The Ministry of Energy released its Long-Term Energy Plan (“LTEP”) for Ontario on December 2, 2013, entitled Achieving Balance. The LTEP covers electricity generation and distribution for all of Ontario for the next 20 years.
As expected, the LTEP is focused on the conservation of energy rather than the generation of new energy. The government has planned for a lower demand scenario with the ability to adjust the LTEP in the event that demand increases. As a result, the government will issue an annual Ontario Energy Report outlining any changes in supply and demand.
Although the LTEP provides fewer procurement opportunities than its predecessor, the government has reaffirmed its commitment to renewable energy projects and the refurbishment of nuclear reactors at the Darlington and Bruce Generating Stations.
The following is a high-level overview of the key items from the LTEP which are most relevant for industry participants:
1. Nuclear Energy
Despite the fact that nuclear energy will remain the largest component of Ontario’s electricity mix, the government has indicated that nuclear energy will only supply 42% of Ontario’s energy in 2025, compared with 59% in 2013.
The government has decided not to proceed with the development of new nuclear capacity at this time. However, Ontario will continue to refurbish existing nuclear reactors at the Darlington and Bruce Generating Stations. Each station will begin refurbishing one unit in 2016, and subsequent refurbishments will depend upon the performance of the initial refurbishment.
While the plants are being refurbished, the government expects that the continued operation of the Pickering plant will provide replacement capacity and energy. However, the government maintains that the Pickering plant may shut down earlier, depending on demand.
Although new build projects have been deferred, the Ontario government has expressed its commitment to supporting the export of Canada’s nuclear industry expertise, products and services to international markets.
2. Renewable Energy
The government has reaffirmed its commitment to renewable energy, such as wind, solar and bioenergy generation. In particular, the government has extended the existing target of 10,700 MW for wind, solar and bioenergy to 2021, and has expanded the existing hydroelectric target to 9,300 MW. Currently, the Ontario system has approximately 9,500 MW of solar, wind and bioenergy capacity and more than 9,000 MW of hydroelectric capacity. By 2025, government projections predict that 20,000 MW of renewable energy will be online, representing about half (46%) of Ontario’s installed capacity.
In 2014, the government intends to make available for procurement up to 300 MW of wind, 140 MW of solar, 50 MW of bioenergy, and 50 MW of hydroelectricity capacity. In 2015, the following targets will be available for procurement: 300 MW of wind, 140 MW of solar, 50 MW of bioenergy and 45 MW of hydroelectricity. Any capacity that is not procured or not delivered under existing contracts will be reallocated for procurement in 2016.
3. New Competitive Procurement Process for Renewables
The Ministry of Energy and the Ontario Power Authority are developing a new procurement process for future renewable energy projects larger than 500 kWh. The new procurement process is expected to be released before the end of the first quarter in 2014.
The procurement process will adhere to these principles:
Follow a provincial and/or regional electricity system need
Consider municipal electricity generation preferences
Engage early and regularly with local and aboriginal communities
Occur in multiple successive rounds, providing opportunity for a diverse set of participants
Identify clear procurement needs, goals, and expectations
Encourage innovative technologies and approaches, including consideration of proposals that integrate energy storage with renewable energy generation
4. First Nation and Métis Participation
The government will continue to encourage participation by both the First Nations and Métis communities in transmission and renewable energy projects. In particular, where commercially feasible, the government expects companies looking to develop new, major transmission lines to involve these communities.
5. Impact on Electricity Rates
Although the Ministry of Energy has indicated that rate mitigation is at the forefront of all energy policy decisions and the focus of the LTEP, electricity rates are still expected to increase by 33% over the next five years, 54% over the next 10 years, and 68% over the next two decades. Predictably, the expected rate increases have generated significant attention in the media and will likely be a hot topic in the next election.
In a short time, the LTEP has already sparked considerable debate. We expect further details of the LTEP and its implications to fuel more reaction and analysis from energy stakeholders. Look for more detailed commentary from Heenan Blaikie in the coming weeks.