2008 quebec forum on electricity: business opportunities in the rest of canada

2008 Quebec Forum on Electricity:Business Opportunities in the Rest of Canada

RON EZEKIEL

Fasken Martineau

Tel: 604 631 4708

Email: [email protected]

With the assistance of:Brenden Hunter, CalgaryRaziel Zisman, Toronto

mailto:[email protected]

Outline

MarketsParticipants

Structure

Opportunities

ChallengesTransmission

NIMBYism

First Nations

Markets: Participants

BCBC Hydro managed most of BC’s generation, transmission and distribution

In 2002 (and subsequent) energy plans and 2003 Transmission Corporation Act:

BC Hydro’s role in new generation is limited, with most new generation to come from IPPs.

BC Hydro’s transmission role transferred to new Crown corporation, British Columbia Transmission Corporation


AlbertaHistorically, no one dominant vertically integrated utility, but a variety with an integrated transmission network (ATCO, TransAlta, EPCOR)

1995 Electricity Utilities Act established:independent entity, Power Pool, to administer hourly wholesale market

Transmission Administrator role to operate Tx system


AlbertaNew 2003 Electricity Utilities Act consolidated Power Pool and Transmission Administrator functions into AESO


OntarioOntario Hydro managed most of Ontario’s generation, transmission and distribution

In 1998 Electricity Act, Ontario Hydro’s role was divided up:

Generation: OPG and IPPs

Transmission: Hydro One

Distribution: Hydro One and other D COs.

Market: IESO


OntarioSystem Planning left to market, resulted in demand supply gap in 2002

Electricity Restructuring Act of 2004 created the OPA, responsible for ensuring long term supply, including through planning and DSM/conservation


Summary

BC AB ON

Generation BC Hydro and IPPs

IPPs OPG and IPPs

Tx Owner BC Hydro Various (largely AltaLink and ATCO)

Various (largely Hydro One)

Tx Operator BCTC AESO IESO

Distribution BC Hydro Various (largely FortisAlberta and ATCO)

Various (largely Hydro One)

Markets: Structure

BCNo real wholesale market

BC Hydro predominant buyer

In 2005, BCUC approved BC Hydro tariff permitting industrials to purchase electricity from third parties, but stepped rates and uncertainty over assured supply limit attractiveness

Export opportunities limited; limited availability on interties; Powerex an option

Markets: Structure

AlbertaPool system

One hour bids for rolling 7 day periods

AESO develops a merit order, taking into account congestion and constraints

Scheduling is day-ahead

Pool price is weighted average marginal price over the hour – all sellers receive and all buyers pay the pool price

Markets: Structure

OntarioPool System - similar to Alberta

IESO balances supply and demand and dispatches generation accordingly

Pool price is weighted average marginal price over the hour – all sellers receive and all buyers pay the pool price

Where pool price less than PPA price, there may be a top up from OPA to seller

Markets: Opportunities

BC2007 Energy Plan

Energy self-sufficiency, through Special Direction No. 10, directs BCUC to regulate BC Hydro to achieve electricity self-sufficiency by 2016 and each year thereafter


BCBill 15, Utilities Commission Amendment Act, 2008

BCUC must consider the “government’s energy objectives” in assessing long term resource plans

reduce greenhouse gas emissions

demand-side management

produce, generate and acquire electricity from clean or renewable sources


BCBill 31, Greenhouse Gas Reduction (Emission Standards) Statutes Amendment Act, 2008 requires:

CCS of GHG emissions at least equal to emissions of prescribed GHGs attributable to use of coal for generation

Net zero GHG emissions from natural gas-fired generation facilities; existing facilities given until 2016 to comply


From BC Hydro LTAP Workshop materials, April 25, 2008 at http://www.bchydro.com/rx_files/info/info55971.pdf


BCBioenergy Call

Phase I for projects immediately vaiable; Phase II for projects requiring new tenure

Standing Offer ProgramClean or high efficiency cogen; proven technologies; 0.05MW<Capacity<10MW

Clean Power CallClean power; 5000 GWh/year; COD by 2016; Buyout option


Alberta

Proposed Generation (2007-2016)Type Capacity (MW)

Gas 2073

Wind 3687

Cogeneration 2356

Coal 1873

Biomass 17

Hydro 100

Interconnection 300

Total Proposed Generation 10,406


AlbertaLoad growth forecast at 3.1%/year to 2027

From AESO Future Demand and Energy Outlook 2007


AlbertaAESO generation forecast (AMEC 2005)

2300MW new generation by 2011, and 4100MW by 2016

Comprised of 1600MW cogen; largely oil sands behind the fence

Small additions of aggregating 1100MW

Leaves 500-1500MW; forecast to be met with new coal or cogen


AlbertaBioenergy Plan

9 point plan aimed at developing and expanding biodiesel, biogas and ethanol

Wind2006 cap of 900MW eliminated


OntarioGovernment’s 2006 Supply Mix Directive

6300 MW peak reduction through DSM by 2025

10,402 MW of renewables by 2010, and 15,700 MW by 2025

Limit nuclear to 14000 MW

Phase-out coal ASAP

Gas for peak, high value applications

Build transmission


OntarioOPA filed Integrated Power System Plan in 2007 to implement Directive

OEB Issue List decision March 2008

Review expected to commence mid-2008


OntarioOPA is responsible for procurement of supply, but PPAs only provide for a revenue floor -- set to stimulate investment, but not to prop up or subsidize uneconomic generation

Generators, distributors, wholesale customers and retailers sell and buy energy through the IESO market


OntarioOPA procurement activities, largely competitive (RFP, RFQ, etc.)

Standard Offer ProgramWind, hydro, solar, biomass

Capacity<10MW

20 year EPA

Solar @ $0.42/kWh; others @ $0.11/kWh (20% indexed for inflation) + $0.0352/kWh for reliable peak deliveries

Challenges: Transmission

BC


BC10 yr $5.1B capital plan

One goal is integration of new clean and renewable energy

Northwest Transmission Line

BC to CA line

From BCTC


Alberta

The high cost of suboptimal generation being developed in response to transmission constraints is a substantial burden to customers that can be avoided if congestion is eliminated


AlbertaExamples

Restricted development of low-cost cogen potential in the Fort McMurray because of lack of transmission infrastructure

Development of uneconomic TMR and other Southern AB generation because of constraints on the north-south system

Source:http://www.crhnet.ca/casestudies/blackout/ alberta_restructuring.pdf


AlbertaExamples

Exhaustion of existing system capacity under normal conditions in Southern Alberta; RAS relied on to support the operation of existing generation; market has expressed strong interest in developing wind generation in this region, but no further generation development until the transmission system is expanded

Source:http://www.crhnet.ca/casestudies/blackout/ alberta_restructuring.pdf


Ontario

From OPA


Ontario

From OPA

Waterpower Potential

Wind Power Potential

Purchase Potential

Waterpower Potential

Wind Power Potential

Purchase Potential

Challenges: NIMBYism

Not In My Back Yard (NIMBY)

Build Absolutely Nothing Anywhere Near Anything (BANANA)


ExamplesThe Edmonton-Calgary 500kV

In May 2004 AESO submitted 13 “concepts” for a new tx line between Edm and CgyIn April 2005 EUB approved the need for AESO's preferred 500 kV line After the decision was issued, NIMBY opposition groups were formed, including LAVESTA Area Group and 566 Corridor Group



Because the NIMBY groups did not participate in the proceeding, the EUB granted their application for a review and variance (R&V) hearing to consider issues like land density and agricultural impactsOn December 6, 2005, the R&V Panel affirmed the earlier decision



In April 2006, the hearing for AltaLink’s facilities application commenced, but was postponed due to security concernsOn June 18, 2007, the EUB admitted hiring four private investigators to spy on landowners during the facilities application



On September 30, 2007, on its own motion, EUB voided all previous decisions related to the proposed 500 kV lineOn November 20, 2007, after approximately 3.5 years of regulatory proceedings and despite EUB’s September 30th decision, the Court of Appeal quashed all prior EUB decisions relating to 500 kV line on the basis of reasonable apprehension of bias


ExamplesUpper Pitt River IPP, BC

Required change of boundaries of provincial park to accommodate Tx lineLocal government (Squamish) voted against project, but insufficient – local governments lost control over IPP approvals in 2006 through legislative amendment responding to blocking of Ashlu projectMinister refused park boundary adjustment

First Nations

First NationsSparrow (SCC 1990)

Aboriginal rights still exist – constitutionally protected under section 35

Aboriginal rights are not absolute – can be infringed by government

Government must be able to justify infringement – duty to consult

First Nations

First NationsBadger (SCC 1996)

Treaty rights also constitutionally protected

Government must also justify infringement of treaty rights

First Nations

First NationsHaida (SCC 2004)

Crown may have to consult (and accommodate) prior to rights being formally established

No independent duty on industry but can be delegated certain aspects

Content of duty depends on circumstances

First Nations

First NationsMany different paths to take in the building a relationship with First Nations

Various agreements may be used in the course of relationship-building and which, in some cases, can be relied on by the Crown to assist in fulfilling its consultation and accommodation obligations

Conclusion

Considerable need for new supplyRenewables preferred, but challenges including transmission, ability to serve base load and ability to meet demand

May leave opportunities for other generation

Questions?

Ron Ezekiel

2008 quebec forum on electricity: business opportunities in the rest of canada

Documents

electricity act

transmission corporation

electricity restructuring

bc hydros transmission

new generation

pool pricewhere pool

participantsbcbc hydro

hydro onedistribution