The Future of Energy in Canada: Baseload Generation Options for Ontario

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The Future of Energy in Canada Baseload
Generation Options for Ontario
Relevant. Independent. Objective.

• Dr. Phil Prince
• President C.E.O.
• Dr. Matt Ayres
• Senior Director, Electricity
• September 2, 2004
• Ontario Energy Association

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Canadian Energy Research Institute

• Independent, non-profit energy research
  organization established in 1975
• Our mission is to provide relevant, independent,
  objective economic research and education in
  energy and environmental issues to benefit
  business, government, academia and the public.

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CERI Conferences and Training

• Five Annual Conferences
• Electricity, December 6-7, 2004
• Natural Gas, March 7-8, 2005
• Oil, May 1-3, 2005
• Environment, April 2005
• Petrochemicals, June 5-7, 2005
• Training Programs
• All sectors, all Provinces

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World Consumption of Primary Energy
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Fossil Fuel Reserve/Production Ratios Year-end
2002
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Conventional and Other Sourcesof Natural Gas
Supply
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2000 Fuel Share of World TotalPrimary Energy
Supply
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Annual Growth of RenewableEnergy Supply 1971-
2000
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2000 Fuel Share of World TotalPrimary Energy
Supply (TPES)
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Baseload Generation Options for Ontario
Relevant. Independent. Objective.

• Dr. Matt Ayres
• Senior Director, Electricity

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Ontario The challenge to 2020

• Replacement of coal plants (7500 MW)
• Load growth (6,500 MW)
• The challenge
• up to 14,000 MW required
• potential retirement of nuclear plants would add
  a requirement of up to 10,000 MW
• in total, requirement is approximately 80 of
  Ontarios current generating capacity
• requiring an investment of 25-40 billion

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The solution

• Refurbish
• Rebuild
• Replace
• Conserve

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Replacing baseload

• The options
• coal fired generation
• nuclear generation
• large natural gas fired generation
• large hydroelectric generation
• Other alternatives are not a good replacement for
  baseload capacity

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CERIs study

• Compares
• Coal fired generation
• new scrubbed coal
• Natural gas fired generation
• combined cycle gas turbine
• Nuclear generation, two options considered
• twin CANDU 6 nuclear reactor
• twin ACR-700 nuclear reactor
• Comparisons made using levelised unit electricity
  costs (LUEC)

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Characteristic and costs
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How long to build?
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Costs of financing

• Two stylised financing scenarios considered for
  the base case.
• Merchant financing
• 50 debt, with a required return of 8
• 50 equity, with a required return of 12
• Straight line depreciation
• Income tax rate 30
• Public financing
• required return of 8
• no taxes

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Results Base case
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CO2 Emissions Cost (15/tonne)
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Capital cost of new nuclear
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Other sensitivities considered

• Capacity factors
• Plant cost
• Heat rate
• Fuel costs
• Operational lifetime
• Emission costs at lower heat rates

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Range of results
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Financing assumptions

• Financing costs subject to some uncertainty
• Low capital cost technologies relatively robust
  to changes in financing assumptions
• For high capital cost technologies financing
  assumptions much more important.
• Key issues
• Allocation of risk
• Possibility of public-private partnership

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Conclusions

• Natural gas fired generation for baseload power
  is an unattractive option in the event natural
  gas prices remain high. Tight domestic supply
  and increased reliance on imports of liquefied
  natural gas (LNG) contribute to the view that
  natural gas prices will remain high.
• Under many of the scenarios considered, coal
  fired generation represents a low cost
  technology. Costs may be significantly higher if
  the potential cost of CO2 emissions is included.
• The costs of nuclear generation varies
  considerably with assumptions made about the
  technology deployed and the method of financing.
  CERIs study indicates that at the lower end of
  the range of costs estimated for nuclear
  generation it is competitive with coal.

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Questions