electricity 101 slide deck_december 2010

8/7/2019 Electricity 101 Slide Deck_December 2010

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Canadas Electricity Industry"Background and Challenges"


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Presentation Outline!

Introduction & Context

State of Canadas Electricity Industry

Key Challenges

Policy Implications

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CEAs Corporate Utility Members!

Manicouagan PowerCompany Limited

City of Medicine HatElectric Utility

Distribution


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CEA Mission Statement

A safe, secure, reliable, sustainable and competitively priced supply of

electricity is essential to Canadas prosperity. CEA is the voice of the

Canadian electricity industry, promoting electricity as the critical enabler

of the economy and Canadians expectations for an enhanced quality of

life.

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CEA Strategic Goals

Infrastructure Ability to build needed electricity infrastructure, to meetgrowing demand and replace aging assets.

Energy Efficiency Ability to provide options to customers to assist them inusing electricity more efficiently, manage costs and minimize environmental

impacts.

Technology Ability to maximize and deployleading-edge technologies.

Regulation Need formore coordinated, effective and efficient regulatoryregimes within and between governments, and more timely decisions.

Environment Need for holistic approach and greater regulatory coherence onenvironmental issues.

Security Need to ensure the long-term security, reliability and stability of theelectricity system.

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The Great Divide: Canadas Multi-Jurisdictional Environment!

Jurisdictional Division of Responsibility!

Provincial/Territorial Governments! Federal Government"

resources management withinprovincial boundaries

intra-provincial trade and commerceintra-provincial environmental impactsgeneration and transmission of

electrical energyConservation and demand response

policies

resource management on frontier landsnuclear safetyinter-provincial and international tradetrans-boundary environmental impactsenvironmental impacts where federal

lands, investment or powers applyOther policies of national interest"


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Status of Market Restructuring!

SaskatchewanWholesale open

accessFunctional separation

AlbertaMandatory Power PoolWholesale & retail open access

since 2001

ManitobaWholesale open accessFunctional separation

OntarioIndustry unbundling in 1998

Wholesale & retail open accesssince 2002

QubecWholesale open accessFunctional separationWholesale competition for

domestic load >165 Twh

NewfoundlandEnergy policiesunder review

New BrunswickWholesale & large

industrial openaccess

Nova ScotiaWholesale open

access

FunctionalSeparation

BC

Wholesale & industrialopen accessIndependent transmission

entity

PEIOpen access

Transmission Tariffapplication pendingregulatory decision

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North American Electric Reliability Corporation

(NERC) Regions!

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The State of Canadas Electricity Industry

Demand and Supply

Trade and Economics

Transmission and Distribution Environment and Climate Change

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Electricity Demand in Canada by Sector, 2008!

10!

Total Electricity Demand in Canada, 2008 = 548.8 TWh

*Numbers may not sum to 100 percent due to roundingSource: Statistics Canada, Energy Statistics Handbook, Q4:2009


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Electricity Demand in Canada by Sector, 1990 - 2008!

Total Electricity Demand in Canada, 2008 = 548.8 TWh

Source: Statistics Canada, Energy Statistics Handbook, Q4:2009


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Electricity Generation in Canada by Fuel Type, 2009!

Total Electricity Generation in Canada, 2009 = 575.2 TWh

*Numbers may not sum to 100 percent due to rounding.Source: Statistics Canada, Survey 2151, 2010


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Electricity Generation in Canada by Fuel Type, 1990 - 2009!

0

100

200

300

400

500

600

700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Genera&on(TWh)

Wind Tidal Combustion Turbine

Internal Combustion Nuclear Conventional Steam

Hydro*

*Prior to 2008, wind and tidal generation are included in hydro.Source: Statistics Canada, Survey 2151, 2010



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Electricity Generation in Canada by Province and Fuel Type, 2009!

-50

0

50

100

150

200

250

BC AB SK MB ON QC NB NS PEI NFLD

Generation(TWh)

Tidal Wind Combustion Turbine Internal Combustion Nuclear Conventional Steam Hydro

Source: Statistics Canada, Survey 2151, 2009


59.662.2

33.8

13.1

38.4

11.6

143.7

0.1

193.8

18.4


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Electric Generating Capacity in Canada by Fuel Type, 2009*!

Hydro58.0%

ConventionalSteam

20.5%

Nuclear10.3%

CombustionTurbine

8.0%Wind2.7%

Tidal


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Average Residential Electricity Price in Canada, 1998 2009

(2009 cents/kWh)!

9.779.67

9.40

9.589.66

9.85

9.58

9.799.94

10.3410.44

10.82

8.5

9.0

9.5

10.0

10.5

11.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2008Cents/k

Wh

Source: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities, 1998 2009.

Notes: Based on 1,000 kWh monthly consumptionAverage electricity price is an average of 11 major Canadian cities and may not represent an exact national average.Prices have been adjusted from current cents/kWh to 2008 cents/kWh


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Good Neighbors: North American Bulk Transmission Lines!

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Total Length of High Voltage TransmissionLines (>230 kV) in Canada = 74,640 km


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Utility Investment in Canadas Transmission & Distribution

Cables & Lines, 1998 - 2007!

Source: Statistics Canada, Survey 2803, 2009

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Transmission Lines in Canada (>230 kV)

Length by Voltage, 1990 - 2007!

Source: North American Electric Reliability Council (NERC)

22!


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Environmental Protection Expenditures by the Electric

Power Sector, 1996 2008 !

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

1996 1998 2000 2002 2004 2006 2008

Millionsofdollars

Operating

Capital

Source: Statistics Canada, Environmental Protection Expenditures in the Business Sector, 2008

Total electric sector environmental protection expenditures, 2008 = $1,288 million


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Greenhouse Gas (GHG) Emissions in Canada by Sector, 2008!

Transportation26.9%

Other Energy*18.8%

Electricity & HeatGeneration

16.1%

Fossil FuelIndustries

9.2%

Agriculture

8.5%

IndustrialProcesses

7.1%

Residential5.8%

Commercial &Institutional4.7%

Waste & Other2.9%

Total GHG Emissions in Canada, 2008 = 734 Megatonnes CO2 Equivalent

Source: Environment Canada, National Inventory Report 1990 2008*includes stationary sources such as mining, manufacturing, and construction, and fugitive sources.


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Sulphur Oxide (SOx) Emissions in Canada by Sector, 2007!

Source: Environment Canada, Criteria Air Contaminants Emissions Summaries

Total SOx Emissions in Canada, 2007 = 1,904 Kilotonnes


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Top Challenges facing the Canadian Electricity Industry

1.Infrastructure renewal and new build

2.Technology shift and Supply Mix Planning

3.Access to U.S. markets

4.Employment and critical skills

5.Capital formation and balance sheet issues

6.Addressing Climate Change and Reducing GHG Emissions

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Context for Infrastructure Renewal and New Build

Canada needs to invest in electricity infrastructures renewal andreplacement in order to meet growing demand.

Canada needs a combination of generation sources that will ensuresecurity, reliability, affordability that will minimize environmental

impact. The need to address climate change is driving infrastructure renewal

The demand for electricity is increasing and will require an increasein base load generation

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Properties of Electricity: The Constants

1.Reliability

2.Cost- effectiveness

3.Safety4.Sustainability (environmental, social and economic)

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Building the Next Generation of Infrastructure:

Capital Investment Requirements!

(Billions of 2007 CDN dollars)

Generation Transmission Distribution Total

2007 2015 40.3 15.2 32.8 88.3

2016 2030 93.7 17.6 38.0 149.3

Total to 2030 134.0 32.8 70.8 237.6

Source: International Energy Agency, World Energy Outlook 20082007 US-CAN exchange rate: Bank of Canada

Total Canadian Electric Sector Investment Required by 2030 = $CAN 237.6 Billion

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Challenge: Infrastructure Renewal and New Build

Securing permission to renew, build and operate will requirestreamlining of regulatory approvals processesFisheries Act

Canadian Environmental Assessment Act (CEAA)

Species at Risk Act (SARA)

Investment in the electricity sector will require increases in electricitypricesAs investment in the electric power sector increases, companies will need

to pass those costs through to customers

Provincial regulatory authorities will monitor cost prudency

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Industry Progress towards Infrastructure Renewal

Memorandum of Understanding (MOU) with Department of Fisheries(DFO)

2010 Review of CEAA

Active participation in five year review of SARA

Open lines of communication with Major Projects Management Office(MPMO)

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Federal Programs Supporting Electricity

Infrastructure Investment! Major Projects Management Office MPMO (2007)

Streamline regulatory review of major resource projects

ecoENERGY for Renewable Power (2007) One cent per kWh for up to 10 years to renewable electricity projects

constructed between April 1, 2007 and March 31, 2011 ecoENERGY Technology Initiative (2008)

Co-funding for Clean Coal and Carbon Capture and Storage (CCS) andCleaner Fossil Fuels

Clean Energy Fund (2009) $1B over 5 years for clean energy research, development and

demonstration projects $150M for research; $650M for CCS; $200M forother technologies

Green Infrastructure Fund (2009) $1B over 5 years for sustainable energy projects

Yukon Energys Mayo B and Carmacks-Stewart line first to receive funding

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ecoENERGY Technology Initiative Projects!

Heartland Area Redwater Project (ARC Resources)

Integrated Carbon Capture and Enhanced Oil Recovery(Enhance Energy)

Fort Nelson Exploratory Project (Spectra Energy Transmission)

Pioneer Project (TransAlta)

CO2 Injection in Heavy Oil Reservoirs (Husky Energy Inc.)

Source: Natural Resources Canada, ecoENERGY Technology Initiative

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Active MPMO Electricity Sector Projects!

Source: Major Projects Management Office, Project Tracker

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MPMO Project Name Description Proponent Project Type LocationBruce to Milton Transmission Reinforcement Project 500 kV line Hydro One Transmission ON Labrador - Island Transmission Link 1,200 km line Nalcor Energy Transmission NLLower Churchill Hydro Project 2,00 MW Nalcor Energy Hydro NLPointe Du Bois Hydro-Electric Modernization Facilities Decommission Manitoba Hydro Hydro MBDarlington New Nuclear Power Plant Up to 4,800 MW OPG Nuclear ONMarten Ridge Wind Energy 80 MW Premier Renewable Energy Wind BCMount MacDonald Wind Power 250 MW Rupert Peace Power Wind BC

Naikun Wind Energy 320 MW (off-shore) NaiKun Wind Development Wind BCNicomen Wind Energy 70 MW Premier Renewable Energy Wind BCRocky Creekwind Power 500MW

Rupert Peace PowerCorportation

Wind BC


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Selected World Residential Electricity Prices, 2009!

0 5 10 15 20 25 30 35

United States

Mexico

Canada

Switzerland

Turkey

Finland

France

Poland

Spain

Austria

United Kingdom

Ireland

Hungary

Italy

US cents/kWh

Source for Canada: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities,2009Source for Rest of World: International Energy Agency, Key World Energy Statistics 2009


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Selected World Industrial Electricity Prices, 2009!

0 5 10 15 20 25 30 35

FranceUnited States

Canada

Spain

Switzerland

Finland

Mexico

PolandTurkey

United Kingdom

Portugal

Hungary

Ireland

Italy

US cents/kWh

Source for Canada: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities,2009Source for Rest of World: International Energy Agency, Key World Energy Statistics 2009


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Selected Commodity Price Indices (Monthly)!

Source: Statistics Canada, Surveys 2306, 2318, 2325

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Challenge: Technology Shift

Technological shift and innovation will help Canada meetenvironmental expectations

Development of the Smart Grid will enable increases in energy

efficiency and further integration of renewable energy technologies

Despite the current economic downturn, global competition forelectricity infrastructure resources may result in supply chain issues inthe long term

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Key Emerging Technologies for Electricity Generation in Canada!

Resource Advantages Challenges

Wind Power No fuel cost, no emissions or waste, and commerciallyviable source of power

Obtaining access to grid, wind does not alwaysblow, most wind farms operate at 25-35% capacity

Small Hydro Low capital costs, many potential sites in Canada, wellestablished technology

Regulatory approval can be costly and timeconsuming, local opposition to new development

Biomass Uses landfill gas and waste products to create electricity,reduces greenhouse gas, high availability of sites

High start-up and operating costs, produces someemissions

GeothermalEnergy Reliable source of power, low fuel and operating costs,clean and renewable source of energy High capital costs, connecting to the grid can bedifficult, few potential sites in Canada

Solar PV Fuel is free, suitable for areas where fossil fuels areexpensive or where there is no connection to the grid

Restrictive and unclear grid connection standards,not cost competitive, sun does not always shine

Fuel Cells Fast start-up time, very low emissions, wide range ofapplications

Technological breakthroughs are needed for fuelcells to be commercially viable

OceanEnergy

Costs are expected to decline as technology develops,intermittent, but predictable source of green energy

Potentially intrusive to marine life, investment isneeded to promote research and development

Clean Coal Highly efficient, potential for reduced greenhouse gasemissions

High capital costs, lengthy start-up period

DemandManagement

Could be a least-cost option, postpones the developmentof new power plants, improves energy efficiency

If the cost is high, consumers may not perceivepotential benefits, participation by industry is notuniversal

Source: National Energy Board, Emerging Technologies in Electricity Generation, 2006

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Canadian Electricity Statistics"By the Globalnumbers

5 Canadas world ranking inprimary energy production

7Canadas world ranking inprimary energy consumption

26 Per cent of Canadas total .exports that were energy.related

2Canadas ranking inHydroelectricity generation

By the Domesticnumbers

15Per cent of Canadas electricityproduced from nuclear generation

23 Per cent of Canadas electricityproduced from thermal generation

62Per cent of Canadas electricitygenerated from hydropower

598 Terawatt-hours of total electricity generation

Page 42 Centre for Energy, 2008 Canada wide Statistics


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Installed Wind Capacity in Canada as of December 2009!

Source: Canadian Wind Energy Association, 2010

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Smart Grid: Benefits and Challenges!

Actively monitor and more efficiently control the two-way flow ofelectricity

Allow variable generation sources to be reliably integrated in the

power system Improve efficiency through time of use pricing, reducing

transmission congestion and power interruptions

Requires more comprehensive planning approaches toelectricity infrastructure development and system management

Adaptation of existing infrastructure to be interoperable withnew, advanced technologies

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Global Competition for Electricity

Infrastructure Resources!

(Billions of 2007 CDN dollars)

Generation Transmission Distribution Total

Canada 134.1 32.8 70.8 237.6

North America 1,628.3 385.4 828.7 2,842.4

OECD 3,706.9 731.6 1,696.0 6,134.4

Source: International Energy Agency, World Energy Outlook 20082007 US-CAN exchange rate: Bank of Canada

OECD Electric Sector Investment Required by 2030 = $CAN 6,134.4 Billion

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Challenge: Access to U.S. Markets

Grid interconnection and reliability is essential to maintaining theimportant electricity trade relationship between the U.S. and Canada

A national U.S. Renewable Portfolio Standard (RPS) could have

potentially negative impacts on this trade relationship

Critical Infrastructure Protection (CIP) impacts

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Major Canada-U.S. Transmission Interconnections!


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Canada-US Electricity Trade Revenue, 1990 2009!

Source: National Energy Board, Electricity Exports and ImportsNote: Trade figures have been adjusted from current dollars to 2009 constant dollars

= $2.35 Bn in 2009

= $0.65 Bn in 2009

= $1.7 Bn in 2009

California Energy Crisis


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Exports & Imports Between Canada & US 2009!


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Federal Government Direct Spending for Energy!

2009 US Stimulus Package = $45.5 billion

2009 Canadian Budget = $2.7 billion

Sources: Troutman Sanders LLP February 2009 Advisory, Support for Energy in theStimulus Package; Department of Finance, Canadas Economic Action Plan, Budget 2009.

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Security and Infrastructure Protection Program!

CEA Security and Infrastructure Protection (SIP) Committee actsas an advocate for security issues and emergency preparedness

Coordination and guidance for protection of the industrys critical

infrastructure against: All hazards Physical incidents and threats Cyber incidents and threats

Coordination with the NERC Critical Infrastructure Protection(CIP) Committee to assure consistency with North Americanpartners

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Challenge: Industry Employment and Critical Skills

Recruitment and retention of electricity sector workers will be essentialto renew, build and operate new electricity infrastructure in light offuture retirements

Recruitment and retention of engineering and scientific personnel, aswell as trades, crafts and specialty skills is of particular importance

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Average Age Profile of Non-Support Electricity Industry

Employees!

Source: Electricity Sector Council Employer Survey, 2008

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Characteristics of Canadas Electricity Sector Workforce

28.8 percent of the current electricity workforce is expected to retire by2012.

More than 50 percent of workers in the generation (excluding

renewables), distribution, and integrated utility lines of business areover 45 years of age.

The line of business expected to be most affected by futureretirements is transmission, which will see retirements increase bymore than a factor of nine by 2012.

In 2012, electricity sector workforce supply is projected to fall short ofdemand by more than 3,000 workers (based on electricity demandgrowth of 1.8 percent annually).

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Challenge: Capital Formation and Balance Sheet Issues

Tax treatment of assets and new electronic equipment will impactinvestment in electricity infrastructure

Options may exist for patient capital that have not yet been explored

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Challenge: Lowering Carbon Emissions of the

Canadian Economy

Canada has set objectives of 17 percent emissions reductions from 2005levels and 90 percent non-emitting electricity generation by 2020

The 2010 proposed GHG framework will require all existing coal-firedelectricity generation, upon reaching end of economic life, to meet a GHGemission standard equivalent to that achieved by an NGCC facility

Canada needs to engage in forecasting and long-term planning forelectricity sector infrastructure investment with an effective supply mix

Electrification of the transportation sector will increase electricity demand

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Federal Regulation of GHG emission regulation in

Canada

Federal commitment to reduce national greenhouse gas emissions by 17percent below 2005 levels by 2020, and by 60 to 70 percent by 2050.

Federal government may require the electricity sector to reduce itsemissions by more than the national target.

Goal of achieving 90% non-emitting electricity generation by 2020. Federal government intent was to arrive in Copenhagen (December 2009)

with domestic policies in place for all sectors.

Prentice announced the federal governments intent to allign Canadasclimate change policy with that of the U.S. In terms of both targets and form(February 2010).

Prentice proposed a GHG Framework for coal-fired electricity generationbased on a NGCC facility, the framework to be executed under the CEPA(April 2010).

The regulations are scheduled to come into effect on July 1st, 2015 andare expected to reduce GHGs by 15MT.

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U.S. And International GHG development in Canada

In December 2009, US EPA promulgated its endangerment finding withrespect to GHGs.

COP15 resulted in Copenhagen Accord, which required developed countriesto submit national emissions targets for 2020 by January 31, 2010.

US committed to reduce US GHG emissions by 4 percent below 1990 levelsby 2020 or 17 percent below 2005; pending legislation.

In December 2010, the EPA enacted its endangerment finding, which allowsthe EPA to regulate GHGs under the Clean Air Act.

Commencing July 2011 new sources producing 100,000 tons of GHG or

more and existing facilities that increase emissions by 75,000 tons mustobtain a permit. The permit will demonstrate the use of best available

control technologies.

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Projected Electricity Generation Mix in 2020!

2020 projected generation1

(75% non-emitting)90% non-emitting2

Emitting

Non-Emitting

1 Based on the National Energy Boards forecast Canadas Energy Future (2007) and input from CEA member companies.2 Generation mix if 90 percent of Canadas generation in 2020 is non-emitting.

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Translating the Shortfall into Generation Options!

The following options illustrate the magnitude of the non-emitting generation additions (by fuel type) that would berequired to replace 110 TWh of emitting generation.

15,000 MW of Nuclear Capacity1

21,000 MW of Hydroelectric Capacity2

21,000 MW of Clean Coal with CCS3

42,000 MW of Wind Capacity4

1 Based on an average capacity factor of 85% for nuclear2 Based on an average capacity factor of 60% for hydro3 Based on an average capacity factor of 60% for clean coal with CCS (including a 30% energy penalty)4 Based on an average capacity factor of 30% for wind

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Policy Implications

Infrastructure

Technology Shift

Access to US markets

Employment and Critical Skills

Addressing Climate Change and Reducing GHG emissions

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Policy Implications Infrastructure

More effective policy/regulatory frameworks and processes

Industry alignment with provincial and federal regulatory authoritiesto reconfigure transmission and distribution systems in order tosuccessfully implement new sources of energy

Build understanding of need for electricity infrastructure investment Equitable rates of return

Ability to recover costs through rates

Public acceptance- the not in my backyard (NIMBY) phenomenonhas implicated many electricity developments

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Policy Implications Technology Shift

Funding for developing technologies

Improved tax treatment

Promotion of distribution and end-use technologies (Smart Grid)

Greater understanding of technology options

Greater understanding of the supply mix and the suitability oftechnologies to serve load

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Policy Implications Access to U.S. Markets

Continued active involvement with the North American ElectricReliability Council (NERC)

Consideration of U.S. climate change policies

Consideration of U.S. rates of return

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Policy Implications Employment and Critical Skills

Raising awareness about careers in the electricity sector

Aboriginal engagement

Foreign credential recognition

Recognition of HR/training requirements as cross cutting issues

Continued support and funding of the Electricity Sector Council

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Policy Implications Lowering Carbon Emissions in the

Canadian Economy

Align emissions reductions targets with capital stock turnover

Avoid stranding existing assets

Provide sufficient compliance mechanisms

Comparable effort

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Desired Outcomes and the Path Forward!

Robust Canadian electricity sector within interconnected NorthAmerican marketplace

Canada seen as destination of choice for electricity investment

Efficient, effective, coordinated regulatory environment Fair, balanced, performance-based economic regulation

Coherent policy vision

Clean, affordable, reliable electricity for Canadians

The path towards 90% non-emitting technologies

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For More Information...!

Priya Patel

Economic and Electricity Policy Analyst

Canadian Electricity Association

[email protected]

www.electricity.ca

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electricity 101 slide deck_december 2010

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