There are viable economic alternatives to Ontario Hydro's nuclear and fossil-fired electric plants, according to a report released today by the Independent Power Producers' Society of Ontario (IPPSO). "This study shows that a combination of cogeneration and renewable energy can go a long way to meeting Ontario's future power requirements. There's a light at the end of this tunnel, and it's running on independent power," said IPPSO Executive Director Jake Brooks.
Fossil Fuels Are Not Needed
To Replace Ontario's Nuclear Electricity
Independent Power Producers' Society of Ontario
August 20, 1997
Meeting Ontario's future power needs:"There's a light at the end of this tunnel,
and it's running on independent power"
The study entitled "A Review of the Economic Cost of Power in Ontario" was commissioned by IPPSO about six months ago, and conducted by Dave Argue of David Argue Consulting earlier this year. Mr. Argue is an economist with many years experience analyzing the Ontario electricity market. "This analysis shows that Ontarians can have efficient, cost-effective, safe and practical sources of power that make more sense than centralizing all power generation with Ontario Hydro. Independent power producers can compete economically. We would like the opportunity to prove it in the market place," said Brooks.
One of the study's central findings is that "when compared on a consistent basis, the dispersed technologies all show advantages against the central generation options in Ontario." The study found that when considering all costs, (including capital costs, operating costs, repair costs like those just discovered at Ontario Hydro's nuclear plants, and environmental costs) fossil, nuclear and large hydro-electric power all cost more than 10 cents per kilowatt-hour, while cogeneration, biomass, small hydro and wind- generated electricity all cost less than 10 cents per kilowatt-hour (kWh). If you remove the environmental costs, the cost of fossil comes down significantly, but it is still more expensive than alternatives like industrial cogeneration.
"Ontarians need not feel they have to choose between reasonable electricity costs and a clean environment, because there are efficient options that are both affordable and environmentally-friendly," Brooks said. "In addition, the independent power alternatives create jobs, attract investment and pay taxes in a way that Ontario Hydro's centralized options do not." The independent power option provides ratepayer benefits by improving generation efficiencies and creating a real competitive market for electric power.
"There is no perfect method for comparing the costs of generation technologies which are designed to serve different purposes, but the method we chose is designed to fairly adjust for most of the important issues," Brooks says.
The study did not attempt to estimate financial costs, because the author did not want to allow current tax policy or other changeable factors to distort the reported costs. The study identified, to the extent possible, "true costs to society" on an economic basis.
One important assumption was to compare the cost of new generation only to other new generation. For the purpose of assisting public policy decisions, comparisons need to be made between new alternatives, rather than between existing historic capacity (usually from Ontario Hydro) and new capacity (usually from Non-Utility Generators). All technologies were priced on the basis of the best estimate of the cost of new capacity, assuming that it had come on line this year, and operated for 20 years at 65% average capacity factor.
The study found that, before counting environmental costs, nuclear power is the most expensive, at 11.7 cents per kWh, and industrial cogeneration is the least expensive, at 5.5 cents per kWh. In general, corresponding to findings in other studies, central generation technologies were more expensive than the decentralized technologies. Adding in environmental costs raised the cost of all alternatives, but did not change their relative rankings very much. See the chart of results in the report for details.
"It should be heartening for all Ontarians to know that Ontario-based independent power sources offer better economics in addition to better environmental values, safety, reliability, and growth opportunities. We are asking the government to open the market to competition to provide Ontarians with real options in the electricity marketplace."
Good morning. I represent The Independent Power Producers' Society of Ontario, or IPPSO. IPPSO represents over 500 companies and individuals in the independent power business in Canada. We believe that independent power producers should be allowed to generate some of the province's electricity, as well as Ontario Hydro. We are known as an advocate not just for improved customer choice, but also for cheaper, cleaner, more efficient and environmentally- friendly power options.
Remarks by Jake Brooks,
Executive Director of IPPSO
Queens Park Media Studio
August 20, 1997
On the release of the "Cost of Power Report"
We have long believed that independents can produce environmentally-friendly power at less cost than Ontario Hydro's problem-plagued centralized generating stations, be they coal or nuclear. For many years Hydro told us to buzz off because - they said - our power was too expensive.
The the study we are releasing today, combined with the record of over 100 operating plants in Canada and many more around the world, clearly puts the lie to that excuse.
We have also long believed that Ontario's electricity delivery grid should be considered as a common carrier, similar to the province's natural gas distribution system ... a system with input from a number of suppliers.
And for a brief while, it was. For a short period of time in 1990 and 1991, the government and Hydro said that they needed so much power so fast that they were willing to buy up to 3000 MW of independently produced electricity. From our perspective, this trial was hugely successful. During that brief period of time, Ontario signed up independent power projects more quickly than any place in the world, many of which have proven to be world-class models of success.
Nonetheless, less than a year later, Hydro told us that they were no longer willing to purchase any power from independent sources, citing a newly-discovered surplus of capacity. We argued at that time that the alleged surplus was extremely shaky, being dependent on unreliable predictions of nuclear production.
Since then, Ontario Hydro has mounted an extraordinarily offensive campaign to discourage and obstruct our members from selling power to customers, exporting, or even generating power for our own use.
IPPSO's view is that, in this day and age, Ontario consumers should have the right to purchase power from the supplier of their choice, within whatever reasonable limits of safety and environmental standards are set by society. If power is to be purchased on behalf of customers, they must have confidence that the power purchased is the least expensive overall, when full consideration is given to fuel, capital, and all other costs, including the environmental price tag.
As our study clearly demonstrates, power generated by independent producers in many cases represents a better deal and a more attractive menu of options, than Ontario Hydro's centralized monopoly based on coal and nuclear power. The more producers there are and the more varied the generating methods, the less likely it is that supplies will be disrupted by problems with one method of generation - and the more stable everybody's rates will be.
IPPSO's membership is prepared to provide all the power needed to replace Ontario Hydro's failing nuclear reactors at lower cost, and with much reduced environmental impacts, than Hydro's proposed increase in fossil-fuel generation.
Our study shows that several options are less expensive than Ontario Hydro generation. Co-generation, biomass, small hydro and even wind farms can produce less expensive electricity than Ontario Hydro's options for new supply.
Please note that our economic study does not compare anything against the cost of Hydro's already-built plants. They are not relevant in terms of providing for new demand or comparing the alternative choices we face today or in the future. Our study only compares new construction against other new construction. And shows that these options are clearly economically viable right now.
These options that we present are not just viable business propositions for producers. Consumers will get a price they can depend on - with no surprise. When an independent says he will supply the power at a certain price, that's what it costs. The public is not liable for cost over-runs - the independent producer has to absorb the cost of any unexpected problems.
Our study does not deal directly with the question of rates. Rates are an artificial and not always accurate measure of production cost - especially when today's costs can be hidden in long-term debts and write-downs. Costs are what really matter in the end, and are the ultimate determinant of rates. The numbers in our report are not offers of sales, but comparative, to show the relative cost of technologies, more for planning purposes.
Undoubtedly there will be people with numbers other than these. Other figures will come from other methodologies. The methodology we have chosen for our study evaluates both capital and operating costs, on a consistent basis.
The differences of opinion, while interesting and valid to investigate, will not affect the robustness of our findings. If there is any question about the assumptions we used, please note that they are applied consistently across all the technologies compared.
Interestingly, last week's announcements by Ontario Hydro have not affected the results of our study, because the methods we used anticipated capital improvement costs such as Hydro announced last week.
The time is right for what we are offering. There are sources of electricity available in Ontario now, that are competitive, environmentally-friendly, and free of unwelcome surprises like those we have seen lately - but Ontario Hydro still denies the public access to these new options. All we need is the right to compete in the marketplace. We can create jobs, new economic opportunities, new exports of technology and knowledge. Every day Ontario is burning coal and uranium, as well as money, when we could be using clean, economic and job-creating independent power .. if we are allowed to proceed with our projects.
We urge the government to release its long-awaited White Paper on restructuring the electric system, and to begin the process of introducing meaningful competition into Ontario's electricity market.
Independent Power Producers' Society of Ontario (IPPSO)IPPSO is a non-profit organization representing over 500 independent power producers, as well as individuals and companies involved in related efforts such as equipment supply, consulting and environmental work. IPPSO members produce power from cogeneration, small hydro, wind energy, waste wood and other sources. IPPSO is a member of the Stakeholder Alliance for Competition and Customer Choice, an ad hoc coalition of nearly 100 industries, consumer groups and municipal utilities that has been lobbying the Ontario government to begin the process of introducing competition into electricity. For further information:
Tom Brett, President 613-236-3882
Steve Probyn, Director 416-777-2800
Jeff Passmore, Senior Vice President 613-566-7005
Jake Brooks, Executive Director 416-322-6549
Mailing Address: PO Box 1084, Stn. F, Toronto, Ont. M4Y 2T7
Street Address: 163-C Eastbourne Ave., Toronto, Ont. M5P 2G5
telephone: 416-322-6549 fax: 416-481-5785
e-mail: email@example.com website: www.newenergy.org/newenergy/