: Estimated Typical Regulatory & Construction Lead Times

A useful tool for comparing construction costs is to use the overnight cost. This is the full cost of building a

facility as if it were built and completely paid for overnight, and no interest was incurred. Other important

costs to take into consideration are Operating and Maintenance (O&M) costs. O&M costs fall into two main

categories:

variable O&M which represents the cost of consumables such as replacement parts or fuel and

fixed O&M, which represents costs such as labour, regular maintenance and overhead.

Overnight cost, variable O&M and fixed O&M are typically expressed on a per-kilowatt basis to make themcomparable. It is important to consider both variable and fixed O&M in decision-making because there

can be significant differences in these costs. Geothermal electricity generation, for example, has almost

no variable O&M, but its fixed O&M is much higher compared with other forms of generation. Figure 8 is

a simplified representation of the types of costs incurred, when judged in overall comparison with other

forms of generation. For the sake of illustration and comparison,the rankings of variable and fixed O&M

costs were averaged (see footnote) when, as discussed, there can be quite a variance.11

1-3 yrs

Natural Gas

Fuel cells

Distributed Generation

Wind

Solar

4-6 yrs

Conventional coal

Clean coal

Biomass

Run of River Hydro

Geothermal

Offshore wind

6+ yrs

Large-scale Hydro

Nuclear

11 The matrix is compiled using data from the US Energy Information Administration. Assumptions to the Annual Energy Outlook 2008.

Table 38, page 79. Assumed Overnight and O&M costs from that paper were ranked highest to lowest, and these rankings used to

place the generation sources on the matrix. For the purposes of illustration, the rankings of Variable and Fixed O&M costs were

averaged to create an overall O&M rank.


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B



Figure 8: Generation Construction and Operating Costs

Figure 9: Electricity Generation by Typical Project Life

Lower overnight cost /

higher O&M costs

Conventional combined

-cycle natural gas with CCS

Geothermal

Lower overnight

cost /lower O&M costs

Hydropower

Conventional combined -cycle natural gas

Conventional Combustion

Scrubbed Coal Wind Power

Distributed Generation

Higher overnight cost /

higher O&M costs

Tidal power

Nuclear power

Integrated Coal Gasification

Combined Cycle (with or without CCS)

Offshore wind power

Biomass

Landfill Gas

Higher overnight

cost/lower O&M costs

Photovoltaic Solar

Solar Thermal Fuel Cells

The typical project life of the plant is another

important consideration. Not only does project

life indicate when replacement capacity must be

available to come on line, it also helps estimate

the O&M costs for a plant over its lifespan. Typical

project lives are shown in Figure 9. It is worth

noting that there are many projects that extend

past their expected lives due to refurbishment.

In Figure 9, nuclear is treated slightly differently,

since CANDU reactors must be refurbished mid-

way through their life span and the 40 years

represented below includes that refurbishment.

Light water reactors (there are none in Canada

at this time) have a lifespan of approximately 40

years without mid-life refurbishment.

0 20 40 60 80 100

Project life (yrs)

Geothermal

Biogas

Tidal

Thermal Biomass

Photovoltaic Solar

Wind

Natural Gas

Coal

Nuclear

Hydro


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Maximize Canadas Generation Potential

The supply and projected price of energy sources for generation during a plants life cannot be overlooked. It

would be pointless, for example, to build a wind farm in a location that is sheltered from the wind. It would

be similarly risky to build a plant when it seems likely that geopolitics or other factors will choke the fuelsupply and drive commodity prices to record highs. Another risk is that of building stranded power, or

generation that is unable to connect to the electrical grid.

The potential of some of the leading forms of generation follows12:

Hydro More than 60% of Canadas electricity production is from renewable hydro generation. Today,

11.5% of the worlds hydropower is generated in Canada. There remains an estimated 163,173 MW

of undeveloped hydro potential, chiefly situated in Quebec, B.C., Alberta, Ontario and the North.13 An

increase of 7600 MW is forecast between 2005 and 2015.

Ocean Global tidal power potential has been estimated at 450,000 TWh. From Canadas Bay of Fundy

alone there is potential for 30,000 MW of power.14

Wind power Wind power is expected to lead the growth of newer generation technologies. Industry

Canada estimates that by 2015, there could be an installed wind capacity of 8,000 MW.15 The Canadian

Wind Energy Association aims to have wind make up 20 percent, or 55,000 MW, of Canadas electricity

capacity by 2025.16

Biomass Generation Among the remaining newer generation technologies, the NEB expects an increase

by 50% by 2015, to a total of 812 MW, chiefly due to new biomass generation. Other organizationsexpect stronger biomass growth, especially from wood biomass in B.C., Ontario, Quebec and the

Atlantic provinces. According to a BIOCAP study, Ontario could sustainably generate 27% of its power

from forest biomass.17

12 Unless otherwise noted, the cited potentials are taken from the National Energy Board, Canadas Energy Future: Reference Case and

Scenarios to 2030, An Energy Market Assessment November 2007.

13 Canadian Hydropower Association. Hydropower in Canada: Past, Present & Future. 2008. P. 6.

14 Pembina Institute. Energy Source: Tidal Power. 2007. http://re.pembina.org/sources/tidal

15 Industry Canada. Canadas Wind Energy Industry Directory 2007-2008. Ottawa: 2007. Page 1. http://www.ic.gc.ca/eic/site/rei-ier.nsf/

vwapj/energydirectory-energierepertoire_eng.pdf/$file/energydirectory-energierepertoire_eng.pdf

16 Canadian Wind Energy Association. Wind Vision. 2008. http://canwea.ca/windvision_e.php

17 BIOCAP. David B. Layzell et al. Exploring the Potential for Biomass Power in Ontario: A Response to the OPA Supply Mix Advice Report. 2006


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B

uildingTomorrowsElectricity

System:


Solar Photovoltaic While some solar farms are being constructed in Canada for commercial electricity

production, this generation technologys greatest potential seems to be in meeting the electricity needs

of individual structures, which could reduce the amount of electricity required from the commercialelectricity system. According to the 2007 solar mapping project by the government body CanMET: For

the combined residential and commercial / institutional Canadian building stock, about 73,000 MW of

building integrated photovoltaics (BIPV) systems could be installed on Canadian buildings, generating

29% of the 246 TWh of electricity consumed annually.18

Fuel Cells/Micro-turbines R&D is ongoing in this sector, with only early commercialization achieved to

date. It is unlikely that fuel cells will be in widespread use for electricity generation before 2020.

Geothermal According to the Canadian Geothermal Energy Association (CanGEA), the use of thermal

energy recovered from the earths crust has been growing by approximately 3% per year. CanGEAs goalis to have 5,000 MW of geothermal electricity generation capacity in place by 2015.19

Nuclear Currently, Canadas nuclear capacity is 8th in the world, with just under 13,000 MW. However,

a majority of existing plants will reach the end of their service lives within 20 years. The potential

for new build is limited by uranium fuel supply, public acceptance issues, and global competition for

component parts and skilled labour. Taking into account the planned construction of an additional

1000 MW plant in Ontario and life extensions to existing reactors, the NEB estimates that 2650 MW of

nuclear power is likely to be added between 2005 and 2015.

Fossil Fuels Gas-fired generation and co-generation, currently accounting for 7% of Canadas power,are expected to increase to 11% by 2015, with the addition of 6600 MW. This increase is mainly

because natural gas plants are relatively quick to construct, so that they can meet short- to mid-term

increases in demand.

Despite new conventional coal plants projected in Alberta, the expected phase out of coal in Ontario leads

to forecasts of a decrease in Canadas coal-fired generation by 36%, or 3600 MW by 2015. Canadas first

demonstration of new clean coal with carbon capture and storage (CCS) is expected to come on line around

2015, and CCS is currently supported by the Canadian and US Federal governments.

18

http://canmetenergy-canmetenergie.nrcan-rncan.gc.ca/eng/buildings_communities/buildings/pv_buildings/publications/2007227.html

19 Canadian Geothermal Energy Association. www.cangea.ca


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24

Bridge the Gap in Public Acceptance

Electricity projects across Canada have been stalled or cancelled due to public opposition. Many arguments

with varying degrees of merit are employed by project opponents: land use, emissions, wildlife impacts,

aesthetics, public health and safety. Increasingly, opponents object on multiple grounds, requiring projectproponents to provide multiple studies, expert witnesses, compensation packages, and other means to

move a project toward final approval. Even after approvals take place, some opponents seek legal remedies

such as injunctions and court appeals to stop projects. Even a very small but vocal group can hold up a

project for some time.

In other cases, projects move through the system without opposition and are welcomed by local residents.

They may bring innovation and jobs to a region, or a needed improvement to the electricity system. From

experience, CEA members know that public education and awareness, as well as transparency, are the keys

to public acceptance for new generation. However, with widespread availability of social communications, itcan be difficult to combat the spread of misleading or false information. This is a significant challenge for

all project proponents today.

Understand the Environmental Impacts in Context

There is much focus on green electricity in North America today. The reality is, however, that there are

environmental costs associated with every form of electricity, whether this electricity is generated with

renewable energy sources or not. There is significant progress being made in the development of new and

improved generation, transmission and distribution technologies and in ways to improve energy efficiency.

Electricity providers, planners and policy makers are striving to provide the best possible electricity mix, but

there are no quick fixes or blanket solutions.

Two related ideas for improving the environmental profile of the electricity system are demand management

and energy conservation. By using certain technologies, along with education campaigns and the employment

of market-based principles, consumers are encouraged to reduce electricity consumption. There have been

significant gains made recently in electricity conservation across Canada, and CEA members are active

participants in these initiatives. However, new electricity infrastructure is still needed, both to replace ageingfacilities and to meet increased load growth.

Demand management takes place through measures that provide incentives for reduced electricity use.

Examples include:

New Englands program to allow electricity users to bid on future energy conservation in a demand

response market.

Financial incentives for property owners who allow system operators to remotely and incrementally

raise air conditioning temperatures when additional capacity is required.

Smart meters and time-of-day pricing that gives home owners or businesses real-time price signals for

planning significant electricity consumption (doing laundry, for example) during off-peak hours.


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BuildingTomorrowsElectricity

System:

ElectricityFundamentalsforDecis

ion-Makers

Conservation initiatives include such measures as enforcing electricity usage standards for appliances and lighting

(such as Energy Star) or building code standards for increased energy efficiency. It also includes energy audits,

education programs and awareness campaigns to encourage voluntary reduction of electricity consumption.

In recent years, as the need for transmission system revitalization has become more urgent, governments

and electricity planners have been looking at smart grid technologies. These components give electricity

system operators much greater ability to monitor electricity supply and load in real-time, making it easier to

incorporate intermittent power supplies such as wind and solar or even incorporate input from very small,

or micro, generation. In the latter case, a distributed generation model allows small-scale generators (farms

with biogas digesters, solar arrays, or small wind turbines) to sell their excess electricity onto the grid.

Figure 10: Compares the typical known environmental effects of various generation technologies.20

Technology TypeStage of Tech.Development

Local resourcedependence

Environmental Footprint

high mid lowCriteria airpollutants

GHGWater useimpacts

Extraction Waste Other

Hydro

Storage-based Commercial None NoneFlow

changesNo No

Flooding New hydrofacilities are held tostandard of no netloss of habitat.

Run-of-river Commercial None None Minimal No

In-streamPre-commercial

None None Minimal No No

Ocean Tidal Pilot stage None None

Non-consumptive

No NoCan interfere with orenhance recreation

WavePre-commercial

None None No No

Nuclear Generation III+

Commercial/Pre-commercial

None NoneThermal

dischargeYes Radioactive

High cooling waterdemand

Generation IV+ Conceptual

Fossil

Fuels

NaturalGas Single Cycle

CommercialLow Medium

Thermaldischarge

Yes YesModerate coolingwater demand

Combined-cycle Commercial

Oil-

fred

Commercial High HighThermal

dischargeYes Yes

Moderate coolingwater demand

Coal-fred Conventional Commercial High High

Thermaldischarge

Yes YesModerate to highcooling waterdemand

Clean Coal Demonstration Low MediumThermal

dischargeYes Yes

bon

ure&

age

Demonstration/ Low Medium No Yes

Moderate to highcooling water


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26

Carb

Captu

Stora e o st at o /

Conceptual Low Medium No Yes cooling water

demand

Co-

generation

Commercial Dependenton source

Dependenton source

Thermaldischarge

Dependent onsource

Dependent onsource

Polygeneration

Pre-commercial Dependenton source

Dependenton source

Thermaldischarge

Dependent onsource

Dependent onsource

Bioenergy

Bio

uels Manufactured

liquid fuelsDemonstration Low None Low No No

Land-use, irrigation,fertilizer for energycrops, pesticides

Biogas

Biomass Wood waste Commercial

Other Commercial

Geothermal

Commercial None Low Low No Yes Odour

Distribute

d

Electricit

y

Generatio

n

Commercial Dependenton source

Dependenton source

Dependenton source

Dependent onsource

Dependent onsource

Windpower Large turbines Commercial None None None No No Bird/bat kills

Small turbines Commercial None None None No No Noise

Jet-stream Conceptual None None None No No

Solar

Photovoltaic Commercial None None LowFor

manufacturing& materials

NoHigh energyrequirements formanufacturing

Solar tower Demonstration None NoneLow to

moderateNo No

Solar waterheating

Commercial

FuelCells

Pilot

None NoneFor

hydrogenproduction

For hydrogenproduction &

Manufacturingmaterials

No

High energyrequirementsto make purehydrogen

Dem

and-

side

Management

Commercial

None None None No

Disposal of

replacedequipment

Reduced demand =

reduced emissions

20 Adapted from Canadian Electricity Association. Power Generation in Canada: A Guide. Ottawa: Canadian Electricity Association,

2006. pp 16-17. www.electricity.ca

canada electricity guide

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