November 18, 2014

Quebec electricity would save Ontario consumers $14 Billion

Ontario can reduce its electricity costs by $14 billion over twenty years by signing a long-term supply contract with Hydro Quebec, according to a report released today by the Ontario Clean Air Alliance (OCAA).

An investment of $500 million in new transmission infrastructure would give Ontario access to Quebec waterpower at lower cost than would be available from a re-built Darlington.

An investment of $12.9 billion to re-build Darlington’s aging reactors would produce electricity for 8.9 cents per kWh, according to Ontario Power Generation (OPG).
 
Currently, most of Hydro Quebec’s electricity exports are sold to the United States at an average spot market price of 3 cents per kWh.
“By signing a long-term electricity supply contract with Hydro Quebec for 6 cents per kWh and cancelling the Darlington Re-Build Project, Ontario can reduce its electricity costs by $14 billion over 20 years”, said Jack Gibbons, Chair of the OCAA.
 
In 2010, Hydro Quebec signed a 26-year export contract with Vermont at an initial price of 5.8 cents per kWh.
 
“Cancelling Darlington would also free up $12 billion of Government of Ontario borrowing capacity for other needed infrastructure investments such as public transit,” Mr. Gibbons said.
 
Transmission Infrastructure
 
“Significant investments in transmission infrastructure” would be required to allow Ontario to import 2,788 MW of electricity from Quebec on a firm basis, according to a recent report by the Ontario Power Authority (OPA) and Independent Electricity System Operator (IESO).  
 
But the OPA/IESO report identified only $500 million of incremental costs needed to accommodate 2,788 MW of firm imports from Quebec. (A $325 million upgrade in the Ottawa area is needed anyway to improve local service.)
 
This would allow Quebec to provide Ontario with virtually the same amount of electricity as Darlington produced in 2013.
 
“The payback period for the incremental transmission upgrades necessary to take full advantage of available Quebec electricity would be less than one year”, said Mr. Gibbons.
 
Nuclear Cost Overruns
 
Every nuclear project in Ontario’s history has gone massively over budget – on average by 2.5 times.
 
Because of that cost-overrun history, Ontario’s Long-Term Energy Plan requires the Darlington Re-Build process to “minimize commercial risk on the part of ratepayers and government”.  But OPG’s re-building strategy does not comply with this directive since consumers and taxpayers would bear the primary cost-overrun risk for more than 93% of the project’s costs. 
 
(In contrast, the OPA has signed more than 21,000 electricity contracts from renewable and natural gas-fired power plants. Not one of these contracts permits the capital cost overruns from these power plants to be passed on to Ontario’s electricity consumers and taxpayers.)
 
If the Darlington project has average Ontario nuclear construction cost overruns, the plant will cost $32 billion to re-build, and the cost of its electricity will be 16.6 cents per kWh — nearly triple the cost of firm electricity from Quebec.
 
“Ontario is at a crossroad. We can buy available, affordable waterpower from our neighbour Quebec, or we can step aboard the nuclear cost-overrun escalator and pay more, likely much more, for our electricity,” said Mr. Gibbons.
 
Cost per Job
Good jobs are sometimes cited as a reason to refurbish old nuclear generating stations.
 
But Darlington jobs would be expensive. A $12.9 billion re-build works out to $5.8 million each to maintain the 2,200 jobs associated with Darlington ($14.4 million per job if the costs escalate at the historic rate).
 
In contrast, Ontario taxpayers paid $25,000 each to maintain 2,800 well-paid jobs at the Ford Oakville auto plant, and more recently paid $21,425 each to maintain 4,000 jobs at Honda’s Alliston auto plant.
 
Other Voices
 
The Darlington Re-Build project “carries enormous risks” – Ed Clark, Chair of the Advisory Council on Government Assets and former CEO, TD Bank
 
“Ontario will …. pursue contractual arrangements for firm imports where cost effective and well matched to Ontario’s electricity needs” – Ontario’s Long-Term Energy Plan
 
“We have power available, we have surpluses…we also want to sell it to our neighbours….I’m sure we can reach an agreement” – Philippe Couillard, Premier of Quebec
 
For More Information
 
Jack Gibbons, Chair, OCAA can be reached at 416-260-2080 or jack@CleanAirAlliance.org.
 
Click here to read the  OCAA Report, Ontario’s Long-Term Energy Plan: A One Year Review