June 20, 2014
Hydro firms scrap over Ontario import market
Power companies inside and outside Ontario are debating whether the province would be better off importing more hydro energy.
It sounds like a simple idea: why not import electricity to Ontario from hydro-rich provinces such as Quebec, Manitoba, or Newfoundland?
But it’s drawing vigorous debate from companies who have a financial stake in the outcome.
Importing power under long-term contract from Quebec has long been championed by the Ontario Clean Air Alliance.
Ontario’s power market operator, the Independent Electricity System Operator, has asked for comment on the idea — or more specifically, on whether that’s the best way to use the connections linking Ontario with its power-rich neighbours.
The links, or interties, are currently used only for short-term transactions, to manage day-to-day or hour-to-hour shortages and surpluses by trading with Ontario’s neighbours.
The IESO and the Ontario Power Authority are due to report this summer on whether the links should be used to bring in power from Quebec or elsewhere under long-term contract, as a steady source of supply.
That would probably mean generating less power inside Ontario.
Ontario doesn’t have a long-term power deal with Quebec. But the clean air alliance argues that importing power from Quebec makes more sense than investing heavily in nuclear plants. Ontario is facing the prospect of spending at least $25 billion on major, mid-life overhauls of the Darlington and Bruce B plants.
In its submission, the alliance assumes that power from Quebec can be purchased for 4.1 cents a kilowatt hour — which it says was Hydro-Québec’s average export price in 2012. Meanwhile, it says, power from a re-built Darlington will cost at least 8.6 cents a kwh.
On that basis, buying Quebec power could save Ontario ratepayers a billion dollars a year, it argues.
Companies that might want to sell power into Ontario agree that the idea is a good one.
Hydro-Québec’s marketing arm argues that using the Quebec-Ontario intertie links “are amongst the most flexible resources available to Ontario.”
“Allowing clean external resources to compete on a level playing field with internal generators will undoubtedly come to the benefit of Ontario consumers,” it says.
Nalcor — Newfoundland’s power company — has a similar perspective. It’s developing its Gull Island site on the Lower Churchill River in Labrador.
“Nalcor views Ontario as a potential long-term market” for Gull Island power, it says. The company says it would consider a deal up to 35 years long.
Both Nalcor and Hydro-Québec point out numerous power market complexities that would have to be ironed out before a deal could be struck.
But Ontario Power Generation is skeptical that long-term import deals are a good idea at all. Publicly owned OPG owns and operates the Darlington and Pickering nuclear stations, as well as an extensive network of hydro stations.
There’s no place like home, OPG argues: “All internal solutions should be comprehensively considered prior to the consideration of fixed term contracts for external energy supply.”
Fixed term import contracts could create “considerable inefficiencies” at times by displacing home-grown power that might be lower priced at certain periods, OPG argues.
“OPG does not believe fixed term energy contracts would be of benefit to consumers in Ontario,” it says.
Shell Energy North America is also a skeptic.
It argues that the current system is meeting Ontario’s needs, and a long-term import contract could interfere with the dynamics of Ontario’s power market.